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MODULE 4: INTELLECTUAL PROPERTY, THE INTERNET AND E-COMMERCE

4.1 INTRODUCTION

Achieving legal and business order in cyberspace, forms but another step in the quest for
knowledge that is perhaps the special legacy of the new millennium1. For commercial
interests eager to gain ground in the new order, ironically, the Internet is at the same time
intimidating and indispensable, essential for business success. The issue of regulation is
replete with unanswered e-business issues that desperately need to be clarified as
companies operate electronically across the globe. Some of the regulatory issues are:


Whose law governs contracts that are formed online? Are contracts valid without a
physical signature? Do the same laws apply to both consumers and businesses?
Can the actual electronic transmission between countries be subject to taxes or
tariffs? Are product and service sales treated the same under local law? Who
decides?
What are acceptable forms of online promotion? Are firms with websites that link to
other sites using questionable tactics, putting themselves at risk?
When the buyer sends his address and phone number to the seller, whose laws
determine the restrictions on the use of that data? How is the seller’s credit card
number protected? Who is empowered to address disagreements that might arise?
What tariffs and taxes are due? How are they accounted for and paid?
What transaction crosses a border, what consumer protection is available? What
additional risks do sellers assume?
What happens if the seller does not get paid? Where do consumers return damaged
goods purchased online? Does business-to-business commerce operate predictably
across all trading jurisdictions?
How can buyers and sellers enforce their rights in foreign countries? What
international treaties apply? Does enforcement differ geographically? By product or
service type?
Many laws applicable to global e-business are not yet clear. Does it make sense to
move aggressively to gain first mover advantage? Or wait? How can an individual
company protect its interests?

4.2 QUESTIONS, QUESTIONS WITH NOT SO OBVIOUS ANSWERS?

Business in the new economy will mean that traditional business approaches don’t
necessarily apply when viewed through the lens of the digital environmental. E-business is a
completely different way to transact ordinary business. Since governments and regulatory
organizations routinely scrutinize new, unfamiliar business practices, one can expect
continued regulatory review, especially where consumer protection and economic welfare
are at stake.


1 Report of the American Bar Association (“ABA”) Jurisdiction in Cyberspace Project empanelled in
1998 under the title, “Transnational Issues in Cyberspace: A Project on the Law relating to
Jurisdiction”.

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E-business shrinks the optimal regulatory action. New business arrangements with industry-
wrenching impacts can take effect in months, not years. This rapid change means that
regulatory issues must be addressed early on to avoid overly “reactive” responses that can
be counterproductive.

E-business effectiveness depends on a regulatory environment that is both supportive and
predictable. While onerous rules can be stifling to business interests, regulatory indecision
can be similarly disruptive. In order for e-business to work best, business must accept equal
responsibility with governments to point the way.

4.3 COMPANIES, INDUSTRY ‘VIGILANCE’ AND AUDITS

Companies must remain vigilant both to protect their business interests and ensure that
they can proceed securely in uncharted territory. While some maintain it is unrealistic to
have no restriction whatsoever on e-business, yet others shudder at the burden various
bureaucracies might place upon the Internet. Most are hopeful that industry, driven by
market forces, will ultimately regulate itself. If that fails, however, a wide range of
regulators can be expected to step in forcefully.

Perhaps industry groups could identify potential and real ‘hurdles’ and attempt a solution.
The vast majority of regulatory hurdles facing Internet businesses today relate to traditional
considerations whose scope and application are transformed by the global character of the
electronic market. This industry along with CII should examine key international issues and
identify major international institutions that are addressing them. The issues include:


International trade and tariffs
Data Security
Encryption
Infrastructure and Access
Intellectual Property Rights
Liability: Choice of Law and Jurisdiction
Content
Competition Law
Self-Regulation
Privacy

4.4 WEB AUDITS AND COMMERCIAL STRATEGY: AN ADVANTAGE

According to Internet surveys, the fastest growing Web Sites are those, which provide a
place for personal expression, such, as chat rooms, message boards, email and personal web
pages2. In addition, "e-tailing," or retail sales over the Web has exceeded industry
expectations. Online sales tripled from $3 billion in 1997 to $9 billion in 1998. By the year
2000, commerce on the Internet is expected to generate $30 billion3. Not surprisingly, many

2 Media Metrix, "The Media Metrix Web in Review: Top 50 Fastest Growing Web Sites in Audience
Reach," (Aug. 10, 1998), http://www.relevantknowledge.com/PressRoom.
3 U.S. Dept. of Commerce, "Remarks of Sec. of Commerce William M. Daley," (Feb. 5, 1999),
http://204.193.243.2/public.nsf/docs/commerce-ftc-online-shopping-briefing.

