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Data Protection Regime in the European Union- General Data Protection Regulation (EU-GDPR)

Originally proposed by the European Commission in 2012, the EU GDPR[1] came into effect on 25th May 2018. It is intended to harmonize privacy and data protection laws across Europe. It further aims to provide a framework to ensure that the data subjects have control over their personal data. The provisions are GDPR are applicable[2]–

  1. When a controller or a processor is established in the EU
  2. When the personal data of EU data subjects is processed

The Regulation defines terms like ‘personal data’, ‘processing’, ‘data subject’, ‘controller’, ‘consent’, ‘processor’ and ‘personal data breach’.[3] It also enumerates the basic principles on which GDPR is based. These include “lawfulness, fairness and transparency; purpose limitation; data minimization; accuracy; storage limitation; integrity and confidentiality; and accountability”[4].

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One of the grounds mentioned under the Regulation which makes the processing of personal data by the controller or the processor lawful is when the data subject has consented to such processing[5]. The declaration seeking such consent should be made in an intelligible and easily accessible form, using clear and plain language[6]. Further, the data subject has the right to withdraw his consent at any time, and such withdrawal will not affect the lawfulness of the processing prior to the withdrawal.[7] When the data subject is a child below the age of 16 years, consent for the processing of personal data can only be given or authorized by the parents.[8] However, the Regulation gives the discretion to the individual member states of the EU to decide the minimum age for which parental consent will be required, however, such age cannot be lower than 13 years.[9]

The GDPR prohibits the processing of personal data relating to a specific category (sensitive personal data)[10]. However, such data can be processed in certain conditions like when the data subject gives explicit consent or when processing is necessary to protect the vital interests of the data subject or when processing is necessary for substantial public interest etc.[11]

Chapter 4 of GDPR enumerates the rights provided to the data subject with respect to the processing of their personal data. These include the right to access the data by the data subject (to know the purpose of processing, the categories of data being processed, recipients of such data, the period for which data will be stored, right to be informed of additional safeguards if data is transferred to a third country or an international organization etc.)[12], right to rectification (of inaccurate data concerning the data subject), right to erasure (when data is no longer necessary, when consent is withdrawn when data is unlawfully processed etc.), right to restriction of processing (for a particular time period) , right to data portability (receive the data in a machine-readable format and transmit the same to another controller) and right to object.

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The member states of the Union have the right to restrict the scope of rights and obligations[13] of the data subject and the controllers/processors, under the Regulation on the ground of national security, defence, public security, and criminal offences[14], general public interest etc.[15] by means of legislative measures.

The controller is obligated to take necessary technical and organizational measures which are designed to implement the principle of GDPR while processing the personal data of the subject (data protection by design).[16] Furthermore, the technical measures should be implemented to ensure that, by default, only the personal data which is required for specific purposes, is processed[17] (data protection by default).

In case of a data breach which is likely to risk the rights of natural persons, the controller should notify the supervisory authority within 72 hours of becoming aware of such breach. The controller should also inform the data subject about such data breaches in certain specific situations[18].

Further, if the processing of data involves new technology which might result in “high risk to the rights and freedoms of natural persons, the controller should carry out an impact assessment, before processing any data”[19].

The Regulation also mandates the appointment of a Data Protection Officer by the controller and processor in certain situations.[20] The Officer has the duty to inform and advise the employees of their obligations while processing the data of data subjects, to monitor the compliance of provisions of GDPR, to cooperate with supervisory authority etc.[21]

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In case of infringement of any right of the data subject or any obligation mentioned under GDPR, the data subject has the right to lodge a complaint with the supervisory authority of a particular member state[22]. For severe violations, the fine framework can be “up to 20 million euros, or in the case of an undertaking, up to 4 % of their total global turnover of the preceding fiscal year, whichever is higher”[23]. In case of less severe violations, the Regulation sets forth fines of “up to 10 million euros, or, in the case of an undertaking, up to 2% of its entire global turnover of the preceding fiscal year, whichever is higher”[24].

Therefore, the privacy and data protection regime in the European Union is very stringent. Although it has only been two years since the GDPR came into effect, however, the recent cases of imposition of huge sums of fines on Twitter[25] and Google[26] in Europe for violating the provisions of GDPR, highlight the seriousness of privacy and data protection in Europe.

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[1] General Data Protection Regulation, Regulation (EU) (2016/679).

[2] Id, art. .

[3] Supra note 1, art. 4.

[4] Supra note 1, art. 5.

[5] Supra note 1, art. 6(1)(a).

[6] Supra note 1, art. 7(2).

[7] Supra note 1, art. 7(3).

[8] Supra note 1, art. 8(1).

[9] Id.

[10] Supra note 1, art. 9(1).

[11] Supra note 1, art. 9(2).

[12] Supra note 1, art. 15.

[13] Supra note 1, under art. 12-22, art. 34 and art 5.

[14] Prevention, Investigation, Detection or Prosecution.

[15] Supra note 1, art. 23.

[16] Supra note 1, art. 25(1).

[17] Supra note 1, art. 25(2).

[18] Supra note 1, art. 34(3).

[19] Supra note 1, art. 35.

[20] Supra note 1, art. 37.

[21] Supra note 1, art. 39.

[22] Supra note 1, art. 77.

[23] Supra note 1, art. 83(5).

[24] Supra note 1, art. 83(4).

[25] BGR, https://www.bgr.in/news/twitter-fined-547000-dollars-for-not-disclosing-data-breach-927683/ (last visited Feb. 1, 2021).

[26] REUTERS, https://www.reuters.com/article/us-google-privacy-france/french-watchdog-fines-google-amazon-for-breaching-cookies-rules-idUSKBN28K0NA (last visited Feb. 1, 2021).

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The Himalaya Drug Company vs Sumit 2006

Delhi High Court

Judges: Justice Badar Durrez Ahmed

Applicable law: Copyright Act, 1957

Did you know: ‘Meta-Data’ is like a digital footprint, which allows a person to assess what tools and code have been used to develop a particular website

Where it all began:

  1. Drug Company is engaged in the manufacture and sale of Ayurvedic Medicinal preparations and was established in the trade in the year 1930. Realizing the potential of the Internet as a medium of information, the plaintiff registered its own domain name www.thehimalayadrugco.com’ on 10.6.1998 and developed a website under the said name.
  2. The most important feature of the website is the section titled “HIMALAYAS HERBS”. This section essentially consists of a database of a wide variety of medicinal herbs, arranged in alphabetical order.
  3. Such information is not only comprehensive but is also arranged in a manner that is visually appealing and easy to grasp. It was clear that Himalaya has expended considerable time, labour, skill and money in preparing this database of Ayurvedic Herbs that find mentioned on its website. Himalaya has claimed that the preparation of the database began sometime in June 1998 and took more than a year to complete.

Legal issue: Whether Sumit has infringed the copyright of Himalaya and if so what damages is Himalaya entitled to?

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Himalaya’s arguments: Himalaya noticed that Sumit was operating a website “http://ayurveda.virtualave.net” which reproduced Himalaya’s entire herbal data verbatim. The copying was to such an extent that even the grammatical or syntactical errors that appear on Himalaya’s website have been copied onto Sumit’s website. Moreover, the meta tag of the source code of Sumit’s website includes Himalaya’s trademark “Himalaya Drug Co.”

Sumit’s arguments: Sumit did not appear despite service and the case proceeded ex-parte

Judgment in the case:

  1. The Court held that Sumit had misappropriated the effort, skill and expense that had gone into the creation of Himalaya’s website. Therefore, Sumit had copied the entire herbal database of the plaintiff and had infringed the copyright of Himalaya.
  2. The plaintiff has also been able to demonstrate that the defendants have attempted to pass off its herbal database as and for that of the plaintiff’s and have also violated the “trade dress” rights that exist in respect of the plaintiff’s herbal database. The reason being that the plaintiff’s herbal database is unique and, therefore, any similar herbal database that appears on a different website is bound to create confusion by causing a consumer to associate the website with that of the plaintiff’s.
  3. Because Sumit did not appear in this case it was impossible to assess what kind of profits he had earned from the website and accordingly difficult to calculate damages. Thus the court calculated the costs involved in preparing and putting up the website. Those costs were 7.9 Lakhs and the court granted 7.9 Lakhs as compensatory damages and an additional 7.9 Lakhs as punitive/Exemplary damages.

Significance: The judgment is noteworthy because it has used a novel way of calculating damages and has awarded both compensatory as well as punitive damages.

