Arbitrability Of Competition Law and Intellectual Property Rights Disputes in Light of the Monsanto Judgement

Priyanshi Sarin*

Competition Law and Intellectual property rights (hereinafter, IPR’) form an independent and interdependent relationship. Deliberations on the interrelationship between IPR and Competition Law have gained profound significance. Intellectual Property Rights grant exclusivity and monopoly rights to the creator, on the other hand, competition law aims to discourage the concentration of power in any form. The author would delve into the shortcomings of present dispute resolution pertaining to Competition law disputes which have an element of IPR by analyzing the case of Monsanto v. Competition Commission of India

In the instant case, Monsanto had developed a technology which genetically modified cotton seeds so as to make them resistant against pests and worms. The technology was patented and thereby farmers and seed manufacturers “sub-licensed” the same from Monsanto’s Indian subsidiary MMBL. MMBL while licensing this technology not only imposed a high trait value charge, but also imposed restrictive clauses within the license agreement. The clauses were such that they prevented the sub-licensees from entering into a supply agreement with Monsanto’s competitors and also mandatorily forced the sub-licensees to destroy their “technology infused” cotton crops.

Competition Commission of India found prima facie merit in the case of the petitioners, taking due note of the fact that Monsanto constitutes 99% of the market share in BT technology and thus was dominant. By imposing the above restrictions Monsanto was “abusing” its dominant position and thus CCI invoked its powers under Section 26(1) of the Competition Act, 2002 by ordering the Director General to carry out the investigation. Monsanto approached the Delhi High Court and pleaded that firstly, by virtue of Section 3(5) of the Competition Act, the restriction of “anti-competitive” agreements was not applicable on IPR related disputes. Secondly, it contended that CCI lacked jurisdiction in this matter by arguing that even if Monsanto’s practices were unfair, the matter should have been referred to the Controller of Patents. The Delhi High Court refuted both the arguments by stating that section 3(5) permits an Intellectual property right holder to impose “reasonable conditions”, the criteria which Monsanto nullified and also established the supremacy of Competition Commission of India in competition law and IPR related disputes.

COMPETENCY OF COMPETITION COMMISSION

It is pertinent to note, that while Competition Law was apprised properly by the Commission; it failed to analyse the case from the perspective of “patent law”. Firstly, the author would like to argue that for being deemed as an agreement under Section 2(b) of the Competition Act, the parties should enter into arrangement or understanding or action in “concert.” The allegations of unreasonable conditions establishes that the seed manufacturers were not in concert with MMBL. Thus, the CCI erred in holding MMBL liable under section 3(4) of the Act, since the said agreement was not as per the requirement of the Competition Act. Indeed, there was an agreement but it was a “Patent licensing agreement” which by its very nature grants the licensor the right to impose certain conditions. The validity of such conditions is determined in light of Section 140 of the Patents Act. As a matter of fact, in the prominent case of FICCI Multiplex Association of India v. United Producers/Distributors Forum, CCI stated that there was a clear violation of Section 3(3) of the Act as it was found that the members of United Producers/ Distributors Forum formed a cartel for extracting higher revenues. Thus, section 3 is applicable when there is “an anti- competitive agreement” such as in the case of cartels.

Additionally, the conditions imposed by MMBL were similar to the ones as were imposed by Monsanto in the case of Bowman v. Monsanto Co., In this case, Vernon Hugh Bowman was a farmer who licensed Monsanto’s genetically modified soybean seeds, which were glyphosate-resistant, for planting his first season crops and then sold the crops to a local grain silo as stipulated under the agreement. The agreement stated that; ‘To use the seed containing the Monsanto gene technologies for planting commercial crops only in a single season. To not supply any of this seed to any other person or entity for planting, and to not save any crop produced from the seed for replanting, or supply saved seed to anyone for replanting. To not use the seed or provide it to anyone for crop breeding, research, generation of herbicide registration data or seed production.’ In order to escape payment of a hefty license fee, for the second season Bowman bought seeds from a local grain silo assuming that most of the seeds would have the benefit of Monsanto’s technology and thereby would be glyphosate-resistant (Roundup Ready). The farmer was successful in growing round-up ready seeds for over eight years without paying the licensing fees and thereby was sued by Monsanto for Patent infringement. The US Supreme Court held Bowman liable for patent infringement and emphasized that Patent law gives the patent owner the right to exclude others from making, using, selling, or importing a patented invention. Nonetheless, whether the conditions were reasonable in the Indian scenario or not should have been determined under the Patents Act by the appropriate authority.  The author in no way supports Monsanto’s exploitation of farmers in India, but advocates the need for appreciating and interpreting all the legal issues.

