Shapes, designs, patterns, etc. applied to products can be protected under trademark laws as well as design laws. Depending upon the nature of use and purpose, a proprietor of such a shape or pattern may choose to protect the same under either of these statutes, viz. the Trade Marks Act, 1999 or the Designs Act, 2000. Once the intellectual property has been registered under a specific statute, it can be protected and enforced solely as per the provisions contained thereunder. However, there has been some uncertainty as to whether and to what extent the relief of passing off (being a common law remedy) can be availed in respect of a registered design, in addition to the relief of infringement of design.

Relevant provisions under the respective statutes

The confusion regarding overlapping protection stems in part from the broad definition of a trademark under the Trade Marks Act, 1999 – “a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colour” (emphasis supplied). It is, therefore, evident that visually, the same subject matter could qualify for trademark or design protection. Of course, the essential ingredient for being a trademark, which clearly differentiates it from a mere design is that it must be “capable of distinguishing the goods or services of one person from those of others”. Therefore,only in scenarios where the graphical representation or shape fulfils this requirement, can it be protected as a trademark and remedies of infringement and passing off [under Sections 29 and 27(2) of the Trade Marks Act, respectively] can be available in respect thereof.

The definition of a “design” under the Designs Act clarifies its distinction from a trademark – ““design” means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means,…but does not include…any trade mark…”. This provision clarifies that a trademark cannot be registered as a design and therefore, simultaneous protection under the statutes is not permissible.

Unlike the Trade Marks Act, the Designs Act does not contain any provision for the relief of passing off. Regardless, there has been longstanding confusion and debate regarding whether the common law remedy of passing off is available in respect of designs or not.

Judicial precedents

The Delhi High Court’s judgment in Tobu Enterprises Pvt. Ltd. v. Megha Enterprises [1983 PTC 359] was one of the earliest decisions on the aspect of concurrent trademark and design protection. The Plaintiff sought a permanent injunction against the Defendant on the grounds of infringement of its registered designs and passing off. The Court held as follows:

“The right against ‘passing off’ is a common law right. But that right is subject to the provisions of a particular statute. In the present case, Section 53 of the Act deals with the remedy of injunction and claim of damages and rendition of accounts. That does not provide for any remedy against any alleged passing off…

Had there been any intention of the Legislature that the passing off would entitle a plaintiff to obtain an injunction, that could have been so expressly stated as had been done in section 27 of the Trade and Merchandise Marks Act, 1958…Therefore, in cases designs are registered under the Act, the doctrine of passing off has no application…” (emphasis supplied)

The Court very clearly stated that the relief of passing off cannot be claimed in respect of a registered design and there is no scope of overlap between these laws. However, in Smithkline Beecham Plc. And Ors. v. Hindustan Lever Limited And Ors. [2000 (52) DRJ 55], the Delhi High Court, while referring to Tobu Enterprises, arrived at a contrary conclusion:

“The Plea that concept of passing off cannot be made applicable to a case of design is…without merit…Infringement right accrues on the basis of the provisions of the Design Act whereas the passing off rights accrue on the basis of Common Law rights… It is true that there is no similar section to that of section 27 of the Trade and Merchandise Marks Act in the Design Act. Section 27(2) of the Trade and Merchandise Marks Act gives a statutory recognition to the passing off rights making the said rights a statutory right as well but that does not mean that in absence of a similar provision to that of the provisions of Section 27 in the Trade and Merchandise Marks Act the right of passing off would not be available to a case of design.” (emphasis supplied)

These two judgments, both delivered by Single Judges of the Delhi High Court, had therefore, taken contrary positions on the issue of availability of passing off in respect of registered designs.

In 2013, this issue came up before a three-judge bench of the Delhi High Court in Mohan Lal & Ors. v. Sona Paint and Hardwares [AIR 2013 Delhi 143]. The Plaintiffs, being the owners of design registrations, claimed design infringement as well as passing off. The Court held that

“…a design can be used as a trade mark and if by virtue of its use, goodwill is generated in the course of trade or business, it can be protected by an action in the nature of passing off…

…having regard to the definition of a design under Section 2(d) of the Designs Act, it may not be possible to register simultaneously the same mater as a design and a trade mark. However, post registration under Section 11 of the Designs Act, there can be no limitation on its use as a trademark by the registrant of the design. The reason being: the use of a registered design as a trade mark, is not provided as a ground for its cancellation under Section 19 of the Designs Act.” (emphasis supplied)

Accordingly, the Court held that the remedy of passing off would be available to the owner of a registered design if it is being used as a trademark and has become the source identifier of the proprietor’s products. However, the Court held that design infringement and passing off are different causes of action, incapable of being unified in a single suit.

