PPP, a small scale industry company, is engaged in manufacturing of low cost backhoe loaders, called 'Bull Smart', light construction equipment. It informed the Competition Commission of India (CCF) alleging that QQQ, a
CS Professional · Intellectual Property Rights - Law and Practice · PYQS · December 2020
PPP, a small scale industry company, is engaged in manufacturing of low cost backhoe loaders, called 'Bull Smart', light construction equipment. It informed the Competition Commission of India (CCF) alleging that QQQ, a competitor company, inter alia, was contravening the provisions of section 4 of the Indian Competition Act, 2002. QQQ is stated to be India's largest manufacturer of construction equipments and has been engaged in manufacturing of 21 different construction and earthmoving machines under 7 product types such as Backhoe Loaders, Loading Shovels, Tracked Excavators, Compactors, Telehandlers, Skid Steer Loaders and Pick and Carry Cranes in India. QQQ's market share was 75%. The large sized QQQ has been operating independently of competitive forces in the relevant market. As per the information furnished by PPP, the product 'Bull Smart' was exhibited at an 'Exhibition' in Bangalore, one of India's premier earthmoving machinery exhibitions and the product was due to be launched in November, 2011 in the said Exhibition. It was stated by PPP that 'Bull Smart' became a sensation and received overwhelming appreciation from existing and potential customers and peers from across the industry and attracted heavy crowds on the very first day of the Exhibition because it was an indigenously developed 60 HP hydrodynamic transmission based backhoe loader. PPP alleged that during the formal launch of 'Bull Smart' at the Exhibition, it was served with an ex parte interim injunction order granted by the Hon'ble High Court of Delhi on an application by QQQ alleging that PPP had infringed the design registrations/copyright of QQQ in developing the backhoe loader 'Bull Smart'. The said order restrained PPP and its dealers 'from making, selling, offering for sale, dispatch, advertising, directly or indirectly dealing in/launching backhoe loaders in any manner'. It was the case of PPP that QQQ obtained the ex-parte ad interim injunction order based on misrepresentation of images/design registration number/documents and bogus numbers, suppression of its pre-existing UK patent, misrepresentation by comparing the wrong angle of the images in the application and reliance upon fraudulent design registrations which were pre-existing in the public domain. It was further averred that QQQ, armed with the ex parte order of the Hon'ble Delhi High Court, forced PPP to remove the backhoe loader 'Bull Smart' from the Exhibition in front of a huge crowd of dealers, existing and potential customers, end-customers, financing company officials, bankers, suppliers, foreign delegates and peers in the industry and media. Furthermore, PPP stated that pursuant to the said order, teams consisting of local commissioners appointed by the Hon'ble Delhi High Court along with the officials of QQQ and their advocates visited PPP's manufacturing plant and stopped the operations and production of the backhoe loader 'Bull Smart'. In the process, all the documents, moulds and components were seized and sealed. The said ex parte order of the Hon'ble Delhi High Court prohibited even the dealers from displaying any sales, promotional material or the product itself at the dealer(s) showroom and, as a result, the dealerships were closed across India on the day of the formal launch and even before the formal sale of 'Bull Smart' could commence. On 29 Nov, 2011, PPP moved the High Court for vacation of the ex-parte interim stay order and submitted all the evidence required to show that there was no similarity in the design of backhoe loader 'Bull Smart' developed by it and the designs registered by QQQ. Further, stated PPP, that in its application for vacating the ex-parte ad interim order, it had submitted evidence to show that QQQ misrepresented the images and the design registration numbers/documents and misled the Hon'ble Delhi High Court to secure an ad interim ex-parte injunction order in its favour. PPP adduced evidence before the Controller of Designs to show that the design registrations obtained by QQQ were fraudulently obtained. After hearing the parties, a consent order was passed by the Hon'ble High Court on 12 Dec, 2011. "......that parties have arrived at a workable interim arrangement by which it is agreed that : (i) the interim order shall stand suspended, till further orders; and (ii) the defendants will permit the engineers of the plaintiff to inspect the product in question at a time, date and place to be mutually agreed upon between the parties within ten days.' PPP informed the CCI that after nearly 10 months, QQQ, much to its surprise, voluntarily withdrew its application for ex-parte interim injunction and the Hon'ble Delhi High Court dismissed the case as withdrawn and vacated its ex-parte interim order and that all this had caused huge irreparable damages to PPP. It was prayed by PPP before the CCI that QQQ should be directed to cease and desist from misusing or abusing judicial process to exclude competitors, including PPP, and all other anti-competitive activity and that CCI should penalize QQQ for its anti-competitive practices in contravention of the provisions of the Act. As per your judicious understanding, what orders should be passed in the instant case?
Answer & Explanation:
From the information furnished, relevant market in this case is the market for manufacturing and sale of backhoe loaders in India'. Reckoning the size and market share of QQQ and the fact that it operates independently of competitive forces in the relevant market. It would conclude that it was a dominant enterprise in the relevant market. (Section 4 of Competition Act, 2002) The entire case of abuse as laid and made by PPP was predicated upon the alleged bad faith litigation filed by QQQ before the Hon'ble High Court of Delhi. It was argued by PPP that the bad faith litigation initiated by QQQ against it alleging infringement of its design rights was totally false and that the said legal proceedings before the Hon'ble High Court of Delhi were only initiated to harass it and prevent the launch of 'Bull Smart', which in effect would have competed with backhoe loaders of QQQ in the relevant market. Furthermore, PPP alleged that the injunction was obtained on the basis that Bull had infringed the registered designs and copyrights of QQQ while manufacturing 'Bull Smart, which designs and copyrights themselves were obtained fraudulently. The predation through abuse of judicial processes presents an increasing threat to competition, particularly due to its relatively low anti-trust visibility. QQQ by abusing its 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 Competition Act, 2002. This case demonstrates that denial of market access and abuse of judicial process stifle Competition and that holding of Intellectual Property Right for design does not provide immunity to the holder from action under the Competition Act for violating section 4 thereof.
Topics: Competition Act, 2002 & Designs Act, 2000
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