END-SEM NOTES - E-Commerce

General Disclaimer:
● These notes have been prepared based on my revision method.
● Points are explained in brief and are based on the materials I have.
● The color scheme in the notes are as follows:
○ Class notes (based on classes of Amrisha Maam and other materials gathered by
me) are in BLACK
○ I have also majorly relied on notes from Deepti Maam’s slides and those would be
in RED
○ Additional points from Karnika Seth would be in BLUE
● DO NOTE THAT THESE ARE NOT EXHAUSTIVE NOTES.

For any doubts and clarity or if you think I would have missed out on a topic please do let me
know!

All the Best and hope this helps!

- Titash
 UNIT 1: INTRODUCTION TO ELECTRONIC
COMMERCE

BUSINESS MODEL CATEGORIES

1. Business to Business (B2B)
○ Between businesses
○ Primary force of e-commerce as it attracts maximum capital flow
○ Low cost of procurement, production and operation
○ Better management of suppliers and customers
○ Higher sales - wider outreach, relationship with existing customers
○ Comprehensive data analytics help business grow better and faster
○ Eg: Automobile manufacturers, Serum Institute India (?)
2. Business to Consumer (B2C)
○ Businesses selling directly to the consumers using internet services
○ Smooth entries into market for sellers
■ Simplification of experiences for consumers
○ Stakeholders include enterprise buyers, enterprise sellers
■ Eg: Decathlon and BTwin
○ Services: Intangible and Tangible
○ Consumer to Business (C2B) - where consumers bring value to companies by
their ideas, reviews, reverse auctions(where consumers name a price for a product
or service that they would like to buy).
3. Government Transactions (B2G)
○ Companies bid for government contracts
○ B2G: Public sector marketing providing the government with goods and services
through integrated marketing communications
○ Encourages local service providers
○ Stable and guaranteed capital influx
○ Labour intensive, time consuming
○ G2C:
■ Electronic commerce
○ Availability of govt services to citizens in an efficient and transparent manner
(Eg: Reliance).
○ Employee management, Communication and correspondence
○ Democratizing Political participation to citizens; ensuring wider outreach , growth
of smaller regions, communities and initiatives.
○ Govt tenders - e-governance, e-courts, KISSAN, UIDAI
4. Consumer to consumer (C2C)
○ Consumers buy and sell products amongst themselves - sites such as ebay
○ Online auctions and non-corporate business activities, matrimonial services as
well

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DEFINITION, THEORY AND CONTEXT OF E-COMMERCE
● electronic commerce includes any form of economic activity conducted via electronic
connections.
● The bandwidth of an “electronic commerce” spans from electronic markets to electronic
hierarchies and also incorporates electronically supported entrepreneurial networks and
cooperative arrangements (electronic networks).
● Delineating among differing forms of electronic markets becomes even more difficult, as:
○ Organizational boundaries change or disappear and, as market coordination forms,
may also find a place within organizations themselves.
○ Value-added chains change, and value-added activities are newly distributed.
○ Customers become part of the value-added chain, and private citizens become
entrepreneurs on their own.
● Electronic data interchange (EDI) and electronic mail, for example, are central business
tools underlying the operation of electronic commerce.
○ Its a value added service
○ impossible to trade over EDI without a contractual agreement..
● The Internet is the universal dial-tone for conducting business.
● Electronic commerce should be perceived as ‘markets’ → Information is an essential
ingredient for the functioning of any market and is exchanged frequently between buyer
and seller
● Effects of IT in E-Commerce -
○ Vital for optimal performance -- augments the firm’ s capability to coordinate
business transactions within the firm, but also among firms such as between
buyers and suppliers.
○ The communication effect -- Advances in information technology allow for
more information to be communicated in the same unit of time, thus reducing
transaction costs
○ The electronic integration effect -- A tighter electronic linkage between buyer
and seller is enabled
○ The electronic brokerage effect -- An electronic marketplace where buyers and
sellers come together to compare offerings
○ The electronic strategic networking effect -- Information technology (including
networks) enables the design and deliberate strategic deployment of linkages and
networks among cooperating firms intended to achieve joint, strategic goals to
gain competitive advantage
● The resulting new organizational forms indicate an ongoing transformation of value
chains due to technological change
● Disintermediation -- Disintermediation is the displacement or elimination of market
intermediaries, enabling direct trade with buyers and consumers without agents.
Electronic markets allow firms to reach very large customer groups at very low costs
● Electronic commerce denotes the seamless application of information and
communication technology from its point of origin to its endpoint along the entire
value chain of business processes conducted electronically and designed to enable
the accomplishment of a business goal. These processes may be partial or complete
and may encompass business-to-business as well as business-to-consumer and
consumer-to-business transactions.

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● Interactivity tends to be high in most electronic commerce settings. It appears also that
the higher the degree of interactivity, the more perfected the electronic market might be.
Four essential features in order to ensure their acceptance:
○ (1) The device or service must replace a process that is inefficient, costly or
boring,
○ (2) consumers must not be asked to choose between competing technologies,
○ (3) consumers must not feel a “tracked” or that privacy is threatened, and
○ (4) consumers must perceive that the use of the service (and information
technology) is relatively easy and user-friendly.
● Theoretical/Conceptual Approaches to Electronic Commerce
○ Transaction Cost Theory
■ Transaction costs may be viewed as the economic equivalent of friction in
a physical system -- if transaction costs are high, no or little economic
activity is likely to occur.
● Search costs -- the cost of searching for products, sellers, and
buyers
● Contracting costs -- the cost of setting up and carrying out the
contract
● Monitoring costs -- the cost ensuring that the terms of the
contract have been met
● Adaptation costs -- the cost incurred in making changes during
the life of the contract
○ Marketing
■ Three main foci of orientation within the marketing effort are identified:
customer orientation, product orientation, and profit orientation.
■ The basic challenge faced by a firm, then, is to identify needs and provide
linkages between the firm and its customers.
■ Electronic commerce can provide a direct linkage, an electronic marketing
and information channel, between these target customers and the firm.
■ The term liquid marketing suggests itself as a suitable and appropriate
descriptor of this evolving setting.
■ Moreover, the concept of liquid marketing is enabled by the Internet’s use
and while being interactive with those individuals within the target group.
■ Future electronic commerce marketing strategies may demand that we
attempt to bring in the buyers and hook them to products and services
offered such that it is very difficult for customers to leave or switch,
resulting in competitive advantage.
○ Diffusion
■ Social process by which an innovation is communicated through certain
channels over time among members of a social system.
■ Resembles the task at hand in the electronic commerce setting; that is, a
task or transaction needs to be communicated to a set of firms or
customers (members of a social system) within a market or an industry.
■ Electronic messaging via the Internet comes close to this ideal, that is,
using a cost effective one-to-many medium while still reaching specific,
targeted individuals, assuming a critical mass of users of this medium.

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 ○ Information retrieval
■ Firms tend to be overwhelmed with information stored in central
databases, as well as dispersed documents (e.g., correspondence) in
various places throughout the organization.
■ In electronic dissemination, it is obvious that the users can readily retrieve
information once the information is stored on the system.
■ Many databases are available within firms that could be accessed through
the Internet.
○ Strategic Networking
■ The deliberate design and deployment of networks enabling new
organizational forms, includes all four of the preceding topics, without
which networking could not take place.
■ Strategic networks as a distinct organizational form, that is, as being
separate from other organizational forms: hierarchy, market, and clan.
■ we can label networks strategic networks, as they reflect connotations of
long-term, rational importance, being proactive, selectivity, complexity,
intention and coherence.
● Definitions of E-Commerce:
○ Refers to various online commercial activities focussing on commodity exchanges
by electronic means, by companies, factories, etc
○ ISO defines it as it is the general term for exchange of information among
enterprise and between enterprise and customers.
○ Intel → Ecommerce = electronic market + electronic trade + electronic service
○ IBM → Information technology + web + business
○ HP → Ecommerce is to accomplish the commercial business by electronic means.

Advantages and Disadvantages of E-Commerce

Advantages Disadvantages

1. Removes barriers of geography. 1. High costs of the E-commerce portal.

2. A larger market – more choices. 2. No interpersonal relationships.
3. Security issues.
3. No brick mortar.
4. High risk of failure.
4. Low transaction cost.
5. No personal touch.
5. Less effort on the consumer.
6. Anti-competitive effect.
6. Less time consuming – highly debatable. 7. Credit card fraud.
7. 24x7 shopping. 8. Data piracy.
8. Quick transactions. 9. Privacy violation.
10. Taxation issues.

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9. Deep discounts. 11. Violation of Intellectual property.
10. High reciprocity to consumer trends. 12. Quality issues.

11. Opportunities to sell.

12. Instant gratification.

United Nations Commission on International Trade Law - MLEC

● Provides a set of internationally accepted rules which aim to remove legal obstacles and
increase legal predictability for e-commerce.
● It has established equal standards for paper based and electronic information thereby
promoting the use of technology in communication.
● MLEC has a limited framework approach and governs only those aspects of e-commerce
that enable and facilitate e-commerce.
● Fundamental Principles of E-Commerce Law:
○ The principle of non-discrimination – It ensures that any document would not
be denied legal validity, effect, and enforceability solely on the basis that it is in
electronic form.
○ The principle of technological neutrality – It mandates the adoption of such
provisions which are neutral with respect to technology used. This aims at
accommodating any future developments without any further legislative work.
○ The functional equivalence principle – It sets out the specific requirements that
e-communication ought to meet in order to fulfill the same functions that certain
notions ,in traditional paper based system, seek to achieve, for example,
“writing”, “original”, “signed”, and “record”.
● Key Provisions of MLEC:
○ Part II: Articles 15 and 16 - carriage of goods, and transport of documents
○ Art.3: standard of international origin and uniformity in application of general
principles of law.
○ Art.4: variation in the communication of data messages by the agreement of the
parties
○ Art.5: principle of non-discrimination - information communicated via electronic
mode, cannot be denied legal validity and effect.
○ Art.6 and 7: Accessibility of data messages does not require the document to be
in writing, and recognition of digital signature marks the approval of the full
structure of the contract.
○ Art.8: Originality of data messages -- fulfill the legal requirement of presentation
and retention of information in its original form subject to the assurance of
integrity and presentability of data messages.

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 ○ Art.9: specifies that the data messages cannot be denied admissibility in the court
of law solely on the basis that the information is in the form of a data message.
Thus, evidentiary value has been granted to data messages.
○ Art.10: retention of information in the form of data messages subject to the
accessibility, accuracy and originality of format and identity of origin
○ Art.11: the formation of a valid contract was made possible through the means of
data messages → Offer and acceptance of offer, when communicated in the form
of data messages, cannot be denied legal validity and enforceability
○ Art.12: Acknowledgement in the form of receipt of data messages has also been
granted legal validity.
○ Art.13: The data message is attributed to the originator if it is sent by him or by a
person authorised by him
○ Article 14 provides that the receipt of the data message and its acknowledgement
can also be agreed upon by the parties beforehand.
○ Art.15: The transaction ensues when the information goes out of control of the
sender. The place of dispatch is the place of business and the time is when the
acceptance enters the system of the addressee.
● Interpretation by domestic courts:
○ Khoury v. Tomlinson is a landmark case decided by the Texas Court of Appeal.
The facts of this case are such that an agreement was entered via e-mail which
was not signed but only the name of the originator appeared in the ‘from’ section.
Referring to the principles in Article 7 of the Model Law, the court found
sufficient evidence that the name in the ‘from’ section establishes the identity of
the sender.
○ Martha Helena Pilonieta v Gabriel Humberto Pulido Casas is a case dealt with
by the Supreme Court of Justice of Columbia. The court found that the electronic
message by a spouse was not relevant on the ground of evidential thresholds.
● Conclusion:
○ Factors leading to the formation of the model law: heterogeneity in electronic
contracts, lack of legal enforcement, threats to international trade
○ Objectives secured by MLEC:
■ Validation and recognition of contracts formed through electronic means
■ Validating originality and retention of documents in electronic form
■ Validity of electronic signature for legal and commercial purposes
■ Admissibility of electronic evidence in courts and arbitration proceedings

IT Act Provisions governing E-Commerce:

● It Act was passed to facilitate e-commerce and grant legal recognition ot e-contracting
(preamble of the Act).
● Based on the UNCITRAL MLEC
● Sec.3: Authentication of electronic records
● Sec.4: Grants legal recognition to e-records
● Sec.5: Grants legal recognition to e-signatures

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 ● Sec.10A: contracts cant be deemed to be unenforceable merely on the grounds that
electronic means have been used for the same purpose.
● Chapter IV: attribution, acknowledgement and dispatch of e-records
● Chapter V: secure electronic records and secure electronic signatures
● Chapter VI and VII: legal framework and infrastructure to support an efficient
e-commerce regime
● Chapter VIII: Duties of subscribers pertaining to private and public keys
● Chapter XII: Intermediary liability

Anisha’s Asynch Assignment (BBA A)

UNCITRAL Law on E-Commerce IT Act, 2000

Art. 5 provides for legal recognition of data No such provision exists in the IT Act
message that states that such data messages
shall not be denied validity, legality or
enforceability on sole grounds that it is a data
message.

Art. 5 bis. Any information shall not be No such provision exists in the IT Act
denied validity, legality or enforceability on
the sole grounds that it is not contained in the
data message but is merely referred to in the
data message.

Art. 6 where law requires information to be in Under section 5 of the IT Act, provides for
writing, a data message if the information legal recognition of electronic records where
contained therein is accessible so as to be if law requires any information to be in
usable for subsequent reference is deemed to writing, typewritten or printed form, then it is
have met the requirement. It applies when deemed to be satisfied if it is rendered or
there is an obligation or law has consequences made available in the electronic form or is
for not being in writing. usable for a subsequent reference.

Art. 8 provides for signatures which states Chapter II of the IT Act under section 3, deals
that when law requires the signature of a with electronic signature where it is
person, it is met in relation to a data message authentication is given effect by use of crypto
if a method is used to identify and indicate his currency and hash function and a pair of
approval; the method is reliable for which the public and private keys are used that
data was generated. It applies when there is an constitute a functioning pair. Further section

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obligation or law has consequences for not 3A provides that the subscriber may
being in writing. authenticate an electronic record if it is
reliable and as specified under the II
Schedule. Subsection (2) provides for what is
considered reliable and under subsection (3)
and (4) about Government prescribing
procedures for authentication and the manner
of publishing the notification prescribing it.

Art. 9 provides for the admissibility of digital No such provision exists in the IT Act
evidence and states that it shall not be denied
admissibility on the sole ground it is a data
message or best evidence that a person
adducing it could reasonably obtain. While
giving weight to digital evidence, regard shall
be given to the manner it was generated,
stored, communicated and the reliability of
such data in the form of integrity.

Art. 10 provides for the retention of data Section 7 provides for retention of electronic
messages, wherein it states the conditions that record and the provisions of this section are
should be met while retaining it. similar to the clauses provided under Art. 10
of UNCITRAL.

Art. 11 deals with the formation and validity Section 10 A provides for validity of contracts
of contracts where it states that an offer and formed by electronic means wherein, the
acceptance must be expressed over data validity of a proposal, acceptance, formation,
messages. The said contract shall not be revocation are not considered invalid on the
denied validity on the sole ground that data sole ground that it was done so using
messages were used for the purpose of electronic form or other such means.
formation.

Art. 12 provides for recognition by parties of There are no direct provisions similar to Art.
data messages wherein, a declaration of will 12, however Chapter IV provides for
or other such statements shall not be denied attribution of electronic records to the
validity on the sole grounds that it is in the originator, receiver and time and place of such
form of data message. dispatch and its subsequent receipt under
sections 11-13 of the Act.