 

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Role of Precedent in the Development of Law and Society

Before analysing the role of precedent in the development of law and society, it is important to understand what constitutes a precedent. According to Gray, it “covers everything said or done which furnished a rule for subsequent practice”[1]. According to Keeton, it is a “judicial decision to which authority has in some measure been attached”.[2] In general words, precedent means a set pattern guiding future conduct. Judicial precedent, on the other hand, means the judgment of a Court of law which can be used as an authority for deciding a similar set of facts, by the lower courts, or the same court itself.

Where a court pronounces its decision, it contains in itself a principle. This principle creates a judicial precedent. The opinion in which the judge formulates his reasons for the decision is not the precedent, although such opinion plays an indispensable role in ascertaining the precedent, since only from the opinion can one discover what facts are regarded by the court as material. The application of the judicial precedent is governed by the different principles in different legal systems. These principles are called the ‘Doctrine of Precedent’.

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The concept of precedent originated from the doctrine of stare decisis which means to “abide by the decisions”[3]. This doctrine aims to bring certainty and conformity to the decisions of the court and to the law.

The judicial precedents are binding on the lower courts and the same court, unless-

  1. The same has been overruled by the higher court
  2. The same has been reversed by the higher court
  • The facts of the case seem to be different

Precedent plays an instrumental role in the development of law and society. It ensures equality and fairness by means of treating similar cases in a similar manner. This brings the certainty of law and upholds the confidence of the citizens in the justice delivery system. With respect to the judiciary, it acts as a guideline to decide future cases based on similar facts. It ensures that the lower courts adhere to the interpretation of the law by the superior court in line with the changing needs of the society (the Vishaka guidelines in India[4]).

Furthermore, it provides a binding nature to the principles evolved seldom by the judiciary, while discharging their functions as an interpreter of law (the binding nature of the doctrine of basic structure with respect to amending the Constitution[5]). Lastly, it saves time and increases the convenience of the court, as a question of law, once decided, is settled and the judges and the lawyers need not spend time and labour on reestablishing the same principle.

With respect to India, the Indian Constitution empowers the Apex Court to interpret the law. Such interpretation is binding on the lower courts. The judgement of the Supreme Court is a decision, for the litigants, however, for the nation, it is a declaratory law[6]. However, a judgement acts as a precedent only when it decides a question of law and not otherwise[7].

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The expression ‘all courts’ used under Article 141 infers that the Supreme Court is not bound by its own decisions, except that a smaller Bench of the Apex Court is bound by the decisions of a larger Bench and that of a Co-equal Bench.[8]

With respect to the significance of precedent, the court in Union of India v. Raghubir Singh,[9] held that-

“The doctrine of binding precedent has the merit of promoting a certainty and consistency in judicial decisions, and enables an organic development of the law, besides providing assurance to the individual as to the consequence of transactions forming part of daily affairs. And, therefore, the need for a clear and consistent enunciation of legal principle in the decisions of a Court.”[10]

 

 

[1] https://www.srdlawnotes.com/2015/11/precedent-meaning-definition.html

[2] Id.

[3]http://mja.gov.in/Site/Upload/GR/Title%20NO.149(As%20Per%20Workshop%20List%20title%20no149%20pdf).pdf (last visited Feb. 1, 2021).

[4] As provided in the case of Vishaka v. State of Rajasthan, (1997) 6 SCC 241.

[5] Kesavananda Bharati Sripadagalvaru & Ors. v. State of Kerala & Anr., AIR 1973 SC 1461.

[6] Ganga Sugar Co.. Ltd., Etc vs State Of U.P. & Others, AIR 1980 SC 286.

[7] State of Punjab v. Surinder Kumar, 1992 (1) SLR 335(SC).

[8] Indian Oil Corporation v. Municipal Corporation, AIR 1995 S.C. 1490.

[9] Union Of India & Anr v. Raghubir Singh, AIR 1989 SC 1933.

[10] Id.

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Right to be forgotten under General Data Protection Regulations

‘Right to be forgotten’ is the claim of an individual to have any data pertaining to him deleted, with no trace. The foundation of this right was laid by the European Court of Justice in its 2014 judgement in Google Spain SL v/s Agencia Española de Protección de Datos & Mario Costeja Gonzalez[1], wherein it held that European citizens have a right to request commercial search firms like Google to remove links to private information when asked, provided the information is no longer relevant[2]. This case set the precedent for the principle of the right to be forgotten under the General Data Protection Regulation (GDPR)[3] in the European Union.

Under the GDPR, the right to be forgotten has its basis in Recitals 65 and 66 as well as Article 15 and Article 17. Recital 65 iterates the right of a data subject to have his personal data erased when it is no longer necessary for the purpose for which it was collected. Therefore, the right to be forgotten is also known as the right to erasure in the EU[4].  On the other hand, Recital 66 talks about the obligation of the data controller who made the personal data public to take reasonable steps and technical measures to inform the data controllers processing such data about the request for erasure[5].

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Furthermore, Article 15 provides for the right to rectification or erasure of personal data or restriction of its processing[6]. This right to erasure is not absolute and can only be exercised in certain conditions. Article 17 obligates the data controller to fulfil the request of erasure without undue delay[7], if one of the following grounds is met[8]–

  1. The personal data is no longer necessary for the purpose for which it was collected or processed;
  2. Processing is based on consent and the data subject withdraws the same;
  • The data subject objects to the processing, and there is no overriding legitimate interest to continue the processing of data;
  1. Personal data has been processed unlawfully;
  2. Erasure is required to comply with a legal obligation; or
  3. Personal data has been collected to offer information society services to a child.

It is pertinent to note that the data controller can deny the exercise of the right to erasure if the processing of personal data is necessary for[9]–

  1. Exercising the right of freedom of expression and information;
  2. Complying with a legal obligation;
  • Public interest in the area of public health;
  1. Archiving purposes in the public interest, scientific research historical research or statistical purposes; or
  2. Establishment, exercise or defence of legal claims.

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Furthermore, the data controller can request a reasonable fee from the data subject for fulfilling his request of erasure[10].

[1] Google Spain SL v. Agencia Española de Protección de Datos & Mario Costeja Gonzalez, C‑131/12.

[2] EPIC.ORG, https://epic.org/privacy/right-to-be-forgotten/ (last visited Apr. 26, 2021).

[3] Regulation (EU) 2016/679.

[4] Id., recital 65.

[5] Supra note 46, recital 66.

[6] Supra note 46, art. 15(1)(e).

[7] Supra note 46, recital 59- A time period of one month.

[8] Supra note 46, art. 17(1).

[9] Supra note 46, art. 17(3).

[10] Supra note 46, art. 12(5)(a).

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Role of Social Media in a Democracy

Social Media has for long been considered the fourth pillar of democracy owing to its potential to not just report what is happening around the world but to build a public opinion about the ongoing issues. The term ‘democracy’ implies the participation of people. Media facilitates this participation.

The emergence of social media, however, has changed the way in which people now participate in democracy. Compared to traditional media, social media has a larger reach, is easily accessible, enables mass participation and provides instant updates. These factors have led to a situation where people rely more on social media than their traditional counterparts, to become aware of their surroundings and participate in discussions- political, economic, or otherwise, which in turn strengthens democracy. However, social media does not have only positive implications on democracy. On the flip side of the coin, it has been misused a number of times, often becoming the antithesis of democracy. The following headings discuss the role played by social media in a democratic setup, both positive and negative.

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Election Campaigning

Free and fair elections are undoubtedly one of the most important elements of modern democracy, and election campaigning forms very much a part of it. Political campaigning is not limited to physical rallies and posters. Social media has entered the realm of campaigning and is extensively being used by various political leaders as well as political parties to communicate their agendas to the general public. The ubiquitous nature of the Internet allows the leaders and political parties to simultaneously communicate with the voters across regions.

Social media is used for political campaigning through commercials, blogs, tweets etc. using social networking sites like WhatsApp, Facebook, Twitter, to announce a candidate running for the election, organize physical campaigning, recruit supporters and volunteers, seek funds, mobilize voters, share the party’s election manifesto and the candidate’s message to the general public, among other things.