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companies are launching Web sites to establish their presence on the Internet and to
introduce themselves to the emerging online consumer market.

In doing so, many of these companies enter into new businesses, and some may enter into
regulated industries. Each of these Web site owners--whether they are software vendors,
search engines, banks or auction houses--becomes a publisher, in addition to their original
core business. And, because of the thick competition to offer more and better services on
the Web, Internet companies frequently move from their core business to entirely new
ventures as sales agents, financial information providers, mail providers, and more. This
article outlines some of the issues arising from operating a Web site in India and offers some
suggestions to minimize legal risk.

For a variety of reasons, initial and periodic legal audits for content liability issues on a Web
site play an important role in managing a company’s risk on the Internet. First, for Web site
operators located in the India, there are a number of constitutional and statutory
protections for these "New Media" publishers, similar to the protections long enjoyed by
traditional publishers, such as newspapers, magazines and TV. or radio broadcasters. The
same probably for “new media” laws world-wide. Indeed, the U.S. Supreme Court
determined that online "speech," or content, should enjoy the highest level of constitutional
protection4. As part of the audit, Web sites also should be reviewed for compliance with
legislation regulating Internet content, commerce and conduct.

Second, Web sites generally contain a mixture of content--some of which may be generated
by the site owner, but often, is not. An audit identifies the different types of content and the
different risk associated with each type, and creates risk management strategies to protect
the company.

Finally, the most successful Web sites are highly dynamic; that is, the content is not only
interactive but constantly growing, and therefore changing. A good audit identifies "hot
spots" on a site that are more likely to draw complaints or have greater exposure. Given the
uncertainty of the law in the Internet space, a primary objective of risk management is to
"marginalize" the potential plaintiff's success. An audit may provide guidelines for dealing
with particularly complex areas, such as chat rooms or message boards, e-commerce
transactions and user privacy. A great deal of thought and practical judgment are necessary
to conduct a legal audit of Web site content.

4.5 CONTENT AND CONTROL – A GUIDE FOR BUSINESSES

1.5.1 ORIGINAL CONTENT

Web site content which is entirely or mostly generated by the Web site owner often
presents the least complex liability issues. These issues are substantially similar to liability
issues that a newspaper publisher has when publishing its daily paper or that a company has
when publishing its prospectus or retail catalogue. Like their traditional media counterparts,
Web site owners in India enjoy the significant legal protections available to publishers.

4 Reno v. American Civil Liberties Union, U.S., 117 S. Ct. 2329 (1997) (the Internet receives full First
Amendment protection).

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Generally, Web site owners should review their content for accuracy, fair advertising
practices, intellectual property rights and Securities Exchange Commission and other
regulatory related issues.

4.5.2 LICENSED CONTENT

Many Web sites license content rather than create their own. An audit therefore may also
include review of the licensing agreements to ensure that the Web site owner has the rights
it needs to distribute, alter, republish or otherwise use the licensed content. In addition, the
audit should review all representations and warranties for the content and any appropriate
indemnifications by the licensor.

4.5.3 THIRD PARTY CONTENT

As interactivity becomes a primary draw for bringing back Internet users, more sites are
including chat, message boards, e-commerce and e-mail at their site. As a result, much of
the content in these areas is created by users of the site and cannot as a practical matter be
reviewed or edited by the Web site owner. Not surprisingly, while user-created content
draws the most interest, it also draws the most complaints.

4.5.4 LINKING AND FRAMING

The practice of linking to or framing other Web sites raises liability issues unique to the
Internet. A Web site owner may be found liable for contributory infringement or vicarious
liability for knowingly linking to another site that contains copyright infringing material or
otherwise engages in infringing activity. In an interesting claim arising from allegedly
improper linking, Ticketmaster sued Microsoft for its use of hypertext links to bypass
Ticketmaster's homepage and advertising.5.

4.6 CONTENT LIABILITY ISSUES – A CHECKLIST

4.6.1 COPYRIGHT & TRADEMARK

A content audit should include a review of the third-party content, and the corresponding
license agreements, to ensure that the Web site owner has acquired the appropriate rights
for use on its site. This includes graphics, images, logos and text. Indeed, use of another's
trademark as a link may give rise to liability if the manner in which one uses a trademark
creates the false impression that the trademark owner is somehow affiliated with the Web
site owner. In addition, the audit should review the owner's copyright and trademark
notices to ensure that they are accurate and current.

