Category Archives: Legal Issues

Competition Law in India Vis-a-Vis Food Delivery Apps in India (Zomato/ Swiggy/ Foodpanda/ Uber Eats) and its Impact on Small Restaurants

In December 2018, Kerala Hotels and Restaurants Association (KHRA) went on a strike for 10 days on the account of high commission being charged by the food delivery apps. Subsequently to which a report was published stating that if this kind of practice is continued by the food delivery apps then it would definitely harm the dining out business in a long- run. Also according to statistics, there is a jump of 30% in the daily handling of daily order in the first quarter of 2018 when compared to the last quarter of 2017.

With emergence of competition being seen in very field it can be noted that the food business is also not protected from its coherence. After the complained filed by  the retailers and shopkeepers against the e-commerce sites we witnessed that 500- small restaurants owners also filed a petition in the CCI and PMO against unfair trade practices of the food delivery apps. They alleged that apps like Zomato, Swiggy, Uber Eats, Food Panda, etc were abusing their dominant position the market. The petition filed against them include allegations like deep- discounting, in- house kitchens and internal sourcing, because of which the small and medium enterprises. Many of us would not see this as a imminent threat but, this could actually have a grave impact on the dine-out/ restaurant industry in the long run.  Since the awareness about competition law in our country is less so in order to  understand  this concept lets us first  understand about the concepts :

WHAT IS DOMINANCE?

The Competition Act,2002 (the Act)  defines dominant position (dominance) in terms of a position of strength enjoyed by an enterprise, in the relevant market in India, which enables it to:

a. operate independently of the competitive forces prevailing in the relevant market;

b. or a affect its competitors or consumers or the relevant market in its favour.

It is the ability of the enterprise to behave/act independently of the market forces that determines its dominant position. In a perfectly competitive market no enterprise has control over the market, especially in the determination of price of the product. However, perfect market conditions are more of an economic “ideal” than reality. Keeping this in view, the Act specifies a number of factors that should be taken into account while determining whether an enterprise is dominant or not[1]. Thus, dominance per se is not bad, but the abuse of dominance which is the concern of CCI[2].

There are primarily three stages in determining whether an enterprise has abused its dominant position:

  1. The first stage is defining relevant market.
  2. The second is determining whether the concerned undertaking/enterprise/firm is in a dominant position has a substantial degree of market power in that relevant market.
  3. The third stage is the determination of whether the undertaking in a dominant position/having substantial market power has engaged in conduct amounting to the abuse of such dominant position[3].

ABUSE OF DOMINANCE

Dominance is not considered bad per se but its abuse is. Abuse is stated to occur when an enterprise or a group of enterprises uses its dominant position in the relevant market in an exclusionary or/ and an exploitative manner.

The Act gives an exhaustive list of practices that shall constitute abuse of dominant position and, therefore, are prohibited. Such practices shall constitute abuse only when adopted by an enterprise enjoying dominant position in the relevant market in India.

Abuse of dominance is judged in terms of the specified types of acts committed by a dominant enterprise. Such acts are prohibited under the law. Any abuse of the type specified in the Act[4] by a dominant firm shall stand prohibited.

Section 4 (2) of the Act specifies the following practices by a dominant enterprises or group of enterprises as abuses:

  • directly or indirectly imposing unfair or discriminatory condition in purchase or sale of goods or service;
  • directly or indirectly imposing unfair or discriminatory price in purchase or sale (including predatory price) of goods or service;
  • limiting or restricting production of goods or provision of services or market;
  • limiting or restricting technical or scientific development relating to goods or services to the prejudice of consumers;
  • denying market access in any manner;
  • making conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts;
  • using its dominant position in one relevant market to enter into, or protect, other relevant market.

EXPLOITATIVE AND EXCLUSIONARY BEHAVIOUR

Abuses as specified in the Act fall into two broad categories: exploitative (excessive or discriminatory pricing) and exclusionary (for example, denial of market access). These are discussed here under.

Are current provisions of the Competition Act,2002 dealing with abuse of dominant position exhaustive in order to address the issue of abuse of dominant position?

Inquiry Into Abuse Of Dominance

In exercise of powers vested under section 19 of the Act, the Commission may inquire into any alleged contravention of section 4 (1) of the Act that proscribes abuse of dominance. Section 19(4) gives a detailed list of factors that the Commission shall consider while inquiring into any allegation of abuse of dominance. Some of these factors are market share of the enterprise, size and resources of the enterprise, size and importance of the competitors, dependence of consumers, entry barriers, and social obligations and costs in the relevant geographic and product market.

The Commission, on being satisfied that there exists a prima facie case of abuse of dominance, shall direct the Director General to cause an investigation and furnish a report. The Commission has the powers vested in a Civil Court under the Code of Civil Procedure in respect of matters like summoning or enforcing attendance of any person and examining him on oath, requiring discovery and production of documents and receiving evidence on affidavit. The Director General, for the purpose of carrying out investigation, is vested with powers of civil court besides powers to conduct ‘search and seizure’.

What form do Anti-competitive practices take when Dominant entities attempt to manipulate the market dynamics to their advantage?

There is a fine distinction between defending one’s market position in market share which perfectly legal and legitimate and may involve a certain degree of aggressive competitive behaviour and deliberate exclusionary and exploitative practices. A greater threat to competition lies majorly from the action(s) of dominant enterprises is inimical to future completion. Based on the definition and understanding of ‘abuse’. Abusive of conducts may classify into broad categories;

 (A) Exploitative practices

1. Excessive pricing- the Indian completion law condemns and prohibits imposition of unfair price by dominant firms.[1] While there is very less guidance as to unfair price so far the CCI is cognizant of the importance of evolving an appropriate analytical framework for treatment of unfair price cases that may come up in future so as to avoid the associated risk and cost to consumers, industry and economy.

(B) Exclusionary practices
Exclusionary practices are contracts, pricing strategies and more generally actions taken by dominant firms to deter new competitors from entering an industry, to oblige rivals to exit, to confine them to market niches, or to prevent them from expanding, and which ultimately cause consumer harm[2]. One class of exclusionary practices involve vertical agreements. Such arrangements are common business practices and infringe the law only if reduce competition. These could result from the following types of arrangements:

1. Predatory pricing– it refers to strategies adopted by a dominant undertaking whereby it offers low prices to consumers( below their cost of production) in the short term to insure the exit of competitors and then followed by higher prices in the medium and long run to recoup the losses. Thus we see that for predatory pricing to be proved two conditions must be fulfilled;

(a) Pricing below cost
(b)With a view to reduce completion and eliminate competitors

Thus we see that the Indian definition of predatory pricing focuses on both cost based approach combined with the intention to dominant undertaking to eliminate competition.

2. Rebates– Sec.4 (2) has been couched in an extremely wide manner and it includes cases when the dominant undertaking provides rebates with the intention of foreclosure of competition in market. Broadly speaking 3 forms of non- predatory price cuts which can be regarded as exclusionary include;

  1. Selective price cuts- price cuts that are offered only to certain selected customers.
  2. Fidelity rebates- discounts or rebates that are offered to customers who purchase products only from dominant undertakings.
  3. Threshold rebates- where the dominant firm offers its customers and across-the-board discounts of x percent if the total value of the customers purchase during a given period crosses a certain threshold.

Thus, it is this differential condition in sale of goods, which attracts liability under section Sec.4 (2)(a)(1).