The ex-President of the United States of America, Barack Obama, is famous for effectively harnessing the potential of social media as his campaign strategy in the 2008 Presidential Campaign. Since young voters rely more on social media compared to conventional media, social media was used to establish a contemporary voter-politician relationship between Barack Obama and the voters. Regular voting reminders were sent on Twitter, and Facebook was used as a platform to interact with people. As a result, President Obama maintained a significant lead in both Facebook likes and Twitter followers over his rival Governor Romney during his election campaign. The significant difference in the response on social media was translated into the historic win of Barack Obama as the first Africa-American President of the United States of America.[1]

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The field of social media campaigning has not been left unexplored by Indian politicians and political parties. Launched in 2012, the Aam Aadmi Party (AAP) ran its political agenda through social media and emerged victorious in Delhi Assembly polls. AAP used social media platforms like Twitter, Facebook and YouTube to interact with voters, share their election manifesto and raise funds, thus, keeping the election expense within the limit. Indian media reported that Arvind Kejriwal, the founder of AAP had admitted to adopting the strategies used by Barack Obama in 2008.[2]

Furthermore, in the 2019 general elections in India, there were around 15 million voters who were aged between 18 to 19 years. In light of these statistics and the interest of youngsters in social media platforms, various political parties adopted full-fledged social media campaigns to communicate with the large audience of voters, which in turn helped the parties to save their money, time and resources. Social media political campaigning has benefits other than saving the time and resources of the political party. Politicians are able to gauge their communication by viewing direct responses to their social media campaigning on Facebook, Twitter or Instagram.

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Taking into account the potential of social media campaigning in the 2019 elections, the Internet and Mobile Association of India (IAMAI), in consultation with the Election Commission of India (ECI) had developed a set of ‘Voluntary Code of Ethics’[3] to be adopted by various social media platforms to ensure free, fair and ethical use of social media in order to maintain the integrity of the electoral process. By virtue of this Code, the social media platforms were required to develop a notification mechanism for violations of section 126[4] of the Representation of Peoples Act, 1951.[5]

Although the potential of social media has been used to a great extent by various political parties for election campaigning, however, it is imperative to understand that social media platforms sometimes go overboard for political purposes. In the 2020 Presidential election in the United States, there were numerous reports of Facebook posting ads of Donald Trump, violating its own pre-election policies wherein it had announced that it would stop accepting new political ads after 27th October and would indefinitely ban all political ads after the polls close. However, on the first day of the moratorium, several ads appeared on the platform which was later taken down after being flagged.[6] Furthermore, social media political campaigning also has another drawback. After social media has been used for campaigning to the maximum extent possible, politicians use it as a one-way communication tool, rarely engaging in discussions with the citizens. This continues after they have been elected; they use social media to inform the people of their constituencies about different policies, rather than engaging in discussions with them.

Political Discussions

A healthy democratic setup gives utmost importance to public participation as the government is “of the people, for the people and by the people”[7]. Public participation can best be achieved by expressing one’s political views and discussing them with others. Efficient democratic deliberation assumes citizens as equal participants where opposing points of view are not only accepted but encouraged, and the main goal is to achieve a rationally motivated consensus.

From the point of view of political involvement, social media has taken the power of political messaging from the mass media model and firmly placed it into the peer-to-peer, public dialogue. It provides an environment where the ‘aam aadmi’ of a country is able to freely express his political opinions and expectations, with the use of his phone/device. Earlier, only those individuals could be a part of political discussions who read newspapers, watched news channels or discussed politics at the nukkad of the village. However, the tech-savvy nature of social media campaigning effectively makes the youth a part of political discussion as well. They take time to analyse and discuss political issues. Such discussions also influence administrative decision making.

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One of the examples of healthy political discussion is the 2015 #SOTU,[8] which enabled Twitter users to react to the topics covered by Barack Obama in the State of the Union address. There were around 2.6 million tweets in this context.

However, social media has the potential to be misused to manipulate individuals. It should always be kept in mind that “computer technologies should be used to serve the interests of the people and not corporate elites, to inform and enlighten individuals rather than to manipulate them, to articulate their own experiences and interests, and to promote democratic debate and diversity, allowing a full range of voices and ideas to become part of the cyberdemocracy of the future.”[9]

Cyber Governance

Social media also plays a vital role in cyber governance i.e. the use of information and communication technologies to support governance. Taking the example of India, various Ministries and the Ministers of the respective Ministries have their official social media handles which they use to perform their functions. These social media handles, on one hand, help the citizen to easily let the concerned Minister/Ministry know about the grievances faced by him, and on the other hand, help the concerned Minister/Ministry to respond and resolve the grievance raised.

The peculiar feature of cyber governance is the element of time and resources used to raise concerns. Earlier, citizens had to write formal letters to the concerned Minister/Ministry and wait for days for a response. This traditional system becomes futile if the situation requires urgent intervention. Therefore, social media has become a boon for cyber governance.

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The micro-blogging site Twitter was extensively used by late Sushma Swaraj, ex-Minister of External Affairs, to resolve the issues faced by Indian citizens trapped abroad. She rescued 168 Indians trapped in Iraq by acting on a video that was tweeted to her, and helped a number of other individuals, Indians as well as foreigners, to return to their homeland.[10]

Facilitator of political change in Arab nations

Social media platforms have also been used to accelerate revolutions in many Arab countries.

During 2010-11, a number of campaigns of civil resistance and street demonstrations took place in Tunisia. These efforts led to the ousting of President Zine El Abidine Ben Ali. During this process, social media played a positive role by spreading awareness among people, helping people to organize themselves using Facebook and clearing the clouds of misinformation by sharing photos and videos.[11]

Social media also played a key role in ending the 30 years long misrule by President Hosni Mubarak of the National Democratic Party in Egypt. It all started with a photograph being posted on Facebook. The photograph depicted a young man named Khaled Mohamed Saeed who was brutally beaten to death by the Egyptian police. This prompted an agitated Ghomin to start a Facebook page named ‘Saeed’ to highlight the scenario in Egypt. The number of followers of this Facebook page increased from 300 to 25,000 in just three months. The online expression of distress of the regime of President Mubarak spread to the streets of Egypt wherein the historic Tahrir Square in Cairo was filled with protestors shouting ‘We are all Khaled Saeed’. As a result, President Mubarak was forced to resign and dissolve his party.[12]

2.6. As a tool of manipulation  

Social media has also been used to manipulate the political choices of voters. This has a detrimental effect on the democratic setup of a country, where manipulation does not find a place.

The 2016 United States Presidential election was at the central stage of the allegations of the use of social media to manipulate elections. Facebook admitted that Russian Groups Company bought $100,000 worth of ads with the purpose of spreading disinformation and propaganda.[13] Furthermore, Cambridge Analytica, a political consulting firm, found itself in deep trouble over the United States 2016 Presential Elections involving Presidential candidate Donald Trump. It was found that it used deceptive means to gain access to data of about 87 million Facebook users, without their consent or knowledge. It was alleged that the firm got hold of such data through researcher Aleksandr Kogan, a Russian American who worked at the University of Cambridge. He built a Facebook app, which was actually a personality quiz. Around 2,70,000 people were paid to take this quiz, under the shadow of research. However, the catch was that the quiz was designed to access the Facebook data of the people taking the quiz, as well as the data of the people who they are friends with. The data included personal information on where users lived and what pages they liked, which in turn helped Cambridge Analytica to build psychological profiles of the quiz takers that analysed characteristics and personality traits. This kind of information was later used to tailor political messaging for Donald Trump’s presidential campaign.[14]

The attempts of manipulation directly go against individual autonomy as well as privacy enjoyed by the individuals.

As a Tool of Repression

Social media has been used to propagate one’s ideas and opinions. However, this platform has also been used by different organizations to propagate communal, racist and sociological tensions. Taking into account the possibility of exploitation of social media by such organizations, the Information Technology Act, 2000 contains a provision[15] which allows the Central Government to block public access to information on social media, on certain grounds namely in the interest of sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence relating to above. These grounds are identical to the grounds mentioned under Article 19(2), based on which freedom of speech and expression can be curtailed by the government.

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Since the power to block public access to information on the Internet and social media sites violate the freedom of speech and expression enjoyed by the citizens of India, such power should be used cautiously by the government. However, in recent times, the Central Government has overused this power to suppress genuine political discussion on social media. Some examples include the government’s order to Twitter to block certain tweets and accounts pertaining to farmer’s protests, anti-CAA protests as well as those criticizing the handling of the COVID-19 pandemic by the government[16]. These blocking orders highlight the misuse of power by the Government to curb political criticism, which is detrimental for the largest democracy in the world.

Conclusion 

The advent of social media has taken democracy a step further by firstly, facilitating public discussions on important issues, whether political, religious, social or economic, secondly, providing a greater reach to election campaigning with minimal time and resources, thirdly, ensuring that the grievances of individuals reach the concerned authorities in time, and lastly, facilitating and accelerating political revolutions in countries. However, the use of social media in democracy has a flip side as well, which is highlighted by its use in manipulating the opinions of individuals and suppressing the voices of people raising genuine concerns on the social media platforms.