4.6.2 DEFAMATION

Under U.S. as well as Indian law, a Web site owner may be held liable for false statements of
fact which are defamatory and published with fault. While the owner may not be liable for

5 Ticketmaster Corp. v. Microsoft Corp., No. 97-3055 DDP (C.D. Cal., filed Apr. 29, 1997).

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statements by third parties because of the statutory protections of the Communications
Decency Act, statements originating with the owner may give rise to liability. Traditional
publishers frequently have an attorney review sensitive articles prior to publication to
identify troublesome statements and to set up the best possible legal defenses for
publication of the article. A similar practice may be appropriate for articles published on the
Internet which are written by the Web site owner.

4.6.3 INVASION OF PRIVACY

There are three types of privacy torts that may arise from statements made on Web sites:
the public disclosure of private facts, statements which place the subject in a false and
defamatory light, and the commercial use of another's image or likeness without their
permission. As in defamation, while the Web site owner in the United States may not be
liable for state law invasion of privacy claims arising from third party statements, the owner
should carefully review original content.

4.6.4 USER PRIVACY

An audit should include a review of the Web site's collection of user information. This
usually is done at the registration page, and may include name, address, email address,
telephone number and credit card number. In addition, most sites now monitor the pages
viewed and services utilized by a user via "cookie" technology. Thus, sites may maintain and
use personally identifiable information about its users for a wide range of purposes such as
targeting banner advertisements, tailoring services to individual users and sending direct
advertisements to individual users based on their demonstrated interests. What information
is collected, how it is used and to whom it is disclosed should be carefully reviewed to
ensure that the Web site owner is in compliance with applicable privacy statutes,
Competition and MRTP regulations and the site's privacy policy.

4.6.5 ADVERTISING & PROMOTIONS

As a growing number of Web sites move toward the advertising business model, a content
audit should include review of the site's guidelines for accepting advertising on its site,
particularly banner ads which hyperlink to the advertiser's site. The guidelines should
adhere to state and federal fair advertising laws, particularly in regard to minors. In
addition, the audit should review the ad insertion orders to ensure that they include
appropriate indemnifications and representations and warranties. Some Web sites also
sponsor interactive contests or sweepstakes and an audit may include review for
compliance with sweepstake and contest laws.

4.6.6 SALES

If the site includes commercial transactions, the audit should include a review of the online
contracts and also the Web site owner's account procedures for creating and maintaining
records of the transactions. In some cases, the owner also may need to obtain accounting,
security or other professional advice.


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4.6.7 REGULATORY COMPLIANCE

If the business hosting the Web site is publicly traded or involved in a regulated industry,
such as banking, real estate, utilities, pharmaceuticals, or alcoholic beverages, the audit
should include a review of SEC compliance and the specific advertising, shipping or other
regulations for such industries.

4.7 NECESSARY WEB AUDITS

Specific components of a Web site are worth particular attention.

4.7.1 DISCLAIMERS & TERMS OF SERVICE

The disclaimers and Terms of Service are important in establishing the relationship between
the Web site owner and its users. Generally, the comprehensiveness of a user agreement is
determined by balancing the potential exposure created by site content and activities
against the potentially intimidating impression a long agreement will make on the user. For
example, relatively straightforward sites that provide information about a company, but
have little user interactivity, may only require a short disclaimer. On the other hand, sites
which host e-commerce, chat, email, or message boards or provide sensitive information,
such as financial information and services, will likely require a more extensive user
agreement.

4.7.2 MESSAGE BOARDS & CHAT

Many Web sites now provide areas for users to interact with both the Web site owner and
other users. These areas take the form of message boards (where users can post a message
that can be read and responded to by other users) and chat rooms (where users can send
each other messages, or "chat," in real time).

4.7.3 USER INFORMATION

The privacy and security of personal information on the Internet has become an increasing
concern. A Web site audit should include review of the site's policies for disclosing user
information and, in particular, policies for responding to subpoenas for user information. In
the United States, responding to requests for either the content of communications (i.e.,
email messages) or user information is strictly limited by the [federal] Electronic
Communications Privacy Act. Any policy should take into consideration privacy or
procedural requirements and other duties arising from common law or the site's Terms of
Service.

