WTO IP waiver too simplistic: Global vaccine tech-transfer needs other strategies

By YOGESH PAI

Since October 2020, India and South Africa, joined by two-thirds of the WTO Members (African Group, LDCs and most of the developing world) have been actively pursuing other developed country Members to agree to their request to waive global intellectual property (IP) rules. The waiver asserts that by suspending IP protection for COVID-19 technologies, countries will be able to quickly augment production and foster equitable access for COVID-19 related products. 

The push for the IP waiver proposal rests on an often simplistic textbook assumption that IP controls exercised through legal rights allow IP owning firms exclusive control on production by reducing output (by restricting competitive copycat entry) and thus increasing prices. Of course, this is something no country wants during a pandemic where equitable access is paramount. 

However, truth be told, the IP waiver proposal, even if passed by approval of three-fourths of current WTO Members (a minimum requirement under WTO Rules) or with a consensus, will not enable India or any other country (even with decent production capabilities) to quickly access complex technologies and augment production, particularly in the context of COVID-19 vaccines.

The critical issue surrounding access to COVID-19 vaccine technologies involves an active technology licensing component, which the waiver/suspension of IP laws cannot achieve (e.g. by suspending patents or trade secret protection). 

Most complex technologies such as vaccines and other biological products contain two major knowledge components. One component is the knowledge that can be copied by competitors and hence patented to legally prevent copying for at least 20 years in India. Another component involves any undisclosed information such as a trade secret or know-how, including hard tacit knowledge of manufacturing/quality control measures for production and clinical data required for regulatory clearances.

IP waiver simply can’t achieve access to tacit knowledge components which are in the exclusive possession of a firm in the form of trade secrets or any other undisclosed information. Any IP lawyer with an understanding of IP intensive industries would confirm that trade secrets do not require any ‘exclusivity’ type of legal protection (e.g. like patents). Trade secret laws provide defensive protection to a firm that already has exclusive possession of some undisclosed information against industrial espionage, breach of confidence/contracts by its employees or by connected parties who benefit from such misappropriation. Of course, unconnected parties (i.e. competitors) are always free to come out with their own products/processes through capital intensive and time-consuming (months/years) reverse-engineering or independent innovation, which the law on trade secrets does not prohibit. 

So even if the WTO IP waiver will allow countries like India to suspend legal protection for trade secrets/undisclosed information, it means nothing in the real world unless the law (and often a draconian criminal measure) is used against a firm and its employees physically located in its territory to engage in forced technology transfer (FTT). Such FTT requirements have never worked in practice without other social and economic costs. India has already had a taste of it in its unsuccessful bid to get Coca-Cola to reveal its know-how under foreign exchange laws in the late 1970s. It led to Coke’s exit from India and return in the post-liberalisation era in the early 1990s.

Realising such complexities and the potential futility of blunt legal instruments early on, the Serum Institute of India (SII) actively collaborated with AstraZeneca/Oxford for obtaining a technology licence involving a reported fee of Rs. 75/- per jab. This allowed SII access to AstraZeneca’s tacit knowledge (trade secrets/other undisclosed information) and clinical trial data to engage in quality-controlled production. Scaling-up is a different challenge altogether as it requires both time and investment in heavily quality-controlled production facilities.

Similarly, India’s Council of Scientific & Industrial Research (CSIR) – Centre for Cellular and Molecular Biology (CCMB), which already has certain expertise in mRNA technologies, is pursuing Moderna to engage in vaccine technology licensing. Although Moderna has allowed free access to its mRNA patents for COVID-19 vaccine production, the crux lies in active technology licensing.

In fact, even in the case of an indigenously developed vaccine technology by Bharat Biotech with early-stage lab support from the publicly-funded Indian Council of Medical Research (ICMR) – National Institute of Virology (NIV), the Department of Biotechnology had to recently nudge Bharat Biotech to engage in talks with Panacea Biotech(the only other company in India which is currently equipped to produce Covaxin) to scale-up production. 

So, a WTO IP Waiver to suspend IP obligations domestically will not help unless India engages in FTT – a recipe for complete disaster, particularly when we have finally decided to open up to more foreign players. The Government of India must not waste its valuable energy in pursuing the waiver proposal in trying to look for solutions that are far removed from the real-world complexities and constraints posed by the economics of vaccine technologies and production, and an equally complex IP ecosystem in the context of global tech-transfers. Where blunt legal instruments don’t work, using track-1 and track-2 diplomacy to place moral coercion on western governments to nudge firms to actively engage in technology licensing may still work wonders. 

Allowing manufacturers to strike early deals with tech players to facilitate risk-sharing and exploration of synergies driven by a predictable and transparent entry-enabled regulatory environment is a prerequisite for sustainable vaccine production. Securing cheap upfront volume discounts for state-sponsored distribution and allowing private players to cross-subsidise through differential pricing in private sales will help in meeting the demand. This will facilitate the scaling-up of production and pave the way towards healthy competition by driving down vaccine prices in order to attain vaccine equity. 

Acknowledgment: This write up was first published in Express Pharma section of Indian Express on 28th April, 2021. The write up can be accessed here.

Image Courtesy: www.wto.org

Shutting Sci-Hub is Not Anti-Science: Courts, Government and the Parliament Must Explore Alternative Remedies (Part II)

Yogesh Pai

Continues from Part 1.

Courts must institute ongoing royalties as an alternative remedy

Apart from providing exclusive control over supply of works, copyright law serves to preserve the metering function in exploitation and use of works. The argument that any infringement by Sci-Hub and Lib-Gen involves a ‘non-commercial purpose’ and hence falls within the current fair-dealing provision of educational use is farfetched. Any reading of a limited exception that exempts infringement for the purpose of research altogether, cannot include all educational content since it would conflict with the ‘normal exploitation’ of the right. This is precisely because there is no other substantial ‘commercial use’ of educational content, except for the purposes of research. Thus the previous ruling of the Delhi High Court in the DU Photocopying caseinvolving legitimacy of course-packs is not a direct precedent in the current case. The argument that the researcher accessing Sci-Hub and Libgen is not directly engaging in infringement activity is only partly correct (as a fair-dealing exemption for personal use) as it does not extend to the website that hosts pirated content. In any case, the current dispute is not against individuals downloading pirated content but against Sci-Hub/Libgen as platforms that facilitate it.

However, if the court decides to block Sci-Hub and Libgen, by way of a preliminary or even a permanent injunction, it must require the petitioners to provide access to all its databases to any public educational/research institution in India for any reasonable period of time (or at least until the Executive or the Parliament finds a permanent solution) based on certain ongoing royalties. After all, these shadow libraries have been around for many years now. In fact, it would be extremely detrimental to serve the ends of justice if the court does not mandate such an alternative. The only caveat is that any existing licence should not be disturbed until the expiry of current subscriptions and private educational institutions should not benefit from such an order unless they are engaged in non-profit activities.

Thus, an ongoing royalty model does not unreasonably prejudice the right-holders, while simultaneously opening avenues for equitable access. Although controversial, a remedy of reasonable royalty has been explored by courts in comparative jurisdictions in the context of copyright infringement. The ongoing royalties could be determined based on a proportionate reduction in subscription rates currently offered to comparable different tiers/kinds of public educational/research institutions in India. In fact, the court can institute near to zero or minimal subscription rate in favour of those institutions where library budgets simply do not exist. Such tiered model presupposes cross-subsidisation by top-tiered educational/research institutions in favour of less privileged institutions.

Can a court legally grant such a remedy to serve the ends of justice? The Copyright Act, 1957 does not prohibit the court from undertaking such an exercise since the remedy of an injunction is an equitable remedy. Courts have often instituted ongoing (interim) royalties against defendants in patent cases. There is nothing that prevents an Indian court from instituting ongoing royalties in a copyright dispute as a permanent remedy. The court must explore the full contours of its inherent powers under Section 151 of the Civil Procedure Code and the Supreme Court’s observations by requesting the Department of Science and Technology and third parties like the Indian Library Association, to undertake the task of identifying and mapping the institutions which could benefit from such a model.

One Nation, One Subscription: Will the Government’s Plan Work?