Therefore, though social media has vast potential to uphold and propagate democratic principles, however, it should only be used in a bona fide manner to further lawful political interests. Furthermore, social media, in absence of a privacy and data protection regime in a country, is highly susceptible to exploitation by organizations who manipulate the psychology of individuals by using the data of social media users, without their consent, or even knowledge.

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[1] Jennifer Aaker & Victoria Chang, Obama and the Power of Social Media and Technology, STANFORD BUSINESS (Feb. 28, 2021, 9:20 PM), https://www.gsb.stanford.edu/faculty-research/case-studies/obama-power-social-media-technology.

[2] Sevathi Ninan, Learning media strategy from AAP, LIVE MINT (Apr. 28, 2021, 9:30 PM), https://www.livemint.com/Opinion/HwHIPVrpDJC2Ax0TcTv03N/Learning-media-strategy-from-AAP.html.

[3]PIB,https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1586297#:~:text=Internet%20%26%20Mobile%20Association%20of%20India,bye%20elections%20being%20held%20simultaneously (last visited Apr. 26, 2021).

[4] Prohibition of public meetings during period of forty-eight hours ending with hour fixed for conclusion of poll.

[5] Jinala Sanghvi, Role of social media in Indian politics, LEGAL DESIRE (Apr. 28, 2021, 9:36 PM),  https://legaldesire.com/role-of-social-media-in-indian-politics/.

[6] Abhishek Singh, Democracy in times of social media, THE INDIAN EXPRESS (Apr. 25, 2021, 3:43 PM), https://indianexpress.com/article/opinion/democracy-in-times-of-social-media-6910382/

[7] Richard A. Epstein, Direct Democracy: Government of the people, by the people, and for the people, 34 HARVARD LAW JOURNAL AND PUBLIC POLICY 819, (2011), https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2260&context=journal_articles.

[8] TWITTER, http://twitter.github.io/interactive/sotu2015/#p1, (last visited Apr. 26, 2021).

[9] Fenton & Barassi, Alternative media and social networking sites: The politics of individuation and political participation, 14(3) THE COMMUNICATION REVIEW 179-196, (2011).

[10] Ten times when Sushma Swaraj won the internet with her Twitter outreach as Foreign Minister, LIVE MINT (Apr. 29, 2021, 2:20 PM), https://www.livemint.com/news/india/ten-times-when-sushma-swaraj-won-the-internet-with-her-twitter-outreach-as-eam-1565121014539.html.

[11] How Social Media Accelerated Tunisia’s Revolution: An Inside View, HUFFPOST (Apr. 28, 2021, 2:10 PM), https://www.huffpost.com/entry/how-social-media-accelera_b_821497.

[12] Serajul I. Bhuiyan, Social media and its effectiveness in the political reform movement in Egypt, 1(1) MIDDLE EAST MEDIA EDUCATOR 14, (2011), https://ro.uow.edu.au/cgi/viewcontent.cgi?article=1002&context=meme.

[13] Scott Shane & Vindu Goel, Fake Russian Facebook accounts bought $100,000 in Political ads’ THE NY TIMES (Apr. 27, 2021, 9:30 PM), https://www.nytimes.com/2017/09/06/technology/facebook-russian-political-ads.html.

[14] Nicolas Confessore, Cambridge Analytica and Facebook: The scandal and the fallout so far, THE NY TIMES (Apr. 27, 2021, 9:36 PM), https://www.nytimes.com/2018/04/04/us/politics/cambridge-analytica-scandal-fallout.html.

[15] The Information Technology Act, 2000, s. 69A.

[16] Pranav dixit, Twitter is blocking tweets that criticize how the Indian government has handled the pandemic, BUZZFEED NEWS (May 5, 2021, 11:13 AM), https://www.buzzfeednews.com/article/pranavdixit/twitter-blocking-tweets-india.

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The interplay between cyber forensics and threat to cyber security in digital spaces like Clouds

More and more businesses organizations are becoming dependent on technology, and most of the data and information is being stored online. The development of storage technologies and computing resources, which are reasonably priced, provide more storage on demand, and are ubiquitously located, became inevitable. Cloud computing is the product of such technological development. In simple terms, cloud computing services provide resources (like a computer, storage, network, etc.) to organizations on a lease and on-demand basis. It helps various organizations to increase affordability and availability. Owing to the potential cloud computing services hold, various enterprises- large, medium and small, as well as individuals, have stepped up and made use of these services to the maximum extent possible. [1] However, increased reliance on the Internet also has a dark side, i.e. cyber security concerns.

Cloud computing services are peculiar in the following ways-

  1. It provides on-demand self-service, i.e. users can avail and manage the resources automatically;
  2. It provides ubiquitous network access, which helps in delivering the resources to heterogeneous users located in different parts of the world;
  3. It provides the option to scale up and down the resources based on the user’s needs. This feature had proved to be very helpful in times of COVID-19 when on the one hand, few users scaled up the resources owing to the increased dependence on technology and work from home measures, and on the other hand, few others (primarily small entities) scaled down the resources because of lack of financial capability to afford the same;
  4. It provides a pay-as-you-go service, i.e. the users spend based on consumption. 

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There is no doubt that cloud computing will enable further technological changes in the future. However, increased reliance on the Internet also has a dark side, i.e. cyber security concerns. Cloud computing has various issues, like privacy and security concerns. Since most of the data is stored in the cloud, any breach into the network implies firstly, breach of cyber security measures and secondly, jeopardizing the privacy of the individuals whose data is stored. Data breaches resulting from cloud misconfiguration led to a loss of nearly $3.18 trillion to businesses in 2019. [2] Furthermore, increased reliance on technology and cloud services during the COVID-19 pandemic also increased reliance on technology and cloud services has privacy and security implications attached to it. 

Cloud computing services are also often victims of malware infections. Distributed Denial of Service (DDoS) attack is the most common threat wherein a large volume of traffic is sent to a web-based application, leading to the crashing of servers. Botnets are also emerging as one of the most severe threats to cloud security as they provide a distributed platform for major illegal activities in the cloud.

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Insecure Application user interfaces (APIs) also pose a cybersecurity challenge. APIs are the primary tools that enable interaction with cloud storage systems. Generally, they are used by the staff of an entity that uses cloud services and the staff of the cloud service provider. It is pertinent to note that many APIs are still vulnerable, which gives the cloud service provider an undue level of access to the data. For example, in March 2021, we found that Facebook stored the passwords of its users in plain text instead of encrypted text, which could be read by any staff within the organization. [3]

Cyber forensic tools can be used to address the challenge of cyber security posed by the use of cloud computing services. Cyber forensics help identify the offender, procure the required evidence and prosecute him. However, the use of cyber forensics in cloud computing services per se poses several challenges[4] owing to the nature of these services. 

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Firstly, traditional cyber forensics methodology requires turning off the device and making an image of the hard drives. However, this methodology is not a viable option in the present time as entities are entirely dependent on cloud computing services, which act as their servers. Since cloud computing is not something that can be turned off by switching off the device, the traditional cyber forensics methodology becomes futile in the case of cloud computing. 

Secondly, cyber forensics uses the provenance technique to trace life changes and data transformation. However, such technology becomes futile in cloud computing, where the infrastructure is very complex to trace the originator of the data, the person who modified it and when it was modified. 

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Thirdly, since the ‘cloud’ in ‘cloud computing’ signifies cyberspace, it is believed that the data in the cloud is stored in cyberspace. However, the providers of cloud computing services locate their services in various physical locations. Therefore, to procure electronic evidence, it becomes challenging to access such data due to its geographic distribution and the subsequent necessity of complying with the legal requirement of such jurisdictions. 

Fourthly, specific file systems used in the cloud could be redesigned, customized or specifically created to cater to the users’ needs. Traditional cyber forensics methodologies fail to retrieve data from such files as their structure is unknown to anyone other than the cloud computing providers. 

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Lastly, since cloud computing services hold an enormous amount of data, it becomes difficult to retrieve a particular data without carrying out a mass data analysis using data mining technology. Such technology is not a part of the traditional cyber forensics methodologies. 

Therefore, the architecture and model of cloud computing makes it more complex to retrieve evidence using traditional cyber forensic tools. In such a situation, the development of newer devices to cater to the specific challenges posed by cloud computing becomes a necessity. 

  [1] Julian Jang, Surya Nepal & Y Jay Guo, Cybersecurity threats in cloud computing, 1(1) Australian Journal of Telecommunications and the Digital Economy 4.2., (2013). 

[2] Hashedout, https://www.thesslstore.com/blog/cloud-security-5-serious-emerging-cloud-computing-threats-to-avoid/ (last visited May 8, 2021). 

[3] the Tech Republic, https://www.techrepublic.com/article/facebook-data-privacy-scandal-a-cheat-sheet/ (last visited May 8, 2021).