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 UNIT 2: E-CONTRACTS
INTRODUCTION
● Essentials of a contract
○ Section 10 ICA
■ Offer and Acceptance
■ Lawful consideration
■ Lawful object
■ Free and informed consent
■ Intention to create a legal partnership
■ Parties must be competent to contract
■ Agreement must be able to be performed
● Legal aspects of e-contracts
○ IT Act -
■ Sec 2(t)- E-records
■ Sec 2 ( r) - Electronic form
■ Sec 4- Recognition to e-records
■ Sec 10A- Recognition of e-contracts
○ Section 4 and Section 10A IT Act 2000:
■ Legal enforceability to the conventional means and methods of execution
of a contract
■ Fulfillment of online requirements through electronic medium
■ Exceptions:
● Negotiable instruments
● Power of attorney
● Will/testament
● Trusts
● Conveyance or sale of immovable property
● E-contracts under the Indian evidence act
○ Evidence under section 3 of the act includes ‘electronic records’
○ Case: NCT of Delhi v. Mohd Afzal; Harpal singh vs. St of Punjab -- legal
validity of electronic evidence; qualifications applicable under s.65B of the Act
■ Mhd Afzal case - the person challenging evidence has the onus to prove
the same
● E-contracts under Indian Stamp Act 1899
○ For the purposes of this legislations, states have amended their respective stamp
laws to include electronic record as “instruments”creating rights, duties, and
liabilities
○ Electronic signatures -- State amendments incorporated.
○ Electronic records are easier to trace
● For e-contracting usually, a website is used or an online contact is formed by e-mail
exchange between the parties.
● Article 11 of UNCITRAL MLEC grants recognition to the validity and enforceability of
Clickwrap licenses.

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 ● Sec.10A IT Act, confers legal recognition to electronically formed contracts

Execution and Formation of E-contracts:

● Offer:
○ Offer- Sec 2(a) Indian Contract Act, 1872 ( obtaining assent)
○ General Offer vs Specific Offer-
■ Carlill vs Carbolic Smoke Ball case, Lalmanshukla (Sec 8)
○ Express offer vs Implied Offer- Sec 9 Indian Contract Act, 1872
○ Counter Offer- Hyde vs Wrench
○ Cross Offer- Tinn vs Hoffman
○ Standing Offer- single contract vs multiple contracts
○ Invitation to offer vs Offer
■ Fisher v Bell (invitation to offer - shop advertisement)
○ Mailbox Rule: (Adam v Lindsell)
■ Contract is concluded when an accepted is communicated to the offeror
■ Contract is formed when the letter is dispatched in the Mail Box
● Execution
○ Digital signatures
○ Emails
○ Scanned copies of paper-based contracts
○ Electronic signature -- compliance under the UIDAI Act -- controversial
● Formation
○ Email
○ E-commerce websites
○ EULA
○ Electronic Data Interchange
○ Electronic Agents
● Websites as invitation to offer or offer:
○ Case laws:
■ Harvey vs. Facey
■ Pharmaceutical Company of Great Britain vs. Boot cash Chemicals
● “Advertisement usually means ‘invitation to treat’ or invitation to
the world at large for the public to submit an offer to purchase the
product advertised”
■ Lefkowitz vs. Great Minneapolis Surplus Stores
■ Chwee Kin Keong vs. Digilandmall.com
○ Art. 11 of NY Convention 2005 -- Manner of ads decides the nature of contract

CONTRACTUAL ISSUES
● Agreement:

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 ○ Offers may be made directly or through a mass email or through a web page. → a
mass email or advertisement on a web page may be either an offer or an
invitation to make an offer.
○ Conclusion of contract → If any advertisement over the web or any
communication over the internet (automatic or otherwise) is construed as an offer,
and if that offer is unconditionally accepted, the contract is concluded. On the
contrary, if the advertisement is construed as an invitation to make an offer, it only
invites users to make an offer for the advertised product or service.
○ As such, web advertisements will be an invitation to offer unless it clearly
indicates the web advertiser intends to be bound upon the acceptance.
○ IT Act and MLEC → states that unless otherwise agreed by the parties, an offer
and the acceptance of an offer may be expressed by means of ‘electronic records’.
● Offers:
○ Under the Information Technology Act, 2000 the offer is made, unless otherwise
agreed between the originator and the addressee, at the time when the electronic
record enters any information system designated by the addressee for the
purpose or, if no system is designated for the purpose, when the electronic record
enters the information system of the addressee or, if an information system has
been designated, but the electronic record is sent to some other information
system, when the addressee retrieves such electronic record.
● Agreement:
○ Section 4 of Indian Contract Act 1872 → acceptance is complete as against the
offeror, when it is put in the course of transmission; the communication of
acceptance is complete as against the offeree, when it reaches the knowledge of
offeror.
○ E-commerce has 4 ways of conveying acceptance:
■ By sending an email message of acceptance.
■ By delivery online of electronic or digital product/service
■ By delivery of physical product.
■ Or by any other act or conduct indicating acceptance of the offer.
○ Section 12 of IT Act -- Revocation of offer: provides that the acceptance is
binding on the offeree when the acceptance is out of his control, and binding
on the offeror when he receives the acceptance. (thus is different from the
position under the ICA).
● Revocation:
○ IT Act -- states that the offeror is bound by an acceptance when he is in
receipt of it.
○ Therefore, if a revocation of the offer enters the information system of the
offeree before the offeror is in receipt of the acceptance, the revocation is
binding on the offeree and no valid acceptance can be made.
○ The Information Technology Act, 2000 and the UNCITRAL Model Law differ
from the Indian Contract Act, 1872 and state that an acceptance becomes binding
on the offeree the moment the acceptance enters an information system outside
the offeree’s control.
● Conclusion of contract:

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 ○ In Entores, (Entores Ltd. v. Miles Far East Corporation [1955] 2 Q.B. 327, 332.)
it was held that in the case of oral communication or communication by telex or
over the telephone, acceptance is communicated when it is actually received by
the offeror, and therefore the contract is deemed to be placed where it is received;
this view was accepted by the Supreme Court of India.(Bhagwandas v/s
Ghirdharilal & Co [1966] 1 S.C.R. 656.)
○ The Information Technology Act, 2000 provides that the dispatch of an electronic
record occurs when it enters an information system outside the control of the
person who sent the record, unless otherwise agreed.
○ The time for receipt of an electronic record is determined by the time when the
electronic record enters the computer resource designated by the addressee or, if
the electronic record is sent to a computer resource not designated by the
addressee, it occurs at the time when the addressee retrieves the electronic record.
■ Alternatively, if no computer resource has been designated, then receipt
occurs when the electronic record enters the ‘computer resource of the
addressee’.
● The electronic records are deemed to have been dispatched at the place the originator of
the message has his principal place of business and received at the place where the
addressee has his principal place of business.
● Section 4 of the Information Technology Act, 2000, which states that where a law
requires information to be written or to be presented in writing, or provides for certain
consequences if it is not, an electronic record satisfies that rule if the information
contained therein is accessible so as to be usable for subsequent reference.
● Article 5 of the UNCITRAL Model Law states that where the law requires information
to be in writing, that requirement is met by a data message if the information contained
therein is accessible so as to be usable for subsequent reference.
● Digital Signatures and Encryption:
○ Cryptography uses sophisticated mathematical algorithms, particularly a
technology known as ‘asymmetric cryptography’.
○ Cryptography can be differentiated between the following:
■ use of cryptography for confidentiality of a message; and
■ use of cryptography in digital signature.
○ The most popular and useful method of encryption for general messaging is
public key cryptography;
○ One key is used for encryption and the other corresponding key is used for
decryption.
○ Under IT Act encryption is regulated by the DoT.
■ As at the time of writing, permission is required from the DoT to send
encrypted messages.
○ Section 2(p) read with Section 3 of the Information Technology Act, 2000
establishes that a signature could be sent using public key cryptography. In order
to link the identity of the sender with the signature, it is necessary to attach a
digital certificate, which is issued by so-called CAs.
○ Section 15 provides that a digital signature is a ‘secure digital signature’ if it can
be verified using a security procedure applied by the parties concerned.

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TYPES OF E-CONTRACTS:

Shrink-wrap
● These contracts are considered to be license agreements which are ‘enforceable’ the
moment the user begins using the product. This implies that the acceptance by the user
begins with the usage of the product/service. These contracts/agreements are widely used
by programmers and organisations due to the reason that they are ‘unsigned permit
understandings’ - viz. the user acknowledges the terms and conditions once the
link/‘package’ has been opened(accessed).
● Boilerplate contracts -- usage of product is deemed acceptance.
● Are enforceable unless their terms are objectionable on the grounds applicable to
contracts in general.
● UCC - Uniform Commercial Code - has to be followed
● Case: ProCD vs. Zedidenberg
○ “By opening this package you are consenting to be bound by its license
agreement. If you do not agree to all of the terms of this agreement, return the
unopened product to the place of purchase for full refund” -- was on the cover.
○ District Court: held that licenses are ineffectual as their terms do not appear on
the outside of the package.-- terms inside the package are a ‘secret’ at time of
purchase.
○ Held: no contract was formed by the parties until the buyer accepted the sellers
terms by electing to keep the contract
○ The UCC permits parties to structure their relationstions so that the buyer has a
chance to make a final decision after a detailed review. The customer inspected
the package, tried out the software, learned of the license and did not reject the
goods, which the customer could if the license was unsatisfactory. Thus buyer
had accepted and was bound to abide by the license.

Click-wrap
● These contracts are primarily found in softwares that requires any form of installation
onto the user’s device. Its also known as a “click-through” agreement.
● The contracts lack a ‘bargaining power’ which means that there can be no form of
negotiation between the parties - the user either has to accept to use the program or he/she
would be unable to use the same if they reject the terms or conditions.
● Are often used in downloading software and contain provisions to protect the IPR
contained therein by restraining the licensee from selling the copy of the software.
● Case: Feldman vs Google
○ FACTS: Defendant, Google, Inc. sought to have plaintiff’s amended complaint
dismissed and/or transferred on the ground of improper venue. Defendant

13
 contended that plaintiff agreed to Santa Clara County, California as the proper
venue for all actions between them by clicking on an internet “clickwrap”
agreement which contained a forum selection clause. Plaintiff, on the other hand
argued that there was no meeting of the minds and that the “clickwrap” agreement
is a contract of adhesion which by its terms is unconscionable.
○ CONCLUSION: The court applied federal law to determine the validity of the
forum selection clause based on case law that requires federal law to be applied in
diversity actions. The clickwrap agreement was enforceable as there was
reasonable notice of and mutual assent to the agreement and the agreement
described with sufficient definiteness a practicable process by which price
was determined. The agreement was not procedurally unconscionable where the
advertiser was a sophisticated purchaser, he was not pressured to agree, he was
capable of understanding the agreement's terms, and he consented to the terms.
The agreement was not substantively unconscionable as the forum selection
clause did not shock the conscience, and the 60-day limitations period afforded
sufficient time to identify, investigate, and report billing errors.
○ RATIO: A clickwrap agreement appears on an internet webpage and
requires that a user consent to any terms or conditions by clicking on a
dialog box on the screen in order to proceed with the internet transaction.
Even though they are electronic, clickwrap agreements are considered to be
writings because they are printable and storable.
● Hotmail Corp v Van $ Money Pie Inc 1998
○ Hotmail sued its customers for sending spam mails as if the mails were sent from
Hotmail accounts. According to Hotmail such actions clearly violated the express
clause of services agreement entered into by the customers at the time of opening
an email account.
○ The court held that customers had violated the terms of contract signed with
Hotmail and held that the Clickwrap agreement to be enforceable in a court of law
● Comb v PayPal Inc 2002
○ The court held that PayPal’s Clickwrap Agreement was excessively one-sided and
was highly unconscionable.

Browse-wrap
● Ticketmaster Corp v Tickets.com Inc 2000 → browsewrap terms do not require an
express consent of the user and its terms are generally accessible through a hyperlink
● These contracts are implicitly present in the webpages, which implies that they cover the
aspects of access to or use of online materials available on a website or any other page
that permits downloads.
● The user has to agree to the terms and conditions of the particular website in order to
access the contents of the website.

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 ● These agreements can be either hidden or can be bought to the notice of the user.
● Majority of the times, the website would include a statement that explains as to how the
user’s continued use of the site would imply agreement.
● Covers the access to or use of material available on websites or downloadable products --
person can access only if he agrees to the terms and conditions of the web-page
● Commonly used by websites -- includes a notice on the screen which states that by using
the website, the user automatically assents to the terms and conditions.
● Is a type of standard form contract
● Case: Specht vs. Netscape:
○ Facts: Netscape is a internet browser provider -- offers softwares such as
Communicator and SmartDownload -- Specht (Plaintiff) alleged that these
programs when downloaded collectively allowed eavesdropping of the customers
use -- Def argued that Plaintiffs agreed to the terms of license which allowed
eavesdropping, further any dispute is to be resolved by means of arbitration --
Plaintiff before downloading had to ‘click’ on several agreements.
○ Issues: Validity of contract if the internet browser webpage does not alert the user
of the existence of the license terms of software and does not require users to
manifestly and clearly agree to the terms and conditions.
○ Defendants had stated that Plaintiff had used reasonable prudence to ensure that
the license was apparent
○ Held:
■ If there is no adequate alert on the webpage about the existence of the
terms and conditions and does not manifestly require the user to clearly
agree, then not bound by terms of the license contract.
■ There is an exception when the written terms do not appear in the contract
and the terms are then not made apparent to the signer; if so, a contract is
not formed since there would be manifest agreement between the parties.
● In the case of Brett Long vs. Provide Commerce inc, the california Appellate court laid
down that the essential ingredients which shall constitute a browse wrap agreement and
which might support in proving the validity of such contract is absence of actual notice.
● PDC Laboratories v Hach Co 2009
○ Court upheld enforceability of Browsewrap Agreement observing that the terms
were sufficiently visible and hyperlink in blue was clearly conspicuous.

METHODS OF E-CONTRACTING
● Electronic Agents-EDI, AI, smart contracts
○ A software program or an electronic device that acts as a tool and carries out tasks
on behalf of the originator or person using it
○ Refer to Can Computers make Contracts?
○ Legal Status of Electronic Agents:

15
 ■ EDI
■ Inter-process of communication of business information in a standardized
electronic form
■ Used in trade transactions
■ Contract between two computers (Electronic agents)
○ International Conventions:
■ Art. 12 UN Convention on use of Electronic Communication in
International Contracts 2005
● Recognizes formation of contracts through automated message
systems
■ Sec 14 Uniform Electronic Transaction Act, 1999 US
● Defines electronic agents and provides for rules applicable to
automated response systems
■ Art. 9 E-Commerce Directive of European Parliament 2000
● Treatment of contracts
○ Section 11 IT Act 2000
● Emails
● Through Websites
○ Shrink Wrap Agreements
○ Click Wrap Agreements
○ Browse Wrap Agreements

RULES OF CONTRACT FORMATION AND ACCEPTANCE

● Mailbox rule or postal rule which is applicable when the means of communication is
non-instantaneous like post, telegraph etc. which states that a contract comes into effect
when the acceptor commits his acceptance to the post. The rule is designed to remove
uncertainty from the contract-formation process. It provides the offeror with the
confidence that an acceptance once posted will be effective even if postal system delays
delivery of the acceptance beyond the offer date.
● Receipt rule which is applicable telephone, telex or fax. It lays down that when the
communications are instantaneous like when a contract is complete when the acceptance
is received by the offer or. The Information Technology Act, Section 13 provides the
framework for understanding the principles of contract formation in the cases of
electronic contracts. It lays down inter alia, that, unless otherwise agreed:
○ 1. the dispatch of an electronic record occurs when it enters a computer resource
outside the control of the originator;
○ 2. the time of receipt of an electronic record is the time when record enters the
designated computer resource (if the addressee has a designated computer
resource);
○ 3. if the electronic record is sent to a computer resource of the addressee that is
not the designated computer resource, receipt occurs at the time when the
electronic record is retrieved by the addressee;

16
 ○ 4. If the addressee has not designated a computer resource along with specified
timings, if any, receipt occurs when the electronic record enters the computer
resource of the addressee.
● However, the above rules do not tell us anything more than when dispatch and receipt of
electronic records takes place. Therefore, in order to understand the rules relating to
electronic contract formation, the principles of the Indian Contract Act will have to apply
in this context. Section 4 of the Contract Act lays down the following rules regarding
communications of offers and acceptances:
○ 1. The communication of a proposal is complete when it comes to the knowledge
of the person to whom it is made.
○ 2. The communication of an acceptance is complete, — as against the proposer,
when it is put in a course of transmission to him, so as to be out of the power of
the acceptor; as against the acceptor, when it comes to the knowledge of the
proposer.
○ 3. The communication of a revocation is complete as against the person who
makes it, when it is put into a course of transmission to the person to whom it is
made, so as to be out of the power of the person who makes it; as against the
person to whom it is made, when it comes to his knowledge.
○ 4. A combined application of Section 4 of the Contract Act and Section 13 of the
Information Technology Act would reveal the following law for contract
formation in the case of electronic contracts in the event that nothing contrary has
been agreed to between the parties in their contract:
■ a) The communication of an offer becomes complete at the time when the
electronic offer enters any information system designated by the offeree
for the purpose, or, if no system is designated for the purpose, when the
electronic offer enters the information system of the offeree, or, if any
information system has been designated, but the electronic offer is sent to
some other information system, when the offeree retrieves such electronic
record.
■ b) The communication of an acceptance is complete — as against the
offeror when the electronic acceptance is dispatched such that it enters a
computer resource outside the control of the acceptor.
■ c) As against the acceptor, the communication of acceptance would be
complete when the electronic acceptance enters any information system
designated by the offer or for the purpose, or, if no system is designated
for the purpose, when the acceptance enters the information system of the
offer or, or, if any information system has been designated, but the
electronic record is sent to some other information system, when the offer
or retrieves such electronic acceptance.
■ d) The communication of revocation (of an offer or acceptance) is
complete as against the person who makes it when the electronic record is
dispatched such that it enters a computer resource outside the control of
the person making such offer or acceptance.
■ e) As against the person to whom it is made, such revocation is complete
when it comes to his knowledge i.e. Rule (2), (3) or (4) of Section 13
enunciated above would apply.

