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Recent trends in IP infringement in the fashion industry

IP in fashion industry

This blog has been authored by Vivek J. Vashi

INTRODUCTION

Fashion has become an integral part of the modern Indian society.  People have developed a general affinity towards fashion trends to showcase their fashion sense by purchasing various products from brand names. Everyone wants to associate themselves with the latest fashion trends. Sometimes money becomes a constraint, so contrabands and copies of the original creations are purchased.

Fashion has become an essential part of people’s lives as it sets the tone for people to present themselves. Wearing or owning products of a particular brand corresponds with status, eminence, and desirability of an individual. Brands such as Louis Vuitton, Bulgari, Gucci, Prada, Hermes, Rolex, etc. are examples of brands known as ‘luxury brands’ that claim to bestow the wearer with a sense of power and prestige owing to their massive reputation. In the process of self-expression, many a times a design becomes famous and others start copying it resulting in a loss for maker of the original design. Counterfeiting is one of the most significant problems faced by the fashion industry. There are two types of counterfeiting prevalent in the fashion industry. Firstly, Deceptive, where the consumers are under the impression that the product is a genuine product, and secondly, Non-Deceptive, where the consumers are aware that they are buying a knock off product.[1]

One may find counterfeit products of famous brands selling counterfeit products through various trade channels including online portals or branded companies taking advantage of loopholes in law to copy and create products belonging to some other brand. E.g. On 8th December 2017, Nike (the famous brand) was awarded damages and a permanent injunction against a trader selling counterfeit goods using their Nike and Swoosh trademark. The damages were compensatory and punitive.[2] Also, the “Indian media was abuzz with the news of High Fashion brand, Christian Dior having allegedly plagiarised certain designs from a small, Indian art collective and store known as ‘People Tree’. According to reports – which carried allegations raised by the collective – Dior’s Cruise 2018 collection contained a dress that contained exact reproductions of the Block Printing designs created, and sold by ‘People Tree’ in India.”[3]

India is the second-largest market in the Asia Pacific, with retail e-commerce sales growth of 25.5 percent in 2022. Most consumers prefer to continue shopping online even after the COVID-19 pandemic due to an overall positive experience and convenience of online shopping.[4] The counterfeiters deceive the consumers by domain name squatting as the consumers shopping online are increasing. They make the shopping experience look original and professional so that the consumer does not question the counterfeiter’s authenticity. The counterfeiters also make fake reviews and manipulate the buying decisions of consumers while shopping online.[5] Apart from e-commerce portals, social media portals like Instagram, Facebook, WhatsApp and Telegram are utilised to sell counterfeit products. To limit the counterfeit products from appearing on online retail platforms, measures must be taken by the platform to destroy counterfeit products appearing on its online marketplace for the sake of law makers, brands, and consumers.[6]

Counterfeit industry poses a huge threat to the economy too (due to government’s loss of revenue), apart from posing huge challenges to the profits and brand values of the popular brands. The counterfeiting industry is colossal and has had a strong impact of about one lakh crore on the Indian economy.[7] Counterfeiting can have severe legal and economic consequences for the brand owners, as well as the consumers who unknowingly purchase counterfeit goods. This is called as wilful counterfeiting where buyers are aware of the counterfeit products and buy the same. For the brand owners in the fashion industry counterfeiting attributes to a large gap in the price between the original and the counterfeit products.  Thus, counterfeiting is the offence of manufacturing or distributing lower quality imitating goods under someone else’s name without their consent or permission.[8] A person is said to “counterfeit” who causes one thing to resemble another thing, intending by means of that resemblance to practise deception, or knowing it to be likely that deception will thereby be practised.[9]

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LEGAL EFFECTS OF COUNTERFEITING

Counterfeiting in the fashion industry can lead to several legal implications for both brand owners and consumers. Some of the legal implications of counterfeiting in fashion include:

  1. Infringement of Intellectual Property Rights: Counterfeiting in the fashion industry involves the unauthorized use of trademarks, designs, and copyrights, which infringes the intellectual property rights of the legitimate owner of the brand. Under Indian intellectual property law, trademark infringement can result in civil and criminal liability, including damages and imprisonment.
  2. Unfair Competition: Counterfeiting in the fashion industry can lead to unfair competition, as counterfeiters can sell their products at lower prices, taking away market share from legitimate brands. This can lead to a loss of revenue and reputation for legitimate brand owners.
  3. Consumer Health and Safety: Counterfeit products in the fashion industry are often of poor quality and can pose a health and safety risk to consumers. Example: Counterfeit cosmetics can contain harmful chemicals that can cause skin and other health related problems. [10].

The Indian judiciary has dealt with several cases related to counterfeiting in the fashion industry. In the case of Christian Louboutin SAS vs. Nakul Bajaj And Ors.[11] the Delhi High Court has clarified the responsibility and liability of online intermediaries for infringement of trademark. The judgement has shed light on India’s intermediary liability regime as it relates to infringement of trademark. The Plaintiff is Christian Louboutin, the owner of the registered trademarks, including the single colour mark for its distinctive ‘red sole’. According to the plaintiff the products are sold in India only by authorized dealerships. The defendant is “darveys.com”, a website marketing itself as a ‘luxury brands marketplace’. The plaintiff in this case alleged trademark infringement against the defendant, by selling counterfeit products. The defendant argued that the goods which were sold were genuine and there was no infringement on its part because it was mere intermediary and is entitled to be protected by “Safe harbour” provision of Section 79 of the Information Technology Act, 2000.

In this case the Delhi High Court examined ‘intermediary’ under section 2(w) of the Information Technology Act, 2000 and discussed intermediary position in the European Union, the United States and in India. The court analysis was based on whether the role played by the defendant was neutral i.e., if the conduct was merely technical, automatic, and passive, pointing to a lack of knowledge or control of the data that it stored. The court examined various judgements and concluded that knowledge of infringement by intermediaries makes the liability shift. This was also stated in the Indian judgement of MySpace Inc. v. Super Cassettes Industries Ltd. [12]

The concept of constructive knowledge and the active knowledge was discussed. In the MySpace judgement, it was declared that even if the intermediary has a knowledge of the illegality happening in their website, then the intermediary does not need a court order to stop the counterfeited product or infringing product from using their intermediary service. The activities that happen even after a minimum knowledge of the infringement can be claimed to be of a sort of abiding by the infringement done by the third party and it would amount to the intermediary becoming liable. The defendant Darveys.com was exercising complete control over the products and identified the sellers, which enabled them actively, promoted them and sold the products in India. When an e-commerce website is conspiring, abetting, aiding, or inducing, or contributing to selling counterfeit products, it could be said to cross the line from being an intermediary to an active participant. In such a case, the website would be liable for infringement in view of its active participation. The position in MySpace judgement is in line with the position on intermediary liability in cases of copyright infringement adopted by leading international jurisdictions such as United States, particularly in the case of A&M Records, Inc v. Napster, relating to reasonable knowledge of infringement.[13]

At last, the court in Christian Louboutin case concluded that the defendant is more than an intermediary and exercised complete control over product being sold. Therefore, the conduct of intermediaries in failing to observe ‘due diligence’ with respect to Intellectual Property could amount to conspiring, aiding, abetting, or inducing unlawful conduct would disqualify it from the safe harbour exemption, as per Section 79(3)(a). Finally, the Court ordered that the intermediary must require its sellers to honour the warranties and guarantees provided by the plaintiff and must also remove all meta-tags containing the plaintiff’s mark.

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THE WAY FORWARD

In the recent years online platforms play an important role in facilitating the exchange of information at a scale. This allows spreading of all types of content, legal and illegal. The role of online platforms sometimes expands from hosting information to governing how content is shown and shared which raises pressing questions on role and responsibility of platforms in preventing criminals and other persons involved in infringing activities online from exploiting their services. Some platforms have self-regulation of the content however, arbitrary actions by online platforms could affect freedom of speech and expression. The challenge of regulatory framework for online platforms is to find the correct balance between enhancing the role of online platforms and government in detection, moderation and the need to ensure protection for users and their fundamental rights and freedoms.[14]

The Government of India has brought reforms to effectively curtail the trade of counterfeit products in the country. On 23 July 2021, the Department-related Parliamentary Standing Committee on Commerce presented the 161st report on “Review of the Intellectual Property Rights Regime in India” in the upper house (Rajya Sabha) of Parliament.[15] It acknowledged that counterfeiting and piracy are rising threats to IP rights and recommended specific legislation to curb counterfeiting and piracy in India. A separate Central Coordination Body on IP Enforcement was also recommended to facilitate coordinated efforts involving various ministries, departments and government agencies. The Government has formulated due diligence requirements for intermediaries to adhere to under the Information Technology Act, 2000 and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 to safeguard itself for the information it holds or transmits. The intermediaries remain immune from liability unless they are aware of the illegality and are not acting adequately to stop it.  They are subject to ‘duties of care’ and ‘notice and take down’ obligations to remove illegal content.[16]

Approved on 12th Match 2016, the Government of India has formulated the National IPR policy which is reviewed every 5 years for a vibrant IP regime. The National IPR Policy was formulated after intensive stakeholder consultation with nearly 300 organisations and individuals by an IPR Think Tank, as also 31 departments of the Government of India.[17]

Also, the courts in India are taking strict view on online intermediaries thereby narrowing the scope of safe harbour to prevent online infringement. One effective legal framework to resolve issues relating to domain names in India is the .IN Domain Name Dispute Resolution Policy (INDRP). It was drafted in accordance with international guidelines (of the WIPO) and the provisions of the Information technology Act, 2000. The INDRP governs disputes regarding domain names containing the .IN or .Bharat code at the end. Any person aggrieved by the registration of a ‘.in’ domain on the grounds that it is identical or confusingly similar to his or her name or trademark may file a complaint before the National Internet Exchange of India, an administrative body for resolving issues under INDRP. It provides a quick and effective grievance redressal mechanism.

As Import of infringing goods is prohibited under the Customs Act 1962 and the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007, the brand owners can record their trademarks with Customs so that the import of any products that infringe the trademarks is stopped. Further, the laws empower the enforcement authorities to seize misbranded and spurious goods and to suspend manufacturing licenses of businesses involved in such counterfeiting activities. Freedom to do business should not be an excuse to perform acts of counterfeiting and trademark infringement. In this regard, Sections 102, 103 and 135 of the Trademarks Act, 1999, can be employed as remedies against infringement and counterfeiting as they deal with falsification and false application of a trademark. Notably, Section 103 mandates imprisonment of three (3) years and a fine up to two lakh rupees as penalties for counterfeiting. The Courts have also stepped in by compensating brand owners who are the victims of widespread counterfeiting in India.

With an increase in awareness of intellectual property rights among the consuming public and brand owners taking actions on counterfeiters, the end to this epidemic may be possible soon.

References

[1] Kala, S. and Ghosh, R., 2019. Faking It In Fashion – Intellectual Property – India. [online] Mondaq.com. Available at: <https://www.mondaq.com/india/trademark/845644/faking-it-in-fashion> [Accessed 30 March 2023].

[2] Nike Innovate C.V vs. Ashok Kumar on 8 December 2017 suit no. 23/17.

[3] People tree v. Dior: IP Infringement, Cultural Appropriation or Both? [online] Available at:       <https://www.spicyipcom/2018/02/people-tree-v-dior-ip-infringement-cultural-appropriation-or-both.html> [Accessed 30 March 2023].

[4] Number of Digital Buyers in India [online] Available at: <https://www.statista.com/statistics/251631/number-of-digital-buyers-in-india> [Accessed 31 March 2023].

[5] A case over sale of counterfeits on Amazon may have implications for fashion [online] <https://www.finnegan.com/en/firm/news/a-case-over-the-sale-of-counterfeits-on-amazon-may-have-implications-for-fashion.html> [Accessed 31 March 2023].

[6] Amazon destroyed more than 2 million counterfeit products last year [online] <https://edition.cnn.come/2021/05/11/business/amazon-counterfeits/index.html> [Accessed 31 March 2023]

[7] The Economic Times. 2020. Counterfeit products create Rs 1-lakh-cr hole in economy, incidents up 24% in 2019: Report. [online]

Available at: <https://economictimes.indiatimes.com/news/economy/finance/counterfeit-products-create-rs-1-lakh-cr-hole-in-economy-incidents-up-24-in-2019-report/articleshow/77259432.cms?from=mdr> [Accessed 31 March 2023].

[8] International Anticounterfeiting Coalition. n.d. What is Counterfeiting | International Anticounterfeiting Coalition. [online]

Available at: https://www.iacc.org/resources/about/what-is-counterfeiting  [Accessed 3 April 2023].

[9] The Indian Penal Code, 28 (1860)

[10] Combating Counterfeiting in Fashion: Legal Implications and Strategies for Brand Protection in India. [online].

Available at: <https://www.legalbites.in/topics/articles/combating-counterfeiting-in-fashion-legal-implications-and-strategies-for-brand-protection-in-india-894661>

[Accessed 3 April 2023].

[11] (2018) 253 DLT 728.

[12] (2017) 236 DLT 478.

[13] 239 F.3d 1004 (2001).

[14] Liability of online platforms- European Parliamentary Research Service, February 2021 [online] Available at:  <https://www.europarl.europa.eu/RegData/etudes/STUD/2021/656318/EPRS_STU(2021)656318_EN.pdf > [Accessed on 5 April 2023].

[15] Recommendations/observations at a glance- Rajya Sabha press release [online],

Available at: <https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/Press_ReleaseFile/13/141/410P_2021_8_14.pdf > [Accessed 6 April 2023].

Available at: <https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/Press_ReleaseFile/13/141/410P_2021_8_14.pdf > [Accessed 6 April 2023].

[16] European Parliamentary Research Service, May 2020 [online] Available at: <https://www.europarl.europa.eu.RegData/etudes/IDAN/2020/649404/EPRS_IDA(2020)649404_EN.pdf > [Accessed on: 6 April 2023]

[17] National IPR Policy [online]

Available at: < https://cipam.gov.in/index.php/about/national-ipr-policy/ > [Accessed 6 April 2023].

