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TMI Blog2016 (3) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. JUDGMENT VIBHU BAKHRU, J 1. These petitions have been filed by Telefonaktiebolaget LM Ericsson (Publ), a company incorporated under the Laws of Sweden (hereafter also referred to as 'Ericsson'), inter alia, impugning orders dated 12th November, 2013 and 16th January, 2014 (hereafter referred to as the 'impugned order' or 'impugned orders') passed by the Competition Commission of India (hereafter 'CCI') under Section 26(1) of the Competition Act, 2002 (hereafter referred to as 'the Competition Act'). The impugned order dated 12th November, 2013 was passed pursuant to an information filed by Micromax Informatics Ltd. (hereafter 'Micromax') under Section 19(1)(a) of the Competition Act and the same is the subject matter of W.P.(C) No. 464/2014 (hereafter also referred to as the 'Micromax Petition') and the impugned order dated 16th January, 2014 was passed pursuant to an information filed by Intex Technologies (India) Ltd. (hereafter 'Intex') and is the subject matter of W.P. (C) No. 1006 of 2014 (hereafter also referred to as the 'Intex Petition'). 2. The controversy raised in these petitions are similar and, therefore, these petitions were taken up together. 3. Both Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. It is claimed that Ericsson has a significant presence in India with around 20,000 employees across 25 offices located in various parts of the country. 6. Micromax is an Indian company and its registered office is situated in Gurgaon, Haryana. Micromax claims that it is the 12th largest mobile handset manufacturer in the world and is focused on providing innovative products catering to the needs of the Indian consumers. Micromax states that it has a product portfolio of more than 60 models of mobile phones. 7. Intex is a company incorporated under the Companies Act, 1956 and has its registered office in New Delhi. It has a pan-India presence and its product portfolio consists of over 250 items from 29 product groups including Mobile Phones, Multimedia Speakers, Desktops LED/LCD TVs CRT, DVD players, Computer UPS, Cabinets and Headphones. Intex claims that it offers products with innovative and high-end specifications at affordable prices. Intex claims that it has a Centre for market research and related design and development in Delhi, which is well-equipped and is manned by highly qualified personnel. The said centre is engaged in product development, bench marking, qualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory ("FRAND") terms and conditions under such IPR to at least the following extent: * MANUFACTURE, including the right to make or have made customized components and sub-systems to the licensee's own design for use in MANUFACTURE; * sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED; * repair, use, or operate EQUIPMENT; and * use METHODS. The above undertaking may be made subject to the condition that those who seek licences agree to reciprocate." Admittedly, Ericsson is bound by the aforesaid policy and in terms thereof, has undertaken to offer its SEPs on Fair, Reasonable And Non- Discriminatory (FRAND) Terms. The disputes between the parties relate to the patents concerning the technologies pertaining to 2G and 3G devices that are claimed by Ericsson to be SEP's for which Ericsson is bound to offer licences on FRAND terms. Substratal Disputes 11. Ericsson alleges that the products manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged that eight of the SEPs held by it, which related to the three technologies pertaining to 2G and 3G devices were infringed by Micromax. The three technologies are briefly described as under:- A. Adaptive Multi-Rate (AMR) speech codec - a feature that conserves use of bandwidth and enhances speech quality; (AMR) B. Feature in 3G phones-Multi service handling by a Single Mobile Station & A mobile ratio for use in a mobile radio communication system: (3G) C. Enhanced Data Rates for GSM Evolution (EDGE) - A transceiving unit for block automatic retransmission request; (EDGE) The eight patents claimed to be infringed by Ericsson are as under:- AMR PATENTS IN203034 : Linear Predictive Analysis by synthesis encoding method and encoder. IN203036 : Apparatus for producing from an original speech signal a plurality of parameters. IN234157 : A method of encoding/decoding multi- codebook fixed bitrate CELP signal block. IN203686 : Method and system for alternating transmission of codec mode information. IN213723 : Method and apparatus for generating comfort noise in a speech decoder. 3G PATENTS IN229632 : Multi service handling by a Single Mobile Station. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abide by the following interim payments as per term sheet enclosed with letter dated 05th November, 2012, purely as an ad-interim arrangement and subject to the final outcome of its negotiations with Ericsson. A. For phones/devices capable of GSM - 1.25% of sale price. B. For phones/devices capable of GPRS + GSM - 1.75% of sale price. C. For phones/devices capable of EDGE + GPRS + GSM - 2% of sale price. D. WCDMA/HSPA phones/devices, calling tablets - 2% of the sale price. E. Dongles, data cards - USD 2.50. Micromax undertakes to make a deposit of interim payments in Court, as set out above, within five working days of the intimation by Customs of the arrival of the consignment. Post inspection, Ericsson will forthwith inform the Customs that it has no objection to the release of the consignment so that the consignment could immediately be handed over to Micromax. Both the parties agree that the royalties, if any, for the past period will be negotiated as part of the final FRAND agreement that may be arrived at between the parties." 12.9. The aforesaid interim arrangement was extended by an order dated 10th April, 2013 and Justice A.P. Shah (Retired Chief Justice, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing the parties. The Court had, however, clarified that the arrangement was an interim arrangement and was not a determination of the FRAND rates. 12.14. The learned counsel for Micromax informed this court that Micromax had sought a modification of the aforesaid order dated 12th November, 2014, which was not accepted and Micromax's application (IA No. 10933/2015) was disposed of by an order dated 7th July, 2105. Micromax has appealed against the said order before a Division Bench of this Court (FAO No. 555/2105) which is stated to be pending. 12.15. On 7th July, 2015, the following issues were framed in CS(OS) No. 442 of 2013: "1. Whether the plaintiff is the registered proprietor of the suit patents being IN203034, IN203036, IN234157, IN203686, IN213723, IN229632, IN240471 and In241747? OPP 2. Whether the suit patents being IN203034, IN203036, IN234157, IN203686, IN213723, IN229632, IN240471 and IN241747 are Standard Essential Patents? OPP 3. Whether the plaintiff has offered to Defendant No.2 a license on fair, reasonable and non-discriminatory (FRAND) terms and conditions? OPP 4. Whether the defendant No.2 is an 'unwilling licensee'? OPP 5. Whether the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Intex on 23rd April, 2013 and the same were discussed between the parties at a meeting held on 23rd May, 2103, wherein Ericsson agreed to provide the revised terms. These were provided by Ericsson to Intex on 30th May, 2013. Intex made a counter-offer on 19th June, 2013, which, according to Ericsson was unfeasible. 13.5. On 23rd August, 2014, Intex filed revocation proceedings in respect of five SEPs held by Ericsson before the Intellectual Property Appellate Board (IPAB). Ericsson claims that this was not communicated to it and it continued to make efforts to resolve the impasse. 13.6. It appears that the negotiations between Ericsson and Intex continued thereafter. Admittedly, the licence offered by Ericsson to Intex included its entire portfolio of 2G and 3G SEPs. On 19th September, 2013, Ericsson explained to Intex that the licence offered by it would also include any new patent that may be granted to Ericsson in relation to the aforesaid technological standards. According to Intex, the offer made by Ericsson was unreasonable. 