In 2 peculiar judgments, in the cases of John Wiley & Sons & Ors. v. Prabhat Chander Kumar Jain & Ors. CS (OS) No.1960/2008 and John Wiley & Sons v. International Book Stores & Ors. CS(OS) No. 2488/2008, the Delhi High Court has restrained the Defendants, from exporting low-priced Indian editions, which were bought from the Plaintiffs, to foreign markets such as the U.S.A. While the first case was contested and decided by Justice Manmohan Singh, the second case proceeded ex-parte and was decided by Justice Ravindra Bhat. Both cases were decided under the Copyright Act, 1957.
THE FIRST CASE – 17th May, 2010
(i) Facts: The Plaintiffs in this case, Pearson Education, John Wiley & Sons etc. who are foreign publishing houses (No. 1,3,5) and their exclusive licensees (No. 2,4,6) all of whom were subsidiaries, were in the business of selling low-priced editions of advanced educational books in the Indian sub-continent. There was a notable qualitative difference between the American edition and the Indian edition of the Plaintiff’s books in terms of quality of paper, printing and accompanying online features. The content however was same. The price difference between the Indian version and the U.S. version was substantial, upto 150 U.S. dollars for some editions. The Defendants, cunning Indian businessmen that they were, setup a website, to sell the low priced Indian editions to customers in the U.S.A. The Plaintiffs therefore filed the present lawsuit in India to shut down the Defendant’s business and website.
(ii) Previous litigation between both parties: Apart from the Indian law suit, the Plaintiffs also filed a lawsuit against the Defendants in the United States District Court, Southern District of New York (S.D.N.Y). A search of the SDNY’s docket reveal’s that the Plaintiffs, collectively, have pursued and won several such actions against defendants in identical fact situations. I was initially under the impression that the Defendants in such actions would have succeeded in the U.S.A. under the ‘first sale doctrine’, spelt out in Section 109(a) of the U.S. Copyright Act, 1976. As per this provision of law once a person has bought a lawfully produced copy of a copyrighted work, he is free to further sell or dispose that copy without the permission of the copyright owner. However as clarified by the SDNY court in the identical case of Pearson Education & Ors. v. Vinod Kumar & Ors. No. 1: 07 – CV – 9399, the first-sale doctrine does not extend to works manufactured outside the U.S.A. Therefore a low-priced edition manufactured in India will not be protected by U.S. law. The Defendants in the present case did not contest the American lawsuit against them and instead settled with the Plaintiffs by agreeing to not indulge in any such activities in the future. The Indian action however continued as the Defendants decided to put up a fight.
As a normal practice I usually summarize the arguments put forth by both the parties. However, given the nature of the wholly meritless arguments put worth by the Plaintiffs’ counsel, I’d much rather skip the exercise this time around. The Defendants however put forth some note-worthy arguments.
(iii) The Delhi High Court’s judgment: In this judgment the Delhi High Court surprisingly disregarded the applicability of the first sale doctrine within India when it restrained the Defendants from exporting the books bought from the Plaintiffs. The judgment tries to give several different reasons for coming to this conclusion. I’ve dealt with the main contentions below:
(a) The terms of the licensing agreement between the Plaintiffs are binding on the Defendant: This convoluted judgment starts of with an entirely misguided attempt to establish a case of copyright infringement on the basis of the licensing agreements between the Plaintiffs.
In order to establish this the judgment discusses the nature of the agreement between the Copyright Owners (Plaintiffs No. 1,3,5) and the Exclusive Licensees (No. 2,4,6) and how the licensing agreement extended to circulation of the copies only within the Indian territory and no further. The judge then delves into a wholly unnecessary discussion on Sections, 19,19A & 30 of the Copyright Act, 1957 in order to establish that territorial licensing agreements for copyright are recognized by the law. He however fails to distinguish that these licensing agreement pertain only to the right of publication and not necessarily to the right to circulate copies already in the market. In paras 75-80 of the judgment, it is argued by the Judge that the terms of the licence are binding not only between the Plaintiffs but also any person who subsequently purchases the book i.e. to say that the Defendants would be bound by the terms of the licensing agreement between the Plaintiffs and that by selling the books in territories not covered by the licensing agreement the Defendant would be infringing the copyright of the Plaintiffs as defined in Section 51 of the Copyright Act since he would in fact be violating the licensing agreement between the Plaintiffs! (para 75)
This is a patently wrong interpretation of the law especially since the doctrine of privity in contract makes it amply clear that a contract is binding only on the parties to the contract and not on any third party. The terms of the licence between the Plaintiffs are not binding on the Defendants unless the Defendants have expressly agreed to the terms of the licence, as would have happened in a software licensing agreement, when the customer clicks on the ‘I agree’ button. Even then it is not certain that the transaction would have been characterized as a licence and not as sale. We’ve discussed one such case here. In the absence of an express agreement between the Plaintiffs and the Defendants, the latter is bound by only the rights and exceptions as understood under the Copyright Act, 1957.