Thereafter, the issue whether the actions of design infringement and passing off of trade dress can be consolidated in a single composite suit was dealt-with comprehensively by a five-judge bench of the Delhi High Court in Carlsberg Breweries A/S. v. Som Distilleries and Breweries Ltd. [AIR 2019 Delhi 23]. Carlsberg had filed the suit seeking reliefs of infringement of design and a decree for injunction against passing off of the trade dress, get up, and label of its bottle for the beer ‘Tuborg’. The Defendant relied on the judgment in Mohan Lal, to contend that design infringement and passing off cannot be unified in a single suit.

After perusing the judgment in Mohan Lal, the Court made an important observation – “if the registered design per se is used as a trade mark, it apparently can be cancelled…however,…as long as the elements of the design are not used as a trademark, but a larger trade dress get up, presentation of the product through its packaging and so on, given that a “passing off” claim can include but is also broader than infringement of a trademark, the cause of action against such use lies.” (emphasis supplied)

This judgment has clarified that use of a registered design as a trademark is a ground for  cancellation of the design registration under Section 19 of the Designs Act and therefore, passing off cannot be claimed in respect of the exact subject matter forming part of the design registration. It has further clarified that passing off may be claimed in respect of the larger get up, trade dress and presentation of the product. Composite suits for claims of design infringement and passing off have been held to be maintainable.

Recently, in Crocs Inc. USA v. Bata India Ltd. & Ors. [RFA(OS)(COMM) 22/2019 & CM APP No. 22655/2019], Crocs had filed separate suits for design infringement and passing off of the trademark/trade dress in the shape of its ‘Crocs’ footwear. The Single Judge dismissed the passing off suits as not maintainable on the ground that no passing off action is available with respect to a registered design. Crocs appealed against this decision.

During pendency of the appeal, Crocs sought a limited interim relief to the effect that during the pendency of the suit, the judgment of the Single Judge should not prevent the Plaintiff from filing similar passing off suits against other parties.

After a detailed reading of the judgments in Mohan Lal and Carlsberg, the Division Bench granted the interim relief sought by the Plaintiff, holding as follows –

“The Single Judge misinterpreted the majority judgment in Mohan Lal to mean that a registered design cannot be protected as a trademark at all…

…during the pendency of these appeals, the impugned judgment of the learned Single Judge will not…bar other STSs of the Plaintiff, whether pending or to be filed against parties (other than the Respondents/Defendants in these appeals) seeking the relief of restraint of passing off qua its registered design used as a trademark/trade dress, get up, presentation of the products.” (emphasis supplied)

The formulation developed in Carlsberg was applied in this order and has generally clarified this aspect significantly in India.

Conclusion

Based on the judicial precedents, the current position on the overlap of trademark and design protection can be summed up as follows:

No passing off claim is available in respect of the exact subject matter forming part of a design registration, because if such subject matter is used as a trademark, the design registration would be liable to be cancelled, as per the Designs Act. A passing off claim may be available in respect of the overall trade dress, get-up, shape, features, combination of colours, etc. of the product (if the same qualify for trademark protection), which are beyond the specific elements of the product registered as a design. Passing off claims of the above nature can be made even during the subsistence of the design registration and can be combined with a suit for design infringement.

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

Copyright: ALG India Law Offices LLP.

Introduction

Fashion and textile industries are prominent sectors in the Indian economy. These sectors have particularly witnessed a massive growth in the last 2 decades with a spurt of fashion design schools in India. According to the India Brand Equity Foundation, India is the world’s second-largest exporter of textiles and apparel. The textile industry contributes about seven per cent to the industrial output, two per cent to the GDP and fifteen per cent to the country’s total export earnings. Despite its immense and valuable contribution, the fashion industry is fraught with issues of rampant counterfeiting and knock-off culture. While it is often said that ‘imitation is the highest form of flattery’ the same doesn’t quite apply to the fashion world since the cheap and widely circulated imitations only water down the designers’ creative efforts and pursuit of exclusivity.

Given this scenario, putting in place a sound IP strategy can protect fashion designs from exploitation by others. Even though the fashion industry involves various form of IP, viz. trade marks, registered designs, copyright, know-how, etc., from a purely creative viewpoint, copyright and design law assume primary significance. The question that has often plagued the fashion industry is the appropriate means of IP protection for fashion designs, viz. whether it is copyright law or design law.

Nature of protection and relevant provisions under The Copyright Act, 1957 (Copyright Act) and The Designs Act, 2000 (Designs Act)

Section 2(c) of the Copyright Act defines ‘artistic work’ to mean:

 (i) a painting, a sculpture, a drawing (including a diagram, map, chart or plan), an engraving or a photograph, whether or not any such work possesses artistic quality;

(ii) a [work of architecture]; and [work of architecture]; and”

(iii) any other work of artistic craftsmanship;

Since the definition of artistic works under the Copyright Act has a wide connotation, even an abstract work, such as a few lines or curves arbitrarily drawn would qualify as an artistic work. Given this, fashion designs are as such capable of being protected under the Copyright Act if they qualify as original works of art.