The recently released Draft Science, Technology and Innovation Policy has proposed a “one nation, one subscription” policy whereby the “Government of India will negotiate with journal publishers…. in return for one centrally negotiated payment, all individuals in India will have access to journal articles. This will replace individual institutional journal subscriptions”. For starters, while the idea is great, its feasibility is still in question because there is no legislative backing. At best, such a policy is geared towards voluntary licensing negotiations with publishers which draws from the monopsony power of the Government. However, there are no incentives for publishers to come to the table unless the Government decides to stop buying annual subscriptions, which is difficult proposition. At best, the ongoing royalties’ model instituted by the courts may push publishers towards negotiations. Nothing stops the Government from bringing a law to overrule the Copyright Act. If the TRAI can regulate pricing and copyright licensing conditions for media and entertainment purposes, which the Supreme Court has upheld in ‘public-interest’, nothing stops the Government from drawing powers under any existing law to regulate pricing of academic publishing content, provided such a legislation exists. Beyond the ambiguous and potentially unfruitful outcomes associated with the voluntary character of the one nation, one subscription model, if the Government wishes to urgently regulate the activities of academic publishers, it can explore invoking the Essential Commodities Act, 1955 as an interim measure by way of a Gazette notification.

Permanent Solution through the Parliament: Shift to Liability Regime (i.e. Statutory Licensing)

Some public-interest groups have argued that all infringing activities associated with Sci-Hub and Libgen like shadow libraries must be legalised by amending Section 52 of the Copyright Act since they are non-commercial activities conducted for the purposes for research. In other words, the effect is to render any copyright in favour of academic publishers redundant. Undoubtedly, one can envisage any model in a world free of trade-offs. However, irrespective of any potential violation of international IP norms, if the activities of publishers provide real-world value for academics, why would such a model of “no-copyright” be considered legitimate or grounded in public reason, particularly when the collective action problem associated with academic publishing still exists?

The natural escape is to shift to a system of liability rules. The current compulsory licensing provision, which has been extended to “any work” by the Copyright (Amendment) Act, 2012, is not helpful because it involves a case by case determination of whether or not the refusal by the Copyright holder to licence on favourable terms and conditions has led to the work being “withheld from the public”. It is doubtful if such a provision can be invoked by institutions and libraries with ease. Instead, a system of statutory licensing must be instituted on the lines of current statutory licensing provisions in favour of TV and Radio broadcasters. In fact, a recent decision of the IPAB, which is the first such order on statutory licencing, suggests that such a model can work although it shifts the value of economic entitlement from the voluntary negotiations to terms determined by bureaucrats/tribunals/courts.  However, this is precisely the need of the hour to resolve the conundrum of access to scientific communication in an industry which shows all signs of grim competition and increasing concentration among the top publishers.

Since the markets themselves have not pushed the academic publishing industry towards a two/multi-sided platform market in the digital era where content is given away for free and incentives are drawn from elsewhere, a statutory licensing model will help digital content aggregators (i.e. internet companies with deep complementary digital goods) to exploit content through their business models. Of course, there is always a cost of free associated with information markets that provide abundant “free stuff” and its impact on overall welfare since it shifts rent-extraction opportunity from content production to content aggregation markets. However, such an inevitable shift towards zero-pricing of scientific and academic content is needed to ensure equitable access. After all, neither the academic publishers nor digital content aggregators are actual content producers in the context of academic publishing. So the shift in rent-extraction opportunity from academic publishers to content aggregation markets should not matter.

While the nuances of such a reform to the Copyright law must be widely deliberated and discussed, a shift towards liability rules in literary works involving scientific and academic content is most desirable and a reasonable solution for preserving equitable access. Policy makers should note that half-baked solutions driven by lack of deeper insights into both the ex-ante and ex-post benefits of academic publishing neither serve public policy nor national interest.

Yogesh Pai is an Assistant Professor and Co-Director of CIIPC at National Law University Delhi. Views are personal and does not express the views of the Centre/University.

Shutting Sci-Hub is Not Anti-Science: Courts, Government and the Parliament Must Explore Alternative Remedies (Part I)

By Yogesh Pai

A recent civil suit at the Delhi High Court by publishers (Elsevier, Wiley and American Chemical Society) to permanently block popular shadow libraries (i.e. pirate websites) like Sci-Hub and Libgen has drawn an expected backlash from civil society groups, copyright scholars and popular commentators. While some scholars and commentators have called the business of academic publishing ‘greedy’, others note that shutting down such pirated websites is ‘anti-science’ and against ‘national interest’. Over two thousand academics, scientists, teachers and students have signed a petition against blocking such websites citing public-good and highlighting their stance against “commoditization of research information”.

The argument is as follows. Academic publishing relies on an outdated proprietary business model in the internet age where push-button open-access publishing is a reality. We don’t need the ‘rent-seeking’ academic publishers, except their existing curated content. Barring a few exceptions, it remains a fact that academic publishers do not pay authors for content creation or for engaging authors in the peer-review process. Thus, the costs incurred and the value addition by the academic publishing industry are arguably minimalistic (editing, enabling peer-review, curating, archiving and marketing) considering the profit margins of top scientific publishers (approximately between 30% and 40%). Copyright law serves such interests in a disproportionate way since it allows academic publishers to fully control the supply of books and journals. The risk-rewards ratio is skewed in favour of publishers. As a result, science and knowledge flow is restricted to only those institutions/individuals that can pay (and/or continue to pay annual subscriptions), which is certainly not an ideal outcome for the public-good involved in science. Ergo, all paywalls must be demolished as there is no real-world value contributed by academic publishers.

Real Value of Academic Publishing: The Publishing Paradox

Surprisingly, the real value provided by academic publishers is not limited to the low-value addition activities they undertake. In fact, the real value is deeply entrenched in the current academic and scientific culture. After all, scientific research, even in public institutions, is highly competitive. Hence over the past half a century, a system has evolved where publishing with journals having an impact-factor is associated with academic prestige. To a large extent, this has reinforced the role of academic publishers since publishing with journals having a high impact factor is used for hiring, promotions, awards, grants and overall academic prestige. For e.g. the journals listed by UGC-CARE implicitly recognise that quality in academic publishing matters irrespective of the publishing house or its proprietary status. Thus, a collective action problem in academic publishing is resolved by academic publishers in an organic way (i.e. science/academic policy reinforcing the role of academic publishers), albeit at the cost of the academic and scientific community giving away their soul (i.e. content). Where peer-review and impact factor are not easily correlated with academic prestige (particularly in law), academics are inclined towards publishing with student-edited and open-access journals. Paradoxically, the science policy folks are in no hurry for any wholesale reforms to delink the matrix of academic prestige and academic publishing.

Price, Competition and Market-Failure: The (False?) Promise of Open Access and the Internet

Funding agencies, particularly in western universities and research institutions, quickly bought into the idea that allocating specific funds (sometimes a whopping $500 and up to $5000 per paper) for open-access publishing would ultimately make access to scientific publications free for all. The emphasis on pay and publish also led to a rise of predatory journals with India at its epicentre. While reputed academic publishers co-opted the pay and publish open-access model along with their proprietary user-based subscription model, the final price of subscribed databases never dropped. The dominance of academic publishers has not eroded even with the rise of the internet and open-access publishing models. After all, if many academic institutions consider it problematic to pay for subscriptions, how would they be able to justify allocation of funds for open access publishing unless someone (a funding agency perhaps) paid for it? Any seasoned economist would confirm that in cases of monopoly (i.e. proprietary subscription-based) tied with non-monopoly bundles (i.e. free/open-access content), the pricing is always based on a single monopoly profit, and hence always monopolistic. It reveals that the idea of shifting towards an open-access model, with academic publishers as strange bedfellows, was not tested for economic robustness. This is not to underestimate the virtues of open-access, provided we find a voluntary and sustainable model to keep it open.

Another problem in pricing of academic publications is that the market for academic publishing (mostly public/private universities and research institutions) is not price sensitive. Because one book/journal does not compete with another, institutions that can afford to pay, end up subscribing to all major databases. Others either subscribe in a limited way or simply don’t subscribe. Unfortunately, due to the very narrow market for academic publishing (unlike music and films), academic publishers have failed to adopt a two/multi-sided platform market approach (like internet companies/newspapers), where content can be provided for free as revenues are generated through an advertising model. Thus, pricing still remains a potential issue even in the age of the internet and open-access.

Sci-hub and Libgen do not incur opportunity costs which are even remotely close to those of the academic publishers and thus the virtue-signalling associated with it being ‘free’ and ‘open-access’ relies on untested economic and policy grounds. Sure, pricing is an issue associated with academic publishers which needs to be managed through legal instruments, but expecting every market participant to have similar incentives is factually inaccurate. If it were feasible, the markets themselves would have made an inevitable shift towards forfeiture of IP assets. Copyright law does not prevent well-funded universities, non-profits, and internet/big-data industries from investing in new and fully open-access journals in-order to create high-impact factor journals to replace existing academic publishers. As the collective action problem associated with academic publishing still remains, so does the economic case for the existence of academic publishers.