[4] Pedro Ramos Brandao, Computer forensics in Cloud Computing Systems, 1(1) BirEx 71, (2019). 

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Laws governing the Telecommunications sector in the United Kingdom

The current legal regime governing the telecommunications sector in the United Kingdom (UK) comprises primarily of two laws:

  1. The Communication Act of 2003[1], and
  2. The Wireless Telegraphy Act of 2006[2]

Before the 2003 Act was enacted, the Director-General of Telecommunication (DGT) was established as the independent regulatory authority under the Telecommunication Act, 1984. However, the 2003 Act replaced the 1984 Act to give effect to the Framework Directive (2002/21/EC)[3], which resulted in the setting up of the Office of Communications (Ofcom) as a new regulator of communications under the 2003 Act. The Digital Economy Act, 2017 prescribes that Ofcom is to be entirely funded through industry fees.

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Ofcom is responsible for the regulation of all electronic communication networks and services and for licensing of broadcasting services as well as promoting fair competition across the industry, in collaboration with the Competition and Markets Authority (CMA), by enforcing the competition laws.

The main idea behind the new regime of the 2003 Act was to reduce the regulatory burden on the communications providers (referred to as providers hereafter)[4]. This approach was implemented employing general conditions and certain special conditions (if applicable), which the providers must comply with. General requirements apply to all providers, while special conditions apply to certain providers in certain situations. It is pertinent to note that there is no need for general authorization or licensing to provide electronic communications networks and services in the UK. Providers are merely required to comply with the General Conditions of Entitlement[5]. The general conditions were recently revised in 2018. Furthermore, Ofcom has the power to set specific requirements relating to universal service, access (network access and service interoperability), privileged operators (public communications providers) and significant market power (SMP- having dominance either alone or collectively with others in relevant markets). [6] Ofcom can impose financial and other penalties on failure to comply with specific conditions[7].

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Concerning radio and mobile communications in the UK, service and network providers must receive a license from Ofcom under the Wireless Telegraphy Act, 2006 (WTA). The permit contains details relating to the specific frequency, use, fees and duration of the license. Ofcom is also empowered under the WTA to prescribe ‘Administered Incentive Pricing’, which allows setting fees above the administrative costs to encourage efficient spectrum use.

After UK’s exit from the EU, certain amendments were required to be made to the existing laws. These changes were incorporated through various Regulations in 2019[8], and now, the UK is no longer necessary to comply with any EU Directive or Regulation of the telecommunications sector.

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[1] Communication Act, 2003.

[2] Wireless Telegraphy Act, 2006.

[3] To give effect to Directive 2002/21/EC, Directive 2002/20/EC, Directive 2002/ 19/EC and Directive 2002/22/EC.

[4] The general authorization regime under the Act does not distinguish between fixed, mobile and satellite networks and services.

[5] OFCOM, Original Notification setting general conditions under section 45 of the Communications Act

2003, Jul. 22, 2003, http://stakeholders.ofcom.org.uk/telecoms/ga-scheme/general-conditions/archive/.

[6] Supra note 57, § 45.

[7] Supra note 57, § 96A-104.

[8] Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019 and the Broadcasting (Amendment) (EU Exit) Regulations 2019.

 

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Right to Privacy and its Significance in Social Media

Life and personal liberty can be considered as inalienable rights which an individual enjoys by virtue of being a human. These rights are inseparable from a dignified human existence.[1] According to J S Mill, “privacy is an aspect of liberty grounded on the permanent interests of man as a progressive human being”.[2] It exists in every human being, irrespective of socio-economic status, gender or orientation.

Until a few years ago, there was a lack of clarity with respect to the scope of the right to privacy under the Indian Constitution. However, in 2017, the nine-judge bench of the Supreme Court in Justice K.S. Puttaswamy v. Union of India[3] held that privacy is a fundamental right, as part of the right to life and personal liberty under Article 21. However, it cannot be considered as an absolute right and is subject to invasion by state, only if such an invasion is based on “legality, need and proportionality for safeguarding this cherished right”[4].

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It is pertinent to note that privacy should not only be protected in the physical world but in cyberspace as well. The use of the Internet and social media has become very common in India owing to the availability of smart devices, lower internet tariffs and global connectivity.

The social media platforms, on one hand, provide an effective platform to freely express oneself to a large audience, and on the other hand, risk the exposure of certain sensitive personal data of the users. In certain situations, the user is aware of the information being collected by the social media networking sites, however, there might also be instances where the user is completely unaware of the information trail he is leaving online, over which he has no control. Such information can be used by potential offenders to commit physical crimes. For example, in 2016, a group of thieves pretended to be Police officials, entered a hotel in Paris where Kim Kardashian,[5] an American model, was staying for the time being and robbed her at gunpoint. It was later found out that the thieves were following Kim’s Instagram posts where she uploaded pictures wearing costly jewellery and tracked down Kim’s location using her Instagram. This instance shows how potential cybercrime offenders can exploit social media platforms to commit conventional crimes. This example was just one of many instances where information either provided or retained by the social media sites could be made use of for purposes unknown to the user, thus violating the user’s privacy. Therefore, just like any other aspect of life, privacy is an indispensable part of social media life as well.

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The existing and emerging legal framework governing the right to privacy vis-à-vis social media in India

  • The Information Technology Act, 2000 (I.T. Act)[6]

The right to privacy in social media has been protected in India even before privacy was even recognized as a fundamental right. The Information Technology Act, 2000 is considered comprehensive legislation dealing exclusively with the aspects of privacy in the realm of cyberspace.

Section 43A of the I.T. Act obligates a body corporate that possesses, deals or handles any sensitive personal data or information in a computer resource, to implement and maintain reasonable security practices and procedures. If the body corporate fails to do so, and as a result, there is a wrongful loss or wrongful gain to any person, such body corporate can be made to pay damages to the affected person.[7] The provision further defines ‘body corporate’[8] and ‘reasonable security practices and procedures[9].

Furthermore, the I.T. Act, under Section 69A, authorizes the Central Government to block public access to any information through any computer resource under certain grounds[10]. This provision has been relied on by the Government to ban various Chinese apps, including the social media site TikTok, over privacy concerns.[11]

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  • The Information Technology (Reasonable security practices and procedures and sensitive personal data or information) [SPDI] Rules, 2011[12]

With respect to the reasonable security practices and procedures which the body corporate is required to implement under the I.T. Act, section 43A has to be read with the SPDI Rules of 2011. These rules provide a detailed framework for the implementation of section 43A.

The Rules firstly define ‘personal information[13] and ‘sensitive personal data or information.[14] It obligates the body corporate to-

  1. Provide a privacy policy for handling personal information, including sensitive personal information, to the users[15]. The same has to be published on the website of the body corporate[16];
  2. Obtain the consent of the user providing sensitive personal information, regarding the purpose of usage, before collecting such information[17];
  • Take prior consent of the user before disclosing any sensitive personal information of the user to a third party[18];
  1. Have a documented policy containing managerial, technical, operational and physical security control measures that are proportional to the information assets being protected with the nature of business.[19]

Therefore, it is evident that the SDPI Rules primarily cover privacy concerns over sensitive personal information. However, such protection has not been provided to the personal information of the user.

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  • The Personal Data Protection Bill, 2019[20] (PDP Bill)

Taking into account the limited protection provided to privacy on social media by section 43A of the I.T. Act read with the SDPI Rules of 2011, and the judgement of the Apex Court in the Puttaswamy case[21] recognizing privacy as a fundamental right, the Personal Data Protection Bill, 2019 was finally drafted to provide a robust framework on privacy and data protection in India.

The Bill defines ‘personal data’[22], ‘sensitive personal data[23], ‘data principal’[24], ‘data fiduciary’[25] and ‘consent’[26].

By dealing with the loopholes of the existing legal framework in India, the PDP Bill obligates the processing of ‘personal data of an individual only for specific, clear and lawful purposes [27]. It further provides that processing of personal data should be carried out in a fair and reasonable manner to ensure the privacy of data principal and for the purpose consented to[28]. Furthermore, personal data should be collected only to the extent necessary for the purpose of processing.[29]

With respect to the consent of data principal, consent should be obtained prior to processing of personal data[30] and should be specific vis-à-vis the purpose of processing[31]. Furthermore, with respect to consent for the processing of sensitive personal data, it should be obtained after giving the choice to the data principal to separately consent for purposes of the use of different categories of sensitive personal data[32].

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The PDP Bill has not yet become law and is currently referred to the Standing Committee[33].

  • The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021[34]

The Government of India notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which replaced the Information Technology (Intermediaries Guidelines) Rules, 2011.