It is pertinent to draw attention to a specific provision under the Copyright Act, viz. Section 15 which sets out the interplay between the Copyright Act and the Design Act and is often touted as a contentious provision. This provision reads as follows:

15. Special provision regarding Copyright in designs registered or Capable of being registered under the ¹*** ²[Designs Act, 2000 (16 of 2000)].–(1) Copyright shall not subsist under this Act in any design which is registered under the [Designs Act, 2000 (16 of 2000)].

 (2) Copyright in any design, which is capable of being registered under the [Designs Act, 2000 (16 of 2000)] but which has not been so registered, shall cease as soon as any article to which the design has been applied has been reproduced more than fifty times by an industrial process by the owner of the copyright or, with his licence, by any other person.

Reference should also be drawn towards Section 2(d) of the Designs Act which defines ‘design’ as:

“…only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device, and does not include any trade mark as defined in clause (v) of sub-section (1) of section 2 of the Trade and Merchandise Marks Act, 1958 (43 of 1958) or property mark as defined in section 479 of the Indian Penal Code (45 of 1860) or any artistic work as defined in clause (c) of section 2 of the Copyright Act, 1957 (14 of 1957); (emphasis added)

A composite reading of the aforementioned statutory provisions provides us with an interesting situation. Let’s suppose we have a painting which is an original artistic work. While creating an article from the painting in question, the design of the painting will have to undergo some modification to be used as a printable design on an article (such as a garment), where the final output should have some visual appeal. The harmonising effect of the Copyright Act and the Design Act would result in an interpretation that while the painting being an original artistic work would enjoy copyright protection (viz. during the life of the copyright-owner and for 60 years thereafter), the modified derivative that is applied (by an industrial process) on an article will lose copyright protection upon production of the 51^st unit. Further, if the same has not been registered under the Designs Act, it becomes a ‘free’ design, which is neither protected under Copyright law nor under Designs law.

Though the provisions under these two laws are in fact still a subject matter of unsettled debate, the Indian judiciary has tried to tackle this issue by a harmonious reading of the said provisions.

Judicial interpretation

The most prominent case with respect to interpretation of Section 15 of the Copyright Act is that of Microfibres Inc. and Ors. Vs. Girdhar and Co. and Ors. [2009 (40) PTC 519 (Del)]. In this case, both parties were engaged in the business of upholstery fabrics. The Plaintiff-Appellant alleged infringement of its copyright in the artistic works applied to upholstery fabrics by the Defendant-Respondent. The Defendant-Respondent on the other hand claimed that the designs in respect of which the plaintiff claimed proprietary right were a subject matter of the Designs Act and not the Copyright Act. Accordingly, in absence of registration under the Designs Act, the designs were in public domain with the production of 51^st unit by the Plaintiff-Appellant.

In appeal, the grievance of the Plaintiff-Appellant arose from the premise that the learned Single Judge held that the designs in question were capable of being registered under the Designs Act and the Appellant was not entitled to seek protection under the copyright law.

The Division Bench of Delhi High Court while dismissing the appeal arrived at the following important findings:

“…the interpretations canvassed by the appellant would, render the design legislation otiose, because every registered design would then be able to trace its origin to a chart, drawing, diagram etc. and consequently also claim copyright protection under the Copyright Act in addition to the protection as a registered design under the Designs Act.

e. A perusal of the Copyright Act and the Designs Act and indeed the Preamble and the Statement of Objects and Reasons of the Designs Act makes it clear that the legislative intent was to grant a higher protection to pure original artistic works such as paintings, sculptures etc and lesser protection to design activity which is commercial in nature…

 f. The original paintings/artistic works which may be used to industrially produce the designed article would continue to fall within the meaning of the artistic work defined under Section 2(c) of the Copyright Act, 1957 and would be entitled to the full period of copyright protection as evident from the definition of the design under Section 2(d) of the Designs Act. However, the intention of producing the artistic work is not relevant.

i. If the design is registered under the Designs Act, the Design would lose its copyright protection under the Copyright Act. If it is a design registrable under the Designs Act but has not so been registered, the Design would continue to enjoy copyright protection under the Act so long as the threshold limit of its application on an article by an industrial process for more than 50 times is reached. But once that limit is crossed, it would lose its copyright protection under the Copyright Act. This interpretation would harmonize the Copyright and the Designs Act in accordance with the legislative intent.” (emphasis added)

It is pertinent to note that prior to the Microfibres case, the judiciary had adopted a slightly different approach in the case of Rajesh Masrani vs. Tahiliani Design Pvt. Ltd. [2009 (39) PTC 21 (Del)]. In this case, the Court while referring to the patterns printed or embroidered by the Plaintiff on a fabric as original artistic works held that such works were also entitled for protection under Section 2(c) of the Copyright Act. In this case the Plaintiff contended that the drawings which were made in the course of developing garments and accessories were artistic works under Section 2(i)(c) of the Copyright Act. The patterns printed and embroidered on the fabric were also alleged to be artistic works, as were the garments finally designed. The Plaintiff alleged infringement of copyright in these various artistic works. The Division Bench of the Delhi High Court injuncted the infringing activity and held that:

“In the present case, as per the pleadings, the work in question has not been reproduced more than 50 times by an industrial process by the plaintiff…”

We are, therefore, of the opinion that the plaintiffs’ work is entitled for protection under Section 2(c) of the Copyright Act and is an original artistic work. Since the work is an ‘artistic work’ which is not covered under Section 2(d) of the Designs Act, 2000, it is not capable of being registered under the Designs Act and the provisions of Section 15(2) is not applicable.

