Patentee cannot include onerous conditions under the guise of protecting its rights: Delhi HC dismisses Monsanto plea challenging CCI probe

Holding that a patentee was not "free to include onerous conditions under the guise of protecting its rights" under Section 3(5) of the Competition Act, the Delhi High Court today dismissed biotechnology giant, Monsanto's plea against initiation of CCI probe against it in connection with its sub-licensing agreement for Bollgard-I and Bollgard-II Bt cotton technologies. (Monsanto vs CCI).The order was passed by a Single Judge Bench of Justice Vibhu Bakhru..The Petitioners before the Court were Monsanto Holdings Pvt Ltd (MHPL), Monsanto Company (Monsanto), Mahyco Monsanto Biotech (India) Pvt Ltd (MMBL). They had moved the High Court against an order passed by the Competition Commisison of India (CCI) in Februray 2016, directing the Director General (DG) to investigate the activities of the Petitioners and Maharashtra Hybrid Seeds Company (Mahyco)..The CCI order was passed pursuant to an information filed under Section 19(1)(a) of the Competition Act by Nuziveedu Seeds Ltd (NSL) and others. .MMBL had licensed Bollgard-I and Bollgard-II Bt cotton technologies to NSL. .The trait fee charged by MMBL, as well as the other terms and conditions imposed by it for using the technology for manufacturing Bt Cotton Seeds, became a matter of dispute between the parties, and NSL and others moved CCI, alleging contravention of the Competition Act..Since there was no substitute for Bt Technology and there was a huge demand of the Bollworm resistant characteristics of Bt Cotton Seeds, the NSL and others accused the Petitioners of abusing their dominant position by charging excessive and unfair prices..It was also alleged that MMBL imposed unfair conditions in the sub-license agreement(s), in violation of Section 4(2)(a)(i), Section 3(1) and Section 3(4) of the Competition Act..NSL and other argued that MMBL virtually eliminated all potential competition for its technology by incorporating restrictive and unfair conditions in the sub-license agreements. .Before the High Court, the Petitioners challenged CCI probe on the ground that CCI did not have any jurisdiction to examine the issues raised before it as they related to the exercise of rights granted under the Patents Act..According to the Petitioners, the remedies against the alleged abuse of any rights by the patentee fell exclusively within the remedies provided under the Patents Act. .It was also asserted that in terms of Section 3(5) of the Competition Act, the Petitioners were well within their right to enter into an agreement to restrain any infringement of patented technology..To decide the issues raised before it, the Court discussed in length the judgment passed by the High Court in Telefonaktiebolaget L.M. Ericsson v Competition Commission of India & Another (2016). .The Court noted that as decided in Telefonaktiebolaget L.M. Ericsson, there was no irreconciliable repugnancy or conflict between the Competition Act and the Patents Act. Therefore, the jurisdiction of the CCI to entertain complaints regarding abuse of dominance in respect to patent rights could not be excluded..The Court also noted that in terms of Section 62 of the Competition Act, the Act was "in addition to and not in derogation of the provisions of any other law for the time being in force"..As far as the protection to a patentee under Section 3(5) of Competition Act was concerned, the Court held that "unreasonable conditions" did not enjoy the safe harbor provided under the Section..Holding that Section 3(5) of the Competition Act did not mean that a patentee was "free to include onerous conditions under the guise of protecting its rights", the Court said, ."It recognizes that a person has a right to restrain infringement of IPR granted under the specified statutes and any agreement entered for the aforesaid purpose would fall outside rigors of Section 3 of the Competition Act. However, such rights are not unqualified. Only such agreements that are “necessary for protecting any of his rights which have been or may be conferred upon him under” the specified statutes are provided the safe harbor under Sub-section (5) of Section 3 of the Competition Act and only to such extent.. Plainly, the exclusionary provision to restrain infringement cannot be read to mean a right to include unreasonable conditions that far exceed those that are necessary, for the aforesaid purpose."Delhi High Court.In view of the above, the Court concluded that there were no reason to interfere with the order initiating CCI probe against the Petitioners. .It added that the an order passed by CCI under Section 26(1) of the Competition Act was an administrative order and, therefore, unless it was arbitrary, unreasonable and failed the wednesbury test, no interference was warranted. .It was added that the allegations of anti-competitive practices had not been reviewed on merits. .The Petitioners were represented by Senior Advocate Chander M Lall with Advocates Rajshekhar Rao, Anusuya Nigam, Lakshay Kaushik, Anandh Venkatramani, Nancy Roy..CCI was represented by Advocates Pallav Saxena, Mohammad Nausheen Samar..Senior Advocate Jayant Bhushan, briefed by J Sagar Associates team comprising Partner - Vaibhav Choukse, Principal Associate - Ela Bali and Associate – Nripi Jolly represented NSL..Read the Order: