Delhi HC: A Virtual Presence May Mean 'Carrying on Business' for Jurisdiction in IP cases
A Division Bench of the Delhi High Court ("DB") in the case of World Wresting Entertainment, Inc. v. M/s Reshma Collection & Ors.1 in an appeal order, held that the online sale of merchandise to customers in Delhi by World Wresting Entertainment, Inc amounted to ‘carrying on business’ in Delhi, under Section 62(2)2 of the Copyright Act, 1957 and Section 134(2)3 of the Trade Marks Act, 1999. The DB held that the WWE carried on business’ in Delhi merely due to sales effected through the Appellant’s website accessed / accessible in Delhi, thus conferring jurisdiction on the Delhi High Court (“Court”) to try a suit for trademark and copyright infringement.
World Wresting Entertainment, Inc. (“Appellant”) is a company incorporated under the laws of Delaware, USA and is, among other activities, engaged in the development, production and marketing of television programming, pay-per-view programming, live events and licensing and sale of branded consumer products featuring its well-known World Wrestling Entertainment (“WWE”) brand. The Appellant is the owner of the copyright of the pictorial representations of WWE and various WWE wrestlers and also has trademark registrations in respect of various WWE wrestlers and slogans. The Appellant has licenses to distribute products and memorabilia including apparel, posters, calendars, fact books, sunglasses, water bottles, key-rings, DVDs etc. The Appellant licenses its trademarks and images / characters to various third parties for use on merchandise in a wide range of products.
The Appellant in a suit for infringement (“Suit”) alleged that the M/s Reshma Collection & Ors. (“Respondents”), who are based in Mumbai, are engaged in the business of manufacture and sale of various forms of counterfeit garments and apparel, such as t-shirts, wrist bands, which are reproductions of the Appellant’s talent. It was further alleged that the Respondents were infringing the Appellant’s trademarks and that the merchandise sold by the Respondents bore the images of WWE wrestlers and characters displayed prominently.
Order of the Single Judge Bench
In order to claim jurisdiction under Section 134(2) of the Trade Marks Act, 1999 (“TM Act”) and Section 62(2) of the Copyright Act, 1957 (“Copyright Act“), the Appellant would need to establish that it actually and voluntarily resides or carries on business or personally works for gain within the jurisdiction of the Court.
The Appellant pleaded that the Court had jurisdiction to entertain and try the Suit based on the following three facts.
The facts as disclosed in the judgment are silent on whether sales were made by the Appellant exclusively in Delhi, or in other territories in India in addition to Delhi. Consequently, as a result of the Appellant’s business model of selling products through their website, it can be presumed that products would have been sold in other cities in India in addition to Delhi.
The Respondents filed an application for return of plaint, on the ground that the Court did not have jurisdiction to entertain the Suit.
The Single Judge dismissed the Suit for lack of jurisdiction in Delhi. The Single judge:
Consequently, sale of WWE products and provision of services in Delhi would not by itself confer jurisdiction for the purpose of the TM Act or Copyright Act. Therefore, the Single Judge held that the Appellant did not carry on the business within the territorial jurisdiction of the Court.
Decision of the Division Bench
‘Carries on business’
The DB while examining the decision of the Single Judge stated that the entire case rests on the meaning of ‘carries on business’ under Section 134(2) of the TM Act and Section 62(2) of the Copyright Act.
DB examined the Dhodha House Case.
In the Dhodha House Case, the Supreme Court stated that for the purpose of ‘carrying on business’, the presence of a man at a place is not necessary. Such a phrase would mean having an interest in a business at that place, a voice in what is done, a share in the gain or loss and some control there over. The Supreme Court further stated that the following three conditions should be satisfied for the purpose of establishing that a plaintiff is ‘carrying on a business’ within the territorial limits of the court:
The Supreme Court had cautioned that although the expression ‘carries on business’ has a very wide meaning, it is necessary that the three conditions specified should be satisfied.
The Appellant however contended that Dhodha House Case would not be applicable to the present facts as in this decision web-based business models, i.e. new media, were not considered by the Supreme Court.
The DB made the following observations:
Though this decision appears progressive, it raises several legal and practical issues.
It appears that the conclusion of DB is not consistent with the interpretation of the law and decisions of the Supreme Court in the Dhodha House Case and Kedia Case.