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Regulation of cross-border mergers in India – A critical analysis

This blog has been authored by Lohitaksh Shively 

Introduction

Over the past few decades, with the expansion of the Indian economy in a threefold manner, namely, Liberalisation, Globalization and Privatisation; the need for collaborations and strategic alliances have risen immensely. A principal tool used is that of merging two entities. Mergers are when two entities come together to amalgamate their business operations and become one single entity to defeat the competition, achieve economies of scale, and attain positive synergies. Mergers are synonymous with amalgamation, falling under the ‘corporate restructuring’ umbrella. Other such methods of corporate restructuring include – Acquisitions, Takeovers, and Absorptions; wherein acquisitions are when the acquirer entity ends up acquiring controlling power in the target entity. The acquirer can be termed as the ‘big fish’ and the target entity would naturally be the ‘small fish’. The motive for such restructuring is essentially growth; and growth in such abovementioned scenarios is always termed ‘inorganic’, wherein the entities choose external mechanisms to grow their business, customer base, operations etc. This should be juxtaposed with organic growth which is the antithesis of inorganic; it is when the entity reforms its internal working, like, pricing options, among others.

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CBMAs

Mergers and Acquisitions (“M&As”) when spoken about can be classified into various sub-types based on industry, financing options, and territorial limits. In this article, the author will comment upon M&As w.r.t. Territorial limits and the regulations governing such transactions. Such M&As are termed as Cross Border Merger and Acquisitions (“CBMAs”) or ‘transnational’ M&As due to the fact that one entity to such a transaction is always a foreign entity. Any Indian entity in the backdrop of globalization may prefer expanding overseas by acquiring or merging with foreign entities. CBMAs are generally Inbound and Outbound, wherein the former is characterised with a foreign entity merging with or acquiring an entity in India, whereas the latter is when an Indian entity expands overseas. One such example of an inbound acquisition is Walmart’s majority acquisition of Flipkart’s 77% stake for a whopping USD 16 billion. It is evident from the above cross border transaction, that the inflow of USD 16 billion was in fact Foreign Direct Investment (“FDI”) into the Indian economy, and that it opened the doors for Walmart (foreign entities) to enter the Indian market and strengthen their presence. A simple continent wise distribution of inbound M&As shows that North America has accounted for the largest percentage of M&As and Europe running to a close second. This is because for the MNCs (Multi-National Corporations) India has the world’s best resources with cheap but talented labour, largest markets in terms of size, capital markets, technologies, low cost suppliers etc.[1] Similarly on the outbound front, India has mainly targeted the IT, Telecom and pharmaceutical sectors. A continent wise distribution would portray that, maximum of deals entered into are in North America and Europe followed by Asia, as Indian companies have targeted at the developed capital markets for better growth and expansion opportunities.[2] Some landmark examples of outbound CBMAs are Tata-Chorus, Tata-JLR, Tata Tea-Tetley, DIS-Ranbaxy etc.

Motivations for CBMAs

Corporate restructuring transactions mainly aim at enhancing economies of scale and achieving high levels of efficiency. This metamorphosed corporate structure ensures that the newly formed entities focus on their core strengths, efficient allocation of resources, reduction in costs, synergies, corporate performance, R&D (research and development) among others. Apart from the above mentioned rational motives to merger, there are various developed theories to merge, them being the Hubris Hypothesis theory (executives being overconfident and they overestimate their ability to manage the target firm) and the Free Cash-flow theory (utilization of idle cash surplus by the acquirer). A major motive to enter into CBMAs is to overcome restrictions from limited home market growth i.e. the location of acquisition. Thusly, a country must strategically choose from various jurisdictions across the world where it wishes to do ‘business by integration’. Howsoever, while choosing the relevant jurisdiction, business rules, market regulatory mechanism, taxation risks all must be taken into consideration.

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Legal Framework

Cross border M&A deals have been the key consideration of the overwhelming FDI inflow in India. In order to tighten the ties between the boundaries it was essential to create an environment for cross border merger transactions between the countries.[3] For this very reason, CBMA in the Indian realm is strictly regulated by a catena of rules under various laws such as Companies Act, 2013, Foreign Exchange Management Regulations, Competition Act, 2002 and various other related statutes. In short, the Indian corporate laws, foreign exchange laws, capital market laws and merger control regulations govern CBMAs. These laws govern entry routes, deal value thresholds, combinations, sectoral caps, mandatory approvals of authorities (like the RBI), investment limits, disclosures etc. A glimpse into a few of the statutory regulations is given below –

1. Companies Act, 2013 (“CA, 2013”)

The CA, 2013 has been brought in order to replace the 1956 act so as to cater to the ‘newer’ needs. Chapter XV of the CA, 2013 lays down guidelines for Compromise, Arrangement and Amalgamations. § 230-240 expressly deal with the such alliances. The Ministry of Corporate Affairs of the Government of India (“MCA”) by way of a notification[4] has notified § 234 of the CA, 2013 enabling cross-border mergers with effect from April 13, 2017. Our focus would thus be on § 234 which governs ‘merger or amalgamation of company with foreign company’[5]. Vide Explanation[6] of § 234 the ambit of the provision is explained by making it such a situation applicable only in cases wherein one entity is a ‘foreign company’. In addition to this internal aid of interpretation, such mergers or amalgamations may only be done pursuant to the prior approval of the RBI and that the terms and conditions of the scheme of merger may provide for payment of consideration to shareholders of merging company in case, DRs (depository receipts) or a combination of both. Vide another notification[7], Rule 25A[8] of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“CAA Rules”), ‘merger or amalgamation of a foreign company with a Company and vice versa’, states that, the prior approval of RBI along with compliance of §230-232 of the CA, 2013 is a mandate[9]. Such rule read with Annexure B enlists various jurisdictions in which such mergers are possible.[10]

2. Foreign EXCHANGE Management Regulations

The Foreign Exchange Management (Cross Border Merger) Regulations, 2018 have been notified vide notification no. FEMA 389/ 2018-RB dated 20 March, 2018[11] and are effective from the date of notification. As per the Regulations, any merger transactions in compliance with these regulations shall be deemed to have been approved by RBI, and hence, no separate approval should be required[12]. In other cases, merger transactions should require prior RBI approval.[13] The Merger Regulations allow an Indian company to issue or trans­fer any security to a person resi­dent outside India subject to ad­herence to pricing norms, sectoral caps on foreign investment and other applicable conditions pro­vided under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.[14] The Merger Regulations allows a resident person in India to hold securities of the foreign company in accordance with the Foreign Ex­change Management (Transfer or Issue of Any Foreign Security) Re­gu­lations, 2004.[15] In the realm of foreign investments into India, there exists two routes, i.e. Automatic Route and the Approval Route; which means that, if an investment is being made into a particular sector, for instance pharmaceuticals,[16] which does not need any approvals, then the same is said to fall under the Automatic route of investment.

3. Competition Act, 2002 (“CA, 2002”)

A replacement to the Monopolistic Restrictive Trade Practices Act, 1969, the CA, 2002 tackled the issue of combinations and various other arrangements in a methodological manner with detailed and economically sane provisions. §5 and 6 of the CA, 2002,  the key provisions to regulate combinations, prevent such mergers if it leads to AAEC (Appreciable Adverse Effect on Competition).  As per the scheme of the CA, 2002, enterprises that propose to enter into combinations have to notify the CCI (competition commission of India) prior to entering into any such arrangements. If the proposed transaction crosses the thresholds given under §5, then it amounts to ‘combination’.[17] The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (“Combination Regulations”)[18] must be referred to whilst entering into any such transaction as they govern the procedural aspects of combinations.

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Analysis and Conclusion

The detailed provisions must be complied with in strict accordance as well as various sectoral approvals must be acquired. The companies would also need to carefully evaluate the regulations of the jurisdiction of the foreign company with which a merger is intended and may have to comply with additional requirements that may be specified by the foreign jurisdictions.[19] Since there exists an obvious jurisdictional difference, the question(s) that comes to our mind is the likely contradictions betwixt the different nation’s regulators. For instance, the CCI has extra-territorial jurisdiction as per §32[20] which provides for the CCI to have power to inquire into such arrangements o/s India effecting India. This provision gives life to the ‘effects doctrine’[21]. The CA, 2002 also encapsulates within its ambit the Principle of Attributability, wherein if assets are transferred to an enterprise (Special Purpose Acquisition Companies, Special Purpose Entities, Special Purpose Vehicles) for entering into arrangements, the value of assets/ turnover of transferor entity shall be attributed to the value of assets/ turnover of the transferee entity for calculation of thresholds.[22] This ensures that there is no contravention of law by investor entities who want to escape cognizance by the regulators by way of incorporating shell companies. Coming to approvals by quasi-judicial bodies, the NCLT (National Company Law Tribunal) and NCLAT (National Company Law Appellate Tribunal) cannot be forgotten. However, due to the number of pending cases, the same has led to a continuous delay in merger approvals. Thusly, the benefit of fast-track mergers (green channel)[23] could be made available in the cases of a merger of a wholly-owned foreign subsidiary or small company with its Indian parent company or vice versa.[24] Nevertheless, the existing regulations on CBMAs is an open door for FDI (Foreign Direct Investment) in the form of FPIs (Foreign Portfolio Investment) and FIIs (Foreign Institutional Investment). It may also provide for an impetus to ‘bailout takeovers’ under the Insolvency code. In short, CBMAs would provide for growth and recognition to  Indian Companies. One mustn’t forget that India is still in the stage of developing its economy, thusly any harsh or stringent statement made at the current stage would not do justice to the legal and policy developments that might occur in the future in the realm of transnational transactions.

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[1] Dr. Rabi Narayan Kar and Dr. Minakshi, Mergers Acquisitions & Corporate Restructuring Strategies & Practices, pg. 328, Taxmann’s, 3rd Edition, 2017.

[2] Ibid.

[3] https://www.roedl.com/insights/india-ma-cross-border-mergers-evolution

[4] https://www.mca.gov.in/Ministry/pdf/section234Notification_14042017.pdf

[5]https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00008_201318_1517807327856&orderno=238

[6]“Explanation.— For the purposes of sub-section (2), the expression foreign company means any company or body corporate incorporated outside India whether having a place of business in India or not.”

[7]https://www.mca.gov.in/Ministry/pdf/CompaniesCompromises_14042017.pdf

[8] http://www.bareactslive.com/ACA/act2987.htm

[9] Rule 25A(1) of CAA Rules.

[10] Rule 25A(2) of CAA Rules.

[11] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11235&Mode=0

[12] Rule 9 of Foreign Exchange Management (Cross Border Merger) Regulations, 2018.

[13]https://www.pwc.in/assets/pdfs/news-alert-tax/2018/pwc_news_alert_26_march_2018_fema_cross_border_merger.pdf

[14] https://www.roedl.com/insights/india-ma-cross-border-mergers-evolution

[15] Ibid.

[16] https://pib.gov.in/newsite/PrintRelease.aspx?relid=76548

[17] Adv. Gautam Shahi and Dr. Sudhanshu Kumar, Indian Competition law A Comprehensive Section-wise Commentary on Competition Act 2002, pg. 206-207, Taxmann’s, July 2021.

[18] https://www.cci.gov.in/images/combinationlegalframeworkregulation/en/cci-procedure-in-regard-to-the-transaction-of-business-relating-to-combinations-regulations-2011.pdf

[19]https://kpmg.com/in/en/home/insights/2017/04/firstnotes-section-234-of-the-companies-act-2013-notified.html

[20]https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=33

[21] Empowers competition regulators to extend jurisdiction beyond the ‘principle of territoriality’; See case Ms. Vijayachitra Kamlesh v. RCI India (P.) Ltd. 2021, CCI Case No. 29 of 2019.

[22] Regulation 5(9) of Combination Regulations; Etihad Airways/ Jet Airways Deal.

[23] https://ibclaw.in/section-233-of-the-companies-act-2013-merger-or-amalgamation-of-certain-companies/

[24] https://www.roedl.com/insights/india-ma-cross-border-mergers-evolution

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Regulation of genetically modified food in India and the U.S. – A critical analysis

Genetically modified food
Genetically modified food

This blog has been authored by Muhammad Salman Chukkan

Introduction

Genetically Modified or Engineered Food (GM Food) is defined as “food and food ingredients composed of or containing genetically modified or engineered organisms obtained through modern biotechnology, or food and food ingredients produced from but not containing genetically modified or engineered organisms obtained through modern biotechnology” in the draft Food Safety and Standards (Genetically Modified or Engineered Foods) Regulations, 2021[1]. GM Food has been a buzzword worldwide since 1994, which is well evident from the Google trend analysis.[2]

The introduction of the topic GM Food has brought a fair share of controversies both in India and Worldwide, it seems to be a big socio-political issue in some of the Agrarian economies in the world like India, Brazil etc which is well explained in the article titled ‘Policymaking in the Context of Contestations: GM Technology Debate in India’ by Asheesh Navneet and the News article titled ‘All you need to know about the GM food controversy’ which is published by The Hindu 08/06/2016. [3],[4]

The major concerns revolve around the Health, Ethics and emergence of unexpected risks. The most discussed health concern is emergence of new and super allergens. However the same is generally understood in the safety evaluation by the competent authorities. The second most discussed concern is regarding the build-up of toxins due to the changes happening to the biochemical pathways, the assessment generally becomes a problem due to the limitation in the animal studies. In the ethical viewpoint, Scientists and the general public are concerned about the domino effect or Ice-berg effect of GM Food in the food chain or food web and effect on biodiversity. Emergence of ‘Secondary-pest’ and ‘Superweed’ are also often a discussion, however the Superweed phenomenon is due to over usage of a same herbicide which led to the resistance and Secondary pest is a phenomenon happens even with the traditional pest control system.[5],[6]

The supporters of GM Food on other hand terms the technology as essential for Humankind. This is due to the numerous benefits associated with GM Foods and technology i.e. Reduced usage of pesticides, Increased productivity, Crops better resistance against the drought, Crops with improved nutrition etc. [7],[8],[9]

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Safety Assessment of GM Foods:

The basic assumption is that all the food made in traditional ways are safe to consume.It is worthy to note that we have accepted all the varieties which are being made by using the conventional breeding techniques. All GMO and GM Foods are strictly evaluated for the safety aspects of the product.

