The Legal 500

Amendments in Information Technology Act, 2000 The Information Technology (Amendment) Act, 2008 has come into force from October 27, 2009. Some key amendments in the Information Technology Act, 2000 (“IT Act”) are highlighted below:

Certain important and recent legal developments and case laws in this area are set out below: 

Amendments in Information Technology Act, 2000

The Information Technology (Amendment) Act, 2008 has come into force from October 27, 2009. Some key amendments in the Information Technology Act, 2000 (“IT Act”) are highlighted below:

 

• New legal definition given to the term “Cyber Security” under the newly inserted section 2(nb) which states as: “Cyber Security means protecting information stored therein from unauthorized access, use, disclosure, disruption, modification or destruction”. The said term incorporates both the physical security of devices as well as the information stored therein. The amendments also focus on defining penalties for violation, defining appropriate level of compensation and setting up an authority for implementation.
• Section 2(d) has been modified and the term “Digital Signature” is replaced with “Electronic Signature” under the Act. New section 3A defines Electronic Signature.

   

• Section 7A has been introduced to make audit of Electronic Documents mandatory wherever the legacy physical records were subject to audit. This provision now casts a huge responsibility on the GOI to get its electronic records audited.

   

• In defining penalties for violation, a new offence has been defined penalizing the theft of computer or other communication devices. Under the newly added section 66B, the receiver of a stolen computer resource or communication device (computer/mobile.CD/e-mail containing stolen information) may be liable for punishment. The offence is cognizable and compoundable.

   

• Section 77B provides that all offences with 3 years imprisonment under the IT Act are to be considered cognizable and bailable. As per the changes made in sections 78 and 80, the powers to investigate cognizable offence etc. earlier available to DSP are now vested in Inspectors.

   

• Section 43 recognizes two new contraventions corresponding to sections 65 and 66 for civil liability.

   

• New section 43A has been included for “Data Protection” need. It specifies liability for a body corporate handling sensitive data, and introduces the concept of “reasonable security practices” and sensitive personal data. There is no limit for compensation. Section 72A has also been introduced for Data Protection purpose and it provides for criminal prosecution for breach of information security.

   

•  Under section 46, the powers of the Adjudicator have been limited for claims upto INR 50 million. Civil Court’s authority introduced for claims beyond INR 50 million (read with section 61).

   

• New sections have been added to cover new offences.

   

• Section 67A, 67B and 67C have been introduced to cover material containing “sexually explicit act”  and child pornography with stringent punishment.

   

• Section 67C is a new section which requires Intermediaries (which now also includes body corporate) to preserve and retain certain records for a stated period.

   

• The scope of section 69 has been extended from decryption to interception and monitoring also.

   

• Also provisions to enable blocking of websites and monitoring and collecting traffic data have been added.

   

• Section 81 has been amended to keep primacy of Copyright and Patent Acts above IT Act.

   

Case Laws

Ms. Barkha Dutt v. Easyticket, Kapavarapu, Vas

In this case, the complainant Ms. Barkha Dutt, had filed a complaint in the WIPO Arbitration and Mediation Centre (“Centre”) and in furtherance of which the Centre constituted a Panel for the hearing of the complaint. 

The complainant was a well known journalist in India and had won several accolades in her field, including India’s highest civilian honor, the Padmashri Award. She was a known media figure and was recognized for her writings and contribution to news and current affairs discussions in various media. 

The respondent had registered a domain name “barkhadutt.com” in his name. 

The contention of the complainant was that she enjoyed a celebrity status and her name had acquired secondary meaning which has trademark significance. Celebrities have a right to restrain third parties from exploiting their name and fame. She had not authorized the respondent to use her name as a domain name and the disputed domain name, which wholly incorporated her name, not only impinges her right but also causes deception and confusion to users. The purpose of the respondent’s registration of the domain name is for renting, selling or otherwise transferring it for valuable consideration or for deriving illegal gains by capitalizing on the fame and goodwill associated with her name. 

The respondent’s contention was that the literal dictionary meaning of the composite term “Barkha Dutt” is “adaption of rain/life giving”. He had registered the disputed domain name two years ago and he had a right in the domain name as his only intention was to run a website relating to rains/rainwater preservation. Furthermore, he had never used the domain name in bad faith and had been using it for activities which are not related to journalism. 

