Monsanto under Scrutiny Over Abuse of Dominant Position
Monsanto and its Indian subsidiary, Mahyco Monsanto Biotec (India) Pvt Ltd (MBML), are embroiled in several disputes with its licensees and other seed manufacturers over Bt Cotton Technology (Bollgard-I and Bollgard-II). The technology was patented and sub-licensed by MBML in two parts 1) a non-refundable fee to be paid upfront 2) a recurring fee to be paid, referred to as “trait value” to be determined based on selling price of seeds. The seed companies have alleged that Monsanto, through MBML, is abusing its dominant position by charging higher royalty fees or trait value. This post analyses whether it is within the domain of the Competition Commission of India (CCI) to examine matters involving abuse of dominant position involving patent rights. Or it should be the role of Controller of Patents and be the first port of call being the designated authority for grant of Patents and compulsory license. The post also examines the interplay between competition laws and intellectual property laws.
Monsanto Holdings Pvt. Ltd (MHPL) and MBML have filed a petition challenging the order[i] wherein CCI ordered an investigation on their alleged abuse of dominant position in India in Bt cotton business by directing an investigation into activities of Monsanto. Monsanto has argued that CCI does not have jurisdiction to deal with issues relating to IPRs (patent). The order of investigation by CCI arises out of a complaint filed by the Seed companies[ii] alleging Monsanto exploiting its dominant position is charging excessive licensing trait fee/royalty and using discriminatory licensing terms for “Bt. Cotton Technology (Bollgard -II)”. The main allegations by the complainant of Monsanto being in a dominant position were: –
- No substitute for Bt. Technology – Monsanto has market share and accounts for 99% of the Bt. Cotton Technology cotton seeds which make it dominant in the relevant sector. And by charging excessive trait fees, Monsanto has abused its dominant position, which would not have been the same if there was adequate competition in the relevant market.
- Clauses that stifle competition – Clauses of the sub-licensing agreement requires licensees (seed companies) to notify Monsanto before dealing with its competitor and failing to do so renders revocation of the sub-license agreement.
- Policy of selective licensing – Monsanto refuses to sub-license Bt. Technology to the licensee that deals with competitors. This practice has denied market access to other seed companies.
The CCI held the conduct of Monsanto 1) in imposing unfair conditions in the Sub-license agreements 2) charging unreasonably high fees for Bt cotton seeds violate Competition Act, 2002. CCI opined the restrictive licensing terms acted like a barrier for other Seed companies entering the market. Furthermore, an embargo on dealing with Monsanto’s competitors resulted in the restriction of the development of alternate technologies.
The ruling of Delhi HC
Monsanto challenged the preliminary finding of CCI and order to investigate by way of the writ to the Delhi High Court (DHC). The main issue before DHC was to determine whether CCI has jurisdiction to govern the abuse of a dominant position by a Patentee. Court’s response to the allegations put forth by Monsanto:-
- Is Jurisdiction of the CCI excluded-
Monsanto- Patents Act[iii] provides a remedy of seeking compulsory license where a patentee has unjustifiably withheld the grant of a license. Thus Controller and not CCI is to gauge whether there is any appreciable adverse effect on the competition by not licensing the technology to specific manufacturers of companies.
Court held – Competition Act is in addition to Patents Act and the licensee has full right to approach the Controller for grant of a compulsory license without affecting its right of approaching CCI claiming abuse of dominant position or anti-competitive agreement.
- Provision of Patents Act mirrors to Anti-competitive provisions in Competition Act –
Monsanto – Where a patentee is abusing his position of dominance, Patents Act has a provision[iv] which regulates the patents rights when found to be anti-competitive.
Court held – Patents Act empowers Controller to govern abuse of a dominant position of the patentee only. In contrast, Competition Act[v] empowers CCI to regulate abuse of a dominant position by an enterprise that materially bifurcates the remedies provided by both the statutes.
- Impact of Ruling by Supreme Court in Competition Commission of India v. Bharti Airtel Ltd. And Ors[vi] –
Monsanto – In the present case, the Supreme Court (SC) ousted the CCI’s jurisdiction to entertain complaints regulated by ‘specialized statutory bodies’ (in the current dispute, Patent Controller).
Court held – The issue before SC was of such nature that there was a requirement of TRAI’s domain expertise owing to which SC referred back the matter to TRAI, and hence, CCI had to await for TRAI’s recommendation. The decision in Bharti Airtel Ltd cannot be taken as an authority for the proposition that wherever there is a statutory body, the complaint must be first placed before the body. Further examination of a complaint by the CCI is contingent on the findings of the statutory body.
- Is Section 3(5) of Competition Act a savior for every conditions imposed? –
Monsanto – Section 3(5) of Competition Act permits IPR owners to (i) right to restrain infringement of IPR, (ii) or to impose other reasonable conditions by entering into a contract. The term ‘other reasonable’ encompasses the act of imposing conditions in its sub-license agreement.
Court – Section 3(5) cannot be dissected in the manner as Monsanto contended. In no way, the term “or to impose reasonable conditions” can be read as a right of the patentee to include unfair conditions under the guise of protecting its rights that far exceed those that are necessary. CCI is the authority to determine the reasonability of terms incorporated in the agreement.
- No interference with CCI order –
Order passed by CCI under Section 26(1) of the Competition Act is an administrative order and, therefore, unless the order founds to be arbitrary, unreasonable, no interference would be warranted.
The ruling clears the path for CCI investigation in cases where the subject of a license is a patented technology. The current situation is not the first case where the High Court has held that CCI has the power to investigate, whether the terms of a license are reasonable and do not impede competition. CCI is also investigating Ericsson that owns Patents over 3G technology licensed on FRAND terms being a Standard Essential Patent. The challenge to the High Court by Ericsson had met with a similar fate. The decision further highlights that a patent grant is not an absolute right. In particular where such technologies have a public interface, and the terms of license would dictate its availability and cost to the user.
[i] 10.02.2016 in Case 02/2015
[ii] Department of Agriculture, M/s Nuziveedu Seeds Limited (NSL), M/s Prabhat Agri Biotech Limited (PABL) and Pravardhan Seeds Private Limited (PSPL)
[iii] Section 84
[iv] Section 140 and Section 84(7)
[v] Section 3 & 4
[vi] Civil Appeal No. 11843/2018, decided on 05.12.2018