Patent Litigation and Competition Law in India II
Here's the second post from our good friend and blogging colleague from India, J. Sai Deepak, founder of The Demanding Mistress intellectual property and innovation weblog. Both pieces focus on areas of interplay between patents and competition law.
In my previous post,
I discussed certain situations under Indian law which could attract both
the Patents Act and the Competition Act. Continuing in the same vein, this
post discusses the interaction between the two sets of legislation in instances
of abuse of dominance.
Section 4 of the
Competition Act recognizes abuse of dominance by an “enterprise” or a “group”.
Section 2(h) of the same Act exhaustively defines an “enterprise”, which
includes a person, natural or juristic. As for the definition of a “group”,
this is provided for in the Explanation to Section 5.
In order to
establish abuse of dominance by a patentee, the first ingredient to be
established is that the patentee enjoys a position of dominance in the relevant
market. As to what constitutes “relevant market”, Section 19(5) states that the
Competition Commission of India (CCI) could have regard to either the “relevant
geographic market” or the “relevant product market”.
In assessing
whether a patentee enjoys a dominant position in the relevant market, Section
19(4) of the Competition Act lists a host of factors which the CCI must have
due regard to. Some of the factors include the market share of the enterprise
and the economic power of the enterprise including commercial advantages over
competitors. Critically, Section 19(4)(g) also recognizes the following factor
to establish the patentee’s dominant position:
“monopoly or
dominant position whether acquired as a result of any statute or by
virtue of being a Government company or a public sector undertaking or
otherwise”
The
above-underscored portion is wide enough to include a patent grant which could
bestow a monopoly or a dominant position in the relevant market. Therefore, if
an aggrieved party is able to establish that the existence of a patent on a
particular technology has resulted in the patentee acquiring a position of
dominance, that alone is sufficient to satisfy the first and basic ingredient
of Section 4 i.e. position of dominance of the patentee.
The second
ingredient of abuse of dominant position is dealt with by Section 4(2) of the
Competition Act, which lists a host of situations that could amount to abuse of
dominance. For instance, imposition of an unfair or discriminatory price in
purchase or sale (including predatory price) of goods or services amounts to
abuse of dominance. What is important is that the Act recognizes and
distinguishes between “unfair price”, “discriminatory price” and “predatory
price”. Each of these clearly is capable of having distinct meanings.
Since the
interface between the Patents Act and Competition Act is being discussed, it is
important to understand the position of these legislations on similar or
identical or related issues. For instance, while the Competition Act refers to
“unfair price”, Section 84(1)(b) of the Patents Act (Section 84 being the
compulsory licence provision) refers to a “reasonably affordable price”. How
does one harmonize the interpretations of “unfair price” under the Competition
Act and “reasonably affordable price” under the Patents Act? Is harmonization
necessary since, as stated in my previous post, Section 60 of the Competition Act
states that the Competition Act shall prevail over all other legislations or
provisions in other legislations which are “inconsistent” with it? Although the Patents Act may be treated as the “parent legislation”
which governs patents and patentees, Section 60 of the Competition Act ensures
that the latter prevails over the Patents Act.
An exercise in
harmonization is necessary because the overriding effect of Section 60 of the
Competition Act can take effect only when it is established that two provisions
are “inconsistent” i.e. they are in conflict with each other. If, however,
harmonization is possible without distortion of the objects or language of
either legislation, Section 60 must be the option of last resort. So how does
one harmonize “unfair price” with “reasonably affordable price”? It must be borne
in mind that both “unfair price” and “reasonably affordable price” judge the cost
of the transaction through the prism of the effect of the price on the
licensee, as opposed to the proportionality between the price demanded and the
value of the technology being licensed. In other words, “fairness” of a price
may be the same as its “reasonable affordability”, but it is distinct from
“reasonable price”.
Therefore, it
could be said that both the Patents Act and the Competition Act are in harmony
with each other when they require the cost of a licence to be fair/reasonably
affordable. In fact, so long as there is no conflict between the two
requirements, it could be said that what is “reasonably affordable” under the
Patents Act would be “fair” under the Competition Act.
Having said
this, it would be banal to state that to decide what is unfair or not
reasonably affordable, it may be necessary to first determine what is fair or
reasonably affordable, which probably calls for use of econometrics, and not
just wordplay. In situations like these, the CCI has the power to farm out
certain issues, such as licence fees, for the consideration of and determination by
the Controller General of Patents. Under Section 21A of the Competition Act,
the CCI could refer the issue of determination of licence fees to the
Controller General of Patents before taking a final call on the issue of unfair
pricing. In the alternative, in certain situations, the CCI may first record a
finding of unfair pricing and then refer the matter to the Controller General
of Patents for determination of a fair price.
The situation
discussed in this post is but one possible scenario. However, the larger point
being made here is that there exists a plethora of options outside of the
Patents Act in patent-related matters, and it would help to consider them in bringing
about the desired outcome, instead of restricting oneself to only the Patents
Act.
1 comment:
Given India is a place where compulsory licencing does happen, I think that competition developments there are important. I suspect the developing world at least will look to India for how to develop legislation and national policies on IP and competition. In the longer term I suspect Indian policies and decision will also be of interest in the West when it considers options for how to do things differently.
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