3. Denial of Market Access- Sec.4(2)(c) suggests that any entry barriers created by the dominant enterprise, by its conduct which results in denial of market access, in any manner will be an abuse. The set clause will cover all acts done by dominant undertaking which will result in market foreclosure for the competitors in the same market or even the downstream or upstream market.

4.Refusal to deal– the term refusal to deal(refusal to supply) describes a situation in which one firm refuses to sell to another firm, is willing to sell only at a price that is considered too high or is willing to sell only under conditions which are deemed unacceptable.[1]

5. Exclusivity- exclusive dealing arrangement are commonly defined as arrangement, which require a buyer to purchase all of its requirements or a large extent thereof only from one (dominant) seller, or, respectively, as arrangements, which require a supplier to sell all of its products or services or a large extent thereof to the dominant firm.[2]

  • Exclusive dealing and purchasing- under such arrangements a retailer agrees to purchase or deal in good of only one manufacturer making entry difficult for new manufacturers
  • Exclusive/selective distribution- under such arrangements the manufacturers supplies one or a selected numbers of retailers making entry difficult for other retailers.
  • Tie-in sales- its makes the purchase one product conditional on the sale of another (tied) product.

LEGAL POSITION IN INDIA

There are a plethora of cases that have come up for consideration before the Competition Commission with respect to Abuse of Dominant position as it has become a rampant practice in the market for dominant enterprises to abuse their position of strength. And such abusive conducts cannot be overlooked as they have far reaching consequences. Hence it would be of immense importance to comprehend the position of this practice in India with the help of certain landmark cases handed down by the commission from various sectors of the market. Transportation sector Case: In Shri Shamsher Kataria[3]: Two levels of market were determined. One was the primary market for “sale of cars in India”, and two aftermarkets, at secondary level, are market for “sale of spare parts” and market for “repair and maintenance services”. Original Equipment Manufacturers (OEM’s) contended that there exists no such distinction as primary and secondary markets and that there is only one “system market”. The Commission observed that the two levels were distinguished so as to see the capability to affect competitors and consumers, market share and entry conditions. As regards market share, it was observed by the CCI that OEM’s have a 100 percent share in the aftermarket for their own brand of cars. This was solely because of the inter and intra brand non-substitutability of the spare parts of one brand with other, due to high degree of technical specificity. As a consequence of lack/absence of substitutability of their spare parts, OEM’s were protected from any form of competitive restraints in the aftermarkets from their competitors in the primary market. Furthermore, through a series of contracts, OEM’s became the only suppliers of their own brand of spare parts and tools in the aftermarket and protected themselves from any competition. This makes it abundantly clear that OEM’s had 100% share in their own brand of cars whereby being in a dominant position and also abusing the same.

Real- Estate Case: In Belaire Owners Association[1], the CCI in this case delineated the relevant market in the context of services of development or construction provided by the opposite party. While determining the relevant product market for the service of construction, the impugned assets were categorized as being of the “residential” and “high-end” assets category. Residential property, being different from the non residential ones, may be of various kinds, such as independent houses, builder-floors, apartments, row-houses, condominiums or studio apartments, et al. Irrespective of the presence of consumer preferences, these categories are substitutable to quite an extent, with respect to the price range, geography, facilities and amenities of these assets. On the basis of these factors the Commission held that DLF is in every sense capable of operating independently of competitive forces in the relevant market and thus, the requirement of conditions laid down in explanation (a) (i) to section 4 are fulfilled. DLF thereby has the ability to manipulate the market dynamics itself in its favour. On one occasion an announcement was made regarding several large projects by DLF Ltd. DLF possesses substantial market power to make its competitors react by withholding some of their own projects in order to avoid market saturation. Similarly, prospective consumers may shift or sustain their demand in expectation of availability of projects to be offered by the market leader. Thus, DLF would be in a position to influence both demand and supply of projects in the given relevant market. These possibilities prove that DLF enjoys a position of strength like none of its competitors as envisaged in explanation section 4 (a) (ii) of the Act.

The Competition Act, 2002 (as amended), follows the spirit and philosophy of modern competition laws regime and aims at fostering competition and at protecting Indian markets against anticompetitive practices by enterprises. The Act prohibits anticompetitive agreements, abuse of dominant position by enterprises, and regulates combinations (mergers, amalgamations and acquisitions) with a view to ensure that there is no adverse effect on competition in India.

Competition laws all over the world are primarily concerned with the exercise of market power and its abuse. The term “market power” is variously known as “dominant position”, “monopoly power” and/ or “substantial market power”[1].

 The Competition law denies the utilization of market controlling position to avoid singular ventures or a group from driving out competing organizations from the market and from managing costs. The idea of maltreatment of dominant position of market control alludes to anticompetitive business in which prevailing firm may take part with a specific end goal to keep up or increment its situation in the market.

Abuse of dominant position bears upon the unilateral behaviour of the enterprise or group thereof. Thus concurrence of wills of two or more parties is not a condition precedent to make out a case under Section.4 of the Act. Abuse of dominance being a unilateral conduct does not emanate from any agreement.

A finding of abuse of dominance-be it of an individual enterprise or that of a group essentially involves a three stage or a threefold process in the Indian jurisdiction- firstly it is the determination of relevant market based on relevant product market or relevant geographic market. Secondly, it is the determination of dominance in the relevant market and thirdly, it is the determination of “abuse” of that dominant position[2].

Conclusion

After understanding these basic concepts of Competition Law, we understand that the practices which Zomato, UberEats, Swiggy and Ola financed FoodPanda are following are  clearly a  case of Predatory Pricing, offering food at unsustainable discounts below the cost price which forces small eateries and restaurant to shut down owing to huge losses , as per reports, Zomato intends to serve meals for as low as 50-60 Rs. Therefore, they are in a manner, directly or indirectly, imposing unfair or discriminatory price in purchase or sale. Over and above this, they are also involved in Exclusive Sales Contract, Tie-in arrangements with restaurants and some like Swiggy have started their own kitchens like “The Bowl Company” and then drive traffic to their kitchens bypassing other restaurants. In this manner these big MNC’s crush small start-up kitchens and to an extent medium business restaurants who are not able to compete due to Predatory Pricing. In view of the above there is a strict need to put an end to this unsustainable pricing.

Mr. Anurag Katriar CEO of deGustiBus Hospitality ( Indigo, Tote on the Turf and Neem) stated

“ Deep Discounting by the online food delivery platforms is impacting footfalls and diverting the Customers Traffic to these platforms , besides the cost of doing business is also escalating because Commission are directly getting impacted, these are hurting us in the Long run”

Thomas Fenn, Founder of Mahabelly restaurant  said  “ We need to reach middle grounds on commissions and have more transparency in the system. The Delivery platforms are very good for the restaurant sector but the concequence cannot be detrimental for businesses. As for the … in house kitchens.[1]

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Co- Author- Poulomi Goswami, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[1] Available at https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf

[2] Roy Abir and Kumar Jayant, Competition Law in India, Eastern Law House, Second edition,2014,p.159

[3] Clauses (a) to (e) of sub section (2) of Section 4

[4] A combined reading sec. 4(1) along with sec. (2) which lays down the ingredients of unfair or discriminatory price.