In another relatively recent case of Ritika Private Ltd. vs. Biba Apparels Private Ltd. [230 (2016) DLT 109], a leading fashion label (Ritu Kumar) accused a rival company of imitation of its fashion designs and claimed copyright in various drawings and sketches which were created by the plaintiff for dresses being sold by them. The Plaintiff contended that copyright continues to exist in a sketch or a design of a dress. It was argued by the Plaintiff that although the said sketch, drawing or design is capable of being registered as a design inasmuch as the drawing, sketch or design which is the subject matter of Section 2(c) of the Copyright Act is not a design because it is excluded from the definition of design under the Designs Act. The Defendant urged for seeking dismissal of the suit in light of provision of Section 15(2) of the Copyright Act. The Delhi High Court decided the case in favour of the Plaintiff largely following the Microfibres Inc. case and held that:

“…that once a drawing, a sketch or a design is used for creation of dresses, then, once the dresses cross 50 numbers, no copyright can subsist in the drawing and sketch under the Indian Copyright Act because of the language of Section 15(2) of the Indian Copyright Act.”.

CONCLUSION

Even though Section 15(2) of the Copyright Act still appears to be open to various interpretations,  the current position is that designs capable of being registered under the Designs Act, but not so registered, as soon as are applied more than 50 times by industrial process by the owner of the copyright or his licensee, the copyright in a design shall cease under the Copyright Act as well as the Design Act.

For fashion designers it is important to obtain adequate protection for their artistic works (which have to be applied by industrial process on article) under the Designs Act. An example of sound IP strategy with respect to fashion designs can be seen in the very recent case of House Of Anita Dongre Private Limited vs. Vikram Phoolwani [CS(COMM) 63/2020] where renowned designer Anita Dongre moved the Delhi High Court against infringement of her registered designs. The infringers were renowned textile house from Jaipur having stores in Delhi as well. The designer was successful in obtaining ex–parte ad interim injunction order from the Delhi High Court restraining them from manufacturing or dealing in any kind of garment, lehenga, etc. based on its design registrations and pro-active enforcement efforts. An important factor for designers to keep in mind is that for designs to be registered under the Designs Act, the designs should be novel and there should not be prior public disclosure of the designs before applying for registration of the design.

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

Copyright: ALG India Law Offices LLP.

Introduction

With the advancement of internet around the world, international borders are constantly shrinking and access to goods, services and information globally is increasing exponentially. A consequence of the global village we all now live in is the rapid increase in piracy and counterfeit goods. Trademark owners must now exercise greater vigilance and invest substantial amount of time, money and energy in protecting their valuable intellectual property on an international scale. A delay in taking steps towards enforcement of their rights might not only result in monetary loss but also affect goodwill and reputation of the trademark owner. In such a situation, it is pertinent to understand the consequences of delay and whether delay by itself amounts to acquiescence of trademark rights.

What is the defense of acquiescence?

The Merriam-Webster dictionary defines the term acquiescence as “passive acceptance or submission”. With respect to the law of trademarks, acquiescence is a defense wherein one party has assented to use of a trademark, trade name, etc. by another party, thereby surrendering the right of exclusive use. In the Trade Marks Act, 1999 (the Act), the doctrine of acquiescence is dealt with under Section 33(1), which reads as-

Where the proprietor of an earlier trade mark has acquiesced for a continuous period of five years in the use of a registered trade mark, being aware of that use, he shall no longer be entitled on the basis of that earlier trade mark –

(a) to apply for a declaration that the registration of the later trade mark is invalid, or

(b) to oppose the use of the later trade mark in relation to the goods or services in relation to which it has been so used, unless the registration of the later trade mark was not applied in good faith.

We can see from this provision that the essentials to claim a defense of acquiescence are: (1) that the mark must be registered; (2) the subsequent proprietor should have used the mark for continuous period of 5 years; (3) the earlier proprietor should be aware of such use and acquiesce to the same; and (4) the subsequent proprietor should have adopted the mark in good faith. If a subsequent proprietor can satisfy each of these criteria, the earlier proprietor will be precluded from enforcing its rights against the subsequent proprietor. This defense of acquiescence can be availed in opposition and rectification proceedings as well as in a civil suit. The question, however, arises as to what amounts to acquiescence and whether it is the same as mere delay or inaction.

Are delay and laches the same as acquiescence?