13.7. On 30th September, 2013, Intex filed a complaint (information) under Section 19(1)(a) of the Competition Act before the CCI, which was register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a notice dated 29th June, 2011 whereby Ericsson had threatened to file an intimation with Securities Exchange Board of India (SEBI) in the context of Micromax's IPO (Initial Public Offer). Micromax also referred to Ericsson's notice dated 5th November, 2012, whereby, Micromax was called upon to sign the licence agreement based on the attached term sheets failing which Ericsson had threatened to pursue other available options. Intex's Information under Section 19(1)(a) before the CCI 19. Intex also filed information under Section 19(1)(a) of the Competition Act, inter alia, alleging that Ericsson and its subsidiary in India, Ericsson India Pvt. Ltd., had abused its dominant position. The specific allegations made by Intex are summarized as under:- 19.1. That Ericsson was operating in India through its subsidiary Intex India Pvt. Ltd. 19.2. That Ericsson had abused its position of dominance by insisting on Intex obtaining licences without disclosing the patents that were alleged to have been infringed by Intex. 19.3. That Ericsson had insisted on execution of a NDA as a necessary pre-condition for informing Intex of the specifics of the alleged infringement. Intex further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Case No.50/2013 and 16th January, 2014 in Case No. 76/2013 20. The CCI passed the impugned order dated 12th November, 2013 under Section 26(1) of the Competition Act pursuant to an information filed by Micromax. The CCI took note of the fact that Ericsson was a member of ETSI and held several SEPs which were recognized as standard by ETSI. The CCI also noted that as per clause 6 of ETSI IPR policy, the IPR holder/owner is required to give an irrevocable written undertaking that it would grant irrevocable licence on FRAND Terms to be applied fairly and uniformly to similarly placed parties. The CCI noted that Ericsson had declared that it had standard patents in respect of 2G, 3G and EDGE technologies, which were also accepted by the Department of Telecommunications, Ministry of Communications and Information Technology, Government of India. The 'Unified Access Service License' granted by the Government of India also required all GSM/CDMA network and equipments imported into India to meet the international standards of international telecommunication technology. In view of the fact that in case of SEPs, there is no possibility of using a non-infringing technology, CCI f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of non-availability of rights to use a patent on reasonable terms. He contended that the Controller General of Patents, Designs and Trade Marks (hereafter 'Controller' or 'Controller of Patents') and/or a Civil Court were vested with the function and the power to remedy any grievance relating to a patentee's demand for excessive or unreasonable royalty by grant of compulsory licence and the CCI, on the other hand, had no jurisdiction to grant such relief. He argued that the Patents Act being a special act also occupied the field in relation to anti- competitive practices by a patentee in relation to patents and, thus, the same would be outside the scope of the Competition Act. 25. Mr Vaidyanathan next contended that Section 4 of the Act was not applicable in respect of licensing of patents for the following reasons:- (a) That a patentee insofar as grant of patent license is concerned, is not an 'enterprise' within the meaning of Section 2(h) of the Act. (b) That the patentee insofar as licensing of patent is concerned, is not engaged in purchase or sale of goods or services. (c) A patents are not a goods or services and a licence for a patent is also not goods or serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed therein, which clearly indicated that the Court was in seisen of the dispute regarding fixing of licence fee and, therefore, any grievance in respect of the rates of royalty or terms of licence was squarely covered under the proceedings before the High Court. He submitted that in the circumstances, CCI would have no jurisdiction to entertain any proceedings in regard to the very same issues that were under consideration of this Court. He further submitted that the exercise of rights by Ericsson under the Patents Act could by no stretch be considered an abuse of dominance so as to warrant any investigation under the Competition Act. 29. Mr T.R. Andhyarujina, Learned Senior Advocate, appearing on behalf of Ericsson in Micromax Petition (W.P.(C) No. 464 of 2014) also contended that the Patents Act was a special statute which allowed monopoly by granting a patent and at the same time also contained provisions for controlling the abuse of such monopoly. He then referred to Sections 27 and 28 of the Competition Act, which provides for the relief that can be granted in cases where it is found that an enterprise has abused its dominant position, and submitted that none of these provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition Act for any alleged abuse of dominant position by a patentee. 32. Mr T.R. Andhyarujina referred to Section 60 of the Competition Act which provided that the Act would apply notwithstanding anything inconsistent contained in any other law. On the strength of the aforesaid Section, he submitted that since the Competition Act did not provide for grant of a compulsory licence or for determination of a royalty, there was no inconsistency between the Competition Act and the Patents Act. He referred to the decision of the Supreme Court in Basti Sugar Mills Co. Ltd. v. State of U.P. & Anr.: AIR (1979) SC 262 in support of his contention that 'inconsistency would mean mutual repugnancy where acceptance of one would imply abrogation or abundance of the other'. He next contended that since CCI had no jurisdiction to determine the reasonableness of the royalties in respect of the patented technologies, it would not have the jurisdiction to entertain any complaint in that regard particularly when a suit in regard to the same subject matter was pending before this Court. 33. Lastly, Mr T.R. Andhyarujina contended that the impugned order dated 12th November, 2013 passed by CCI was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he drew the attention of this Court to paragraph 37 & 38 of the said decision wherein the Supreme Court had held an order under Section 26(1) of the Competition Act to be an administrative direction akin to an inter- departmental communication which did not involve entering into an adjudicatory process. The Supreme Court had also observed that an order under Section 26(1) of the Competition Act did not entail any civil consequences in light of the strict confidentiality required to be maintained by CCI in terms of Section 57 of the Competition Act and Regulation 35 of the Competition Commission of India (General) Regulations, 2009. 37. Mr Haksar next contended that the function of CCI is inquisitorial and regulatory. He referred to the decision of the Supreme Court in M. Krishna Swami v. Union of India & Ors.: (1992) 4 SCC 605 for the meaning of the expression "inquisitorial". He next contended that CCI was not required to give any notice or hear the parties before passing an order under Section 26(1) of the Competition Act as an order under Section 26(1) only required formation of a prima facie opinion and the Competition Act provided sufficient safeguards by affording the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent in their respective spheres. He referred to the decision of the Supreme Court in Gujarat Urja Vikash Nigam Ltd v. Essar Power Ltd: (2008) 4 SCC 755 in support of its contention that both, the Competition Act as well as the Patents Act must be interpreted harmoniously and it is only in cases where there is irreconcilable inconsistency that the question of which act or provision had an overriding effect would have to be considered. 40. Mr Haksar controverted the submission advanced on behalf of Ericsson that it was not an enterprise within the meaning of Section 2(h) of the Competition Act. He submitted that the said definition was wide enough to include any person engaged in any activity relating to production and supply of articles or goods. He stressed on the expression 'relating to' and submitted that Ericsson's SEPs had a co-relation with production, distribution and control of articles or goods. He contended that it was not necessary that an enterprise be directly engaged in production of goods and an enterprise engaged in controlling the technology for production of goods would also fall within the scope of Section 2(h) of the Competition Act. Submissions on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetition Act expressly stated that the Act would have effect notwithstanding anything inconsistent therewith in other laws; (b) there was nothing in the Patents Act which would either impliedly or expressly oust the jurisdiction of CCI; (c) the Competition Act was a later enactment; and (d) the scope and substance of the Competition Act and the Patents Act was different. He then referred to the decision of the Supreme Court in Union of India v. G.M. Kokil: AIR 1984 SC 1022 in support of his contention that a non-obstante clause was a well recognized device for giving the overriding effect to certain legislative provisions. 