[5] Available at  https://www.cambridge.org/core/books/exclusionarypractices/AC0652A15F36536280BAD10F8A2EBC25

[6] OECD Policy Rounds Tables, Refusal to Deal, 2007,(DAF/COMP(2007) 46) at page 11

[7] Reports on Single Branding and exclusive Dealing, The unilateral Conduct Working Group,7th Annual Conference, International Competition Network, April 2008,p.3

[8] Shri Shamsher Kaaria v. Honda Siel, MANU/CO/0066/2014:2014 Comp LR 1 (CCI)

[9] Belaire Owner’s Association v. DLF Ltd., Case no. 19 of 2010. Decided on 12 August 2011.

[10] Available at https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf

[11] Bhatia G.R., Assessment of Dominance, Issues and Challenges under the Indian Competition Act,2002 Available at http://www.luthra.com/admin/article_images/Manupatra-CLR-Dominance-GRB.pdf



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Patentee Rights During Pendency Of Post-Grant Opposition

Issues:

In the case of Novartis AG & ANR v Natco Pharma Ltd, Swiss Pharma major Novartis has been granted patent for novel and inventive compound “Certinib” for treatment of non-small cell lung cancer. The suit patent was filed claiming priority since 2007, and was granted on 28th September, 2015.

Novartis came across NOXALK (Natco Pharma’s product) at a pharmaceutical conference at Kolkata and noticed the launch of “Certinib Capsules”.

Natco Pharma claimed that the Certinib molecule is neither novel nor inventive as it is covered under the broad “Markush” formula which is disclosed in the patent granted to AstraZeneca ortwo other patents granted to Rigel. Based on such contentions Natco Pharma opposed Novartis’s patent by post-grant opposition.

Novartis filed a case in High court against Natco Pharma seeking permanent injunction, damages, rendition of accounts and delivery up in respect of its granted patent and restraining Natco Pharma from manufacturing and selling “Certinib” capsules.

Judgement:

Justice Pratibha M Singh passed an order on May 2, 2019 directing Natco to file a response to the injunction moved by Novartis within 2 weeks.

Referring to the decision of the Supreme Court in Aloys Wobben, the judge held that though the patent rights may be crystallized once the opposition is actually decided, during the pendency of the post-grant opposition, the rights of a patentee subsist. Thus, confirming that Section 48 of the Patents Act grants rights in favour of a patentee, are not affected during the pendency of a post-grant opposition.

The court remarked that Natco Pharma ought to have waited for the decision of the court on the post-grant opposition instead of launching the product.

In an interim the court allowed selling of the stock that is already manufactured by Natcounder the mark NOXALK (Certinib) considering the interest of the patient community holding that stopping the sale of defendant’s product would only harm the patient community.

The Delhi court restrained Natco Pharma from manufacturing any fresh stock of drugs comprising “Certinib” compound.

The court also directed the Controller General of Patents, Designs and Trade Marks with a request to pass the order on the post grant opposition before the next date of hearing so that the Court can have the benefit of the decision of the Patent Office.

Author: Ms. Mita Sheikh – Associate Director  and Co- Author- Siddhi Mundada , Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at mita@iiprd.com .



Correct Interpretation of section 107A of the Indian Patents Act: Judgement in Bayer Vs. Natco & Alembic

In a recent decision, the Divisional bench of Delhi high court has dealt with correct interpretation of Section 107A of the Patents Act, 1970, commonly known as the Bolar provision.The ruling came as a result of two appeals made by Bayer Corp. Ltd.  against the Natco Pharma and Alembic Pharmaceuticals for infringement of its patents for its drugs Nexavar and Xarelto. Both the appeals dealt with the identical issue.

Background of the Case:

Bayer had approached Delhi high court to stop Alembic Pharmaceuticals from exporting Rivaroxaban, the active ingredient of its patented drug ‘Xarelto’ and Natco Pharmaceutical from exporting Sorafenib, the active ingredient of its patented drug Nexavar. Both the Indian drug manufacturers were granted compulsory licenses for manufacturing respective drugs. According to records, both the patents for the drugs ‘Xarelto’ and ‘Nexavar’ granted to Bayer would cease to be in force from 2020.

On March 8, 2017, a single-judge Bench of the Delhi high court lead by Justice Rajiv Sahai Endlaw had allowed Natco Pharma and Alembic to export the active pharmaceutical ingredient (API) Sorafenib and Rivaroxaban for research and development of information for regulatory submissions.

Natco pharma and Alembic pharmaceuticals affirmed that they will export Bayer’s patented drugs only for the purposes allowed as per section 107A of the Patent Act, 1970.

Some of the findings of the single- judge bench were as follows: –

  • Sale by a non-patentee (even if the non-Patentee is a compulsory Licensee) of a pharmaceutical product solely for the purposes prescribed in Section 107A would also not be infringement;
  • Use of the word selling in section 107A refers to selling within India, and also exports;
  • Merely because no provisions are stated to exist in laws relating to export of pharmaceutical products, for ensuring that API exported is used in the destination country for the purposes for which it has been exported, does not allow Court to interpret Section 107A as not permitting export;
  • Natco and Alembic can export the patented invention for purposes specified in Section 107A of the Patents Act, and for no other purposes.

Aggrieved by the judgement, Bayer Corp. Ltd. Appealed to the Division bench of the Delhi high court for correct interpretation of Section 107A.On 22nd of April 2019, the divisional bench gave its final verdict in both the cases.

Bolar provision-Interpretation:

The decision of the divisional bench of the Delhi high court dealing with the issue of correct interpretationof Section 107A(a) of the Patent Act, 1970 relating to “Bolar Provision” concluded that:

The Bolar exemption is the global community’s thought out design to ensure that –

the enclosure of intellectual property rights, granted to inventions, does not last beyond the term assured and that

the general public is afforded with the end of the bargain which every society guarantees while sealing a patent i.e. access to the technology or invention for generations to come.

But for a Bolar exemption, a third party manufacturer would not be able to start experimentation and ready a product, for its availability to the general public after the expiry of the patent term.

Final Judgement of the Divisional bench of the Delhi high court:

On 22nd April 2019, the division bench of Justice S. Ravindra Bhat and Justice Sanjeev Sachdeva affirmed the findings of the single bench Judge Rajiv SahaiEndlaw.

The decision of the divisional bench confirmed that the sale, use, construction of patented products (by individuals and entities that do not hold patents) in terms of Section 107A of the Act for purposes both within the country and abroad is authorized and legal provided the seller ensures that the end use and purpose of sale/export is reasonably related to research and development of information in compliance with regulations or laws of India (or the importing country), for its submission in accordance with such laws.

The divisional bench held that any dispute over the end use or purpose of the export, whether it is reasonably for research or regulatory submissions will be the subject matter of a civil suit, where the relief can be granted based on circumstances and the evidence.

The divisional Bench directed that the court trying the suit would decide the case in accordance with law taking into account discussion and factors indicated in this judgment.

Author: Ms. Mita Sheikh – Associate Director  and Co- Author- Dhanada Deshpande , Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at mita@iiprd.com .



Export Of Patented Product For Research Or Experimental Purposes– A Part Of Bolar Exemption

The High Court of Delhi had finally adjudged, the case of Bayer Corporation v. Union of India & Ors and Bayer Intellectual Property gmbh & Anr, v. Alembic Pharmaceutical Limited by the order dated 22.04.2019, on the scope of section107(A) of Indian Patent Act 1970 by reading the meaning of word ‘export’ into it, though it finds no express mention. The court thereby upheld the acts of respondents (Alembic/ Natco) legally and statutorily valid while dismissed to entertain the petitioner’s (Bayer) pleas in this regard.