Under the Rules, the intermediary is required to publish its privacy policy on its website[35]. Further, the intermediary is required to periodically inform its users that in case of non-compliance with privacy policy, it has the right to terminate the account of such users [36]. However, the Rules do not talk about the elements and aspects of the privacy policy, leaving it to the whims and fancies of the intermediaries in the absence of a privacy and data protection framework in India. Furthermore, the provision of traceability of originator of information[37] under Rule 5(2) has the implication of violating the privacy of the users as for tracking the first originator of a message/information, the intermediary should have access to the metadata of the entire chain of the conversation. Therefore, in order to comply with the traceability requirement, the significant social media intermediaries will have to break end-to-end encryption, thereby compromising the privacy of communication.

WhatsApp privacy policy issue

The current privacy policy change by WhatsApp is undoubtedly the best example to illustrate the concern of the right to privacy on social media. Before understanding the implications of policy change in 2021, let us first understand the policy change in 2016.

WhatsApp was launched in 2010 and was bought by Facebook in 2014. Facebook affirmed that it would not change the privacy policy of WhatsApp. However, in 2016, WhatsApp announced a change in its privacy policy to be effective from the 25th of September 2016. The new policy sought to collect information like phone numbers, names, device information etc. of every WhatsApp account, and share the same with the parent company, Facebook. As a result, a petition was filed in the Delhi High Court challenging the change of the policy. In Karmanya Singh v. Union of India,[38] the Delhi High Court rejected the petition but directed WhatsApp to delete the data collected till 25th September 2016 from its servers. The information shared post-25th September was allowed to be shared according to the new policy. Aggrieved by the decision, the petitioners appealed to the Supreme Court, where this case is presently pending.[39]

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In January 2021, WhatsApp came up with a new privacy policy that basically does not touch upon the end-to-end encryption feature, however, WhatsApp can now share user metadata with its parent company and its subsidiaries[40]. WhatsApp gave two options to its users- either accept the policy and continue using the platform, or the WhatsApp account will be eventually deleted. Therefore, in essence, an opt-out option for the new policy change was not provided to the users.

Taking these developments into account, an application[41] was filed in the Apex Court challenging the new privacy policy. The application claimed that WhatsApp was offering lower privacy protection in India as compared to Europe[42]. The primary issue in the case is whether the ‘opt-out’ provision simply opts out of the application in totality i.e. whether WhatsApp is obligated to provide a specific option of ‘Not sharing data with Facebook. The case is currently pending in the Supreme Court.

It is pertinent to note that WhatsApp was able to come up with a privacy policy of ‘take it or exit it’ because of the lack of privacy and data protection framework in India. In such a situation, users have to rely on the privacy policies of the company as the I.T. Act read with SDPI rules provide very limited protection in this regard. If the PDP Bill had become law, WhatsApp would never be able to come up with a policy like this as the provisions of the Bill ensure that information is collected only for a specific purpose for which consent of data principal is explicitly taken and that the data fiduciary takes consent for processing sensitive personal data separately for each different purpose[43]. This provision would have prevented WhatsApp from taking consent for both purposes (for a chat with friends and family and chat with businesses) together, as messages with business entities could reveal sensitive personal data like health information, sexual orientation, etc. However, the scope of Clause 11(3)(c) should be expanded to include ‘personal data’ rather than ‘sensitive personal data of the data principal, just like Article 7(2) of the GDPR.

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[1] Opinion of Justice D Y Chandrachud in Justice K S Puttaswamy v. Union of India, (2017) 10 SCC 1.

[2] Jack Stillinger, Introduction in John Stuart Mill Auto biography, OXFORD UNIVERSITY PRESS, 7 (1971).

[3] Justice K.S. Puttaswamy v. Union of India, (2017) 10 SCC 1.

[4] Id, part T(3)(H).

[5] VANITY FAIR, https://www.vanityfair.com/style/2016/10/solving-kim-kardashian-west-paris-robbery (last visited Apr. 26, 2021).

[6] The Information Technology Act, 2000, No. 21, Act of Parliament, 2000.

[7] Id., § 43A.

[8] Id., explanation (i).

[9] Supra note 7, explanation (ii).

[10] If such information is prejudicial to the sovereignty and integrity of India, defense of India, security of the State, friendly relations with foreign States or public order or incites the commission of any cognizable offence relating to above.

[11] BBC, https://www.bbc.co.uk/newsround/53266068 (last visited Apr. 26, 2021).

[12] The Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011.

[13] Id., Rule 2(1)(i).

[14] Supra note 12, rule 3.

[15] Supra note 12, rule 4.

[16] Id.

[17] Supra note 12, rule 5.

[18] Supra note 12, rule 6

[19] Supra note 12, rule 8.

[20] The Personal Data Protection Bill, 2019.

[21] Supra note 3.

[22] Supra note 20, cl. 3(28).

[23] Supra note 20, cl. 3(36).

[24] Supra note 20, cl. 3(14).

[25] Supra note 20, cl. 3(13).

[26] Supra note 20, cl. 3(10).

[27] Supra note 20, cl. 4.

[28] Supra note 20, cl. 5.

[29] Supra note 20, cl. 6.

[30] Supra note 20, cl. 11(1).

[31] Supra note 20, cl. 11(2)(c).

[32] Supra note 20, cl. 11(3)(c).

[33] PRS INDIA, https://prsindia.org/billtrack/the-personal-data-protection-bill-2019 (last visited Feb. 26, 2021).

[34] The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

[35] Id., rule 4(1)(a).

[36] Supra note 34, rule 4(1)(c).

[37] Supra note 34, rule 5(2).

[38] Karmanya Singh v. Union of India, 233 (2016) DLT 436.

[39] SC OBSERVER, https://www.scobserver.in/court-case/whatsapp-facebook-privacy-case (last visited Apr. 26, 2021).

[40] The latest clarifications from WhatsApp drew a differentiation between “messages with friends or family” and “messages with a business”. It claims that the new privacy policy pertains to the latter alone and the former remains unchanged. WhatsApp has clarified that some “large businesses might need to use secure hosting services from Facebook to manage WhatsApp chats with their customers, answer questions, and send helpful information like purchase receipts”.

[41] Supra note 38.

[42] In Europe, by virtue of General Data protection Regulation, though WhatsApp privacy policy talks about data sharing with Facebook, however, the users can rectify, update or erase information that the platform controls.

[43] Supra note 20, cl. 11(3)(c).

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Initial Public Offering (IPO)

By: Mahima Bheemaiah

What is an IPO?

Most companies that kick off their business starts with a limited source of capital and resources, but soon these companies over a period of time grow into a sustainable business and will need more capital to expand and to grow their business. These funds can be raised through private placements and by also taking loans but when a company needs much more money for its business then it issues securities to the general public. This raising of fresh funds through the public is done through the primary market. Funds are raised through retail investors, qualified institutional buyers and non-institutional investors. The primary market is nothing but a capital market where a company issues securities to the general public for the first time and which is not previously traded in the stock exchanges. Securities are directly issued to the investors through the company. The primary market is also known as the New Issue Market (NIM). The secondary market is where the trading of the stock takes place and keeps varying from time to time. The initial raising of capital is done through the stock market where the general public is allotted shares of that respective company. This process of initially raising capital is known as “Initial Public Offering”.

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Initial Public Offerings or in its abbreviated form called ‘IPO’ raises funds by listing a company in the stock market exchange and by selling securities to the people who have been allotted their respective shares. Only a limited number of shares are available and are allotted in a random process without any bias. Securities could be shares, stock, debentures, bonds etc., but in an IPO it is only the selling of shares to the public. Only a public company is allowed to raise funds through the stock market and a private company cannot do so. IPO raises funds by a company to fulfil its long term goals.

IPO is a fundamental aspect of Capital Markets. It is the very first step for a public company to grow its funds for the development of a company. A company raises capital for the growth of the business, for new investments, to expand their business, to reimburse their debt, for research and development, to acquire any company for strategic planning etc. It can also help in expanding their brand name which provides companies with a huge amount of publicity which may help in securing better terms in lenders. In terms of the economy, when a large number of IPOs are issued, it is a sign of a healthy stock market and economy.

In an IPO the relationship is directly between a shareholder and the company. A shareholder carries the risk factor associated with the shares of the company. A shareholder becomes the owner of a company when he acquires the shares of the company, hence the risk factor which comes with it. If a company performs well in a financial year, these shareholders will also get dividends or bonus shares according to the number of shares they hold in that company. Along with it if there is an increase in demand for the shares of that particular company then the profits of the capital returns will also add to the advantage of the shareholders. A company is liable to its shareholders and must disclose requirements such as filing quarterly and annual financial reports. The money that flows into a company from its investors is known as the ‘Share Capital’ of a company. IPO is the largest source of funds to raise capital for a company.

