Overseas Online Business And Territorial Jurisdiction In Trademarks Infringement Suits

Anubha Sinha

29 Sep 2022 5:27 AM GMT

  • Overseas Online Business And Territorial Jurisdiction In Trademarks Infringement Suits

    An ex-parte interim injunction was granted, by Delhi High Court, in favour of Tata sons (Tata Sons Private Ltd v. Hakunamatata Tata Founders & Ors), restraining two companies registered in the UK and the USA from unauthorized use of the registered trademark 'TATA'. These foreign companies were marketing and trading online in digital tokens or cryptocurrencies through the...

    An ex-parte interim injunction was granted, by Delhi High Court, in favour of Tata sons (Tata Sons Private Ltd v. Hakunamatata Tata Founders & Ors), restraining two companies registered in the UK and the USA from unauthorized use of the registered trademark 'TATA'. These foreign companies were marketing and trading online in digital tokens or cryptocurrencies through the websites www.tatabonus.com and www.hakunamatata.finance. The appellant filed a suit for a permanent injunction restraining trademark infringement, passing off, dilution, etc. It was alleged that websites were accessible in India and also accessed by visitors from Delhi on daily basis.

    Initially, the single judge had declined to grant ad interim injunction questioning the extraterritorial reach of the court's jurisdiction over foreign seated respondents. However, a division bench eventually granted an injunction restraining respondents from unauthorized use of the appellant's trademark 'TATA,' considering the prima facie case, the balance of convenience, and irreparable loss.

    This case extensively discusses the jurisdiction of courts in the case of online businesses, including foreign-registered online companies.

    Legislation Vesting Jurisdiction:

    The jurisdiction for trademark infringements is guided by provisions of Civil Procedure Code Section 20, which states that every suit shall be instituted in a Court within the local limits of whose jurisdiction -

    • The defendant resides, carries on business, or personally works for gain; or
    • The cause of action, wholly or in part, arises

    Further, Section 134 of The Trademark Act, 1999 provides an additional forum to file suits in district courts within the local limits of whose jurisdiction -

    • The registered proprietor or registered user who is instituting the suit resides or carries out business or
    • Personally works for gain

    In Indian Performing Rights Society v. Sanjay Dalia (2015), SC had held that the object of Section 134 of the TM Act was to provide an additional forum and not to drag the defendant further away for a suit. Therefore, section 134 does not oust the applicability of Section 20, CPC.

    Online businesses can offer services anywhere because of the ubiquity, universality, and utility of the features of the World Wide Web, which complicates the understanding of the jurisdiction. To identify the jurisdiction in online businesses, understanding the meaning and scope of the terms "carry on business" and "cause of action" means is crucial regarding online trade via internet websites.

    Cause Of Action :

    In Banyan Tree Holding (P) Limited v. A. Murali Krishna Reddy & Anr (2009), neither the plaintiff nor the defendant was located within the court's territorial jurisdiction. The plaintiff, involved in the hospitality business, had a registered office in Singapore, whereas the defendants were in Hyderabad. Plaintiff had adopted the word mark' Banyan Tree, '; which complainant claimed had acquired a secondary meaning and had become distinctive. The defendant started their business under the mark Banyan Tree Retreat.

    The plaintiff submitted that since the defendant's services were offered through the website, using the impugned mark, accessible in Delhi, a cause of action has arisen in Delhi. After noticing development in law in India, Canada, the USA, and England, the court answered an essential question.

    When can it be said that hosting of universally accessible website lends jurisdiction to the court where a suit is filed (forum court)?

    When the plaintiff is not carrying on business in the court's jurisdiction in the traditional sense, it needs to prove that defendant "purposefully availed" the jurisdiction, which resulted in injury to the plaintiff. To achieve that, it needs to be established that the said website is euphemistically termed as "passive plus" or "interactive."

    A "passive" website is one with no intention to market products at a particular place. In "passive plus," there is no move from the defendant to block access to customers in a particular location, and they view the content through any device without purposeful avoidance to block it. On the other hand, the "Interactive website" clearly intends to target potential customers in the forum state. This intention is presumed unless there is purposeful avoidance by blocking or placing filters on viewers at a particular location.

    In the Banyan Tree case, it was expounded that for the cause of action to arise and "targeting" the customers, it will be necessary to prove that some commercial transaction was concluded using the website resulting in injury.

    Later, the jurisdiction of courts was discussed again in Burger King Corporation v. Techchand Shewakramani & Ors. (2018) In this case, the plaintiff, based in the USA, filed a suit in Delhi against the defendant in Mumbai for unauthorizedly using the mark 'Burger King' and registering the domain name theburgerking.in.