The safety assessment of GM Foods is not a singular approach, the assessment shall be conducted differently for different products. For example, a GM Apple made for Pest resistance and GM Apple made for sweetness shall have separate assessment. Evaluating the safety of a GMO is a comprehensive process that involves several steps. Systematic safety assessment methodologies are in place that have been agreed on years of consultations under the aegis of international organizations and agreements viz. Food and Agriculture Organization (FAO), World Health Organization (WHO), Codex Alimentarius Commission, Organisation for Economic Co-operation and Development (OECD) and Cartagena Protocol on Biosafety.

Generally, safety assessment is done with major three types of assessments i.e. Food Safety Assessment, Environmental Safety Assessment and Molecular & Protein characterization. And it is also ensured that no GM Food is released without proper safety evaluation.

To learn more about Food laws in India, check out Certificate course in Food and Beverages Law.

GM Food Regulations in USA

The USA government was always open to GM Technology and GM Food, maybe due to the economic interest of the USA. Also, it is understood that the USA takes a hybrid approach starting with a product-based approach and then if required they take up a process-based approach as well. This may be due to the fact that Americans have been consuming GM Foods since the introduction of Flavr Savr Tomato in 1994. The scientific world is unanimously supporting the GM Food but as per the recent study the American consumers are concerned over GM Food when they find it on label, this is due to widespread misinformation.[10]

The federal government of the USA has made a coordinated approach to regulate the GM Foods in the USA. The federal government released the Coordinated Framework for Regulation of Biotechnology as their policy. The regulation give the responsibility of ensuring the safety on to three different agencies ie. USDA’s Animal and Plant Health Inspection Service (USDA-APHIS) & its Biotechnology Regulatory Services (BRS), the U.S. Environmental Protection Agency (EPA), and the Department of Health and Human Services’ Food and Drug Administration (FDA)(Fig. 2). These three agencies work together to understand the impact of GM Food on the environment. [11],[12],[13], [14],[15]

  • FDA: FDA regulates all the foods including the GMO Foods in the US. They regulate the industry through the Federal Food, Drug, and Cosmetic Act (FD&C Act) and Food Safety Modernization Act which deals with the standards for manufacturing, storage, Transportation, Allergen management, Quality management and labeling.
  • USDA: APHIS, through its Biotechnology Regulatory Services (BRS) program, regulates the introduction of certain organisms developed using genetic engineering that may pose a risk to plant health. The Food Safety and Inspection Service (FSIS) is the public health agency in USDA that is responsible for ensuring that the United States’ commercial supply of meat, poultry, egg products, and fish of the Order Siluriformes is safe, wholesome, and correctly labeled. Under the Federal Meat Inspection Act (FMIA), Poultry Products Inspection Act (PPIA), and Egg Products Inspection Act (EPIA), FSIS inspects all meat, poultry, and processed egg products in interstate commerce. FSIS uses these authorities to regulate products under its jurisdiction, including those derived using genetic engineering.
  • EPA: EPA regulates pesticides, including plants with plant-incorporated protectants (PIP) (pesticides intended to be produced and used in a living plant), to ensure public safety. That agency also regulates pesticide residue on food and animal feed.Under section 408 of the FD&C Act, EPA establishes the amount of pesticide chemical residues that may be present in food. Under the Toxic Substances Control Act and regulations implementing that statute, EPA currently regulates biotechnology products that are new microorganisms not specifically excluded by the statute. Thus working on the plant-incorporated protectants for the safety.

So in a typical outlook when a new GMO is used as PIP, One shall get clearance from EPA. If the same is going as an feed to the Animals they shall get approval of USDA and FDA. This suggests that the regulatory aspects are cumbersome due to involvement of multiple agencies, however the jurisdiction has been clearly defined in the Coordinated Framework for Regulation of Biotechnology which makes the work easy as Government. These three agencies are working together to educate the stakeholders.

But multiple agencies may create confusion and problems among the Food Business Operators and sometimes the Consumers as well.

To learn more about Food laws in India, check out Certificate course in Food and Beverages Law.

GM Food Regulations in India

Since the inception of the discussion of GM Food, India was very much resistant to the concept, may be due to the general mentality of the government with respect to sentiments and concerns to mother nature.

In India, all GMOs including GE plants are regulated by the Ministry of Environment, Forest andClimate Change (MoEFCC) as per rules notified under the Environment (Protection) Act, 1986. Guidelines and protocols are in place for safety assessment of GM foods. GM foods are also subjected to regulations by the Food Safety and Standards Authority of India (FSSAI) under the Food Safety and Standards Act, 2006 and its upcoming draft regulation. As of now FSSAI is having a ‘Zero’ tolerance approach to the GM Foods. This can be understood from some of the Orders or Advisories from FSSAI, refer order dated 21/08/2020 & 27/07/2021.[16],[17],[18]

In India each and every GM Food is required to get a prior approval from GEAC (Genetic Engineering Appraisal Committee, the regulatory authority in MoEFCC. And there are other bodies for Enforcement, Monitoring and Approvals of GMO or GM Food. The final authority to give the go-ahead is the GEAC.

As per the Draft-Food Safety and Standards (Genetically Modified or Engineered Foods) Regulations, 2021, After getting the required approval from the GEAC, the FBO shall get submit application for approval at Food Authority if the product falls under the definition of food as mention in 3(j) of FSS Act 2006. The draft regulation is also providing provision for exemption of approval in 4(11) of Draft-Food Safety and Standards (Genetically Modified or Engineered Foods) Regulations, 2021 i.e. Genetically Modified Organisms having unique identification Code provided by Biosafety Clearing House, Organisation for Economic Co-operation and Development etc, is approved by FSSAI, approval for the same will not be required for any other Food Business Operator. Approval will also not be required if it is used as an ingredient in any product. It also restricts the usage of GM Foods in Infant Foods. Also mentioned the labeling attributes in the regulation.

Critical Analysis:

The Indian regulatory system is taking cautious steps to deal with the risks of GM foods. It is worth noting that the information is easily accessible for someone who is looking at the GM Regulations. However, the US regulations are often cumbersome and messy.

To learn more about Food laws in India, check out Certificate course in Food and Beverages Law.

Reference:
  1. https://fssai.gov.in/upload/uploadfiles/files/Draft_Notification_GM_Food_17_11_2021.pdf
  2. https://trends.google.com/trends/explore?cat=71&date=all&q=%2Fm%2F01fn1t
  3. Policymaking in the Context of Contestations: GM Technology Debate in India, Asheesh Navneet
  4. https://www.thehindu.com/sci-tech/All-you-need-to-know-about-the-GM-food-controversy/article14483330.ece
  5. Genetically modified foods: safety, risks and public concerns—a review, A.S.Bawa and K.R.Anilkumar
  6. https://www.canr.msu.edu/news/superweeds-secondary-pests-lack-of-biodiversity-are-frequent-gmo-concerns
  7. A meta-analysis of the impacts of genetically modified crops, Wilhelm Klumper et al.
  8. Development of Drought-Tolerant Transgenic Wheat: Achievements and Limitations, Shabhaz khan et al.
  9. Biofortified Crops Generated by Breeding, Agronomy, and Transgenic Approaches Are Improving Lives of Millions of People around the World, Monika Garg et al.
  10. https://www.fda.gov/food/agricultural-biotechnology/science-and-history-gmos-and-other-food-modification-processes
  11. A new window of opportunity to reject process-based biotechnology regulation, Gary E Merchet et al.
  12. https://www.fda.gov/
  13. https://www.aphis.usda.gov/
  14. https://www.epa.gov/
  15. https://usbiotechnologyregulation.mrp.usda.gov/
  16. Handbook for Food Safety Officials – Genetically Modified Foods Safety Assessment and Regulations
  17. https://www.fssai.gov.in/upload/advisories/2020/08/5f3fb6de8a4f1Order_GM_Food_21_08_2020.pdf
  18. https://www.fssai.gov.in/upload/advisories/2021/07/610025e12375dNotice_GM_Food_27_07_2021.pdf
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Evolution of basic structure doctrine in India

This post has been authored by Hiral Chandrakant Jadhav- Panchal

EVOLUTION OF BASIC STRUCTURE DOCTRINE
1.    A.K. Gopalan v. State of Madras (1950)

In the A.K. Gopalan v. State of Madras (1950) case, the Supreme Court interpreted the Fundamental Rights under Part III of Indian Constitution.

In this case, it held that the protection under Article 21 is available only against arbitrary executive action and not from arbitrary legislative action.

This means that the State can deprive the right to life and personal liberty of a person based on a law.

This is because of the expression ‘procedure established by law’ in Article 21, which is different from the expression ‘due process of law’ contained in the American Constitution.

Hence, the validity of a law that has prescribed a procedure cannot be questioned on the ground that the law is unreasonable, unfair, or unjust.

Secondly, the Supreme Court held that ‘personal liberty’ means only liberty relating to the person or body of the individual.

2.     Shankari Prasad v. Union of India (1951)

In this case, the constitutional validity of the First Amendment Act (1951), was challenged.

The Supreme Court ruled that the power of the Parliament to amend the Constitution under Article 368 also includes the power to amend Fundamental Rights.

The word ‘law’ in Article 13 includes only ordinary laws and not constitutional amendment acts (constituent laws).

Therefore, the Parliament can abridge or take away any of the Fundamental Rights by enacting a constitutional amendment act and such a law will not be void under Article 13.

To learn more about the Indian Constitution, enrol for Certificate in Constitutional Law. 

  1. Berubari Union Case (1960)

In this case, the issue was resolved about whether the Preamble is part of the Constitution or not.

According to the Supreme Court, in the Berubari Union case (1960), the Preamble shows the general purposes behind the several provisions in the Constitution and is thus a key to the minds of the makers of the Constitution.

Further, where the terms used in any article are ambiguous or capable of more than one meaning, some assistance at interpretation may be taken from the objectives enshrined in the Preamble.

Despite this recognition of the significance of the Preamble, the Supreme Court specifically opined that the Preamble is not a part of the Constitution.

Therefore, it is not enforceable in a court of law.

  1. Golaknath v. State of Punjab (1967)

In that case, the Supreme Court ruled that the Parliament cannot take away or abridge any of the Fundamental Rights.

The Court held that the Fundamental Rights cannot be amended for the implementation of the Directive Principles.

The Parliament reacted to the Supreme Court’s judgement in the Golaknath Case (1967) by enacting the 24th Amendment Act (1971) and the 25th Amendment Act (1971).

  • The 24th Amendment Act declared that the Parliament has the power to abridge or take away any of the Fundamental Rights by enacting Constitutional Amendment Acts.
  • The 25th Amendment Act inserted a new Article 31C which contained the following two provisions: No law which seeks to implement the socialistic Directive Principles specified in Article 39 (b) and (c) shall be void on the ground of contravention of the Fundamental Rights conferred by Article 14, Article 19, or Article 31.

No law containing a declaration for giving effect to such a policy shall be questioned in any court on the ground that it does not give effect to such a policy.

To learn more about the Indian Constitution, enrol for Certificate in Constitutional Law. 

5. Indira Nehru Gandhi v. Raj Narain case (1975)

The doctrine of basic structure of the constitution was reaffirmed and applied by the Supreme Court in the Indira Nehru Gandhi case (1975).

In this case, the Supreme Court invalidated a provision of the 39th Amendment Act (1975) which kept the election disputes involving the Prime Minister and the Speaker of Lok Sabha outside the jurisdiction of all courts.

As per the court, this provision was beyond the amending power of Parliament as it affected the basic structure of the constitution.

The Parliament reacted to this judicially innovated doctrine of ‘basic structure’ by enacting the 42nd Amendment Act (1976).

This Act amended Article 368 and declared that there is no limitation on the constituent power of Parliament and no amendment can be questioned in any court on any ground including that of the contravention of any of the Fundamental Rights.

  1. Minerva Mills v. Union of India (1980)

The Supreme Court reiterated that Parliament can amend any part of the Constitution but it cannot change the “Basic Structure” of the Constitution.

In the Minerva Mills case, the Supreme Court held that ‘the Indian Constitution is founded on the bedrock of the balance between the Fundamental Rights and the Directive Principles.

They together constitute the core of the commitment to social revolution.

The goals set out by the Directive Principles have to be achieved without the abrogation of the means provided by the Fundamental Rights.

Therefore, the present position is that Fundamental Rights enjoy supremacy over Directive Principles.

Yet, this does not mean that the Directive Principles cannot be implemented.

The Parliament can amend the Fundamental Rights for implementing the Directive Principles, so long as the amendment does not damage or destroy the basic structure of the Constitution.

7.  S. R. Bommai v. Union of India (1994)

In this case, the Supreme Court laid down that the Constitution is federal and characterised federalism as its ‘basic feature’.

It observed the fact that under the scheme of our Constitution, greater power is conferred upon the Centre vis-a-vis the states does not mean that the states are mere appendages of the Centre.

The states have an independent constitutional existence. They are not satellites or agents of the Centre. Within the sphere allotted to them, the states are supreme.

The fact that during an emergency and in certain other eventualities their powers are overridden or invaded by the Centre is not destructive of the essential federal feature of the Constitution.

They are exceptions and an exception is not a rule. Let it be said that the federalism in the Indian Constitution is not a matter of administrative convenience, but one of principle–the outcome of our own process and a recognition of the ground realities.

To learn more about the Indian Constitution, enrol for Certificate in Constitutional Law. 

  1. Keshavanda Bharti v. State of Kerala (1973)

It was the Kesavananda Bharati case that brought this doctrine into the limelight. It held that the “basic structure of the Indian Constitution could not be abrogated even by a constitutional amendment”. The judgement listed some basic structures of the constitution as:

  • Supremacy of the Constitution
  • Unity and sovereignty of India
  • Democratic and republican form of government
  • Federal character of the Constitution
  • Secular character of the Constitution
  • Separation of power
  • Individual freedom

Over time, many other features have also been added to this list of basic structural features. Some of them are:

  • Rule of law
  • Judicial review
  • Parliamentary system
  • Rule of equality
  • Harmony and balance between the Fundamental Rights and DPSP
  • Free and fair elections
  • Limited power of the parliament to amend the Constitution
  • Power of the Indian Supreme Court under Articles 32, 136, 142 and 147
  • Power of the High Court under Articles 226 and 227

Any law or amendment that violates these principles can be struck down by the SC on the grounds that they distort the basic structure of the Constitution.