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 ● A binding contract would take place once the acceptor dispatches the electronic record
such that it enters a computer resource outside the control of the acceptor.
● However, the above proposition may not hold well in all types of electronic contracts.
The Supreme Court in Bhagwandas v. Girdharlal, following the English decision in
Entores Ltd. v. Miles Far East Corpn, has held that Section 4 of the Contract Act is only
applicable in cases of non-instantaneous forms of communication and would not apply
when instantaneous forms of communication are used. The Court observed that the
draftsman of the Contract Act did not contemplate the use of instantaneous means of
communications. Hence, where proposal and acceptance are made by instantaneous
means of communications like the telephone, telex etc., the postal rule does not apply and
the contract is made where the acceptance is received. Therefore, the default rules
elucidated above may have relevance only in non-instantaneous forms of contract
formation.

POSTAL RULE AND RECEIPT RULE FOR INSTANTANEOUS DIGITAL

COMMUNICATION
● Postal Rule → Offer is accepted when letter is posted provided both parties contemplate
the use of post.
○ Where it is agreed that the parties will use the post as a means of communication
the postal rule will apply. The postal rule states that where a letter is properly
addressed and stamped the acceptance takes place when the letter is placed in the
post box.
○ Case: Adams vs. Lindsell 1818
■ “Communication”
■ The defendant wrote to the claimant offering to sell them some wool and
asking for a reply 'in the course of post'. The letter was delayed in the post.
On receiving the letter the claimant posted a letter of acceptance the same
day. However, due to the delay the defendant's had assumed the claimant
was not interested in the wool and sold it on to a third party. The claimant
sued for breach of contract. Held that there was a valid contract which
came in to existence the moment the letter of acceptance was placed in the
post box.
● Receipt Rule:
○ The receipt rule states that, any contract is formed only when the acceptance
comes to the knowledge of the offeror. In other words, a contract is concluded
only when the acceptance has come to the knowledge of the offeror. Applying
receipt rule it can be stated that, a contract is not formed unless the acceptance has
come to the knowledge of the offeror.
○ General Rule is Receipt Rule
○ Postal Rule is exception and applies where there is delay between sending and
receiving acceptance (Brinkibon case)
○ Instantaneous modes of communication is when offeree will be able to tell that his
attempt to communicate acceptance has failed.
● Case: Entores Ltd vs. Miles Far East Corp. (Receipt Rule) -

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 ○ The Plaintiffs (Entores) were an English Company and the Defendants (Miles Far
East Co) were an American corporation with agents in various locations,
including Amsterdam. An offer and acceptance in relation to a contract for
Japanese cathodes was made between the companies in London and Amsterdam.
Specificially:
■ the Plaintiffs (in London) sent an offer by telex to the Defendants (in
Amsterdam).
■ the Defendants (in Amsterdam) sent an acceptance by telex to the
Plaintiffs (in London)
○ The issue was when the contract entered into force, as this would determine
whether Dutch or English law would apply to the contract. Specifically, the Court
was required to determine whether the postal rule (providing that acceptance
occurs when and where the letter is sent) applied to telex communications.
○ The court held the postal rule does not apply to instantaneous forms of
communication. As a result, in the case of instantaneous communications
(including by telex) acceptance occurs when and where received. The rule in
relation to instantaneous communications is encapsulated in this passage by
Lord Justice Denning:
■ My conclusion is that the rule about instantaneous communications
between the parties is different from the rule about the post. The contract
is only complete when the acceptance is received by the offeror; and the
contract is made at the place where the acceptance is received.
■ When a contract is made by post it is clear law throughout the common
law countries that the acceptance is complete as soon as the letter is put
into the post box, and that is the place where the contract is made. But
there is no clear rule about contracts made by telephone or by Telex.
Communications by these means are virtually instantaneous and stand on a
different footing.
● Case: Brinkibon Ltd. vs. Stahag Stahl (Receipt Rule) -
○ The offeror, Brinkibon (London, England) wanted to sue the offeree, Stahag
(Vienna, Austria) for breach of contract. Acceptance of Brinkibon’s offer had
been by way of telex from London to Austria. Which jurisdiction’s law applied?
○ The answer to this question depended on whether the postal rule applied - if it did
the contract would have been concluded in England and English law would apply;
if it did not apply then the contract would have been concluded where the
acceptance was received – Vienna.
○ The postal rule does not apply to direct/instant forms of communication
(including telex) – as telex was used here the postal rule did not apply and the
contract was formed in Vienna - Austrian law applied.
○ Even though with telex the message may not be received by the intended recipient
immediately (there may be agents or other third parties who receive the messages
to be passed on to the intended recipient) a telex that goes directly from the
offeree’s business to the offeror’s business (unlike a telegram which employs the
use of a post office) should be treated as if it were an instantaneous
communication. If a telex is sent to an office acceptance occurs when the telex

19
 reaches the place of business, not when it actually gets to the person to whom it is
addressed.
○ However, although the postal rule does not apply to instantaneous forms of
communication, there is no 'universal rule' with each case needing to be
decided by reference to the intention of the parties.
○ [Lord Wilberforce] Since 1955 the use of Telex communication has been greatly
expanded, and there are many variants on it. The senders and recipients may not
be the principals to the contemplated contract. They may be servants or agents
with limited authority. The message may not reach, or be intended to reach, the
designated recipient immediately: messages may be sent out of office hours, or at
night, with the intention, or on the assumption that they will be read at a later
time. There may be some error or default at the recipient’s end which prevents
receipt at the time contemplated and believed in by the sender. The message may
have been sent and/or received through machines operated by third persons. And
many other variants may occur. No universal rule can cover all such cases; they
must be resolved by reference to the intentions of the parties, by sound business
practice and in some cases by a judgement where the risks should lie.
● Case: Bhagwandas Case (Receipt Rule) -- Telephone agreements
○ Plaintiff offered to get certain goods supplied at Ahmedabad to defendants who
accepted the offer at Khamgaon. On defendants’ failure to supply requisite goods,
the plaintiff sued them at Ahmedabad. Dispute arose as to where the contract was
formed- at Khamgaon where acceptance was given by defendants or at
Ahmedabad where acceptance was received by plaintiffs.
○ An agreement does not result from mere intent to accept the offer: Acceptance
must be by some external manifestation (either by speech, writing, conduct in
further negotiations, or any other overt act) accompanied by its communication to
the offeror (Brogden v. Metropoliton Rly Co.) unless expressly waived by him or
impliedly by the course of negotiation to the contrary (Carlill v. Carbolic Smoke
Ball).
○ Entores v. Miles: An offer was made from London by telex to a party in Holland
and was duly accepted through telex; the question arose as to which court had
jurisdiction to try the dispute between the parties. Denning L.J. observed that in
case of instantaneous communications between the parties, i.e. where parties are
in each other’s presence or though separated in space are in direct communication
with each other as for example by telephone or telex, contract is complete when
the acceptance of offer is duly received by the offeror and the contract is formed
where such acceptance is received.
○ Adams v. Lindsell: An offer was made by defendants by post to sell certain
goods. Though, the acceptance was duly posted by plaintiff but, it reached
defendants nearly after a week when latter had already sold the goods to a third
party. Court ruled that ‘when parties aren’t in each other’s presence and
communicate long distance either by post or telegram, both parties get bound by
contract as and when the acceptor puts the letter of acceptance in the course of
transmission to offeror so as to be out of his power to recall’ (postal rule).
○ But in India, according to S.4 of ICA, application of Postal Rule results that
acceptor is bound only when the acceptance “comes to the knowledge of the

20
 proposer” while proposer becomes bound much before when letter was “put
in course of transmission to him as to be out of the power of acceptor to
recall”. “S.4 doesn’t imply that the contract is formed qua the proposer at
one place and qua the acceptor at another place”. The gap of time between
posting of acceptance and its coming into knowledge of proposer can be utilised
by acceptor in revoking his acceptance by speedier communication which will
overtake the acceptance (S.5 of ICA)
○ The postal rule came into existence in Adams case for two prominent reasons:
■ The rule was based on commercial expediency/empirical grounds: for if
the defendants were not bound by their offer till the acceptance by the
plaintiffs is not received by them, then the plaintiffs ought not to be bound
till after they had received the notification that the defendants had received
their acceptance and had assented to it; and so it might go on ad infinitum.
■ Secondly, if the contract is not finally concluded till the intimation of the
acceptance by the promisee to the promisor, then there may be instances
that the promisor will deny the receiving of any acceptance even though
he may have received it. This may lead to instances of fraud and also
delay in commercial transactions. Further, the satisfactory evidence of
posting a letter is generally available as against of its having been
received.
○ The conversation over telephone is analogous to the conversation when the
parties are in presence of each other, wherein, the negotiations are concluded
by instantaneous speech and therefore communication of the acceptance
becomes a necessary part of the contract and the exception to the rule on
grounds of commercial inexpediency is inapplicable.
○ Further, in case of correspondence by post or telegram, a third agency
intervenes which is responsible for effective transmission of letters at every
instance, however, in case of telephonic conversation, once the connection has
been established, there is no need of any third agency to transmit the
correspondence between the parties.

PRINCIPLES APPLIED IN INDIA FOR INSTANTANEOUS MODES OF

COMMUNICATION
● Section 4 ICA is based upon, the Postal Rule in the English Common Law of Contract.
When acceptance to a proposal is dispatched via post or telegram, the acceptance is
complete when it is dispatched by the acceptor— this is the Postal Rule. In English Law,
the Postal Rule, true to its name, is applicable only to acceptances communicated via post
or telegram. It does not apply to modes of instantaneous communication (viz. face-to-face
conversations, phone calls, etc.). In such cases, the communication of an acceptance is
complete when, the fact of the acceptance comes to the knowledge of the proposer, which
is known as the ‘Receipt Rule’. However, the plain language of Section 4 evidently
makes no such distinction— it applies the Postal Rule to all acceptances, regardless of
how they are communicated.

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 ● The decision of the Supreme Court in Bhagwandas Goverdhandas Kedia v. M/s.
Girdharilal Parshottamdas & Co. (1965) (hereinafter referred to as the “Bhagwandas
case”) has judicially engrafted an exception to the plain language of Section 4— the
majority opinion has constricted the application of the Postal Rule to acceptances
communicated via, post or telegraph, alone; and has validated the application of the
‘Receipt Rule’ to acceptances communicated via instantaneous modes of communication.
This ratio of the Bhagwandas case is now settled law in India.
● It becomes pertinent to do a critical analysis of the reasoning of the majority in the
Bhagwandas case. The majority opinion in the Bhagwandas case seems to suffer from
some limitations because, it— (i) most importantly, reaches a conclusion which does
violence to the plain statutory language of, Section 4 of the Contract Act; (ii) makes an
unwarranted distinction between, instantaneous and non-instantaneous, modes of
communication; and (iii) fails to appreciate that the justification underlying the Postal
Rule is applicable to modes of instantaneous communication too.
● Section 4 Indian Contract Act
○ Issues - Conclusion of offer and acceptance.
○ Execution of paper based contract vs. online communication
● Principles concluded
○ General rule is rule of receipt (not the postal rule)
○ Postal Rule is exception and applies where there is delay between sending and
receiving acceptance (Brinkibon case)
○ Instantaneous modes of communications is when offeree will be able to tell that
his attempt to communicate acceptance has failed.

Postal Rule and Emails:

● Whether Postal rule applies to emails? → no
● When does email-acceptance take effect?
○ Upon reading and communicating acceptance.
● What happens in case of default?
○ Postal Rule is applicable.
● Often the view that is adopted is that the general postal rule in inapplicable and the
receipt rule to apply to email communication.
○ Reflected in Art.15 UNCITRAL MLEC and Sec.12 and 13 IT Act.
● The Dispatch usually occurs when a message enters a computer system outside the
control of the sender. A message will be deemed to be received by the designated
email account when the same enters the system.
○ In case there is no designated email account, a message will be deemed to be
received when it enters the system of the recipient
○ In case a message is sent by the email account other than the one which is
designated, it is received when the recipient reads the message.
● When is acceptance received???
○ When the email is read
○ When the email is reasonably ought to have come to the attention of offeror
○ When e-mail arrives on the server which manages the offerors emails.

22
 ● Cases of Default:
○ General principles under ICA
○ When the offeree knows or ought to have known that his mail has not been
received
○ When the offeree does not have actual or constructive knowledge of
communication
○ When the offeror is not at fault but the problem lies in his sphere of control.
● When can communication be considered to be completed???
○ S.12 IT Act -- when there is acknowledgement of receipt
■ Elucidates the receipt rule and provides that when the originator has not
specified that an acknowledgement of receipt is required in a particular
format or method, an acknowledgement can be given through any
communication by the addressee (automated or otherwise) or by any
conduct of the addressee that reasonably indicates to the sender of a
message that the electronic record has been received
○ When received during business hours
○ S.13 IT Act -- depending on the time and place of despatch.
■ The dispatch of electronic records occurs when it enters a computer
outside the control of the originator
■ In case the addressee has not designated any computer resource, receipt
occurs when the electronic record enters computer resource of the
addressee.
● Section 11 IT ACT: Attribution
○ An electronic record is attributed to the originator if it was sent by the originator
himself or by a person duly authorised by the originator or by an information
system programmed by the originator to send a message automatically.
● Conduct of parties - intention to enter into a legal relationship by means of external
manifestation - is the key principle

E-Commerce Directives of EU and Important Topics:

● Fundamental for the proper functioning and recognition of e-commerce in the EU
Markets.
● Ensure smooth flow of information across sectors
● Aimed at naturally harmonising the law of member nations of EU -- to ensure uniformity
● Crucial issues -- transparency, e-signs, copyrights, etc
● Object and Scope:
○ Remove obstacles to cross-border online services in the EU internal market (free
movement of services)
○ Provide legal certainty to business and citizens
○ Offer a flexible, technically neutral and balanced legal framework
○ Enhancing competitiveness of European service providers.
○ Establish additional rules on private international law nor does it deal with the
jurisdiction of Court.

23
 ○ Exceptions: taxation; betting, gaming or lotteries; data protection; the activities of
a public notary; the representation of a client before courts;
○ Provide more stability, flexibility to stakeholders to attract investment.
● Key Provisions:
○ Article 2 : Definitions
■ 2(a): Information society service
■ 2(b): Service Provider
■ 2(d): Recipient of Service
■ 2(f): Commercial Communication
■ 2(h): Coordinated Field
○ Article 3: Internal Market Clause:
■ “Member States may not, for reasons falling within the coordinated field,
restrict the freedom to provide information society services from another
Member State”
■ Derogations possible under strict conditions, e.g: measures necessary for
public policy, protection of public health, public security, protection
consumers proportionality test.
■ Article 3 does not apply to intellectual property rights, consumers
contracts, freedom of parties to choose the applicable law
○ Article 4: Prohibition of Prior Authorization
■ Members States shall ensure that the taking up and pursuit of the activity
of an information society service provider may not be made subject to
prior authorization or any other measure having equivalent effect“.
○ Article 5: General Information to be provided.
■ Member state shall ensure additional information shall be provided by the
service provider other than requirements established by community law.
Such as:
■ The name of the service provider, the geographic address at which the
service provider is established, the details of the service provider,
including his electronic mail address, which allow him to be contacted
rapidly and communicated with in a with in a direct and effective manner
○ Article 6: Information to be Provided
■ Other than the information provided by the community law, member states
shall comply with the following condition:
■ Commercial communication must be clearly identifiable;
■ On whose behalf Commercial Communication is made,;
■ Promotional offer such as discounts, premium, a gifts should be clearly
identifiable and condition to qualify them shall also be easily accessible
○ Article 7 : Unsolicited Commercial Communication:
■ It means any message through telecommunication service transmitted for
the purpose of transmitting information.
■ Unsolicited Commercial Communication -- Spam offers from Paytm,
Bookmyshow etc.
○ Article 9: Member State to ensure that their legal system allows contracts by
electronic means.

