CCI To Investigate Monsanto’s Cotton Licenses; Delhi High Court Refuses To Interfere

Monsanto (Monsanto Holdings Pvt. Ltd., Monsanto Company, Mahyco Monsanto Biotech (India) Pvt. Ltd. (hereafter ‘MMBL’)- collectively referred to as “Monsanto”) is a group of companies engaged in developing technology for producing genetically modified seeds. It has developed and commercialized Bt. Cotton Technology (Bollgard-I and Bollgard-II) which makes the cotton seeds resistant to Bollworm. This invention is patented by Monsanto and licensed to MMBL (Monsanto’s Indian counterpart) in India. MMBL, in turn sub-licensed the technology to various seed manufacturers in India. As consideration for sub-licensing the technology, a non-refundable fee (to be paid upfront) and a recurring fee (known as “trait value”) was charged. Some of the seed manufacturers, Nuziveedu Seeds Ltd., Prabhat Agri Biotech Ltd. and Pravardhan Seeds Pvt. Ltd. (collectively referred to as “Manufacturers”), disputed the royalty charged by Monsanto in its sub-license fee.

The Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture and Farmers Welfare, Government of India (‘MOA&FW’) and the Manufacturers (together referred to as “Informants”) approached the Competition Commission of India (“CCI”) alleging that Monsanto’s practices relating to imposition of exorbitant trait fee for using the technology for manufacturing Bt. Cotton Seeds were anti-competitive and therefore in contravention with Sections 3 and 4 of the Competition Act. It is the case of the Informants that the Bt. Cotton Seeds sublicensed by Monsanto are used to cultivate 99% of the Cotton produce in India. This clearly makes Monsanto a dominant player in the market. By charging an excessive and unfair fee and restrictive and unfair terms of sub-licensing, the Informants state that Monsanto has resorted to Anti-competitive practices. The CCI found the allegations made by the Informants prima facie hold merit. It also held that prima facie, the conditions imposed in the sub-licence agreements were harsh and not reasonable for protecting the IPR rights, as is claimed by Monsanto.

Monsanto filed a petition at the Delhi High Court Monsanto Holdings Pvt. Ltd. And Ors v. Competition Commission of India And Ors.1 challenging the order of CCI directing an investigation into Monsanto’s activities. Monsanto challenged the jurisdiction of CCI over a matter related to licensing of patents. It stated that this was exclusively within the jurisdiction of the Controller of Patents. It also argued that the Patents Act exclusively governs all practices and contracts relating to exercise of patent rights and the remedies against their alleged abuse would fall exclusively within the ambit of the Patents Act.

Monsanto cited the Ericsson2 case and stated that since there is a repugnancy between the Patents Act and the Competition Act, the Patents Act will prevail. The Court however observed that, “the various provisions of the two enactments, concluded that the orders that can be passed by the CCI under Section 27 of the Competition Act in respect of abuse of dominant position by any enterprise are materially different from the remedies that are available under Section 84 of the Patents Act.” It further observed that as per Section 21 and 21 A of the Competition Act, any Regulator and the CCI have the power to refer matters to each other as the case may be. Thus, it observed that, the legislative intent, to ensure that the provisions of the Competition Act are implemented in addition to the provisions of other statutes, is apparent. Also, the other important case relied upon by Monsanto was Bharti Airtel3. However, in this case also the Supreme Court has not ousted the jurisdiction of CCI. With respect to Bharati Airtel, the Court held that the deductions made with respect to TRAI are not verbatim applicable to the Controller of Patents, even though both are specialised regulatory bodies in this case. This is because, both, the scope of the issues in that case and the powers of the TRAI are different from the dispute in this case and the scope of powers of the Controller of Patents.

In view of the above, this Court held that it found no reason to interfere with the impugned order. It also observed that “an order passed by the CCI under Section 26(1) of the Competition Act is an administrative order and, therefore, unless it is found that the same is arbitrary/ unreasonable, etc.., no interference would be warranted.” Thus the petition filed by Monsanto was dismissed.

1W.P.(C) 1776/2016 and CM Nos. 7606/2016, 12396/2016 & 16685/2016

2Telefonaktiebolaget L.M. Ericsson v Competition Commission of India & Another: W.P.(C) 464/2014 decided on 30.03.2016

3Competition Commission of India v. Bharti Airtel Ltd. And Ors.: Civil Appeal No. 11843/2018, decided on 05.12.2018