The Case against Sci-hub and Libgen: Saving the Rule of Law and Public Interest

One significant concern with the Robin-Hood approach of such pirate websites is that access to scientific and academic research rests at their mercy and individual whim. For example, in 2017, Sci-Hub’s founder Alexandra Elbakyan, a self-proclaimed communist (“inspired by communism, but not a strict Marxist”), temporarily cut-off access to Sci-Hub for the Russian Federation due to her personal and ideological opposition to a liberal faction of the Russian scientific community. While the whereabouts of Elbakyan are known to be in Russia (physical address never revealed), the founder and chief-librarian at Libgen is unknown. Elbakyan is being investigated by the U.S. agencies for potential links to Russian intelligence. Notwithstanding their political and other persuasions, these websites are blocked in several western jurisdictions for copyright violations.

While the case against Sci-Hub and Libgen in not unique to India, the access situation certainly is, since many universities and institutes in India rely upon Sci-Hub/Libgen for access to academic publishing. While there is no specific dis-aggregated data, India ranks No. 3 in terms of Sci-Hub downloads, next only to Iran and China. Interestingly, a quarter of these downloads was from the rich OECD countries, which is attributed not only to the rising subscription costs and falling library budgets, but also due to the convenience in accessing Sci-Hub ubiquitously.

If Sci-Hub is necessary for the progress of science, what is the problem? The moral case for a violation of copyright as an exclusive ‘property’ right is relatively weak in the light of enormous public-good enabled by ‘access’ to scientific content. While the core values of scientific research (i.e. reproducibility and falsifiability) need access to scientific content, it does not make access to pirated content a core value.

By refusing to block Sci-hub/Libgen, the court will provide a legal endorsement, effectively legalising mass-scale piracy. This is squarely against the rule of law and will not withstand judicial scrutiny. Until now, at least some universities/institutes obtain a licence because of the illegal nature of activities attributed to such websites. If the court refuses to shut it down, no institution will be required to take any licence from publishers. That’s the irreparable injury which will irreversibly harm not only academic publishers in the short-run, but also the real-world benefit derived by the scientific community from academic publishing in the long-run.  In granting an injunction, courts are required to consider the question of such ‘irreparable harm’ and whether monetary damages are adequate. Monetary damages in this case are simply unenforceable since these websites operate from a foreign location and the known/unknown defendants do not own any assets in India. Particularly due to the dubious nature of their activities, courts cannot institute any ongoing royalties against the website owning defendants, either temporarily or permanently in lieu of an injunction.

Although a case for full trial has been made as these websites may hold non-infringing material (i.e. open-access articles/ public domain materials or those belonging to other publishers), it does not take away the fact that practically all articles from several paid journals are available on sci-hub’s content archives. In a website that dynamically hosts millions of papers (currently 85 million!), it is impossible to pin down the exact number of infringing articles published and hence only an indicative list is sufficient. In civil litigation, the standard of proof is to show the preponderance of probabilities that an infringement has actually taken place.

It has also been argued that the public interest factor, which is often considered in evaluating balance of convenience in granting/denying of an injunction in India, strongly weighs in favour of the defendants. That’s only partly correct. Any full view of public-interest must consider both ex-ante factors that make academic publishing a necessary cog in the system of science communication and ex-post factors involved in equitable diffusion of scientific research. The ex-ante and ex-post public-interest involved in academic publishing and its dissemination is far too complex, even if one were to fully discount the private interests of the publishers.

A case for a dynamic injunction (to block any mirror links created to circumvent court orders) exists based on the Delhi High Court’s previous rulings. Although the websites in question satisfy most factors associated with any ‘rogue’ website, the courts must explore all possibilities of tailoring such an injunction. An order for dynamic injunction must only cover the copyright claims of present petitioners. In other words, if the current websites or a mirror link hosts any content other than those of the petitioners, the present preliminary injunction should not cover it. After all, copyright is a private right and hence its enforcement must also be left to right-holders. Once a list of journals/book titles is provided by the plaintiffs over which copyright is claimed, the burden must be on the defendant to scrutinise the Rights Management Information (RMI) and ascertain that the copyright infringing materials belonging to the plaintiffs are permanently removed. If the defendant refuses to undertake such an obligation, only then a dynamic injunction must follow. Even going by the furthest reforms to copyright remedies that scholars have envisaged, it is noted that any act of wilful infringement must attract the full panoply of legal remedies under copyright law.

Furthermore, should the court decide to go ahead with a trial, it must at least ask the defendants to deposit some interim damages in an escrow account under its supervision and for the petitioners to provide a cross-undertaking by way of bank guarantee. Courts have done this previously in other IP cases involving patent infringement. However, it is doubtful if Sci-hub or Libgen will even contest the litigation by providing any physical address and consider full participation in a trial, which will require payment of monetary damages on finding of infringement. A case for full-trial on merits rests on the conduct of the all defendants to participate in the trial and not otherwise.

Click here for Part 2 of the Blog.

Yogesh Pai is an Assistant Professor and Co-Director of CIIPC at National Law University Delhi. Views are personal and does not express the views of the Centre/University.

What could have been the possible intentions behind Disney’s tweet? – Part 3

Karthik Subramaniam and Shrudula Murthy


 

Disney is one of the largest media organisations in the world having companies such as Marvel, Pixar, Lucasfilm, National Geographic and ESPN under their umbrella. While they do ensure that they have the highest level of protection for the intellectual property for the assets that they own, they also need to ensure that they do not infringe on anyone else’s rights. In a cut-throat world where any slight mistake can lead to expensive repercussions, especially for large organisations such as Disney which have a reputation to protect, legal teams can often go on overdrive in an effort to protect the company from taking any wrong steps.

When any individual registers as a user on any social media platform, they assent to the Terms of Service (ToS) put forth to them. The assent is generally given while registering for a service, where the ToS is displayed for users to access and understand before assenting. The ToS clear out the legal aspects of various issues such as developer rights, redistribution of content and privacy conditions amongst various others. Agreeing to abide by the ToS while signing up for a service creates a contractual relationship between the user and the platform.  The ToS of Twitter clearly mentions that any content posted, displayed or submitted on Twitter are solely owned by the user putting them up, and Twitter is provided with a worldwide, non-exclusive, royalty-free license (with the right to sublicense) to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute such Content in any and all media or distribution methods available. Through this, we get a clear understanding that the sole owner of any content uploaded would be the individual who uploads it and they would be providing Twitter with certain licensing rights. What is important to clarify however, is that a tweet can be considered as having a copyright only if it fits into the mold of what can be copyrighted by the applicable copyright laws. With Disney wanting to use the content of Twitter users across the globe, but with the fear of being held liable for possible infringement, Disney might have taken the step of putting forward a legal notice to protect themselves. The most perplexing question that arises after this is with respect to why Disney would have even needed to go ahead with putting forth legal notices on Twitter.

  1. Applicability of fair use principles 

There are certain instances when an individual or entity can use content of other individuals. It is common practice for personalities and companies in the entertainment industry to often use content uploaded by people online on social media platforms. On the Jimmy Kimmel Live! TV Show for example, the Mean Tweets segment conducted uses tweets uploaded by various users. On this segment, celebrities starring on the show read out tweets uploaded by users that target the same celebrity, with the intention of humoring the audience. This however does not fall under infringement of copyright of any content or tweets. Copyright laws to a great extent look at protecting the commercial exploitation of protected content. They provide a few general exceptions through “fair use” policies. A general four point test is conducted to determine whether the use of any copyrighted material falls into “fair use” or not. The four-points used to do so (derived from Section. 107 of the Copyright Act of the United States of America) are as follows:

i. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

ii. the nature of the copyrighted work;

iii. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

iv. the effect of the use upon the potential market for or value of the copyrighted work.

In this scenario it would depend on the manner in which Disney used the content of the tweets put forward by people using the hashtag MayThe4th. The usage of the tweets by Disney would have to go through the four factor analysis. In the scenario that usage of these tweets did not fall under fair-use, then Twitter users in effect could sue Disney for violation of their copyrights. Thus, it could be interpreted that Disney flagged out the tweet with the terms and conditions as a precaution against future claims of infringement from Twitter users.

        2. Cross-platform implications

Another issue that would arise would be the implications of the situation occurring on an online platform that was not affiliated to Disney, which had its own Terms of Service (ToS). Since the platform on which Disney and other individuals present in was Twitter, the ToS of Twitter would be applicable to them. Twitter does not consider “re-tweeting” any content to be infringement. However, with Disney having a presence across multiple media platforms, the possibility of them sharing it on other platforms definitely does exist. In case sharing across platforms does occur, the Twitter ToS would be applicable with respect to sharing content in platforms apart from Twitter and its affiliates. Due to the ToS applicable on Disney, the following can be considered as the ways through which anyone could use copyrighted content, apart from usage for fair use, from Twitter:

i. Since content uploaded by each user is owned by them, and the license provided to twitter to use such content is non-exclusive in nature, Disney could obtain individual permission from each user. While the ToS of Twitter clearly states that Twitter has a royalty-free license with a right to sublicense any content uploaded on the platform, Disney could obtain a license from Twitter to access user content. However, the ToS also mentions that express and informed consent must be taken from users if someone’s Twitter content is used to promote a product or service. While this is what Disney attempted to do, the manner in which this was executed clearly had various failures.

ii. The Twitter ToS mentions this: “Twitter has an evolving set of rules for how ecosystem partners can interact with your Content on the Services. These rules exist to enable an open ecosystem with your rights in mind. You understand that we may modify or adapt your Content as it is distributed, syndicated, published, or broadcast by us and our partners and/or make changes to your Content in order to adapt the Content to different media. You represent and warrant that you have all the rights, power and authority necessary to grant the rights granted herein to any Content that you submit.”

The presence of this clause in the ToS allows anyone to quote a tweet without the user’s permission if the tweet is embedded. Thus, a tweet can be reused by another individual on a different platform but when it is viewed, it will be rendered through the original platform itself. Thus, one is essentially using Twitter’s services as it is one of the tools provided by them, and the information is directly pulled from the service they offer.

Conclusion

While this action of Disney has frustrated Star Wars fans across the world, no one could say that they were surprised. Over the years, Disney has garnered the reputation of going a step ahead of everyone else with respect to the protection of their intellectual property. As explained above, Disney may not own a trademark over #MayThe4th as the characteristics of this hashtag are not in keeping with the requirements of trademark laws and the possibility of them claiming it would be slim. Given that Disney did not own the trademark over #MayThe4th, there would be no binding contract on Twitter users who used the hashtag due to this leading to an absence of an offer from Disney. When users agree to certain terms of service, it is done with the intention of availing a certain service provided by the platform. In the absence of this, the users are not required to comply with the same.

Even if one assumes that Disney did have a Trademark or would acquire one in the future, it would still not form a binding contract on the users as the criterion of consensus ad idem was missing. The terms and conditions were not mentioned in the first tweet and there is a huge possibility of people using the popular hashtag even without the knowledge that such conditions existed.

When looking at why Disney would have chosen to go ahead with wanting to impose legal notices on users of a hashtag, a clear understanding that they would have done so to prevent any future copyright claims with respect to the content they put forward arises. However, a diversified multinational mass media and entertainment conglomerate, with a massive legal team clearly faltered in the way it chose to approach the situation. All Disney had to do was analyse whether the content they would be creating fall under the ambit of fair use or not, and if it did, they would have required to have taken consent from users in a more effective, legally established manner.

With the advancement of technology, situations like these are prone to arise more frequently. Organisations need to be prepared to tackle such circumstances in a better manner, so as to continue maintaining their relationship with their end customers, while also maintaining required legal compliance. While  protecting one’s intellectual property assets is definitely important, managing to do so without enraging the consumers and fans is imperative as well. It’s for Disney to bring balance in the Force and not leave it in darkness for the fans.


Part 1 of the blog

Part 2 of the blog

This is part 3 of a 3-part blog written by Karthik Subramaniam and Shrudula Murthy, Second Year Undergraduate Students of Law at NALSAR University of Law, Hyderabad. They can be contacted at their respective email id at karthik.subramaniam.nalsar@gmail.com and shruanshu@gmail.com. The views expressed are personal and do not express views of the organisation.

Picture Courtesy: Lucasfilm LTD. – https://www.starwars.com/star-wars-day

(Image in Public Domain)

Did the tweet put forward by Disney lead to the creation of a binding contract between them and other twitter users who used the hashtag?: Part 2

Karthik Subramaniam and Shrudula Murthy


 

A contract is an agreement between two parties, that might either be oral or in writing, which creates mutual legal obligations between each other. A contract is extremely important in any business transaction as it clearly sets out the legal relationship between the parties involved, the rights that they possess and the responsibilities that they have to one another. Since the effects of a valid contract are legally binding and therefore enforceable in a court of law, it is extremely necessary for there to exist certain prerequisites for a contract to be considered to be valid in the eyes of the law. There are various elements that create a valid contract.

The basic essentials of a contract consist of 3 elements:

  1. An offer
  2. Acceptance of the offer
  3. Valid consideration for the transaction.

These 3 elements form the basic elements of a simple contract. Another important element of a valid contract is consensus ad idem, or the meeting of minds. It refers to the understanding or comprehension of the contract by both parties, and both of them being in mutual agreement of the same thing in the same sense.

The 3 elements of a contract, as well as the principle of consensus ad idem are essential in analysing the following 2 questions that arise in understanding whether Disney was successful in creating a contractual agreement between them and twitter users who used #MayThe4th.

A. Were the three basic essentials of a contract present?

To be able to use or access any content online, platforms provide certain terms and conditions that need to be accepted and adhered by the users. These platforms provide a plethora of services ranging from hosting user content to allowing advertisement presence for users and developers. In a “transaction” such as this, the service provided, would be considered as the offer, the Terms and Conditions that the user would have to abide by would be considered as the consideration, and the assent to follow these terms while using the service so provided would amount to acceptance.

Disney tried to create a contractual relationship with the users without having an existing offer in the first place. While the Terms and Conditions did exist, and a user could have assented to them, there was nothing present that could constitute  an offer. To offer a service or a good to any individual, one must have ownership over the same. In the case of Disney trying to create a contractual relationship with twitter users who used #MayThe4th, it has been clearly established that Disney did not have any actual ownership over the hashtag MayThe4th.

In this case, if Disney had ownership over the hashtag, them, allowing users to use the hashtag would be considered as the provision of a service. With Disney not having ownership over the hashtag, they essentially do not provide any service, thereby ensuring that Twitter users need not abide by any of the Terms and Conditions put forth by Disney over the usage of the hashtag.

The absence of one of the basic elements required for a contract to be valid clearly did not exist in the above case. Disney was thus unsuccessful in its attempt to create a contract.

B. Was there consensus ad idem between Disney and twitter users who used the hashtag?

While it was clearly established that Disney does not have any rights over the usage of #MayThe4th, let us consider a scenario where they do have trademark rights over the term, or had suggested the usage of a different hashtag that they did have complete rights over. In such a case, the three basic elements of a contract; an offer, consideration, and acceptance would be present. However, this still doesn’t amount to a valid contract.

Consensus ad idem implies that all the parties to the contract have a mutual understanding and comprehension of the contract that they are getting into. Disney’s first tweet did not include the terms and conditions, but they rather chose to put a follow up tweet which imposed a contractual obligation on twitter users based on the directions of the first tweet. It was due to this split nature of the tweet that a lot of confusion ensued. The first tweet did not give any indication of the fact that any terms and conditions would be applicable, or that there even existed a follow up tweet. It was only the second tweet that made the existence of a legal notice clear. Due to these reasons, any individual using #MayThe4th could have used the hashtag without reading the second tweet, consequently not having any knowledge of the existence of a legal notice. Due to the popularity of Twitter as a social media platform with a tremendous amount of content being uploaded on it constantly, coupled with the massive popularity of the hashtag MayThe4th, many users could have put forward a tweet containing the hashtag without any knowledge of the legal notice being imposed on them. Both these conditions indicate the absence of a mutual understanding between the parties implying that there was no consensus ad idem, thereby invalidating the contract.

In the last part of this series we try to dig into the possible intentions behind Disney putting forth the terms and conditions and what the future implications of that would entail.


To read the first part of the blog, click here.