9. Waman Rao Case (1981)
  • The SC again reiterated the Basic Structure doctrine.
  • It also drew a line of demarcation as April 24th, 1973 i.e., the date of the Kesavananda Bharati judgement, and held that it should not be applied retrospectively to reopen the validity of any amendment to the Constitution which took place prior to that date.
  • In the Kesavananda Bharati case, the petitioner had challenged the Constitution (29th Amendment) Act, 1972, which placed the Kerala Land Reforms Act, 1963 and its amending Act into the 9th Schedule of the Constitution.
    • The 9th Schedule was added to the Constitution by the First Amendment in 1951 along with Article 31-B to provide a “protective umbrella” to land reforms laws.
    • This was done in order to prevent them from being challenged in court.
    • Article 13(2) says that the state shall not make any law inconsistent with fundamental rights and any law made in contravention of fundamental rights shall be void.
    • Now, Article 31-B protects laws from the above scrutiny. Laws enacted under it and placed in the 9th Schedule are immune to challenge in a court, even if they go against fundamental rights.
  • The Waman Rao case held that amendments made to the 9th Schedule until the Kesavananda judgement are valid, and those passed after that date can be subject to scrutiny.

To learn more about the Indian Constitution, enrol for Certificate in Constitutional Law. 

  1. Indra Sawhney and Union of India (1992)

SC examined the scope and extent of Article 16(4), which provides for the reservation of jobs in favour of backward classes. It upheld the constitutional validity of 27% reservation for the OBCs with certain conditions (like creamy layer exclusion, no reservation in promotion, total reserved quota should not exceed 50%, etc.)

  • Here, ‘Rule of Law’ was added to the list of basic features of the constitution.
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Role of Indian Coast Guard in Maritime Security

This blog post has been authored by Jay Maniyar

INTRODUCTION

As a maritime nation-state, maritime security is critical to India. With a large coastline of 7516 km, India has much to worry about as far as its maritime safety and security are concerned. Challenged by a panoply of traditional and non-traditional security threats to its survival, India employs the Indian Coast Guard (ICG) to guard its waters. Official statements describe the Indian Coast Guard as a “multi-mission, round-the-year” organization tasked with monitoring India’s massive coastline every day. The ICG is headed by a Director-General while its headquarters are based in New Delhi. Five Coast Guard regions have been devised for effective command and control.

As a coastal security force, the ICG is concerned with the overall maritime security of the country. The ICG governs India’s territorial waters and its contiguous and exclusive economic zones which extend up to a total of 200 nautical miles from the maritime baseline of the country. The ICG is a maritime law enforcement agency and is concerned with illicit activities such as human smuggling, drug trafficking, potential terrorism, and other forms of maritime crime at sea. The ICG has 15,714 personnel within its ranks, 175 vessels for duty, and 44 aircrafts. The ICG was established through the Coast Guard Act of 1978.[1] It was devised and set on course for duty on February 1, 1977. The Act officialised its operations and legalized the ICG as an armed force of the Union of India.

To learn more about maritime law and security, enrol for Diploma in Maritime Law and Security. 

ROLE OF INDIAN COAST GUARD

The ICG plays a pivotal role in India’s overall coastal security because it is an agency that is concerned with everything to do with the coastal waters. Moreover, its duties now extend to preserving India’s blue economy, which is an area which has emerged as an engine of growth for the country. The ICG is the foremost, first-rate force which provides coastal security to the country and is even involved in humanitarian assistance and disaster relief (HADR).

The ICG also assumes a key and central role in the overall maritime security of India because it is the second-most important agency of security after the Indian Navy (IN). The ICG, in particular, does not play second fiddle to IN and is actively involved in maritime-naval exercises, seabed security, security to the untapped energy reserves in the EEZ and other activities which have to take place across the EEZ. These further emphasize the importance of the Indian Coast Guard in India’s maritime security regimen.

Within the inventory of the ICG are several offshore patrol vessels (OPVs), pollution control vessels (which pertain to the health of the maritime ecosystem), fast patrol boats, hovercrafts, intelligence survey ships, and many others. The ICG has a strong inventory which can be expected to officiate duties that would otherwise pose hindrances and problems to India’s maritime security. The ICG is a stand-alone force and it is not merely a force which is to play second fiddle to the Indian Navy. It is to be a coastal and maritime security mechanism by itself through its well-arranged hierarchy.

The Indian Coast Guard undertakes duties ranging from the safety of islands, offshore terminals, installations, etc. to the protection of fishermen who are facing distress at sea.[2] As far as legal responsibilities are concerned, the ICG is responsible for enforcing the Maritime Zones of India Act 1981 which governs the fishing regulation by foreign vessels. The ICG also assists customs and other authorities in anti-smuggling operations.

As far as foreign Coast Guards are concerned, coast guard-to-coast guard cooperation takes place in the form of joint maritime-naval exercises, joint patrols called Coordinated Patrols (CORPATs), and cooperation and collaboration at the officers’ level (training, education, sharing of best practices, etc.).  Coast Guards cooperate much like navies do because maritime security has largely become an area dominated by common security concerns and the need for joint missions and better interoperability during crises.

The Indian Coast Guard is no different. The Indian and regional Coast Guards have agreed to cooperate by signing Memoranda of Understanding (MoUs). India cooperates chiefly with Coast Guards in its immediate proximity such as those of Thailand and Indonesia. Thus, it can be seen that the Indian Coast Guard takes ample interest in the larger maritime security affairs of India and is keen on linking up with regional bodies that serve their nations in a similar way to the ICG.

The technology used by the Indian Coast Guard includes a Coastal Radar Surveillance System, Automatic Identification System (AIS), and various cameras and sensors. These ensure technological adeptness and provide for better surveillance and improve upon the manual abilities of Coast Guard personnel. As can be understood from the above, the ICG is a high-tech force and continues to upscale its technologies to achieve maritime-naval dexterity and fight maritime crime and other such problems at sea.

To learn more about maritime law and security, enrol for Diploma in Maritime Law and Security. 

INDIAN COAST GUARD AND MARITIME SECURITY- AN ANALYSIS

Maritime security is a continual process which requires that there should be round-the-year observance, surveillance, and response mechanisms in place. The Indian Coast Guard is a state-of-the-art coastal security force that is responsible for the coastal security of the country. The Indian Coast Guard battles traditional and non-traditional threats in an insecure environment around the Indian maritime zones. The Mumbai 26/11 attacks which shocked the nation were initiated through the maritime routes from Pakistan to India. Such destruction has catalyzed an improved Coast Guard and the accompanying security apparatuses.

At the time, India had accorded the responsibilities for coastal security to the State Marine Police. However, following the ghastly terror that was unleashed in Mumbai, the Indian Coast Guard was made responsible for the security of the Indian coastline of 7516 km. This was approved by the central government in February 2009. The Coast Guard has also been made responsible, in the wake of the Mumbai attacks, to ensure synergy and coordination between coastal and state maritime security agencies. This further entrusts it with a major role in the holistic maritime security of India. Today, the Indian Coast Guard provides much much more than ordinary coastal security and is integral to the entire maritime security of India.

The many forms of surveillance provided by the Indian Coast Guard[3] are the following:

1) On the Beat: This covers the ICG’s mere presence at sea. The ICG will also be expected to provide first response to maritime crime or natural disasters. The presence of the ICG is akin to a maritime policeman.

2) Exclusive Economic Zone (EEZ) Surveillance: The ICG is expected to provide surveillance to the 2 million square kilometres (sq. km.) of India’s EEZ. This surveillance is expected to preserve resources, sustain the maritime environment, and secure communication between ships and oil platforms (for example).

3) Aerial Surveillance: Shore-based aircrafts and helicopters in the Indian Coast Guard are supposed to provide for rescue operations and options to assist the Indian Navy’s maritime-naval arm, too. High technologies are also provided to the aircrafts and they are also expected to respond to oil spills or other ecological disasters.

4) Extended EEZ Surveillance: The ICG is also expected to assist its partners with surveillance of their EEZs owing to low coastal security capacities within their navies or the absence of Coast Guards in their entirety.

5) Coastal Security: Coastal security is the fundamental and foremost duty of the Indian Coast Guard. Contingency plans created by various maritime-naval agencies are conducted by the ICG as part of its coastal security operations.

6) Offshore Security: Offshore security is akin to coastal security but envisages a broader plan and perspective for the maritime domain. Anti-terrorism, anti-piracy, and port security are undertaken by the Coast Guard as part of its offshore security mechanisms.

7) Boarding Operations: The ICG is also entrusted with searching vessels and other merchant ships such as oil tankers for nefarious activities such as maritime crime, smuggling, trafficking, etc. ICG officers board suspect ships to inspect them and then initiate the necessary mechanisms to ensure that the maritime domain remains crime free.

As can be seen from the above, the ambit of operations of the Coast Guard is quite exhaustive and extensive. The Coast Guard is expected to conduct duties such as surveillance, initiate first responses to contingencies such as disasters and pirate attacks, combat maritime criminals and bring them to the jurisdiction of law, and be responsible for the overall coastal security of the country.

The Coast Guard can be further expected to expand its duties. They can provide coastal escort for merchant ships to de-burden navies while they can also be expected to take up some of the duties of the navies themselves. The Coast Guard is a foremost coastal security force and it will serve the force well to continue to broaden the ambit and scope of its duties. The Coast Guard is presently India’s second most important maritime security force in comparison to the Indian Navy.

To learn more about maritime law and security, enrol for Diploma in Maritime Law and Security. 

CONCLUSION

A continually improving Indian Coast Guard will secure India better

The Indian Coast Guard remains a strongly vigilant force that continues to upgrade its capabilities and capacities in an urgent manner. With upgraded technologies, a broader scope and vision, and expanded duties, the ICG is a force to reckon with and remains at the helm of the maritime security affairs of the nation. A strong and capable Coast Guard provides for a safe and secure coastline and, effectively, a safe and secure India. Only such a worthy coastal and maritime security body will secure India in the short, medium, and long terms.

For a country that is now an aspirant to atmanirbharta (self-reliance in defence production and procurement), India must have a strong and capable Coast Guard in place to ensure that it achieves the goal of SAGAR or Security And Growth for All in the Region. This coupled with uniquely Indian initiatives such as the Indo-Pacific Oceans’ Initiative (IPOI) or SAGARMALA (a chain of ports and coastal community-led development in India) will have to be secured by the Coast Guard and only then will they achieve their maritime security goals.

India’s maritime security has traditionally been weak since maritime security agencies have always been given no importance in the hierarchy. The Indian Army remains the most important instrument for securing the country. The Indian Navy is third even after the Indian Air Force. Thus, the Coast Guard suffers from a similar predicament and was only founded several decades after India’s independence. It is hoped that such negligence will become a relic of history and the ICG will be a prominent force for Indian national security.

To learn more about maritime law and security, enrol for Diploma in Maritime Law and Security. 

[1] Source: https://www.mod.gov.in/sites/default/files/Coast%20Guard%20Act%2C%201978.pdf

[2] Source: https://joinindiancoastguard.cdac.in/role.html

[3] Source: https://indiancoastguard.gov.in/content/1718_3_MaritimeSurveillance.aspx

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Intellectual Property in Fashion Industry

This blog post has been written by Akanksha Sudhakar

1. INTRODUCTION

As long as there have been fashion houses-and almost as long as there have been people making clothes- there are countless occasions where there has been a need to consult lawyers. Some years ago, the words “fashion” and “law” were not linked, and fashion law wasn’t a specialised area of law practice. Today, a few short years later, there is a legal field made to measure for the business of fashion. Many law students [and even practicing lawyers] equate fashion law with intellectual property laws. One might reasonably consider intellectual property to be at the core of fashion law, since the value of fashion-as opposed to clothing-rests in large part on the fascination of a brand, and that fascination is protected primarily by intellectual property law.

The term intellectual property, conventionally understood, includes, on a federal level, utility and design patents and copyrights; on a federal and state level, trademark and trade dress protection; and on a state level, trade secret protection, the right of publicity, the right against misappropriation, and other causes of action that vary by state.[1]

This article discusses in detail, the role played by intellectual property in fashion industry.

2. TRADE MARK PROTECTION

Intellectual property, especially in the form of trademark protection is often one of the most valuable assets owned by a fashion enterprise. Indeed, in today’s fashion world, many companies are little more than vendors of licenses to use well-known brand names in connection with particular categories of apparel and accessories.[2] Trade marks do not directly protect textiles or fashion garments but the way in which designers can use their trade marks in their designs can enable their creations to come under the remit of trade mark law. This central emphasis on trademark protection is arguably the result of the fashion’s function as an indicator of social status[3] and the lack of copyright protection for fashion design which largely shifts the emphasis from what is being sold to who is selling it. Whatever the explanation, trademark protection tends to eclipse other forms of intellectual property protection in the fashion world.

To learn more about Fashion Law, enrol for Diploma in Fashion Law.

3. COPYRIGHT PROTECTION

On the other hand, the laws of copyright is often described as “bundle of rights” that are granted to the creator of an original work of authorship that is fixed in tangible form.[4] The Supreme Court of the United States has explained that the word “original” has a special meaning in the context of copyright; a work may be “original”, even if it is not entirely novel, provided that it was “independently created by the authors opposed to copied from other works- and that it possesses at least some minimal degree of creativity”.[5] This is a low threshold, however, while evaluating protection for the copyright-eligible categories of fashion design, we might reasonable come to an inference that the otherwise lax originality requirement may have more “teeth” when it comes to clothing and jewellery.