44. Mr Kathpalia also drew the attention of this Court to Section 84(6) and Section 90(1)(ix) of the Patents Act and submitted that the said provisions clearly indicated that the CCI would have the jurisdiction in respect of anti-competitive practices or abuse of dominance by patentees. 45. Insofar as the contention that CCI lacked the technical competence to examine issues relating to patents, Mr Kathpalia referred to Section 21A of the Competition Act and on the strength of the provisions, argued that in cases where CCI required any inputs from the Controlle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCI had also failed to consider the same. 50. Mr Narain further submitted that in the present case, CCI had issued notice to Ericsson and had further taken the written submissions of Ericsson on record. However, CCI had failed to address the issue as to its jurisdiction; thus rendering the permission granted to Ericsson to intervene and file written submissions illusory. He contended that it was necessary for the CCI to have considered the challenge laid by Ericsson to its jurisdiction while passing the impugned orders. Submissions made on behalf of Ericsson in Rejoinder 51. In rejoinder, Mr C.S. Vaidyanathan and Ms Pratibha M. Singh, learned Senior Advocates submitted that the jurisdiction of the High Court under Article 226 of the Constitution of India could not be curtailed and, therefore, any order, whether administrative or judicial, passed by any authority without jurisdiction would be amenable to the judicial review under Article 226/227 of the Constitution of India. They relied upon the decision of the Supreme Court in S.P. Sampath Kumar & Ors. v. Union of India & Ors.:(1987) 1 SCC 124 and L. Chandra Kumar v. Union of India and Ors.: (1997) 3 SCC 261. It was further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an abuse of Ericsson's dominant position and reiterated that the remedies for the same were available under the Patents Act. 54. Ms Singh, emphatically, reiterated her contention that none of the allegations made by Micromax/Intex could remotely be considered as abuse of dominance as Ericsson was only exercising its statutory rights. She urged that filing suits/or warning of legal action against infringement could not be construed as abuse of dominance. 55. Insofar as the contention that the Controller of Patents did not have the power to grant a compulsory licence prior to the expiry for a period of three years from the grant of patent, Ms Singh contended that such condition was not absolute and in certain cases - such as indicated in Section 92 of the Patents Act - compulsory licence could be granted even prior to the expiry of the period of three years. She further contended that the period of three years had been provided by the legislature to enable a patentee to work its patent and such legislative intent could not be defeated by resorting to the provisions of the Competition Act. Whether the petition is maintainable - Scope of judicial review 56. First and foremost, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection or order issued by CCI that is not in accordance with the provisions of the Competition Act or is outside the scope of its function and authority as specifically enacted, would be unsustainable. 60. I have reservations as to merits of the contention that a direction under Section 26(1) of the Competition Act to conduct an investigation does not prejudice the party being investigated in any manner, as it does not amount to a final determination of the allegations made. Indisputably, a direction to conduct an investigation may not involve an adjudicatory process and does not foreclose or in any manner affect the defence that is available to the party being investigated. But, nonetheless, it does have the effect of subjecting a party to an inquisitorial process at the hands of DG. The DG is obliged to carry out the directions of CCI and conduct an investigation into any contravention regarding provisions of the Competition Act. By virtue of Section 42(2) of Competition the Act, the DG has the same powers as conferred upon the CCI under Section 36(2) of the Act. Section 36(2) of the Competition Act expressly enacts that CCI will have the same powers as are vested in a Civil Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 1956 which provides an expansive definition for the expression 'book and paper' or 'book or paper'. In terms of the said definition 'book or paper' includes "acts, deeds, voucher, writings and documents". Thus, the DG or any person acting under his authority would have an unmitigated access to any document available with the enterprise being investigated. Obviously, such documents may also include confidential and sensitive information and even though the DG may keep the same as confidential, it can hardly be disputed that an enterprise furnishing sensitive information to DG would run the risk of the information being leaked or disclosed. It also cannot be overlooked that the fact that an enterprise is being investigated in respect of allegations of its anti-competitive conduct may also result in loss of reputation and goodwill. 64. In the facts of the present case, the Ericsson has produced communications from the DG which require Ericsson to produce "(i) certified copies of all email communication during the period January 2011 to March 2013 by the executives or Ericsson who are or have been related to the discussion/negotiation with Indian compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of India. Indisputably, scope of Article 226 of the Constitution of India is very wide. 69. In Dwarka Nath v. Income Tax Officer: 1965 57 ITR 349 (SC) had explained the scope of Article 226 of the Constitution of India as under:- "This article is couched in comprehensive phraseology and it ex-facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England ; but the use of the expression 'nature" for the said expression does not equate the writs that can be issued in India with those in England, but only draws analogy from them. That apart, High Courts can also issue directions, orders or writs other than the prerogative writs. It enables the High Courts to mould the reliefs to set the peculiar and complicated requirements of this country. Any attempt to equate the scope of the power of the High Court under Article 226 of the Constitution with that of the English Courts to issue prerogative writs is to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunals within the bounds of their respective jurisdiction. The High Court must ensure that while performing this function it does not overstep the well- recognized bounds of its own jurisdiction." 73. In State of Tamilnadu v. State of Karnataka: 1991 Supplement 1 SCC 240, the Supreme Court was called upon to consider controversy whether in view of Section 11 of the Interstate Water Disputes Act, 1956, it had the jurisdiction to entertain an appeal against an order passed by the Cauvery Water Dispute Tribunal constituted under that Act. Section 11 of said Act expressly provided that "notwithstanding anything contained in any other law, neither the Supreme Court nor any other Court shall have or exercise jurisdiction in respect of any water dispute which may be referred to a Tribunal under this Act". In the aforesaid context, the Supreme Court held as under:- "The Tribunal is a statutory authority constituted under an Act made by the Parliament and this Court has jurisdiction to decide the judiciary i.e. the courts alone that have the function of determining authoritatively the meaning of a statutory enactment and to lay down the frontiers of jurisdiction of any body or Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e - that the subject matter is outside the pail of the Competition Act. However, it must be added that a challenge to the jurisdiction of the CCI to pass such directions under Section 26(1) of the Competition Act must be examined on a demurrer; that is, the information received under Section 19 must be considered as correct; any dispute as to the correctness or the merits of the allegations - unless the falsity of the allegations is writ large and ex facie apparent from the record - cannot be entertained in proceedings under Article 226 of the Constitution of India. Equally, in cases where the direction passed is found to be malafide or capricious, interference by this Court under Article 226 of the Constitution of India would be warranted. 