This is part 2 of the 3-part blog written by Karthik Subramaniam and Shrudula Murthy, Second Year Undergraduate students of Law at NALSAR University, Hyderabad. The authors can be reached at their respective email id karthik.subramaniam.nalsar@gmail.com and shruanshu@gmail.com.

 

Picture courtesy: Lucasfilm LTD. – https://www.starwars.com/star-wars-day (Image in Public domain)

The Disney Hashtag Saga: How did they cause a disturbance in the force? : Part 1

Karthik Subramaniam and Shrudula Murthy


 

Disney has been caught up in a storm again. Star Wars fans across the world have been expressing their frustration against Disney with reference to a particular tweet floated out by them. What exactly was this tweet and why has it created a disturbance in the force?

The 4th of May each year is a day of celebration for all Star Wars fans, using it to commemorate the iconic movie saga that captured the imagination of people of all ages through its wonderfully intricate creation of a fantasy world, in a galaxy far, far away. One of the most iconic lines of the movie series – “May the Force be with you”, which is used to wish one good luck, and goodwill, managed to find itself morphed into a pun “May the 4th be with you”. Through usage in popular culture, this pun led to the creation of 4th May as an unofficial Star Wars day, an eventful day that unites Star Wars fans all across the globe. With this phrase being something very close to the fans, what exactly made the people feel betrayed, as if Disney had turned to the Dark Side?

On 27th April, 2020, Disney put out a tweet asking people to post their favourite memories with the hashtag- “MayThe4th”, which would then be used by Disney to create something ‘special’. Disney followed up with another tweet stating that anyone who would be using #MayThe4th would be agreeing to allow Disney to use their message and their account name in all media, and would also be agreeing to Disney’s terms of use.

Disney was immediately subjected to immense backlash due to this not only on Twitter, but on other social media platforms, and news websites as well. Disney has had an unpleasant history with extreme overreach on its intellectual property; and the public perceived this incident on Twitter to be another of Disney’s attempts to overstretch its boundaries on Intellectual Property. The tweet led to Twitter users trying to understand why Disney would have wanted to do this, and how it would be affecting them.

Disney did put forward a clarificatory tweet almost 5 hours later by stating that only tweets that used the hashtag #MayThe4th and mentioned @DisneyPlus would be subject to the legal conditions put forward. However, this served too little in resolving the concerns that netizens had with Disney’s actions.

These set of events led to the formulation of several questions relating to Intellectual Property Rights and Fair Use, which this article will look at resolving, to understand the situation better. The analysis of the questions in this paper has been largely done from  the perspective of United States Intellectual Property Laws.  The three main, broad questions are as follows:

  1. What is the extent of ownership that Disney must have over a hashtag to impose conditions on others for its usage?
  2. Did the tweet put forward by Disney lead to the creation of a binding contract between them and other twitter users who used the hashtag?
  3. What could have been the possible intentions behind Disney’s tweet?
  1. WHAT ARE THE RIGHTS DISNEY MUST HAVE OVER A HASHTAG TO IMPOSE CONDITIONS ON OTHERS FOR ITS USAGE?

The main question which has put people in a frenzy is whether Disney had the right to impose such terms and conditions on the Twitter users who used the hashtag “MayThe4th”. For a company or an individual to have control over the use and dissemination of particular words or to bind people to their terms and conditions, they usually need to have  certain rights over it , primarily in the form of Intellectual Property rights. This section seeks to analyse what kind of ownership Disney could claim over “MayThe4th”, what the essential requirements or conditions are which need to be fulfilled to obtain these rights and whether Disney could be doing the same in this scenario.

                  A. What kind of ownership could Disney claim? 

A hashtag has come to be understood as a particular word or phrase preceding the symbol ‘#’. The use of the term hashtag has seeped into daily conversations, dictionaries and through contemporary use has managed to gain a meaning greater than a mere symbol. One of the primary purposes of a hashtag is not only to increase the popularity of a product but also to provide information about other related content to users. By using a hashtag, individuals attempt to create a community of similar and related content that can be easily accessed by merely clicking on the hashtag.

Hashtags have been used over the years to generate popularity for products and to conduct marketing campaigns and have thus received protection as intellectual property under trademark laws in the past. They have managed to garner a massive reputation in online marketing and companies have increasingly resorted to using a common hashtag as a mark of their company or product. Companies generally claim ownerships over hashtags under trademark laws.

The Lanham Act of the United States Patent and Trademarks office describes a trademark as something which includes distinctive signs, numbers, words and colours specifically meant to distinguish the good(s) or service(s).[1] In order for Disney to impose the terms and conditions on the users of the Tweet #MayThe4th, they need to have a trademark over the term. To obtain this trademark the term  has to fulfil two essential conditions. This section will analyse whether the hashtag fulfils the criterion in order for it to be trademarked.

                        B. Can ‘MayThe4th’ be trademarked by Disney?

There are certain conditions that need to be met in order for a phrase to get protection under trademark laws. Even though hashtags are a relatively new and emerging concept there have been numerous debates surrounding this area. Cases such as Eksouzian v. Albanese, under the central district of California  brought to picture why hashtags could not be trademarked The court in this case,highlighted how the characteristics of a hashtag were not in consonance with those of a trademark. A trademark serves two primary purposes. First off it aims at identifying the source of the product or service and secondly it seeks to protect consumers from duplicate or spurious products. The court held that a hashtag does not fulfil these criterions. It explained how a hashtag in most cases, cannot redirect a user towards a single source of a good or service and that hashtags on an online portal under usual circumstance do not create confusion among consumers over the product of a particular brand.  However, the United States Patent and Trademark Office (“USPTO”) began granting trademarks for hashtags that very year but the rationale put forward in the Eksouzian case becomes extremely important in understanding under what scenarios a hashtag could be trademarked.

Hashtags have been granted trademarks in the past if they complied with certain criterions of the trademark law. While there are clear precedents of hashtags having been trademarked in the past, the hashtag #MayThe4th cannot be trademarked. There are two primary conditions which a Trademark needs to fulfil in order to be granted protection under the Lanham Act. They are:

a. The trademark should be used commercially or with the intention of being used commercially in the future

b. It should be distinctive in nature.

Explained below are the reasons why the term #MayThe4th does not comply with the conditions mentioned above and cannot be granted a Trademark.

                           i. Commercial usage of #Maythe4th

While not much can be commented on this criterion, it has to be observed that the hashtag or the term MayThe4th has been used commonly to wish someone good luck and has come to become a phrase of encouragement. Disney does not link any product or commercial venture exclusively to the term MayThe4th. To this extent Disney would not be granted a trademark for the hashtag.

However, this is not set in stone and the possibility of Disney trademarking the date- MayThe4th is not impossible. If it can link the date to a specific service or if it could be traced back to massive sales on a prime day, Disney could be granted a   trademark on “#MayThe4th”. However, with the phrase having been largely promoted and created by the fans of the franchise, such an act would be looked upon as an unfavourable practice.

                         ii. Distinctive nature of the term #MayThe4th

The USPTO put forward certain criterions to be complied with for companies claiming a trademark for their hashtags. In October 2013, the USPTO revised its Trademark Manual of Examining Procedure and inserted Section 1202.18 which dealt exclusively with hashtags. One of the first conditions put forward in the manual was that the word which followed the hashtag should fulfil the basic criterion of trademark laws. To this end, the primary question which needs to be answered is whether the date ‘MayThe4th’ could be trademarked. It needs to be analysed whether the term “Maythe4th” is distinctive in nature and if it has been used exclusively in relation to Star War products?

According to the USPTO a hashtag would be entitled to a trademark as long as it complies with the criterions all trademarks have to fulfil in order to be distinctive. It has been established that for a date ) in particular to be trademarked there has to be a direct association or linkage to the goods or service being provided. The famous chain of  departmental stores – ‘seven eleven’ has a trademark over its store name despite it being a name strictly associated with numbers. The name was adapted to indicate the extended hours and days of the functioning of the store. The name, ‘seven-eleven’ in this case directed the users to the departmental stores and the goods and services so provided by them and was thus able to get a trademark over its name. In the given scenario the phrase ‘MayThe4th’ does not direct the customers to an exclusive product or service and would thus not be able to get the right of Trademark over it.