The Panel found, based on the substantial evidence provided by the complainant that she had acquired considerable fame associated with her name as a television reporter and as a talk show host. The Panel accepted the complainant’s contention that due to her fame she has acquired the status of a celebrity broadcast journalist who regularly appears in the media. In the light of this finding, the Panel is convinced that due to her fame the public has come to recognize and identify the complainant with her services as a television broadcast journalist and the complainant therefore has unregistered common law trademark rights in her name. 

The Panel further stated that it found no merit in the argument extended by the respondent that the dictionary meaning of the term “Barkhadutt” is “adaption of rain/life giving” in Sanskrit. It was well established that dictionary words or personal names that have acquired fame are found to have secondary meaning and have obtained distinctiveness in commerce which have protectable trademark rights. 

The Panel affirmed  that the Complainant in the present dispute had established that her name BARKHA DUTT had acquired fame and secondary meaning due to use in commerce prior to the Respondent’s registration of the disputed domain name, therefore the Respondent arguments did not help the respondent’s case. 

The Panel held that the disputed domain name is identical to the Complainant’s name and mark in which the Complainant has unregistered rights and the Complainant accordingly satisfied the requirements under the first element of the Policy, paragraph 4(a). 

The Panel observed that the respondent failed to demonstrate any right or legitimate interest in the domain name. Furthermore, the fact that the respondent had chosen a well known name and had placed links to derive revenue from internet traffic points reflects the malafide intentions of the respondent. 

Therefore, the Panel was of the view that the disputed domain name was identical to the complainant’s name and mark in which the complainant has unregistered rights and hence, the domain name was ordered to be transferred to the complainant. 

Bayer Corporation and Ors. v. Cipla, Union of India (UOI) and Ors.

In this case, Bayer Corporation (petitioner) filed a petition to restrain grant of drug license to the respondent to manufacture, sell and distribute its drug “soranib”. The Petitioner claimed that the said drug is an imitation of, or substitute for its patented drug. It was submitted that the said drug “soranib”, being a “spurious drug” as defined in Section  of the Drugs and Cosmetics Act, 1940 (the “Drugs Act”) and the second respondent Drugs Controller (the “Controller” or “DCGI”) would be exceeding his jurisdiction, and deciding in contravention of Chapter IV of the Drugs Act, if the application for marketing license is processed. 

The term “spurious drug” as defined in the Drugs Act has to be understood in light of the fact that after January 1, 2005, full-fledged product patent regime had come in place in India. Therefore, it has to be read not only to accommodate the relevant provisions of the Patent Act, 1970 (“Patent Act”) but also to accomplish the goal that was contemplated to be achieved by Indian legislation while ushering in a full-fledged product patent regime. By a mere reading of Form 44 of the Drugs Act, and also by virtue of publication of grant of the subject patent, it would be well within the knowledge of the Drug Controller that the subject patent exists in relation to the product for which CIPLA (respondent) has applied for; consequently, if the marketing approval is granted, it would contravene the provisions of Section 17B of the Drugs Act, as well as the provisions of Section 48 of the Patent Act. Drugs Controller would be exceeding his jurisdiction, and deciding in contravention of Chapter IV of the Drugs Act, if the application for marketing license is processed.  

On the other hand the respondent contended that petitioner’s  claim for patent linkage, based on an interpretation of Section 2 of the Drugs Act is misleading, because i) the grant of drug regulatory approval by the DCGI cannot, by itself amount to a patent infringement ii) the existence of patent infringement cannot be assumed merely because the patentee states so, but has to be clearly established before a court of law in accordance with the infringement provisions mentioned under the Patents Act. Such an assessment is beyond the statutory powers of DCGI, which is institutionally incapable of dealing with complex issues of patent scope, validity and infringement. Further, grant of a drug regulatory approval by the DCGI to the respondent on the basis that its drug is safe and effective does not amount to an act of “making, using, offering for sale, selling or importing” the petitioners' patented product. Section 107A of the Patents Act, clearly exempts from patent infringement any of the acts of making, using or even selling a patented invention, in so far as such acts are necessary to obtain information for the filing of a drug regulatory application before the DCGI. Section 107A (a) of the Patents Act, commonly referred to as the “Bolar” provision permits any drug manufacturer to experiment with any patented drug with a view to generating data that could then be submitted to a drug control authority. The aim of this section is to ensure that generic drugs are introduced into the market as soon as the patent expires or is invalidated, so that consumers may benefit from this early entry of affordably priced drugs. 