(b) The Doctrine of First Sale: Ideally the Plaintiff’s case should have been dismissed on the grounds the Defendant’s activities were perfectly legitimate under the First Sale Doctrine. As already explained above, under the first-sale doctrine, once a person has bought a lawfully produced copy of a copyrighted work, he is free to further sell or dispose that copy without the permission of the copyright owner. Section 14 of the Copyright Act, 1957 recognizes the First Sale Doctrine with respect to literary works. In relevant part Section 14 states by virtue of having a copyright the owner of such copyright would have the sole right “to issue copies of the work to the public not being copies already in circulation”. This is followed by an Explanation which states that “For the purposes of this section, a copy which has been sold once shall be deemed to be a copy already in circulation”. The copyright owner is therefore allowed to control the terms of only the first sale and no sale beyond the first sale. Therefore copies already in circulation can be further ‘issued’ by the subsequent owners of those copies. The subsequent owners however are bound by the other conditions of the Copyright Act i.e. they cannot reproduce copies of the books. ‘Grey markets’ i.e. second hand book stores are legitimate only because of the first sale doctrine.
In this particular case the Delhi High Court held that the first sale doctrine was applicable only qua the exclusive licensees (i.e. No. 2,4,6) and not the owners (1,3,5) who will continue to have a cuase of action against the Defendants!!!! (para 100) It is inconsequential as to whether a copy of the work has been sold by the licensee or the owner. The only criterion is whether the copy of the work has been legitimately sold i.e. as long as the licensee is duly authorized by the owner, the sale is valid and the doctrine of first sale will kick in.
The judgment further states “The purchaser after purchasing from the exclusive licensee cannot by claiming the principle of exhaustion or extinguishment of rights defeat the rights of the owner. This is the only harmonious interpretation possible by invocation of doctrine of first sales in the present case.” This is a prima facie wrong conclusion and is not substantiated by any cogent reasoning, especially since the judgment very conveniently avoids an in depth analysis of Section 14 which expressly provides for such a right.
The Judgment instead pointlessly meanders around discussing the principle of international exhaustion and regional exhaustion as understood in various Indian, American and English precedents. A discussion on international and regional exhaustion is wholly and completely irrelevant for the purposes of this case. International and regional exhaustion are relevant only in a factual scenario where the goods are being imported into the country and not exported. If anything, this is a subject for an American Court dealing with the import of these copies into the U.S.A.
THE SECOND CASE – 20th May, 2010
The facts in this case are identical to the case above. Since the defendants did not put in an appearance in this case there was no discussion on the doctrine of first sale and exhaustion. The Court instead just analysed all of the evidence that was put forward by the Plaintiff during the ex-parte trial and came to a conclusion that the Defendants were violating the copyright of the Plaintiffs. The Court therefore granted the reliefs prayed for by the Plaintiffs along with Rs. 3,50,000 towards damages. The reason that I find this judgment surprising is because of the fact that Justice Bhat has delivered, last year, an excellent judgment in the case of Warner Bros. v. Santosh wherein he extensively discussed the doctrine of first sale, exhaustion of rights etc. In fact this judgment was discussed extensively by Justice Manmohan Singh in his judgment.
Conclusions: The defendants would do well to appeal this judgment and have it set aside. Having said that I have a word of advice for the gentlemen advising these publishing houses. Although exports may not be banned under the Copyright Act, 1957, it is possible to restrain exports under Section 29(6)(c) of the Trade Marks Act, 1999 i.e. as long as John Wiley, Pearson Education are registered trademarks in India and as along as these trademarks are fixed on the books aimed at the export market, it will be possible to seek an infringement for trademark infringement. Of course they cannot avail of these provisions if their trademarks are not registered.