Lucasfilm Ltd. LLC which was bought by Disney in 2012, does own the Trademark over the entire phrase “May the 4th be with you”. As this phrase complied with the requirements of the Trademark laws, there is a possibility that Disney could trademark the hashtag. Previously, Disney had attempted to trademark the name of ‘Dies di los muerto’ or the day of the dead festival, a festival celebrated in Mexico, for their movie Coco. There was an outrage over Disney’s actions of claiming ownership over a festival and several termed it as a form of cultural appropriation. The term ‘Dies di los muerto’ is only descriptive of a certain event and further has been used as a popular term since ages. Similarly, MayThe4th does not fulfil the basic criterion required for it to be granted protection under trademark laws and consequently even the hashtag MayThe4th would not be granted any.

Assuming a scenario where Disney does own the trademark over #MayThe4th, or manages to attain one in the future, would the terms and conditions put forward by Disney on Twitter be binding on its users? In the next part of this series we seek to answer questions related to the nature and enforceability of the contract or the terms and conditions put forward by Disney.


[1] U.S. Patents and Trademarks office, Lanham Act, 15 U.S.C § 1065 (2013).

 

Part 2 of the blog.

 

This is part 1 of a 3-part blog written by Karthik Subramaniam and Shrudula Murthy, Second Year Undergraduate Students of Law at NALSAR University of Law, Hyderabad. They can be contacted at their respective email id at karthik.subramaniam.nalsar@gmail.com and shruanshu@gmail.com.

The views expressed are personal and do not express views of the organisation.

Picture Courtesy: Lucasfilm LTD. – https://www.starwars.com/star-wars-day

(Image in Public Domain)

An Evidence-Based Analysis of Relevant Market- The Case of Ridesharing in Delhi-National Capital Region (India)

By: Amol Kulkarni[1], Swasti Gupta[2] , Parveer Singh Ghuman and Ujjwal Kumar[3] 


Introduction

Globally, digitalization is expanding at an unprecedented pace. Rapid internet revolution has made multi-sided platforms (MSPs) ubiquitous in our modern economy. In India, ride sharing within urban transportation is one sector that has been significantly upended with the entry of MSPs. Owing to their distinct features, these Online App-based Platforms (OAPs) exhibit significant competitive pressure on traditional players. Concurrently, the enforcement of competition law with respect to MSPs generally and OAPs specifically is at an incipient stage. Particularly, the delineation of market definition of MSPs forms the hotbed of competition law discourse.

Ascertaining the relevant market encompasses the relevant product and geographic markets. According to the Indian Competition Act, 2002, a significant factor for the accurate delineation of relevant market is an intricate assessment of several factors, including ‘consumer preferences’. However, the extent to which consumer preferences are currently evaluated and relied on appears to be limited and lacks on-the-ground research.

To fill this void, we undertook an evidence-based analysis to ascertain the relevant market of OAPs in the context of the ride sharing industry in the Delhi National Capital Region from the perspective of consumers (both riders and drivers on OAPs).

Methodology

We undertook on-the-ground in-depth in-person interactions with 1377 riders and 660 drivers in Delhi NCR to understand their preferences and switching decisions with respect to urban transportation. Price as well as non-price factors influencing consumer preferences and decisions were gauged. The survey results were supplemented with findings from Key Informant Interviews with relevant stakeholders such as on-the-ground service providers, transport and competition experts (national and international) as well as government officials. The data sets were analysed by applying tailored versions of Small but Significant Non-transitory Increase in Price and Small but Significant Non-transitory Decrease in Quality tests in a complementary manner to ensure robust findings.

Importance of non-price factors and network effects

The first step in the relevant market analysis was to undertake a general assessment of riders’ preferences in the market. We found that OAP services (followed by personal vehicles and non-app autos) were most preferred private/ hiring modes of transport by riders. Radio taxis did not rank high despite offering similar physical characteristics as OAPs as riders value non-price factors such as availability and reliability, as much as price, while choosing a mode. These are supply-induced factors which are directly linked to the critical mass of drivers available with OAPs at all relevant times. Alongside income, drivers also value non-price factors such as more riders on a platform and readily available rides, in attaching with OAPs. These are demand induced reasons, responses in favour of which collectively surpass the most obvious incentive for drivers, i.e. a better income. These findings indicate a growing significance of non-price factors alongside price factors for consumers, and the relevance of cross group network effects generated by platforms.

Multifarious consumer preferences

We found that preferences of riders are multifarious and are influenced by factors like their income, gender, geography, purpose, duration, and time of the trip. For instance, some riders prefer OAP services owing to availability, while women riders prefer personal vehicles for the reasons of safety. Similarly, riders travelling within Delhi are likely to value price over other factors, while riders travelling to Delhi from other parts of NCR are likely to value reliability and comfort more.

As a result, riders are unlikely to view OAP services uniquely. While considering alternative modes, they are likely to compare specific features of OAPs, from which they derive most value, with similar features of other service providers, online as well as offline. This leaves scope for innovation and entry in the market substantially open.

Similarly, a substantial number of drivers are likely to switch to a new online platform which, if it caters to specific driver needs (price or non-price), may be able to compete with existing platforms. Thus, it was found that despite the existence of cross-price network effects, there is scope for innovation and entry in the market.

Relevant product market

To examine shifting decisions of riders, different scenarios in the form of hypothetical increase in prices, decrease in availability, and unavailability of OAPs were administered. Their shifting trends were further analyzed across demographics like income, gender and geography. We found that there is a significant shift of riders availing OAP services to alternative modes (app and non-app based) of transport indicating that current pricing levels are competitive and not monopolistic.

We envision the relevant product market for riders as ‘market for transportation services for riders’, in which the different probable substitutes of OAPs in Delhi-NCR are OAP service providers, non-app auto rickshaws, personal vehicles, non-app taxis, metro and radio taxis (in the decreasing degree of substitution).

To examine the shifting decisions of drivers, differnt scenarios in the form of hypothetical increase of service fee of platform operators, reduction in incentives of drivers, and unavailability of OAPs were administered. Key alternatives considred by taxi drivers are other OAPs or plying as non-app taxis (in that order) and key alternates considered by auto drivers are plying as non-app autos or linking with other OAPs (in that order), due to difference in shifting costs and friction for taxi and auto drivers. We envision the relevant product market for drivers as ‘market for facilitation services to drivers for accessing riders’.

Relevant geographic market

We found that the cities of NCR where OAPs are providing their services, including New Delhi, Faridabad, Ghaziabad, Gurugram and Noida lie in the same relevant geographic market for OAP services. Sonepat, however, displays heterogeneity in availability of OAPs and rider preferences, and is unlikely to fall in the relevant geographic market.

Relevant market

The relevant market on the riders’ side has been delineated as market for transportation services for riders in Delhi NCR (consisting only the following cities: New Delhi, Faridabad, Ghaziabad, Gurugram and Noida).

The relevant market on drivers’ side has been delineated as market for facilitation services to drivers for accessing riders in Delhi NCR (consisting only the following cities: New Delhi, Faridabad, Ghaziabad, Gurugram and Noida).

This study marks further support to growing body of literature on a more intricate determination of relevant market in competition assessments. Further, as the study highlights, the need for weighing in consumer preference and non-price factors is an essential exercise that must be undertaken by competition authorities across the world in order to ensure that rhetoric do not suppress the market reality. This is especially true for digital markets.

 


Amol Kulkarni is Director (Research), at CUTS International, Jaipur. [Profile]

Swasti Gupta is a Research Associate at CUTS International, Jaipur.

Parveer Singh Ghuman Is an ex-colleague from CUTS International who participated in the study.

Ujjwal Kumar is a Policy Analyst with CUTS International, jaipur. [Profile]

[1] https://cuts-ccier.org/pdf/CV-Amol.pdf; https://www.itu.int/en/ITU-T/Workshops-and-Seminars/ifds/Pages/KULKARNI-AMOL.aspx;.

[2] https://cuts-ccier.org/pdf/CV-SWG.pdf

[3] https://cuts-ccier.org/pdf/CV-Ujjwal.pdf

Picture Courtesy: User:vm2827 – https://www.flickr.com/photos/vm2827/2623555339/

Has the Supreme Court Changed Below-Cost Pricing to Predatory Pricing?

Soham Goswami


The Supreme Court of India has passed an order dismissing the appeal against the erstwhile Competition Appellate Tribunal’s (“COMPAT”) decision in Meru Travel Solutions Pvt. Ltd. v Competition Commission of India.[1] Vide judgement dated 3 September 2019, Rohinton F Nariman and Surya Kant JJ affirm the COMPAT’s decision.

