Category Archives: India

M/s. Sunwhite Infrastructure Pvt Ltd. V. Kindle Developers Pvt Ltd, CP No. 40 (ND)/17 (decided on 23.08.2017)

Facts

The petition was filed by M/s Sunwhite Infrastructure Pvt Ltd (hereinafter referred to as “the petitioners”) against Kindle Developers Pvt Ltd (hereinafter referred to as “the respondents”) Sec 241[1] and Sec 242[2] of the Companies Act, 2013 alleging acts of mismanagement and oppression prejudicial to the interests of the company as well as the stakeholders. The respondent company, engaged in the business of real estate development was incorporated in March 2011 with a paid up capital of Rs. 1 Lakh of which the petitioner acquired a 40% shareholding from respondent No. 3. The petitioners alleged that upon the representation of the respondents that they had been allotted a plot by Greater Noida Authority for development of a group housing project and were in need of financial assistance, the petitioners extended a loan of Rs. 6 Lakh to the respondents upon the following conditions:

  1. The loan was to be repaid within the period of one year.
  2. The respondent undertakes not to borrow any further money from third parties without the petitioners consent.

However, due to the failure of the respondents to repay the loan within the time specified, the petitioners filed a suit for permanent and prohibitory injunction in Court of Civil Judge, Delhi to restrain the defendants from parting, selling or creating rights of third parties over the allotted land. An order of injunction was passed against the respondents by the said Judge. The present petition was filed subsequently against the acts of oppression and mismanagement by the respondents who failed to appear despite being served and were, thus, proceeded ex parte.

Contentions of the Petitioner

The petitioners in the present petition contend that:

  1. In complete disregard of the loan agreement entered into by the petitioners and the respondents, the respondents not only defaulted on the payment but also took further loans from various third parties.(Para 5)
  2. The defendants were defrauding investors by siphoning off the funds collected from prospective buyers without engaging in any significant construction work. The petitioners also entered into record the audited balance sheet of the defendants for 2015-2016 reflecting advances of Rs. 157 crores collected for booking of flats against which very little construction was completed.(Para 5)
  3. The petitioners further alleged that statutory compliances were not carried out on time, no Annual General Body meeting had been conducted since Sept, 2014 and books and accounts of the defendant company were not available for inspection to the petitioners.(Para 6)
  4. It is also contended by the petitioner that in complete contempt of the order of Civil Judge, Delhi, which restrained them from altering the management of the company, respondent no. 4 & 5 were appointed as Additional Directors by the respondent company. Such appointment is otherwise illegal as well due to it not being ratified by the remaining management. (Para 6)

Issues

  1. Whether there has been oppression and mismanagement by the respondent company?
  2. Whether the appointment of additional directors is in violation of the order of civil judge, Delhi?

Judgement

The NCLT held that there had been no oppression of the petitioners in their capacity as shareholders and that their grievance was misplaced as they were aggrieved in capacity of creditor whose entitlement under a loan agreement was violated  for which the appropriate remedy would lie in a civil forum. It observed that, “The non-payment of a creditor could not be held as oppressive to the shareholder. The order of Civil Court Judge restraining the respondent from alienating the said property was enough to secure the interest of the creditor” (Para 9d).

It was held that allegations of siphoning off of funds by the respondents were largely uncorroborated and unsubstantiated and on the basis of the material placed on record, it was not possible for the Tribunal to conclude whether the advances justified the quantum of work done (Para 9a). On absence of any cogent material, the Bench was unable to accept allegations of siphoning off of funds, duping of prospective buyers or direct an investigation into the affairs of the company.

Secondly, with regard to non-availability of books & accounts of the respondent company, it was observed that there was nothing to show that the petitioners ever made any effort to inspect the same which they, as shareholders of the company, had a right to do. (Para 9b)

The NCLT held that insofar as the appointment of the Additional Directors was concerned, the appropriate form to deal with such appointment was the Court of Civil Judge, Delhi who has passed the impugned order restraining the respondents from doing so. (Para 9c)

Lastly, in response to the allegations that no AGM had been held since Sept, 2014, and that statutory compliances have not been complied with, the Bench held that as shareholders with 40% equity in the respondent company, the petitioners were well within their rights to requisition the management to convene a meeting to discuss any agenda or matter they thought fit. (Para 9e)

Directions

The NCLT gave the following directions:

  1. The Bench directed the respondents to hold AGM for defaulting years as well as the Financial Year ending on 31.03.2017 in exercise of provisions of Sec97[3] of the Companies Act, 2013, holding, the allegation of non-compliance with statutory requirements would, in absence of any defence by respondents, be tantamount to mismanagement. (Para 13)
  2. The respondents were also directed to lay before members, all Financial Statements, Annual Returns, Directors Report etc followed by filing them with the Registrar of Companies as statutorily required as well as paying all taxes required by Government. (Para 14)
  3. Lastly, though observing that courts should not ordinarily interfere with the management, with due regard to the fact and circumstances of the present case, the Bench directed the appointment of an independent Observer/ Administrator to oversee proper convening of the AGM and ensuring that all statutory requirements are complied with. The Bench also remarked that failure to comply with any of the directions would invite penal consequences under the Act. (Para 15 & 16)

 

Author: Ms. Noyonika Mukherjee, Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at   anirudh@khuranaandkhurana.com.

References:

[1] Sec 241, Companies Act, 2013 provides that any member may apply to the Tribunal who complains that the affairs of the company are  being conducted in a manner prejudicial to public interest, interest of the company or is prejudicial/oppressive to him or any member of the company OR any material change has taken place in the management/ control of the company by reason of which it is likely that affairs of the company will be conducted in a manner prejudicial to interests of the company, any members or any class of member. The Central Government can also apply to the Tribunal for an order under this section.

[2] Sec 244, Companies Act, 2013 provides that an application may be made under Sec 241 by any member- (a) in case of a company having a share capital, not less than 100 members or not less than 1/10th of total members or any members(s) holding not less than 1/10th of issued share capital provided that have paid all calls/sums due on their share;(b) in case of company not having share capital, not less than 1/5th of total members. The Tribunal may, on an application, waive any of the requirements.

[3] Sec 97, Companies Act, 2013 provides that the Tribunal may, on the application of any member of the Company, call or direct calling of an AGM and give such ancillary/consequential directions as it thinks expedient, if any default is made in made in holding the AGM under Sec 96, provided that the directions may include a direction that one member of the company present in person or proxy shall be deemed to constitute a meeting. A general meeting held in pursuance of the above may be deemed to be an annual general meeting.