A lot of such instances in the fashion law not only has determined whether a party has infringed on one’s copyright, but it must first assess the validity of the copyright and then evaluates whether ‘substantial similarity’ exists between the plaintiff’s work to that of the defendant’s. The validity of one’s copyright in a fashion article relies on a number of factors, including the “idea/expression dichotomy” and, particularly important for fashion design, the “separability” test. In determining whether substantial similarity exists between the plaintiff’s and the defendant’s works that could potentially give rise to a copyright infringement, federal courts typically ask whether

  1. a non-trivial amount of the original work was used[6], and if the amount used was more than de minimis
  2. whether the ordinary observer [unless is set out to detect the disparities] would be disposed to overlook them, and regard their aesthetic appeal as the same.[7]

Even where drawings or photographs of garments are protected by copyright, the garments themselves have long been considered ‘useful articles. Since, majority of the copyright legislations around the world excludes ‘useful articles’ from federally copyrightable subject matter, clothing generally receives no protection under the copyright law. Newcomers and many long-established designers are also surprised by this situation and many have argued that ‘useful article’ bar to protection makes little sense in an age where much of fashion is more ornamental than functional.[8] However, garments along with other types of fashion accessories, are eligible for copyright protection to the extent that their design “incorporates pictorial, graphic, or sculpture features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article”.[9]

The common case of infringement that takes place in the fashion industry is that of the large high-street chain copying a smaller fashion designer. The way that Issa is copied is indicative of this. Issa deals with copycats and takes action, but many designers do not have access to advice, nor funds to deal with copycats in the same way. It is true that to an extent the designers accept that being copied is recognition for success; however, this does not mean that they are flattered by it, nor does it stop them from taking action where action is available. Today, copying is easier than ever, with the ease of access of information and liberalised trade in textiles and clothing, the often-cheaper copies being imported from a low-wage developing country especially now that the trade has been liberalised.

The rampant copying has caused high fashion designers to accept that being copied is part of the process and there is too much copying and different degrees of it to stop it all. Thus the only way to deal with this as designers is to keep innovating. As Miuccia Prada puts it, “The highstreet, actually is a kind of good. The only thing is that you’re always forced to do something new, something more. You are never allowed to enjoy anything because it’s always everywhere and then it’s over, over, over in a very short time.”[10]

In this context, copyright does not play that much of a role, as it only bites when copying has taken place and the rightful owner chooses to take action. This does not support the Piracy Paradox but highlights the reality of the industry and how IP protection is not just about action taken afterwards but equally about protection before as well as innovation and creativity. Taking action is not always seen as an option for designers not only for cost and time expenses but also for lack of information and availability of IP services.

4. TRADE SECRET PROTECTION

On the other hand, protecting valuable information as a trade secret always comes into play when one discloses information on a new project, novel technologies or solutions in the context of potential research or business collaborations. One might share sensitive information, expertise, and specific plans on how a project should be carried out during meetings with possible business, research, or financial partners. To safeguard all confidential information shared during the meeting, one needs to make sure that they have their partners sign a non-disclosure agreement (NDA), either one-way or mutual. This gives a legal foundation on which one can defend their rights if one of the prospective partners violates its confidentiality.

But one thing that needs to be taken in account is that trade secret protection is only useful for inventions that rivals won’t be able to deduce from looking at your product and company’s public elements which is another difficulty that is face while protecting their inventions. This is because one the information comes in the public knowledge, the trade secret protection automatically ceases to exist.

To learn more about Fashion Law, enrol for Diploma in Fashion Law.

5. PATENT PROTECTION

The inventive component of a design in the fashion business can also be protected under the patent law. But, in order to do so, there are two considerations that must be taken in order for a design to be patented. They are novelty and originality. A design needs to be novel and Original. It should have been made for the first time because of its nature. The design must also be feasible from a scientific standpoint. However, the fashion business does not use patent law very frequently. The technical sector has a greater prevalence of them. A patent registration is an expensive and time-consuming process. The fashion industry has little value in this sector because it is so dynamic.[11]

6. LANDMARK CASE LAWS

Louis Vuitton Malletier, S.A. v. My Other Bag, Inc.,[12]

This case of copyright violation is very well-known. In this instance, the company ‘My Other Bag’ created a parody tote bag with a print of a Louis Vuitton image. My other bag was the target of a lawsuit by Louis Vuitton for its design and copyright theft. In this case, the hon’ble court ruled that the parody accounts could convey two concurrent, and contradictory meanings. Louis Vuitton, the petitioner, complained that the defendant had attempted to imitate their copyrighted design. The petitioner added that it is attempting to defend its IP rights in its defence. The court rejected the accusations since the defendant’s offering was a parody.

Puma SE v. Forever 21, Inc.[13]

Infringement of copyright and design were issues in this case. Puma filed a lawsuit against forever 21 for allegedly copying the limited-edition shoes that the well-known singer Rihanna created for the company known as puma. The singer Rihanna personally developed the Creeper Sneaker, Fur Slide, and Bow Slide for the Fenty line. The court in this case decided that a product does not automatically fall under the umbrella of copyright production merely because a particular celebrity is associated with it or has supported it. Copyright is issued based on the originality and novelty of a particular design as well as the design’s individuality. The lawsuit and this case made no mention of Rihanna.

To learn more about Fashion Law, enrol for Diploma in Fashion Law.

7. MEASURES TO EFFECTIVELY PROTECT THE BRAND ONLINE

First of all, the consumers need to be informed and made aware that the sale of fake goods not only damages the brand but can also directly harm them, such as when it comes to the quality and safety of the products they buy or the absence of warranties. In addition to the negative effects fake fashion has on the economy and the environment (mass production, low-quality chemicals used, annual disposal of tonnes of clothing), this uncontrolled sector frequently uses sweatshops, with all the negative effects and ramifications these have on people. Additionally, it is well known that many counterfeit businesses are linked to organised crime, and fake currency has also emerged as a go-to source of funding for terrorist organisations.

Competing with counterfeiters may be difficult, discouraging, and dangerous for a brand. However, the majority of internet players are developing tools to help brand owners efficiently combat counterfeits online. For instance, Amazon recently debuted “Project Zero.” Automated protections will continuously monitor the website and proactively delete suspected counterfeits after receiving from the brand the logo, trademark, and other essential information from Amazon. Additionally, without having to first get in touch with Amazon, this solution enables marketers to easily regulate and remove listings from the Amazon shop.

8. CONCLUSION

Technology can therefore, be your best ally when it comes to safeguarding a fashion brand’s intellectual property online. Artificial intelligence (AI), like Project Zero and other such programmes, has demonstrated effectiveness in the fight against counterfeits, cutting down on the time that businesses must devote to a manual search for prospective infringers. One can now rely on software and AI to attempt to remove counterfeiters effectively because there are so many platforms and counterfeiters. But keep in mind that any IPR asset must be successfully protected through the use of conventional methods like customs or legal procedures in the battle against counterfeits. This is because IP and fashion are interconnected. They both co-exist, and neither can survive without the other. IP law is required to increase any fashion design’s monopoly and serves as a shield against the ills of duplication and plagiarism.

To learn more about Fashion Law, enrol for Diploma in Fashion Law.

[1] Charles E. Coleman, ‘An Overview of Intellectual Property Issues Relevant to Fashion Industry’ (Navigating Fashion Law), Aspatore (2012).

[2] Vicki M. Young, ‘JA Apparel Said to Favor Licensing Model’ (Women’s Wear Daily, 21 July 2011), < https://wwd.com/business-news/financial/ja-apparel-said-to-favor-licensing-model-3728944/>  accessed on 30 August 2022.

[3] Barton Beebe, ‘Intellectual Property and the Sumptuary Code’ 123 Harvard Law Review (2010) at p. 809.

[4] Feist Pubs v. Rural Telephone Service Co., 499 US 340, 355 (1991).

[5] Ibid.

[6] Ringgold v. Black Entertainment TV, 126 F.3d 70 (2nd Circuit).

[7] Peter Pan Fabrics Inc. v. Martin Weiner Corp., 274 F.2d 487 (2nd Circuit).

[8] Amy M. Spindler, ‘COMPANY NEWS; A Ruling by French Court Finds Copyright in a Design’ (The New York Times, 19 May 1994), < https://www.nytimes.com/1994/05/19/business/company-news-a-ruling-by-french-court-finds-copyright-in-a-design.html> accessed on 30 August 2022.

[9] Section 101, US Copyright Act.

[10] D Llewelyn, Invisible Gold in Asia: Creating Wealth Through Intellectual Property (Marshall Cavendish Business 2010) at p. 36.

[11] Beebe, B. (2010). INTELLECTUAL PROPERTY LAW AND THE SUMPTUARY CODE. Harvard Law Review, 123(4), 810–889.

[12] 18-293-cv (2d Cir. Mar. 15, 2019).

[13] No. CV17-2523 PSG Ex, 2017 U.S. Dist. LEXIS 211140 (C.D. Cal. June 29, 2017).

 

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Role of Intellectual Property in Cyber Law

This blog post has been written by Dr. Apoorva Dixit

INTRODUCTION

The Intellectual Property Rights[1] protect the original work in fields of art, literature, photography, writing, paintings, even choreography in written format, and audio, or video files. The IPR protects these works both in tangible and intangible form. Patent, Copyright, Trademarks, Trade Secrets, Industrial and Layout Designs, Geographical Indications are intellectual property rights for which legal remedies are available even for online infringements.

With the technological advancements and innovations in cyber world the global markets have benefitted the copyright or patent owners. However, every good innovation has its own pitfalls as violation of IPR has become one of the major concerns because of the growth of cyber technology. The IPR and Cyber law go hand in hand and cannot be kept in different compartments and the online content needs to be protected.

The ever-increasing and evolving cybercrimes are not confined to cyberstalking, frauds, cyberbullying, phishing, or spamming but are also infringement of IPR- copyright, trademark, trade secrets of businesses carried online, audios, videos, service marks by illegal practices like hyperlinking, framing, meta-tagging, and many more.

What are Intellectual Property Rights in Cyberspace

IPR can be defined as – “Intellectual property rights are the legal rights that cover the privileges given to individuals who are the owners and inventors of a work and have created something with their intellectual creativity. Individuals related to areas such as literature, music, invention, can be granted such rights, which can then be used in the business practices by them.”[2]

Types of Intellectual Property Rights[3]

Intellectual Property Rights can be further classified into the following categories −

  • Copyright
  • Patent
  • Trade Secrets, to name a few[4]

Every innovation in technological zone becomes prone to threats. The cyberspace on one hand has facilitated e-commerce, connecting with friends and family, publishing the literary works, and sharing knowledge but at the same time these personal data or copyrighted or patented data become vulnerable to various cyber-attacks.

It is best suited to have an effective intellectual property management strategy for all the e-businesses encompassing a considerable number in cyberspace.

There are various laws nationally and internally to safeguard intellectual property against cyber-threats, but it becomes the moral duty of the owner of IPRs to take all the required protective measures to negate and reduce illegitimate virtual attacks.

Intellectual Property Rights in India

For the protection, the IPRs in Indian soil, various constitutional, administrative, and judicial rules have been defined whether it is copyright, patent, trademark, or other IPRs.

Legislations Enacted to Protect IPR[5]

In the year 1999, the government passed an important legislation based on international practices to safeguard the intellectual property rights. The same are described below−

  1. The Patents (Amendment) Act, 1999, facilitates the establishment of the mailbox system for filing patents. It offers exclusive marketing rights for a time of five years.
  2. The Trademarks Bill, 1999.
  3. The Copyright (Amendment) Act, 1999.
  4. Geographical Indications of Goods (Registration and Protection) Bill, 1999.
  5. The Industrial Designs Bill, 1999, replaced the Designs Act, 1911.
  6. The Patents (Second Amendment) Bill, 1999, for further amending the Patents Act of 1970 in compliance with the TRIPS.

Learn more about the IP regime in India with Enhelion’s Diploma in Intellectual Property: Law and Management.

CHALLENGES FACED IN PROTECTION OF IPR IN CYBER LAW

A. Copyright Infringement:[6]

“Copyright protection is given to the owner of any published artistic, literary, dramatic, or scientific work over his work to exclude everyone else from using that work on his own name and thereby gain profit from it.”

The infringement of these copyrights includes the usage without the permission of the owner, making and distributing copies of software and unauthorized sale of the same, and illegitimate copying from websites or blogs.

  • Linking:

Linking refers to directing a user of a website to another webpage by action of clicking on a text or image without leaving the current page. It poses a threat to rights and interests of the owner of the website and the owner can lose the income as it related to the number of users visiting the websites. It may lead users to believe that the two websites are linked and are under same domain and ownership.

In Shetland Times, Ltd. v. Jonathan Wills and Another[7], it was held to be an act of copyright infringement under British law and an injunction was issued as the Shetland News’s deep link was supposed to be with the embedded pages of the Shetland Times’s web site, but they were also linked to the Times’ website.

With digitisation there is a threat to copyright ownership and rights over their own innovation as it has become easy to mould various components of copyright elements into variety of forms by the process of linking, in-linking, and framing. This requires no permissions to be accorded.

Deep linking is challenging to manage as there are no clear-cut laws at both national and international level and this ambiguity becomes advantageous for cybercriminals who try to breach the copyrights. The rights of the owner of copyrights on one hand and free availability of information on another is needed to be balanced to ensure smooth working of online resources and businesses. Reading Sections 14 and 51, Indian Copyright Act, 1957, a legal issue emerges whereby it is not clear as to the exact stage when the reproduction of the copyrighted work is being committed[8]. The ambiguity lies in tracing the copyright infringement that is it at the stage of formation of deep link without the disclaimer of accessing a link which needs no approval or at the time when a user accesses the link at his will.

Another challenge is with the in-linking links. On a browser visited by a user accessing the link is created with map to navigate and fetch images from various sources, these images are copied by final user who is clueless that he is retrieving those from different websites. Like deep linking, the problem of tracing the infringement remains the same as it is difficult to track the exact phase of reproduction of the copyrighted images. The in-line link creator is guilty of copyright infringement though not directly distributing it but giving way to facilitate making of unauthorized copies of the original website content thereby falling under the purview of Section 14 Copyright Act, 1957. However, the final user has no mens rea or knowledge of any violation of copyright and is thus caught off-guard.

  • Framing:

Framing is another challenge and becomes a legal issue and debate subject over the interpretation of derivation and adaptation under Section 14 Copyrights Act, 1957. The framer only provides users the modus operandi to access copyrighted content which is retrieved from a website to browser the user is accessing so they cannot be held responsible for copying, communicating, or distributing the copyrighted content. The question arises whether getting the copyrighted content from a website and combining with some more to create one’s own will amount to adaptation or interpretation under law or not.