To appreciate the issue in question, the facts of the case are to be related simultaneously with sections 48 and 107A of Indian Patent Act 1970.

Section 48. Rights of patentees.—Subject to the other provisions contained in this Act and the conditions specified in section 47, a patent granted under this Act shall confer upon the patentee— (a) where the subject matter of the patent is a product, the exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing for those purposes that product in India; (b) where the subject matter of the patent is a process, the exclusive right to prevent third parties, who do not have his consent, from the act of using that process, and from the act of using, offering for sale, selling or importing for those purposes the product obtained directly by that process in India.

Section 107A. Certain acts not to be considered as infringement.—For the purposes of this Act,— (a) any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product; (b) importation of patented products by any person from a person who is duly authorised under the law to produce and sell or distribute the product, shall not be considered as infringement of patent rights.

THE ISSUE

Whether “export” of the patent product for research or experiment purpose is comprehended to be a part of bolar exemption [section 107A of Indian Patent Act, 1970]

FACTS OF THE CASE

The drug in issue is Sorafenib Tosylate (a Bayer’s product) was sold under the trade name “Nexavar”, was patented in India in 2008. NATCO applied to the controller general of patents for grant of Compulsory License under Section 84 (1) of the Patents Act, after an expiry of three years, as stipulated under the Act. Controller General of Patent issued the compulsory license to NATCO which was upheld by IPAB and the Supreme Court.

NATCO next applied for permission to export 1 Kg of Active Pharmaceutical Ingredient (hereafter “API”) Sorafenib to China to conduct clinical studies and trials for development of drug for regulatory purposes. It pleaded that export of the patented invention is squarely covered under section 107A and that its intentions were not for commercial purpose. Natco held that grant of Compulsory License does not take away the rights to export the patented invention for the purposes of section 107A.

Bayer alleged that 107A of Indian Patent Act does not allow exporting of drug even for the purposes laid down under 107A. And that absence of the word ‘export’ clearly indicates the purpose of the law – not to allow the export of the patented invention. And the words ‘in a country other than India’ should be interpreted only to allow export of the information generated by experiments in India. It held that the word “selling” should be interpreted to mean “selling in India and not outside the country”. Bayer alleged that if law intended to allow export, language would have expressly included that as it has included import. In summary, Bayer requested the court to interpret the word ‘sell’ to mean selling without exporting, i.e. selling in India. And such export of patented invention is violation of law.

On similar lines, Bayer filed an injunction against Alembic from making, selling, distributing, advertising, exporting, offering for sale and in any manner directly or indirectly dealing in Rivaroxaban and any product that infringes Bayer’s patented product. Alembic was manufacturing and exporting RIVAROXABAN to the European Union and had made multiple Drug Master File submissions to the USFDA in the USA for the drug RIVAROXABAN. Alembic alleged that exports being effected by Alembic were within the meaning of Section 107A only.

IN THE LIGHT OF PRESENT CASE

Learned Single Judge with regard to section 48 and section 107A in Bayer Vs. Natco, held that the words ‘sale/ selling’, as per their literal/textual meaning are without any geographical limitations and in Section 107A are not to be understood as within India only and if such sale / selling were to involve transfer of the patented invention / product to a country other than India though would also qualify as export / exporting but would not cease to be sale / selling. Observations of Ld. Single Judge are given below.

(1) The terms “constructing” in Section 107A and “offering for sale” in Section 48 were not important. It was then held that – It is thus the purpose for which the said acts are done which distinguishes, whether the acts constitute infringement of patent or not. If the said purpose is within the confines of Section 107A, the acts so done would not constitute infringement and vice versa. (para 9, page 6)

(2) That the words ‘sale/ selling’ thus, as per their literal/textual meaning are without any geographical limitations and in Section 107A are not to be understood as within India only and if such sale / selling were to involve transfer of the patented invention / product to a country other than India though would also qualify as export / exporting but would not cease to be sale / selling (para 35, page 9)

(3) It becomes immediately evident that ‘selling’ permitted by Section 107A is of a patented invention i.e. a product and not of ‘information’ (para 29, page 8)

(4) the words “law for the time being ‘in a country other than India’ is evidence of, obtaining regulatory approvals in countries other than India being contemplated by the legislature. Certain acts mentioned in Section 107A, required to be done for the purpose of obtaining such approval, would not be considered as infringement of patent rights. One of such acts is of selling of patented invention. The plain meaning of Section 107A is that selling of patented invention for obtaining regulatory approval in country other than India would entail transfer of patented invention i.e. product from India to that country. There is nothing in the language of Section 107A to suggest that only the information generated / collected in India could be transported out of India and not the patented invention. Therefore, the word ‘selling’ in Section 107A cannot be restricted to India only. (para 37, page 9)

The High Court bench comprising of two Learned Judges, after referring different dictionaries and relying on landmark judgements, finally observed that:

(1) there cannot be ironclad or bright line rule as to what acts are reasonably related to use or sale of product, with the object of using the developed information to satisfy the regulations, as stated below.

“That brings the question to what is use, sale, etc. “reasonably related” for the purpose of developing information, ultimately used for in compliance with regulatory processes and laws in or outside India? Ultimately, on this aspect, there cannot be an ironclad rule or bright line as to what acts are reasonably related to the use or sale of the product, with the object of using the developed information to satisfy the regulations.” (para 107, page 80,81)

(2) the sale, use and construction of patented products in terms of section 107A of the Act for purposes both within country and abroad is authorized and legally provided, as stated below.

“Sale, use, construction of patented products (by individuals and entities that do not hold patents) in terms of Section 107A of the Act for purposes both within the country and abroad is authorized and legal provided the seller ensures that the end use and purpose of sale/export is reasonably related to research and development of information in compliance with regulations or laws of India (or the importing country), for its submission in accordance with such laws. The impugned judgment of the learned single judge and the findings recorded on this aspect are accordingly affirmed.” (para 119, page 89)

(3) that section 107A is not to be treated as an exception to section 48 of Indian Patent Act as pleaded by Bayer. Discussion in parliamentary Joint Committee Report makes it a special provision dealing with right of patented invention for research purposes.

“In the light of the above discussion, the court is of the opinion that there is no question of treating Section 107A(a) as an exception to Section 48. Its history of interpretation by TRIPS, the discussion in the Parliamentary Joint Committee Report, all clearly point to its being a special provision that deals with the rights of the patented invention for research purposes.” (para 89, page 67)

(4) that the section 107A is in line with provisions of TRIPS agreement and other international guidelines too.

CONCLUSION

The sale of patented product for research or experimental purpose, within or outside India irrespective of quantity of product sold is held to be statutorily and constitutionally valid. No infringement lies with regard to Bayer’s product. In this regard, court states that,

“Once it is held that patented inventions can be sold for the purpose of carrying on research which fulfils the regulatory requirements of India, there cannot be any bar or an interpretation narrowing the scope of such sale. What is important is the purpose of the sale, i.e. objective of carrying on experiment, research and developing information (in the form of reports, outcomes etc.). If the purpose of the sale is to ultimately exploit the patented invention and either work upon it or “work around” or work it through research so as to be prepared to apply for the patent for approval to market it once the patent tenure ends, there can be no impairment of the patentee’s rights. The natural consequence of that sale cannot be curtailed by a contrived interpretation to say that it is only information that can be sold or exported, not the patented invention.” (para 91, page 68)

High Court gives utmost significance to A-47 and A-21 of the Indian constitution and upholds export as a valid part of Bolar Exemption, thereby not limiting the scope of export to information only. (para 117, pages 87,88)

Hence, allegations made by Bayer stand settled and the reliefs claimed by Bayer are dismissed. The matter is adjudged in the favour of Natco and Alembic.