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Online Disputes and Forum Jurisdiction

The Delhi high court on 3rd January, 2018 in Impresario Entertainment & Hospitality Pvt. Ltd. vs S&D Hospitality[1], took a different view with respect to the Internet jurisdiction[2].

In the above case, plaintiff sought permanent injunction against the defendants who was running a restaurant at Hyderabad, under  the impugned trademarks ‘SOCIAL’ and ‘STONE WATER’ and its services were available through Zomato. The court held that the plaintiff would have to produce material prima facie to show that some commercial transaction using the website was entered into by the Defendant through the app- ZOMATO, within the forum state and that the specific targeting of the forum state by the Defendant resulted in an injury or harm to the plaintiff within the forum state.

Defendants contended that this Court has no territorial jurisdiction to entertain the present suit  as the defendant neither has his registered office within the jurisdiction of the said Court nor carries on any business within the jurisdiction of this Court. Mere existence of a website without proof of ‘the effect’ does not clothe this Court with territorial jurisdiction to entertain the present suit. Returning the plaint, the court held that a mere hosting of a website that is  accessible by anyone within the jurisdiction of the court is not sufficient for this purpose[3].

Convinced with the Defendant’s contention, the Court Further relied on Banyan Tree Holding (P) Limited v. A. Murali Reddy and Anr[4] which held that a passive website, with no intention to specifically target audiences outside the State where the host of the website is located, cannot vest the forum court with jurisdiction. The Hon’ble Court also observed that for the purposes of a passing off or an infringement action (where the plaintiff is not located within the jurisdiction of the court), the injury on the plaintiffs business, goodwill or reputation within the forum state as a result of the Defendant’s website being accessed in the forum state would have to be shown.

Earlier, the stance of the court was a bit different  in the case of World Wrestling Entertainment v. M/S Reshma Collection & Ors[5]– The Delhi High court had held that the mere website of the party referring to various goods  is not an offer but an invitation to an offer, just as a menu in a restaurant. The invitation, only if accepted by a customer in Delhi, becomes an offer made by the customer in Delhi for purchasing the goods “advertised” on the website of the appellant/plaintiff. Further, it held that mere accessibility of website in a forum state which ‘solicits’ its business, through which Defendant’s goods and services are sold, is enough to raise cause of action and in determining the personal jurisdiction in Delhi.

Legal Provisions in Regard to Jurisdiction

The Code of Civil Procedure, 1908 contains the provisions under section 20 with respect to institution of the suits where defendant resides or cause of action arises . It reads as : Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction –

  • The defendant, or each of the defendants where there are more than one, at the time of the commencement of the Suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
  • any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or 
  • the cause of action, wholly or in part, arises.”

[Explanation]: A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.

Section 62 [6] provides that every suit or other civil proceeding in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.

 Learned author Mulla in the Code of Civil Procedure, 18th Edn., has observed that under clauses (a) to (c) of section 20, plaintiff has a choice of forum to institute a suit. The intention behind Explanation to section 20 of the Code of Civil Procedure is that once the corporation has a subordinate office in the place where the cause of action arises wholly or in part, it cannot be heard to say that it cannot be sued there because it did not carry on business at that place. The linking of the place with the cause of 12 action in the Explanation where subordinate office of the corporation is situated is reflective of the intention of the Legislature and such a place has to be the place of the filing of the suit and not the principal place of business. Ordinarily the suit has to be filed at the place where there is principal place of business of the corporation.

The Indian Courts have always followed the parent legislation – Civil Procedure Code, 1908 and have  constantly tried to harmonize the technological advancement with the statute. Therefore, in the following caselaws, the courts have explained Section 20 of the CPC with reference to IPR and internet jurisdiction.

Indian Performing Rights Society Ltd. v. Sanjay Dalia & Anr The Supreme Court of India interpreted section 62 of the Copyright Act, 1957 and section 134(2) of the Trade Marks Act, 1999 with regard to the place where the plaintiff can institute a suit. Wherein it observed that “The very intendment of the insertion of provision in the Copyright Act and Trade Marks Act is the convenience of the plaintiff. The rule of convenience of the parties has been given a statutory expression in section 20 of the CPC as well. The interpretation of provisions has to be such which prevents the mischief of causing inconvenience to parties.”

Banyan Tree Holding (P) Limited vs A. Murali Krishna Reddy & Anr. on 23 November, 2009– The division bench of the Delhi High Court held that “Under clauses (a) to (c) of section 20 CPC, a plaintiff has a choice of forum and cannot be compelled to go to a place of business or residence of the defendant and can file a suit where the cause of action arises.”

In Icon Health And Fitness, Inc vs Sheriff Usman And Anr. – the Delhi High Court assumed jurisdiction under Clauses (a) and (b), stating that the defendants ‘carried on business’ in Delhi. The entirety of the Court’s reasoning for the above is contained in two sentences – “Though the defendants are not residing in Delhi, however, the defendants are offering their fitness apps and brands through App Store, Google Play Store and e-commerce portals like http://www.amazon.in which can be accessed and operated from all over the country, including from Delhi. Thus, it can be said that the defendants are carrying on business or working for gain at Delhi and this Court has territorial jurisdiction to try and decide the present suit as per section 20 of the CPC, 1908

Conclusion

At the outset, the Court does not subscribe to the view that mere accessibility of the Defendants website in Delhi would enable this Court to exercise jurisdiction. However, a passive website, with no intention to specifically target audiences in the forum State where the host of the website is located, cannot vest the forum court with jurisdiction.[7] The Court in Impresario Entertainment & Hospitality Pvt. Ltd. vs S & D Hospitality, took a very balanced stand and logically differentiated the concept of ‘mere presence of website’ and ‘targeting the forum state’. Thus, it is appreciated that the Court is not rigid and is flexible in providing a reasonable and tenable judgments by considering different facts and circumstances. Hence, it can be seen that the Indian Judiciary is swiftly moving towards a new jurisprudence on internet jurisdiction, in accordance to section 20 of CPC.

Author: Mr. Himanshu, Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at   anirudh@khuranaandkhurana.com.

References:

[1] Decided on: 3rd January, 2018 ; CS(COMM) 111/2017

[2] The Code of Civil Procedure, 1908, S-20 (c) – Other suits to be instituted where defendants reside or cause of action arises.

[3] Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414

[4] CS (OS) No. 894/2008

[5] https://indiankanoon.org/doc/71641182/

[6] The Copyright Act, 1957, Section-62-Jurisdiction of court over matters arising under this chapter.

