Internet has marked its presence in the commercial world in an unprecedented way. With businesses moving online to escalate their accessibility to a wider range of customers in the market, it has become pertinent to address the consequent legal implications which arise due to the challenges posed by these practices to the conventional understanding of statutorily defined rights and responsibilities. One of the controversial issues in the trademark infringement cases is the determination of the court’s jurisdiction in case businesses involving online transactions. Statutorily, the Code of Civil Procedure, 1908, contains the provisions under Section 20 with respect to institution of the suits where the Defendant resides, or cause of action arises. It reads as:
Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction –
- 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
- 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
- the cause of action, wholly or in part, arises.
Explanation: A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.
The provision prima facie gives the Plaintiff a choice of forum to institute a suit.
Over the past decade, the Delhi High Court has become the hub of IP disputes. It has passed judgements interpreting the provision to determine the jurisdiction in cases where one of the parties (or both the parties) have online presence. The Court, in the case of World Wrestling Entertainment v. M/S Reshma Collection & Ors, stated that,
“The website of the appellant/plaintiff is not an offer but an invitation to an offer, just as a menu in a restaurant. The invitation, if accepted by a customer in Delhi, becomes an offer made by the customer in Delhi for purchasing the goods "advertised" on the website of the appellant/plaintiff. When, through the mode of the software and the browser, the transaction is confirmed and payment is made to the appellant/plaintiff through its website, the appellant/plaintiff accepts the offer of the customer at Delhi. Since the transaction between the two takes place instantaneously, the acceptance by the appellant/plaintiff is instantaneously communicated to its customer through the internet at Delhi. Therefore, in such a case, part of the cause of action would arise in Delhi.”
Hence, in cases where the commercial transaction takes place over the internet, due to the spontaneous nature of the offer and acceptance of payment or consideration, the cause of action is deemed to have arisen at the place where the customer carried out his/her part of the online transaction. In the recent case of Impresario Entertainment & Hospitality Pvt. Ltd. v S&D Hospitality, the Court further clarified its position on jurisdiction for the cases where businesses have online accessibility. The position taken by the Court in this case deviates from its stance in the previous cases. In the case of Renaissance Hotel Holdings, Inc. v B. Vihaya Sai, the Court refused to entertain the suit on the basis that online booking from Delhi of a hotel room situated in USA or situated at Bangalore, the jurisdiction of the High Court of Delhi cannot be invoked. Hence, the judgement in the case has re-defined the trend to be followed by the Courts in such cases.
Impresario Entertainment & Hospitality Pvt. Ltd. V S&D Hospitality
In this case, the Plaintiff contended that since the Defendant’s services are available on websites like Zomato and Dine-Out, the customers can book the Defendant’s restaurant at Delhi as well. Due to this reason, the cause of action can be said to have arisen in Delhi for the purposes of jurisdiction of the Court. To the contrary, the Defendant argued that the Court had no territorial jurisdiction to entertain the suit as “mere booking or placing an order through internet is insufficient to say that any transaction took place since the contract formation is not at the place of booking or ordering the product or service.” It was argued that without proof of ‘the effect’ (Effect test), the territorial jurisdiction of the Court cannot be established.
At the outset only, the Court clarified that that the mere accessibility of the Defendant’s website at a place would not enable the Court to exercise its territorial jurisdiction over the dispute. The Court also distinguished the facts from the World Wrestling Entertainment case as in the present case only reservation for dining at the Defendant’s restaurant at Hyderabad could be made at Delhi. The transaction by acceptance of offer could take place only when the person making the reservation goes to Hyderabad and eats at the Restaurant. Hence, merely reserving a table in the Defendant’s restaurant at Hyderabad would not amount to commercial transaction over the internet as discussed in the World Wrestling Entertainment case.
For the determination of jurisdiction where the Defendant is sought to be sued on the basis that its website is accessible in the forum state, the Court laid a few requirements that the Plaintiff has to fulfill in order to establish that the forum court has jurisdiction to entertain the suit. They are as follows:
- Nature of Defendant’s online activity:
It is required to be 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.