After hearing the contentions of both the sides the Delhi HC concluded that the patent infringement is never assumed, at the askance of the patentee; it has to be established before a court of law, under the Patents Act. Such adjudication is unquestionably beyond the Drug agencies' jurisdiction, or charter, under law. If the petitioner’s contention were to prevail, every generic drug would ipso facto amount to a “spurious drug”, since they are deemed substitutes of originator (patented) drugs. Such interpretation is facially untenable and contrary to the intent of the Drugs Act. The key elements of “spuriousness” are deception, in the manner of presentation of the drug concerned, in the sense that they imitate or represent themselves to be something that they are not. 

Delhi HC further stated that Section 17 B was introduced when Parliament felt the need to address the serious challenge faced by adulterated drugs. The Statement of Objects and reasons for the Drugs Act, clarify that the definition of “spurious drugs” was introduced because of the problems of adulteration of drugs and production of spurious and sub-standard drugs, as posing a serious threat to the health of the community. The regime for enforcement of these provisions, essentially penal in nature, presupposes that samples of offending or suspected drugs, placed in the market, or offered for sale, are drawn by inspectors and enforcers (Section 23); they are sent for testing. If they are determined to be contrary the prescribed standards, the offender can be prosecuted, and found guilty, under Section 27. 

A declaration by the drug agency entrusted with the task of deciding applications seeking marketing approval that someone not holding a patent is attempting to get clearance for a “spurious drug” would be pre-emptive, and would negate the provisions requiring that enforcers should follow certain mandatory procedures, and prosecute potential offenders. Such a declaration would be startlingly preclusive, even drastic, whether given by the Drug Controller, or this Delhi HC. For this reason alone, the court should desist from making it, as it would be arriving at findings, contrary to procedure established by law. Hence, Delhi HC concluded that unpatented drugs are “spurious drugs”. 

Glochem Industries Ltd. v. Cadila Healthcare Ltd and Union of India 

In this case, Glochem Industries (respondent) had filed a Patent Application along with the provisional specification at the Mumbai office of the Controller General of Patents and Designs, which was later on allotted Patent Application No. 413/MUM/2003A. Thereafter, on April 22, 2004, the respondent filed international application under the Patent Cooperation Treaty, corresponding to Patent Application No. 413/MUM/2003A. On September 02, 2004, Patent Publication No. WO/2004/074215A titled Process for preparation of Clopidogrel, its salts and pharmaceuticals compositions, claiming priority from Indian Patent Application No. 54/KOL/2003 dated February 03, 2003 filed by Nadkarni, et al, (Torrent) was published. Thereafter, on February 11, 2005, respondent Patent Application was published in issue No. 04 of 2005 of the Patent Official Journal at page 2704. Thereafter, on September 05, 2005 the International Preliminary Report on Patentability of the corresponding international application of the respondent was issued. The petitioners through its agents obtained a copy of the complete specification accompanying the said patent application which pertains to Clopidogrel Besylate, a known salt of a previously known compound Clopidogrel. According to the petitioners, as on the date of the alleged invention, the therapeutic efficacies of Clopidogrel and Clopidogrel Bisulfate (Plavix) in treating heart ailments were well known. Accordingly, the petitioners filed a representation by way of opposition on July 10, 2008 in terms of Section 25(1) of the Patent Act raising diverse issues. 

Respondent filed its reply statement to the said representation by way of opposition of the petitioners. The said reply statement was supported by an affidavit of evidence and certain enclosures which were received by the petitioners on or about November 18, 2008. The petitioners were later on informed by communication that the representation by way of opposition would proceed on January 02, 2009. The petitioner’s representation by way of opposition was dismissed by impugned order dated January 7, 2009 for the reasons recorded in the said order. 

Aggrieved by the impugned order, the petitioner had filed a writ petition in the Bombay HC challenging the order on the following grounds:

 (i) That there was no legal or admissible evidence produced by the respondent in support of their claim.

 

(ii) The respondent has not shown that the disclosure of a new form of known substance in respect of which Patent is an applied result in the enhancement of the known therapeutic efficacy.

 

(iii) The authority has failed to examine the above issues and in fact has decided the objection upon misconstruction and misapplication of Section 3(d) of the Patent Act.

The Bombay HC noted that the claim of the petitioner that there was no legal and admissible evidence before the authority which would establish the claim of the respondent that the alleged invention results in the enhancement of the known therapeutic efficacy of the stated substance-as is the requirement of  the Patent Act had force. 

