A Case for Adjusting the Delhi High Court’s Recent Approach to IP Jurisdiction Claims in Online Transaction Cases

We are pleased to bring to you a guest post by Eashan Ghosh. Eashan has been in practice as an intellectual property advocate and consultant in New Delhi since 2011, and teaches a seminar on intellectual property law at National Law University, Delhi. He has previously written about the area of law covered in this post for the European Intellectual Property Review in 2015. Eashan writes about Indian intellectual property law, including a monthly review of Delhi High Court judgments, on his Medium page. He has written guest posts for us in the past as well (see here, here, here, here and here).

A Case for Adjusting the Delhi High Court’s Recent Approach to IP Jurisdiction Claims in Online Transaction Cases

Eashan Ghosh

I read with great interest Divij’s two–part post on these pages last month on the Delhi High Court’s recent approach to jurisdiction over trademark and copyright infringement claims relying on online transactions. It is a thorough primer on the subject, and one that I recommend. In this essay, I pick up where it left off. I offer some different looks on these recent Delhi cases, and some suggestions on how to address the incongruities they raise.

[I use the term “Sections 62(2)/134(2)” hereafter as shorthand for those provisions of the Copyright Act and Trade Marks Act, respectively. The provisions, which are in pari materia in every respect, offer what I call “Plaintiff-option jurisdiction” i.e. a statutory basis for bringing suit where the Plaintiff resides or carries on business at the option of the Plaintiff. Reference to other authority will be integrated.]

Banyan Tree and WWE

I think it impossible to venture into the Delhi High Court’s recent case law on the subject without first dealing with the two decisions around which so much of the conversation is structured: November 2009’s Banyan Tree and October 2014’s WWE.

I also think it ought to be impossible to disagree on the basic position that Banyan Tree and WWE operate in separate spaces. This much is clear from WWE itself. Banyan Tree’s inquiry is into the Defendant purposefully availing of a jurisdiction by targeting consumers in that jurisdiction. This speaks to “cause of action” under Section 20(c) of the CPC. WWE’s inquiry, on the other hand, is into the Plaintiff concluding online transactions with consumers in a manner consistent with the essential part of business being executed in that jurisdiction. This speaks to “carries on business” under Sections 62(2)/134(2).

Though some by-the-numbers differences can be pointed out between the two, the substantive sticking point for both is broadly the same. It must be demonstrated that the online activity is with the intention (or better) of concluding commercial transactions with consumers. If this is established, it sets up a cause of action claim for jurisdiction against a Defendant under Section 20(c) (Banyan Tree) or for a Plaintiff carrying on business under Sections 62(2)/134(2) (WWE).

Banyan Tree permits Plaintiffs to intrude on the relationship between Defendants and their consumers for the reason that the establishment of this online relationship has the consequence of visiting injury on those Plaintiffs. It is this injury that supplies the Plaintiff’s cause of action under Section 20(c). [“For the purposes of a passing off or an infringement action (where the plaintiff is not located within the jurisdiction of the court),” said Dr Justice Muralidhar in Banyan Tree, “the injurious effect on the Plaintiff’s business, goodwill or reputation within the forum state as a result of the Defendant’s website being accessed in the forum state would have to be shown.”]

In sharp contrast, the online relationship between Plaintiffs and the Plaintiffs’ consumers is entirely exogenous to Defendants under WWE. So absolute is the Defendant’s exclusion from the field of vision of the WWE test that it is effectively a standard applied in vacuo. (It is relevant to recall here that WWE itself was decided entirely ex parte, both Mr Justice Sanghi’s ruling against the Plaintiff in October 2013, and the appeals court for for the Plaintiff a year later.)

One final point stands to be made on the scope of these observations. The Banyan Tree standard operates where a Plaintiff makes no attempt to claim that it carries on business in the jurisdiction. As such, if the Plaintiff fails on the Banyan Tree standard, it cannot, by hypothesis, look to WWE to make jurisdiction. However, the WWE standard rests on an interpretation of Sections 62(2)/134(2). These have been acknowledged by numerous courts, most notably the IPRS Supreme Court, to have been fashioned as “additional forum” provisions. Therefore, in the event that a Plaintiff cannot make jurisdiction on WWE, reliance on Banyan Tree to make cause of action jurisdiction by reference to the Defendants’ activities cannot be shut out.