[7] Banyan Tree Holding (P) Ltd

Patent (Amendment) Rules 2017

Department of Industrial Policy and Promotion (DIPP) has amended Patent Rules 2003 with effect from 1st December 2017 called as the Patent (Amendment) Rules, 2017. The definition of “startup” under rule 2(fb) has been substituted with a new definition. A more liberal definition of startup has been incorporated that can allow domestic as well as foreign entities to claim benefits such as fast-track mechanism and lower fee for filing patents.

According to the Patent (Amendment) Rules, 2017:

“Startup” means

(a) an entity in India recognized as a startup by the competent authority under Startup India Initiative.
(b) In case of a foreign entity, an entity fulfilling the criteria for turnover and period of incorporation/ registration as per Startup India Initiative and submitting declaration to that effect.

Explanation: In calculating the turnover, reference rates of foreign currency of Reserve Bank of India shall prevail.[1]

According to the Patents (Amendment) Rules, 2016 startups were defined as entities which are working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property where more than five years have not been lapsed from the date of incorporation/registration with a maximum turnover of INR 25 crore per year.[2] However, according to the Patent (Amendment) Rules, 2017, a startup can be any Indian entity recognized as a startup by the competent authority under the Startup India Initiative or a foreign entity that fulfils criteria for turnover and period of incorporation/registration as per Startup India Initiative.

Under Startup India Initiative an entity shall be considered as a Startup, if it fulfils following criteria:

1. incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India;
2. incorporated or registered in India not prior to seven years, however for Biotechnology Startups not prior to ten years;
3. turnover for any of the financial years since incorporation/ registration has not exceeded INR 25 crores;
4. has not been formed by splitting up or reconstruction of a business that was already in existence; and
5. working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.[3]

In view of the foregoing, it can be concluded that the period of incorporation/registration that was 5 years under 2016 rules has been extended to 7 years (10 years in case of biotechnology startups) by the 2017 rules. Also, foreign companies can now claim benefits if they fulfill above mentioned criteria for turnover and period of registration as per Startup India Initiative. Further, to claim benefits for filing patents, Indian entity should be recognized as a startup by a competent authority under Startup India Initiative, whereas foreign entity may provide equivalent documents as an evidence for fulfilling criteria for turnover and period of incorporation/registration as per Startup India Initiative along with a declaration to that effect.

[1] http://www.egazette.nic.in/WriteReadData/2017/180577.pdf

[2] http://www.ipindia.nic.in/writereaddata/Portal/IPORule/1_42_1_Patent__Amendment_Rules

[3] Notification Number G.S.R. 501 (E), https://startupindia.gov.in/notification.php#

Mobilox Innovations Private limited vs. Kirusa Software Private Limited

The much debated question with respect to the interpretation of what amounts to “existence of a dispute” has been finally answered by the Supreme Court in the (Mobilox vs. Kirusa) judgment. The interpretation of “existence of dispute” was seen in the context of initiation of CIRP of corporate debtors under the Insolvency and Bankruptcy Code, 2016.

The Corporate Insolvency Resolution Process (CIRP) can be initiated by the operational creditor in cases of payment default, through an application filed in the NCLT. Prior to such application, a demand notice (demanding the payment of the amount) needs to served upon the corporate debtor under Section 8 (1) of the Insolvency and Bankruptcy Code, 2016.

FACTS

The appellant (Mobilox) was engaged in a Star TV program “NachBaliye” conducting telephonic voting mechanism. The appellant engaged the respondent company (Kirusa) for providing various services relating to the TV program, and the parties also executed a non-disclosure agreement. The NDA stipulated certain conditions such as confidentiality obligations towards Mobilox. During the time period Kirusa raised necessary monthly invoices for the rendered services. However, Mobilox informed Kirusa about the payments that were subsequently withheld due to breach of the NDA obligations.

Kirusa senta demand notice to Mobiloxunder Section 8 of the Insolvency and Bankruptcy Code, due to non- payment. Mobilox’s response to the demand notice stated that there was a bona fide and serious dispute between the parties, inclusive of the breach of obligations mentioned under the NDA.

NCLT

Kirusa subsequently filed an application before the NCLT, Mumbai under section 9 for the initiation of Corporate Insolvency Resolution process (CIRP) of Mobilox. NCLT rejected the application on the grounds that Mobilox had issued a notice of dispute to the operational creditor.

NCLAT

An appeal against the order of NCLT was subsequently filed by Kirusa stating that mere dispute to the demand notice by the operational creditor does not amount to a valid ground for rejection of application under Section 9 of the ‘I & B Code’. The question before the Appellate Tribunal was with respect to the clarification of meaning of “dispute” and “existence of dispute” for the purposes of application under Section 9 of the Insolvency and Bankruptcy Code.

Section 8 provides for the requirements which should be complied with prior to filing an application under Section 9 of ‘I & B Code’.

Under Section 8 (2) of the I & B Code, once the demand notice is served upon the corporate debtor by the operational creditor, the corporate debtor needs to inform the creditor about the payment of the debt or dispute if any, within 10 days of receiving the notice.

Section 9 enshrines the right to file an application for the initiation of corporate insolvency resolution process after the expiry of 10 days from the date of delivery of demand notice.

NCLAT allowed Kirusa’s appeal on the groundthat the reply to the Demand Notice by the Mobilox cannot be seen within the purview of Section 8(2) and Section 5(6) of the Insolvency and Bankruptcy Code. It stated that the defense raised by Mobilox was vague and motivated as the debt demanded was not in connection with the non-disclosure agreement. Further NCLAT stressed upon the interpretation of “dispute” stating the a dispute would not be limited to only arbitration proceedings or suits but shall include any proceedings initiated before any tribunal, consumer court, labour court etc.

SUPREME COURT

Mobilox went in appeal before the Hon’ble Supreme Court against the order passed by NCLAT.

OBSERVATIONS

1. The Hon’ble Supreme Court allowed the appeal by Mobilox, while interpreting the expression “existence of a dispute” under Section 8(2) (a) of the Insolvency and Bankruptcy Code. The Hon’bleSupreme Court was of the opinion that the breach of NDA was sufficient to construe the existence of a dispute to invalidate the CIRP application filed by the operational creditor.

2. Interpretation of Section 8 (2) (a): “The word “and” occurring in Section 8 (2) (a) must be read as “or”. According to the earlier interpretation,the Code provides that a dispute between operational creditor and corporate debtor would only be valid if a suit or an arbitration proceeding with respect to the dispute has been filed prior to the receipt of demand notice. The Supreme Court was of the opinion that such an understanding shall lead to “great hardship” as the corporate debtor would then be able to stave off the bankruptcy process provided a dispute is already pending in a suit or arbitration proceedings”. An important point was highlighted by the Hon’bleSupreme Court stating that, if the “and” mentioned under Section 8(2)(a) is not read as “or”, such persons shall be excluded from the ambit of Section 8 (2) and application of CIRP shall be easily obtained which was not the intent of the legislature.