24
 ■ To ensure that it does not create any obstacles to e- contract nor its illegal
or affects its validity.
■ Exception:
● Contract that create or transfer rights in real estate
● contracts requiring by law the involvement of courts, public
authorities or professions exercising public authority;
● contracts of suretyship granted and on collateral securities
furnished by persons acting for purposes outside their trade,
business or profession;
● contracts governed by family law or by the law of succession.
○ Article 12: Mere conduit
■ Service providers, whose role solely consists in the transmission of
information originating from third parties and the provision of access
through a communication network, cannot be held liable for third party
illegal content if they:
■ Do not initiate the transmission
■ Do not select the receiver of the transmission and
■ Do not select or modify the information transmitted Automatic,
intermediate and transient storage of information which takes place during
the transmission of the information in order to carry out the transmission,
are covered by the exemption of liability
○ Article 13: Caching
■ Service providers cannot be held liable for third party illegal content when
providing caching facilities provided they:
● do not modify the information,
● comply with conditions on access to information and with rules on
the updating of the information,
● do not interfere with lawful use of technology to obtain data on the
use of the information,
● expeditiously act to remove the access to the information stored
when informed that the information has been removed from the
network, when access to it has been disabled or when a responsible
authority has ordered the removal.
○ Article 14: Hosting
■ Service providers who store information supplied by and at the request of
a recipient of the service are not liable if: They do not have actual
knowledge of illegal activity or information and as regards claims for
damages and are not aware of the facts or circumstances from which the
illegal activity or information is apparent; or
■ The provider, upon obtaining such knowledge or awareness, acts
expeditiously to remove or disable access to the information
○ Article 15: Prohibition of a general monitoring obligation
■ Member State shall not impose a monitoring obligation on providers,
when providing the services covered by Articles 12, 13 and 14, to monitor
the information which they transmit or store
● A general obligation actively to seek facts or circumstances indicating illegal activity

25
 ○ Case: McFadden v. Sony Music
■ Whether there is an obligation over network access providers to monitor
information that is transmitted over the network?

Correlation with Intermediaries under the IT Act 2000

● Section 2(w) Intermediary: with respect to any particular electronic records, means any
person who on behalf of another person receives, stores or transmits that record or
provides any service with respect to that record and includes telecom service providers,
network service providers, internet service providers, web-hosting service providers,
search engines, online payment sites, online-auction sites, online-market places and cyber
cafes;
● Section 2(b)- addressee excludes intermediary
● Section 2 (za)- originator excludes intermediary
● Section 67(c)- obligation of an intermediary to retain information as prescribes by the
government; violation amounts to fine and imprisonment
● Section 69- data interception or monitoring by government or an authorized agency;
intermediaries are expected to co-operate; failure to do so amounts to imprisonment and
fine
● Section 69A- authorized blocking of sensitive information from public access; failure to
do so amounts to imprisonment and fine
● Section 69B- An intermediary is obligated to provide technical assistance to the
government or an authorized agency in collection of traffic data-
○ Explanation (ii)- any data identifying or purporting to identify any person,
computer system or computer network or location to or from which the
communication is or may be transmitted and includes communications origin,
destination, route, time, data, size, duration or type of underlying service and any
other information.
● Section 70B: Co-operating with the Indian Computer Emergency Response Team in
managing cyber security:
○ collection, analysis and dissemination of information on cyber incidents;
○ forecast and alerts of cyber security incidents;
○ emergency measures for handling cyber security incidents;
○ co-ordination of cyber incidents response activities;
○ issue guidelines, advisories, vulnerability notes and white papers relating to
information security practices, procedures, prevention, response and reporting of
cyber incidents;
○ such other functions relating to cyber security as may be prescribed.
● Sections 71-75: Punishment for various offences; includes intermediaries; applicable
to persons outside India
● Safe Harbour Exemptions:
○ Section 79-
■ An intermediary not liable for third party information, data, or
communication link made available or hosted by them (third party);

26
 ■ An intermediary not liable if its responsibility is limited to merely
providing a communication system for the transmission of information;
■ An intermediary is not liable if it has exercised due diligence; (Shreya
Singhal vs. UOI 2015)
○ Exceptions to the protection:
■ aiding, abetment or instigation of an unlawful act;
■ Failure on the intermediary’s part to co-operate with the government with
respect to information transmitted through their communication system
and used for unlawful purposes;
● Case: Amway India Enterprises Pvt. Ltd. and Ors. vs. 1MG Technologies Pvt. Ltd. and
Ors. (2018)
○ Amway claimed that their goods could not be sold without a direct contract --
many e-commerce platforms sold the products without authorisation -- use of
trademark on e-commerce sites amounted to trademark passing off hence a breach
of trademark guidelines -- 1MG argued that they are intermediaries and are
entitled to safe harbour -- Plaintiff had issued notices despite that infringement
continued -- are the defs liable???? Intermediaries were actively involved in
assisting the sale (Del HC Single bench).....division bench reversed the order + no
distinction between active and passive intermediaries and safe harbour would
apply based on s.79(2)ITAct.
○ the Delhi High Court held:
■ Intermediaries must abide by their own terms and conditions/policies or
risk losing protection under Section 79 of the Information Technology
Act, 2000.
■ E-Commerce platforms may be held liable for tortious interference by
allowing sellers to operate on the platform upon receipt of actual
knowledge that sale by such sellers is in breach of third party agreements.
■ Owner of a trademark can object to unauthorized resale of products
bearing their registered trademark in cases of impairment of the products.
“Impairment” may include change in warranties, return policies, selling
prices of the product.
● Rights of a manufacturer; direct involvement of an intermediary
● Case: Kent RO Systems Ltd. & Anr. v. Amit Kotak & Ors. (2016) -
○ In the case of Kent RO Systems Ltd. & Anr. v. Amit Kotak & Ors.2 (“Kent RO
Systems Case”), the question before the Delhi HC was whether once a complaint
has been lodged by a complainant with the e-commerce platform service provider
relating to allegedly infringing goods displayed by certain seller(s) on the
platform, whether the e-commerce platform had an obligation to continuously
verify whether goods subsequently displayed by the same sellers that may
infringe the intellectual property rights of the complainant. The Delhi HC held
that question of an intellectual property right infringement is more often than not
a technical question, and intermediaries are not equipped and not required to

27
 screen all goods / information hosted on its platform for infringement of the rights
of persons who have made complaints in the past relating to infringement.
○ Kent RO Case -- product listing alleged by Kent that their IPR under designs act
were infringed by merchant Amit Kotak -- sought an injunction to restraint from
selling goods on ebay -- ebay should've been liable as well as they had informed
ebay about infringement and removal -- ebay took immediate action but there was
a problem that certain standards had to be observed even if they do not have
active knowledge, so they said that their liability extends not only to effective
action, but to proactive action as well to preempt any infringement though the
channelisation -- Question that arose that if ecommerce platform had a role to
actively clarify upon the goods -- DelHC held that standards to determine the
rights is a legal question and must be determined by the courts and the
intermediaries are not equipped nor are required to screen the goods hosted on
their platform -- ebay was not held to be responsible
● Case: Christian Louboutin SAS vs Nakul Bajaj & Ors. (2019) -
○ products on ecommerce platform bearing trademark were not authorised nor were
genuine products -- held in favour of plaintiff and observed that ecommerce
portals are responsible to ensure genuineness of products
● Case: Swami Ramdev & Anr. vs. Facebook, Inc. & Ors. (2019) -
○ The Delhi High Court issued an injunction against Facebook, Google, YouTube
and Twitter (Defendants) and other online intermediaries, directing them to
globally take down a list of URLs from their platforms which were allegedly
defamatory to the Plaintiffs.
○ The case was brought by yoga guru Swami Ramdev in relation to an alleged
defamatory video and related content posted and disseminated on the Defendants’
platforms. The impugned content summarized the contents of a book which had
been found to be defamatory by another court.
○ After a detailed analysis of the law on intermediary liability in India under the
Information Technology Act, 2000 and the Information Technology Rules, 2011,
the Court held that the intermediaries were obliged to take down and block all
such illegal content and videos which had been uploaded from I.P. addresses
within India, on a global basis.
○ Further, for illegal content which was uploaded outside the Indian territory, the
Court directed geo-blocking access and disabling viewership of such content from
within India.

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 UNIT 3: E-SIGNATURES AND DIGITAL
SIGNATURES

DIGITAL SIGNATURE - INTRODUCTION

● Mathematical scheme to verify the authenticity of digital documents or messages.
● Allows the recipient to trust the fact that a known sender sent the message and it was not
altered in transit.
● Authentication of the associated input or messages.
● Important Features:
○ Authentication
○ Integrity
○ Non-Repudiation
● Digital Certificates are the digital equivalents of physical or paper certificates like
driving license, passport, membership cards etc.
● IT ACT:
○ Digital Signatures mean authentication of any electronic record by a subscriber by
means of an electronic method or procedure in accordance with the provisions of
section 3.
○ Sections under the act that deal with digital signatures are s.2,3,15.
○ Section 2(1)(p):
■ digital signature means ‘authentication of any electronic record using an
electronic method or procedure in accordance with the provisions of
Section 3‘.
○ Section 3:
■ authentication of electronic records
■ Any subscriber can affix his digital signature and hence authenticate an
electronic record.
■ An asymmetric crypto system and hash function envelop and transform
the initial electronic record into another record which affects the
authentication of the record.
■ Any person in possession of the public key can verify the electronic
record.
■ Further, every subscriber has a private key and a public key which are
unique to him and constitute a functioning key pair.
○ Section 15 -- Secure Digital Signature
■ Unique to the subscriber affixing it.
■ Capable of identifying the subscriber.
■ Created in a manner under the exclusive control of the subscriber.
■ change in the record invalidates the digital signature
■ Then it is a secure digital signature.

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ELECTRONIC SIGNATURE - INTRODUCTION
● uses a technology that binds the signature to the signer’s identity and the time it was
signed.
● An electronic signature could be a process attached, electronic symbol or sound to a
message, contract or document which can be used to get consent or approval on
electronic documents or forms. Electronic signatures are a substitute for handwritten
signatures in practically each personal or business process

ELECTRONIC SIGNATURE VS. DIGITAL SIGNATURE

● Regulatory Legal framework:
○ Information Technology (Certifying Authorities) Rules, 2000;
○ Digital Signature (End Entity) Rules, 2015; and
○ Information Technology (Use of Electronic Records and Digital Signature) Rules,
2004.
○ IT Act 2000
● Both have the effect of a handwritten signature
● Digital signatures are used for government transactions- e-filing in corporate affairs; tax
filing
● Electronic signatures- Second Schedule of the IT Act- Aadhar e-KYC
● Recognized vs. Non-recognized signatures
● Validity of e-signatures under the IT Act:
○ Uniqueness
○ Control exercised by the signatory
○ Any changes must be detectable
○ Transparency in the generation of e-signature
○ Authorized certification to e-signature- http://www.cca.gov.in/licensed_ca.html.
■ Eg: e-Mudhra used by Adobe
● Public Sector Transactions Using e-Signature
○ Online applications
○ Online licensing, permit and approval
○ Financial transaction online
○ Companies (Registration Offices and Fees) Rules 2014 (Rules 7 and 8)
○ Government authorized purposes that can use e-signature during e-filing:
○ Digital locker self-attestation;
○ Goods and sales tax returns and invoices;
○ Account opening in banks and post offices;
○ Application for driving license renewal and vehicle registration;
○ Application for birth, caste, marriage and income certificate etc.;
○ Passport application for issuance or reissue/renewal;
○ Telecom application for new connection.
● Disputed electronic signature:
○ In the scenario where e-signatures are non-certified, they may not suffer
disqualification per se but their legal validity would still be disputed.
○ The signatory, then, will be legally obligated to prove the following:

30
 ■ the generated signature can be linked only to the signatory and to no other
person;
■ only the signatory had access to and control over the document at the time
of signing;
■ any alteration to the signature or the information made after the signature
is affixed is detectable; and
■ the essentials of a valid contract under the Indian Contract Act, 1872, such
as offer, acceptance and intention to create legal relationship, capability of
the parties, consideration etc., are met.

Difference between Digital Signatures and Electronic Signatures

Electronic Signatures Digital Signatures

Technologically neutral - no specific Follows a technology-specific approach such

technological process is to be followed to as use of hash functions
create an e-signature

It can be created by using various available It uses public key cryptography system to sign
technologies like attaching a picture of your up for a particular message which requires a
signature pair of keys (private key for encryption and
public key for decryption) computed by hash
functions

It can be in the form of a name typed at the It involves the usage of cryptographic system
end of an email, a digital version of a of constructing the signature with a two-way
handwritten signature in form of an protection system
attachment, a code or even a finger print

It is less authentic as compared to the digital It has more authenticity as compared to the
signature electronic signature

It is verified through the sender's identity It has a certificate based digital verification

It is used for verifying a document It is used as a means of securing a document

It has no expiration or validity period It is valid upto a maximum of 3 years

It is easily vulnerable to tampering It is more secure and highly reliable

Legally binding Used to prove authenticity of document

Does not require any kind of signing To get digital signatures on the document, the
certificate signer must have the digital signing certificate
from an issuing Certifying Agency

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Symmetric Key and Asymmetric Key Encryption
● Symmetric Key Encryption:
○ Encryption is a process to change the form of any message in order to protect it
from reading by anyone. In Symmetric-key encryption the message is encrypted
by using a key and the same key is used to decrypt the message which makes it
easy to use but less secure. It also requires a safe method to transfer the key from
one party to another.
○ There is only a single key known to both the sender and the receiver. Under this
system, the secret key or the private key is known to the sender and the legitimate
user. This secret key is used for both encryption and decryption of the message.
○ The only drawback of this symmetric encryption is that as the number of pairs of
users increases, it becomes difficult to keep track of the secret keys used.
● Asymmetric Key Encryption:
○ Asymmetric Key Encryption is based on public and private key encryption
technique. It uses two different key to encrypt and decrypt the message. It is more
secure than symmetric key encryption technique but is much slower
○ Can only be decrypted using a publicly available key known as the ‘Public Key’
provided by the sender. The procedure has been under Section 2(1)(f) of the
Information Technology Act, 2000. Under this system, there is a pair of keys, a
private key known only to the sender and a public key known only to the
receivers.
○ The message is encrypted by the private key of the sender, on the contrary,
decryption can be done by anyone who is having the public key. It depicts the
authenticity of the sender. It is also known as the ‘principle of irreversibility’ ie.
the public key of the sender is known to many users, but they do not have access
to the private key of the sender which bars them from forging the digital
signature.

PUBLIC KEY INFRASTRUCTURE (PKI)

● Related to digital signatures.
● Certifying authorities for the digital and e-signatures for crucial transactions.
● Reasons for PKI:
○ Security and management of online transmission of information- emails,
commerce, banking, etc.
○ PKI uses a pair of keys to achieve the underlying security service:
■ private key, and
■ public key- susceptible to abuse
○ Inadequacy of conventional protection measures for online
communications/transactions
● Paid softwares are based on private keys.
● Protection measures that protects online communication (conventional) -- passwords,
firewalls, incognito, encryption, -- modern methods are cryptography.
● Cryptography:
○ Protects the usage of information --

32
 ○ Security of crypto systems is dependent on the management of the private keys.
○ Cryptographic schemes are rarely compromised through weaknesses in their
design. They are often compromised through poor key management
○ There are some important aspects of key management which are as follows −
■ Cryptographic keys are nothing but special pieces of data. Key
management refers to the secure administration of cryptographic keys.
● Key Management for Public Key
○ Two specific requirements:
■ Secrecy of private keys. → Throughout the key lifecycle, secret keys
must remain secret from all parties except those who are owner and are
authorized to use them
■ Assurance of public keys. → In public key cryptography, the public keys
are in open domain and seen as public pieces of data. By default there are
no assurances of whether a public key is correct, with whom it can be
associated, or what it can be used for. Thus key management of public
keys needs to focus much more explicitly on assurance of purpose of
public keys
● Components of PKI
○ PK Certificate (Digital certificate)
■ Examples -- SSL certificate from Christ
○ Private key tokens
● Certification authority
○ Function s of CA -- generation of keys (private and public keys), issues Dc, signs
DC, publish the certificates for users to be able to find them, can even revoke the
certificate as well.
● Registration authority
○ Presence is subjected to a use of a third party registration --
● Certificate management system.
● Publication of certificates -- online directory or to actually send it to those people who the
CA thinks might be entitled to the persons.
● Issuance of certificates can be done either through private or public channels, but is done
after due diligence by the CA.
● PKI Process:
○ Step 1: Subscriber applies to Certifying Authority for Digital Signature
Certificate.
○ Step 2: Certifying Authority verifies identity of subscriber and issues Digital
Signature Certificate.
○ Step 3: Certifying Authority forwards Digital Signature Certificate to Repository
maintained by the Controller.
○ Step 4: Subscriber digitally signs electronic message with private key to ensure
Sender Authenticity, Message Integrity and Non-Repudiation and sends to
Relying Party.
○ Step 5: Relying party receives message, verify Digital Signature with Subscriber‖s
Public Key, and goes to Repository to check status and validity of Subscriber‖s
Certificate.