Author: Rajeshri Thota,, Intern at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at Dhakshina Moorthy C.



Trimmer Troubles Nova . Delhi HC imposes 3 Cr damages for Infrigement Analysis- Philips vs (Nova)Amazestore and Philips vs Amitkumar Kantilal Jain

Recently on April 22nd 2019, The Hon’ble Delhi High Court passed a judgment, awarding the highest ever quantum of damages in a copyright & design infringement case. Total cumulative relief awarded to the Plaintiff ( Philips) amounts to about INR 3, 15,71,000 (USD 451,244) [i.e. INR 1,19,96,000 (i.e. about USD 171,458) against the importer & INR 1,45,75,000 (i.e. about USD 208,320) against the manufacturers of the infringing product][1] . Philips filed two suits, first one was for piracy of a registered design (under Section 22 of the Designs Act, 2000) and one other for infringement of copyright as well as trade dress for its Advance Beard Trimmer Series 3000 against Nova Manufacturing Industries Ltd, Badri Electro Supply and Trading Company(Owner of the Nova trademark), and OmniEximPrivate Limited(importer of the infringed product).

Plaintiff argued that Nova has placed a product in the market which was deceptively similar to Philip’s own product. They sold it under NOVA NHT 4000 Trimmer for Men.Everything from the packaging, design, layout and colour scheme and description of this product has been copied. The registered design of the product has also been copied by the defendants. The literary work, artistic work and the photographs in the Plaintiffs’ product literature and promotional material and packaging fall within the meaning of Sections 2(c), 2(o) and 2(s) of the Copyright Act, 1957 respectively and were infringed upon. By virtue of Sections 13 and 14 of the Copyright Act, 1957, Plaintiffs are entitled to the exclusive rights in the copyright vested in the literary work, artistic work, etc. as well as the packaging of the product, which has been developed and sold by the Plaintiffs( Philips). When a suit for an injuction was filed against them, they continued selling the same product under different model numbers deceptively.

The Hon’ble Court consolidated both the suits and passed a permanent injunction against Nova Furthermore, the Hon’ble Court also accorded aggravated damages as well as actual damages. Citing three different landmark governing cases, The Court has given their justification as to how this case constituted the award of aggravated/exemplary damages. These are also known as punitive damages, which are seldom awarded and are intended to punish the defendant for maliciously wrongful conduct or causing irrevocable damage to reputation and to deter him from acting similarly later.  Summary and analysis of the three cited cases in the  present judgment are given below.

Rookes vs Barnard

Douglas Rookes was employed by the British Overseas Airways Corporation (BOAC) had resigned from the Union he was a part of, Association of Shipbuilding Draughtsman (AESD) who was in a closed shop agreement with the BOAC which entailed that BOAC employ, only those employers , who were part of the union and that the employer needed to be a part of the union as long as he was employed. Rookes had gone against that agreement.He was suspended by BOAC and later dismissed with one week’s salary with notice. After Rookes filed a suit, The Court ruled in his favour and against the Union. While it was argued that only compensatory damages were enough to recover and damage caused, the judgment stated three situations where exemplary damages could be awarded:

a. Oppressive, arbitrary or unconstitutional action by the servants of the government;

b. Wrongful conduct by the defendant which has been calculated by him to make profit for himself which may well exceed the compensation payable to the claimant; and

c. Any case where exemplary damages are authorized by the statute

These have been the foundation for exemplary damages to be awarded but have also been criticized on many fronts stating that the conditions are too narrow. Among them was during the case of Casselle vs Broome

Casselle & Co. vs Broome[1]

This was an English Libel case which concerned the issuance of exemplary or aggravated damages. David Irving, was a very controversial writer in England who published a book with Casselle Publishing Company which blamed the destruction of a World War Two Convoy on a retired Royal Navy Officer, Captain Jack Broome. Even though, the Captain had been devoid of any blame. Hence, he sued the publishing company and the author for libel and the Court awarded £25,000 alone in damages which was a first at that time. An appeal was filed by the defendants but the Court upheld the order of exemplary damages saying the case qualified for it. It also criticized the judgment in Rookes vs Barnard stating that the conditions laid down for exemplary damages were too narrow.

Hindustan Unilever Limited vs Reckitt Benckiser India Limited

Closer home in India, Reckitt Beckinser filed a suit against Hindustan Unilever for permanent and mandatory injunction after the defendants aired an advertisement which depicted a child allegedly falling sick because of using Dettol as an antiseptic liquid in their bathing water. The liquid that is poured into the bathing water turns it milky which is considered an exclusive feature of Dettol and goes on to depict that Dettol cannot ward off any infections and fails as an antiseptic which according to the plaintiff harmed their reputation and goodwill in the market. Reckitt also sought damages of around Rs.20,00,050/- along with an additional claim for exemplary damages towards disparagement, denigration and tarnishment of its goodwill and reputation by the impugned advertisement.

Before this, Time Incorporated v. Lokesh Shrivastava[1]was the first case where punitive damages were awarded for an IP case and it departed from a long standing precedent. The court in that case stated

“This Court has no hesitation in saying that the time has come when the Courts dealing actions for infringement of trade marks, copy rights, patents etc. should not only grant compensatory damages but award punitive damages also with a view to discourage dishearten law breakers who indulge in violations with impunity out of lust for money so that they realize that in case they are caught, they would be liable not only to reimburse the aggrieved party but would be liable to pay punitive damages also, which may spell financial disaster for them. In Mathias v. Accor Economy Lodging, Inc. reported in 347 F.3d 672 (7th Cir. 2003) the factors underlying the grant of punitive damages were discussed and it was observed that one function of punitive damages is to relieve the pressure on an overloaded system of criminal justice by providing a civil alternative to criminal prosecution of minor crimes. It was further observed that the award of punitive damages serves the additional purpose of limiting the defendant’s ability to profit from its fraud by escaping detection and prosecution. If a tortfeasor is caught only half the time he commits torts, then when he is caught he should be punished twice as heavily in order to make up for the times he gets away This Court feels that this approach is necessitated further for the reason that it is very difficult for a plaintiff to give proof of actual damages suffered by him as the defendants who indulge in such activities never maintain proper accounts of their transactions since they know that the same are objectionable and unlawful.” However, there was noframework laid down for calculation of these exemplary damages which may lead to over generous award of damages.

However Justice Ravendra Bhatt in the case of HUL v. Rickett (supra) observed that “to say that civil alternative to an overloaded criminal justice system is in public interest would be in fact to sanction violation of the law. This can also lead to undesirable results such as casual and unprincipled and eventually disproportionate awards.” By this  the court has overruled the Judgement of Times Incorporated v Lokesh Srivastava (supra) which provided that punitive damages can be granted in  cases of infringements of copyrights ,trademarks patents etc with a view to discourage the law breakers and to ensure that they  are liable to pay not only compensation to the aggrieved party but  also pay punitive damages ,thereby putting them under financial constrain.