Briefly: vide order dated 10th February 2016, the Competition Commission of India (“CCI”) had dismissed an Information filed by Meru Cabs on the grounds that conflicting statistical reports had been filed by the Informant and Uber was not a dominant player in the delineated market.[2] In appeal, the COMPAT held that the CCI had selectively read the reports and misunderstood them as a result and further, did not take the other factors in assessing dominance under Section 19(4) into account; as a result, the COMPAT reversed the CCI decision and sent the matter to the Director General to investigate. Uber appealed the COMPAT order to the Supreme Court.

The Supreme Court’s judgement (I shall refer to the same henceforth as a dismissal order; the Court has declined to hear this appeal on its merits) sets out the following reasons for not interfering with the COMPAT order:

  1. The ingredients of abuse of dominance set out in section 4(1) are two, i.e. a dominant position and its abuse;
  2. Explanation (b) to section 4(2)(a)(ii) (predatory price) would automatically attract scrutiny insofar as a dominant entity engages in below-cost pricing (“predatory pricing” in the language of the Competition Act 2002) thereby attracting this section prima facie. Notice the circular reasoning.

This reasoning could spell trouble for competition law jurisprudence in India. It implies, if not expressly provides for, per-se treatment of below-cost pricing. Note that below-cost pricing is arguably a misunderstood area of competition law, prone to errors known as Type I and II errors (false positives and false negatives, the latter being significantly more detrimental to consumer welfare) and can only turn predatory in a given set of circumstances.[3] These decisions collectively state that:

  1. below cost-pricing under the firm’s average variable cost (AVC) is inherently predatory;
  2. Pricing above AVC and below average total cost (ATC) are only predatory where there is an actual or likely detrimental effect on competition,
  3. the firm accused is unable to offer an objective justification.

The CCI explained the framework to assess anti-competitive effects of predatory pricing in MCX v National Stock Exchange & Ors.[4] This decision was affirmed by the erstwhile COMPAT:

“before a predatory pricing violation is found, it must be demonstrated that there has been a specific incidence of under-pricing and that the scheme of predatory pricing makes economic sense.

 

The size of Defendant’s market share and the trend may be relevant in determining the ease with which he may drive out a competitor through alleged predatory pricing scheme-but it does not, standing alone, allow a presumption that this can occur. To achieve the recoupment requirement of a predatory pricing claim, a claimant must meet a two-prong test: first, a claimant must demonstrate that the scheme could actually drive the competitor out of the market; second, there must be evidence that the surviving monopolist could then raise prices to consumers long enough to recoup his costs without drawing new entrants to the market.”

 

(emphasis mine.)

The two-prong test is in conformity with jurisprudence from the EU dealing with below-cost pricing, which is usually followed as precedent in the CCI and Appellate Tribunal. Supreme Court’s decision would, in practice, reverse this test to require the enterprise accused by the informant herein to demonstrate either a lack of market power or that it had no intention to increase prices. Neither are supposed to be incumbent upon the accused enterprise.

The legislative framework of the Competition Act 2002 allows the CCI discretion (“if the Commission is of the opinion…”) in establishing a prima facie opinion; however, any case involving below-cost pricing is now, in the Court’s language, predatory pricing and therefore a prima facie case:

“Explanation (a)(ii) would prima facie be attracted inasmuch as this would certainly affect the appellant’s competitors in the appellant’s favour or the relevant market in its favour.

 

Insofar as ‘abuse’ of dominant position is concerned, under Section 4(2)(a), so long as this dominant position, whether directly or indirectly, imposes an unfair price in purchase or sale including predatory price of services, abuse of dominant position also gets attracted.”

The Supreme Court had, most recently in West Bengal Electricity Regulatory Commission v Calcutta Electricity Supply Corporation, set out the law relating to an appellate court’s ambit of powers while considering a tribunal’s decision.[5] Merely because the appellate court believes that on review of the material before it that a contrary outcome is possible, it should not substitute its views for that of the regulator’s. This is owing to the lack of expert qualifications on the appellate court’s bench. Though the Supreme Court has affirmed the COMPAT order in the present case, it has gone a step further and substituted an arguably more reasoned order (the COMPAT order) with its own findings; the doctrine of merger will require that the COMPAT order will now merge into the Supreme Court’s.

The CCI has no established competition policy; two attempts by the Ministry of Corporate Affairs to publish a national company policy never bore fruit. The legislative framework of the Competition Act 2002, however, allows the CCI to exercise a great deal of discretion at the section 26(1) stage (this is not a quasi-judicial order). As can be seen above, given that below-cost pricing issues need significant scrutiny, and therefore the CCI’s discretion is warranted. However, the regulator must now necessarily treat all Informations dealing with below-cost pricing as predatory pricing complaints, and must refer the same to the Director General for investigation.

This has far reaching implications for a regulator that only last month celebrated ten years of its functioning. One might recall that the legal framework governing the CCI’s predecessor, the Monopolies and Restrictive Trade Practices Commission, proceeded under the presumption that any restrictive trade practice was prejudicial to the public interest unless the parties could demonstrate that their case fell within the strict exceptions under section 38 of the old statute.[6] The CCI should not proscribe below-cost pricing unless the test explained in MCX is satisfied, and by the informant; to do otherwise would be detrimental to Indian competition law.

It remains to be seen whether the Dismissal Order is applied by prospective Informants in claims involving below-cost pricing.

[1] Civil Appeal 641 of 2017, against COMPAT Appeal 31 of 2016.

[2] Competition Commission of India, Case 95 of 2016.

[3] See Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3559 and Case C-209/10, Post Danmark A/S v Konkurrenceradet.

[4] Competition Commission of India, Case 13 of 2009.

[5] (2002) 8 SCC 715.

[6] s 38, Monopolies and Restrictive Trade Practices Act 1969.


Pic courtesy: By Petar Milošević – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=42775314

L2Pro India IP e-learning Platform Launch on 14th October, 2019 at Udyog Bhawan, DPIIT, Ministry of Commerce & Industry

Centre for Innovation, Intellectual Property and Competition (CIIPC), NLU Delhi on Monday, 14th October, announced the launch of the L2Pro India IP e-learning platform in collaboration with Cell for IPR Promotion & Management (CIPAM), DPIIT, Government of India and Qualcomm Inc.

The L2Pro (Learn to Protect) India IP e-learning platform aims to educate start-ups, MSMEs and innovators on protection and enforcement of their intellectual property. It was launched by the Hon’ble SIIT Mr. Guruprasad Mohapatra. As an e-learning platform, the course is divided into three different levels. The basic level provides an overview of the intellectual property landscape in India. The intermediate and the advanced levels deal in detail with the more sophisticated concepts of protecting, managing, and commercializing IP, funding, the role of IP tech-standards, and IP dispute settlement. The course consists of interactive introductory and summary videos, e-text with detailed explanation on concepts, brain teasers, practical information, and assessments to grade the learner’s knowledge. The content has been authored by Prof. Yogesh Pai, Assistant Professor of Law, Co-ordinator-IPR Chair, and Co-director-CIIPC, NLU Delhi and Ms. Pragya Chaturvedi, Research Fellow, CIIPC.

Mr. Rajiv Aggarwal, Joint Secretary, DPIIT in his welcome address and opening remarks thanked the Hon’ble SIIT for launching the platform. Mr. Aggarwal expressed pleasure at having the teams from Qualcomm, NLU Delhi and CIPAM present for the launch and stated that while the launch itself may seem like a small step, it is the effort behind it which speaks volumes. While thanking the respective teams for their efforts, he also expressed confidence that the teams will continue to cooperate and evolve an IP ecosystem in the entire country. Mr. Aggarwal also informed that while the intended audience is start-ups and MSMEs, the plan is also to introduce the online platform in academic institutions as presently there is only physical outreach and some online presence in the form of YouTube videos which have limited impact.

Mr. Parag Kar, Vice President, Qualcomm provided a brief overview of the L2Pro India IP e-learning platform. Mr. Kar emphasised that the e-learning platform has been customized for India, making it the biggest USP of the platform. He informed the Hon’ble SIIT that the L2Pro platform has already been successfully implemented in other countries, including Germany and Italy. Mr. Kar stated that the idea was to ensure that innovation, which is fundamental to all the activities being undertaken, specifically in relation to start-ups, is protected and monetized. Responding to the Hon’ble SIIT’s question on the strategy to popularise the course, Mr. Kar informed that there will be a marketing strategy in place soon after the launch to maximise its outreach. Mr. Kar then expressed his appreciation of Qualcomm’s partnership with NLU Delhi and CIPAM, stating that the project was made possible because of these valued partnerships.

