Given the meteoric rise of e-commerce companies like Flipkart and Snapdeal in India, one may safely conclude that e-commerce is here to stay. Legal disputes in the e-commerce sphere are already cropping up dime a dozen. These disputes are unique in this that unlike traditional businesses which are permanently established in a particular geographical region, e-commerce businesses enjoy a virtual/online presence and this inevitably leads to questions of jurisdiction being pondered by the Court. Recently, the Delhi HC in World Wrestling Entertainment, Inc. v. M/S Reshma Collection decided conclusively that jurisdiction in e-commerce cases involving trademark and copyright disputes would be determined by the buyer’s place of residence.
The Court specifically interpreted the meaning of the phrase “carries on business” as set out in Section 134(2) of the Trademarks Act,1999 and Section 62(2) of the Copyright Act, 1957; both these sections deal with the institution of suits in case of violation of any provision of the aforementioned Acts.
The essential issue which the Court sought to address in this case was “When a transaction takes place over the internet, where is the contract concluded?”
[Warning: Long post follows]
WWE Inc. had filed an appeal against the order of the Single Judge of the HC wherein the Court had returned the plaint filed by the plaintiff-appellant to be presented before a Court of competent jurisdiction. WWE Inc. had filed the plaint seeking permanent injunction on the ground of copyright infringement, trademark infringement, passing off etc. WWE was a company incorporated under the laws of the State of Delaware, USA and the defendant (Reshma Collections) is a company incorporated in Mumbai. The appellant had invoked the jurisdiction of the Delhi HC on account of the provisions of Section 134(2) of the Trademarks Act and Section 62(2) of the Copyright Act.
It was submitted by the plaintiff that it carries on business within the territorial limits of the Delhi HC; this was supported by the fact that the plaintiff’s programmes are broadcast in Delhi, the plaintiff sells books and merchandise in Delhi and most importantly, the plaintiff’s goods and services are sold to customers in Delhi through the plaintiff’s websites which can be accessed all over India, including Delhi.
The plaintiff was engaged in the business of licensing and sale of branded consumer products featuring its well- known World Wrestling Entertainment (WWE) brand and had registered its trademarks worldwide including in India. The plaintiff alleged that the defendants were selling counterfeit merchandise (like books, apparels etc.) using the plaintiff’s logo. The Single Judge returned the plaint by relying on the decision given in Dhodha House v. S.K. Maingi [2006 (9) SCC 41], wherein the SC had interpreted the expression “carries on business” given in Section 134(2) and Section 62(2) and held that the plaintiffs could not be said to carry on business in Delhi and therefore, the suit was not fit to be tried by the Delhi High Court.
The Delhi HC delved into the interpretation of the phrase “carries on business” mentioned in Section 134(2) and Section 62(2). The Sections state that as suit for infringement under the said Acts is to be instituted in a District Court having jurisdiction to try the suit. Further, the Courts specify that “District Court having jurisdiction” would “include a District Court within the local limits of whose jurisdiction…the person instituting the suit or proceeding…carries on business or personally works for gain.”
The Division Bench of the HC examined the Dhodha case where the SC laid down a 3-pronged test to determine whether the plaintiff could be said to “carry on business” in a particular place; the SC was also of the view that a person may carry on business not necessarily by himself but through a servant or an agent.
The 3 conditions are:
(i) the agent must be a special agent who attends exclusively to the business of the principal and carries it on in the name of the principal and not as a general agent who does business for any one that pays him;
(ii) the person acting as agent, must be an agent in the strict sense of the term and a manager of a Joint Hindu Family cannot be regarded as an ―agent within the meaning of this condition; and
(iii) to constitute ―carrying on business at a certain place, the essential part of the business must be performed at that place.
Since the plaintiff had no agent in Delhi, the Court proceeded to examine whether the 3rd condition was fulfilled in the instant case, i.e., ‘Was an essential part of the plaintiff’s business being performed at Delhi?’ To determine this issue, the Court was invariably led to the issue, ‘When a transaction takes place over the internet, where is the contract concluded?’
The Court then referred to the case of Bhagwan Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. [AIR 1966 SC 543] which had also been referred by the Single Judge and stated in Para 21:
“The general rule is that the contract is complete when the offeror receives intimation that the offeree has accepted his offer. An exception to this has been carved out in respect of contracts negotiated by postal communications or telegrams. The exception being that the bargain in such cases (post or telegram) would be struck and the contract would be complete when the acceptance of the offeree is put into a course of transmission by him by posting a letter or despatching a telegram.”
The main issue to be decided in Bhagwan Goverdhandas Kedia case was ‘when would the contract be concluded where offer and acceptance takes place by way of conversation by telephone?’ The SC had held that in such a case, the negotiations are concluded by instantaneous communication of speech and therefore, the exception to the general rule of contract would not be applicable in this case.
The Delhi HC observed that just as in the case of telephonic conversation, there is instantaneous communication where transactions take place online and applying the rule in Bhagwan Goverdhandas Kedia, the Court held that in case of e-commerce, “contracts would be completed at the place where the acceptance is communicated.”
In Para 23, the Court notes, “The website of the appellant/ plaintiff refers to various goods and services. It is not an offer but an invitation to an offer, just as a menu in a restaurant. The invitation, 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. When, through the mode of the software and the browser, the transaction is confirmed and payment is made to the appellant/ plaintiff through its website, the appellant / plaintiff accepts the offer of the customer at Delhi. Since the transaction between the two takes place instantaneously, the acceptance by the appellant/ plaintiff is instantaneously communicated to its customer through the internet at Delhi.”
The Court in Para 24 reasons, “if the contracts and/ or transactions entered into between the appellant/ plaintiff on the one hand and its customers are being concluded in Delhi, can it not be said that the essential part of the business of the appellant/ plaintiff, insofar as its transactions with customers in Delhi are concerned, takes place in Delhi? The offers are made by customers at Delhi. The offers are subject to confirmation/ acceptance of the appellant/ plaintiff through its website. The money would emanate or be paid from Delhi. Can it not then be considered that the appellant/ plaintiff is, to a certain extent, carrying on business at Delhi?”
“Because of the advancements in technology and the rapid growth of new models of conducting business over the internet, it is possible for an entity to have a virtual presence in a place which is located at a distance from the place where it has a physical presence.”
Based on the above reasoning, the Court was of the opinion that the plaintiff could be said to carry on his business (to some extent) in Delhi and therefore, fulfilled the condition “carrying on business” as laid down in Dhodha case. Consequently, the Court set aside the order of the Single Judge, thereby allowing the appeal in the present case.