(There is one final, final point on this, though one of limited relevance here. The Banyan Tree standard is worded in terms that are certain and unqualified. The WWE standard is framed speculatively, and grapples with its own reliability at points. Even taken at its best, WWE merely asserts that, on the terms provided, a Plaintiff can be said “to a certain extent” to be carrying on business.)

Icon Health, News Nation & Impressario

Now, let us pick up the recent Delhi cases that Divij’s post summarized.

September 2017’s Icon Health, which I have previously written about here, is a pure passing off claim. This means that WWE has no role to play, and that a positive finding on jurisdiction rests solely on the Defendants’ online activities being sufficient to set up a cause of action under Section 20(c). The basis offered by Ms Justice Gupta here is that the Defendants’ website “can be accessed and operated from all over the country, including Delhi”.

There is a measurable gap between this possibility and the concreteness built into purposefully availing jurisdiction under Banyan Tree. Banyan Tree requires prima facie proof of the Defendants targeting consumers in the jurisdiction with the intention of concluding transactions, and consequent injury resulting to the Plaintiff. It would require a rather generous reading of the Icon Health facts to have them meet the Banyan Tree standard. It is, I fear, an objectionable finding for that reason.

December 2017’s News Nation, also a pure passing off claim, is a rather more straightforward application of Banyan Tree. It yields the finding that a Facebook page, however interactive, is not the same thing as an online presence that sets up commercial transactions for the Defendant. There is little room to disagree with this.

Last month’s Impressario, in which Ms Justice Gupta dismissed a jurisdiction claim against a Hyderabad restaurant, is similarly uncontroversial for its finding alone. It does, however, generate some confusion, for it makes reference to both Banyan Tree and WWE, in a case which invites the former, but not the latter. It generates still more confusion since it can be read as offering grounds to split online transaction jurisdiction cases based on whether or not Defendants are set ex parte, whether or not the online cause of action claims the assistance of an intermediary, or even whether it relates to the delivery of products or the physical completion of services.

The Composite Claims Rule

The Banyan Tree and WWE approaches to jurisdiction over online transactions also offer pause on how the relief in such claims are set up.

For instance, trademark infringement and passing off often travel together. They are routinely asserted as such in thousands of civil claims every year. Supreme Court imprimatur since at least 2013’s Paragon Rubber has dictated two rules in such cases. First, that a Plaintiff must separately make jurisdiction on the infringement and passing off elements of such claims. Two, as a corollary, the claim may only be tried in a court before which jurisdiction is made on both. (Indian IP literature refers to such cases as “composite”. A more detailed explanation of the Supreme Court position on jurisdiction in such cases is here.)

In reference to the issue at hand, this can be read one of two ways.

One possibility is to see this distinction between trademark infringement and passing off as a proxy for a thematic distinction between cases where the Plaintiff-option jurisdiction under Sections 62(2)/134(2) is available to Plaintiffs (trademark infringement) as against those where it is not (passing off). Taken as such, Banyan Tree and WWE are not the analogues Delhi’s recent online cause of action cases treat them as. They are, instead, the logical endpoints of an online cause of action spectrum that places Section 20 of the CPC and Sections 62(2)/134(2) at opposite ends. It is at these endpoints that this area of law in Delhi is presently governed by Banyan Tree and WWE respectively.

The second possibility is that the requirement for separately making jurisdiction for trademark infringement and passing off, though formally valid, is a touch overplayed. Not only do these claims frequently coincide but, from a similarity inquiry standpoint, there is little to separate them in a substantive sense either. It would be inconsistent for these claims, which are often not separated by much more than the absence or presence of a trademark registration certificate, to be governed by radically different rules of jurisdiction.