80. In the present case, Ericsson has contested the jurisdiction of CCI to entertain any complaint regarding the rates of royalty in respect of SEPs as according to Ericsson, the same is outside the scope of the Competition Act. Since this issue relates to the jurisdiction of CCI, it would clearly fall within the limited scope of judicial review as available in respect of directions passed by the CCI under Section 26(1) of the Competition Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot had to it or if recourse was had to it, it confirmed what ex facie was a nullity for reasons aforementioned." 82. In view of the aforesaid, the fact that Ericsson had an alternative remedy, albeit at a later stage, would not in any manner disable this court from entertaining the present petition. 83. In view of the above, the contention that the present petition is not maintainable, is without merit. However, the validity of the impugned orders can be examined only from the perspective of: (a) whether allegations made by Intex and Micromax could form the subject matter of proceedings under the Competition Act; and (b) whether the impugned orders are perverse? Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act, 2002 84. The central challenge in these petitions is to the jurisdiction of the CCI to entertain complaints filed by Micromax and Intex in relation to what is described as Ericsson's exercise of rights granted under the Patents Act. It is Ericsson's case that by virtue of being granted the subject patents under Section 48 of the Competition Act, it has the exclusive right to prevent third parties from making, using, offerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Competition Act and, therefore, impugned orders passed by CCI are without jurisdiction. (iv) The disputes between parties - alleged demand for excessive royalty, breach of FRAND assurances, imposition of unreasonable terms for licencing etc. - are subject matter of proceedings in the suits filed by Ericsson and, therefore, outside the scope of the Competition Act. (v) The complaints made by Micromax and Intex are not maintainable as they have denied Ericsson's claim for infringement and Intex has also initiated proceedings for revocation of Ericsson's SEPs and, therefore cannot allege abuse of dominance by Ericsson as the same is premised on Ericsson being the proprietor of the subject SEPs. Micromax and Intex are unwilling licensees and therefore, their complaints with regard to licensing terms could not be entertained. (vi) In the given facts and circumstances of the case, CCI's view that a prima facie case is made out is perverse and thus the impugned order is wholly without jurisdiction. (i) Ericsson is not an 'enterprise' within the meaning of Section 2(h) of the Competition Act: 88. The next issue to be examined is whether Section 4(1) of the Competition Act - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under:- "2(h) "enterprise" means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space. Explanation.-For the purposes of this clause,- (a) "activity" includes profession or occupation; (b) "article" includes a new article and "service" includes a new service; (c) "unit" or "division", in relation to an enterprise, includes- (i) a plant or factory est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, one would have to turn to the General Clauses Act, 1897 which defines 'movable property' to mean "property of every description, except immovable property". Section 3(26) of the General Clauses Act, 1897 defines 'immovable property' to "include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth". Thus, plainly, the word 'goods' would encompass all kinds of property other than land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth. 97. Next, it is necessary to examine the nature of patent rights. Grant of a patent, essentially, provides the grantee, the right to exclude others from using the patented invention for the specified period; it does not provide the grantee (patentee) the right to use the patent but merely a right to restrain others from doing so. 98. In Bayer Corporation and Ors. v. Cipla, Union of India (UOI) and Ors.: 162 (2009) DLT 371, this Court had described "patents" as under:- "Patents are monopoly rights granted to those who invent or discover new and useful processes, products, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Tamil Nadu, Karnataka and Kerala noticed that whereas the definition of 'goods' under the Sale of Goods Act, 1930, used the expression "every kinds of movable property", the definition of 'goods' under the Tamil Nadu General Sales Tax Act, 1956, the Karnataka Sales Tax Act, 1957 and Kerala General Sales Tax Act, 1963, used the expression "all kinds of movable property". The Court then proceeded to examine the meaning of 'property' as well as 'movable property'. The Court referred to the definition of 'property' in Black's Law Dictionary, Sixth Edition; Dictionary of Commercial Law by A.H. Hudson (published by Butterworths) and noticed the expansive meaning in which the expression 'property' is understood. The Supreme Court also referred to the Law of Property, in Salmond's Jurisprudence (Twelfth Edition, 1956) and observed that the expression 'property' would include immaterial things such as patents, copyrights and trademarks which along with leases, servitudes and securities were described as 'incorporeal property' and the expression 'movable property' included corporeal as well as incorporeal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 370 P 2d 694, 697. Goodwill is property, Howell v. Bowden, Tex Civ App, 368 S W 2d 842, 848; as is an insurance policy and rights incident thereto, including a right to the proceeds, Harris v. Harris, 83 N M 441, 493 P 2d 407, 408." The Dictionary further says "property is either: real or immovable; or, personal or movable". It then proceeds to give the meaning of the expression "absolute property", "common property", "intangible property", movable property", "personal property" "private property" and "public property" among others. The above definition shows the wide meaning attached to the expression. It is said to extend to every species of valuable right and interest. It denotes everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal it includes "everything that has an extendable value". It extends to every species of valuable right and interest. 20. To the same effect is the definition in the Dictionary of Commercial Law by A. H. Hudson (published by Butterworths, 1983). It reads: ''Property.- In commercial law this may carry its ordinary meaning of the subject-matter of ownership, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this sense is divided into general and special or qualified. General property is that which every absolute owner has (Co. Litt 145-b.), See OWNERSHIP. Special property has two meanings. First, it may mean that the subject-matter is incapable of being in the absolute ownership of any person. Thus a man may have a property is deer in a park, hares or rabbits in a warren, fish in a pond, etc.; but it is only a special or qualified property, for if at any time they regain their natural liberty his property instantly ceases, unless they have animus revertendi (2 Bl. Comm. 391). See ANIMALS FERAE NATURAE...." This definition also shows that the expression signifies "things and rights considered as having a money value". Even incorporeal rights like trade marks, copyrights, patents and rights in personam capable of transfer or transmission, such as debts, are also included in its ambit. The meaning given to "general property" and "special property" are self-explanatory and need no emphasis at our hands. It is worth recalling that movable property means "property of every description except immovable property" - the definition in all the General Clauses Acts. 22. The above mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aws of England, 3rd Edn. Vol. 6, Art. 75 at p. 43, it is stated that "Although various ingredients go to make up an undertaking, the term describes not the ingredients but the completed work from which the earnings arise. ......... The expression "property" in Entry 42 List III has a wide connotation and it includes not only assets, but the Organisation, liabilities and obligations of a going concern as a unit." (underlining for emphasis) 103. As noted above, the nature of patent rights - right to exclude without the right to use - does not in any manner exclude patent rights from the scope of 'goods' as defined under the Sale of Goods Act, 1930. All kinds of property (other than actionable claims, money and immovable property) would fall within the definition of 'goods' and this would also include intangible and incorporeal property such as patents. 