4.8 INTELLECTUAL PROPERTY AND THE IPL

4.8.1 IPL T20 – THE BUZZ

The cricketing world has witnessed something very extra ordinary with the coming up of the
Indian Premier League. The IPL as it is popularly known in the cricketing world has been

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created by the Board of Control for Cricket in India. The first season of the IPL commenced
last year with a lot of fanfare and ended successfully. This year it is being played in South
Africa due to security concerns back in India. Though the IPL is in its second year, it is
already worth US $ 2 billion and counting, says UK based brand valuation consultancy Brand
Finance. The IPL brand in itself is worth US $ 330 million according to Brand Finance.6 Many
people compare the Indian Premiere League with the English Premier League which
generates millions of dollars every year.

The popularity of the IPL has opened up a lot of business opportunities for the franchises
which own the teams of the competition. This has caused the brand managers of the
franchises to take notice of the importance of protecting their intellectual property and seek
IP protection for both existing trademarks/products like team apparels, team symbols and
those which are still under consideration but not made public.

It is for the above mentioned reasons, why protecting Intellectual Property plays such an
important role. This article would deal with the aspects of protecting IP in the IPL.

4.8.2 INTELLECTUAL PROPERTY: TRADEMARKS SHOULD BE WELL PROTECTED

In order to be safe from all angles, franchises like “Deccan Chargers has applied for
trademarks to merchandise and manufacture numerous products. Besides obvious
trademarks for clothing, footwear and sporting articles, it has filed applications for
consumable products such as meat, tobacco products, tea, coffee, mineral and aerated
water. The categories under which trademarks has been sought include Class 25 (dealing
with clothing, footwear) and Class 28 (games, playthings). The controller general of patents,
designs and trademarks’ registry shows trademark applications from Kolkata Knight Riders,
owned by actor Shah Rukh Khan, for financial services, insurance, websites, telecom,
entertainment and beauty care products. Similarly, Mumbai Indians have filed trademark
applications for cosmetics, musical instruments and photographic and cinema equipment,
among others.”7

Now if we look at the brand value of the eight teams of the IPL the Kolkata Knight Riders has
been ranked as the most valued with a brand value of USD 42.1 million, followed by
Mumbai Indians (USD 41.6 million), Rajasthan Royals (USD 39.5 million), Chennai Super
Kings (USD 39.4 million), Delhi Daredevils (USD 39.2 million), Royal Challengers Bangalore
(USD 37.4 million), Kings X1 Punjab (USD 36.3 million) and Hyderabad Deccan Chargers (USD
34.8 million).8

It is important for all trademarks of the franchises to be well protected. The brand value of
the franchise would increase if its trademarks are well protected. Looking at the figures
mentioned above, it becomes necessary for franchises to protect their Intangible assets.

6 Amit Sharma & Shailesh Dobhal ‘New kid on the cricket block: IPL's a $2-bn brand’ 4th May, 2009
available at <http://m.economictimes.com/articleshow/4480368.cms>

7 Malathi Nayak ‘IPL brands work on intellectual property bouquets’ 4th May 2009 available at at
<http://www.livemint.com/2009/05/04005536/IPL-brands-work-on-intellectua.html>
8 Kolkata Knight Riders is richest in IPL, May 11th 2009 available
<http://thatscricket.oneindia.in/news/2009/05/11/kolkata-knight-riders-richest-in-ipl.html>

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Since protection of trademark is territorial in nature, franchises should register their
trademarks in the domestic country and the countries where they expect their products to
sell or where they are popular among the masses. This is done as there might be instances,
where people may start using franchise’s logos for products and services with which the
franchise is no where associated. This creates confusion in the eyes of the common man.

4.8.3 AMBUSH MARKETING

One of the major problems which franchises and sponsors of the IPL have to fear is from
Ambush Marketing. Ambush marketing is practiced by companies which attempt to
associate themselves with an event with which they are neither sponsored nor obtained a
license. This has a damaging effect on an official sponsor’s ability to associate themselves
with the games. It also raises doubts in the sponsors mind as to whether the sponsorship
route is commercially in their best interest or not.

Now a question would arise, what can the ambush marketers do to cause trouble to
sponsors? They can:

Use franchise trademarks along with theirs in the newspapers to increase their own
brand value.
Use pictures of players who play in the IPL who are not associated with the Ambush
Marketer.
Advertise their own brands in the vicinity of the grounds where the matches are
being played.
Distribute free branded merchandise, free ticket giveaways or unofficial
programmes.