33
 ○ Step 6: Repository does the status check on subscriber‖s certificate and inform
back to the Relying Party.

PKI GOVERNANCE IN INDIA

● Certifying Authority:
○ According to section 24 under Information Technology Act 2000 "Certifying
Authority" means a person who has been granted a license to issue Digital
Signature Certificates
○ A Certifying Authority is a trusted body whose central responsibility is to issue,
revoke, renew and provide directories of Digital Certificates.
○ In real meaning, the function of a Certifying Authority is equivalent to that of the
passport issuing office in the Government. A passport is a citizen's secure
document (a "paper identity"), issued by an appropriate authority, certifying that
the citizen is who he or she claims to be. Any other country trusting the authority
of that country's Government passport Office will trust the citizen's passport.
○ Similar to a passport, a user's certificate is issued and signed by a Certifying
Authority and acts as a proof . Anyone trusting the Certifying Authority can also
trust the user's certificate.
● IT Act Provisions:
○ Section 17: Appointment of Central Certifying Authority- centrally governed-
deputy controllers and assistant controllers- promotes e-commerce and
e-governance through a wide use of digital signatures.
○ Section 18: Functions -
■ Supervising the CA’s
■ Certifying the pk’s issued by the CA’s
■ Prescribing professional standards to be followed by the CA’s
■ Specifying qualifications and experience of the CA’s
■ Specifying the contents of an electronic signature certificate and public
key- written, printed, advertisements, visual materials, etc.
■ Facilitating the establishment and regulation of electronic systems
■ Conflict resolution among CA’s and subscribers
■ Specifying duties of CA’s
■ Maintaining a public record of disclosures made by CA’s as specified by
relevant regulations
■ Maintaining a National Repository of Digital Certificates (NDRC) which
keeps the record of all the certificates issues by CA’s across the country
○ Section 19 - Powers
■ It can recognize a foreign certifying authority as a CA for the purposes of
IT Act
■ It can revoke such recognition in case of a breach of the law or regulations
governing the duties and functions of a foreign certifying authorities
■ It can grant license to issue electronic signature certificates subject to the
requirements to be fulfilled by the applicant
■ It can revoke such a licence on failure of compliance to such requirements

34
 ■ It can delegate its powers to the office of the Deputy Controller, Assistant
Controller or any other office
■ It can investigate any contravention of the provisions of the IT Act or
rules/regulations under it
■ Investigative powers are similar to the powers of an ITC under Section
116 of the Income Tax Act 1961
○ Section 20 - Controller to act as a repository
■ The Controller will act as a repository of all digital signature certificates
under this Act.
■ The Controller will –
● Make use of secure hardware, software, and also procedures.
● Observe the standards that the Central Government prescribes to
ensure the secrecy and also the security of the digital signatures.
■ The Controller will maintain a computerized database of all public keys.
Further, he must ensure that the public keys and the database are available
to any member of the public.
○ Section 21 - License to issue DSC:
■ (1) Subject to the provisions of sub-section (2), any person can apply to
the Controller for a license to issue digital signature certificates.
■ (2) A Controller can issue a license under sub-section (1) only if the
applicant fulfills all the requirements. The Central Government specifies
requirements with respect to qualification, expertise, manpower, financial
resources, and also infrastructure facilities for the issuance of digital
signature certificates.
■ (3) A license granted under this section is –
● (a) Valid for the period that the Central Government specifies
● (b) Not transferable or inheritable
● (c) Subject to the terms and conditions that the regulations specify
○ Section 22 - Application for License:
■ (1) Every application for issue of a license shall be in such form as may be
prescribed by the Central Government.
■ (2) Every application for issue of a license shall be accompanied by-
● (a) A certification practice statement;
● (b) a statement including the procedures with respect to
identification of the applicant;
● (c) payment of such fees, not exceeding twenty-five thousand
rupees as may be prescribed by the Central Government;
● (d) such other documents, as may be prescribed by the Central
Government.
○ Section 23 - Renewal of License:
■ An application for renewal of a license shall be-
● (a) in such form;
● (b) accompanied by such fees, not exceeding five thousand rupees,
as may be prescribed by the Central Government and shall be
made not less than forty-five days before the date of expiry of the
period of validity of the license.

35
 ○ Section 24 - Procedure for grant or rejection of license
■ The Controller may, on receipt of an application under sub-section (1) of
section 21, after considering the documents accompanying the application
and such other factors, as he deems fit, grant the license or reject the
application
■ Provided that no application shall be rejected under this section unless the
applicant has been given a reasonable opportunity of presenting his case.
○ Section 25 - Suspension of License
■ If CA fails to maintain acceptable standards
■ If CA fails to follow terms and conditions
■ If CA contravenes any provisions of IT Act
■ If CA makes any false statement in relation to the issue or renewal of
license issued by CCA
■ No CA whose license has been suspended shall issue any ESC (Electronic
Signature Certificate i.e. Digital Signature Certificate) during such
suspension.
○ Section 28 - power to investigate contraventions
■ The Controller or any other Officer that he authorizes will investigate any
contravention of the provisions, rules or regulations of the Act.
■ The Controller or any other Officer that he authorizes will also exercise
the powers conferred on Income-tax authorities under Chapter XIII of the
Income Tax Act, 1961. Also, the exercise of powers will be limited
according to the Act.
○ Duties of CA
■ To follow procedures regarding security systems - Section 31
● To ensure privacy of subscribers
■ To ensure compliance with the Act
■ To display license - Section 32
■ To surrender its license on suspension or revocation - Section 33
■ To disclose its Electronic Signature Certificate and any relevant
certification practice statement - Section 34

ELECTRONIC SIGNATURE CERTIFICATE

● Section 2 (tb): Electronic Signature Certificate (ESC) issued under section 35 and
includes Digital Signature Certificate (DSC)
● Section 35: Requirements of ESC
○ Fee in a prescribed mode
○ Certification Practice Statement (CPS) or an equivalent document specifying the
particulars required under relevant regulations
● Section 36: Contents of an ESC
○ Compliance with the provisions of the IT Act
○ Publication of ESC for subscriber usage- accepted by the subscriber
○ Subscriber hold the private key corresponding to the public key that is listed in the
ESC
● The subscriber holds the private key that is capable of creating a digital signature

36
 ● Public key listed in the ESC can be used to verify a digital signature affixed by the
private key
● The subscriber’s public key and private key constitute a functioning key pair- pk(public)
can be used to verify a request created by pk(private)
● Accuracy of the information contained in the ESC
● The CA has no knowledge of inclusion of any information on the ESC which would
affect the “trust” of a subscriber
● Suspension and Revocation of ESC:
○ Section 37: Suspension
■ Request of suspension can be file by either a subscriber or an authorised
person
■ ESC should be suspended in public interest
○ Section 38: Revocation
■ On the request of the subscriber or an authorised person
■ Death of the subscriber
■ Dissolution of a firm or winding up of a company that is the subscriber
■ Inaccuracy of a material fact
○ Requirements not met
○ Reliability of the ESC was affected by a compromise in the private key or security
system
○ Insolvency of a subscriber; if a subscriber ceases to exist
○ The IT Act mandates the publication of revocation under Sections 37 or 38, in the
repository carrying other details of such an ESC.

Digital Signature Certificates (DSC)

● is the electronic format of physical or paper certificate like a driving License, passport
etc.
● Certificates serve as proof of identity of an individual for a certain purpose; for example,
a Passport identifies someone as a citizen of that country; who can legally travel to any
country.
● Likewise, a Digital Signature Certificate can be presented electronically to prove your
identity, to access information or services on the Internet or to sign certain documents
digitally.

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 UNIT 4 - PAYMENT ISSUES IN E-COMMERCE

INTRODUCTION

Payment System:
● Regulated by the PSS Act 2007
● Defined under s.2(1)(i) of the PSS Act
● Parties Involved in E-Commerce Transaction
○ Payer - customer
○ Payee - Merchant
○ Issuing bank - customer’s bank
○ Acquiring bank - merchant’s bank
● Players involved in Electronic Payment Systems
○ Payment Processors
○ Intermediaries
○ Technology providers

Electronic payment issues

● Common Issues
○ Lack of Usability
○ Lack of Security
○ Issues with e-cash
○ Lack of Trust
○ Lack of awareness
○ Online Payments are not feasible in rural areas
○ Highly expensive and time consuming
● Legal Issues
○ Secure credit card transactions
○ Recognition of digital currencies
○ Determining the relevant jurisdiction
○ Risk of regulatory change
○ Transaction risks
○ Consumer oriented risks
○ Disabling IT Act
○ No virtual banks

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PAYMENT SETTLEMENT SYSTEMS ACT 2007
● regulation and supervision of payment methods in India.
● provide a legal basis for “netting” and “settlement finality”.
● The two regulations made under the Act through RBI are Board for Regulation and
Supervision of Payment and Settlement Systems Regulations, 2008 and the Payment
and Settlement Systems Regulations, 2008.
● It deals with matters relating to the form of application to authorize commencing/
carrying on a payment system and grant of authorization.
● It prescribes payment instructions and determines the standard of payment systems.

Definitions
● Settlement
○ It means the settlement of payment instructions. It also includes the settlement of
securities, foreign exchange, derivatives, or other transactions involving payment
obligations. It can be either on a net basis or on a gross basis.
● Sec 2(1)(i) - Payment System
○ “payment system” means a system that enables payment to be effected between a
payer and a beneficiary, involving clearing, payment or settlement service or all of
them, but does not include a stock exchange;
○ Explanation.- For the purposes of this clause, “payment system” includes the
systems enabling credit card operations, debit card operations, smart card
operations, money transfer operations or similar operations;
● Sec 2(1)(c) - Electronic Fund Transfer
○ any transfer of funds which is initiated by a person by way of instruction,
authorisation or order to a bank to debit or credit an account maintained with that
bank through electronic means and includes
■ point of sale transfers;
■ automated teller machine transactions,
■ direct deposits or withdrawal of funds,
■ transfers initiated by telephone, internet and, card payment

Authorization of payment system

● According to Section 4 of the PSS Act, only RBI has an authority to operate or
commence any payment system and if any person or system providers desire to operate or
commence a payment system then he has to apply for authorization from RBI under
Section 5 of the Act.
● Any unauthorized operation through a payment system would be considered as an
offence under this Act and would be liable for punishment.

39
 ● Foreign entities are allowed to operate the payment system in India. To commence a
payment system in India, it is necessary to obtain license or approval from the RBI,
irrespective of being a domestic or foreign entity.

Offenses and Penalities

● Section 26, 27, 28, 29, 30, and 31 deals with the provisions related to offences and
penalties.
● Offences under the Act include the unauthorized operation of a payment system, failure
to comply with the terms of authorization, failure to produce statements, return
information, or documents providing false information, disclosure of prohibited
information, violating the provisions of the Act, not acting in compliance of the
directions given by the RBI.
● For committing any of the offences, RBI is empowered to initiate a criminal proceeding
against the offender. RBI can even impose fines on the person for contravening certain
provisions of the Act.

Kinds of Electronic Payment

● Electronic Clearing Services (Credit)- Salary, Dividends
○ ECS (Credit) facilitates customer accounts to be credited on the specified value
date and is presently available at all major cities in the country.
○ National ECS (Mumbai) and Regional ECS (Ahmedabad, Chennai, Kolkata,
Bangalore)
● Electronic Clearing Services (Debit)- bills
○ The ECS (Debit) Scheme was introduced by RBI to provide a faster method of
effecting periodic and repetitive collections of utility companies.
○ ECS (Debit) facilitates consumers / subscribers of utility companies to make
routine and repetitive payments by ‘mandating’ bank branches to debit their
accounts and pass on the money to the companies.
○ This tremendously minimises use of paper instruments apart from improving
process efficiency and customer satisfaction.
○ There is no limit as to the minimum or maximum amount of payment.
○ This is also available across major cities in the country.
● Electronic Fund Transfers (EFT)- hourly transfers
○ Enabled an account holder of a bank to electronically transfer funds to another
account holder with any other participating bank.
○ Available across 15 major centers in the country, this system is no longer
available for use by the general public, for whose benefit a feature-rich and more
efficient system is now in place, which is the National Electronic Funds Transfer
(NEFT) system.

40
 ○ NEFT
■ a more secure system was introduced for facilitating one-to-one funds
transfer requirements of individuals / corporates.
■ Available across a longer time window, the NEFT system provides for
batch settlements at hourly intervals, thus enabling near real-time transfer
of funds.
■ Certain other unique features viz. accepting cash for originating
transactions, initiating transfer requests without any minimum or
maximum amount limitations, facilitating one-way transfers to Nepal,
receiving confirmation of the date / time of credit to the account of the
beneficiaries, etc., are available in the system.
● Real Time Gross Settlement (RTGS)- interbank
○ RTGS is a funds transfer systems where transfer of money takes place from one
bank to another on a "real time" and on "gross" basis.
○ Settlement in "real time" means payment transaction is not subjected to any
waiting period.
○ "Gross settlement" means the transaction is settled on one to one basis without
bunching or netting with any other transaction.
○ Once processed, payments are final and irrevocable.
○ This was introduced in in 2004 and settles all inter-bank payments and customer
transactions above Rs. 2 Lakh
● Immediate Payment Services (IMPS)- Axis cash to mobile service
○ IMPS stands for Immediate Payment Service in Indian banking system
terminologies. It is a money transfer mechanism made available by the apex bank
of the country, the Reserve Bank of India and the National Payments Corporation
of India (NPCI). Initiated in 2010 by the NPCI with the help of a pilot project
with 4 major banks, IMPS has now grown to 150+ banks.
○ The major feature of IMPS is that it is available at all times for usage. It transfers
funds instantly and is a great banking platform in case of emergencies. The
transaction charges of this platform are also very nominal and the transfer limit is
also considerable, approximately Rupees 2 lakhs per day. Moreover, IMPS is
available on mobile too which makes it super-convenient.
○ National Electronic Fund Transfer (NEFT) and RTGS (Real-time gross
settlement) transfer mechanisms are only available during their business hours.
Moreover, NEFT and RTGS are not available on bank off-days and holidays.
However, IMPS scores a point in this regard as it is available 24 x 7.
○ National Payments Corporation of India (NPCI) is responsible for managing the
IMPS fund transfer mechanism. This mechanism is regulated by the Reserve
Bank of India. One can define IMPS as an immediate, inter-bank real-time fund
transfer mechanism enabled through electronic means.