Delay and laches are equitable defenses, which can be broadly be defined as an unreasonable delay in pursuing a right or claim by one party in a way that prejudices the opposite party. There may be delay in approaching the Courts or Registrar, because the earlier proprietor may not be aware of the subsequent proprietor’s infringing use or the former may consider such infringement as not being serious enough to injure business and demand immediate action. Further, laches and delay, though often used together are not synonymous. The concept of laches was explained acutely by the Delhi High Court in the case of Cable News Network LP, LLLP (CNN) v. CAM News Network Limited [2008 (36) PTC 255 (Del)]. The Court in this case held that –

‘Mere passage of time cannot constitute latches, but if the passage of time can be shown to have lulled defendant into a false sense of security, and the defendant acts in reliance thereon, laches may, in the discretion of the trial court, be found’. It would follow, logically, that delay by itself not sufficient defense an action for interim injunction, but delay coupled with prejudice caused to the defendant would amount to laches.”

Therefore, if the earlier proprietor sleeps on its rights and takes no action against use of a mark, such that the subsequent proprietor acts upon it and it causes prejudice to the latter, the court can deny the request for equitable relief.

Acquiescence, on the other hand, implies consent by an earlier proprietor, expressly or impliedly. Delay is said to be only a facet of acquiescence. Delay by itself, however, may not be necessarily be a ground for the defense of acquiescence. The difference between these concepts can be understood with more clarity with the help of some judgments of the Indian judiciary.

Courts’ stance on acquiescence

The principle of acquiescence has undergone a lot of deliberation by the Indian Courts. It has been established now that delay or inaction alone is not sufficient to establish that the earlier proprietor has abandoned its rights. There needs to a positive act or encouragement which implies assent on part of the earlier proprietor. For instance, in the case of M/s. Power Control Appliances and Others v. Sumeet Machines Pvt. Ltd. [1995 (15) PTC 165 (SC)], the Apex Court all the way back in 1995 held that –

“Acquiescence is sitting by, when another is invading the rights and spending money on it. It is a course of conduct inconsistent with the claim for exclusive rights in a trade mark, trade name etc. It implies positive acts; not merely silence or inaction such as is involved in laches.” (emphasis added)

In certain judgements, however, the line between acquiescence, delay and laches did seem to get a little blurry. For instance, in the case of Jolen Inc v Doctor & Company [2002 (25) PTC 29 (Del)] the Delhi High Court in 2002 held –

“In trade mark cases the plea of acquiescence is therefore available only if the defendant succeeds in proving that the plaintiff has been not only standing by but also turning a blind eye for a substantial period. If the defendant succeeds in proving the aforesaid conduct of the plaintiff, then the plaintiff cannot be allowed to trample upon and crush the business or the trade set up by the defendant.”

In 2014, the Bombay High Court took up the issue of acquiescence in Emcure Pharmaceuticals Ltd. v. Corona Remedies Pvt. Ltd. [2014 (60) PTC332 (Bom)]and held that –

“A mere failure to sue without a positive act of encouragement is no defence and is no acquiescence.”

In other words, the court was of the opinion that acquiescence is not mere negligence or oversight as there must be an abandonment of the right to exclusivity.

In 2017, the Bombay High Court again elaborated the difference between acquiescence and delay vide its judgment in the case of Torrent Pharmaceuticals Limited v. Wockhardt Limited & Anr [2017 (70) PTC 215 (Bom)], wherein it held that –

“Delay is not to be confused with acquiescence. The latter implies knowledge, and where knowledge of the defendant’s mark and product is shown and this is coupled with a long period of inaction against the alleged invasion of a claim of exclusivity, it is no answer to say ‘there is no positive act’, for acquiescence is also not explicit consent, but is silent assent. Mere inaction is not acquiescence either, but prolonged inaction coupled with the knowledge of an invasion of that right might well be.”

Conclusion

While it is an established principle that ‘equity aids the vigilant and not those who slumber on their rights‘, it is not fair to expect trade mark owners to take action against all infringers everywhere, as soon they are discovered. The Courts have clarified that for the defense of acquiescence to be applicable, the subsequent proprietor has to show positive acts and encouragement, thereby establishing express or implied assent of use of the mark by the subsequent proprietor. Prolonged period of inaction, on the other hand, may attract the defense of delay and possibly laches if resultant prejudice to the subsequent proprietor can be proven.

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

Copyright: ALG India Law Offices LLP.

Cyberspace markets and e-commerce businesses have witnessed an exponential growth in the recent past. The internet has reshaped markets, supply models and the entire concept of buying and selling by bringing the concept of a local global market to the forefront. Further, with the on-going pandemic, the shift to the cyberspace has been enormous, giving rise to numerous legal complexities pertaining to transactions over cyberspace. Particularly in the realm of intellectual property, we have witnessed an influx of counterfeiters and infringers sprouting every day. With the limitless boundaries of the internet, the enforcement of intellectual property rights is often faced with the question of determination of the court which has the jurisdiction to adjudicate on a dispute.