The Court has however not closed the door for providing punitive damages, instead provided the circumstances under which punitives damages can be granted. These circumstances include:

“a. Oppressive, arbitrary or unconstitutional action any the servants of the government.

b. Wrongful conduct by the defendant which has been calculated by him for himself which may well exceed the compensation payable to the claimant; and

c. Any case where exemplary damages are authorised by the statute.”

Philips vs Nova:

The present judgment cites the following lines from the Rookes judgment to justify exemplary damages in this cases.

“Cases in the second
category are those in which the Defendant’s conduct has been calculated by him
to make a profit for himself which may well exceed the compensation payable to
the plaintiff

Where a Defendant with a cynical disregard for a Plaintiff’s rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity

Exemplary damages can properly be awarded whenever it is necessary to teach a wrongdoer that tort does not pay.”

The Rookes judgment also laid down three considerations which should always be borne in mind when awards of exemplary damages are being considered.

“Firstly, the Plaintiff cannot recover exemplary damages unless he is the victim of the punishable behavior.Secondly, Some of the awards that juries have made in the past seem to me to amount to a greater punishment than would be likely to be incurred if the conduct were criminal; and moreover a punishment imposed without the safeguard which the criminal law gives to an offender. I should not allow the respect which is traditionally paid to an assessment of damages by a jury to prevent me from seeing that the weapon is used with restraint.

Thirdly, the means of the parties, irrelevant in the assessment of compensation, are material in the assessment of exemplary damages. Everything which aggravates or mitigates the Defendant’s conduct is relevant.”

In the case, it is clear that the defendant knew that the profits they were gaining from the sale of the infringing product is way more than the damages they would have to pay and they continued with it. Hence, this falls in the second situation as stated by Rookes vs Barnard and is valid for receiving aggravated damages. In Consequence of the  considerations laid down by the Rookes judgment, the profits earned by Nova were taken into consideration while calculating the total aggravated damages. The Judgment laid down a new thumb rule to be followed for calculating the damages which states,

Serial No   Degree of Mala fide conduct Proportionate Award
1 First time innocent infringer Injunction
2 First time knowing infringer Injunctions + Partial Costs
3 Repeated knowing infringer which causes minor impact to the Plaintiff Injunction + Cost + Partial Damages
4 Repeated knowing infringer which causes minor impact to the Plaintiff Injunction + Cost + Compensatory Damages
5 Infringement which was deliberate and calculated (Gangster/scam/mafia) + wilful contempt of court. Injunction + Costs + Aggravated damages (Compensatory + additional damages)

The present judgment falls in the last category as the infringement of the design as well as the copyrighted material and trade dress was deliberate. And in contempt of an earlier injunction order, the said Defendants deliberately changed their modus operandi and routed the impugned products through M/s Omni Exim Private Limited.

Conclusion

Whilst Rookes vs Barnard still remains controversial universally, the present judgment stated that a deliberate infringement was carried out against Philips and the Defendant acted calculative in order to earn profits. This is a landmark judgment when it comes to awarding aggravated damages for an Intellectual Property case and also lays down a thumb rule to be followed for calculation of these damages in order to avoid arbitrariness.

References:

[1] http://updates.anandandanand.com/landmark-decision-question-damages-involving-philips/

[2] [1964] 1 All ER 367

[3] [1972] A.C. 1027, House of Lords

[4] RFA (OS) 50/2008, C.M. APPL. 17116/2008

[5] 116 (2005) DLT 599



Are Streaming Services Broadcasters?

Traditionally, the consumption of media content was primarily carried out through television and radio. This has changed with the internet. In today’s day and age, internet content streaming services have taken over the market and changed the way in which content is consumed by the public.

While the developments in technology have made life more convenient for the consumers, the laws governing such content are not clear with respect to the use of such content. This can be seen in the conflict that arose between Spotify and Warner Chapple Music Ltd. (WMC).

Spotify is a company that provides an audio streaming services around the globe. While Warner Chapple Music Ltd. is a Music record label that produces and licenses out music.

As Spotify provides an audio streaming service, it licenses music and other sound recordings from the owners of the copyright. In this case the record labels or the production houses. Once they have licensed out their Musical works, Spotify can upload the works on their application for its users.

Spotify wished to enter the Indian market and thus wished to acquire the licenses form record labels and production houses, in order to stream their music on its app. While doing so, they had a conflict with the WMC and thus a license agreement could not be reached upon.

Though Spotify did not have an agreement with WMC, they launched their application in India and provided their users access to the songs by WMC. WMC had issued an objection against the same, still Spotify went ahead made WMC’s music available to its users. Though not all WMC’s songs were being streamed many of them were available to the users1.

The conflict had grown when Spotify made its intentions clear to invoke the Statutory licensing provision given in the Copyrights Act under section 31D. On the 25th of February 2019, Spotify issued a notice to the Intellectual Property Appellate Board (IPAB) stating that it was invoking the statutory

licensing provisions given under section 31D of the Act as it is an internet broadcaster and intended to broadcast the same. Spotify supported its claim of being a broadcaster through an Office Memorandum issued by the Department of Industrial Policy and Promotion (DIPP).

Spotify launched their service and enforced the statutory license on the 26th of February 2019. However, there was an issue in the enforced statutory agreement i.e. the IPAB had not fixed any royalty rates for the statutory license to be enforced2.

Section 31D allows broadcasters to communicate to the public any ‘previously published’ musical work or sound recording. They can do so by invoking compulsory licensing through a unilateral notice i.e. the party intending to use the work shall inform the owner of the copyright that they intend to broadcast their work. The provision also directs the parties that the license would be enforceable after the IPAB fixes the royalty rates3.

However, as the royalty rates have not been fixed by the IPAB for either radio, television or even internet broadcasters with respect to statutory licenses, there is no clarity that the move by Spotify to not wait for the IPAB to fix the rates and launch their services with the musical works of WMC was authorised.

WMC responded to the notice for statutory licensing and anticipated infringement of their copyrights by suing Spotify and applied for a petition seeking injunction against their music being streamed on the app.

The Bombay High Court issued an order where, Spotify was asked deposit a sum rupees six crores fifty lakhs with the high court, they were directed to do so without any justification. The court also directed them to not enforce the statutory license till the time the IPAB fixed the royalty rates. But did not prohibit Spotify, from using WCM’s catalogue of musical works, subject to the remuneration being offset upon the final disposition of the suit.

On one hand, if the legislative intent of section 31D of the Copyrights act were to be understood, it was put in place with the view of television and radio broadcasting4. However, the Office Memorandum issued by the DIPP brought internet streaming services under the purview of being broadcasters5.

As both the companies wish to continue their business relations this matter would be in most likelihood be resolved by negotiations. However, it would be interesting to know what could happen if the courts were to give a judgement on the issue6.

If the court went in favour of Spotify, all internet audio streaming services would be become as broadcasters and could therefore apply for statutory licenses. At the same time, it would mean that the DIPP has substantial powers with regards to the interpretation of copyright laws. As well as, WMC would have to allow Spotify to use their musical works on their application.

If the courts were to go in favour of WMC, internet streaming services would not come under the purview of being a broadcaster and the Office Memorandum issued by the DIPP would become invalid. Spotify would have to remove the music catalogue belonging to WMC and proceed to negotiate a voluntary licensing agreement in order to stream WMC’s music.