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While IPO seems like an easy option for a company to raise the capital it does have its share of ups and downs. A company cannot raise capital as and when it wants to. Filing an IPO comes with huge costs and resources. If a company is not well-advised by its financial advisors the company could flop in the open market and might lose out financially. Advantages of going public could be for 1) Easier raising of funds 2) Exit for existing investors 3) Liquidity 4) Increased trust of shareholders 5) Possibilities of takeovers 6) Employee motivation through ESOPs 7) Enhanced visibility and 8) Cost-effective way of raising funds compared to bank loans. Some of the disadvantages of going public can be 1) Loss of Autonomous control over the company and 2) Increase of Compliance Requirements.

What is the process of an IPO?

An IPO process in India typically takes at least seven to nine months. However, the timeline may vary depending on the transaction involved, compliance with the law, preparation of financial statements, receipt of all necessary regulatory approvals and other market conditions. The first step while applying for an IPO is to recruit merchant bankers. He is responsible for making sure the company follows the rules and regulations which goes from application till the listing date. The merchant banker and the company go and apply to the SEBI with their registration application which talks about the health of the company. After this process, the SEBI needs to give their approval for the listing of the company. Once the nod from SEBI is acquired then the company needs to draft a prospectus and this prospectus needs to be filed with SEBI at least after 30 days, it needs to be filed with the Registrar of Companies (ROC) and with the stock exchanges. If it’s a red herring prospectus then it needs to be filed at least 3 days before the ROC before listing takes place. Once the prospectus is issued which contains information about the company which talks about what the company has done so far, its management, the goals it wants to achieve, the risks associated with the shares of the company etc. This is followed by an IPO roadshow or simple marketing of the company, this could be advertising on TV, radio, newspaper etc., so that the general public comes to know about it. Further, the company needs to fix the price range to the shares, this process is known as the book-building process. SEBI guidelines define Book Building as “a process is undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built-up and the price for such securities is assessed for the determination of the quantum of such securities to be issued employing a notice, circular, advertisement, document or information memoranda or offer document”.2 In this process bids are placed by the investors which could be above or below the floor price, and once the bidding ends a final offer price is fixed. And lastly, the listing day is when the company gets listed on a stock market exchange and according to the demand and supply of the market participants, the share price may be premium or discount.

Legal Framework over IPO

A company while filling for IPO is mainly regulated by the Securities and Exchange Board of India (SEBI) addition with it, it is also regulated by Securities Contract (Regulations) Act, 1956, Securities Contract (Regulations) Rules, 1957 and Companies Act, 2013. The SEBI ICDR (Issue of Capital and Disclosure Requirement), Regulations 2018 deals with all aspects of the IPO. This Act provides detailed provisions governing an IPO. They provide detailed provisions related to disclosure requirements, opening and closure of issuance, publicity guidelines etc. The other Act is the SEBI LODR (Listing Obligations and Disclosure Requirements) Regulations, 2015 deals with disclosing details of a company when a company is going to list itself in the stock exchange. The Listing Regulations cover principles, common obligations and continuing disclosure requirements for all entities that have already been listed on any of the stock exchanges in the country.

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IPO during Covid Outbreak

December 2019 saw the rise of a new virus called Covid-19. This outbreak disrupted the entire world. Everything came to a standstill when restrictions were imposed due to Covid. There was uncertainty everywhere around the world. When the lockdown was imposed in March of 2020 nobody expected that it would prolong around for months together and would still be looming around in the environment even today. Many sectors were affected by the impact of the Covid such as the manufacturing sector, agricultural sector, service sector and the list goes on and on.

The market was low during this period and took time to recover from the sudden crash in the market. The next few month’s companies were not listing themselves and IPO’s in India which was already staggering due to prolonged slowdown and also due to threat to financial stability only saw 146 IPO’s in the fiscal year of 2019-2020 which was little higher than the previous year. The past 3 years saw a downfall of IPO with the least in a year being 116 IPO’s. The start of 2020 saw the listing of 50 IPO’s, but after the lockdown was imposed the markets were very low. The next four months of FY2020 saw only 19 companies get listed in the stock exchanges, which was a 62% downfall compared to the previous fiscal year.

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The second half of the year saw a rise in IPO’s even though there was still a rise in Covid cases. A few of the company’s IPO was even oversubscribed. This was due to excess liquidity, positivity in the markets and positive sentiments that has resulted in even companies which were impacted by Covid-19 raising funds. There was also a rise in retail investors during this period it was reported by Zerodha that about 250,000 accounts were opened during the month of April 2020 alone which took them about 6 years since the inception of their company to gain their first 100,000 investors. Many young investors have joined the market during this period due to increased awareness and also due to a lot of social media platforms have been promoting and teaching how to trade in the market during the pandemic. The increase in user growth can also be attributed to the easy access to these platforms. Not only in India, but even the global markets saw a rise in IPO. One of the keys to raising in IPO’s is due to sectorial resilience that is a lot of pharmaceuticals, medical and biotech industries and chemical as well as technology sector were welcomed in the second part of 2020 with companies like Chemcon Specialty Chemicals Ltd., Mazagon Dock Shipbuilders and Happiest Minds Technologies Ltd was the most-subscribed IPO’s in 2020.

IPO post-Covid

Post-2020, there was a rise in IPO’s in the country. Not only was there a raise but there was stellar growth in IPO as compared to the previous few years. With the second wave still creating panic amongst the public, there seemed like no stop for IPO’s being listed in the stock exchanges.

In 2021 alone, 63 companies collectively raised 1.2 lakh crore through Initial Public Offerings-the highest amount raised in a single calendar year. December was the busiest month for IPO with 11 companies offering their securities through the primary market. Anuj Kapoor, head of investment banking at UBS India, told Bloomberg News that companies will raise twice the money in comparison to last year.5 Many companies have opted for IPOs since the end of 2020, primarily due to the impact of the Covid-19 pandemic on business and exuberant stock market activity. Due to the high number of first-time retail investors and huge foreign influx investors as well as due to excellent performance seen in the market a high number of companies issued securities through IPO. Some of the companies that excelled in the market are Nazara Technologies, Sona BLW Precision, FSN E-Commerce Ventures, and Tatva Chintan Pharma Company etc. Even though the Covid pandemic continues to wreak havoc on India’s economy, the domestic market still remains very optimistic, hence giving confidence to the issuer.

Most of these companies are raising capital due to losses suffered due to the pandemic as well as expanding business due to an increase in demand. Also high retail investors coupled with liquidity makes it a perfect platform for companies to use this space now for companies to go public. However, heading into 2022 the markets can still be volatile with omicron cases spreading and due to high inflation further raising and it could be that central banks may raise interest rates which could curb liquidity. Still, it is expected that IPO’S in 2022 might be vibrant and robust just like in the year 2021.

Regulation Changes by SEBI to IPO’s

2021 ended with a bang for IPO’s in the country. It was a stellar year with 63 companies listed in the stock exchanges. A lot of new-age companies listed their securities in the market with companies such as Zomato, Paytm etc., introducing themselves in the primary markets. SEBI has come up with new regulations to curb the listing of companies.

To enhance the growth and development of public markets as well as to keep transparency and to remove ambiguity before going public and also keeping in mind the best interests of retail investors, SEBI has made amendments to an already existing volatile market.

SEBI has introduced a maximum cap limit of 35% to use from the equity-issuance proceeding (25% towards unidentified acquisition) for acquisition where there was no regulation before the amendment.6 SEBI is of the view that raising funds for unidentified acquisitions leads to ambiguity in IPO objectives. Limits are also imposed on the existing investors of the company to sell their shares through OFS (Offer for Shares). The purpose of doing this is to instil confidence in the investors and can also let pre-IPO investors look for an alternate form of selling their shares.

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From 1st April 2022, half the anchor investors should have a lock-in period of 90 days from the previous existing 30 days. While the remaining half will go through a 30 day lock-in period. This is done with the intention to make investors stay invested for a longer period and to provide confidence to the other investors. SEBI had proposed to introduce a minimum price band in all public issues, with the upper one at least 5% more than the floor price, so that the process will be more dynamic and flexible with the final price falling within or outside the scope of price band depending upon the demand.7 Regulations have also been done to preferential shares by relaxing pricing norms and lock-ins requirements for promoters, to make it easier for companies to raise funds.