104. In view of the above, the issue whether patents are goods is no longer res integra and Mr Vaidyanathan's contention that patents are not goods cannot be accepted. Consequently, Ericsson would fall within the definition of 'enterprise' under Section 2(h) of the Competition Act. 105. The question wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject matter of proceedings and orders under the Competition Act. The aforesaid issue has to be addressed bearing in mind the objective, express provisions and the operative legislative fields of the two enactments. 108. As discussed earlier, patent rights are, essentially, statutory grants that make it unlawful for any person to exploit or use the patent without the consent of its proprietor (the patentee). These rights are property rights and granted to inventors in exchange of their covenant to share its details with the public [see Bayer Corporation (supra)]. The entire purpose and object of granting patents is based on the rationale of rewarding invention to promote and encourage advancement in technology and industry. 109. On the other hand, the focus of the Competition Act is "to ensure fair competition in India by prohibiting trade practices which cause appreciable adverse effect on competition in markets within India". 110. Thus, whereas patent laws are concerned with grants of rights enabling the patent holder to exclude others from exploiting the invention, and in that sense promoting rights akin to a monopoly; the competition law is essentially aimed to promote comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first such set of provisions came into force on 31st March, 2003. The Competition Act has been subsequently amended by the Competition (Amendment) Act, 2007 and the Competition (Amendment) Act, 2009. 114. The Preamble of the Competition Act reads as under:- "An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. BE it enacted by Parliament in the Fifty-third Year of the Republic of India as follows:-" 115. The Statement of the Objects and Reasons for introducing the Competition Bill, 2001 indicates that the Competition Act was enacted to ensure fair competition in India by prohibiting trade practices which cause appreciable adverse effect on competition in the markets in India and the CCI was established as a quasi-judicial body for the said purpose. The Statement of Objects and Reasons further indicates that the CCI would also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then existing law with a view to counteract misuse or abuse of patent rights and recommended enacting provisions for providing compulsory licences. These recommendations were accepted and the Patents and Designs Act, 1911 was amended by Act 32 of 1950. Subsequently, the Patents Bill, 1953, which was based on the United Kingdom Patents Act, 1949, was introduced in the Parliament. However, the same was not proceeded with and it lapsed. Thereafter, the Government of India appointed Justice N. Rajagopala Ayyangar for making recommendations for revision of the Patent laws. Justice Ayyangar submitted his report on the revision of the patents law in September, 1959 and notably, he flagged the issue regarding monopoly abuses, restrictive trade practices and monopolistic combinations in relation to patents. He stated that while making his recommendations on the topic of compulsory working of a patent, he had kept the following three factors in mind, namely, "(1) the reward to the inventor so as to stimulate and accelerate invention, (2) ensuring of freedom from competition so that venture capital would be forthcoming to exploit the invention and (3) the interest of the community that invent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct." The proviso was subsequently deleted by Act 15 of 2005. Section 48 of the Act, as is in force today is worded similar to Article 28 of the TRIPS Agreement. 123. India is also a signatory to the Paris Convention and both Paris Convention as well as the TRIPS Agreement enable the signatory countries to provide for measures to prevent abuse of intellectual property rights. 124. Article 5(A)(2) of the Paris Convention provides as under:- "Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work." 125. Similarly, Article 8.2 of the TRIPS Agreement reads as under:- "Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders." 126. Article 31 of the TRIPS Agreement also enables a signatory country to enact laws to permit use of the patent without authorisation and reads as under:- "Article 31 Other Use Without Authorization of the Right Holder Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eview or other independent review by a distinct higher authority in that Member; (j) any decision relating to the remuneration provided in respect of such use shall be subject to judicial review or other independent review by a distinct higher authority in that Member; (k) Members are not obliged to apply the conditions set forth in subparagraphs (b) and (f) where such use is permitted to remedy a practice determined after judicial or administrative process to be anti-competitive. The need to correct anti-competitive practices may be taken into account in determining the amount of remuneration in such cases. Competent authorities shall have the authority to refuse termination of authorization if and when the conditions which led to such authorization are likely to recur; (l) where such use is authorized to permit the exploitation of a patent ("the second patent") which cannot be exploited without infringing another patent ("the first patent"), the following additional conditions shall apply: (i) the invention claimed in the second patent shall involve an important technical advance of considerable economic significance in relation to the invention claimed in the first paten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c and technological development of India; (e) that patents granted do not in any way prohibit Central Government in taking measures to protect public health; (f) that the patent right is not abused by the patentee or person deriving title or interest on patent from the patentee, and the patentee or a person deriving title or interest on patent from the patentee does not resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology; and (g) that patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public." It is seen that the aforementioned general considerations - in particular clause (b), (c) and (f) - are directed to prevent what could be described as an abuse of patent rights. 129. Sub-section (7) of Section 84 of the Patents Act lists out situations where the reasonable requirements of public are deemed not to have been satisfied. The said Sub-section reads as under:- "(7) For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied- (a) if, by reason of the refusal of the patentee to grant a lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proprietors of patents enjoy a larger degree of protection during the first three years of the grant of the patent. The Parliament in its wisdom thought it fit to grant this minimum period for a patentee to reasonably ensure that its patent is worked in India and the patented invention is available at reasonable and affordable prices. This protection is further diluted by virtue of Section 92 of the Patents Act which provides that in case of national emergency or in circumstances of extreme emergency or in case of public non-commercial use, the Central Government, if satisfied that it is necessary to grant a compulsory licence, is empowered to make a declaration to that effect and on such declaration, the Controller of Patents would be empowered to entertain applications for grant of compulsory licence, notwithstanding that a period of three years has not elapsed from the grant of patent. 132. Section 85 of the Patents Act provides for revocation of patents, if even after two years of the grant of compulsory licence, the patent invention has not been worked in the territory of India or that reasonable requirement of the public with respect to the patented invention has not been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby." Section 108 of the Patents Act provides for the reliefs that may be granted in a suit for infringement. Sub-section (1) of Section 108 provides that the reliefs would include injunction and, at the option of the plaintiff, either damages or an account of profits; Sub-section (2) of Section 108 further provides that the court may also pass orders that infringing goods shall be seized, forfeited or destroyed, as the court deems fit without payment of any compensation. 