A judgement to this case would have a long-lasting effect on the copyright laws in India. It would answer the questions whether a streaming service is a broadcaster. It would ascertain the power of DIPP. Most importantly, it would give a clear picture as to how a statutory license is to be enforced in an authorised manner.

Author: Aditya Vaidya , student of BBA LL.B(Hons.) from Alliance school of law, Alliance University, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at swapnils@khuranaandkhurana.com

References:

[1]Intellectual Property Right. (2018). In: Black’s Law Dictionary, 2nd ed. [online] Available at: http://thelawdictionary.org%5BAccessed 5 May 2018]

[2]The Copyright Act 1957, s 13(1)

[3]Black’s Law Dictionary, 2nd ed.

[4] PTI, ‘Indian Film and TV Industry Threatened by Online Piracy’ The Hindu(Mumbai, 16 december 2009)

[5]Arul George Scaria, Piracy in the Indian Film Industry: Copyright and Cultural Consonance ( 1st ed., Cambridge University Press 2014)

[6]Prasar Bharti v. Tam Media [2012] CCI 32

[7]The Copyright Act 1957The Copyrights Act, 1957

[8]Copyrights and industrial Designs by P. Narayana.

[9]www.spicyip.com

[10]www.billboards.com

[11][www.dipp.gov.in

[12]www.theverge.com



A Frightening Case of Digital Piracy in the Entertainment Industry

Introduction

Creative expressions are not a new domain and are as old as human societies, the difference in today’s scenario being the increased importance that is given to protection of such expressions. It was in 1667, when John Milton sold the rights of his legendary work, Paradise Lost for mere 10 pounds. As it was the problem with earlier times, creative art was not valued commercially and it was restricted to mere philosophers, who used the medium of writing and speaking to share their wisdom without any expectation of commercial returns. With time, human intellect and its products started to be seen as commercially valuable. The intangible rights which protect such products and expressions are collectively known as Intellectual Property Rights.[1]Copyright is one such field in intellectual property rights which specifically deals with the same, the primary domain of which includes literary works (such as novels, poems and plays), films, music, artistic works, etc.[2] Such works of artistic value are vulnerable to being used without giving due credit to its producer. It has become difficult to keep a track on copyright violations with the increasing accessibility of multiple platforms.

Copyright piracy is a threat to the creative liberty of artists. Piracy means unauthorised reproduction and distribution either of the whole or of a substantial part of works protected by copyright.[3] In cinematographic works piracy happens through unauthorised reproduction of the film in various formats.  Among countless ways of piracy, the most prominent in recent times is internet piracy. The increase in external websites in streaming unauthorised content is an alarming concern as accessing content through third party applications does not add up to the revenue of the creator and also harms their prospective of income. The Motion Pictures Distributors Association of India (MPDA)have expressed that India has one of the highest rates of video piracy in the world. It is considered that the global online TV and movie industry would lose 51.6 billion U.S. dollars to piracy in 2022.[4] India is a country with a weak Intellectual Property enforcement system. The US government in its special 301 report asked India to strengthen the protection and enforcement various facets of Intellectual Property.[5]

Digital Content and Network Effect

The recent shift of the entertainment industry has been to the digital platform with all creative content made available online. With newer technologies such as virtual reality, one can create a 360 degree immersive environment without having to venture out. Various streaming websites have come up which act as a platform for producing new content or hosting third party content. But, the increase in accessibility has also resulted in the increase in vulnerability. Earlier, the content was restricted to a certain section of audience in a protected environment, which was not conducive for piracy. With the advent of Internet and development of peer to peer network, every user can find the content he is searching from million other computers and thus establish a link to get the content delivered to the host computer. The structure of internet makes it more difficult to track pirated content as the servers are spread around the world and one might store content in a country different to one’s country of residence.

The revenue generation for these unofficial and unauthorised websites is from advertises through one click ads, leeches etc. The cost of reproduction is marginal as procurement of a single copy would result in unlimited distribution. The market is further problematic as the primary objective is not to make profit or sell content but to develop a network effect so as to get recognition. Network effect is defined as a valued service which is directly proportional to the number of users. Thus larger the network, the better and dominant will be its market structure.[6]The primary source of revenue generation is no longer the content that is available on these platforms but the value of the platform on which the content runs. Among all these there is a serious threat to the content creators and to the expression of their ideas. Copyright laws aims to protect such content creators and thus value content as products of one’s intellect.

Conclusion

The executive legislation and rules are too broad to catch up with the technological advancements. The time has come to critically address the issue which is haunting every creative artist around the world. The entertainment industry needs to take certain measures to tackle the challenge faced from piracy. It can do so by making its content accessible at a nominal rate to the audience so that it can attract audience and thereby start a more reliable trend.

The need is to balance the rights of all stakeholders. While piracy affects the entertainment industry and the economy by depriving the government of the revenue that could have been earned by the means of taxes, other serious concerns overshadow the problem of IPR. Thus importance should be given on efficient implementation of existing laws and keeping infringement under the check by suitable exercise of the available remedies. Among other remedies, the one effective way to deal with digital piracy is through criminal sanctions. Criminal remedies are separate and exist independently and can be availed along with the civil remedies. Criminal remedies include imprisonment, seizure, etc. Section 63 to 70 of the Indian Copyright Act, 1957 lay down the criminal remedies.[7]With ever increasing awareness about the rights ensued by the field of Intellectual Property Rights, it is imperative for a country like India to strengthen its copyright regime and to create an atmosphere conducive for the growth of intellectual faculties and creative talent.

Author: Abhishek Tripathy, student of B.A. LL.B(Hons.) from Institute of Law, Nirma University, Ahmedabad, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at swapnils@khuranaandkhurana.com

References:

[1]Intellectual Property Right. (2018). In: Black’s Law Dictionary, 2nd ed. [online] Available at: http://thelawdictionary.org%5BAccessed 5 May 2018]

[2] The Copyright Act 1957, s 13(1)

[3] Black’s Law Dictionary, 2nd ed.

[4] PTI, ‘Indian Film and TV Industry Threatened by Online Piracy’ The Hindu(Mumbai, 16 december 2009)

[5] Arul George Scaria, Piracy in the Indian Film Industry: Copyright and Cultural Consonance ( 1st ed., Cambridge University Press 2014)

[6]Prasar Bharti v. Tam Media [2012] CCI 32

[7]The Copyright Act 1957



Online Gaming in India

The gaming scene in India, like the rest of the world, has irrevocably been shaken up with the evolution of digital and online gaming. While PC and Console gaming still remain wildly popular, the number of users indulging in online gaming is on a steady rise. In India, the gaming sector is regulated by The Public Gaming Act, 1857. In a study on Online Gaming in India conducted by KPMG India and Google in 2017, the online gaming market in India stands at 290 Million USD and is expected to grow to 1 Billion USD by 2021. There is more diversity among Indian Gamers and in comparison to the global market and it is ever increasing.

The Indian Constitution has granted the individual State Governments the right to enact legislation to govern gambling. But what exactly is the difference between gaming and gambling as provided by the act.