3. Pre-existing Dispute: The Hon’bleSupreme Court held that the existence of the dispute and/or suit or arbitration proceeding necessarily be “pre-existing”, that is to say, it should exist prior to receipt of the Demand Notice.

4. Plausible Contention Test: The Hon’ble Supreme Court while deciding the matter scrutinized the background of IB Code. It observed that the Insolvency and Bankruptcy Bill 2015 defined “dispute” as “a bona fide suit or arbitration proceedings”. However, when the Bill was passed the term “dispute” under Section 5 (6) was dropped from the definition. The Supreme Court stressed upon the interpretation that the previous jurisprudence with respect to the definition “dispute” does not apply to the current IB code. Instead the Hon’bleSupreme Court provided a new test “plausible contention” to determine the “existence of dispute”.

5. Questions to be seen by the Adjudicating Authority while examining any application under Section 9 of the I &B Code
6. Whether there is an “operational debt” of more than One Lakh?
7. Whether the documentary evidence provided with the application shows the debt is due and payable and has not yet been paid?
8.Whether there is an existence of a dispute between the concerned parties or any record of pendency of suit or arbitration proceeding filed before the receipt of Demand Notice.?

If any one of the conditions is not satisfied, NCLT must reject the application.

CONCLUSION

There appears to be no doubt that the interpretation with respect to “dispute” and “existence of a dispute” has been quite in debate since the inception of IB Code. Conflicting interpretations have been provided by different benches of NCLT. However, a conclusive ruling by the Supreme Court has finally provided a settled position.

It would be interesting to note as to how various NCLT’s would interpret and apply this landmark ruling relating to “plausible contention” test. Moreover, the Supreme Court has been vigilant to highlight the strict adherence to the time lines provided under the Code. The Supreme Court has clarified the object of the code keeping in mind the legislative intent. The court through this judgment has provided a balance between the rights of the creditors and also the remedies to the debtor companies.

Author: Tarun Gaur, 5th year student at ILNU, Nirma University, intern at Khurana and Khurana, Advocates and IP Attorneys and can be reached at info@khuranaandkhurana.com.

References:

[1] Interpreting The Nature Of The Notice Under Section 8 Of The Insolvency And Bankruptcy Code, 2016

[2] http://www.livelaw.in/supreme-court-finally-interprets-existence-dispute-ibc-mobilox-v-kirusa

[3] http://www.livelaw.in/key-takeaways-nclat-judgment-kirusa-vs-mobilox

[4] http://ibbi.gov.in/webadmin/pdf/order/2017

Khurana & Khurana Opens DELHI (Jangpura) Office

Khurana & Khurana, Advocates and IP Attorneys (K&K) along with its IP Asset Management Practice, IIPRD, upon successful completion its 10 years of practice,are happy to announce that they are opening up their 7’th branch Office in Jangpura, Delhi  w.e.f  2nd January 2018, in wake of its growing Intellectual Property (IP) and Commercial Litigation Practice, and with an intent of expanding its services verticals across Corporate and Tax Practices in the coming couple of years. The Delhi Office would also cater to IP/Patent professionals based in Delhi/Gurgaon and wanting to work out of the Delhi Office, with Greater Noida continuing to remain the main practice location for the firm.

Khurana & Khurana (K&K) is a leading Legal 500, MIP, IAM, Asia-IP, Acquisition-INTL, Corp-INTL, and Chambers & Partners recommended/ranked full service IP Law Firm in India with exclusive affiliate offices in Bangladesh, Vietnam, USA, Myanmar, and Nepal, and represents Indian and International clients ranging from small start-ups to Fortune 10 companies through its team of over 110 professionals spread across 7 offices in India and focusing on all aspects of IP, Commercial Law, and Media/Entertainment Matters. With 10 years of firm completion, K&K is looking forward to its next level of growth and the next 10 years would help K&K further refine its underlying positioning in the market.

IIPRD, on the other hand, is an established IP Asset Management Practice with a diversified business practice focusing on Patent support Matters ranging from executing mandates from Patent/IP Analytics to Litigation/Prosecution Assistance to Licensing Support for Global Corporates, Licensing Firms, and Law Firms, along with providing services in the domain of Commercialization, Valuation, Licensing, and Technology Transfer Matters.

K&K and IIPRD have completed 10 years of exemplary services. Excellence is our IP services, has given us an up thrust for expansion to Trademark and Copyright domains as well. With the vision of providing dynamic services and expanding our roots geographically, we are proudly opening our Delhi Branch.

Delhi Branch Office Address:

K-16, Jangpura Extension,

New Delhi – 110014, India

Appointment of Chairman of the Intellectual Property Appellate Board

IPAB is one of the most important IP tribunals in the country and was established by the Central Government by notifying in the Official Gazette on 15.07.2003. IPAB is an administrative body that has appellate jurisdiction over the decisions of the Controller of Patents, Registrar under the Trade Marks Act, 1999, and the Geographical Indications. However, IPAB has no statutory powers for trial infringement proceedings.

After the retirement of the Chairman of IPAB, K.N Basha on 13th May 2016, IPAB was run by only one member i.e. Mr.  Sanjeev Kumar Chaswal (Technical Member of Trade Mark) leaving behind other two posts vacant namely Vice-Chairman and Technical Member (Patents). This situation left IPAB almost non-functional for an year, leading to backlog of almost about 50,000 applications, due to which India was put under Priority watch list by US. Trade Representative.

As a result of which writ petitions were filed in Delhi as well as in Chennai, in order to fill up the vacant seats so as to make IPAB functional. This resulted in an expedited appointment of the Chairman, however, other positions are yet to be appointed. Therefore, through the Notice dated 1st January 2018 issued by IPAB (here) in accordance to the order dated 29.12.2017 of Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), Shri Justice Manmohan Singh has been appointed as the Chairman of the said Board.

Justice Manmohan Singh is a well renowned persona in the field of IPR, who practiced the over 10 years and served as the Additional Judge of High Court of Delhi from 11th April, 2008- 21.09.2016.