135. Section 107 of the Act provides for the defences that may be taken in a suit for infringement. Sub-section (1) of Section 107 expressly provides that every ground for revocation of a patent as available under Section 64 of the Act would be available as a ground for defence in a suit for infringement. 136. It is clear from the above that certain specific remedies have been provided under the Patents Act in respect of certain practices that may constitute abuse of dominance or may be considered as anti-competitive. In certain cases, as indicated above, the compulsory licences can be granted by the Controller of Patents. Thus, enabling the manufacturer to manufacture patented articles or use of patented proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties (seeds and other propagating material) 5.1.7 All forms of Intellectual Property have the potential to raise Competition Policy/Law problems. Intellectual Property provides exclusive rights to the holders to perform a productive or commercial activity, but this does not include the right to exert restrictive or monopoly power in a market or society. Undoubtedly, it is desirable that in the interest of human creativity, which needs to be encouraged and rewarded, Intellectual Property Right needs to be provided. This right enables the holder (creator) to prevent others from using his/her inventions, designs or other creations. But at the same time, there is a need to curb and prevent anti-competition behavior that may surface in the exercise of the Intellectual Property Rights. 5.1.8 There is, in some cases, a dichotomy between Intellectual Property Rights and Competition Policy/Law. The former endangers competition while the latter engenders competition. There is a need to appreciate the distinction between the existence of a right and its exercise. During the exercise of a right, if any anti-competitive trade practice or conduct is visible to the detriment of consumer inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in patent law are overdue by nearly two and half years. In order to do this we must, firstly, carve out a law without permitting any ambiguity under the TRIPS agreement to come in our way so as to safeguard our national security, national interests, public health as also ensure availability of medicines at affordable prices, which is one of the human rights. Secondly, we need to design a system for a new era of explosions of state-of-the-art technologies, since internationally approved patent protection regime has become the measuring rod of a country's technological and industrial progress and the protective shield for a knowledge driven economy. Thirdly, we must take note of the awakening of the conscience of the humanity, which was helplessly watching while millions died and while millions more continued to suffer in silence because of HIV/AIDS. In mobilising this international public opinion, India, along with Brazil and about 55 African countries, took the lead and the result was the path-breaking Doha Declaration on TRIPS and Public Health. This Declaration provides flexibilities and there is a need to make use of them to the fullest possible extent in our law. And la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, the same would be construed as later enactments. This rationale was also applied by the Supreme Court in Shri Ram Narain v. The Simla banking & Industrial Co. Limited: AIR 1956 SC 614 wherein the Court while applying the principle that a later Act would override the earlier Act, held that the Banking Companies (Amendment) Act 1953 must be treated as a later Act and that would override the provisions of the earlier Displaced Persons (Debts Adjustments) Act, 1951. 143. Thus, the provisions of Chapter XVI of the Patents Act which were substituted with effect from 20th May, 2003 would be considered as a later enactment. As discussed earlier, Chapter XVI of the Patents Act provides for grant of compulsory licences as well as revocation of patents in certain cases including in cases where the reasonable requirements of the public as specified under Section 84(7) of the Patents Act have not been satisfied. Section 84(7) of the Patents Act as pointed out earlier, is couched in wide terms and takes within its sweep instances where a refusal by a patentee to grant licence on reasonable terms results in prejudicing the existing trade or industry or any person or class of persons t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, and not in derogation of any other Act. Notably, while it has been argued on behalf of the Respondents that the proceedings initiated under the Competition Act are maintainable, none of the counsels even remotely suggested that the Provisions of the Patents Act must yield to the provisions of the Competition Act. Although, counsel for the Respondents referred to the non-obstante provision of Section 60 of the Competition Act, the same was only in support of their arguments that the jurisdiction of the CCI must not be curtailed. 148. Thus, in my view Section 60 of the Competition Act, which provides for the provisions of the said Act to have an effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, must be read harmoniously with Section 62 of the Competition Act and in the context of the subject matter of the Competition Act. As discussed earlier, the Competition Act is directed to prohibit certain anti-competitive agreements, abuse of dominant position and formation of combinations which cause or are likely to cause appreciable adverse effect on competition. Plainly, agreements which may otherwise be lawful and enforceab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1956 contains a non-obstante clause and its provisions would, thus, override other laws. The Life Insurance Corporation Act, 1956, on the other hand, did not contain a non-obstante clause. However, the Supreme Court held that the Life Insurance Corporation Act being a special Act would override the provisions of the Companies Act and the Tribunal constituted under the Life Insurance Corporation Act, would have the jurisdiction to entertain any claim of Life Insurance Corporation against erstwhile life insurance companies. 151. Thus, if there are irreconcilable differences between the Patents Act and the Competition Act in so far as anti-abuse provisions are concerned, the Patents Act being a special act shall prevail notwithstanding the provision of Section 60 of the Competition Act. 152. This brings up the next issue, that is, whether there is any irreconcilable conflict between the Competition Act and the Patents Act and whether both the Acts could be construed harmoniously in the context of the Patents Act. 153. It is well established that an inconsistency or repugnancy in statutes cannot be readily inferred and any interpretation that leads to such conflict must, as far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied. In addition, Section 92 of the Patents Act also provides grant of compulsory licences. 158. Undisputedly, several of the instances listed out in Section 84 (7) could be construed, in certain circumstances, as an abuse of dominance if grant of patent rights places the right holder in a position of dominance. Remedy in cases as specified under Section 84(7) of the Patents Act is grant of compulsory licences and a possible revocation of licence thereafter. Section 89 of the Patents Act specifies the general purposes for granting compulsory licences and provides that the powers under Section 84 shall be exercised with a view to secure: "(a) that patented inventions are worked on a commercial scale in the territory of India without undue delay and to the fullest extent that is reasonably practicable; (b) that the interests of any person for the time being working or developing an invention in the territory of India under the protection of a patent are not unfairly prejudiced." 