- Interactive website:
The website hosted by the Defendant is required to be an active or interactive one. An interactive website is the one where business transactions can be conducted over the internet or if information can be exchanged with users for the purpose of soliciting business. On the other hand, a passive website is akin to an advertisement and hence is used to post information for potential customers. It does not have the feature for interaction between the two parties for soliciting business.
- Purposeful “Avoidance” Test:
The purposeful availment test states that “where the Plaintiff is not carrying on business within the jurisdiction of the forum Court, the Plaintiff is required to show that the Defendant purposefully availed itself of the jurisdiction of the forum court.” The test of purposeful avoidance holds that the Defendant may show in his defence how he avoided the forum state, however, the initial burden will be on the Plaintiff to show that the Defendant "purposefully availed" itself of the jurisdiction of the forum court. In such cases, hence, filters to block access to the website by viewers will be taken into consideration by the Court.
- Conjunctive application of “Effects” and “Sliding scale” test:
Various tests have been evolved to address the issue of Court’s jurisdiction for businesses with online presence. The "effects" test was evolved in the U.S case of Calder v. Jones. In this case, a magazine called the National Enquirer published an allegedly defamatory article concerning a California resident who was a part of the entertainment business. While the article was written and edited in Florida, the Court found the “effects” of the Defendant’s "intentional, and allegedly tortious actions were expressly aimed at California” as the article concerned a California resident with a career in California and relied on California sources. The Court held that since the effects of the Defendants' conduct was in the state of California, the Court’s jurisdiction could be established.
However, the Court did not use the "effects" test in isolation and rather applied it in conjunction with another test called the "sliding scale" or the “Zippo” test. The test evolved in the case of Zippo Manufacturing Co. v. Zippo Dot Com, Inc. in which the Federal Court held that:
"the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.”
Hence, greater the commercial nature and level of interactivity associated with the website, the more likely it is that the website operator has "purposefully availed itself" of the forum state's jurisdiction. The degree of interactivity can be gauged from the website's features and intended uses. Therefore, the Court reiterated the test laid down in the Banyan Tree Holding (P) Limited v. A. Murali Krishan Reddy and held that:
- The Plaintiff is required to show that an injurious effect has been felt by the Plaintiff within the forum state where the Plaintiff is located.
- If the Plaintiff is not located within the jurisdiction of the Court, the injurious effect on the Plaintiffs 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. This would require the presence of the Plaintiff in the forum state and not merely the possibility of such presence in the future.
On March 5, 2018, the Delhi High Court, in the case of Millennium & Copthorne International Limited v Aryans Plaza Services Private Limited & Ors., while relying on the Impresario case, highlighted some inconsistencies in the tests laid down by the judgement. Justice Rajiv Sahai pointed out the inherent problem in applying the test of targeting with the requirement of an interactive website. He stated that,
“Per my understanding, an interactive website cannot be targeted to any particular city or State of India and would be identically accessible throughout, at least India, wherever the reach of internet is. In fact, I have been asking this question in several cases but have not got any reply thereto.”
Further, unlike the distinction drawn out between making reservation and actually carrying out a transaction in the Impresario case was questioned by the Court. The judge opined that:
“The Courts at Delhi will have jurisdiction over subject matter of suit owing to defendants having interactive website accessible at Delhi and enabling defendants situated outside Delhi to carry on business at Delhi.”
With respect to reservation and booking from a website, the Court held that:
“Certainly, making a booking/reservation, even if the same does not subsequently materialize, is part of carrying on business, inasmuch as the hotel which has taken the booking, even if has not received any payment, being unable to turn back a customer if shows up in pursuance to such booking.”
On these grounds, the Court dismissed the application for rejection plaint under order 7 rule 11 filed by the Defendants stating that it had the required territorial jurisdiction to entertain the suit.