ARBITRATION AND LITIGATION: OPPOSITES ATTRACT

There is a constant tussle in determining the appropriate adjudicating forum when there persists an interface between Competition Law and Intellectual Property Laws. Bombay High Court established jurisdiction of Competition Commission of India over IPR disputes in the case of Aamir Khan Productions Pvt. Ltd.. Subsequently, the Delhi High Court in Telefonaktiebolaget Lm Ericsson v. Union of India &Ors., attempted to strike a balance between Competition Law and IPR. It held that CCI cannot be ousted from its jurisdiction solely on the grounds that the case falls under the purview of the patent controller. However, at the same time it “cautioned” CCI to limit its inquiry as to whether in the instant matter the applicant abused its dominant position. It can be deduced that since CCI can inquire only as to the dominance aspect of a case, it is neither competent nor permitted to render its ratio decidendi  by adjudging a case from the lens of Patent Law.

The author argues that giving supreme jurisdiction powers to CCI undermines legal issues related to IPRs.  The “end” i.e. judgment reached by CCI is correct and approved by the Delhi High Court however the “means” i.e. appreciating relevant laws is deficient. Thereby, the author recommends arbitrability of Competition and IPR Law disputes. In the Monsanto judgment, it would be fair to deduce that by way of appealing in the Delhi High Court against CCI, it has managed to stall the investigation ordered by CCI.  To ensure speedy disposal of cases and that the arbitrators are well-versed with both the laws, it is recommended that an arbitral tribunal is appointed for dealing with anti-trust issues flowing from Intellectual property rights. The said arbitral tribunal should comprise two arbitrators, one should be an expert in IPR laws and the other in Competition Laws.

India can amend its laws related to antitrust and IPR, to make the disputes amenable to arbitration. This will bound parties to arbitrate the matter which will help shed some workload and increase efficiency of resolving the disputes. Experts in these two fields would help reinforce satisfactory compromise between incentivising innovation and ensuring fair market competition. International recognition of ADR mechanisms as a means of resolving IPR infringement suits builds foundation blocks for this proposal. IPR disputes such as those which revolve around Patent law are arbitrable under Section 294 of the US Patents Act. Hong Kong, by the way of a recent amendment, has made all IPR related disputes arbitrable. Additionally, Singapore has also IPR disputes amenable to arbitration, wherein a dedicated panel of IPR arbitrators at the Singapore International Arbitration Centre contribute immensely to the success of IPR enforceability.

In order to avert any potential risk of misapplication of competition laws by the arbitrators; Indian laws can adopt the “second-look doctrine” as has been expounded by the US Supreme Court in Mitsubishi Motors v. Soler Chrysler-Plymouth. As per this doctrine, arbitral awards prior to their enforcement can be assessed by the Competition Commission and then by the Courts so as to mitigate the chances of any error that may be committed by the arbitrators. The author believes that the adoption of the second-look doctrine would not only establish credibility to the final judgment but also harmonise the tense relationship between arbitration and litigation. The above-proposed mechanism would establish that both of them are complementary dispute resolution regimes for enforcing rights and more importantly counter the argument that arbitration can only be dealt for private matters and not antitrust/IPR related laws which form an integral part of public policy.

CONCLUSION

The article commenced with the examination of Monsanto judgment in order to delineate the flaws in the present legal regime and thereby has suggested some modifications. The Arbitration Act is implicit while stating that all such disputes which stem from a legal association, which may or may not be contractual in nature, are in fact, arbitrable. The detrimental block to this positive notion lies in the strict compartmentalization and the prevalent distinction between “right in rem” and personam accompanied with a discretionary power granted to courts to struck down arbitral awards on grounds of public policy. The need of the hour is thereby to restructure arbitration laws in a manner which explicitly determines tribunal’s jurisdiction and also breaks-free from the underlying jurisprudence outlined in Booz Allen which limits the scope of this act. It can be deduced that in order to garner a complimentary and level-playing relationship between IPR and Competition Laws which shuns away superiority to either laws, the establishment of an expert arbitral tribunal is inevitable.


* Priyanshi is a fourth-year student at Symbiosis Law School, Pune. She can be reached via her LinkedIn.


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