Citation: Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021, Ministry of Electronics & IT.  <https://www.meity.gov.in/writereaddata/files/Intermediary_Guidelines_and_Digital_Media_Ethics_Code_Rules-2021.pdf>

Introduction

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021(hereinafter “IT Rules, 2021”) notified on February 25th, 2021 are the guidelines under review. The IT Rules, 2021 empower users of social and digital media against Over The Top (OTT) media streaming platforms and online news sites, by holding these entities accountable for the content that is being circulated on their platforms.

The IT Rules, 2021 have been framed by the Central Government in exercise of the powers conferred under Section 87 of the Information Technology Act, 2000 which are in supersession of the Information Technology (Intermediaries Guidelines) Rules, 2011. These new rules classify and provide for separate regulations for intermediaries and other entities as: Under Rule 2(o) “News Aggregator” as an entity who performing a significant role in determining the news and current affairs content, under Rule 2(t) “Publisher of news and current affairs content”, under Rule 2(u) “Publisher of online curated content”, under Rule 2(v) “Significant social media intermediary”(SSMI) and under Rule 2(w) “Social media intermediary”(SMI).

These IT Rules, 2021  are seen by this Reviewer as a restriction on the citizen’s right to freedom of speech as well as right to privacy. Therefore, in the light of the aforesaid, this review examines the socio-legal outcomes of these new IT Rules, 2021.

Identification of the “First Originator”

One of the most controversial provisions in the IT Rules is the requirement of a SSMI engaged in messaging to identify the “first originator” of information. An order to this effect must be made by a competent court or an authority competent under Section 69 of the IT Act. This category of an order can only be passed “for the purposes of prevention, detection, investigation, prosecution or punishment of an offence related to the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, or public order, or of incitement to an offence relating to the above or in relation with rape, sexually explicit material or child sexual abuse material, punishable with imprisonment for a term of not less than five years.” At the very outset the applicability of this provision has been limited to “messaging” SMI’s like WhatsApp, and others. Therefore it is unclear whether this rule would apply to social media platforms where the primary feature is posting, uploading and sharing content along with messaging services such as – Twitter or Facebook. Nevertheless, even if prima facie, it appears that sufficient safeguards have been provided, the Rules will still pose problems at several levels.

The “public order” ground can be used by the Government to curb “anti-government” information. With the advent of these rules, every WhatsApp user would now have to think twice before sending a message. This “public order” ground appears to be suspect from a freedom of speech and right to privacy perspective. It remains to be seen whether the Government will invoke this provision to arbitrarily restrict free speech. This provision also enables the government to intrude upon the privacy of the citizens and their private communications.   

Automated Filtering

The requirement of automated filters to be deployed by SSMI’s to identify, moderate or remove ‘illegal’ content on any social media platform has the potential for operating as a restriction on the constitutional guarantee of free-speech and expression. It may also result in ‘pre-censorship’. Further, intermediaries are also mandated to take down specific categories of content in 24 hours and share information with the law enforcing agencies within 72 hours. This, however, is not sufficient time to analyse such requests, seek clarifications or remedies. 

User verification

Verifying the users through Mobile Number and providing them a badge or mark alongside their name would definitely reduce cases where people create fake accounts in other’s name and then commit frauds. Asking for user’s consent for using the information provided by them for other purposes would definitely have a positive impact on blanket privacy. But if any information is posted by a user which is contrary to the provisions of the IT Rules, 2021, it is liable to be ordered to be removed immediately. This can be unfair as the user must be given an appropriate opportunity of being heard.

Conclusion

The IT Rules, 2021 are expected to have far-reaching consequences in the digital space. Intermediaries, including social media, would be bound by the new regulations which may have an impact on users’ free speech and privacy. Therefore these Rules which would ordinarily seem to bring order to a medium need to be moderated in their implementation.  Whether the government will itself exercise such moderation or whether the courts will have to step in and require it, remains to be seen.  Without judicial oversight,  these IT Rules, 2021 can be another  tool in the hands of the government to use law enforcement agencies to go after individuals who express opinions  against the ruling dispensation.

References:

1.  https://prsindia.org/billtrack/the-information-technology-intermediary-guidelines-and-digital-media-ethics-code-rules-2021

2.  https://www.hindustantimes.com/india-news/big-points-from-govt-guidelines-to-curb-misuse-of-social-media-101614244488164.html

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:

Trademark licensing refers to the process by which a trademark owner can allow third parties to commercially exploit his/her mark in exchange for royalties. While the Trade Marks Act 1999 (“Act”) provides for licensing of a trademark, the Act is silent on the right of a licensee to further sub-license the mark. This article examines the scheme of the Act to determine if sub-licensing can be permitted under the Act.