B. Software Piracy:

Software piracy refers to making unauthorized copies of computer software which are protected under the Copyright Act, 1957.

Piracy can be of following types:[9]

  • Soft lifting – this means that sharing a program with an unauthorized person without a licence agreement to use it.
  • Software Counterfeiting – Counterfeiting means producing fake copies of a software, imitating the original and is priced less than the original software. This involves providing the box, CDs, and manuals, all tailored to look as close to original as possible.
  • Renting – it involves someone renting a copy of software for temporary use, without the permission of the copyright holder which violates the license agreement of software.

C. Cybersquatting And Trademark Infringement:

Trademark means a unique identifier mark which can be represented by a graph and main idea is to differentiate the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours.

Cybersquatting is a cybercrime which involves imitation of a domain name in such a manner that the resultant domain name can dupe the users of the famous one with an intention to make profit out of that. This is executed by registering, selling, or trafficking of a famous domain name to encash a popular domain name’s goodwill.

When two or more people claim over the right to register the same domain name then the domain name dispute arises when a trademark already registered is registered by another individual or organization who is not the owner of trademark that is registered. All domain name registrars must follow the ICANN‘s[10] policy.

Meta tagging is a technique to increase the number of users accessing a site by including a word in the keyword section so that the search engine picks up the word and direct the users to the site despite the site having nothing to do with that word. This may result in trademark infringement when a website contains meta tags of other websites thereby affecting their business.

There are certain conditions which need to be fulfilled for a domain name to be abusive:

  1. The domain name can be said to be abusive if it gives the impression to the users of being same as another popular trademark which is a registered one and users mistakenly access the fake one made with mal intention of gaining profit by diverting users of popular trademark domain.
  2. The registrant has no legal rights or interests in the domain name.
  3. The registered domain name is being used in bad faith.

Learn more about the cyber law regime in India with Enhelion’s Diploma in Cyber Laws. 

INTERNATIONAL LAWS FOR PROTECTION OF IP IN CYBER WORLD

The various international conventions treaties and agreements for protection of intellectual property in cyberspace are : “Berne Convention (1886), Madrid Agreement Concerning the International Registration of Trademarks (1891), Hague Agreement Concerning the Registration of International Designs (1925), Rome Convention for Protection of Performers, Producers of Phonograms and Broadcasting Organizations (1961), Patent Cooperation Treaty (1970) Agreement on the Trade-Related Aspects of Intellectual Property Rights (1994), World Intellectual Property Organization Copyright Treaty (1996), World Intellectual Property Organization Performances and Phonograms Treaty (1996), and Uniform Domain Name Dispute Resolution Policy (1999), in consolidation form the international instruments that govern Intellectual Property Rights.”[11]

Berne Convention (1886) protects the IPRs in Literary and Artistic Works and for the developing countries specialised provisions are provided.

Rome Convention (1961) covers creative works of authors and owners of physical indicators of intellectual property. It permits the implementation at domestic level by member countries where the dispute falls within purview of adjudication by International Court of Justice unless resorted to arbitration.

TRIPS (1994) is a multilateral agreement on intellectual property that has the widest coverage of IPRs like copyrights and related rights.

UDRP (1999) is for the resolution of disputes on registration and use of internet domain names.

Learn more about the IP regime in India with Enhelion’s Diploma in Intellectual Property: Law and Management.

INDIAN LAWS ON IPR

Section 51 of Copyrights Act, 1957 is noticeably clear that exclusive rights are vested in the copyright owner and anything to the contrary constitutes copyright infringement thereof[12]. Since there is no express legislation to determine the liability of Internet Service Provider (ISP), Section 51 can be interpreted to fall within the ambit with respect to the facilitation of server facilities By ISPs for stockpiling user data at their business locations and which is broadcasted for making profit through charging for services and advertisements. However, to interpret in such a way the other ingredients are to be fulfilled in a cumulative manner, these ingredients are ‘knowledge’ and ‘due diligence’ to hold ISP liable in abetment of infringement of copyright.

Information Technology (Intermediaries Guidelines) Rules 2021 and Section 79 IT Act, 2000 provide conditional safeguard from liability of the online intermediaries, but at the same time its open for interpretation under any other civil or criminal Act. IT Act 2000 makes an intermediary non-liable for any third-party content hosted on its site. The 2021 Guidelines entail following of diligent approach by the intermediaries to avail protection or exemption under Section 79 IT Act, 2000. Therefore, it becomes crucial for initiative-taking judicial interpretation depending on the facts of each case.

JURISDICTIONAL ISSUES IN IP CASES IN CYBER LAW 

Cyberspace has no borders and Intellectual Property disputes have become a global concern with mixed infringements and cross border disputes. For prescription, adjudication, and enforcement of law the legal disputes will come under jurisdiction of a Court or not becomes a worrying concern as there is no clear-cut rule of law. A country as a sovereign power has powers to adopt a criminal law for to an offensive act was committed outside its borders may but which has an impact within its territory. Following the international law, Courts can assume universal jurisdiction to prosecute a cybercriminal.

Evolution of various of theories and legal concepts has been witnessed to deal with this much anxiety of jurisdictional issues with respect to adjudicating the infringements of intellectual property in cyberspace. The most significant of these are the Minimum Contacts Test, the Effects Test, and the Sliding Scale Test or ‘Zippo Test’ taken from US Courts. The Minimum contacts test is applicable where one or both parties are out of territorial jurisdiction of the Court but there is a contact with the State in which the Court is located. The Effects test is applicable at the territory of the Court the effects or injury of any cyber-crime is experienced. The Sliding Test is related to personal jurisdiction regarding the interactions with commercial information over the internet between the non-resident operators.

Section 75 IT Act, 2000 is applicable to cybercrimes committed outside India if the offence involving a computer, computer system, or computer network placed in India. Section 4 IPC, 1860 extends its jurisdiction to offences committed in any place outside India targeting a computer resource located in India. The courts in India can adjudicate against the intellectual property infringements in cyberspace and they protect the intellectual property owners by means of judicial activism and effective jurisprudence.

Learn more about the cyber law regime in India with Enhelion’s Diploma in Cyber Laws. 

CONCLUSION

Along with the technological advancements and innovations it becomes imperative to protect the sensitive data and information and the intellectual property online by resorting to stricter legal measures. As newer types of cybercrimes affecting intellectual property are cropping up, so it becomes essential to enact new laws as traditional regulations are not sufficient to render justice as the challenges faced in protection or tracing the infringers of intellectual property in cyber world is quite challenging.

For smooth sail and facilitation of global trade and e-commerce and various businesses conducted online the import and export are necessarily provided a secured atmosphere to protect IPRs. Novice and updated technological practices to protect copyrighted content is absolute necessity like encryption, cryptography, digital signatures, and digital watermarks. It is important to keep a record of all the work with ownership of IPRs to identify the author, numbers or codes involved with such works. Taking the route of legal redressal of dispute is not the only solution but it is very much required on part of copyright, patent, trademark, and various other intellectual property rights owners to be initiative-taking and take all necessary precautions in protecting their works and be updated with the current technological measures of protection for IPRs. Social engineering attacks are generated or started by people, and the answers and solutions to these problems would come from people only.

[1] Hereinafter referred to as IPR

[2] Tutorialspoint.com. 2022. Intellectual Property Right. [online] Available at: <https://www.tutorialspoint.com/information_security_cyber_law/intellectual_property_right.htm> [Accessed 14 June 2022].

[3] Ibid

[4] Ibid

[5] Ibid

[6] Legalserviceindia.com. 2022. Intellectual Property Issues in Cyberspace. [online] Available at: <https://www.legalserviceindia.com/legal/article-3233-intellectual-property-issues-in-cyberspace.html> [Accessed 14 June 2022].

[7] Shetland Times Ltd. v. Dr. Jonathan Wills and Zetnews Ltd. [1996] (Court of Session, Edinburgh).

[8] Banerjee, S., 2021. Intellectual property rights law in cyberspace. [Blog] https://blog.ipleaders.in/, Available at: <https://blog.ipleaders.in/intellectual-property-rights-law-in-cyberspace/> [Accessed 15 June 2022].

[9] Legalserviceindia.com. 2022. Intellectual Property Issues in Cyberspace. [online] Available at: <https://www.legalserviceindia.com/legal/article-3233-intellectual-property-issues-in-cyberspace.html> [Accessed 14 June 2022].

[10] ICANN (Internet Corporation for Assigned Names and Numbers) is the private, non-government, non-profit corporation with responsibility for Internet Protocol (IP) address space allocation, protocol parameter assignment, domain name system (DNS) management and root server system management functions. The Internet Assigned Numbers Authority (IANA) previously performed these services.

[11] Banerjee, S., 2021. Intellectual property rights law in cyberspace. [Blog] https://blog.ipleaders.in/, Available at: <https://blog.ipleaders.in/intellectual-property-rights-law-in-cyberspace/> [Accessed 15 June 2022].

[12] Ibid

Categories
Blog

The interplay between intellectual property law and competition law- Similarities and Differences

THE INTERPLAY BETWEEN INTELLECTUAL PROPERTY LAW AND COMPETITION LAW

This article has been authored by Riya

Intellectual property rights grant the owners exclusive legal rights, limiting others’ access to the same, and thus reducing market competition. Competition law/anti-trust law, on the other hand, seeks to promote competition and increase market access. As a result, we can see that these two topics are diametrically opposed. However, another school of thought holds that the two realms can not only coexist but also complement each other.

As a result, the goal of this article is to examine how IPR and competition law are linked and interdependent. This study focuses on the fact that in order to develop the country’s economic efficiency, both IPR and Competition Law must coexist, and this study provides guidelines to help improve the efficiency of the Indian system of Competition law and patent offices.

To learn more about Competition Law in India, enrol for Advanced Certificate in Competition Law.

  1. INTRODUCTION

Any discussion of the relationship between competition laws and intellectual property rights must start with a definition of these two terms. Intellectual Property Rights are intended to encourage inventors’ creativity by granting them certain rights over their inventions that protect their interests in them. These are exclusionary rights, which grant inventors temporary rights to exclude others from using their IPR. Competition law, on the other hand, exists to promote economic growth by restricting rights arising from private property in order to prevent anti-competitive behaviour.

Competition law seeks to preserve the competitive nature of markets because competition among market forces is critical in protecting consumers from abuse. In India, dominance is not a problem in terms of competition law; however, the abuse of that dominance is. Following liberalisation and privatisation, India has shifted to more open market policies that encourage more innovation and rapid economic growth. The Indian Competition Act was enacted in this context to preserve market competition for the benefit of consumers.

To learn more about the intellectual property regime in India, enrol for Diploma in Intellectual Property: Law and Management. 

  1. THE OBJECTIVES OF IPR AND COMPETITION LAW

It has been observed that IPR and competition law are incompatible. It is because IPR grants the innovators of a new product a monopoly that others do not have access to, or it simply protects those owners from commercial exploitation of their products by granting them exclusive legal rights. Competition law, on the other hand, is opposed to static market access and competition rules, specifically the abuse of monopoly position. As a result, it should be noted that the term “competition” is used differently by IPR and Competition Law.

The main goal of granting licences in IPR is to encourage competition among prospective innovators while simultaneously restricting competition in various ways. After a specified period, the rights revert to the public domain, effectively ending the competition. The primary goal of competition law is to prevent abusive market practices, stimulate and encourage market competition, and ensure that customers receive high-quality goods and services at a reasonable price.

According to a UNCTAD[1] document on ‘examining the interface between the objectives of competition policy and intellectual property,’ the main goal of IPR is to encourage innovation by providing appropriate incentives. This goal is met by granting inventors exclusive rights to their inventions for a set period of time, allowing them to recoup their R&D investments.

Instead, the goals of Competition Law are to promote efficiency, economic growth, and consumer welfare. To achieve them, competition law limits, to some extent, private property rights for the benefit of the community. Competition is thought to be beneficial to the economy because it fosters innovation and increases competitiveness.

Thus, we can say that IPR is about individual rights that provide monopoly only to the owner of the innovated product in order to protect his invention from commercial exploitation, whereas Commercial Law protects the interests of the market and the broader community, rather than an individual, by limiting private rights that may harm the community’s wellbeing and thus encourages market competitiveness. Despite the fact that they are diametrically opposed, their ultimate goal is consumer welfare.

To learn more about Competition Law in India, enrol for Advanced Certificate in Competition Law.

  1. THE INTERFACE BETWEEN COMPETITION LAW AND IPR

It is obvious that, at first glance, the goals of IPR and competition law appear to be at odds. They appear to be irreconcilable, with conflict and friction unavoidable. Whereas friction may be a part of the overlap between IPR and competition law, where they may clash in any case, the truth is that they also work in tandem. Their goals are aligned with their ultimate goal: to improve the welfare of consumers in society by facilitating market innovation.

They achieve this goal through various means. Whereas IPRs give innovators and producers monopoly rights to be adequately reimbursed for their research and development costs, competition law protects the rights of the entire community by limiting private rights, including those granted by IPRs, to ensure the market is free of anti-competitive behaviour, resulting in more innovation and better products for the consumer. In this way, IPRs and competition law ultimately serve to improve consumer welfare by facilitating innovation.

This goal of enabling innovation necessitates a balancing act of competition law to ensure that IPRs are not exploited and abused while still allowing enough room and incentives for a vibrant market for innovation and creativity.

The various sections which speak about the inevitable connection between IPR and competition law are:

Section 3(5) of the Indian Competition Act, 2002 exempts reasonable use of such inventions from the purview of competition law, implying that it only protects reasonable conditions imposed by the IPR holder and that any unreasonable condition imposed can be dealt with under competition law.

Section 4 of the Indian Competition Act, 2002, deals with abuse of dominant position, and it only prohibits abuse, not the mere existence of a dominant position. What is important to note for our current discussion is that no exception has been made for IPRs under this Section, possibly because IPRs do not confer dominant position in the market, and even if they do, this Section does not prohibit the mere existence of dominant position, but only the abuse of dominant position.

