CCI focuses on abuse of judicial process during IP rights enforcement

Over the past few years the Competition Commission of India (CCI) has taken up a number of cases involving the enforcement of IP rights. Some of the big market players under investigation for their alleged use or abuse of IP rights include:

• Google for the use of trademarks in its AdWords programme;
• Ericsson for its standards-essential patents;
• Super Cassettes for its music licensing practices to radio broadcasters; and
• Gilead for its patent licensing agreements with generic pharmaceutical manufacturers.

The first three actions (the complaint against Gilead was dismissed) are pending investigation and adjudication by the CCI.

The latest IP case on the CCI’s roster is a complaint against JC Bamford (JCB) by Bull Machines, a smaller competitor, alleging that bad-faith litigation by JCB intended to harass and prevent the commercial launch of a competing backhoe loader (the CCI’s order is available here).

Facts
The alleged bad-faith litigation occurred during the course of a lawsuit filed by JCB before the Delhi High Court on November 25 2011 alleging that Bull Machine’s backhoe loader infringed registered designs belonging to JCB.

The Delhi High Court granted an ex parte interim injunction restraining Bull Machines from infringing JCB’s IP rights and from advertising the impugned machines at Excon 2011, an internationalconstruction equipment exhibition. The court also granted an Anton Piller order appointing two local commissioners to collect and preserve evidence from the premises of Bull Machine’s factory and office. Although ex parte interim injunctions and Anton Piller orders for the collection of evidence are considered extraordinary judicial remedies in India, the Delhi High Court routinely grants such orders for the enforcement of IP rights.   

According to Bull Machines' version of events, representatives from JCB used the Delhi High Court's order to force Bull Machines to remove its products from Excon “in front of a huge crowd” of dealers, industry peers and the media. Further, on the same day, JCB’s lawyers  visited the premises of Bull Machines, along with the court-appointed local commissioners, who seized and sealed “all the documents, moulds, components”, resulting in the cessation of work at Bull Machine’s manufacturing plant. In effect, Bull Machine’s launch of its new backhoe loader came to a grinding halt even before it began.

Around 10 months after filing the suit and after having had an opportunity to inspect the allegedly infringing machines, JCB withdrew its application for an ex parte interim injunction. Thus, the Delhi High Court vacated the interim injunction against Bull Machines, which claimed to have suffered huge losses due to the interim injunction.

Issues before the CCI
When ordering the investigation into JCB’s activities, the CCI observed that “predation through abuse of judicial processes presents an increasingly threat to competition, particularly due to its relatively low anti-trust visibility”. It was of the "prima facie opinion that JCB by abusing their dominant position in the relevant market sought to stifle competition in the relevant market by denying market access and foreclosing entry of ‘Bull Smart’ in contravention of the provisions of Section 4 of the Act”.  

This may be the first time that the CCI has investigated abuse of the judicial process during the enforcement of IP rights. The case should be of interest to anybody involved in such enforcement.

Since this case is the first of its kind, it is difficult to predict which test the CCI will adopt in determining JCB's conduct. However, it can be presumed that the intentions and knowledge of JCB officials at the time of filing the suit before the Delhi High Court will be the focal point of investigation. Equally important will be the manner in which the design registrations were procured from the Patents and Designs Office.

It will also be interesting to see whether the CCI investigates the manner in which the Delhi High Court's orders were enforced by JCB, especially the Anton Piller order.   

Interplay between Code of Civil Procedure and Competition Act
An interesting issue which is likely to come up during the course of the proceedings is the interplay between the Competition Act and Section 35A of the Code of Civil Procedure 1908, which provides for compensatory costs in case of false or vexatious claims or defences. As per this provision, the court hearing the vexatious litigation has jurisdiction to impose costs. The standard of proof required under this law is “knowledge” of the vexatious nature of the claim. This provision was inserted into Indian law in 1977 to deal with increasing instances of vexatious litigation taking place in Indian courts and costs were capped at a mere Rs3,000. The provision is rarely used in civil litigation in India and it is unknown whether Bull Machines requested the Delhi High Court to award it costs under Section 35A of the code.