“ABUSE OF DOMINANCE” IN THE LIGHT OF TELEFONAKTIEBOLAGET LM ERICSSON V/S COMPETITION COMMISSION OF INDIA

The Competition Act, 2002 under section 4 specifically forbids any enterprise from abusing its dominant position. The term ‘Dominant Position’ means a position of strength enjoyed by an enterprise  in a relevant market, in India, which enables it to:

1. Operate self-sufficiently irrespective of the competition forces prevalent in the relevant market; or
2. Affect its competitors or customers or the relevant market in its favor.

Below mentioned activities may be called abuse of dominance:

1. Directly or indirectly imposing discriminatory conditions on the purchase or sale of goods or service, including predatory pricing;
2. Limiting or confining the production of goods or delivery of services; or limiting technical or scientific development to the prejudice of customers;
3. Indulging  in the denial of market access;
4. Utilization of a leading position in one relevant market to enter into, or protect another related market.

Section 19(4) of the Act empowers the Competition Commission of India (CCI) to determine whether any enterprise abuses a dominant position or not in the relevant market. The mere presence of dominance is not scowled upon unless the dominance is abused.

Micromax and Intel had filed a petition under the CCI alleging abuse of dominant position against Ericsson, contending that Ericsson demanded excessive royalty based on the sale value of the entire phone rather than on the value of the patented technology.

Ericsson while objecting to the said allegations contended that CCI lacked jurisdiction to try the matter, as an abuse of patent rights must be dealt with under the Patents Act and Competition Act. The CCI while dismissing the jurisdictional challenge observed that it had jurisdiction to try the matter, as elements of the Competition Act were present. It also found that a prima facie case of abuse of dominance was made out based on the allegations made by the petitioners and accordingly, ordered investigation under section 19(4) of Competition Act. To this Ericsson moved the Delhi High Court under article 227 of the Constitution and challenged the order of the CCI.

The Delhi High Court in response upheld the order passed by the CCI directing investigation into the allegations of abuse of dominance against Ericsson in respect of its actions as a Standard Essential Patent (SEP) holder. The Court further held that the remedies provided by both the laws for abuse of patent rights are different. While the Patent Act provides the remedy of compulsory licensing, the Competition Act under section 27 provides for penalties, cease-desist orders etc. It held that the two laws are not inconsistent and the CCI has the right to exercise jurisdiction even when there is a pending civil suit for patent infringement. The present decision marks a debut in the jurisdiction of the CCI with respect to anti-competitive actions of essential patent holders vis-a-vis implementers of the standard.  The second objection raised by Ericsson was that it was exercising its right as a legitimate patent holder and hence there was no abuse of dominant position.

The Court referred to Motorola v. Apple, Huawei Ltd. v. ZTE to answer the question of abuse of dominance by the SEP holders by failing to disclose patents during a standard-setting process or by seeking injunctions in the Courts. The Court, therefore, concluded that by filing an injunction or demanding excessive royalty, Ericsson could abuse the dominant position as the pressure of legal action could easily persuade the implementer to enter into a one-sided licensing agreement, which would thereby adversely affect the consumers.

This decision has opened a pathway to the SEP-FRAND jurisprudence in a country like India where the majority of the players are implementers and not SEP holders.

There is a possibility of abuse of dominance in the following respects:

1. Refusal to license on FRAND terms or levying excessive license fee by the SEP holders;
2. Speedy conclusion of licensing agreement by the implementers due to the threat of initiation of legal action or injunction by the SEP holders;
3. Bringing abuse of dominance claims parallel to the patent validity suits in the civil courts by the implementers.

This judgment is a locus classicus on the coexistence of Competition law and the IPR regime in India and has also offered to be a stepping stone in the SEP-FRAND regime in India.