Game vs Gamble

The Supreme Court in Dr. K. R. Lakshmanan vs State of Tamil Nadu and Anr. held that,

“Gambling in a nut-shell is payment of a price for a chance to win a prize. Games may be of chance, or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand – although the element of chance necessarily cannot be entirely eliminated  is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player. Golf, chess and even Rummy are considered to be games of skill. The courts have reasoned that there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – “skill” or “chance” – which determines the character of the game.”

Nagaland, Sikkim, Assam are the only states in India that have their own gaming and gambling rules. The Sikkim rules state that the games have to be safe, secure and fair. In Nagaland, the state issues licenses for games of skill. But what is the need for such regulations?

Recent Developments

There have been a few negative developments in the online gaming scene recently. For instance, the Blue Whale Challenge is a ‘game’ that comprises 50 tasks of increasing difficulty. The penultimate challenge presented to the user is to commit suicide as the ‘final task’ with a promise to provide a thrilling  started in Russia four years ago on a social networking site called VKontakte. It had already claimed over 130 lives in Russia with the first suicide taking place in 2015.What is worrying is that despite the common knowledge that the deadly game started and spread on VKontakte, which is a hugely popular site in Russia, no checks were brought in place to contain the network. One can easily create a VKontakte account . And once you log in, and search for ‘#bluewhale’, you come across psychotic, extremely depressing messages of young people desperately wanting to play the game and end their lives. Blue Whale wasn’t even an actual game but a social media phenomenon that posed as a ‘game’ to fool depressed youngsters. The challenge could be accessed through various platforms

In India, up to 4 people had already committed suicide when the Gujarat Chief Minister Vijay Rupani had stated that the Gujarat State Government would bring an ordinance if need be to ban the game in Gujarat.

In another instance, The Momo Challenge was yet another ‘game’ that encouraged children to take their own lives. It purportedly enticed children to perform a series of harmful task such as violence, self-harm and even suicide. But the social media hoax turned out to be a fake one.

The Sports (Online Gaming and Prevention of Fraud) Bill, 2018

In light of such events, instead of spending time bringing about an ordinance to ban such games, a legislation that protects online gamers from such predators is the need of the hour. Congress Member of Parliament (MP) Shashi Tharoor introduced a private member’s bill, namely, the Sports (Online Gaming & Prevention of Fraud) Bill, 2018 in the Lok Sabha on 28 December 2018. The first objective of this bill is to introduce an offence of ‘Sport Fraud’ in order to prevent unethical gambling that may lead to match fixing or manipulation of international sport events and the second objective being the creation of a national regulatory and licensing framework and the creation of an Online Sports Gaming Commission and licensing framework to oversee online sports gaming which will put forward numerous safety guidelines to be followed.

Even though the primary aim of this bill is to restrict match-fixing, this can also serve as an umbrella framework to prevent destructive games like The Blue Whale Game from festering. The Gaming Commission can ensure that all prerogatives are met by the online game developers.

Online Gaming may be difficult to pin down to follow a regulatory framework. Many local developers may find it easy to skirt around an issue and find loopholes but it may still be a start.

There are many benefits to gaming. They help increase communication, leadership, coordination but these are glossed over in the gaming world if the negative aspects are in the limelight. Xbox has parental controls that lets you lock away content you don’t think is accuratefor children. Similarly, a strict legislation for online gaming will be significant.

About the Author: Kirti Menon, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at swapnils@khuranaandkhurana.com

References:

[1] The Sports (Online Gmaing and Prevention of fraud Bill) – http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/2415as.pdf

[2] Nagaland Gaming Rules – http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/2415as.pdf

[3] Gujarat Government bans the Blue Whale Challenge – https://economictimes.indiatimes.com/news/politics-and-nation/gujarat-government-to-ban-blue-whale-challenge-game/articleshow/60378906.cms?from=mdrhttps://economictimes.indiatimes.com/news/politics-and-nation/gujarat-government-to-ban-blue-whale-challenge-game/articleshow/60378906.cms?from=mdr



Is Death By Mosquito Bite covered under Death By Accident ?



Few Days ago, I came across a very interesting headline “Is Death By Mosquito Bite covered under Death By Accident”. I was impressed by this question as I felt strong arguments can be raised from both side, and hence read about the issue in Depth. For answering this question we need to first understand “What is an accident”.

WHAT IS AN ACCIDENT?

An accident is something that happens unexpectedly and is not planned in advance. It is defined as[i]

  • as unpleasant event, especially in a vehicle, that happens unexpectedly and causes injury or damage,
  • something that happens unexpectedly and is not planned in advance
  • as accident, an unforeseen injuries occurrence, something that does not come in the usual course of event or that cannot be reasonably anticipated
  • an unforeseen and injurious occurrence due to mistake, negligence, neglect or misconduct; an unanticipated and untoward event that cause(s) harm

JUDICIAL PRONOUNCEMENT BY THE SUPREME COURT

In one of the recent landmark judgments by the apex court[ii], the court referred to an anecdote from Mozambique, where a death was caused due to Malaria and then the court was tasked to determine whether death by malaria constituted a death due to an accident. The insured shifted from Assam to Mozambique and was diagnosed with encephalitis malaria and died on Account of multi-organ failure. The heirs of the deceased claimed for insurance under Section II of the policy against personal accident. The state commission by its order stated that a “sudden death due to a mosquito bite in a foreign land” was an accident; it would be rather silly to say that it was a natural death. The order of the State Commission was assailed in revision before the National Commission and it was held that:

“It can hardly be disputed that a mosquito bite is something which no one expects and which happens all of a sudden without any act or omission on the part of the victim. In Consumer Complaint No. 223 of 2006, Shri Matber Singh versus Oriental Insurance Co. Ltd. decided on 05.09.2014, this Commission noted that as per the information available on the website of the Insurance Company, an accident may include events like snake bite, frost bite and dog bite. Hence, it would be difficult to accept the contention that malaria due to mosquito bite is a disease and not an accident.” 

Hence, in order to raise a claim for an accident “the death or mishap must be in the nature which is unnatural, unforeseen or unexpected”. In the present case, death is caused due to a disease being contacted; therefore the question was “whether a disease can be covered within the ambit of “Accident”.

The Supreme Court analyzing the merits of the case from the purview of different definitions of Accident, emphasised that ‘accident’ as a term does not include disease in the ordinary course of events.

The Supreme Court in dealing with an appeal against the National Consumer Commission has held that a disease caused/ transmitted by insect/ virus in the natural course of an event would not be covered under accident.

Although the Hon’ble Supreme Court has given its precedent, but some of my questions have still not been answered, How is a death by a disease caused by event of Mosquito Bite different from death by infection, tetanus or Gangrene caused by event of Vehicle Accident. Both events are unforeseen, unexpected. What I mean is getting bitten by anopheles mosquito and getting hit by a vehicle while on road are “accident” as they both are unforeseen injurious occurrence. 

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Co- Author- Pranay Bhattacharya, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

References:

[i] Oxford Learner’s Dictionary available at https://www.oxfordlearnersdictionaries.com/definition/english/accident

[ii] The Branch Manager, National Insurance Co. Ltd. v. Mousumi Bhattacharjee and Ors, In The Supreme Court Of India Civil Appeal No. 2614 of 2019 (Arising out of SLP (C) No. 4297 of 2017) decided on 26.03.2019; available at  https://www.sci.gov.in/supremecourt/2017/2086/2086_2017_Judgement_26-Mar-2019.pdf (Last Accessed on May 7, 2019 at 11: 08 AM )