Mr. Alexander. H. Rogers, Executive Vice President and President, Qualcomm Technology Licensing thanked the teams at DPIIT and NLU Delhi. While stating that Qualcomm has been working in India for a significant time, he expressed pleasure at the targeted focus on start-ups and emphasised the need of awareness about protecting, monetizing, and taking advantage of IP.

Prof. (Dr.) Ranbir Singh, Vice Chancellor, remarked that in today’s knowledge economy, start-ups and MSMEs play an important part in the economic growth of a nation and that we are at the cusp of the fourth Industrial Revolution in the age of 5G networks, Artificial Intelligence and Big-data. He expressed his confidence on the success of the collaboration between the Ministry, NLU Delhi and Qualcomm to undertake the L2Pro India project as present day start-ups thrive on innovation, new technologies and other creative ideas by protecting and enforcing their intellectual property. He also expressed pleasure on the tremendous progress the project has made within the span of a year and few months. He stated that this was no small achievement since the app and the web versions are very interactive and not only the start-up founders and SMEs, but anyone taking this course will find it to be immensely useful in learning about IP. Dr. Singh concluded by saying that the centre on IP and the recently constituted IPR Chair have been regularly contributing to the IP law and policy landscape in India and NLU Delhi has recently concluded a Memorandum with the World Intellectual Property Organisation, Geneva and the Government of India to host the WIPO summer school at NLU Delhi. He expressed hope that the current discussions with the Government to establish the WIPO LLM programme at NLU Delhi will be fruitful.

The launch by the Hon’ble SIIT comprised of the display of the course overview video, initial screens from the module on patents, and the introductory video from the same module. The Hon’ble SIIT welcomed all the attendees including the teams from Qualcomm and NLU Delhi and the Joint Secretary, Sh. Rajiv Aggarwal. He stated that he was delighted that the Ministry, Qualcomm and NLU Delhi have joined hands to undertake this vital project which was just launched. He expressed his confidence in the utility of the course, stating that it will be very useful for the start-up community, especially in terms of creating understanding of property rights and their protection. He also remarked that what we see on the screen is a finished product but undoubtedly a lot of work has gone into it and congratulated the teams on their efforts. He stated that in every sphere in the country, start-ups hold great promise but what they lack is the legal knowledge of this nature and this course will help them fill this gap.

With this, the launch was concluded and marks the commencement of the basic level of the course on the L2Pro India Platform. The intermediate and advanced level will follow in the coming months. For facilitating learning on the go, the platform has also been launched in the form of a mobile app which will be available on the Google Play Store and Apple Store shortly.

Intellectual Property, Regulation and Competition: Standards, Tech-Licensing and Global Value Chains in The Hi-Tech Industries- A presentation by CIIPC co-director

Yogesh Pai, Assistant Professor of Law and Co-Director, CIIPC at NLU Delhi in a session on ‘Developing the Linkages between Technology Policy and Other Policies: Thinking in Technology’ spoke on ‘Intellectual Property, Regulation and Competition: Standards, Tech-Licensing and Global Value Chains in The Hi-Tech Industries’ at the High Level Policy Dialogue on Technology and Innovation Policy in the Age of Global Value Chain on 11th June, 2019. The dialogue was organized by the International Institute for Trade and Development in Bangkok from 10th-12th June, 2019.

The dialogue focused on harnessing specific technology policies to address the emerging challenges of technology driven competition with a target audience of senior government policy makers, economists and researchers in varied allied fields spanning international trade, trade negotiation focusing on technology transfer, digital trade, high tech industry related trade, competition policies and regional trade agreements.

The first part of Mr. Pai’s address focused on the fourth industrial revolution (dubbed 4IR in industry parlance) which signifies a confluence of physical, digital, and biological spheres. He noted that 5G technologies, Internet of Things (IoT), Industrial Internet of Things, robotics, artificial intelligence (AI), and additive manufacturing through 3D technologies will be the key forces defining and driving home the revolution. Citing the World Trade Report, 2018, he highlighted the increasingly significant role of intellectual property in the form of heightened global trading of IP rights because of widespread licensing in certain technological spheres. He also stressed upon the fact that the current IP regime provides the requisite flexibilities to accommodate the different considerations emanating from the fourth industrial revolution.

The next part of the presentation dealt with IP and Global Value Chains (GVCs). Citing the WIPO Report on IP and GVCs (2017), he noted that GVCs are shaped by intangible assets in a minimum of two ways; by IP licensing for knowledge transfer and by determination of success in the marketplace through IP technology, design, and branding. Some facts relating to value capture through intangibles, size of the market, income from intangibles, the share of intangibles, and the GVC locations in the smartphone industry were also shared before moving on to the next part of the discussion.

Next was a comparison of India and China in the global value chain with focus on two sectors, smartphones and solar power. In the smartphone sector, the success of India’s Phased Manufacturing Programme (PMP) in luring firms to ‘Make-in-India’ through progressive tariff hikes was highlighted and it was also noted that with 11 percent share in global mobile phone production, India’s is the second largest mobile phone producer. It was also pointed that despite being next-in-order in mobile phone production; India lags behind in value capture with Vietnam, Brazil, and China racing far ahead in value-addition. With Japan launching a dispute on import tariffs in May 2019, the PMP scheme may be under challenge. In the solar sector, China’s position as the top supplier in all upstream and midstream PV market segments was noted, observing that the position has been majorly acquired through acquisition and scaling up. Note was also taken of India’s Jawaharlal Nehru National Solar Mission which aims to achieve the capacity of 20000 MW in grid connected solar power. It was also pointed that India after losing the dispute on Domestic Content Requirement (DCR) at WTO has now brought its DCR regulations in compliance, consequent to threats of retaliation. This casts a shadow on India’s future GVCs strategy in the solar cells/modules arena.

Moving on to the dynamics of IP licensing, he discussed Pervasive Technologies, IP licensing in industries requiring active know-how, and loss of labour as a comparative advantage in the context of rise of distributed manufacturing. He pointed out how fixing liability for infringement on 3D tech manufacturers since the 3D printing scenario may be problematic under IP laws in absence of actual knowledge of infringement since these machines may also carry-out non-infringing uses. With the remark that because of rampant infringement, licensing mechanisms would have to evolve, the discussion veered towards the challenges faced by the patent system.

Mr. Pai noted that the debate on challenges of the patent system centers on patent quality, patent quantity, and excessive litigation.  However, he expressed reservations on the validity of such debates in light of observations marking patent quality debate as a category mistake, the self-correcting tendencies of the markets and lack of systemic evidence on anti-commons, the sequential fallacies disputing the patent holdup/royalty stacking theories and also the lack of empirical evidence backing these theories, and finally the different effects different NPAs and PAEs can exert on the markets and the criticism of arriving at the cost of NPE litigation.

Next in the line of discussion were the role and limits of IP, Regulation, and Competition where the dialogue canvassed four key points. One, whether IP was private ordering or public ordering mechanism considering that the knowledge protected by IP is a public good, being non-rivalrous and non-excludable. Two, role and limits of competition law and policy when IP is a legal monopoly but not an economic monopoly and IP licensing is usually pro-competitive. Three, certainty and predictability in both ex-ante and ex-post regulation and four, compliance with international IP regimes.

Taking up two case studies covering licensing of Standard Essential Patents (SEPs) and licensing in Agri-Biotech in India, the discussion in Case Study 1 then focused on the amorphous nature that FRAND commitments usually take, the inherently contentious and litigative nature of SEP licensing, the sudden eruption of FRAND litigation in India, and the pending investigations in Competition Commission of India for abuse of dominant position. Case study 2 covered the nature of BT technology and its use in cotton hybrids, the investigations and litigation surrounding Monsanto and MMBL in India, and price control on patented inputs.

Concluding the discussion, Mr. Pai made certain tentative recommendations calling for conceptual distinctions to be made between the legal instrumentalities to be used by policy makers, namely, private ordering covering contractual restrictions and limitations in restrictive IP covenants, Quasi-Private ordering covering Patent remedies, Quasi- Public ordering covering Competition Law where limitations in the context of IP assume importance, and  public ordering covering regulatory mechanisms in the form of price controls and compulsory licences where certainty and predictability are very important. He concluded by stating that a one-size-fits-all approach may be disingenuous for countries at different stages in the context of GVCs.

The presentation can be found here.

Image courtesy: https://ec.europa.eu/europeaid/node/1032_nl