Under this view, therefore, enforcing this requirement would disproportionately disadvantage pure passing off Plaintiffs who have to chase their Defendants without the benefit of Sections 62(2)/134(2). Meanwhile, Plaintiffs with trademark registrations, under Sections 62(2)/134(2), are able to sue at a location of their convenience. The superiority of their substantive claim, relative to those of passing off Plaintiffs, may, however, owe itself entirely to a trademark registration certificate in their possession. If anything, it sets up incentive for infringement Plaintiffs to drop passing off from their claims since it would require them to make jurisdiction by chasing their Defendants when suing exclusively for infringement brings no such burden.

In practice, the enforcement of this jurisdiction requirement in composite claims, especially by Delhi courts, has been routinely overlooked. While a detailed debate on this enforcement is undoubtedly best left for another time, it does offer a typology that is of considerable persuasion in online transaction cases: before applying jurisdiction rules under Sections 62(2)/134(2) and Section 20 of the CPC, remember that both will frequently apply to the same case.

Three Paths Forward

There are three things to say at this point.

First, the shortest of shortcuts to fixing the problem would be a full resurrection of the Paragon Rubber position on composite claims. (The Delhi High Court has priors for abrupt resurrections of this nature too, most recently its excavation of HUL on the issue of punitive damages, which I wrote about on these pages in December 2017.)

If Plaintiffs are required to independently make jurisdiction on causes of action that travel together, it virtually guarantees an adjustment to the lowest common denominator. In several cases, this would require Plaintiffs to bring trademark or copyright infringement suits at jurisdictions where they can also make jurisdiction under Section 20 for passing off. This would automatically mean that Defendants are no longer be irrelevant to the jurisdiction element of the claim, and that purposeful availment is back on the table.

Second, some Delhi courts have already had success against the Plaintiff strategy of defaulting to Sections 62(2)/134(2) simply by insisting on holding them to their initial written claim on jurisdiction. Mr Justice Mehta in December 2015’s Bigtree Entertainment, for instance, reviewed the Plaintiffs’ written claim and advised them to amend it. He told them to tether jurisdiction to Section 20(c) (for a part of the cause of action arising in Delhi) rather than on Sections 62(2)/134(2). The Plaintiffs refused, and he eventually found that they were incorrect to claim jurisdiction under Sections 62(2)/134(2) but could conceivably have made jurisdiction under Section 20(c). This is a somewhat pedantic check on jurisdiction claims, but one that has worked on occasion.

Third, returning to the initial premise, the principal difficulty remains of WWE offering Plaintiffs a lower bar to clear on jurisdiction, one that requires neither input nor culpability from their Defendants. While WWE itself disqualifies few online transactions from its scope, it is hemmed in by Sections 62(2)/134(2), the provisions that control its applicability.

This is where the Supreme Court’s IPRS decision assumes significance. IPRS, in its simplest iteration, is intended as a sobriety check on the abuse Sections 62(2)/134(2). It draws a balance between catering to the convenience of Plaintiffs by offering them an additional forum to sue, and the anti-mischief objective of disqualifying actions designed to drag Defendants to jurisdictions to which they have no reasonable connection.

This balance is, almost to a tee, the one at issue in WWE. To this end, two conditions may be considered. In cases where Plaintiffs assert jurisdiction solely on the strength of Sections 62(2)/134(2), courts could require them to justify that: (a) there is a practical inconvenience to suing their Defendants under Section 20 or (b) the inconvenience to the Plaintiff in suing under Section 20 prima facie outweighs the inconvenience to the Defendants in submitting to the jurisdiction of the forum before which this question arises.

Both conditions offer the Defendants a stake in where they are sued but retain the primacy of the Plaintiff’s convenience that underlies Sections 62(2)/134(2). While this does amount to reading IPRS over WWE, it does so in a manner that is faithful to the balance that is central to administering Sections 62(2)/134(2).

It goes without saying that this balance is a fine one; one that hits the outer limits of what reason can supply on this subject. Given the Delhi High Court’s struggles with this balance in recent months, it could be a set of solutions well worth trying.

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