41
 ○ Objectives of IMPS
■ To enable bank customers to use mobile instruments as a channel for
accessing their banks accounts and remit funds
■ Making payment simpler just with the mobile number of the beneficiary
■ To sub-serve the goal of Reserve Bank of India (RBI) in electronification
of retail payments
■ To facilitate mobile payment systems already introduced in India with the
Reserve Bank of India Mobile Payment Guidelines 2008 to be
inter-operable across banks and mobile operators in a safe and secured
manner
■ To build the foundation for a full range of mobile based Banking services.
● Pre-paid Payment Systems
○ Pre-paid instruments are payment instruments that facilitate purchase of goods
and services against the value stored on these instruments.
○ The value stored on such instruments represents the value paid for by the holders
by cash, by debit to a bank account, or by credit card.
○ The pre-paid payment instruments can be issued in the form of smart cards,
magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile
wallets, paper vouchers, etc.
○ The use of pre-paid payment instruments for cross border transactions has not
been permitted, except for the payment instruments approved under FEMA.
● Mobile Banking System
○ Reserve Bank brought out a set of operating guidelines on mobile banking for
banks in October 2008.
○ The guidelines focus on systems for security and inter-bank transfer arrangements
through Reserve Bank's authorized systems.
○ On the technology front the objective is to enable the development of
inter-operable standards so as to facilitate funds transfer from one account to any
other account in the same or any other bank on a real time basis irrespective of the
mobile network a customer has subscribed to.
● ATMs / Point of Sale (POS) Terminals / Online Transaction

National Payments Corporation of India

● The Reserve Bank encouraged the setting up of National Payments Corporation of India
(NPCI) to act as an umbrella organisation for operating various Retail Payment Systems
(RPS) in India. NPCI became functional in early 2009.
● NPCI has taken over National Financial Switch (NFS) from Institute for Development
and Research in Banking Technology (IDRBT).

42
 ● NPCI is expected to bring greater efficiency by way of uniformity and standardization in
retail payments and expanding and extending the reach of both existing and innovative
payment products for greater customer convenience.
● UPI Transfers

UPI (Hema Maam’s Notes)

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a
single mobile application (of any participating bank), merging several banking features, seamless
fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect
request which can be scheduled and paid as per requirement and convenience.

With the above context in mind, NPCI conducted a pilot launch with 21 member banks.
The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai.
Banks have started to upload their UPI enabled Apps on Google Play store from 25th August,
2016 onwards. It is unique because of the following reasons:

● Immediate money transfer through mobile device round the clock 24*7 and 365 days.
● Single mobile application for accessing different bank accounts.
● Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet
provides for a very strong feature of seamless single click payment.
● Virtual address of the customer for Pull & Push provides for incremental security with the
customer not required to enter the details such as Card no, Account number; IFSC etc.
● Bill Sharing with friends.
● Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.
● Merchant Payment with Single Application or In-App Payments.
● Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based
payments.
● Donations, Collections, Disbursements Scalable.
● Raising Complaint from Mobile App directly

43
RBI NOTIFICATIONS ON PAYMENT ISSUES
● Directions for Opening and Operating of Accounts and Settlement of Payments for
Electronic Payment Transactions Involving Intermediaries 2009
○ To safeguard the interests of the customers and to ensure that the payments made
by them using Electronic/Online Payment modes are duly accounted for by the
Intermediaries receiving such payments and remitted to the accounts of the
merchants who have supplied goods and services.
○ It requires a separate bank account to be opened for the purpose of such payment
transactions in the nature of an internal account which is not maintained or
operated by intermediaries and prescribes other conditions for settlement of
accounts and related aspects.
● RBI Circular on Payment System Providers and System Participants, 2011
● RBI Master Circular on Plastic Money 2015
● RBI Notification on unauthorized transactions, 2017
● RBI Notifications on Payment Aggregators and Payment Gateways, 2019
● RBI Notification on E-mandates for Card Not Present Transactions, 2019
● RBI Master Direction on Digital Payment Security Control, 2021

CHARGEBACK AGREEMENTS
● Chargeback means reversal
● Also known as friendly fraud
● A buyer protection measure
● The customer keeps the goods/products purchased online from the eCommerce shop but
still asks for a refund stating purchase never made or payment being made twice or item
was never received
● Chargebacks can result from unintentional mistakes or even from malicious intentions
● The chargeback resolution process involves 3 parties
○ The customer
○ The merchant
○ The issuing bank
● A person commits chargeback fraud by authorising a credit/debit card transaction,
receiving the product or service and later filing a false chargeback request to get the item
for free
● Common chargeback frauds suffered by e-commerce merchants include
○ The purchased product or service received is claimed to be undelivered
○ The original transaction authorised is claimed to be unauthorized
○ The genuine product or service received is claimed to be faulty or deficient

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 ● Chargeback not only affects the revenusem but also the reputation and goodwill of the
damaged immensely
● Possible and typical chargeback reasons:
○ consumer was not satisfied with the received goods or services:
○ the ordered goods were not delivered or the service was not provided to the
consumer
○ the received goods were not the ones the consumer ordered, differed from the
description, or the description did not provide significant information
○ consumer returned the goods but did not receive a money refund from the
merchant
○ clerical mistake:
○ consumer was accidentally billed twice (duplicated transaction)
○ the card was charged for a different amount
○ fraudulent transaction:
○ transactions were performed by an unauthorized person (e.g. the card data was
stolen)
○ the cardholder does not recognize a specific transaction on their card statement
● Chargeback process
○ The card holder contacts their issuing bank and requests a chargeback.
○ The issuing bank begins the chargeback procedure and contacts the acquiring
bank.
○ The acquiring bank informs the merchant about the chargeback request and asks
them to take a stand in a specific time period (e.g. 7 days).
○ The merchant either accepts the chargeback or objects it and provides
documentations that proves them right.
○ If the merchant accepts the chargeback, doesn't respond in the said time period or
objects the chargeback, but cannot provide proper documentation, they have to
return the funds and pay the appropriate fees.
○ The acquiring bank informs the issuing bank about the merchant position and
provides appropriate documentation (that, for example, proves the merchant is in
the right).
○ The issuing bank informs the card holder about the result. If the merchant was in
the right, the funds are not returned.

ELECTRONIC FUND TRANSFER

● Oldest electronic payment systems
● EFT is a non-paper financial transaction initiated via a computer or another electronic
terminal that gives financial institution authorization to debit or credit an account
● Also known as wire transfer
● Adopted the cash less and cheque less culture

45
 ● Safe, reliable and convenient to conduct transactions and business
● Advantages
○ Simplified accounting
○ Improved efficiency
○ Reduced administrative costs
○ Improved security

CASES
● State Bank of India v Dr. Subhash Chander March, 2016 NCDRC
○ bank was liable for fraudulent ATM withdrawals
● Mercantile Credit v Dinesh (1998) DEL
○ The card issuing company was held liable for its deficiency in service if any entity
which was a party to the crdity card arrangement refused to accept the credit card.
● Central Bank of India vs Mohinder Singh (2000) Punj
○ The complainant had booked for an insurance of lost or stolen credit card with a
protection to the extent of Rs.50k. The credit card was lost and due intimation was
sent to the bank. It was ruled that the bank was not liable to charge upto
Rs.50,000
● American Express Bank ltd. V Girdhari Jewellers Pvt. Ltd. (2006) Del
○ The case involved the issue of UTP. The customer had used a credit card to pay
for jewellery and the card was fake. The court held that since the shop keeper
could not have known that the card was fake, the pertiner cannot avail the full
recourse clause in the agreement
● Anupama Purohit vs Makemytrip.com (2007) Delhi DCRF
○ Case dealt with Unfair trade practice by the defendant
○ In this case, an online service provider despite receiving an advance payment
failed to book one double bedroom for a consumer although it had granted
confirmation of booking. The defendant debited twice the amount of the
complaint by using his credit card details and password which was used to make
an online payment.
● National Association of Software and Service Companies vs Ajay Sood (2005) Del-
○ Concept of phishing as cyber crime and liable for injunction and damages
● Umashankar Sivasubramanian vs ICICI bank (2008)
○ Case of phishing- bank held liable for not securing its internet banking system in
such a manner that a customer would recognize a mail from the bank

E-MONEY
● Means prepaid money that is stored in an electronic format and used to pay for goods and
services online.

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 ● It includes prepaid online account, smart cards, e-wallets, virtual currencies such as
bitcoins
● E-money is usually implemented by use of cryptography.
● Liability of e-money can be observed based on the provisions of IT Act. Sec42 states that
any subscriber of e-signatures (which are used in e-money) will be liable till he has
informed the certifying authority that the private key used for transactions has been
compromised.
● E-money that is quite similar to real cash (fiat money) shall be covered under the RBI Act
1934.
● Academicians argue that putting a restriction on the right to issue e-cash to banks would
not favour e-commerce activity and may lead to a decrease in its online usage.

PLASTIC MONEY (Hema Maam’s Notes)

● Charge Card: A charge card has similar features of credit cards. However, after using a
charge card, it is necessary to pay the whole amount of bill till the due date. If the person
defaults to pay the amount of the charge card, then he has to pay the late payment
charges.
● Visa & MasterCard: Visa & MasterCard are international non-profit organizations.
They are dedicated to promoting the growth of the business of cards across the globe.
They have designed a wide network of merchant institutions by keeping in mind that the
customers might use their credit cards to make several transactions worldwide.
● Debit Cards: The debit card is an encoded plastic card which is issued by banks and has
replaced with the cheques. It is a multipurpose card, as it can be used as an ATM to
withdraw the money and check the balance of the bank account. It is issued by bank free
of cost with the savings or current account. It is one of the best online-payment tools
where the amount of purchase is immediately subtracted from the account of the
customer and credited to the merchant’s account. It has overcome the delay in the
payment process.
● ATM Cards: These cards are typically used at ATMs to withdraw money, transfer funds
and make deposits. ATM cards are used by inserting the card into a machine and enter a
PIN or personal number for security purpose. The system checks the account for
sufficient funds before allowing any transaction.

Advantages Of Plastic Money

● Convenience: Plastic money provides an easy way to make financial transactions
without carrying cash. It also provides the benefits of anywhere and anytime banking.
● Check Counterfeiting: The proposed plastic currency notes will reduce the chances of
counterfeiting.

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 ● Long life of Plastic Currency Notes: The proposed plastic currency notes will have the
life of five years as against one-year life of paper currency notes.
● Check on Black Money: It is possible to trace the financial transactions done through
cards. Developing a culture of plastic money will make it easy for the government to
trace black suspected black money sources.
● Supports Growth of E-commerce: The use of cards has supported the growth of
e-commerce. Growth of e-commerce enhances cost-effectiveness and alternative channels
to improve economic growth.
● Power of Purchasing: Debit or Credit cards made it easier to buy things. Now we do not
have any need to carry money in a large amount. Plastic money is accepted at any time
and everywhere.
● Time-Saving: one can purchase anything from any place through a credit card or debit
card without spending money on fare or cash transaction. You have to provide your card
details to seller store or corporations and settle your order. It saves time in the transaction
by debit and credit card.
● Safety: In case, if an individual loses the cards, then he/she may contact the bank or
financial institution, which provide the cards. The financial institution or bank will block
the account and no-one can draw a single penny without your permission.

Disadvantages Of Plastic Money

● Shops using other Vendors: Numerous shops accept credit cards of a specific company
only. In this situation, money is the only mode of payment for those who use a credit card
of another company.
● Less Availability: There are several cases where the firms do not let their cards to be
utilized in specific areas wherever they have a regional dispute.
● An issue with Magnetic Strip: The Credit card consists of the magnetic strip that can
get worn out due to extensive use of it. If it happens while travelling, and credit card is
the only form of money with the person, then he/she must wait till the time they receive a
new card. The new card may take a minimum of forty-eight hours to get active.
● Increased Debt and rates of high-interest: Credit Card from Corporations and financial
institutions charge high-interest rate on more money if the person fails to pay off till the
fixed date of the particular month. These interests are the earnings, for which they
provide the additional shopping for limits then the money. It is not a good idea to owe
loan on high-interest rates and spend it in necessary things or purchasing.
● Fraud: In the case of stolen credit cards, the thief may use it directly to get the
information. In today’s world, it is possible to get a clone of any debit or credit card,
which works like original and can be a substantial loss. Thus be aware of the frauds of
credit cards.

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 UNIT 5: CONSUMER PROTECTION

REMOTENESS OF DAMAGE
● Hadley v Baxendale
○ A defendant will be liable for damages that may reasonably be supposed to have
been in the contemplation of the parties arising in the normal course of events.
○ Where special circumstances are communicated, a defendant will be liable for
damages that may have been reasonably contemplated by the parties acquainted
with that special knowledge.
● Question: X a user of an online service ONS clicked on “I agree” twice before running
the application on his system. Eventually, he is charged a hefty amount from his credit
card without getting any prior information on it. X sues ONS for fraud. Is the claim
legally sustainable?
○ Rudder vs. Microsoft (1999)
■ Rudder was the user of Microsoft internet services
■ Clicked on “I Agree” before running the application
■ The legality of click-wrap agreement
■ The validity of forum non conveniens
● Caspi vs. MSN (1999)
○ Fine prints in contracts
● Tata Chemicals vs. Skypack Couriers (2001)

OECD RECOMMENDATIONS ON CONSUMER PROTECTION IN

E-COMMERCE
● Applicable only to B2C E-Commerce
● Transparency- proactive stakeholders; consumer vulnerability
● Fair practices- business, advertising and marketing
● Accurate, clear and accessible online disclosures- limitations such as language,
technological barriers must be accounted for
● Sufficient information about a business that is online
○ Location
○ Identification
○ Prompt and easy communication with consumer
○ Dispute resolution
● Sufficient information about the nature of goods or services being provided by the
business
○ Contractual requirements
○ Key limitations

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 ○ Health, safety and security concerns
○ Age related restrictions, etc.
○ Transparency of information pertaining to transactions and associated costs
○ Payment methods
○ Privacy policy
○ Rights of clients
○ Dispute resolution, etc.
● Easy to use payment methods:
○ Effective security measures
○ Minimum levels of consumer protection vis-à-vis e-payments
○ Minimum liability of consumer on case of default of payment
● SS. 5 and 7 of Payment Settlement System Act 2007- RBI guidelines; applicable to
e-transactions

ECOMMERCE DIRECTIVES ON DISTANCE SELLING

● Sale and purchase of goods/services where a consumer and a supplier running an
organised distance-selling scheme do not meet face to face at any stage until after the
contract has been concluded.
● Rights of Consumers in distance selling contracts
○ Provision of comprehensive information before the purchase- Art.4
○ Confirmation of most of that information in a durable medium (such as written
confirmation) and some additional information which becomes relevant after the
sale- Art. 5
○ Right of withdrawal- within 7 working days- Art.6
○ Where the consumer has cancelled the contract, the right to a refund within 30
days of cancellation;
○ Delivery of the goods or performance of the service within 30 days of the day
after the consumer placed his/her order;
○ Art. 10 – Data Privacy
○ Non validity of any waiver of the rights and obligations provided for under the
Directive, whether instigated by the consumer or the supplier.
● Drawbacks
○ Non-uniform legal sanctions
○ Non-uniform cooling off period
○ Online auctions not covered
● Gentry v E-bay 2002
○ “eBay was not responsible for the goods that are listed in the website since they
act only as the facilitator and not as the seller, and that the auction site did not

50
 guarantee that the goods listed were of genuine, which is the role of the actual
seller.”

BAD PRACTICES IN ADVERTISING

● Advertising Code Committee of the Netherlands
● FTC of the USA
● Consumer Protection Act 2019
● Advertising Standards Council of India (ASCI)
● Stakeholders must make effort to educate and aware the consumers
● Global communication- joint ventures, co-operation between the governments and the
stakeholders
● FTC v ReverseAuction.com
○ Data of e-bay users used by ReverseAuction to send them unsolicited emails with
the subject line- “ADV. [e-bay User ID] will EXPIRE” soon which was not true
○ Violation of e-bay’s user agreement and privacy policy which prohibited anyone
from using the user data for unsolicited emails
○ Section 5(a) of the FTC Act prohibits unfair or deceptive acts or practices in
or affecting commerce.
○ Violation of consumer privacy
○ The Court ordered ReverseAuction:
■ To delete the personal information of consumers who received the spam
but declined to register with ReverseAuction;
■ To give those who did register, as a result of the spam, notice of the FTC
charges and an opportunity to cancel their registration and have their
personal information deleted from ReverseAuction's database;
■ To inform the consumers that their data was collected from e-bay database
and it was not consented to by e-bay
● In Re Double Click Privacy Litigation
○ Online advertising company which collects its user data to analyse user patters
and increase its consumer base through “cookies”
○ Plaintiffs, in a class action, alleged that these “cookies” had unauthorized access
to more private information of the DoubleClick affiliated website users
○ Three counts were alleged:
■ 1. Violation of S. 2701 of the Stored Communication Act;
■ 2. Wiretrap Act S. 2510;
■ 3. Computer Fraud and Abuse Act S. 1030
○ Prohibits intentional unauthorized access of electronic communication while it is
in electronic storage
○ Exception: consent of a website and its user, to intercept their communication for
better delivery of advertisements

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 ○ Restrains the intentional interception of any electronic communication or the
procurement of any other person to do so.
○ Proscribes the intentional and unauthorized causing of damage to a protected
computer resulting from knowingly causing the transmission of a program,
information, code, or command. (respectively)
○ Settlement
■ Better explained privacy policy
■ User awareness campaign
■ Imparting options which give a user the choice to install or decline the
installation of invasive computer programs
● LIC vs. Consumer Education and Research Centre
○ LIC policy meant only for government and semi-government employees, reputed
commercial firms
○ Violation of constitutional rights and objectives
○ LIC- agent of state- must realise the objective of social welfare- subject to judicial
review

CONSUMER PROTECTION AND E-COMMERCE IN INDIA

Consumer Protection Act 2019

● Section 2(16) defines e-commerce
● Section 2(7) explanation (b)- consumer includes anyone who engages in online
transactions through electronic means or telemarketing…goods and services…online
market place…auction sites
● Section 94 provides the central government to take measures to prevent Unfair
Trade Practices in e-commerce
● Covers E-Commerce Transactions:
○ The New Act has widened the definition of 'consumer'.
○ The definition now includes any person who buys any goods, whether through
offline or online transactions, electronic means, teleshopping, direct selling or
multi-level marketing.
○ The earlier Act did not specifically include e-commerce transactions, and this
lacuna has been addressed by the New Act.
● Product Liability & Penal Consequences:
○ The New Act has introduced the concept of product liability and brings within its
scope, the product manufacturer, product service provider and product seller, for
any claim for compensation.

