Mediation processes and out-of-court settlements between warring parties must be respected by all courts and authorities and the Competition Commission of India is no exception to it, the Delhi High Court has recently held.
Essentially, the court has said that once parties to a dispute have settled among themselves, then the said settlement must have an element of finality attached to it and unless the settlement is alleged as an abuse of dominance, the same would not be liable to be examined by the CCI.
The court said so in the backdrop of a design infringement suit filed by JCB India Ltd. against Bull Machines Pvt., alleging an infringement of copyright and piracy of registered design of backhoe loaders.
During the pendency of the dispute, BMPL went to the CCI, seeking an investigation into JCB's abusive conduct, alleging that JCB filed the design infringement suit as sham or predatory litigation in order to prevent BMPL from launching its product in the market.
BMPL also complained that JCB was attempting to evergreen its fraudulently obtained intellectual property rights. As a result, the CCI directed an enquiry into JCB's conduct on the basis of BMPL's complaint.
A lot of back and forth between the two parties finally resulted in a top court approved settlement in 2021, which prompted them to file an application before the high court seeking to quash the investigation initiated by the CCI. The high court agreed.
It held that the entire basis of CCI's investigation was based on the fact that JCB initiated sham litigation against BMPL, so that the latter could not sell its product in the market.
Permitting continuation of the proceedings before the CCI after the core dispute has been settled would be contrary to the spirit of mediation itself, the high court said.
Rohan Arora, partner at Shardul Amarchand Mangaldas, remarked that the judgment is important in terms of the CCI being told that where the parties have settled, then it is prudent for the commission to dispose of the case.
Arora added that the court has recognised that settling and ending disputes quickly rather than leaving it hanging in long-term litigation is better for markets and for consumers.
CCI's Jurisdiction Curtailed
While penning the verdict, the high court said that the CCI does not have jurisdiction to decide whether it was a case of sham litigation or not and neither did it have the authority to decide on the aspect of design infringement. "The former is in the domain of the high court and the latter is in the domain of the patent and design office," the court said.
In essence, the court remarked that the CCI's over-involvement post-settlement would disrupt the harmony and finality that mediation seeks to achieve, undermining trust in both the mediation process and the regulatory body itself.
KK Sharma, former director general at the CCI, said jumping the gun and hurriedly concluding that the case involved "bad-faith litigation" and "fraudulent evergreening of patents", which is the exclusive domain of other authorities, without consulting them, has given rise to a ruling that has the potential to undermine the commission’s own authority.
Had the CCI undergone a due consultation process with the patent and design office and the high court, it would have been a foolproof case to initiate an investigation against JCB, Sharma said.
Sharma added that a good number of CCI cases fall flat due to technical and procedural lapses.
In so far as private settlements in competition disputes are concerned, the verdict seems to have shut the CCI's jurisdiction once a private settlement between disputing parties has been effectuated.
This would strike a blow to the CCI's traditional view that private settlements between two parties should not affect its decision-making over a public wrong, Dinoo Muthappa, partner at AZB & Partners, told NDTV Profit.
While a dispute may be between X and Y, CCI's investigation primarily deals with public wrongdoing to ascertain whether the impugned conduct has had a large-scale market impact or not.Dinoo Muthappa, Partner, AZB & Partners
Muthappa cautioned that the high court's observations could encourage cases where parties file cases before the commission only to obtain leverage for an out of court settlement.
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How Far Can CCI Stretch Its Hands On IP Disputes?
An interesting observation fell from the high court wherein it said that every intellectual property dispute cannot be converted into a competition dispute as it would severely impinge upon statutory rights protecting intellectual property.
While intellectual property rights recognise, grant and enforce monopoly rights, under certain circumstances, competition law does not encourage monopolies. The recognition of monopolies under IP laws is for the purpose of encouraging innovation and creativityDelhi High Court
The Competition Act itself recognizes that there are restrictions on the CCI's power while adjudicating IP disputes, Muthappa said.
However, Muthappa added that it's very factual in terms of when a conduct concerning or related to an IP right restricts competition, and authorities all over the world have a hard time grappling with this. Globally, the position is that competition law does not really concern itself with the existence of an IP right, but with the exercise of that right.
Notably, the CCI's appeal in the Monsanto case is pending before the Supreme Court as of now and a clearer answer pertaining to the jurisdictional overlap between the Competition Act and various IP laws will be available once the top court finally adjudicates the matter.
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