Conclusions

India has become a global hotspot for IPOs. Global investors are also eyeing IPO’s in India. India has generated triple-digit annualised profit through IPO’s. IPO’s offer the biggest opportunity to raise funds for a company. Some IPO’s are a success and some can tank at the market. All of this depends upon the market sentiments. The LIC of India is coming out with the biggest IPO during the month of Feb/Mar 2022 with an issue size of Rs.1 lakh crores.

Some of these provisions which are done by SEBI are in the wake of frenzy number of IPO’s going public and due to high valuations in the markets. To keep a tab on companies and to curb their regulations these changes are placed so that the capital markets are not impacted in the long term. Hopefully, with these changes, the current year IPO’s does not get impacted due to these regulations.

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Categories
Blog Intellectual Property Law

Role of IP in E-Commerce

By: Syeda Fauzia

Introduction:

What are Intellectual property Rights?

Intellectual Property Rights (IPR) would refer to anything and everything that is the conception of the human mind which creates an exclusive right bestowed upon the person over the creations of their intellect. According to the Oxford Dictionary, “intellectual property is an intangible property as a result of human creativity.” Intellectual Property is of various kinds, few significant ones being Copyrights, Trademark and Patents. IPR also include inventions of a product or process, a start-up business, creating new music or lyrics of a song and many more.

What is E-Commerce? 

Electronic Commerce or E-Commerce as simply told is where commercial transactions are conducted through online mode. These would include conducting or establishing businesses, exchanging goods and services or both primarily over the internet. Examples For E-commerce would include platforms such as: Amazon, Swiggy, Zomato and so forth.

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How are IPR and E-commerce interlinked? Let’s find out!

In today’s world, economies are constantly growing and changing. Internet as such plays a vital role in the development of the same. That being the case, it is necessary to understand that IPR plays a crucial role in the process of conducting e-commerce business and its impact in the virtual world. It is necessary to keep a tab on E-commerce along with the technology infrastructure in such a manner that the value of the intellectual property is not disregarded. It is crucial than ever that there needs to be a constant process of improvement in this technicality of internet access.

The methodology to understand the role of Intellectual Property in E-commerce is based on certain aspects. They are:

  1. Protection of business

IPR plays an important role in safeguarding the core business interest of a company including all its affiliates/subsidiaries, its domain in the corporate world. More fully against unfair competition amongst the businesses. In case there is no application of IPR or the IPR laws are not abided by, it will lead to severe violations of IPR and the consequences will surely affect the goodwill of a Company. That means to say that IPR plays a significant role in the digital economy. Without IPR in place, anything and everything can be pilfered. It may extend from design to software. The Owners may be perplexed by such duplication and stealing and then the same being floated over the virtual domain. The Owners will never be recognized for their unique innovations.

  1. Safeguarding the ownership of the factors involved in the business development.

There would be several factors that enable a company to be structured and with Intellectual Property law in place, especially for the e-commerce transactions helps to safeguard the digital and technical components which are critical to the company. For instance, there can be software that is connected to networks/routers, software designs, software programs, HTML codes etc. All these factors may be available in different forms and may contain an intellectual property right that not only needs to be protected but to be continued to be protected. This will enable E-commerce to run efficiently and smoothly. Thus, the IPR coated E-commerce safeguards these important factors which are essentially the enablers.

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  1. Protection of IPR

Every E-Commerce business recognizes IPR on all such creations/innovations especially the patents, copyrights, marks and trade secrets. A product that is developed by a company or an individual and commercializing the product involves the development of a variety of technologies so as to protect the product in the public domain. In such cases, the companies/individuals turn up to technology providers who will enter into licensing Agreements wherein certain rights are given for a certain period of time and for a specific purpose. The License Agreement facilitates the owner of the product to safeguard his intellectual property rights in his products by way of acceptance of the owner’s standard terms and conditions wherein the IPR protection is deemed a material term of the contract.

  1. Preservation of patent portfolios and trademarks

If a business has to capture the market in the e-commerce arena, IPR creation becomes an impeccable asset to the Company. The Company will own the portfolio of such intellectual property eg: by Patent or trademark registration. This enhances the company’s credibility and of course will lead to significant development in the company’s financial position as the online business world catches the company that shows their business in the light of the preservation of their patent portfolios and trademarks.

IPR and E-Commerce

Several Companies believe in the fact that their intellectual properties are worthy to a great extent such that the protection of the tangible assets owned maybe a secondary priority. This is very much true in the global market and with the recent happening of online businesses because the intellectual property rights and the law that exists with regard to the same enables the companies from keeping their trade secrets protected and disallows any unfair competition.

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IPR plays an important role in E-commerce in today’s digital economy. The laws that govern the IPR has brought businesses globally to function by supporting new creations but also guarding the tedious inputs that are gone into by the creator of such intellectual property. The laws pertaining to Intellectual Property Rights allows the law to block others from stealing the Intellectual property of the owner. So that there is no impact on the financial position of the inventor and their struggle in bringing the goodwill in the b2b market which is available in the electronic network.

Fundamentals of IPR in e-commerce:

E-Commerce is a great enabler of a business. However, it is the owner who is solely responsible for protecting intellectual property rights. If the owner while revealing the intellectual property to the public or in any media through E-commerce fails to protect it beforehand. This becomes fatal and gives scope for the others to use the owner’s intellectual property unfairly much before filing for its protection. There may not be any legal solution that the owner can adapt and also leaving the culprits to walk away freely with no reprimand whatsoever. No trade secrets can be protected once it is in the public domain. The owner loses all his rights against the virtual world. Eg secrets of a Software algorithm if shared, then such software algorithms cannot be protected.

Breach of Intellectual property

Any website that involves transactions that are mostly buying or selling online is a part of E-commerce websites. Companies while doing e-business may knowingly or unknowingly tend to violate the intellectual property rights by displaying the images, designs or even products of other companies. The most common example is that of Chinese products that look similar but are just a duplication of the original product. Such companies should carefully ensure that they do their due diligence effectively to avoid any infringements of the owner’s intellectual property rights and also that they do not violate the laws that protect the intellectual property in the country of origin of the product.  They should be able to show that the sale is on an original development and that the intellectual property owner is well aware and there is permission to sell in the online platform.

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Protection of IPR under E-commerce

IPR in retail and e-commerce deals with buying and selling products through a physical shop and a website, respectively[1]. In retail also a owner needs to protect his intellectual property rights. Iit is no different that is for E-commerce and should various types of intellectual properties. The following states the usual IPR in E-commerce.

Various patent models protects E-commerce like search engines etc. Patent Law or the Copyrights Act depend from country to country and their IPR laws may be divergent in application. Eg. A website design protected by copyright law. The copyright protection is available under the copyright law for the graphics, designs, materials, audio or video clippings, photographs etc. Therefore the companies in e commerce world can protect their database under such copyright laws as applicable in their specific country.

Protection of brands:

Features that are posted on their application and/or their websites under the Trademark Law. the Intellectual Property Rights also encompasses protection of webpages, displays that are computer-generated, graphics, graphical user interfaces. This may also be protected under at the Industrial Design Laws as per the applicability in their respective country.

There would be certain websites which will have hidden characteristics like graphics that are confidential in nature, source codes, flow charts, data structure, algorithms, various technical descriptions, manuals, contents etc to name a few, are entirely protected under various Trade Secret Laws and opens up the various other laws in protection of such intellectual property rights.

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Conclusion:

In today’s world there is no denying of the fact that achievement of fair and ethical compliance of online businesses and practices cannot be accomplished without the effective use of Intellectual Property Laws. The society is more relying on e commerce and not only the E- businesses development wherein the retail activity is drastically reduced. Like the pandemic struck economy wherein the E-commerce led to significant growth in the virtual market. Making it more diverse and dynamic approach of online platforms.

As the growth of online business expands the Intellectual Property Rights facilitates the companies to protect and monitor their trade activities that are especially to maintain secrecy. IP rights in e-commerce also allow IPR owners to claim a share of the company’s profits. The Implementation of intellectual property rights will focus on the features that are exclusive and are unavailable to others and thus making the implementation of E-Commerce activity in the public domain successfully. The Legal protection of intellectual property rights brings in sturdiness in the usage of intellectual property which helps in not only in licensing, contracting, outsourcing but also helps in building strategic relationships, developing new concepts which in return enhances the sales and E-Commerce business by bringing in features that are unavailable to its competitors. This enables a healthy competition in the internet world and bringing in profits to the right owners of the intellectual property. Therefore Intellectual property stands as a guard to the E-Commerce and enhances fair play in the economy while adopting right measures of protection if Intellectual Property Rights.

 [1] What’s the Role of Intellectual Property in Ecommerce? (thebalancesmb.com)