159. It is relevant to note that in terms of Section 84 (4) of the Patents Act, the Controller is empowered to settle the terms on which the compulsory licence is to be granted. Section 90 of the Patent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch year of the continuance of such agreement or ten per cent. of its turnover for each year of the continuance of such agreement, whichever is higher. (d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; (e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any; (f) [***] (g) pass such other order or issue such directions as it may deem fit: Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group. " 162. It is clear from the above that the remedies as provided under Section 27 of the Competition Act for abuse of dominant position are materially different from the remedy as available under Section 84 of the Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utory authority has taken or proposes to take is or would be, contrary to any of the provisions of this Act, then such statutory authority may make a reference in respect of such issue to the Commission: Provided that any statutory authority, may, suo motu, make such a reference to the Commission. (2) On receipt of a reference under sub-section (1), the Commission shall give its opinion, within sixty days of receipt of such reference, to such statutory authority which shall consider the opinion of the Commission and thereafter, give its findings recording reasons therefor on the issues referred to in the said opinion." 165. The above provisions also indicate that the intention of the Parliament is not that the Competition Act impliedly repeal other statutes or stand repealed by other statues that present any inconsistency; but that it be worked and implemented in addition to and in not in derogation of other statues. Therefore, the Competition Act expressly contemplates that statutory orders passed - either by CCI under the Competition Act or by any other statutory authority under any other statute, - be made after the concerned authority has taken into account the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1946 or the orders made thereunder. In other words, the orders made under Section 3 would be in operation in regard to essential commodity covered by the Textile Control order where ever there is repugnancy in this Order with the existing laws and to that extent, the existing laws with regard to those commodities will not operate. By-passing a certain law does not necessarily amount to repeal or abrogation of that law" 168. The provisions of Sections 21 and 21A of the Competition Act, read in the aforesaid context, indicate that the intention of the Parliament was not to abrogate any other law but to ensure that even in cases where CCI or other statutory authorities contemplate passing orders, which may be inconsistent with other statutes, the opinion of the concerned authority is taken into account while passing the such orders. The plain intention being that none of the statutory provisions are abrogated but only bi-passed in certain cases. These provisions - Sections 21 and 21A of the Competition Act - clearly indicates that the intention of the Parliament was that the Competition Act co-exist with other regulatory statues and be harmoniously worked in tandem with those s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y jurisdiction to adjudicate whether an agreement falls foul of Section 3 of the Competition Act. This is so because the Controller of Patents cannot exercise any powers which are not specifically conferred by the Patents Act and by virtue of Section 61 of the Competition Act, the jurisdiction of Civil Courts to entertain any suit or proceedings in respect of any matter which the CCI or the COMPAT is empowered to determine, stands expressly excluded. Thus, in so far as the scope of Section 3 of the Competition Act is concerned, there does not appear to be any overlap or inconsistency with the Patents Act. 173. Facially, it may appear that the gravamen of the two enactments are intrinsically conflicting; however, when one views the same in the perspective that patent laws define the contours of certain rights, and the anti-trust laws are essentially to prevent abuse of rights, the prospect of an irreconcilable conflict seems to reduce considerably. 174. In my view, there is no irreconcilable repugnancy or conflict between the Competition Act and the Patents Act. And, in absence of any irreconcilable conflict between the two legislations, the jurisdiction of CCI to entertain compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ller while considering an application for compulsory licence. Clause (iv) of Sub- section (6) of Section 84 reads as under:- "(iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit: Provided that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anti- competitive practices adopted by the patentee, but shall not be required to take into account matters subsequent to the making of the application." 177. It is apparent from the above that a prospective licensee who applies for a compulsory licence is expected to have made, prior to his application, efforts to obtain a licence on reasonable terms. However, it further specifies that this consideration would not be relevant where the conduct of a patentee is found to be anti-competitive. Mr Katpalia had contended that the above-quoted proviso to Section 84(6)(iv) also refers to anti- competitive practices adopted by a patentee and such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consumers. 181. In addition, both Micromax and Intex have complained that Ericsson's conduct and demands were an abuse of Ericsson's dominant position as SEP holder and violate Ericsson's FRAND assurances. It is further alleged that Ericsson has attempted to conduct FRAND negotiations in an opaque, non-transparent and a high handed manner. It has used threat of litigation to coerce the complainants to agreeing to Ericsson's terms for licensing. This, it is alleged, is the most egregious violations of FRAND obligations. In addition, Micromax complains that Ericsson has also used threats of complaints to SEBI to effectively derail Micromax's public offering and thereby harm its business interest. It is contended that Ericsson has issued the threats solely with the object to coerce Micromax to succumb to Ericsson's demand for excessive royalty in respect of its patents. This according to Micromax constitutes Ericsson's violation of its FRAND obligations. Further Intex has also complained that Ericsson had indulged in "bundling and tying licensing" which according to Intex is anti- competitive and proscribed under the Competition Act. 182. Ericsson, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on FRAND terms. This requires the SEP holder to licence technologies on fair, reasonable and non-discriminatory terms. Concededly, in terms of Rule 6 of ETSI policy, the proprietor of a patented technology, which is included as a part of a standard is obliged to licence its technologies on FRAND terms. 185. Concededly, Ericsson being a member of ETSI is bound to offer its SEPs on FRAND terms. It has been argued on behalf of Ericsson at length that it has acted in accordance with its FRAND assurances and had sought injunctive reliefs only after exhausting all possible avenues for licensing its SEPs on negotiated FRAND terms. According to Ericsson, both Micromax and Intex are unwilling licensees and have effectively declined to accept the licences on FRAND terms. This is seriously disputed by both Micromax and Intex, as a brief narration of the complaints filed by Micromax and Intex indicates. 186. In the aforesaid backdrop, one of the principal issues to be addressed is whether the allegations made in the complaint indicate an abuse of Ericsson's dominant position. A patent holder is granted a statutory right to prevent third parties from making, using, offering for sale, sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the issues on the assumption that the allegations made in the complaint were true. It observed that "when a patented technology is incorporated in a standard, adoption of the standard eliminates alternative to the patented technology". In such circumstances, the patent holder may be in a position to demand supra-competitive royalties. The Court proceeded to hold that "in a consensus-oriented private standard-setting environment, a patent holder's intentionally false promise to license essential proprietary technology on FRAND terms, coupled with an SDO's reliance on that promise when including the technology in a standard, and the patent holder's subsequent breach of that promise, is actionable anticompetitive conduct". 190. The aforesaid judgment was rendered in the context of Sherman Act. The Court held that the allegations satisfied the claim for monopolization under Section 2 of the Sherman Act, which required willful acquisition or maintenance of monopoly power accompanied by some anti-competitive conduct on the part of the possessor. 