52
 ○ The term 'product seller' is defined to include a person who is involved in placing
the product for a commercial purpose and as such would include e-commerce
platforms as well.
● Spice jet Ltd V. Ranju Aery 2017
○ The question before the Supreme Court was; consumer who enters online
contract, whether consumer protection Act, is applicable to him ?
● Difference between CPA 1986 and CPA 2019

1986 2019

PECUNIARY District forum (upto 20 lacs) State District forum (upto 1 crore)State
JURISDICTION commission (from 20 lacs to 1 commission (from 1 crore to 10
crore)National commission (from crore)National commission (from
1 crore and above) 10 crore and above)

MRP/PURCHASE Earlier MRP was a criteria to Now discounted price/ actual

PRICE decide pecuniary jurisdiction purchase price is criteria

TERRITORIAL Where seller has office Where complainant resides or

JURISDICTION works

REGULATOR No such provision Central Consumer protection

authority to be formed

APPEAL Earlier 30 days period for appeal Now it is 45 days (Section 41)Now
against the order of District forum 50% of award amount
(Section 15)Earlier 50% or 25,000
whichever is less is to be
deposited

E-COMMERCE Earlier no specific mention Now all provision applicable to

direct seller has been extended to
e-commerce

UNFAIR TERMS No such provision Section 49(2) and 59(2) of the new
AND act gives power to the State
CONDITIONS Commission and NCDRC
respectively to declare any terms
of contract, which is unfair to any
consumer, to be null and void
● Rights of Consumer under s.2(9)
○ The right to be protected against the marketing of goods, products or services
which are hazardous to life and property:

53
 ○ The right to be informed about the quality, potency, purity, standard and price of
goods, products or services, as the case may be so as to protect the consumer
against the unfair trade practices
○ The right to be assured, wherever possible access to a variety of goods, products
or services at competitive prices;
○ The right to be heard and to be assured that consumers' interests will receive due
consideration at appropriate fora;
○ The right to seek redressal against unfair practice or restrictive trade practices or
unscrupulous exploitations of consumers; and
○ The right to consumer awareness
● Example Question
○ One Ms. A purchases Aloe Green Tea face scrub from one e-commerce site, the
instruction for use or any special warning was not mentioned on the product nor
in the e-commerce website. A got some allergy after using the product. And the
allergy caused her mental agony.
○ Questions:
■ Whether Ms. A is considered as consumer under this Act?
■ Whether she is liable to get action under product liability?
○ Answer:
■ Yes, she is consumer under this Act, under Section 2(7). “buying goods
and hearing service includes offline or online transaction though electronic
means or by teleshopping or direct selling or multi-level marketing.
■ Section 2(22) defines harm in relation to a product labiality, includes;
● Personal injury , illness or death
● Mental agony or emotional distress attendant to personal injury or
illness or damage to the property.
■ Under section 85 liability of product service provider;
■ Under section 85(b)-there was an act of omission or commission or
negligence or conscious withholding any information which caused harm,
or
■ Section 85(c)- the service provider did not issue adequate instructions or
warnings to prevent any harm;

Cases
● Deficiency in services availed online
○ Anupama Purohit vs Makemy trip.com
■ Case dealt with Unfair trade practice by the defendant
■ In this case, an online service provider despite receiving an advance
payment failed to book one double bedroom for a consumer although it
had granted confirmation of booking. The defendant debited twice the

54
 amount of the complaint by using his credit card details and password
which was used to make an online payment.
○ Spice Jet vs Ranju Aery, 2017
■ The National Commission observed that the Kolkata airport was
operational and no other flights were affected. SpiceJet’s only defence was
that the cancellation was due to technical and operational reasons, but no
details or explanation were given → hence held to be deficiency in
service.
■ In an internet booking, the contract is concluded when the booking is
accepted by sending the e-ticket which is received at the terminal from
which the booking was done. Since Ranju had done the booking from
Chandigarh, part of the cause of action had arisen in Chandigarh, so the
consumer forum at Chandigarh was entitled to adjudicate the dispute
regardless of the travel sector which was between Kolkata and New Delhi.
■ CH: consumer to initiate legal proceedings at the place from which the
booking was done online, which would usually be the place where he
resides.
● False Advertisements
○ People vs Lipsitz
■ The complaint alleged that the defendant had engaged in fraudulent and
deceptive trade practices on the Internet by using and mis-using e-mail
under various assumed names to sell magazine subscriptions that never
arrived or were only delivered for a portion of the paid subscription
period.
■ In this case, a New York court held that the defendant was subject to
personal jurisdiction and liable for violating New York consumer
protection laws, even though the defendant conducted its magazine
subscription business globally over the Internet.
■ Fraudulent business scheme involving spam emails held to violate New
York State consumer protection laws
○ Minnesota vs Granite Gate Resorts
● Horlicks Ltd. v. Zydus Wellness Products Ltd., 2020 SCC OnLine Del 873
○ The High Court passed an interim order restraining Zydus from telecasting its
advertisement comparing Complan to Horlicks on the grounds that the same was
misleading and disparaging. The Court relied on various judgments on misleading
advertisements, disparagement and law governing publication of advertisements
on television
● Dabur (India) Ltd. v. Colortek (Meghalaya) (P) Ltd., 2010 SCC OnLine Del 391
○ The protection of Article 19(1)(a) of the Constitution is available. However, if an
advertisement extends beyond the grey areas and becomes a false, misleading,

55
 unfair or deceptive advertisement, it would certainly not have the benefit of any
protection.

Consumer Protection and E-Commerce Rules 2020

● Applicability - Rule 2
○ All models of e-commerce
○ All goods and services bought or sold online
○ All e-commerce retailers
○ All UTP across all the models of e-commerce
● Duties of e-commerce entities
○ Every e-commerce entity must be incorporated under the Companies Act, 1956
or the Companies Act, 2013, Foreign Exchange Management Act, 1999
○ E-commerce entity shall not engage itself in any unfair trade or malicious
practice, whether in the course of business on its platform or otherwise.
○ They must establish adequate grievance redressal mechanisms and a
grievance officer shall be appointed who shall ensure acknowledgment of the
consumer complaint within 48 hours and the company shall redress the
complaint within one month from the date of receipt of the complaint.
○ It shall provide the necessary information in a clear manner on its platform,
which can be easily visible by the consumers.
○ It cannot ask for cancellation charges on consumers cancelling after
confirming purchase unless similar charges are also borne by the e- commerce
entity and it has also been prohibited from manipulating the price on its platform
and from discriminating the consumers of the same class.
○ If any e-commerce entity offers imported goods or services for sale, it has to
mention the name and details of any importer from whom it has purchased
such goods or services, or who may be a seller on its platform.
○ Every e-commerce entity must endeavour to become a partner in the
convergence process of the National Consumer Helpline of the Central
Government.
○ Every e-commerce entity has to make their payment process effective
towards accepting refund requests of the consumers as prescribed by the
Reserve Bank of India or any other competent authority under any law for the
time being in force, within a reasonable period of time, or as prescribed under
applicable laws.
○ All e-commerce entities have to record the consent of a consumer for the
purchase of any good or service offered on its platform where such consent is
expressed through an explicit and affirmative action, and not otherwise.
● Duties of Sellers in market Place -

56
 ○ maintain fair trade practice and not to get involved in any kind of unfair
trade practice which includes misrepresenting himself as a consumer and posting
fake reviews about a product.
○ They cannot deny their duty to take goods back while offering goods through
market place entity and cannot withdraw or discontinue services purchased or
agreed to be purchased.
○ The duty to reimburse the consideration paid by the consumers is also cast upon
the seller, if the goods or services are deficient or defective or of different quality
as compared to what was shown in images or are delivered late from the
scheduled time. However, the seller is not responsible if the late delivery is due to
unavoidable causes.
○ Seller should make a written contract with the concerned marketplace
e-commerce entity to undertake or solicit such sale or offer.
○ It is mandatory for a seller to appoint a grievance officer for consumer
grievance redressal and to make sure that the said officer acknowledges the
receipt of any consumer complaint within forty-eight hours and redresses the
complaint within one month from the date of receipt of the complaint.
○ Seller is required to ensure that the advertisement about characteristics,
access and usage conditions of the goods and services are correct and
consistent with the actual product.
○ Seller is also under an obligation to maintain transparency with the respective
e-commerce entity by providing it its legal name, principal geographic address of
its headquarters and all branches, the name and details of its website, its e-mail
address, customer care contact details such as fax, landline, and mobile numbers
and where applicable along with its GSTIN and PAN details.
○ Seller is prohibited for manipulating prices as he is now liable to provide the
e-commerce entity on its platform or website
○ Seller is required to disclose all the relevant information which is required by
the consumer to decide on purchasing a product.
● Liability of e-commerce entity - Rule 5
○ Required to provide information to consumers, relating to return, refund,
exchange, warranty and guarantee, delivery and shipment, modes of payment,
grievance redressal mechanism, payment methods, security of payment methods,
charge-back options and country of origin.
○ Acknowledge the receipt of any consumer complaint within 48 hours and redress
the complaint within one month from the date of receipt. They will also have to
appoint a grievance officer for consumer grievance redressal.
○ Sellers cannot refuse to take back goods or withdraw services or refuse refunds,if
such goods or services are defective, deficient, delivered late, or if they do not
meet the description on the platform.

57
○ The rules also prohibit the e-commerce companies from manipulating the price of
the goods or services to gain unreasonable profit through unjustified prices.

58
 UNIT 6: IPR ISSUES IN E-COMMERCE

INTRODUCTION:
● Main concerns:
○ Trademark violations: Cyber Squatting, Framing, Linking, Meta Tagging
○ Copyright violations: Framing, Linking, Deep Linking
■ Exception: Fair Use Principle
○ Patents: Business Model Patents
● Cyber Squatting: refers to the unauthorized registration and use of Internet domain
names that are identical or similar to trademarks, service marks, company names, or
personal names.
● Framing: Framing is a method of splitting one window into two or more screens. A web
page can be inserted into a frame, and that portion of the screen will remain static as a
user moves through other web pages.
● Linking: "Linking" allows a Web site user to visit another location on the Internet. By
simply clicking on a "live" word or image in one Web page, the user can view another
Web page elsewhere in the world, or simply elsewhere on the same server as the original
page.
● Deep Linking: In the most simple interpretation, a deep link is any link that directs a
user past the home page of a website or app to content inside of it.
○ For example the URL fb:// may open the Facebook app, but
fb://profile/33138223345 opens Wikipedia's profile in the Facebook app.
● Meta Tags: are tags that have no visible effect on the Web page. Instead, they exist in the
source code for a Web page to assist search engines in ascertaining the content of the
page. Problems arise when companies include in their own Web sites meta tags
containing the names or descriptions of other companies.
(The above mentioned definitions and explanations can be better understood from:
https://cyber.harvard.edu/property00/metatags/main.html )

COPYRIGHTS:
● Covers works such as:
○ Literary, Artistic, Cinematographic work, Computer programs- literary,
○ Web sites- unique design then artistic, literary, trade dress
○ Musical work, Motion pictures, Sound Recordings
● Main sections:
○ S.13 - Protected works

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 ○ S.13 - Meaning of Copyright
○ S.51 - Meaning of infringement
○ S.52 - Fair use Principle
○ S.65A - Protection by anti-circumvention measures
○ S.65B - Exceptions
● Copyright (Amendment) Act 2012
○ Grant of Compulsory Licenses
○ Grant of Statutory Licenses
○ Administration of Copyright Societies
○ Fair Use Provisions
○ Access to copyrighted works by the Disabled
○ Relinquishment of copyright
● K C Bokadia vs Dinesh Chandra (1999) MP
○ Registration not mandatory for protection under copyright Act
● Dhiraj Dharamdas v M/S Sonal Infosystems Pvt. Ltd. 2012 (Bom)
○ Registration under Sec 44 mandatory for remedy for infringement under Sec 51 of
Copyright Act, 1957
● Civil remedies to copyright infringement s are provided in chapter XII of Copyright Act,
1957 granting injunction and damages for copyright infringement;
● Criminal liability provisions are provided in chapter XII of Copyright Act, 1957 wherein
abetment of infringement is also unlawful and punishable with imprisonment of up to
three years and a fine up to Rs. 2 Lacs

Issues in Digital Copyright;

● Three main categories
○ Works- Computer Programs, database, multimedia
○ Reproduction, distribution and communication to the public
○ Management and Administration of Copyrights
● Territorial in Nature
○ Different approaches to registrations and nature of protection varies
● Nature of work protected
○ Multimedia
○ Database Rights
■ Same work covered under different works and so different protection
■ Database- computer program (data creation ), literary work (data collected
and arranged)
■ Different rights – rental rights on computer program and no rental right on
literary work
■ Sec 2(o) of Copyrights Act, 1957- database is literary work

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 ■ Sec 17 (c) – who is the author of database- employer unless otherwise
agreed
○ Sec 14 (b) in the case of a computer programme,-
■ to do any of the acts specified in clause (a)
■ to sell or give on commercial rental or offer for sale or for commercial
rental any copy of the computer programme:
● Provided that such commercial rental
○ Does not apply in respect of computer programmes where the programme itself is
not the essential object of the rental.”
○ Information Technology Act, 2000
■ Sec 2 (1) (k) "computer resource" means computer, computer system,
computer network, data, computer data base or software
■ Sec 2 (1) (o) - “data”
● Technology enabled new ways of Copyright infringement
● Reproduction, Storage and Distribution
● Fair use Principle
○ USA - wider || India - narrow
○ USA Fair Use principles:
■ Purpose
■ Nature of Work
■ Amount of Work Used
■ Effect on the market and value of the work
● Liability of Intermediaries

Copyright Protection to Computer Software and Computer Program

Computer Software
● Copyright Act, 1957 grants protection to original expression and computer software is
granted protection as a copyright unless it leads to a technical effect and is not a computer
program per se;
● The computer software which has a technical effect is patentable under India Patent Act,
1970.
● Tata Consultancy Services v. State of Andhra Pradesh
○ A computer software is intellectual property, whether it is conveyed in diskettes,
floppy, magnetic tapes or CD ROMs, whether canned (Shrink-wrapped) or
uncanned (customized), whether it comes as part of computer or independently ,
whether it is branded or unbranded, tangible or intangible; is a commodity
capable of being transmitted, transferred, delivered, stored , processed , etc. and
therefore as a 'good' liable to sale tax.

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 ○ The court stated that, 'it would become goods provided it has the attributes thereof
having regards to (a) its ability; (b) capable of being bought and sold; and (c)
capable of being transmitted, transferred, delivered, stored and possessed.
○ If a software whether customized or non-customized satisfies these attributes, the
same would be goods.