Licensing under the Act:

The Act does not use the word ‘license’ per se, instead uses the term permitted use. Section 2(1)(r) of the Act provides for two kinds of permitted uses by third parties, viz. “…(i) by a registered user of the trademark in relation to goods or services…”; and “(ii)…by a person other than the registered proprietor and registered user in relation to goods or services.”

Section 48(2) of the Act stipulates (underlining supplied by Author)-

“… (2) The permitted use of a trade mark shall be deemed to be used by the proprietor thereof, and shall be deemed not to be used by a person other than the proprietor, for the purposes of section 47 or for any other purpose for which such use is material under this Act…”

Section 49 of the Act lays down procedure and requirements for registering as a registered user of a trademark:

“… the registered proprietor and the proposed registered user shall jointly apply in writing to the Registrar… and every such application shall be accompanied by—

 (a) the agreement in writing…entered into between the registered proprietor and the proposed registered user with respect to the permitted use of the trade mark; and

(b) an affidavit made by the registered proprietor or by some person authorised to the satisfaction of the Registrar to act on his behalf…”

Section 54 of the Act specifically states that a registered user shall not have “any assignable or transmissible right to the use thereof”.

Two Sides of the Coin:

From a plain reading of the above-stated provisions, it is clear that the Act allows licensing of a trademark but is silent on the sub-licensing aspect. While Section 48 and 54 of the Act impliedly disallow sub-licensing, yet in the absence of an explicit prohibition, the ability to sublicense a trademark can be read into the Act. Two opposing views in the regard are presented below-

Firstly, Section 2(1)(r) limits the meaning of permitted use to include viz. (a) use by a registered user; and (b) use by any other person in pursuance of a written agreement with the proprietor. It does not envision the right of a permitted user to further sub-license the mark. This view was also supported by a Division Bench [Lahoti R.C., J & Kapoor S.N., J] of the Delhi High Court, in the case of Rob Mathys India Pvt. Ltd. vs Synthes Ag Chur [1997(17) PTC 669 (Del), wherein the Court refused to accept “…user of a trademark by a sub-licensee (who is not a registered user) as user by the proprietor of the trademark…”.

However, the above interpretation of the Court neglected the rights of a bona fide licensee to use a trademark merely because they are not recorded as a ‘registered user’ under the Act. This position was rectified by a three judge-bench of the Apex Court [Ramaswamy K., J, Faizanuddin, J, & Pattanaik G.B., J] in Cycle Corporation of India Ltd. v.  T. I. Raleigh Industries Pvt. Ltd. and Ors. [AIR 1996 SC 3295], which led to the addition of Section 2(1)(r)(ii), giving recognition to “unregistered licensees”. In view of the same, an argument can be made that the scope of Section 2(1)(r)(ii) is broad enough to bring sub-licensees under the ambit of “unregistered licensees”. A closer look at the provision shows that unregistered licensees are also bound by the same conditions as those of a registered user. The only difference being that a registered proprietor must consent to such use of the mark. As such, where a written agreement between the registered proprietor and registered user allows sub-licensing, the same should be considered as valid.

In assessing the above argument, Section 49 (1) (b) warrants attention. The provision mandates that the registered proprietor will assert control over the quality of goods and services bearing the licensed trademark. Absence of these quality control clauses will result in the registered user agreement being disallowed. The issue here arises from the fact that a registered proprietor might not be privy to the sub-licensing agreement between the registered user and the sub-license. Naturally, this raises concerns about the exercise of quality control by the registered proprietor as mandated under the Act.

On the other hand, a purposeful reading of Section 49 shows that sub-licensing may be permitted if the agreement between the registered proprietor and the registered user explicitly allows it. Moreover, the requirement of exercise of quality control (mandated under Section 49) by the registered proprietor can also be detailed in such agreement.

Conclusion:

There seems to be a statutory ambiguity with respect to sub-licensing of registered trademarks. The courts not having encountered the issue recently, this creates a judicial vacuum and leaves the statute open to interpretation. From a business perspective, a sub-licensing agreement seems economical for a brand owner (licensor) as it allows expansion and popularization of the mark. Accordingly, until the issue is brought up before the courts again, a legislative review of the Act in this regard may, perhaps, fill the void.