As to who appointed the present Chairman and the constitutionality thereof are still contentious issues as the Madras High Court had upheld that the selection committee for appointing members of IPAB, shall have a predominant role of the Judiciary rather than of the Executive. Further, pointed that while appointing the ‘chairperson’, the recommendation of the Chief justice of India must be given ‘due consideration’. The concerned High Court,  elaborately explained and also struck down various parts of Section 85[1] of the Trade Mark Act, 1999 in order to upheld the ‘Doctrine of Separation of Power’[2], thereby making the IPAB, a constitutionally valid Judicial body.

However, it is alleged that this appointment has been made under Tribunal, Appellate and other Authorities (Qualifications, Experience and other conditions of Service of Members) Rules, 2017. The said Act provides for composition of the selection committee that consists of Chief Justice of India or his nominee, two secretaries to the Government of India and two experts nominated by the Central Government, leading to greater dominance of Executive rather than judiciary in the appointment procedure of the Chairperson. This blatantly violates the judgement of the Madras High Court as mentioned earlier.

Moreover, let’s wait whether the said appointment of Justice Manmohan Singh will be challenged on the ground of constitutionality or not, keeping in mind the rulings held by the Hon’ble High Court of Madras.

Author: Ms. Pratistha Sinha, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at anirudh@khuranaandkhurana.com.

References: 

[1] Qualifications for appointment as Chairman, Vice-Chairman, or other Members.

[2]Shamnad Basheer vs Union Of India on 10 March, 2015, W.P.No.1256 of 2011; The petition challenged the constitutional validity of the eligibility criteria, appointment of the members of IPAB

Louboutin’s ‘Red Sole’ Declared as a Well-Known Trademark by Delhi HC

The news of famous French fashion designer Christian Louboutin’s ‘red sole’ shoes with their sky heel stiletto and iconic red sole often regarded as the fashion statement has recently been in the limelight for being declared as a well-known trademark by Justice Mukta Gupta, Delhi High Court, but very few know the story behind the iconic red sole until now. After dissecting Christian Louboutin’s Rizzoli book, it was discovered that while starting off his career as a landscape gardener, it was actually the nail polish that gave Louboutin his inspiration. The renowned reputation of the ‘RED SOLE’ trademark has not been hidden from anyone and is spilled over into India from various countries around the world and consumers are well aware of this goodwill and reputation.

The luxury shoe brand had recently moved the High Court seeking a permanent injunction to restrain the traders, i.e. ‘Kamal Family Footwear’ and ‘Adra Steps’ in Delhi’s Karol Bagh from manufacturing and selling or in any manner, the shoes using his trademarked sole or the design which is deceptively similar or identical to his distinctive design as shown below.

shoe

The Court observed that the Christian Louboutin’s red sole has been a well-known luxury brand with presence in over 60 countries including India and has been using its ‘red sole’ trademark extensively and continuously since 1992.

In the suit which proceeded ex parte, Justice Mukta Gupta observed as follows: “The plaintiff’s trademark is internationally recognizable and has extensive usage in India. The ‘RED SOLE’ trademark also enjoys trans-border reputation in India by virtue of a variety of factors including tourist travel, in-flight magazines, Internet and broadcasting of various films and television programmes…….”

The Court referred to Hindustan Unilever Limited Vs. Reckitt Benckiser India Limited and finally directed two footwear traders to pay compensation of Rs. 10 lakh to the luxury brand owner for infringing the trademark for over a year and a half and decreed the suit by permanently injuncting the defendants from manufacturing, selling, marketing and advertising foot-wears with the trademark ‘RedSole.’

Author: Rashi Gahlaut,  Trademark Associate at Khurana & Khurana Advocates and IP Attorneys can be reached at  rashi@khuranaandkhurana.com.

Source: 

[1] hfttp://lobis.nic.in/ddir/dhc/MUG/judgement/12-12-2017/MUG12122017SC7142016.pd

Exide Industries Limited vs. Exide Corporation, U.S.A. & Ors.

The case Exide India v Exide US brings into effect the perplexing issue of Trade Mark law. The dispute dates back to 1997 when the US based Company ‘Exide Technologies’ entered the Indian market post Liberalisation, where Indian company ‘Exide Industries’ was already present over the decades in the local market selling automobile batteries under the trademark “EXIDE”. As soon as the US based company started its operation in India, Indian company “Exide Industries” filed a suit for infringement of trademark in Delhi High Court. After a significantly long and much converse legal conflict, the Court in 2012 restrained Exide Technologies from using “Exide” trademark in India. Exide Technologies further filed an appeal to Division Bench against the judgement of 2012, which was though dismissed the Division Bench held that there was neither infringement nor passing off done by Exide Technologies as both the commercial ventures were genuine users of the mark. Further to this decision, Exide Industries filed an appeal before the Hon’ble Supreme Court, which was disposed off by the court, as the parties to the dispute opted for an out of court settlement. The foremost dispute of the case was as to who is the real owner of the mark EXIDE.

The case is important as it includes the aspect of prior-use of identical trademark by two commercial entities and its legitimate ownership. The case involves a significant concept of trademark law according to which the prior use and adoption of trademark show distinctiveness of the trademark on account of sale of the goods in market which makes the seller, owner of the trademark. The Delhi High Court single judge held that the trans-border use of the trademark by the registered owner of a mark in a particular jurisdiction does not make him the owner in another jurisdiction where the similar mark is in simultaneous use by other local registered proprietors with proven prior use of that trademark. But subsequently the Division Bench declared the judgement to be impugned and thus held that the trans-national use of the trademark is one of the significant aspects to look for the ownership of the trademark and also the goodwill of the trademark continues to be with the assignor of the trademark even if it is assigned to some other company for use in another jurisdiction.

Case background:

M/s. Electric Storage Battery Company (ESBC) was incorporated in USA in 1888 and subsequently was granted the trademark ‘EXIDE’ in USA. It incorporated a subsidiary company in UK in 1891 named as M/s. Chloride Electric Storage Co. Ltd. (CESCO) which was permitted to use the trademark as it was a subsidiary of the parent US Company. Later, CESCO was also granted registration of trademark ‘EXIDE’ in UK. In 1947, following an order of a US District Court, ESBC and CESCO broke connection but CESCO continued to have right to use trademark ‘EXIDE’ pursuant to an agreement between the two. CESCO started selling batteries under the name ‘EXIDE’ in India and subsequently, in 1942 it was granted registration of the trademark ‘EXIDE’ even in India. CESCO is the parent company of the present plaintiff company to which the trademark was transferred. In 1978, by executing a deed of assignment, trademark ‘EXIDE’ was assigned to the present plaintiff company. Thereafter, the plaintiff company applied for transfer of registration of trademarks in its favour which was also granted. Therefore, it was selling batteries under the name ‘EXIDE’ for quite a long time in India.