The DB relied on the Kedia Case, wherein the Supreme Court had examined where an oral contract negotiated through a telephone would be concluded in comparison to a contract concluded via post or telegraphs in order to determine where the part cause of action arose. This case examined the "cause of action" issue. However, DB has used this case in relation to ‘carried on business’ concept when ‘cause of action’ and ‘carried on business’ are different for the purpose of litigation. By this logic when the Appellant is located in one place, accepts telephone orders from customers in other places (without physical presence) can also be considered to ‘carry on business’ in such other places.
Under Section 206 of Code of Civil Procedure, 1908 (“CPC”) a suit may be instituted in a court within the local limits of whose jurisdiction, the defendant resides, or carries on business or personally works for gain or where the cause of action, wholly or in part, arises. The Copyright Act added a special provision to help authors to initiate action at place convenient to them so that they don't incur higher cost in enforcing their rights. Later, this provision was extended to trademark owners when the new TM Act was introduced in 2003.
The present decision of the DB, however, takes the jurisdiction issue to next level. The Court in the case of Banyan Tree Holdings (P) Ltd. V. A. Murali Krishna Reddy and Another7, examined whether a cause of action arises under Section 20(3) CPC based on the fact that the website of the defendant was accessible in Delhi and was used for soliciting business in Delhi. The Court held that it would have to be prima facie shown that the nature of the activity indulged in by the defendant by the use of the website was with an intention to conclude a commercial transaction with the website user and that the specific targeting of the forum state by the defendant resulted in an injury or harm to the plaintiff within the forum state.
The Court had set a high bar in this case to prove that a cause of action occurred within jurisdiction of a court based on the accessibility of a website to prevent forum shopping. A similar bar could have been adopted by the DB to conclude whether the Appellant ‘carried on business’ in Delhi, or was merely attempting to forum shop.
Further, another intriguing point is that in the Dhodha House Case, the Supreme Court had laid down three conditions that are to be fulfilled for the purpose of establishing ‘carrying on business’ under Section 134(2) of the TM Act and Section 62(2) of the Copyright Act. DB acknowledged this fact but however held that the first two conditions were not applicable, as in the present fact scenario the Appellant did not have any agency in Delhi and only the third condition was applicable. The DB therefore seems to have erred in applying only the third condition. DB ought not to have applied principles laid down in the Dhodha House Case at all rather than applying one condition in isolation to reach its conclusion.
This decision provides almost a pan India presence to such any websites when it comes to invoking territorial jurisdiction of a court in protecting their trademark and copyright and this is clearly contrary to the intention of the legislature. Any law, for its enforcement / application requires certainty, consistency and uniformity and the present ruling seems to violate this fundamental requirement of law.
It will be interesting to see how the Supreme Court will view this conclusion, should this decision be appealed.
– Aaron Kamath, Ajay Chandru, M.S. Ananth & Gowree Gokhale
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1 FAO (OS) 506/2013 and CM Nos. 17627/2013 & 18606/2013, decided on October 15, 2014.
2 Section 62 - Jurisdiction of court over matters arising under this Chapter
(1) Every suit or other civil proceeding arising under this Chapter in respect of the infringement of copyright in any work or the infringement of any other right conferred by this Act shall be instituted in the district court having jurisdiction.
(2) For the purpose of sub-section (1), a "district court having jurisdiction" shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), or any other law for the time being in force, include a district court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or other proceeding or, where there are more than one such persons, any of them actually and voluntarily resides or carries on business or personally works for gain.
3 Section 134 - Suit for infringement, etc., to be instituted before District Court
(1) No suit--
(a) for the infringement of a registered trade mark; or
(b) relating to any right in a registered trade mark; or
(c) for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff's trade mark, whether registered or unregistered,
shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.
(2) For the purpose of clauses (a) and (b) of sub-section (1), a "District Court having jurisdiction" shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or, where there are more than one such persons any of them, actually and voluntarily resides or carries on business or personally works for gain.
Explanation.--For the purposes of sub-section (2), "person" includes the registered proprietor and the registered user.
4 2006 (9) SCC 41
5 AIR 1966 SC 543
6 Section 20. Other suits to be instituted where defendants reside or cause of action arises
Subject to the limitations aforesaid, every suit shall be instituted in Court within the local limits of whose jurisdiction?
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises.
7 2010 (42) PTC 361 (Del)