End Notes:

1. Rob Mathys India Pvt. Ltd. vs Synthes Ag Chur [1997(17) PTC 669 (Del)]
2. Cycle Corporation of India Ltd. v.  T. I. Raleigh Industries Pvt. Ltd. and Ors. [AIR 1996 SC 3295]

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

Citation: The Tribunal Reforms (Rationalization and Conditions of service) Bill, 2021 <https://prsindia.org/files/bills_acts/bills_parliament/The%20Tribunals%20Reforms%20(Rationalisation%20and%20Conditions%20of%20Service)%20Bill,2021.pdf >

Introduction:

The Government of India in February 2021 introduced the Tribunal Reforms (Rationalization and Conditions of service) Bill, 2021 in the House of the People (Lok Sabha), but the Bill could not be taken up for consideration in that House. Thereafter, the President, in exercise of his powers under Article 123(1) of the constitution has promulgated the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 (“the Ordinance”).

The Ordinance abolishes a number of tribunals including Intellectual Property Appellate Board (“IPAB”). The Ordinance aims to streamline the appeal process for IP disputes and provide a mechanism for filing appeals directly to the commercial court or the High Courts, as the case may be. This review of the said Bill will be exclusively focusing on scrapping of the IPAB and resultant changes in the appeal procedure for IP disputes.

Objects and Reasons of the Bill:

The Bill mentions, under its Statement of Objects and Reasons,  that the decision to abolish the tribunals was taken after the government’s analysis of tribunals’ data for the last three years. The Bill mentions that tribunals in several sectors have not necessarily led to faster justice delivery, thus, working at a considerable expense to the exchequer. The Bill is driven by the object of streamlining the judicial process by increasing the delivery of justice and saving considerable expense to the exchequer.

More importantly, the Bill clarifies that the tribunals proposed to be abolished by the Bill are those which handle cases in which public at large is not a litigant or those which neither take away any significant workload from High Courts nor provide speedy disposal. The lack of achieving finality of orders by these tribunals and the further litigation to the High Courts and even the Supreme Court, thus increasing litigation, is stated to be another reason why the Bill seeks to abolish these tribunals. Moreover, separate tribunals require administrative action in terms of filling up of posts and such other matters, and any delay in such action further delays disposal of cases.

The observations by the government in the Objects and Reasons of the Bill are a welcome one and clearly showcases the seriousness of the government in halting inefficient expenditure of the public money as also in increasing the speed of justice delivery.

Shortcomings of IPAB:

The IPAB was constituted in 2003 to look into appeals from Registrar under The Patents Act, 1970, Trade Marks Act, 1999, Geographical Indication of Goods Act, 1999 & the Copyright Act, 1957.

Tribunals, including the IPAB, were established for the supposed expertise into technical matters and the consequent lessening of burden in regular courts. However, the opposite has stood to become true, especially of the IPAB. Considering the inefficiency of IPAB in delivering justice and in reducing significant workload from the High Courts which otherwise would have adjudicated such cases, the Bill proposes to scrap IPAB in its entirety and replace it with respective High Courts and Commercia Courts, as the case maybe.

The step to abolish IPAB is taken in view of increasing backlog of IP disputes and lack of timely disposal of the matters. This step also helps in speedy trial of the IP disputes at the High Courts, as IPAB acted just as an additional layer of litigation and many cases did not achieve finality at the tribunal level. Moreover, the exchequer can relocate the funds earlier utilized on the Appellate Board and its infrastructure to the High Courts for timely disposal of such matters.

Amendments enacted through the Ordinance:

The Ordinance substitutes the terms ‘Tribunal’ or ‘Appellate Board’ under the Copyright Act, 1957, the Patents Act, 1970, Trade Marks Act, 1999, Geographical Indication of Goods Act, 1999, and the Protection of Plant Varieties and Farmers’ Rights Act, 2001 (“the Acts”) with the term ‘High Court’ in all relevant sections of these Acts. Accordingly, as per the Ordinance any appeal arising under the said Acts now lies with the High Courts, which has the jurisdiction to adjudicate the matter. The Ordinance has also repealed certain sections which specifically dealt with Appellate Tribunal in the said Acts.

Moreover, as per Clause 15 (viz. Transitional Provision) in the Ordinance, any appeal or application pending before IPAB are transferred to the Courts, under which such appeal, application would have been filed had this Ordinance been in force on the date of filing of such appeal or application. Further, the Ordinance has granted power to such Courts to deal with such transferred cases from the stage at which it stood before such transfer or from any earlier stage, as the Court may deem fit.

