Abstract

The present study highlights an inherent structural paradox within the Competition Act of India, 2002, which is referred to as the 'Section 3(5) Paradox' in the paper. According to Section 3(5), any person exercising his rights under an intellectual property right license is immune from prosecution under Section 3 (Anti-Competitive Agreements) if he imposes reasonable conditions in his licensing agreement. However, no such provision exists in Section 4, which deals with the abuse of dominance. As such, the result is that the same person who holds the dominant position through the exercise of his IP rights may be held liable under Section 4 for engaging in activities that are protected under Section 3(5) by virtue of the IP license. Using the examples of CCI in Micromax v. Ericsson (2013) and Umar Javeed v. Google LLC (2022), the different rulings of the Delhi High Court in its Single Bench judgment (2016) and Division Bench judgment (2023), and the procedural dismissal of the appeal by the Supreme Court in September 2025, it is illustrated that the existing approach lacks coherence from both legal and economic perspectives. On conducting a comparison of the European Union’s ‘doctrine of exceptional circumstances’ approach and the American rule-of-reason approach, one can observe that the Indian inability to create either the statute of reasonableness or an effective FRAND system is an aberration amongst leading countries. There are three legislative suggestions made at the end of this study: (i) a reasonableness defense statute inserted as Section 4(3), (ii) a statutory consultative process between the Competition Commission of India and IP regulatory bodies, and (iii) statutory SEPs legislation with a FRAND framework.

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