How is Jurisdiction Conferred

The term “jurisdiction” in its natural parlance denotes the extent to which an authority can adjudicate over a matter. A dispute between two parties is decided by a court or other appropriate forum having jurisdiction over the dispute. In the present-day scenario, where parties and persons are connected across territorial boundaries, the aspect of “jurisdiction” is of considerable significance.

The jurisdiction of an adjudicating authority is subject to numerous factors such fiscal value of the dispute, place of performance of the agreement, exclusive jurisdiction decided by the parties, etc. Although the Code of Civil Procedure, 1908 lays down the criteria to ascertain jurisdiction, the same are not exhaustive as several specific legislations grant jurisdiction to other forums and even bar the jurisdiction of a forum over a particular matter.

The era of digital marketplace also opens up the possibilities of multifarious jurisdictions in the event of a dispute. The digital marketplace which has expanded and grown in the recent past in itself makes the world a single market but the law of territorial jurisdiction of a court or forum over disputes arising from such transactions needs to be understood with paramount lucidity. In a dispute concerning parties situated in different geographical territories, there is possibility to invoke jurisdictions of different territories. The parties in such an event always have the option to confer “exclusive jurisdiction” on any one court or forum amongst those capable of having jurisdiction. However, the question of determination of jurisdiction becomes labyrinthine in situations where no exclusive jurisdiction has been conferred by agreement and several courts or forums have the power to exercise jurisdiction which is known as the “natural” or “available” jurisdiction.

Long-Arm Jurisdiction and Anti-Suit Injunctions

The current statutory framework in India does not specifically deal with the concept of long-arm jurisdiction and anti-suit injunctions. However, this concept has been discussed and invoked through judicial precedents.

In simple words, long-arm jurisdiction refers to the ability of a court to exercise jurisdiction over foreign defendants. As for anti-suit injunctions, the Hon’ble Supreme Court of India in Dinesh Singh Thakur versus Sonal Thakur, AIR 2018 SC 2094, stated –

“Anti-Suit Injunctions are meant to restrain a party to a suit/proceeding from instituting or prosecuting a case in another court, including a foreign court. Simply put, an anti-suit injunction is a judicial order restraining one party from prosecuting a case in another court outside its jurisdiction.”

Understandably, one might question how can a person be restrained from exercising his legal rights of approaching a court, particularly in light of Section 41(b) of the Specific Relief Act, 1963 which bars grant of an injunction to restrain any person from instituting or prosecuting in a court not subordinate to that from which the injunction is sought.

Although anti-suit injunctions may be applicable in foreign and domestic forums in different countries, the bar placed by Section 41(b) of the Specific Relief Act, 1963 precludes grant of an anti-suit injunction by one domestic forum against another domestic forum only. This bar, however, does not preclude anti-suit injunctions against foreign forums.

Principles Governing Anti-Suit Injunctions

Courts in India are that of law and equity. Anti-suit injunctions, being a species of injunctions would be governed by the same legal principles that govern the grand of an injunction, an equitable relief.

The Supreme Court of India in Modi Entertainment Network v. WSG Cricket Pte Ltd, [(2003) 4 SCC 341], laid down the following principles to be taken into account while assessing whether or not an anti-suit injunction should be granted:  

“…
(1) In exercising discretion to grant an anti-suit injunction, the court must be satisfied of the following aspects:

(a) the defendant, against whom the injunction is sought, is amenable to the personal jurisdiction of the court;

(b) if the injunction is declined the ends of justice will be defeated and injustice will be perpetuated; and

(c) the principle of comity – respect of the court in which the commencement or continuance of action/proceeding is sought to be restrained – must be borne in mind;

(emphasis added)

(2) in a case where more forums than one are available, the Court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum (Forum conveniens) having regard to the convenience of the parties and may grant anti-suit injunction in regard to proceedings which are oppressive or vexations or in a forum non-conveniens; (emphasis added)

(3) where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein in regard to exclusive or non-exclusive jurisdiction of the court of choice of the parties are not determinative but are relevant factors and when a question arises as to the nature of jurisdiction agreed to between the parties the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case.

(4) a court of natural jurisdiction will not normally grant an anti-suit injunction against a defendant before it where parties have agreed to submit to the exclusive jurisdiction of a court including a foreign court,…

(5) where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum convenience and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum;

(6) a party to the contract containing jurisdiction clause cannot normally be prevented from approaching the court of choice of the parties as it would amount to aiding breach of the contract; yet when one of the parties to the jurisdiction clause approaches the court of choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se be treated as vexatious or oppressive nor can the court be said to be forum non-conveniens; and

(7) The burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein are oppressive or vexatious would be on the party so contending to aver and prove the same.” (emphasis added)

In the case of (India TV) Independent News Service Pvt. Ltd. v. India Broadcast Live LLC & Ors., [2007 (35) PTC 177 Del], it was observed that there are three tests that are repeatedly employed by courts to determine amenability of the defendant to the personal jurisdiction of the court. These are –

1. the defendant must purposefully avail himself of acting in the forum state or causing a consequence in the forum state
2. the cause of action must arise from the defendants activities there
3. the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make exercise of jurisdiction over the defendant reasonable.