The Bombay HC observed that if the discovery of a new form of a known substance must be treated as an invention, then the Patent Applicant should show substance so discovered has a better therapeutic effect. 

The Bombay HC further stated that the authorities had failed to deal with the real question as to whether the substance so discovered has a better therapeutic effect in the impugned order at all. The Bombay HC held that the authorities should have examined the effect of enhancement of known efficacy of stated substance in the context of better therapeutic effect which is the legislative intent behind the amendment of the provision of the Patent Act and should not recognise the alleged invention merely because of its new form or some other advantages or is better in some respect. 

Therefore, the Bombay HC set aside the impugned order and directed restoration of the representation by way of opposition filed by the petitioners and to be reconsidered by the respondent on its own merits in accordance with law.

Technology Media &Telecommunications 

Tata Teleservices (Maharashtra) Ltd v. Union of India 

In this case, Tata Teleservices (“petitioner”) had introduced a service commonly known as Push-To-Talk (“PTT”) service.  Before, however, introducing the same on a commercial basis, the petitioner had held discussions on May 05, 2004 with the members of the Telecom Regulatory Authority of India (“TRAI”).  The petitioner with its letter dated May 26, 2004 enclosed a brief write-up, covering technical aspects, network architecture diagram and highlights of PTT service. 

According to the petitioner, the new application was based on internet protocol under the category of ISP license and its service area being throughout the territories of India, it was eligible to provide the said services throughout India.  By a letter dated February3rd /4th, 2005, the petitioner informed the Additional Director General (BS-II) of DoT, that the customers were not being charged, as the service was being provided on a trial basis.  It was furthermore pointed out that the said service was introduced only in Mumbai in the State of Maharashtra. 

Only on February 18, 2005, the DoT, Union of India (“respondent”) asked the petitioner to stop PTT service.  Thereafter, a show cause notice was issued, which stated that provision of PTT service is not permitted under the terms and conditions of ISP license agreement and the action of providing of PTT service is substantive violation of terms and conditions. 

Several notices and letters were served upon the petitioner by the respondent about lawful inspection/ monitoring of service of law enforcement agency was ensured. 

The respondent then by an order imposed a penalty of INR 500 million on the petitioner.  

The petitioner then challenged the order imposing a penalty of INR 500 Million on the petitioner alleging violation of the terms and conditions of its ISP Licence dated March 11, 2004. 

The petitioner contended that no amount of penalty having been provided for in the ISP licence, respondent had no jurisdiction to specify the amount of penalty purported to be relying on or on the basis of UASL licence under clause 10.2(ii). 

The Telecom Disputes Settlement & Appellate Tribunal (“TDSAT”) stated that the ISP license did not contain a clause for imposition of a penalty of a fixed sum.  It was, therefore, difficult to conceive as on what premise, imposition of penalty for a sum of INR 500 million was proposed.  

TDSAT further held that the respondent, thus, proceeded on a wrong premise.  If no amount of penalty was specified in terms of the ISP License, the respondent had no jurisdiction to initiate a proceeding for imposition of penalty for a sum of INR 500 million.  The respondent is a ‘State’ within the meaning of the Article 12 of the Constitution of India.  It must, therefore, act fairly and reasonably.  A provision for levy of penalty of such a huge amount must meet the requirements of law as provided for in the Indian Contract Act.  The petitioner in its reply to the second show cause notice clearly stated that so far as the purported violation of clause 13.8 is concerned, the same was not attracted, inter alia, having regard to the fact that they had not charged the subscribers at all and thus, there was no reason to levy any penalty much less an amount as high as INR 500 million.  

TDSAT set aside the impugned order and stated that as the petitioner itself had offered, a sum of INR 0.386 million to BSNL towards the loss, which might have been incurred towards inter-connection charges, in our opinion, the petitioner should be directed to pay the said amount to the DoT, which in our opinion would meet the ends of justice.  The respondent must pay and bear the costs of the petitioner Advocate’s fee assessed at INR 50,000.

 Cellular Operators Association of India & Ors. v. Department of Telecommunications and Anr. 