    Section 20 provides that a suit can be filed in any place where the cause of action arises by using the said mark. The Delhi High Court clarified that jurisdiction could be invoked where there is use upon or in relation to goods.

    It further elucidated that term 'relation to' entails promotion, advertising publicity, etc. Advertising goods under the trademark in a territory, promoting business including inviting franchisee queries from a particular territory, allowing franchisee application through the website, and entertaining franchisee queries from the territory will constitute the use of the mark – all such cases will vest the jurisdiction in the court of that territory.

    Furthermore, in Millennium & Copthorne International Limited v. Aryans Plaza Services Private Limited & Ors. (2018), the plaintiff, based in Singapore, had filed a suit in Delhi against the defendant for infringing the mark "MILLENNIUM". Defendants were carrying out business in Haryana and were using a website to make reservations using impugned mark all over India. Using a website to make a reservation means offering service for sale in that location; making a sale using an impugned mark will cause injury. It was pronounced that a place where injury or deception is caused or likely to be caused would have jurisdiction.

    Carrying On Business:

    Supreme Court, in Dhodha House v. S.K. Maingi (2006), considered the meaning of the expression "carry on business." SC held that the presence of a person is not crucial; a business can be carried on by any agent, manager, or servant. "Carries on" business means having an interest in business at that place, but three conditions need to be satisfied

    a. The agent should be a special agent who carries on business exclusively for the principal

    b. Agent must be an agent in the strict sense of the term

    c. The essential part of the business must take place in that place

    The first two conditions do not apply to businesses via the internet. So, the question which then arises is how the business over e-commerce and the internet impacts the meaning of the expression "carries on business."

    In World Wrestling Entertainment Inc. v. Reshma Collection (2014), the division bench concluded that using new media for doing business over the internet is not very different from the traditional business models over telephone or fax.

    It examined the third element from the Dhodha House case, the "essential part of the business" in the backdrop of business over the internet, and decided where the contract was concluded. The bench relied on the Bhagwandas Goverdhandas Kedia v. M/s Girdharilal Parshottamdas and Co. (1966), wherein the transactions over the phone or fax providing instantaneous communication were considered. In this case, it was decided that the contract is completed where acceptance is concluded. Applying the same principle to the internet-based transactions, the court maintained that various goods and services offered online are mere invitations to an offer.

    For example, if a customer accepts the invitation to offer in Delhi, it becomes an offer made by the customer. If the transaction is confirmed through the website and payment is made, the appellant accepts the offer. Since the transaction is instantaneous and acceptance is instantaneously communicated to the customer in Delhi, the contract is said to be concluded in Delhi. As a result, an essential part of business insofar as its transactions with customers in Delhi is being carried out in Delhi. Hence the court in Delhi will have jurisdiction.

    Thus in online trade and e-commerce, where a business has a virtual presence in a place located in a different area from the physical presence- business is said to be carried out where any transaction happens. Consequently, the courts exercising jurisdiction in all those places would thus be appropriate fora for the institution of proceedings.

    Foreign Websites Not Directed At A Particular Country

    The single Judge in the present case was dissuaded by the absence of an element of "targeting" Indian customers by respondents and rejected the argument that Delhi courts can have jurisdiction over companies located overseas.

    While deciding the present case, (Tata Sons case) Delhi High Court found a helpful reference in an English case that decided on the jurisdiction of courts for websites that are not particularly directed at a country.

    In Lifestyle Equities CV v. Amazon UK Services Ltd (2022), the English Court discussed what targeting would mean in global e-commerce websites. It determined whether the sale of goods on a US amazon website could infringe trademark rights applicable to a different country because the website is accessible there.

    The claimants, owners of UK and EU trademarks of "Beverly Hills Polo Club" (BHPC), sued Amazon, alleging infringement of its registered trademark for displaying, advertising, and selling the US branded goods with the mark BHPC on amazon.com to consumers in the UK. In this case, the Court of Appeal did not agree that amazon.com was only directed at US customers and did not target EU/UK customers.

    It was observed that though amazon targets US customers, it does not restrict access to them. If a UK customer can access the web page, make payments, and get the products shipped to the UK, then the website can be said to target customers in the UK.

    Agreeing with the principle expounded in the British case, the division bench of the Delhi High Court held that "targeting" need not always be an aggressive act of marketing; a mere looming presence of the website in geography and the ability of customers to access are sufficient to imply "targeting". So if a website that infringes a trademark by the possibility of confusion and deception in mind can be accessed at a location, then the courts can have jurisdiction to grant an injunction.

    Views are personal.

    References :

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