Conclusion:

The move by the government to abolish several tribunals, including IPAB, is positive and based on a cogent analysis of the functioning of the tribunals in question. In the short term, though, the burden upon the High Courts is certainly set to rise owing to the transfer of files to the High Courts. This will increase the caseload on the already overburdened High Courts. It remains to be seen therefore, whether the move will achieve its intended objectives. 

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

Citation: Damodaran, A. and S, Mariappan, Royalty Payments on Intellectual Property: A Preliminary Analysis of the Principal Policy Issues facing India (September 3, 2018). IIM Bangalore Research Paper No. 562. <https://repository.iimb.ac.in/bitstream/2074/8162/1/WP_IIMB_562.pdf >

Introduction

A study has been undertaken by the DIPP IPR Chair at IIM Bangalore under the aegis of the Department of Industrial Policy and Promotion, Government of India, to study the pattern of royalty payments made across sectors in the country from 2006-2016. The aim of the study is to analyze the payment of royalty by Indian industry for Intellectual Property Rights which have been licensed from overseas holders of proprietary IPRs, and to suggest policy changes for regulating the outflow of royalties from the country. The study has analyzed data from 11 sectors- automobile, auto ancillary, FMCG, IT-software and hardware, media, health care, pharmaceuticals, electronics, engineering, agro-chemicals and trading companies, covering a total of 231 companies.

Outflow of Royalty and low global ranking

The writers of the study assess India’s overall royalty outflow and the reasons for India’s low standing in the Global IP Index. The study has shown that in most sectors the outflow of royalty payments has increased over a 10-year period. The study reveals that in the 2015, India’s royalty payment amounted to US$ 5.0 billion which in comparison to China’s US$22 billion is significantly less. The author agrees with the assessment wherein the study points out the weakness in India’s IP framework which include: Limited protection for life sciences IP; Lengthy pre-grant opposition proceedings; Provisions of compulsory licensing for commercial and non-emergency situations; Limited participation in IP treaties; Judicial decisions such as the DU-Photocopy case.

Sector specific royalty payment

The study also focuses on sector specific trends of royalty payments. The data across all sectors shows a late surge in the outflow of royalty payments. The reasons of such growth vary from one sector to another. This surge in the outflow of royalties shows that a growing number of Indian companies are depending on overseas firms for technology. The more technology they import, the higher royalty is paid. The author believes that the lack of innovation in the local industry has become the primary reason for the above-mentioned trend. The study also shows that in most sectors, the royalty paid as percentage of net profits has shown a net increase.

Reason for growth in royalty outflow

The study analyses the general policy responsible for the growth in the outflow of royalties from India. It states that the primary reason for this growth liberalization of India’s Foreign Exchange Management Rules, 2000, in the year 2010 when the Government did away with the Commerce Ministry’s approval for royalty payments exceeding 5% on domestic sales and 8% on export sales. At that times, the removal of cap on royalty payment was done with a view to attract foreign direct investment (“FDI”) into the country. However, the study now advocates that the incidence of outflow of royalty payments from India needs to be kept under check to ensure the economic viability of technology licensee firms in India and prevent undesirable outflow of foreign exchange from the country. The study’s view is supplemented by recent proposals coming out of the Ministry of Commerce and Industry, Government of India, whereby the Government is contemplating to bring back caps on royalty payments in order to increase the profit of Indian companies and revenue for the Government of India.[1]

The author disagrees with the assessment of the study at this point and believe that such an action might be counter-productive. It is to be noted that the model of excessive regularization which was in place till 2010 did little good to India. It was only after the liberalization that the inflow of FDI increased which in turn led to an increased outflow of royalty. This outflow of royalty was an incidence of increased investment and growth of the industries. Going back to a regulatory framework might do more harm than good to the country.

Policy recommendations

Amongst many recommendations including re-introduction of cap on royalty payments as discussed above, the study advocates for Fair, Reasonable, and Non-Discriminatory (“FRAND”) licensing through Government intervention. The study further advocates for import duties and introduction of a Technology Absorption Fund to develop indigenous know-how. The author disagrees with the study in respect of Governmental intervention and import duties as these are regressive methodologies which do very little to boost the economic growth. A healthy competition fosters innovation and should be the way forward. That said, the author appreciates the idea of a fund to foster indigenous technologies. In this regard, the Government of India has recently introduced the Startup India Seed Fund Scheme under which the Central Government has approved a corpus of Rs. 945 crores for financial assistance to startups. [2]

Conclusion

The study is a comprehensive review of the overall situation regarding the outflow of royalty from India. While the study makes good recommendations regarding fostering innovation in India to generate capital, the author believes that the regressive approach of the study viz. the cap on royalty payments is a step in the wrong direction.