In this case, for the purpose of operating their services, the petitioners have been granted licenses by the first respondent in 1995 and license fee was levied in terms of license which was earlier paid in quarterly installments. The petitioners were also required to enter into agreement with the DoT wherefore royalty to Wireless Planning and Coordination Wing (“WPC Wing”) was required to be paid. The mode and manner, in which the license fees and royalty etc were to be paid, were laid down in the agreements entered into by and between the respondent and the respective cellular operators. The Central Government framed a National Telecom Policy in the year 1999, pursuant whereto or in furtherance whereof, instead of levying fixed charges, charges were to be levied on revenue sharing basis. On or about July 20, 1995,  GOI issued an Office Order in terms whereof the mode of fixation of rate of royalty for GSM Cellular mobile telephone service was fixed, paragraph 7 whereof stated that “Royalty for the first year may be charged on quarterly basis, the quarter being January-March, April-June, July-September and October-December.” 

The issue in this case was whether the respondents can levy penalty upon the petitioners for the period February, 1999 and December, 2001 on the outstanding WPC dues? The demand for payment of penalty, it may be noticed, on royalty was made for the first time in the year 2006. 

TDSAT noted that it was accepted by the parties that whereas license fees were determined on the basis of competitive biddings and thus varies from area to area, royalty payable is a fixed and/or uniform amount. The respondents issued licenses on or about 26.12.2001 which were valid up to December 31, 2001 (co-terminus with DoT license). 

It was not in dispute that 1995 Order continued up to 2001.  An amendment took place in 2001 as a result whereof certain changes were effected. A proposal for amendment was made by the GOI by its letter dated September 25, 2001 wherein it was inter alia stated that any delay in payment of Licence Fee, or any other dues payable under the LICENCE beyond the stipulated period will attract interest at a rate which will be 5 per cent above the Prime Lending Rate (PLR) of State Bank of India prevalent on the day the payment became due.  The interest shall be compounded monthly and a part of the month shall be reckoned as a full month for the purposes of calculation of interest.” 

TDSAT further noted that by reason of such proposal only, the words “or any other dues” were inserted.  However, even then, two different licenses were to be issued. 

Various other communications were also passed between the parties but therein no mention of levy of penal interest was made. By another Office Order dated March 26, 2002, the respondent stated that levied penal interest with retrospective effect. 

A bare perusal of the aforementioned office order would clearly show that the payments were to be made in terms thereof and the amendment was sought to be made effective on and from 1^st September, 2001. The Tribunal would assume that the agreement is bilateral in nature and not a statutory one.  The agreement contains several conditions.  Each of the conditions contained in specified paragraphs were separate and distinct. 

It is a well-known principle of law that the chapter-heading can be noticed for the purpose of interpretation of a document/statute.  A document, although should be read in its entirety so as to ascertain the intention of the maker thereof, but it is well-settled that contractual obligations providing for levy of interest or penalty would not be inferred in absence of any express provision contained therein. 

TDSAT further stated that in our considered view, the very fact that the respondents talked in different voices at different point of time and furthermore as they did not levy any interest for a long time, is itself a pointer to show that no interest or penalty was leviable.  

Levy of interest or penalty must be supported by an authority of law. The respondents themselves quantified/crystalised the amount and/or rates payable towards WPC Charges only in the year 2002.  Any modification or novation on a contract is permissible when both the parties thereto agree.  If no interest or penalty could be levied in terms of the provisions of the contract, the purported Office Orders, which have no force of law, would not make a demand of interest enforceable in law. Having regard to the fact that the respondents did not initiate any proceeding and no demand was made prior to 2006, even the provisions of the Interest Act, 1998 would not be applicable in the facts and circumstances of this case.  Even the respondents had not issued any notice directing that payment should be made on a particular date failing which interest would be charged.  The demand of interest and penalty, thus, being not authorized under the contract, must also be, in the facts and circumstances of the case, held to be without any authority in law. 

Therefore, TDSAT held that the parties to the agreement have always treated the license fees and the royalty for availing the WPC permission as different concepts. Furthermore, the levy of interest or penalty must have an authority of law. The respondents quantified the amount payable to WPC wing only in 2002. Any modification in the contract can be done only if both the parties thereto agree. Since, no interest/penalty could be levied in terms of the contract, the Office Orders would not make the demand for interest enforceable under law because they do not have any force of law. Even otherwise, since the only communication between the parties regarding payment was made on 26.03.2002, the imposition of penalty cannot have any retrospective effect.

Rahul Goel (rahul.goel@sethdua.com) is a Partner and Sushil Mehta (e-mail: sushil.mehta@sethdua.com) is a Senior Associate with Seth Dua & Associates, Solicitors & Advocates, India

 

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