Section 4(2) of the Indian Competition Act, 2002, which treats enterprise action as abuse and applies equally to IPR holders,

Section (3) of the Indian Competition Act, 2002 prohibits anti-competitive practices, but this prohibition does not limit “any person’s right to restrain any infringement of, or to impose reasonable conditions necessary for protecting any of his rights” conferred by IPR laws such as the Copyright Act, 1956, the Patents Act, 1970, the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999), and the Designs Act, 2000.[2]

To learn more about the intellectual property regime in India, enrol for Diploma in Intellectual Property: Law and Management. 

  1. DIFFERENCES

The conflict between competition policy and the regime of intellectual property rights has been most contentious in the context of patent laws. The methods used to achieve their mutual goals give rise to the interface between competition policy and patent law. On the one hand, competition policy requires that no unreasonable restraints on competition exist; on the other hand, patent laws reward the inventor with a temporary monopoly that protects him from competitive exploitation of his patented article.[3]

IPR protection is a tool for encouraging innovation, which benefits consumers by allowing for the development of new and improved goods and services, as well as promoting economic growth. It grants innovators the right to legitimately bar other parties from commercialising innovative products and processes based on that new knowledge for a limited time. In other words, the law provides innovators or IPR holders with a temporary monopoly to recover costs incurred during the research and innovation process. As a result, they earn just and reasonable profits, giving them an incentive to innovate.

Competition law, on the other hand, is critical in closing market gaps, disciplining anticompetitive practices, preventing monopoly abuse, inducing optimal resource allocation, and benefiting consumers with fair prices, a wider selection, and higher quality. As a result, it ensures that the dominant power associated with IPRs is not overcomplicated, leveraged, or extended to the detriment of competition. Furthermore, while competition law seeks to protect competition and the competitive process, which in turn encourages innovators to be the first in the market with a new product or service at a price and quality that consumers want, it also emphasizes the importance of stimulating innovation as competitive inputs, and thus works to improve consumer welfare.

Despite their differences, the two regimes tend to coexist on various grounds where both disciplines prevail by limiting each other’s rights. The interface between these two areas of law is widely anticipated in many sectors of the economy, including the pharmaceutical sector, where there is a lack of consumer knowledge, which gives rise to the problem of Pay for delay/Reverse delay settlements, discrimination in patient assistance programs, ever-greening of patents, and so on, and for which the concept of ‘Compulsory Licensing’ was addressed to draw the balance between intellectual property rights and competition law so that owners of intellectual property rights cannot abuse their privileges and stifle market competition by abusing their dominant position.

To learn more about Competition Law in India, enrol for Advanced Certificate in Competition Law.

  1. JUDICIAL PRECEDENTS

In recent years, the EU and the US have received a large number of cases involving IPR and competition law disputes. However, there are very few cases in India involving IPR and Competition Law disputes; in fact, it is still in its infancy.[4] However, in Aamir Khan Productions vs. the Director-General[5], the court addressed the issue of competition law and intellectual property law for the first time. The Bombay High Court ruled in this case that the Competition Commission of India (CCI) has jurisdiction to hear all IPR and competition law cases.

Conflicts over intellectual property rights (IPRs) were typically resolved before the Monopolistic and Restrictive Trade Practices Commission (MRTP Commission), the predecessor to the Competition Commission. However, the Competition Commission of India (CCI), which enforces The Competition Act, 2002 throughout India, now handles cases involving the applicability of competition issues to both IPR and Competition Law. This Commission was established on October 14, 2003, and it went into full operation in May 2009. The CCI is made up of a chairperson and six members.[6]

Entertainment Network (India) Pvt. Ltd. vs. Super Cassette Industries Ltd[7]. In this case, the Supreme Court addressed the issue of conflict between intellectual property rights and competition law. The Court observed that, even if the copyright holder has a complete monopoly, such a monopoly is limited if it disrupts the smooth operation of the market, which would violate Competition Law, and the same was true with the refusal of licence. Undoubtedly, intellectual property owners can reap the benefits of their innovations by issuing licences, but this is not an absolute.

To learn more about the intellectual property regime in India, enrol for Diploma in Intellectual Property: Law and Management. 

  1. CONCLUSION

Competition Law and Intellectual Property Rights are inextricably linked, necessitating a balanced understanding to appreciate the true scope of their complex and multifaceted interactions in modern India’s dynamic markets. It cannot be denied that there is some necessary tension and friction in their overlap; where competition law seeks to prevent abuses that may arise as a result of monopolistic power, intellectual property rights seek, in many situations, to grant exactly such monopolistic powers to incentivize innovators to innovate. It is in the best interests of Indian society to have the two regimes operate in such a way that there is widespread competition while also providing enough protection for inventors to recoup their investments in research and development.

These two ends point to a single goal: consumer benefit through the facilitation of a robust environment for innovation. Greater innovation is enabled by organisations competing with one another to produce better and more affordable products and services, whereas IPRs enable greater innovation by providing greater incentives to innovators to benefit from their innovations.

In terms of jurisdiction, India would benefit greatly from greater maturity in the legislative framework governing the extent and scope of the CCI’s jurisdiction. Competition law should balance the IPR regime by imposing curbs wherever the exercise of IPRs exceeds “reasonable conditions,” as defined in Section 3(5) of the Indian Competition Act, 2002, but such curbs should not go beyond the extent to which the exercise of IPRs causes an appreciable adverse effect on competition.

[1] http://unctad.org/meetingsen/sessionalDocuments/ciclpd36_en.pdf

[2] Conflict of IPR in Competition Law available at: https://libertatem.in

[3] The interface between IPR and competition law. Available at: https://www.lloydlawcollege.edu.in/blog/interface-between-ipr-and-competition-law.html

[4] Forrester Ian S. Competition Law and IPR: Ten years on the debate still flourishes, http://www.eui.eu/RSCAS/Research/Competition/2005/2005 pdf.

[5] 2010 (112) Bom L R 3778.

[6] Competition Commission of India from https://en.m.wikipedia.org

[7] 2008(5)OK 719

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Contracts in the Maritime Industry

This blog post has been authored by Dikshak Pankaj Soni

INTRODUCTION:

  1. The industry of the Maritime is correlated to those acts connected to waterways and/ or to the sea. The Maritime industry now-a-days impacts almost all the sectors/industries, mainly in terms of import and export (transportation) from one land to another (mostly Cargo).
  2. The second form where the Maritime industry holds its coverage is on the naval architecture, navigation, ocean engineering, exploration, drilling etc., this mainly exhausts the requirements of minerals and oil rigs in furtherance to transportation (mostly Marine Casualties).
  3. The third major form where the Maritime Industry holds its significant value is for direct consumers purpose i.e. cruise ships for travelling, tourism and recreational purpose (mostly Passenger Claims)

To learn more about the Companies Act and the roles of a Director, explore the Diploma Course on Maritime Law. 

MODUS-OPERANDI AND ACTS COVERED:

I. Marine Casualty:

i. Collision:

  • Due to issues caused by navigation or communication barrier/ faults/ miscommunication, there are chances of collisions between vessels travelling on/ against/ cross waved baths thereon. It is to be considered that a vessel is difficult to handle for all its acts and requirements.
  • In case of such collision, the master of the ship shall take all due endeavours for saving the lives of people on board as well as the ship to avoid maximum damage being/ to be caused due to such collision. Immediately thereafter the master shall make an entry in the official logs signed by him and the crew member, the same is then informed to the central government.
  • The Acts concerning this act shall include the Merchant Shipping Act, 1958, (Part X) and the Merchant Shipping (Prevention of Collisions at Sea) Regulation, 1975, such acts are in conscience with adopting the convention on the international regulation for preventing collision at sea, 1972.

ii. Pollution:

  • Pollution is caused by acts such overseas be it due to collision/ due to negligence by the naval, ocean engineering, exploration or drilling, or by the travel, recreational or tourism. The kinds of pollution that can be caused could be oil pollution damage, pollution by garbage and ships, pollution of oil by ships, pollution due to collision resulting in spillage in marine environment, pollution by sewage from ships, pollution by harmful substance carried by ship/ noxious substance carried by ships.
  • Such pollution attracts civil liability to the polluter. There are multiple conventions, rules and regulations that govern such pollution, one of which are International Convention on Civil Liability for Oil Pollution Damages, 1992, similarly there are multiple rules and regulations (2008 to 2010) enacted under the Merchant Shipping Act, 1958, (XB, XC and XIA) which governs such acts in regard to pollution in maritime.

iii. Salvage:

  • Due to collision, there are chances that the vessel might drift or start sinking, salvage is a process of saving such a vessel to the best possible extent, and delivering the same to the owner.
  • There ought to be a salvage agreement, where the owner shall pay a certain amount to the salvager for its services mentioned therein, the same is governed by the Merchant Shipping Act, 1958 (Part XIII) and the Merchant Shipping (Wreck and Salvage Rules), 1974.

iv. Wreck Removal:

  • When the vessel is either due to collision or malfunction, is not able to salvage or is/ started to sink to the sea bed, the process involved shall be construed as a Wreck Removal.
  • Either the owner takes full responsibility for such Wreck Removal, or the finder of such wreck shall be paid his fees/ salvage fees in such a case, or the central government may appoint a receiver to investigate and take possession of such wreck to sell such wreck under their custody. Similarly to salvage, it is governed by the Merchant Shipping Act, 1958 (Part XIII) and the Merchant Shipping (Wreck and Salvage Rules), 1974 but additionally also by the Indian Ports Act, 1908.

v. Limitation and Liability:

  • The losses caused due to collision, salvage or wreck are then subject to certain limitations and liabilities. The owner of the vessel, charter of the vessel, operator, master, crew and servant of the vessel, shall preliminarily limit their liabilities for claims under such vessel, following such the salvor, the defaulter/ neglect responsible for such actions, and later the insurer of such liability shall be limit to such liabilities.
  • The Merchant Shipping Act, 1958 (Part XA) and the Merchant Shipping (Limitation of Liabilities of Maritime Claims Rules), 2015 and its amendment rule of 2017 shall be governing the topic considered herein.

vi. The Limitation fund and Investigation:

  • The losses so caused shall be paid In terms of liabilities secured, such liabilities can be termed limited, wherein the person entitled to limit such liability shall make a reference to the appropriate jurisdictional High Court constituting a limitation fund, the High Court may decide such matter and may direct depositing such funds in the Court or through a bank guarantee.
  • The Director General of Shipping and the Maritime Marine Department shall carry out an investigation in such a case in respect of provisions under the Merchant Shipping Act, 1958 (Part XII) which deals with investigation and enquiries.

To learn more about the Companies Act and the roles of a Director, explore the Diploma Course on Maritime Law. 

II. Cargo Claims:

  • The term cargo mostly includes goods imported or exported. Taking into consideration the sender and the recipient, the problems that may arouse are the extent of bills of lading that defines the title of certain property sent and to be received, the carriage and its variety, feature of any kind supplied by the consignor and outward carriage i.e. from inland to outland.
  • The acts governing such claims shall include The Carriage by Goods Act, 1925, The Bills of Lading Act, 1856, The Major Ports Authority Act, 2021, the Merchant Shipping Act, 1958, the Admiralty Act, 2017, The Marine Insurance Act, 1973, the Sales of Goods Act, 1930, the Multimodal Transportation of Goods Act, 1993, etc.

III. Passenger Claims:

  • Passenger Claims shall include the losses suffered by the passenger due to any shipping incident, negligence, cancellation, refund of deposit money, delay in sailing, injury or death.
  • The acts governing such claims are vested in the Merchant Shipping Act, 1958 (part VIII) and the Admiralty Act, 2017, etc.

IV. Arrest and Security:

  • When a claim is made in regard to any acts as foreseen, and the owner/ master/ operator of the ship chooses to default in its legitimate duties in support of such claim, a claimant may make necessary reference vide an Admiralty Suit to the jurisdictional High Court for seeking an arrest of such vessel on such territorial waters and may pray for securing statutory maritime claims and liens.
  • The Admiralty Act, 2017 governs such claims of arrest, moreover, in case of outstanding freight and other charges, the Major Port Authorities Act, 2021 can also exercise its lien over the cargo in its jurisdiction. The security in such a case can be prayed in terms of cash deposit or bank guarantee. Even the Arbitration Act can entail its applicability in terms of dispute resolution, where in terms of interim relief such arrest can be procured by praying it before the concerned Court.

To learn more about the Companies Act and the roles of a Director, explore the Diploma Course on Maritime Law. 

CLAUSES:

While performing an international transaction in the Shipping and Maritime Industry, one must give due importance to the rules and regulations enacted by the respective jurisdictional countries and the same shall be in conscience with the provisions laid down by International Maritime Organization. Considering the modus-operandi of the Maritime Industry as aforestated, the most common types of agreements in the Maritime Industry include Marine Insurance Contracts, Import and Export Contracts, Transportation Agreement, Logistic Agreement, Affreightment Contracts, Freight Forwarding Agreements, Vessel Lease Agreement, Ship Charter Agreement, Ship/ Vessel Sale and Purchase Agreement, Ship Mortgage Agreement, Ship Management Agreement, Ship Repair, Ship Salvage and Wreck Removal Agreements, Dockage Agreement, Seafarer’s Employment Agreement, etc. Apart from the acts as aforestated, the agreement shall be on the basic principles of the Contract Act. The clauses to be included in the Agreements of Maritime Industry shall include/ safeguard/ clarify all the modus-operandi mentioned in the above chapter, certain of which are mentioned hereinbelow:

  1. Parties, recitals, and their purpose:

This is a preliminary clause of the contract which tends to mention the name address details and business of the parties, the recital which mentions the reason which lead the parties to execute that contract, and the brief purpose of that particular contract whose acceptable/ governing criteria’s shall be mentioned in the clauses mentioned thereafter.

  1. Risk Exclusion Clause:

This clause specifically mentions what kind of risk is to be excluded viz: loss in case of negligence, wilful misconduct, insurance exclusion, unsuitable condition and packing, breach of condition/ warranties, causes due to strikes, lockdown, labour disturbance, riots, civil commotion/ unrest, etc.

  1. Risk Covered Clause:

It shall mention the risk covered, such as salvage charges, loss due to unforeseen circumstances and mechanical malfunction, fire insurance, jurisdictional coverage, done in general governing law and practice, etc.

