Can CCI examine competition issues arising from patent disputes? Supreme Court to decide

The Supreme Court of India on Monday indicated that it will decide whether the Competition Commission of India (CCI) has jurisdiction to examine alleged anti-competitive conduct arising from the exercise of patent rights [CCI v. Swapna Dey]..A Bench of Justices JB Pardiwala and Vijay Bishnoi stayed parts of a National Company Law Appellate (NCLAT) judgment which held that the Competition Act, 2002 does not apply where allegations of abuse of dominance stem from the exercise of patent rights. The NCLAT had held that such disputes fall exclusively within the domain of the Patents Act, 1970. The Supreme Court has clarified that it will decide the matter only on the question of jurisdiction. .The appeal arises from an NCLAT order dismissing a challenge to a 2022 decision of the CCI that had closed a complaint against Swiss pharmaceutical company Vifor International AG relating to its patented drug Ferric Carboxymaltose (FCM). While the CCI had closed the case on merits, the NCLAT went further and held that the CCI lacked jurisdiction altogether, reasoning that the Patents Act is a special statute that prevails over the Competition Act in matters involving the exercise of patent rights..In reaching this conclusion, the NCLAT relied on Section 3(5) of the Competition Act, which protects reasonable conditions imposed by intellectual property holders. It also cited a 2023 Division Bench ruling of the Delhi High Court in the Ericsson–Monsanto line of cases. The Appellate Tribunal also noted that the Supreme Court had earlier declined to interfere with that Delhi High Court ruling..The Ericsson–Monsanto cases arose from a long-running dispute over whether the CCI can investigate allegations of abuse of dominance when such allegations stem from the exercise of patent rights.In Telefonaktiebolaget LM Ericsson’s case, mobile handset manufacturers Micromax and Intex had approached the CCI alleging that Ericsson abused its dominant position by demanding excessive royalties for the use of its standard essential patents (SEPs). The CCI formed a prima facie view of abuse and ordered an investigation. Ericsson challenged this before the Delhi High Court, arguing that issues relating to patent licensing and royalties fall within the exclusive domain of the Patents Act, 1970..While a single judge of the Delhi High Court initially allowed the CCI’s investigations to proceed at the prima facie stage, a division bench in 2023 set aside the CCI proceedings in both Ericsson and Monsanto matters. The division bench held that the Patents Act is a special law and a complete code for dealing with issues such as unreasonable licensing conditions, abuse of patent rights and compulsory licensing, and that the Competition Act, 2002 cannot be invoked to examine such conduct. It ruled that the CCI lacks jurisdiction to investigate abuse of dominance claims rooted in the exercise of patent rights..The Supreme Court subsequently declined to interfere with the Delhi High Court’s ruling, while keeping broader questions of law open. This line of reasoning has since been relied upon by the (NCLAT) to hold that the CCI lacks jurisdiction over patent-based competition disputes..Before the Supreme Court, the challenge is confined to the correctness of the NCLAT’s jurisdictional ruling and not to the outcome of the competition proceedings themselves. The Court has made it clear that the stay is limited to the legal observations on jurisdiction and that the merits of the underlying dispute will not be reopened..CCI was represented by Additional Solicitor General N Venkataraman. .Vifor was represented by Senior Advocates Shyam Divan and Vaibhav Gaggar, briefed by a team from Anand & Anand. .Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.