There have been instances in other sports like the Olympics where official sponsors have
witnessed ambush marketing. A few instances can be cited, One being from the Winter
Olympics of 1994 at Lillehammer, Norway. During that tournament American Express
marketed itself using the slogan “If you are travelling to Lillehammer, you will need a
passport, but you don’t need a Visa” thereby undermining Visa which was the official
sponsor of the Winter Olympic Games.9

Ambush Marketing signifies a serious breach of rights; therefore it is imperative that the
rights of the sponsors and franchises are well protected. The most important measures to
protect sponsors and franchises from ambush Marketing are:

To educate the security and customs authorities in the area where the games are
being played.
To conduct regular information seminars should be organized for the public and the
local companies.
To Monitor through the media and organize patrols in every venue.
To Prevent the use of fans as walking advertisements of brands which are not
associated with the game


9 Helen Padley, London 2012: Five Years, Nine Months and Counting, [2006] EIPR ISSUE 11 p. 587

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4.8.4 IPL AND THE INTERNET

4.8.4.1 CYBERSQUATTING

In the information technology age, domain names play a very important role. They are the
virtual addresses of companies, individuals etc. These addresses enable users to locate
websites on the net in an easy manner. Domain names are often termed as ‘TRADEMARKS
IN CYBERSPACE’. The Indian courts have affirmed the same degree of protection to domain
names as to trademarks. The Indian courts are of the view that domain names should be
protected under the laws of Passing off since they are not limited territorially and as a result
may not be adequately protected by national laws such as the Trademarks Act.

It is a general practice followed by companies to register all possible domain extensions, be
it a top level domain extension like .com or a country level domain like .in. Franchises like
Kolkata knight Riders and Deccan Chargers have registered their domain names under
various top level domains and country level domains, though the .in and the .co.in of Deccan
Chargers are already with cybersquatters. This may pose a serious threat to the franchise in
the future.

Protection of a company’s online identity, including its domain name and variants, is a
critical component of any business strategy in today’s online world. A strong defensive
program to protect domain names must form an integral part of every business entity which
has an internet presence. In other words domain names have become the virtual real estate
of any business entity. In order to protect these virtual assets requires a strong foundation
in technical and legal knowledge and also a strong involvement of both technical and legal
practitioners.

“Protection of domains has become even more important in the last year, as the domain
name market has undergone explosive growth. “Domainers” are now profiled in the Wall
Street Journal and Forbes. Domains are a hot commodity and, as a result, protection of an
online identity is more important and more difficult than ever. The renaissance of the
domain name market is driven by “contextual based advertising” programs that create a
simple way for domainers to “monetize” their investments. These advertising programs,
such as Google’s “Ad Sense” program, provide domain owners a source of revenue for their
domains. By using their domains to generate ad revenue, domain owners can obtain a
meaningful return on what can be a modest investment in cyberspace real estate. Even
purely passive sites that contain nothing more than contextual ads are estimated to
generate $1 billion in advertising revenues in 2007.” 10

“Cybersquatters and typosquatters get a share of this revenue by stealing traffic and
misdirecting visitors destined for legitimate websites. By using domain names that contain
others’ trademarks or misspellings thereof, cybersquatters can capture Internet surfers who
are destined for a legitimate site.”11


10 Tata Sons Ltd. v. Ramadasoft, Case No. D2000-1713 available at
<http://www.wipo.int/amc/en/domains/decisions/html/2000/d2000-1713.html>
11 ibid

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Cybersquatting is a huge problem in the internet today. It is the most crucial type of domain
dispute prevalent around the world. It is a practice where individuals buy domain names
reflecting the names of existing companies, with an intention to sell the names back to
businesses to attain profit when they want to set up their own websites. The definition of
Cybersquatting can be best summarised in Manish Vij v. Indra Chugh, AIR 2002 Del 243,
where the court held that “an act of obtaining fraudulent registration with an intent to sell
the domain name to the lawful owner of the name at a premium”.

4.8.4.2 FAN SITES

Another problem which the franchises and the IPL might face is the growing number of fan
sites of the various teams. Fan Clubs like <http://www.thecricfanclub.com/IPL-2009> offer a
platform for cricketing buffs to contribute their thoughts in the form of blogs, voting, create
polls, inviting other cricket buffs to join and also to share photos, videos. These fan sites
offer an insight as to what the fans are thinking about their favourite players and the teams.
Franchises should keep an eye on the activities which take place in the fan sites. Fan
behaviour is crucial to the brand and there can be instances where some content posted on
the website of such fan clubs might be detrimental to the brand. Therefore it is imperative
for the fan sites to be monitored on a regular basis.

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