Anti-Suit Injunctions, Cyber Space and Trade Mark Law

The statute on Trade Marks in India confers jurisdiction on courts in addition to those provided by the Civil Procedure Code, viz. a suit for trademark infringement or passing off may also be brought before a court in whose jurisdiction the plaintiff resides or carries on business.

Many businesses not only operate in cyberspace but also elect to promote their brands and trademarks on the internet through various means including through acquiring domain names which may possess all characteristics of a trademark. While doing so, businesses often encounter counterfeiters and infringers in the cyberspace, thereby highlighting the issue of enforcement against foreign defendants.

In such cases, in order to ascertain whether jurisdiction vests with a court or not, the purposeful availment test or concluded contract is applied. In case of websites, the mere fact that a website is accessible in a particular place may not by itself be sufficient for courts to exercise personal jurisdiction.

In HT Media Ltd. & Anr. v. Brainlink International Inc. & Anr., CS (COMM) 119/2020, the Delhi High Court, in determining passing off, invoked its inherent powers to pass an anti-suit injunction order against the foreign defendant restraining it from prosecuting legal proceedings initiated by it against the Indian plaintiff before a US district court. In doing so, the court relied upon the principles laid down in Modi Entertainment Network v. WSG Cricket Pte Ltd (supra).  The Court held that “…. Suit before the Eastern District of New York, is vexatious and oppressive, as the Plaintiffs have not asserted Trademark rights in USA. The Trademarks of the Plaintiffs are registered in India and the Plaintiffs‟ goodwill spills over Internationally. But the Plaintiffs do not carry on any business in USA. Defendants had offered to sell the Domain name to the Plaintiffs at a price of US $ 3 Million but once unsuccessful, in the attempt to profiteer, they filed a suit for Declaration in order to further their intention to frustrate the Plaintiffs from availing of their remedies. The filing of the suit is also an attempt to legitimise the alleged infringement action of the registered Trademarks of the Plaintiffs. Plaintiffs have made out a prima facie case for grant of an anti-suit injunction before this Court.”

Conclusion

The concept of anti-suit injunctions has its place in the Indian legal system and has evolved through the judgments of various High Courts and the Supreme Court. The court while granting an anti-suit injunction in any case also needs to consider that this form of injunction involves a court impinging on the jurisdiction of another court and hence, an anti-suit injunction has to granted sparingly and based on the facts and circumstances of each case.

Anti-suit injunctions play an important role in helping ascertain a more appropriate forum and preventing parties from instituting vexatious and oppressive suits in other jurisdictions with the sole intent of causing hardship to the other side.

In the absence of a ‘long arm’ statute in India which deals with jurisdiction as regards non-resident defendants, one would need to see whether the defendant’s activities have a sufficient connection with the forum state (India); whether the cause of action arises out of the defendant’s activities within the forum and whether the exercise of jurisdiction would be reasonable.

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

Copyright: ALG India Law Offices LLP.

Introduction

The rapid technological advancement in the recent past has made a global impact on the functioning of the society, the most prominent of which can be seen in the e-commerce arena. While there has been exponential growth of the e-commerce marketplace, we have also witnessed a rampant rise in sale of counterfeits and pirated goods over such platforms. This issue of counterfeiting and pirated goods has been exacerbated by the COVID-19 pandemic, witnessing an upsurge in the instances exploiting the upsurge in demand on e-commerce platforms. This article explores the extent to which such e-commerce platforms can be made liable and whether they can claim exemption under the safe harbour provision in the Information Technology Act, 2000 (“IT Act”).

Who is an intermediary?

An ‘intermediary’ is defined under Section 2(w) of the IT Act as “…any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes”.

Intermediary Liability and the Information Technology Act, 2000

The significant growth of e-commerce in India has brought the issue of intermediary liability to the forefront in India. This issue first came up in Avnish Bajaj v. State of NCT [2005 (79) DRJ 576], where the Delhi High Court quashed the criminal proceedings initiated against the CEO of Bazee.com (now eBay.in). While the proceedings were quashed on procedural grounds, the Court ruled that the website hosting the impugned video can be held liable under the Indian Penal Code and section 67 read with section 85 of the IT Act (which prescribes deemed criminal liability of director(s)/manager(s) of an intermediary entity responsible for publishing or transmitting content containing sexually explicit act).

Following this judgment, the IT Act was amended to introduce the safe harbour provision, i.e., Section 79, Following this judgment, the IT Act was amended to introduce the safe harbour provision, i.e., Section 79, which exempts intermediaries from liability for third-party content made available on its platform.  The intermediary liability for third-party content in India is primarily governed by section 79 of the IT Act read with the Information Technology (Intermediaries Guidelines) Rules, 2011 (“IT Rules”).