  1. Risk Attachment Clause:

This clause shall mention the subject matter of the insured which is supplied by other party of the insured. It specifically mentions what the insurance shall not attach until the risk of loss or damage to the subject matter insured shall be transferred to the Assured.

  1. Minimising Loss Clause:

In mention of this clause, it includes the acts done by the duty of assured recovery of the loss. It mentions the reasonable purpose of averting, preserving, and minimising the loss. Certainly, there are certain legislative provisions which govern minimising loss o be covered by the insurer/ owner.

  1. Duration and Transit Clause:

The subject matter mentioned herein shall include the duration/ transit time of one location to another, the same shall also mention exceptions in terms of unforeseen circumstances such as weather, salvage, collision etc.

  1. Change of Voyage Clause:

This clause mentions and safeguards the service provider in case a destination/ transit route is changed due to unforeseen circumstances, or a decision relating to minimising loss, shall also include the time and mode of transmitting such information.

  1. Termination of Contract Clause:

The Clause shall mention subject matter wherein circumstances are beyond the control of the service provider and when such the contract of carriage/ cargo/ passenger is to be terminated either at a port or at a particular location other than that of the specified destination named therein.

  1. Avoidance of Delay Clause:

This clause shall mention when the service provider shall undertake acts to avoid reasonable delay to the extent and circumstances, viz: in circumstances of unforeseen weather and change of transit time and route, etc.

  1. Claims Clause:

This clause mentions what kind of claims are to be covered by the Service Provider/ it’s insurance company either in terms of insurable interest, forwarding charges, constructive total loss, and the insured value calculation. In certain Agreement, this clause shall also mention the manner, how claims are to be requested, passed, validated, etc.

  1. Piracy and Malicious Damage Clause:

The maritime industry is subjected to piracy by sea pirates who intend to cause theft/ unrest/ untenable request, such mention of clause mentions where in case of deliberate damage to or deliberate destruction of the insured subject-matter, by the wrongful act of any person or persons causing malicious acts vandalism sabotage or piracy.

  1. Security Clause:

This clause shall mention the safety and security that the service provider tends to provide to the service receiver either cargo/ passenger, in terms of any theft/ malicious acts, vandalism/ sabotage/ piracy/ unforeseen circumstance, mechanical malfunction/ collision, etc.

  1. Weapon, Chemical, Radioactive exclusion, etc. Clause:

This clause is at times considered paramount to all the clauses mentioned in the contract, where without the due permission of law of land, approvals, permissions, and policy of the fearers, certain unwarranted and not-permitted contents/ articles shall not be allowed. This clause also nullifies the liability of the Insurer in such a case.

  1. Governance of Convention:

This clause mentions that the particular contract shall be governed by the provision of which particular international conventions and its specific articles. There are certain chances wherein either of the party’s country of origin is not a signatory party to such convention, and hence clarification in that regard is specifically mentioned.

  1. Preserve of Wild Fauna and Flora Clause:

This clause mentions that the vessel is not derogatory/ causing harm to any natural reserves/ or not causing any pollution and shall be in conscience with the international conventions in that regard. Similarly, the wild fauna and flora shall be preserved in its truest sense.

  1. Good Faith Clause:

This clause shall in its true values shall disclose clearly and accurately all material facts related to the risk involved by executing such contract, or by procuring the service of such service provider.

  1. Subrogation Clause:

The term subrogation means the right which one person has by standing in place of another and availing himself of all the rights and remedies of the other, whether already enforced or not. This clause shall be more specifically included in an insurance contract.

  1. Collision Clause:

This clause shall include what the service provider shall have liability towards, where there is a collision between two vessels/ or with any object tent to cause collision. There shall be a mention as to whether the damages and compensation to be paid is the liability of the Service Provider of the Insurer/ or the tent to choose advantage of ‘both to blame collision clause’.

  1. Salvage Clause:

This clause mentions that, in the case where there has been a mechanical malfunctioning, collision, or any act turning the ship to be salvaged, then in such a manner the claim, cost, reason/ purpose, manner and the company to undertake salvage shall be specifically mentioned herein.

  1. Wreck Removal Clause:

This clause mentions that in a manner where the ship is wrecked, there needs to be a mention where the manner/ purpose/ insurance claim shall be mentioned therein.

  1. Termination of Transit Clause:

This clause mentions the criteria eg: wreck, collision, weather condition, force majeure, terrorism, war etc, then in such a case the vessel’s transit shall be terminated in total and the claim in that regard shall be payable in the manner prescribed in the claim clause.

  1. Represent and Warrant Clause:

This is a general clause, wherein there is a mention of each party that they represent/ warrant towards each other and performance of their part in such modus-operandi.

  1. Waiver Clause:

This is a general clause, and it shall mention where one of the parties (provider) due to certain temporary circumstance, becomes unperformable, what acts shall be considered as wavier or not, similarly, it mentions when another party (receiver) may cause wavier of certain rights prejudice to him.

  1. Law and Practice Clause/ Party’s Jurisdiction Clause:

This clause shall mention the law which is to be followed in due course/ or at the time of enforcement. In terms of specific jurisdiction, there shall be a mention of such specific jurisdiction and the law/ practice and convention to be governed with.

  1. Disclaimer and indemnity Clause:

This clause shall specifically mention what the service provider tends to disclaim its liability towards, similarly there may also be a reference as to what the service provider tends to indemnify the service receiver towards, or vice versa.

  1. Dispute Resolution Clause:

In similar to the aforesaid, this is also a general clause, where there is a mention of Dispute if in case arisen and the provision in the way such dispute is to be resolved wither first by mutually, then by mediation, or by way of Arbitration. In the case of Arbitration, there needs to be a specific mention in terms of the Arbitration clause. The language and location of such Dispute Resolution are also to be mentioned.

  1. Force Majeure Clause:

This is a general clause, which mentions the wavier (temporary) of one of the parties for the performance of their part of the contract, in a situation beyond the control of either of the party, e.g.: natural calamities.

JURISDICTION AUTHORITY (SUBJECT TO LAW OF LAND AND INTERNATIONAL CONVENTIONS):

  1. Concerned High Court where certain territorial waters have jurisdiction for, and the kind and nature of relief which is claimed is beyond the powers/ finding/ disposal of the Mediation/ Conciliation or the Arbitration Tribunal.
  2. Arbitration Tribunal shall have limited jurisdiction, subject to the applicable Arbitration law of the land, disputes relating to contract act/ validation/ interpretation etc.
  3. Mediation and Conciliation shall be subject to the decision of the parties effecting, and the mode/ veracity of dispute that may have arisen.

To learn more about the Companies Act and the roles of a Director, explore the Diploma Course on Maritime Law. 

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Role of Director under the Companies Act, 2013

This article has been written by Mr. Abhishek Sinha

INTRODUCTION- Role of Director

A company’s management and affairs are overseen by the Board of Directors, which has supreme executive authority. In a company, majority shareholders at their wish can appoint a director during the incorporation of the company. Notice to the Board members can be used to call an Annual General Meeting if the shareholders wish to change the director expressing their opinion. Under the Companies Act, 2013, the MoA and AoA of the company, Directors are allowed to enforce their powers.

There is no exhaustive definition given in the Companies Act, 2013. As per Section 2 (34) of the Companies Act, 2013 – a “Director” is one who has been appointed to the Board of Directors. He is the individual who is assigned to carry out the responsibilities and functions of a company’s director in accordance with the Companies Act of 2013.

Lord Reid in the case of Tesco Supermarkets Ltd. v. Nattraso[1] held that “A living person has a mind which can have knowledge or intention and he has hands to carry out his intention. A corporation has none of these it must act through living persons.” As per the Supreme Court, it is important to appoint an individual as a director in the company as the director’s office is the office of trust and if someone fails to carry out this trust then someone should be held responsible.[2] Section 149 of the Companies Act, 2013 states that the Board of Directors shall consist of individuals as directors. Lord Bowen held that the Board of Directors are the brain of the company and the company does act only through them. [3]

To learn more about the Companies Act and the roles of a Director, explore the Certificate course in Understanding Companies Act, 2013. 

 

WHAT ARE THE ROLES OF DIRECTOR? 

As a member of the Board of Directors, he is in charge of the company’s management, supervision, and direction. Directors are said to be the agents of the company, officers of the company and also trustees of the company. Professional men are hired by the company to direct the affairs of the organisation still they are not called the servant of the company.[4] But through a separate service agreement, a director can offer his professional services to the company as a sole employee and sole director.[5] Regarding the position or role of directors in the company, there is mere silence in the Companies Act, 2013. As per Bowen LJ, “Directors are called as agents, MD or trustees. But these expressions are used as indicating useful points of view through which they may for that particular period and the particular purpose is considered instead of using it as exhaustive of their powers and responsibilities.”[6]

I. As Employee

If the Board of Directors appoints and the company’s shareholders approve any full-time director who manages the company’s day-to-day operations as an employee.

In the outline of the employment letter issued by the BoD, all the directors make go an organization.

II. As Officer

  • High Court of Calcutta held that “Certain officials of the company should be treated as organs of the company so that for actions of that particular official company can be held liable just as a natural person is for the action of his limbs.”[7] The absence of the director can paralyze the company.

As per section 2 (59) of the Companies Act, 2013, the director is treated as an officer of the company on whose directions other directors or Board of Directors are accustomed to act. As per section 2 (60) of the Companies Act, 2013, the director is considered an “officer in default” and he is even punished as an officer in default for non-compliance with provisions.

III. As Agents of the Company

  • As per the Observation of Lord Cairns who believed that Public Company Directors are the agents of the Company. The Company and Directors have a relation of Principal and Agent.[8]”

In an Agency a person is bound to form, Perpetuate a relationship of Principal with third parties, the role and powers they get from Memorandum and Articles of the Company, if their activities are outside the criteria given under MOA and AOA, it is beyond legal Power.

IV. As Trustee of the Company

  • Based on an analogy Lindley LJ observed that Director is always considered and treated as trustees of the company as they have control of the company and they have been held liable to make good amounts of money since the invention of joint-stock companies.

They are considered the custodian of the assets of the company and are responsible to use the assets in the best interest of the company, as a trustee of the company. They would be held liable if they misuse or divert the assets in their vested interests.

To learn more about the Companies Act, explore the Certificate course in Understanding Companies Act, 2013. 

 

DUTIES OF DIRECTORS AS PER LEGAL PROVISIONS UNDER THE COMPANY ACT, 2013

The Companies Act of 2013 categorises the duties and responsibilities of directors into two categories: —

[i] The responsibilities and liabilities that uplift and advance the investment of directors’ work bring good corporate governance, good management, and making fully-fledged and shrewd decisions to avoid unnecessary risks to the company.

[ii] Fiduciary duties guarantee and ensure that the directors of companies always protect and secure the interests of the company and its stakeholders, above their self-interests.

The duties of a director were not expressed in the 1956 Act, however, they are specifically stated in Section 166 of the Companies Act, 2013[9].

SECTION 166 of the companies Act, 2013 lay down the following Duties of the Directors of a Company

Directors of Company are bound to do the following Duties given Under Section 166 of the Companies Act, 2013

  • Activities of the Director shall always be in accordance with the AoA[10].
  • Director shall perform in good faith in order to uplift the objects of the organisation, for the profit of shareholders and for the well-being of the organization[11].
  • He shall follow his duties with proper care and exercises independent judgment[12].
  • He shall not perform any act which give rise to conflicts.
  • Director shall be held liable to pay an equal amount to the gain if he found to be gaining any undue advantage[13].

 

ROLE OF DIRECTORS DURING THE PANDEMIC

Pandemic has affected most of the big companies and due to this, they have also suspended their work for the time being. As cases are reducing these days but still due to mass gathering companies are not able to work at full capacity. So here the role of directors during the pandemic is that he needs to take certain steps for the survival of the organization in this pandemic. Primary considerations of the directors are:

I. Procuring the shareholder’s interest

  • As shareholders always look to have transparency and honesty from the companies’ end. The company shall inform the respective shareholders about the crisis plan which they are going to use to tackle the challenges caused due to covid-19. And directors should pay dividends to the shareholders if the company has a good amount of cash reserves. Director shall inform the current situation of the organisation.

II. Health and safety of employees

  • Directors shall emphasize the safety and health of their workers, employees and suppliers. It’s their basic responsibility to build a safe environment during the lockdown. Work from Home should be allowed during the pandemic and in extreme cases, they shall be called to offices and factories. Director shall comply with the government circulars and advisories. To prevent data breaches or losses there shall be proper data security measures.

III. Avoid conflicts of interest

  • The director shall avoid any personal interest while taking the decision for the company and he shall also not engage himself in an act which can give rise to a conflict of interest. All relevant information shall be disclosed by the director to the board as failing to do this can be a reason for dispute with shareholders and which can result in damage to long terms prospects.

IV. Independent decisions shall be made

  • Director shall act in good faith to promote the long interest of the company. He should avoid making decisions which can affect the company in long run.

 

CONCLUSION

The Directors of the Company play a crucial role in the Company, They play an essential part in managing and directing the course of the Company.

The company’s main motive is to run in a successful manner, to hand over the management of the Company in the hand of a responsible person. In this regard Company has a Board of Directors who runs the Company with the greatest responsibility, if the Director’s action causes mismanagement in the Company then the Director is liable to the company for reimbursement of the loss.

To learn more about the Companies Act, explore the Certificate course in Understanding Companies Act, 2013. 

 

[1] [1977] AC 153 at 170.

[2] Oriental Metal Pressing Works P. Ltd. v B. K. Thakoor, [1961] 31 Comp Cas 143.

[3] Bath v Standard Land Co.

[4] Moriarty v Regent’s Garage and Engg. Co., [1921] 1 KB 423.

[5] Lee v. Lee’s Air Farming Ltd., [1961] AC 12.

[6] Imperial Hydropathic Co. v. Hampson, [1882] 23 Ch. D. 1.

[7] Gopal Khaitan v State, AIR 1969 Cal 132.

[8] Ferguson v Wilson, [1886] LR 2 Ch 77.

[9] Section 166, Companies Act, 2013.

[10] Section 166(1), Companies Act, 2013.

[11] Section 166(2), Companies Act, 2013.

[12] Section 166(3), Companies Act, 2013.

[13] Section 166(4), Companies Act, 2013.