The Delhi High Court stated that every IP dispute can’t be converted into a competition dispute.
The bench observed that the spirit of mediation in any dispute is for bringing finality to a matter. Mediations and settlements play a crucial role in dispute resolution by providing a faster, more cost-effective, and less adversarial alternative to litigation. These mechanisms help preserve business relationships, reduce the burden on the judicial system, and allow parties to reach a mutually agreeable solutions tailored to their specific needs.
The court said that the CCI argues that despite the settlement, the inquiry before the CCI should continue in order for the CCI to explore if there is a chance of the settlement being anti-competitive. If the CCI’s argument is accepted, it could mean that despite the settlement, the CCI can proceed with an inquiry under Section 26 of the Act, thereby prejudicing the settlement. This possibility undermines the core principles of mediation by creating uncertainty and instability for the parties involved.
It was observed by the court that the potential for the CCI to continue an inquiry after a settlement has been reached, could even jeopardize the settlement, dissuading parties from opting for mediation in the first place. It could lead to a lack of trust in the mediation process, as parties may fear that their efforts to settle disputes amicably would be disregarded. Moreover, settlements in general being agreements voluntarily agreed to between parties, unless there is an extraordinary situation, they cannot be permitted to be reopened – so as to ensure ‘FINALITY’ and ‘CLOSURE’. Furthermore, the threat of continued investigations by the CCI could compel parties to engage in prolonged and costly legal battles, defeating the purpose of settlements.
The court noted that the Information under Section 19(1) of the Act in the present matter itself is clearly based on the filing of the infringement suit CS(OS) 2934/2011 by JCB against BMPL.
“A conjoint reading of the Information and the impugned order dated 11th March, 2014 leaves no manner of doubt that the core of the impugned order of the CCI, is the filing of the Delhi High Court infringement proceedings which were termed as bad faith litigation and nothing more”, the bench said.
The court further stated that allowing CCI to proceed with an inquiry post-settlement would undermine this fundamental purpose by reopening issues that the parties have already agreed upon and resolved. It would also be a carte blanche to perpetuate the CCI inquiry and pressurize the opposing party. Moreover, the question whether the suit was maintainable is not for CCI to decide. The CCI also cannot decide whether the designs registrations are valid or not. The former is in the domain of the High Court. The latter is in the domain of the Patent and Design office.
It was added that the CCI proceedings in the matters cannot be permitted to hang like a Sword of Damocles on both parties i.e., JCB and BMPL when both parties have themselves sought disposal of the CCI proceedings by a joint application.
“Mediation processes and settlements have to be recognised and acknowledged by all Courts/fora where disputes are pending. Regulatory authorities such as the CCI are no exception to the same. It is imperative that the CCI and similar bodies honour the outcomes of mediation and respect the settlements reached between parties. By doing so, they not only uphold the legitimacy and reliability of the mediation process but also foster a legal environment where parties are encouraged to resolve disputes amicably without fear of subsequent regulatory interference. Furthermore, when regulatory authorities like the CCI respect mediation settlements, it prevents the undermining of negotiated agreements and protects parties from the threat of ongoing inquiries. This recognition reinforces the concept that mediation is not merely a preliminary step but a conclusive process that provides binding and enforceable outcomes”, the court observed.
Facts
A suit was filed by JCB against BMPL seeking an injunction restraining infringement of copyright, piracy of registered design, passing off etc. The said suit was filed before the Original Side of the Court and an ex-parte ad interim injunction was granted in favour of JCB. Vide the said order local commissioners were also appointed to visit various premises of BMPL in Bangalore, Coimbatore and Noida for seizure of products.
Considering that the suit was based on the registered designs of JCB, the Defendant therein i.e., BMPL chose to challenge the validity of the said designs. BMPL then filed cancellation petitions before the Controller of Designs.
However, parallelly, an interim arrangement was arrived at between the parties, which was recorded. Some settlement negotiations ensued between the parties and BMPL agreed to change the design of some of its parts during negotiations.
While the said settlement talks were underway, BMPL filed an Information under Section 19(1)(a) of the Competition Act, 2002 before CCI in December, 2013. JCB sought intervention by way of an application and sought a hearing before the CCI, which was, however, rejected by the CCI. Thereafter, CCI passed the order directing an inquiry under Section 26(1) of the Act.
Conclusion
The court observed that 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 creativity. The same also has a statutory basis. Every IP dispute cannot be converted into a competition dispute as it would severely impinge upon statutory rights recognised under various statutes protecting intellectual property. Moreover, any attempt to hijack an IP dispute from the jurisdiction of a High Court or a commercial court to the Competition authority has to be viewed with caution and in a manner so as not to tread upon the forum seized of the IP dispute.
The bench held that the substratum of the dispute being the design infringement action filed by JCB for protection of its registered designs, the said suit having itself being settled, therefore the CCI proceeding cannot continue and deserves to be disposed of.
Case Details
Case Name: Jcb India Limited And Anr V/S The Competition Commission Of India And Anr
Citation: W.P.(C) 2244/2014 & CM APPL. 31397/2021
Court: Delhi High Court
Coram: Justice Prathiba M. Singh Justice Amit Sharma