After liberalisation, when US company Exide Technologies started selling batteries under the name ‘EXIDE’ in India, The Indian Company brought a suit for infringement and passing off against it which became a long drawn battle.The ownership of the trademark EXIDE was the primary issue in this case. The Indian Company Exide Industries claimed ownership on two grounds:

  • It was the registered owner of the trademark in India. This ownership was transferred from the transferor-company.
  • It was the prior user of the trademark in India and thus it acquired the ownership of the trademark ‘EXIDE’ in India.

Similarly the US based company, Exide Technologies claimed the ownership on two grounds:

  • It is the parent company (US based ESBC) of the former transferor-company (UK based CESCO) which owned the trademark ‘EXIDE’ and thus only Exide Technologies have the exclusive right of the ownership of the trademark ‘EXIDE’ even in India.
  • The trademark ‘EXIDE’ is registered in its name in about 130 countries and thus it is the worldwide owner of the trademark. As the company has a transnational existence, it is the real owner of the trademark ‘EXIDE’ even in India.

In the present case, the concept of prior use was applied, which implied that the plaintiff company was using the trademark by selling batteries under the name ‘EXIDE’ in India. The defendant claimed that it was the owner of the trademark in India as well because it was the parent company of the transferor-company from which the plaintiff acquired the trademark ‘EXIDE’ and the defendant pleaded that it had not abandoned its right by not using the trademark in India and instead didn’t use the trademark in India for long period of time because of some ‘special circumstances’. The court did not accept the Defendant’s plea as it failed to show any ‘special circumstances’ for not using the mark over such sufficiently long period of time in India. The result was that the court accepted the fact that the transferor-company was manufacturing batteries under the name ‘EXIDE’ in India from around 1960 from which the plaintiff company got the trademark assigned. Thus automatically, as far as India is concerned, the plaintiff and their predecessors are the prior user of the trademark ‘EXIDE’.

Judgement:

The Delhi High Court in 2012 through Valmiki Mehta, J. restrained Exide US from using the Exide mark in India and held the plaintiff as the legitimate user and owner of the mark in India due to its prior use by plaintiff. Both, infringement and passing off by US Company Exide Technologies were confirmed by the court. The Defendant’s plea of non-use of trademark in India due to special circumstances was also rejected as Court observed that the Defendant failed to establish any special circumstances.

However, the case came up as an appeal to the Division Bench of Delhi High Court which considered both the issues, the prior use of the trademark by Exide Industries and whether Exide Technologies is liable for the infringement and passing off. Relying on the landmark Supreme Court judgement like Cadila Healthcare, Dyechem v Cadbury and Durga Das Sharma v Navratan Pharmaceutical laboratories, the court inferred that passing off and infringement are both different concepts wherein, an impression of deception or confusion relating to the manufacture or origin of the goods is created in the minds of the buyers. Court observed that the trademark ‘Exide’ used by both the parties is identical, and both were genuine users of the mark. The judgement of the court was quite inventive and only one of its kind wherein the court outlined that US based Company was kept out of the Indian market due to trade restrictions but however on record of evidence Exide Batteries manufactured by Exide US was substantially known in India as well. Another point that the Court illustrated was that though, through an assignment deed, the mark was assigned to Exide India, yet the goodwill in the mark was retained by Exide US because the agreement did not specifically transfer the goodwill. Thus, the transnational reputation was highlighted and the court allowed Exide US to be in possession of the goodwill of the trademark ‘EXIDE’ despite of transfer of rights of ownership of the trademark. At the end, the court confirmed that there was no circumstance of passing off or infringement by the Exide US as it had legitimate rights to the mark. The court termed the use of the mark by Exide Technologies as “bona fide and legitimately concurrent”. Moreover, the counterclaim against Exide India was not maintainable since they were the registered owners of the mark in India.

The order of the division bench was further stayed by the Supreme Court after an appeal was filed by Exide Industries. The apex court restrained the Exide Technologies (defendant) from using the mark until the final adjudication of the matter but the parties before the decision of the court brought about an out of court settlement.

Present scenario and analysis:

In the event of widespread reputation through immense technology (internet, websites), globalisation and restructuring of Indian market, Exide case comes as an exception and as a tenet that considers territorial character of Trademark above trans-border reputation. The Delhi High Court judgement of 2012 clearly delineated that the territorial prior use of the trademark by a registered user in one jurisdiction weighed more than the worldwide reputation of the trademark used by another registered user in other jurisdictions. The case was twirled when the Division Bench restored the rights to the mark to both competing proprietors in a way. In this case the true scope and effect of concurrent use of an identical trademark for similar products in different jurisdictions were brought into light. Both concurrent users of the identical trademark in different jurisdictions were held to be the legitimate users in their respective jurisdictions. The allowed of the retained goodwill for substantiating bona fide claim to the mark was an exclusive and unique approach.

However, out of the court settlement by the parties clearly marked an end to the hopeful jurisprudence in cases of use of identical trademark by different commercial proprietors in different jurisdictions. The parties mutually agreed subject to certain terms and conditions to fully and finally settle all disputes and their rights and obligations with respect to the mark in the way set out in the agreement. As a result of the settlement, the Supreme Court disposed off the case without a proper jurisprudence on the issue.

Source:

[1]   MANU/DE/4642/2012

Author: Ms. Pratistha Sinha, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at anirudh@khuranaandkhurana.com.

Power to review decisions or setting aside orders of the Controller [Indian Patents Act, 1970 Section 77 (f), (g)]

The Indian Patents Act, 1970, Section 77 gives the Controller of Patents the powers of a Civil Court to deal with a suit under the Code of Civil Procedure, 1908 for matters stated in Section 77 (1) Clause f and g of the Indian Patents Act, 1970 which reads as follows –

“Section 77.  Controller to have certain powers of a civil court –

(1) Subject to any rules made in this behalf, the Controller in any proceedings before him under this Act shall have the powers of a civil court while trying a suit under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely: —

(f) reviewing his own decision on application made within the prescribed time and in the prescribed manner;

(g) setting aside an order passed ex- parte on application made within the prescribed time and in the prescribed manner;”

 

The Clause (f) of sub-section (1) of Section 77 of the Indian Patents Act, 1970 says that an applicant can make an application under Form 24 of Patent  Rules, 2003 to the Controller of Patents to review the decision of the Controller within one month from the date of communication of such decision to the applicant or within such further period not exceeding one month thereafter as the controller may on request made in Form 4 allow and shall be accompanied by a statement setting forth the grounds on which the review is sought. Where the decision in question concerns any other person in addition to the applicant, the Controller shall immediately transmit a copy of each of the application and the statement to the other person concerned as specified in Rule 130 (1).