191. In the Matter of Rambus, Inc., No. 9302, at 4 (F.T.C. Aug.2, 2006), the Federal Trade Commission found that Rambus Inc., a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orange-Book Standard) held that a potential licensee could claim such defence only in limited circumstances where the defendants could establish that (i) they had made an unconditional offer for obtaining a licence which could not be refused by the patent holder without abusing its dominant position and (ii) such terms included the defendants waiving their right to challenge the patent. This view was followed in a number of cases. 194. In recent times, there has been much advancement in the telecommunication sector and technology. Companies - such as Ericsson - have acquired a large portfolio of patents which have been accepted as a part of the standards established by various SSOs. Enforcement of these SEPs has become a major area of dispute between the technology company holding the SEPs and mobile phone manufacturers. Two such cases, one initiated by Motorola for enforcement of GPRS Standard Essential Patents and the other initiated by Samsung for enforcement of UMTS Standard Essential Patents are significant. Both these cases were initiated against Apple in German Courts. In both the cases, negotiations for licences with Apple had broken down and this caused both Samsung and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the German Courts and the EU Commission, the Court stayed the proceedings and referred five questions to the European Court of Justice. In those proceedings, Advocate General Wathelet delivered an opinion to the Court of Justice - as is required under the process of the Court of Justice - recommending what is described as a "middle-path" between protection available to an SEP holder and the implementer. The aforesaid opinion was endorsed by the Court of Justice. The Court of Justice held that a refusal of a proprietor of an SEP to grant a licence on FRAND terms may, in principle, constitute an abuse within the meaning of Article 102 of TFEU. Accordingly, the abusive nature of such refusal may in principle be raised as a defence to the actions for prohibitory injunctions. The Court of Justice further held that the irrevocable undertaking to grant licences on FRAND terms given to a SSO by a SEP holder cannot negate the substance of his patent rights. But, nonetheless, it justifies imposition on the proprietor of an SEP, an obligation to comply with certain specific requirements when bringing actions against alleged infringer for injunctive reliefs or for recall of the infringing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics. Should the alleged infringer not accept the offer made to it, it may rely on the abusive nature of an action for a prohibitory injunction or for the recall of products only if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms. Furthermore, where the alleged infringer is using the teachings of the SEP before a licensing agreement has been concluded, it is for that alleged infringer, from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field, for example by providing a bank guarantee or by placing the amounts necessary on deposit. The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use. In addition, where no agreement is reached on the details of the FRAND terms following the counter-offer by the alleged infringer, the parties m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include such discriminatory condition or price which may be adopted to meet the competition; or (b) limits or restricts- (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access; or (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. Explanation.-For the purposes of this section, the expression- (a) "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to- (i) operate independently of competitive forces prevailing in the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng suits for infringement against Micromax and Intex, Ericsson has also threatened Micromax with complaints to SEBI, apparently, while Micromax was contemplating and/or in the process of floating a public offer of its shares. Such threats were, undoubtedly, made with the object of influencing Micromax to conclude a licensing agreement. It is not necessary for this Court to examine whether in the facts of this case, such threats also constitute an abuse of Ericsson's dominant position. Suffice it to state that in certain cases, such threats by a proprietor of a SEP, who is found to be in a dominant position, could be held to be an abuse of dominance. Clearly, in certain cases, such conduct, if it is found, was directed in pressuring an implementer to accept non- FRAND terms, would amount to an abuse of dominance. (iv)The disputes, being subject matter of suits, could not be entertained by CCI. 201. It has been contended on behalf of Ericsson that since, the disputes between the parties were subject matter of pending suits, the same could not be entertained by CCI. In my view, the aforesaid contention is also unmerited. As explained earlier, the proceedings under the Competitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he complaints made by Micromax/Intex were liable to be rejected by CCI. In my view, the aforesaid contention cannot be accepted. It is Ericsson's case that it is the proprietor of subject SEPs and, therefore, it is not open to Ericsson to contend that its conduct in respect of those SEPs cannot be made subject matter of enquiry by CCI on the ground that SEPs have been denied by Micromax and Intex. As mentioned above, the proceedings under the Competition Act are not in the nature of private lis and the scope of enquiry would be only limited to whether there is any abuse of dominance which is proscribed under Section 4 of the Competition Act. Of course, the conduct of Micromax and Intex would have to be taken into account in determining whether Ericsson had violated its FRAND obligations. 204. The issue whether a licensee/prospective licensee could enter into negotiations for a licence on FRAND terms while reserving its right to challenge the rights of a patentee is also a contentious issue. In the Orange Book Case (supra), the German Federal Court had taken a view that a defence of patent abuse could be claimed by a potential licensee only if the potential licensee has waived its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so. 206. It follows from the above, that a potential licensee, could without prejudice to his rights to challenge the validity of patents could take such steps or proceedings which are premised on the patents being valid. The doctrine of election would have no application in this case and it is not necessary for a potential licensee to elect to accept the validity of patents in order to assail its abuse. 207. In view of the above, it would not be necessary for Micromax or Intex to waive their rights to challenge a patent for instituting a complaint which is based on the premise that Ericsson's patents are valid. The CCI, cannot be faulted for proceeding on the basis that Ericsson holds the SEP's that it asserts it holds; at any rate, Ericsson cannot be heard to complain against CCI proceeding on such basis. (vi) Whether impugned orders are without jurisdiction as being perverse 208. In the given facts and circumstances, it is difficult to form an opinion that the conduct of Ericsson indicates any abuse of dominance considering the fact that it does appear that Ericsson had made efforts to arrive at a negotiated settlement with Micromax and Intex, who on the other hand, appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by Ericsson and must take adequate measures to maintain the same. In a given case of negligence, the CCI/DG may not be immune from a claim of loss or damages if they fail to maintain confidentiality/secrecy of the sensitive information provided to them. As regards the conduct of investigation; needless to state that any arbitrary, unreasonable, capricious or malafide actions would be subjected to judicial review and it would be open for Ericsson to initiate fresh proceedings if the conduct of investigation or any actions of CCI/DG are contrary to the provisions of the Competition Act or fall foul of the constitutional standards required of an authority. 211. It is also necessary to clarify that nothing stated herein should be construed as an expression of opinion - prima facie or otherwise - on the merits of the allegations made by Micromax and Intex; all observations made or views expressed herein are in the context of the jurisdiction of CCI to pass the impugned orders. 212. In view of the aforesaid, the writ petitions are dismissed. All applications also stand disposed of. All interim orders are vacated. However, in the circumstances, the parties are left to bear their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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