[1] https://timesofindia.indiatimes.com/business/india-business/govt-considering-to-reintroduce-restrictions-on-royalty-payments/articleshow/72095384.cms[2] https://www.startupindia.gov.in/content/dam/invest-india/Templates/seedfund-gazette.pdf  

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:

Alfred Hitchcock once said that in feature films, the director is god. Proponents of the Auteur theory also believe that the director is the author and creative force behind a movie, and would therefore be the original copyright holder. However, the law as it stands does not vest any rights in a film in its director.

In a recent case before a single judge bench of the Bombay High Court [G.S. Patel, J.], viz. Kabir Chowdhry v. Sapna Bhavnani & Ors. [Interim Application (L) No. 5420 of 2020 in Commercial IP Suit (L) No. 5415 of 2020, February 10-11, 2021], the question of a director’s rights to intellectual property in a film was raised yet again.  

Who owns copyright in a film?

From a reading of Section 17(b) of the Copyright Act, 1957, specifically – “…in the case of a…cinematograph film made, for valuable consideration at the instance of any person, such person shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein”, it is evident that the producer is the first owner of copyright in a film, and not the underlying author, viz., the script writer, lyricist, etc. While the law seems amply clear, issues were raised in several cases as to why the director, being the de facto creative force behind a film, did not have any rights to the film.

In the case of Ramesh Sippy v. Shaan Ranjeet Uttamsingh & Ors. [2013 (55) PTC 95 (Bom)], a single judge bench of the Bombay High Court [S.J. Kathawalla, J.] held that “…the producer of a cinematograph film is the author of the cinematograph film and…is…the person who takes the initiative and responsibility for making the work…The author…will be the persons responsible for the arrangements, particularly in the financial sense…” [Emphasis supplied]

The Plaintiff, in this case, contended that he was the director of the film, Sholay and was involved very closely in finalizing the script, screenplay, cast, location, editing, etc., however, the Court noted that he was unable to furnish any evidence to show that he was financially involved in making the film, and was therefore, at no point of time, the author and/or owner of the film.

Does contribution to a film result in copyright?:

The Kabir Chowdhry case raised an interesting question as to whether contribution to a film by way of shooting, editing, etc. would result in bestowment of copyright. The interim application was filed seeking, inter alia, an order crediting Kabir Chowdhry as co-producer and joint owner of the copyright in a documentary film ‘Sindhustan’ that he made along with the Defendant.

The Court noted that the Plaintiff’s prayers were worded in the manner of a mandatory injunction and, as such, the threshold was even higher than in other claims for interim relief. The Court delved into the concept of owner and author of a copyright as envisaged under the Copyright Act, 1957 and observed that “An analysis of these statutory provisions suggests the following in the context of a cinematograph film:

1. the author is the first owner of the copyright;
2. the author means the producer (and no one else); and
3. the producer is he or she who has taken the initiative and responsibility for making the work.” [Emphasis supplied]

The Court relying on the decision in the Ramesh Sippy case, considered the Plaintiff’s financial involvement in making the film, and whether it satisfied the test of ‘taking initiative’ and ‘responsibility’, and noted that while the Plaintiff’s contributions, viz. re-shooting, editing and providing creative inputs without recompense, was deserving of due credit, the legal test itself was not satisfied.

The Court, dismissed the interim application and observed that “…In a given situation, there may be a director who is also a producer in some capacity…There is the auteur’s vision of the work, but when this is matched with taking the initiative in conceptualising the work and bringing it into existence, and also accompanied by the risk-taking element of responsibility, then and only then does one become a co-producer entitled to protection under the Copyright Act…”.

Conclusion:

V.R. Krishna Iyer, J. had, in the case of Indian Performing Rights Society v Eastern India Motion Pictures [AIR 1977 SC 1443], beautifully penned that “…Cinema is more than long strips of celluloid, more than miracles in photography, more than song, dance and dialogue and, indeed, more than dramatic story…and marvelous acting. But it is that ensemble which is the finished product of orchestrated performance by each of the several participants…”. While the participants deserve due credit, nowhere does the statute and/or courts state that these participants are entitled to become co-producers, and subsequent copyright holders. Considering the sheer number of persons involved in making a film, this would result in utter chaos. The law, and subsequently, the test for ownership of copyright in film is therefore clear, viz., the producer is the first owner of copyright and the producer is only a person who takes initiative and responsibility, specifically financial, in making the film.

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