The Clause (g) of Sub-Section (1) of Section 77 of the Indian Patents Act, 1970 says that an applicant can make an application in Form 24 of the Patents Rules, 2003 to the Controller of Patents for setting aside an order passed by the controller ex-parte. Such application shall be made according to Rule 130 (2) within one month from the date of communication of the order of the controller to the applicant or within such further period not extending one month as the controller may on a request made in Form 4 of the Patent Rules, 2003 for the extension of time allow and shall be accompanied by a statement setting forth the grounds on which the application is based. If the order of the Controller concerns to any other person in addition to the applicant, the Controller shall, immediately transmit a copy each of the application and the statement to the other person concerned.

These provisions can be explained with the help of some recent case studies. In a recent dispute between Abbott Biotechnology and Glenmark Pharmaceuticals. The Patent office set aside its former order by powers advanced to the controller of patents under Section 77(f) of the Indian Patent Act, 1970, granting patent to Abbott Biotechnology ltd. on rheumatoid arthritis (called as HUMIRA) drug in respect of the pre-grant application filed by Glenmark Pharmaceuticals under section 25(1) which reads as

“any person or any third party or Government may challenge the application of grant of patent and inform to the controller of Patents for opposition, in writing against the grant of a patent after the application for a patent has been published but before the grant of a patent”

and rule 55 of the Indian Patents Act, 1970. This decision came after the patent office was asked by the Delhi High Court in an appeal by Glenmark which alleged that on 4th September 2008 Glenmark’s pre-grant opposition was not considered by the controller while granting the patent as given under section 25(1) of the patents act and Abbott was granted the patent for Humira drug on June 8, 2009. The then controller treated the patent held by Abbott as cancelled immediately through a letter on October 30, 2009. Abbott approached the Delhi High Court against the Controllers order. The Delhi High Court stood still on the controller’s order of cancellation of the Patent held by Abbott.

On 9th September 2010, the Delhi High Court ordered that the pre-grant opposition of Glenmark to be considered as review application on decision of the controller under section 77(f) of the Indian Patents Act, 1970 and set aside their previous order of the cancellation of the Patent.

The Senior Joint Controller of Patents and Designs, K S Kardam, following the Delhi High Court’s order, observed, “…. I firmly conclude that the impugned invention as disclosed in the specification and claimed in the claims is obvious to person skilled in the art and hence lacking in inventive step. I am also of the opinion that the description of the impugned invention is also insufficient and ambiguous as described in the specification.”

“In view of the above circumstances and considering the order of the Honorable High Court of Delhi dated September 9, 2010, I hereby set aside the order of grant of patent dated June 8, 2009 in respect of patent application number No. 526/DELNP/2005 under section 77 of the Patents Act, 1970 and consequently the serial number of the patent No 234555 is hereby treated as void,” added the order dated December 31, 2014.

About the Author: Aditya Sehgal, Symbiosis Law School Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at intern@khuranaandkhurana.com

Sarine Technologies Ltd v. Divora Bhandari Corporation & Ors

When it comes to one of the most contentious aspects of copyright law in software, two things come to our mind:

  1. The idea-expression dichotomy and;
  2. Which part of software is copyrightable, and which part is patentable.

The present case of Sarine Technologies Ltd. v. Divora Bhandari Corporation &orsunfolds many perplexing facts of the copyright Law.

The Plaintiff is an Israeli company established in 1988 that is engaged with the business of providing diamond dealers/ merchants with the best in class equipment and services for mapping, processing, and trade of diamonds and other gemstones.They developed“Advisor” software that generates an optical planning and polishing plan so that maximum value can be derived from rough stone in furtherance of its business.

The plaintiff claimed their copyright ownership on the software “Advisor”, stating that computer program comes under the domain of copyright, and therefore the same is claimed under copyright ownership on the ‘sixth version of the Advisor software’ in the USA and Israel through registration and common law respectively. They claimed the same in India as well. Further, they asserted that Defendants illegally use their Advisor software, and have also ‘developed pirated software copy’ in the name of “Mandakini- Work Manager”, leading to their unjust enrichment, and hence the defendants are liable under section 51 of the Copyright act, 1957.

On the other hand, Defendants are engaged in the business for four years for providing scanning services to diamond merchant, and also provide such scanning machines for sale to its customers. For this purpose, they have developed software namely ‘Mandakini- Work Manager’ without any reference to the plaintiff’s software.

The suit was originally filed in the district court of Surat for infringement by the defendants under sections 51 r/w 55, 58,63 and 63B of Copyright Act, 1957, where the permanent injunction restraining the defendants to engage with the copyrighted software and damages prayed by the plaintiffs which were enhanced to INR 50 Crores due to which it was transferred to Commercial court in consonance with the pecuniary jurisdiction.Further, plaintiffs filed an “Interim Injunction Application” under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 seeking an ex parte ad interim injunction restraining the defendants from using, distributing, selling, offering for sale any inclusion scanning services which is claimed to have been infringed by the defendants.

There were few questions that were answered in the proceedings of the case:

  1. How has the plaintiff claimed its copyright protection in India when neither it is first published nor it is registered in India?

 Plaintiff  has copyright ownership on the ‘Avisor software version 6.0’ in Israel, as it was first published in the country and they claimed copyright in the USA through copyright registration according to Title 17 of US copyright Act.[1] Both these countries are party to the Berne Convention and so is India. By virtue of being signatory to the Berne Convention, the plaintiff can claim their copyright ownership on the said software.[2]In addition to this, section 40 of the Copyright Act, 1957 enables the plaintiff to copyright protection in India as it extends protection to the foreign works.

The defendants alleged that there is no evidence as to whether the software is being developed by the employees in ‘contract of service’ or ‘contract for service’. To this, the plaintiff put forth that where the work is developed in course of the author’s employment, under contract of service or apprenticeship, the employer shall be the first owner of the work of copyright, in absence of any agreement to the contrary.[3] Further, plaintiffs cleared that although they have copyright in version 6 of their software, due to this reason, they have copyright in all derivative works which include previous versions of the computer programme as well.[4]

  1. Whether the software is copyrightable or not?

Going by the statutory provisions, section 2 (o) of the copyright Act, 1957, computer program is included in the definition of ‘literary work’ but not software per se. Further, section 2 (ffc) defines computer programs as set of instructions expressed in words, codes, schemes or in any other form including machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result. This principle was also supported in SAS Institute Inc v World Programming Ltd[5], where the EU court of justice, by referring to the Software directives held that expression of ideas in form of source code/ object code is protected under the copyright law and not the ideas in form of functionality.In the present case, the plaintiff claimed that they have copyright over their software in the USA through its registration under statutory provisions[6] and in Israel through common law.

