Delhi HC defines jurisdictional rules for Ecommerce

A Division Bench of the High Court of Delhi in appeal has by its judgement in World Wrestling Entertainment v. Reshma Collection (FAO (OS) 506/2013 dated 15.10.2014) defined the jurisdictional rules which apply to eCommerce and online retailers. These rules are limited to suits for trademark and copyright infringement. This post first sets out the facts and the reasoning of the Single Judge who rejected the Suit on grounds of territorial jurisdiction. It then examines the appeal and the grounds approved by the Division Bench to reverse the decision. Finally it examines the implication of the Division Bench judgement.

Facts and procedural history

The Plaintiff in this case is World Wrestling Entertainment, which primarily broadcasts wrestling programs in India. These programs feature a standard set of wrestlers, whose merchandise in the nature of action figures, clothing and apparel is sold by the Plaintiff as well. Being aggrieved by the alleged unauthorized sale of alleged counterfeit merchandise it preferred a suit for infringement. The basis of its claim against the defendant was copyright and trademark infringement. It is also relevant to mention that the Defendant is located in Mumbai, Maharashtra outside the local limits of the territorial jurisdiction of the High Court of Delhi.

The case was first heard by the Single Judge who dismissed it for lack of territorial jurisdiction. It is important to first examine the statute which defines this rule. Since, the case concerns substantive claims of copyright and trademark infringement the relevant statutes are the Copyright Act, 1957 and the Trademark Act, 2002. Also, since it is not a passing off action, or a a suit alleging a claim under common law, the general jurisdictional rules under sections 16–20 of the Code of Civil Procedure, 1908 are inapplicable (so is the holding in Banyan Tree).

The relevant provisions under the Copyright Act, 1957 and the Trademark Act, 2002 are Sections 62(2) and 134(2) respectively. They are analogous and the jurisdictional test with respect to forum prescribed under both is that the Plaintiff should, “carry on business”, where the case is filed. Hence, 1) the physical location of the defendant is immaterial; b) the case should be instituted in the local limits of a Court within which the Plaintiff, “carries on business”.

The Single Judge, by its Judgement dated October 4, 2013 concludes that the Plaintiff does not carry on business within the local limits of Delhi. The reasoning for this is, mere access of the website from which the sale occurs does not create jurisdiction. Moreover, any sale by the Plaintiff in Delhi without an element of control does not create jurisdiction. The Court states in Para 23 that,

“23. If the plaintiff’s submission were to be accepted, it would mean that the plaintiff could file a suit at any place which provides internet access to the plaintiffs website, irrespective of the defendant?s location, only on account of the plaintiff’s website being accessible in that State. The insertion of Section 134(2) was with a view to enable the plaintiff to institute a suit where it has actual and substantial business interest so that an additional forum convenient to the plaintiff is available. If the intent of the legislature had been to vest jurisdiction solely on account of accessibility of plaintiff?s website at the place of suing, then the same would have been expressly provided for, especially keeping in mind plaintiff?s submissions that the legislature has recognized new media on account of various amendments.”

Aggrieved by this the Plaintiff appealed to the Division Bench of the High Court of Delhi.

Reasoning of the Division Bench

In reversing the decision of the Single Judge and holding that the Delhi High Court does have territorial jurisdiction, the Division Bench (“DB”) interprets the term, “carries on business” more purposively.This reasoning is based on a reading of the Supreme Court judgements of Bhagwan Goverdhandas Kedia and Dhodha House.

The reasoning of the DB, commences from Para 17. They first concentrate on the rules of formation of contracts, which have been interpreted by Courts for instantaneous modes of communication. For this, the Court uses the classic example of formation of a contract by telephone. It states that the acceptance of the contract takes at the place where the acceptance of the offer is intimated to the offeror. The Court applies this rule to commercial transactions over the Internet. It states that:

• A website of the refers to various goods and services. It is not an offer but an invitation to an offer, just as a menu in a restaurant.
• The invitation, if accepted by a customer in Delhi, becomes an offer made by the customer in Delhi for purchasing the goods.
• When, through the mode of the software and the browser, the transaction is confirmed and payment is made to the through the website.
• Since the transaction between the two (customer & vendor) takes place instantaneously, the acceptance by the vendor is instantaneously communicated to its customer through the internet at Delhi. Therefore, in such a case, part of the cause of action would arise in Delhi.

This is not used by the DB to reason jurisdiction by itself as the, “cause of action”. The acceptance at Delhi is only part of one of the requisites of the Plaintiff conducting business in Delhi. Taken with this, the DB reasons, the Plaintiff is virtually carrying on all activities virtually that it would, if it would have a physical shop within the territorial jurisdiction of the Court. On the basis of this the High Court of Delhi has jurisdiction.

Criticisms and prescriptions

The position which emerges from this ruling is as follows:

1. As per this decision in cases of copyright and trademark infringement the Plaintiff can institute the case where sales are made by it. Hence, the choice of forum is now as per the choosing of the Plaintiff if it makes sales across India. It can in effect institute a suit in a civil court or a high court having original jurisdiction in such matters across India.
2. This decision is limited to cases of copyright and trademark infringement and does not extent to passing off matters. For passing off matters (in which the trademark is not registered but has acquired secondary meaning), the High Court decision in Banyan Tree still holds the field.
3. According to the Court at the stage of notice on a suit, a mere demurrer by the Plaintiff as to the territorial jurisdiction should be accepted. In essence at this point of time, the threshold on the Plaintiff is low. Of course this can be challenged by the Defendant by way of an application under Order 7, Rule 11 of the CPC (barred by law) or at the stage of evidence. Hence at the stage of notice if territorial jurisdiction is properly pleaded, notice should be issued. Lawyers should take care by studying the facts of the case and reasoning that such jurisdiction is made out.
4. As a policy criticism, the number of available forums for the Plaintiff, especially an eCommerce retailer is large. The criticism by the Single Judge of this indicating the possibility of forum shopping by the Plaintiff seems credible.
5. Many eCommerce and online retailers have forum selection clauses with customers. Usually they will be inapplicable to such cases since an alleged infringer is usually a third party and not a customer bound by the contract and hence the clause. However, if given a peculiar fact situation where this does occur, there is uncertainty how the DB’s decision in WWE v. Reshma Collection will be applicable.