Section 79(1) of the IT Act provides intermediaries immunity with respect to any third-party content, data or information hosted by them. However, such immunity is not absolute and is limited by section 79(2) and (3) of the IT Act. Section 79(2) prescribes that such immunity is applicable only when an intermediary’s role is passive and technical in nature. Further, section 79(3)(a) provides that an intermediary cannot claim immunity if it has “…conspired or abetted or aided or induced…in the commission of the unlawful act” and section 79(3)(b) provides for a ‘notice and take down’ regime, wherein an intermediary is required to take down infringing content upon receiving actual knowledge of its existence.

Further, Rule 3 of the IT Rules provides that an intermediary shall observe due diligence, which will absolve them of liability for third-party content. Such due diligence will include publishing its rules and regulations (including user agreement and privacy policy), which shall inform users to not upload any information which is misleading/fake and infringes trademark, patent copyright or any other proprietary rights.

Judicial Developments

In Shreya Singhal v. Union of India [2015 (5) SCC 1], the Supreme Court ruled that when an intermediary receives ‘actual knowledge’ (viz. pursuant to an order of a Court of law) to remove infringing material, it should act on such knowledge and remove the impugned content. The Supreme Court also noted that if intermediaries are required to act on complaints by common public, there will be millions of complaints and it would be difficult for an intermediary to assess them in a limited period of time.

Further, in Myspace Inc v. Super Cassettes Limited [2017 (69) PTC 1 (Del)], the Delhi High Court followed the Supreme Court’s decision in the Shreya Singhal case and ruled that it is necessary to establish the ‘actual knowledge’ on part of the intermediary to establish the liability for unlawful/infringing contents on its website.

In 2018, the Delhi High Court in the matter of Christian Louboutin v. Nakul Bajaj [CS (COMM) 344/2018], differentiated between e-commerce platforms which act just as an intermediary and those which act as an active agent in selling goods. To that extent, the court noted certain criterion to identify the role of e-commerce platform viz. transportation, quality assurance, collection of payment, reviews, authenticity guarantee, advertisement/promotion of the product, membership, providing specific discounts to members, uploading the entry of product, booking ad-space, deep-linking to the trademark’s owner website, etc.

The Delhi High Court observed that “…the so-called safe harbour provisions for intermediaries are meant for promoting genuine businesses which are inactive intermediaries, and not to harass intermediaries in any way, the obligation to observe due diligence, coupled with the intermediary guidelines which provides specifically that such due diligence also requires that the information which is hosted does not violate IP rights, shows that e-commerce platforms which actively conspire, abet or aide, or induce commission of unlawful acts on their website cannot go scot free”.

Similarly, the Delhi High Court later on in the cases of L’Oreal v Brandworld [CS (COMM) 908/2016], Skullcandy Inc v Shri Shyam Telecom & Ors. [CS (COMM) 979/2016], M/s Luxottica Group S. P. A. & Anr. v M/s Mify Solutions Private Limited & Ors. [CS (COMM) 453/2016] applied the criterion laid down in the Christian Louboutin case to determine the liability of e-commerce websites in respective cases.  

Recently, a Division Bench of the Delhi High Court in the case of Amazon Seller Services Pvt. Ltd. vs Modicare Ltd. & Ors. [FAO(OS) 540/2011] further strengthened the safe harbour provided to e-commerce intermediaries by ruling that “…the value-added services provided by them as online market places…do not dilute the safe harbour granted to them under Section 79 of the IT Act. Section 2 (1) (w) of the IT Act does envisage that such intermediaries could provide value-added services to third party sellers.”

To summarize, an e-commerce platform’s role in providing value added services such as packaging of goods, door-to-door delivery, etc. would not disentitle it from seeking the exemption under the safe harbour provision of the IT Act. However, an e-commerce platform’s active involvement in sales such as deep linking to the trademark’s owner website, authenticity guarantee, etc. could lead to revocation of such exemption under the safe harbour provision of the IT Act.

Conclusion

The jurisprudence on intermediary liability of e-commerce platforms continues to evolve and develop, as the courts have focused on striking a balance in granting exemptions and imposing liability on e-commerce platforms. As per the judicial precedents, it is evident that liability of an intermediary depends on its extent of involvement in sale of infringing/counterfeit goods, which needs to be determined on a case to case basis.

The series of judgments by the Delhi High Court ensures that e-commerce platforms cannot hide anymore behind the exemption of section 79 of the IT Act and get away scot free from their liability as infringers or enablers by acting in conduit with the manufacturer(s) of counterfeit products. Hence, if an e-commerce platform has an instrumental role in sale of goods (viz. deep linking trademark owner’s website, authenticity guarantee, etc.) and is just not limited to that of an intermediary and its value added services (viz. packaging, door-to-door delivery, etc.), it will lose its protection as an intermediary under section 79 of the Act.

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

Copyright: ALG India Law Offices LLP.