Consequently, another question arose pertained to where the functionality aspect of the software falls? The plaintiff claimed that their software was the only software that could scan the diamond for marking the edges to be cut by the diamond cutters in the diamond industries. Additionally, they stated that in order to provide inclusion scanning services, Defendants have ‘developed pirated software’ and prayed for injunction referring to Microsoft Corporation v. Vijay Kaushik, where the court granted an injunction on account that the defendants had pirated the plaintiffs software.The plaintiff had also submitted few evidences in sealed envelope under section 151 of CPC, 1908, requesting the court to not to disclose the same to the Defendants. This was refuted by the Defendants stating that this is against the natural justice not to show the evidences on which certain allegations are made out on the Defendants. It was further argued by the Defendants that development of software cannot be referred to as ‘piracy’ as Piracy pertains to use of an unlicensed software or use under an invalid license, and therefore reference to the term “developed a pirated software” is technically incorrect, and demonstrates Plaintiffs’ incorrect understanding of how software works and where Copyright subsists in the software. In the present case, the Defendant independently developed their own software by using their own intellect and therefore the source code of the Defendants’ software is completely different from that of the Plaintiff, which scans the diamonds as to show edges of diamond which are to be cut and polished. Therefore, although functionality of Gal Manager of Plaintiff may be overlapping with Work Manager of the Defendant, the implementation/source code/object code is completely different, which is a clear indicator of non-infringement on the copyright of the Defendant. Moreover, law of copyright does not protect ideas/functionality and instead only gives protection to the particular/specific expression of ideas.[7] Defendants also claimed that they used Advisor software (version 4.7) only by acquiring licence, and that the same was clearly stated in the report of the Local Commissioner. Thus, the defendants cannot be held liable for infringement of copyright.

Lastly, Plaintiffs claimed that results generated by the Defendant’s software are deceptively similar to theirs by relying on reports of Private Investigator appointed by them. The report stated that the output result of the scanned diamond through the Defendant’s software was the same as that of the plaintiff’s output result of Advisor software.The Defendants averred that this appointment of private investigator is flawed as no procedure of law was followed and thus, the veracity of the report cannot be relied upon. However, by looking at the plaintiff’s claim comprehensively, the Plaintiff only focussed on the output results/functionality of the defendant’s software, which does not determine copyright infringement. Neither did the Plaintiff disclose any source/object code that it claims to have been infringed by the Defendants, nor did it demonstrate any similarity in the source/object code by comparing it with the Work Manager software of the Defendants.  Moreover, source code can be written in different ways to perform similar function, which need not infringe any copyright of others. This is the rationale behind computer program coming under the ambit of ‘literary work’ for Copyright protection. Like so, the Defendant has independently developed software‘Mandakini- work manager’ that provides a similar file with different codes without any infringement.Defendants agreed that they are using advisor software version 4.7 but only licensed version of said software, which was clearly evidenced in the report of Local commissioner who was appointed by the High Court of Gujarat to investigate defendant’s premises on 28th June, 2017. This was initially prayed by the plaintiff under order XXVI Rule 9 and 10 of the Civil Procedure Code,1908, before the district court which was denied. However, it was successfully appealed in the High Court.

Further in support of their contention, Defendants referred to SAS Institute Inc v World Programming Ltd[8] where the Chancery court, by referring to the software directives, held that “only the expression of a computer program is protected and …ideas and principles which underlie any element of a computer program…are not protected by copyright.’[9]It was upheld by the Court of appeal. The applicability of this case was questioned by the plaintiff as the referred directive was repealed and also that the software directives are based on local European Laws. But in the present case the Hon’ble court confirmed that new directives[10] are in consonance with the Berne Convention and clearly mention the above held decision by the Chancery Court, hence affirmed the applicability of the said case.

The court raised its concern over the fact that the plaint was silent on comparison of the source code and object code of both the software- ‘Advisor’ and ‘Mandakini- work manager’. The plaint has only focussed on functional aspect of the software mentioning that the extension files generated by plaintiff’s as well as defendant’s software is same, which is subject matter of patent and not copyright. The court highlighted the principle that expression of idea is protected under the copyright law and not the ideas[11].Protection to ideas extends only to the protection granted by Patents. The court referred to Lotus Development Corporation v. Borland International Inc[12], where the United States Supreme Court had upheld that only the object code and source code is protected under copyright and not the operating and application software. The court tested the three step process called Abstraction-Filtration-Comparison Test which would determine the non literal elements of software that are protected by Software.[13]  The court did not find any incriminatory results that prove defendants wrong. Lastly, the court relied upon the reports of Local commissioner, who was appointed to inspect the defendant’s premises, where they did not find any infringing material. Hence on considering three issues, i.e. a) whether the matter is a prima- facie case of copyright infringement, b) where do the balance of convenience lie and; c) whether the plaintiff has suffered an irreparable loss. The court declared that the plaintiff could not proof the validity of the suit filed by them, hence no prima-facie case could be established and therefore, the Hon’ble court dismissed the petition.

Therefore, it is clear from the present case that the Court has firmly quoted that copyright does not protect ideas but only the expression of those ideas. The court made it clear in case of computer programs that only the expression of a computer program is protected, and ideas/principles that underlie any element of a computer program are not protected by copyright. Accordingly,  the court dismissed the petition.

[1] Section 101 : Definition of Computer Program; Section 102: subject matter of copyright.

[2]Article 1, Berne Convention For Protection Of Literary and Artistic Works: The countries to which this Convention applies constitute a Union for the protection of the rights of authors in their literary and artistic works.

[3]Section 17, proviso (c)

[4]Aspen Tech.,Inc. V. M3 Tech., Inc.

[5][2012] E.C.D.R. 22

[6]Title 17 of the United States Code

[7]Mishra BandhuKaryalay&Ors v. Shiv RatanlalKoshal, AIR 1970 MadhPra 261

[8][2012] E.C.D.R. 22

[9]SAS Institute Inc v World Programming Limited; [2013] EWCA Civ 1482

[10]Directives 2009/24/EC

[11]R.G Anand v. Delux Films &ors, AIR 1978 SC 1613)

[12] Lotus Dev. Corp. v. Borland Int’l, 49 F.3d 807, 1995 U.S. App.

[13]Computer Associates International, Inc. V. Altai, Inc. 982 F. 2d 693(2nd Circuit, 1992)