Who can judge the internet?

31-07-2010

Thomas George

As the Internet continues to grow in importance, it is vital to know what powers national courts have to assert jurisdiction over websites based in foreign countries. Thomas George looks at the situation in India.

E-commerce has changed the traditional ways of doing business. Today, many companies run their businesses across the globe without having to have an actual physical presence in a given country. The intangible nature of the Internet has resulted in the dissemination of information across borders, but it has also allowed the infringement and passing-off of trademarks by infringers who may not be located or have any physical presence within the state or the country where the infringing activities take place.

Internet users’ first interaction with any website is through a domain name, used as a gateway to the virtual presence of a retailer. Domain names have now come to be identified with the trademark or trade name of companies.

Since they lead every consumer on the Internet to the relevant owner, usurping a domain name leads to a tremendous amount of confusion for the consumer, and a loss of goodwill and potential business for the real trademark owner. The protection of trademarks on the Internet, especially for domain names, is imperative.

The Internet Corporation for Assigned Names and Numbers (ICANN) has a Uniform Dispute Resolution Policy (UDRP) for the resolution of domain name disputes, but the remedies are limited to the transfer or cancellation of domain names. This has left parties needing to look to more traditional forums, such as courts, for remedies such as damages and injunctions. But it is not always clear whether national courts have jurisdiction over domain name cases.

The question of territorial jurisdiction over domain names and Internet-related issues was first addressed in India in Casio India Co. Ltd. v. Ashita Tele Systems Pvt. Ltd. The High Court of Delhi held that the mere ability to access the website gave the court territorial jurisdiction to decide on the matter at hand. The court referred to the Australian case of Dow Jones & Co. Inc. v. Gutnic, which held that due to the ubiquity, universality and utility of the Internet, any matter associated with it is subject to global jurisdiction.

In another case—(India TV) Independent News Service Pvt. Ltd. v. India Broadcast Live LLC & Ors—the High Court of Delhi ruled that it did not have jurisdiction over the domain name www.indiatvlive.com, because the defendant was based in Arizona. The court relied on the US circuit case Compuserve Inc. v. Patterson, which referred to a three-part test for deciding jurisdiction:

  • The defendant must purposefully avail itself of acting in the forum state or causing a consequence in the forum state
     
  • The cause of action must arise from the defendant’s activities there
     
  • The acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make exercise of jurisdiction over the defendant reasonable.

The court then proceeded to discuss the concept of personal jurisdiction, which in essence, states that the court must have jurisdiction over the entity (defendant) in the case as opposed to having or availing jurisdiction on the basis of the property of the entity, which may be under the territorial jurisdiction of the court. The judge concluded that the court should exercise two approaches to determine whether it has personal jurisdiction over the entity.

Firstly, whether the relevant law is a ‘long arm’ statute, which allows jurisdiction to be extended to business entities or individuals located outside the forum state. Then, if the statute does not provide for long arm principles, the purpose test should be applied. This depends on the connection formed by the non-resident with the forum state.

To establish a connection between the defendant entity and the forum state, the India TV precedent contradicted the Casio precedent by concluding that personal jurisdiction cannot be exercised over Internet activities by the mere passive posting of infringing material on a website. The fact that a website is accessible in the forum state does not necessarily mean the case can be tried there.

“The Division Bench ruled that in a passing-off action or an action for infringement where the plaintiff is not carrying on business within the forum state, the onus is upon the plaintiff to show that the defendant purposefully availed itself of the state’s jurisdiction by conducting commercial activity in the state.”

The judge in the India TV case used the ‘purposeful availment’ test to set the criteria for a connection between the defendant and the forum state. India TV relied upon this notion of purposeful availment, along with the concept of ‘interactivity’ or ‘passive plus’ as given in Cybersell Inc v. Cybersell Inc and Ors. The concept of interactivity is that the relevant website must not be passive but interactive, allowing not just browsing of the site’s contents but subscriptions to services provided by the owners or operators of the site.

The India TV case ended on this note and laid the ground for the addition of further principles in subsequent cases.

A further detailed analysis of purposeful availment, and the addition of an ‘effects test’ to the existing jurisprudence took place in Banyan Tree Holding (P) Ltd v. A. Murali Krishna Reddy and Anr. Banyan Tree supplemented the concepts laid down in the earlier case of India TV by developing its practical understanding. The Division Bench summarised the US position in the following terms:

“In order to establish the jurisdiction in forum court, even when a long arm statute exits, the Plaintiff would have to show that the Defendant purposefully availed of the jurisdiction of the forum state by specifically targeting customers within the forum state. A mere hosting of an interactive website without any commercial activity being shown as having been conducted within the forum state would not enable the forum court to have jurisdiction.”

The Division Bench further analysed decisions in other common law countries such as Canada, the UK, Australia and the position in India as laid down by High Court of Delhi in the cases of Casio and India TV.

After analysing the existing laws in different jurisdictions, the court observed that essential common law principles can be adopted without difficultly by the courts in India to determine whether the forum court has jurisdiction to entertain an Internet-related activity. The court expressly stated that it did not support the proposition of law laid down in the Casio judgment.

It found that a passive website with no intention of targeting audiences outside the state where it is located cannot be subject to the forum court’s jurisdiction and hence overruled the judgment.

The court also observed that while the India TV ruling was closer to being correct than the Casio judgment, “there was no occasion for this Court even in India TV to examine the finer aspects of the question of jurisdiction based on the nature of website, the intention of the host of the website to specifically target viewers outside its jurisdiction, and the effect of hosting such website on audiences outside such state”.

The Division Bench ruled that in a passing-off action or an action for infringement where the plaintiff is not carrying on business within the forum state, the onus is upon the plaintiff to show that the defendant purposefully availed itself of the state’s jurisdiction by conducting commercial activity in the state.

The law as laid down in the Banyan Tree case may be summarised as follows:

  • Some commercial transaction must have taken place as a result of the site
     
  • The defendant must have specifically targeted the forum state
     
  • Some injury must have resulted to the plaintiff due to the actions of the defendant
     
  • The plaintiff must have a presence in the forum state, and not merely the possibility of a presence

A mere hosting of a website accessible in the forum state, or a posting of an advertisement or a passive website that does not result in a commercial transaction with a viewer in the forum state, cannot give rise to a cause of action and therefore the court does not have jurisdiction.

The Indian Courts follow a middle path wherein the purposeful availment test has to be applied in conjunction with the effects test in order to decide whether an Indian court has jurisdiction over a given case.

Thomas George is a senior associate at Luthra & Luthra Law Offices. He can be contacted at: tgeorge@luthra.com

This article was first published on 01 August 2010 in World IP Review

E-commerce, jurisdiction, domain names

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