Computer Program
● Sec 14 (b) in the case of a computer program,-
○ to do any of the acts specified in clause 14 (a) (exclusive right over a category of
work)
○ to sell or give on commercial rental or offer for sale or for commercial rental any
copy of the computer program:
○ Provided that such commercial rental does not apply in respect of computer
programs where the program itself is not the essential object of the rental.
● Exemptions
○ Reverse engineering for building another product
■ Sega Enterprises v Accolade Inc. (1992) 9th Circuit
● the purpose and character of the use;
● the nature of the copyrighted work;
● the amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
● the effect of the use upon the market for the copyrighted work.
○ Indian law
■ Sections 52(1)(aa) to (ad) of the act lay down the mandated exceptions
with respect to computer programmes or software
○ Article 6 of the EU directive on the legal protection of computer programs
(1991)
■ deals with “decompilation” and limits the exception only to the “parts of
the original program” which are necessary in order to achieve
interoperability; not applicable in India

Protection of Database
● WIPO Copyright Treaty 1996
○ A. 5: Collection of independent works, data or other materials, arranged in a
systematic or methodical way and capable of being individually accessed by
electronic or other means
● Copyrights Act, 1957
○ Sec 2(o): database is literary work
○ Sec 17 (c): who is the author of database- employer unless otherwise agreed

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 ● Information Technology Act, 2000
○ Sec 2 (1) (k): "computer resource" means computer, computer system, computer
network, data, computer data base or software
○ Sec 2 (1) (o): data―data means a representation of information, knowledge, facts,
concepts or instructions which are being prepared or have been prepared in a
formalised manner, and is intended to be processed, is being processed or has
been processed in a computer system or computer network, and may be in any
form (including computer printouts magnetic or optical storage media, punched
cards, punched tapes) or stored internally in the memory of the computer
● Originality in Database
○ V Govindan vs E M Gopalakrishna ( AIR 1955 Mad 319):
■ “common source” places the onus on the defendant to prove that they
actually went to the common source from where they borrowed,
employing their own skill, labour and brains and that they did not merely
copy.
○ Burlington Homeshopping vs Rajnish Chibber (1995) DEL:
■ Compilation is also literary work as considerable amount of time, money
and effort is spent on putting together a compilation
● Eastern Book Company vs D. B. Modak 2004
○ Unless the work has been prepared by own labour skill and there is originality and
creativity in its generation it will not have copyright
○ Compilation may not have anything original in it but it is the whole work that
should be original
○ Final work must be distinguishable from previous works
● Database and E-Commerce:
○ Burlington Home Shopping vs Rajnish Chibber (1995)
■ “Compilation of mailing addresses of customers is copyright protected as
there is devotion of work, time and resources in creating that compilation”
○ Principle relevant for e-commerce websites as well as law firms
○ Diljeet Titus vs Alfred 2006 Delhi High Court
■ Right over the client list and contact details

Infringement of Copyright
● Section 51 of the Copyright Act 1957- Infringement
● Section 52- Exceptions
● Direct Infringement- Infringement consists of the unauthorized exercise of one of the
exclusive rights of the copyright holder ;
● Contributory Infringement- participating in an activity that constitutes a copyright breach
with the knowledge of such breach
● Vicarious infringement- knowledge; control; financial benefits

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Technology enabled copyright infringement:
● Linking- Providing a link on the website
○ In-line Linking- Enables a web page to summon different elements from diverse
pages or servers to create a new web page
○ Deep- Linking- placing a link on your site that leads to a particular page within
another site (i.e., other than its homepage)
○ Shetland Times vs Wills (1997) - Scottish law
○ Ticketmaster Corp. vs Tickets.com(2000) - US law
○ Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc, 75 F. Supp. 2d 1290
(D. Utah 1999)
■ A website posted infringing copies of a church's copyrighted handbook at
its site.
■ The website was ordered to remove the handbook but subsequently
provided links to other sites that contained infringing copies of the
handbook.
■ These links were different from traditional hyperlinks, because the website
knew and encouraged the use of the links to obtain unauthorized copies.
■ The linking activity constituted contributory copyright infringement
■ It is not a violation of copyright law to create a hyperlink, but it is a
violation of the law to create a link that contributes to unauthorized
copying of a copyrighted work if the linking party knew or had reason
to know of the unauthorized copying and encouraged it.
● Framing
○ Occurs when one Web site incorporates another site’s web pages into a browser
window with the first site’s own content
○ A frame is an independently controllable window on a web site through which
pages from another web site can be viewed;
○ The Washington Post Co. v. Total News (1997)
■ Total News used framing technology to hyperlink Washington post, CNN,
USA Today Etc
■ The Washington Post, CNN, and several other news companies sued a
website, Total News, which framed their news content. Under the terms of
a settlement agreement, Total News agreed to stop framing and agreed to
use text-only links.
■ "Framing" is the process of allowing a user to view the contents of one
website while it is framed by information from another site, similar to the
"picture-in-picture" feature.
■ Framing may trigger a dispute under copyright and trademark law
theories, because a framed site arguably alters the appearance of the

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 content and creates the impression that its owner endorses or voluntarily
chooses to associate with the framer.
● In-Lining
○ Perfect 10, Inc. vs. Amazon.com, Inc. (2007)
■ In-lined links to full sized reproductions are not automatically excused as
a fair use. The federal appeals court, in this case, permitted the use in-lined
links for thumbnail reproductions.
■ "In-lining" is the process of displaying a graphic file on one website that
originates at another. For example, in-lining occurs if a user at site A can,
without leaving site A, view a "cartoon of the day" featured on site B.

Fair Use:
● Users of copyrighted materials have affirmative access to protected materials and their
fair use rights are duly protected and enforced.
● Broadened the scope of statutory and compulsory licensing provisions provided in the
1957 Act
● Empowered broadcasting organisations to broadcast any prior published literary, musical
work and sound recording by just giving a prior notice to the copyright owner and paying
royalty at the rates prescribed by the Copyright Board as laid down in Section 31D of the
Amendment Act.
● Neither any positive confirmation from the copyright owner is required nor do they have
any say in determining royalty rates, making it almost an unqualified right for the
broadcasters
● India - The Delhi University Photocopy case
● Fair use in United States - Los Angeles Times vs Free Republic
● Fair Use in the Internet
○ Kelly vs Arriba- Thumbnail image as fair use
○ Perfect 10 vs Google- thumbnail as fair use
● Authors Guild v Google (2015)- snippets of copyrighted books
○ Plaintiffs, who are authors of published books under copyright, sued Google, Inc.
(Google), the defendant, for copyright infringement in the United States District
Court for the Southern District of New York.
○ Through its Library Project and its Google Books project, acting without
permission of rights holders, Google has made digital copies of tens of millions of
books, including Plaintiffs' that were submitted to it for that purpose by major
libraries.
○ Google has scanned the digital copies and established a publicly available search
function – this was alleged to constitute infringement of Plaintiffs' copyrights.
Plaintiffs sought injunctive and declaratory relief as well as damages.

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 ○ Google defended on the ground that its actions constitute "fair use," which, under
17 U.S.C. § 107, is "not an infringement." The district court agreed; thus, the
plaintiffs appealed.
○ The first fair use factor's inquiry is whether and to what extent the new work
supersedes and is transformative.
○ While recognizing that a transformative use is not absolutely necessary for a
finding of fair use, the goal of copyright, to promote science and the arts, is
generally furthered by the creation of transformative works and that such works
thus lie at the heart of the fair use doctrine's guarantee.
○ A transformative use is one that communicates something new and different from
the original or expands its utility, thus serving copyright's overall objective of
contributing to public knowledge.
● USA:
○ Clause 52(1)(w) provides that the making of a three dimensional object from a
two dimensional work, such as a technical drawing for industrial application of
any purely functional part of a useful device shall not constitute infringement.
This provision should help reverse engineering of mechanical devices.
○ Clause 52(zc) has been introduced to provide that importation of literary or
artistic works such as labels, company logos or promotional or explanatory
material that is incidental to products or goods being imported shall not constitute
infringement.
○ Clause 52 (zb) protects the reproduction of protected work in a format that is
accessible by persons with disability
○ Clause 52 (1)(a) Explanation- The storing of any work in any electronic medium
for the purposes mentioned in this clause, including the incidental storage of any
computer programme which is not itself an infringing copy for the said purposes,
shall not constitute infringement of copyright.
○ Clause 52 (b)- the transient or incidental storage of a work or performance purely
in the technical process of electronic transmission or communication to the public.
○ Clause 52 (c)- transient and incidental storage of a work or performance for the
purposes of providing electronic links, access or integration, where the right
holder has not expressly prohibited such links, access or integration, shall not
constitute infringement.
○ Clause 52 (n)- storage of a digital copy of a work if the library possesses a
non-digital version of it.

Intermediary Liability:
● Sec 2 (w) of IT Act, 2000- Definition of Intermediaries
● Sec.79- Safe harbour for Intermediaries
● IT (Intermediaries Guidelines ) Rules 2011

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 ● My Space vs Super Cassettes, 2016
● A&M Recordings vs Napster, 2001
● Direct Infringement- does not require intent or any particular state of mind
● Contributory
○ Liability for participation in the infringement will be established where the
defendant, “with knowledge of the infringing activity, induces, causes or
materially contributes to the infringing conduct of another."
○ A&M Recordings vs Napster, 2001
■ This was a landmark intellectual property case in which the United States
Court of Appeals for the Ninth Circuit affirmed the ruling of the United
States District Court for the Northern District of California, holding that
defendant, peer-to-peer (P2P) file sharing service Napster, could be held
liable for contributory infringement and vicarious infringement of the
plaintiffs' copyrights. This was the first major case to address the
application of copyright laws to peer-to-peer file-sharing.
● Vicarious Liability
○ A defendant is liable for vicarious liability for the actions of a primary infringer
where the defendant
■ has the right and ability to control the infringer's acts and
■ receives a direct financial benefit from the infringement.
○ Intermediaries providing incentives for posting

Digital Millennium Copyright Act (DMCA), 1998

● Introduced a new category of copyright violations that prohibit the "circumvention" of
technical locks and controls on the use of digital content and products.
● These anti-circumvention provisions put the force of law behind any technological
systems used by copyright owners to control access to and copying of their digital works
● The DMCA contains five main provisions:
○ No circumventing digital protections
○ No distribution of devices circumventing digital protection
○ No selling of anti-security tools- enables copying
○ No removing of copyright information- copyrights management
○ Safe harbor for internet service providers
● Copyright protection
○ Through the use of "digital locks," technological systems behind which these
copyrighted materials are protected, producers and manufacturers are able to
automate fine grained control over who can access, use, and/or copy their works
and under what conditions.
○ Producers insist these "digital locks" are necessary to protect their materials from
being pirated or misappropriated.

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 ○ But, these new technological systems, and the DMCA provisions making it a
crime to bypass them, undermine individuals ability to make "fair use" of digital
information, and essentially replace the negotiation of the terms of use for those
products with unilateral terms dictated by copyright owners
● Anti Circumvention Mesaures
○ 65A. Protection of Technological Measures
■ (1) Any person who circumvents an effective technological measure
applied for the purpose of protecting any of the rights conferred by this
Act, with the intention of infringing such rights, shall be punishable with
imprisonment which may extend to two years and shall also be liable to
fine.
○ Exceptions
■ Alter the technology for purposes not prohibited by the Act
■ Conducting encryption research through legally obtained encrypted copy
■ Testing security of the computer system with the authorization of the
owner
■ During the course of identification of surveillance of users
■ National Security
○ Section 65B - Protection of Rights Management Information Any person, who
knowingly
■ removes or alters any rights management information without authority, or
■ distributes, imports for distribution, broadcasts or communicates to the
public, without authority, copies of any work, or performance knowing
that electronic rights management information has been removed or
altered without authority, shall be punishable with imprisonment which
may extend to two years and shall also be liable to fine

Need for Uniform International Law

● Regulations important- to encourage creativity
● IPR are territorial- different countries have different approaches for registration and
protection of IPR
○ Bern Convention is widely accepted but interpreted inconsistently. Principles
involved:
■ National treatment
■ Automatic protection
■ Independent protection
○ Issues with respect to lesser developed economies- A. 9(2)- Three-step test
■ limited to special cases
■ do not conflict with normal exploitation of the work

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 ■ do not unreasonably prejudice the legitimate interests of the author.

TRADEMARKS:
● For domain name disputes, such as typosquatting and cybersquatting the proceedings are
initiated where country code top level domain (ccTLD) is registered.
● The Uniform Domain Name Dispute Resolution Policy adopted by ICANN offers
expedited administrative proceedings for trademark holders to contest "abusive
registrations of domain names". In India the same is provided by IN Dispute Resolution
Policy (INDRP) formulated by the .IN Registry.
● Function of Trademarks: Identification, Source, Quality, Advertising
● Trademark Infringement:
○ TM owner has the right to use the mark or assign others to use the mark
○ Unauthorized use of the TM amounts to infringement
○ Use of deceptively/identically similar mark is an infringement
○ Registered TM -the registered user may take action against infringement- Sec 29
○ Unregistered TM - the common law remedy of passing off is maintainable- Sec
27
○ Remedy- Sec 103, 104 and 135- TM Act, 1999
● Section 29 TMA 1999
○ A registered trade-mark is infringed by a person who, not being a registered
proprietor or a person using by way of permitted use, uses in the course of trade,
○ a mark which is identical with, or deceptively similar to,
○ the trade-mark in relation to goods or services in respect of which the trade-mark
is registered
○ and in such a manner as to render the use of the mark likely to be taken as being
used as a trade-mark.

Domain Names and Trademarks:

● A name that identifies a computer or computers on the internet. These names appear as a
component of a Web site's URL, e.g. www.christuniversity.in. This type of domain name
is also called a hostname.
● Name used to identify an IP Address
● Management of Domain Names (DN)
○ Prior to December 1999 Network Solutions Inc. ("NSI") was responsible for the
registration of second level domain names
○ First come-first served policy and put on hold if complaint made
○ Internet Corporation for Assigned Names and Numbers (ICANN), a non-profit
corporation is now responsible for coordinating the assignment of protocol, and
management of the Domain Name system

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 ○ India- National Centre for Software Technology runs the Indian Domain
Registration Service

Cybersquatting
● The registering, or using a domain name ,with mala fide intent to make profit, belonging
to someone else.
● The cyber squatter then offers to sell the domain to the person or company who owns a
trademark contained within the name at an inflated price.
● Cyber squatters ask for prices far more than that at which they purchased it.
● Other forms - Typosquatting, Pagejacking
○ Typo-squatting- URL hijacking,- radif.com, amazin.com
○ Pagejacking- contents of a well-known TM posted on another page- usually for
phishing activities
● Pitman vs Nominet (1997) EWHC
○ Two organizations held business names with "Pitman" in them and wanted to use
the domain name pitman.co.uk
○ The court held that, given that both parties had a prima facie right to use "Pitman"
in their business name, the first to register had the better interest in the domain
name.
○ On its own this case was an open invitation to domain name squatters.
● Marks and Spencer PLC v. One in a Million, 1998
○ Website name pirates
○ One in a Million were dealers in Internet domain names, specializing in
registering names identical or similar to the names of well-known companies
without their consent. Domain names including Marks & Spencer, Sainsbury’s,
Virgin, British Telecommunications and Ladbroke Group were registered by the
appellants who wrote to the various companies whose name or mark featured in
particular domain names, offering them for sale.
○ Passing off - Anybody seeing or hearing the name connects it with the business of
Marks & Spencer. So, if a person taps on his keyboard the domain name
marksandspencer.co.uk, and sees the name One in a Million Ltd, it could clearly
create a false representation constituting the common law tort passing off.
○ When a domain name is registered by another person which is deceptively similar
to a famous tm, likelihood of confusion and unfair competition may be assumed
○ Malafide intention of defendants in selling the DN at a higher price to the TM
owners which amounts to bad faith registration
○ The domain names were registered to take advantage of the distinctive character
and reputation of the marks. That is unfair and detrimental to the business
○ The mere sale of a domain name, which is confusingly similar to a registered
trademark, represents an infringement.

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● Cybersquatting in India:
○ Remedies under the Law
○ If the mark is unregistered – passing off
○ If a registered Mark - passing off and fine/imprisonment/ confiscation/ destruction
/all as per Sec 103-105 of Trademarks Act, 1999
○ Satyam Infoway vs Sifynet solutions (2004) SC
■ First Case in SC for Domain name protection
■ Domain name is not just for communication.
■ Domain Name has all the features of a TM
■ No law for IPR in domain names so court applied the common law
principle of Passing off to hold infringement of TM
○ Arun Jaitley vs Network Solutions (2011) Del
■ Dual functions,
● The domain name does not merely remain as an address but rather
performs the function of a trade mark as the prospective customers
or other known persons visit the webpage and are able to
immediately connect with the source and identify the same with
the particular company or the individual.
○ establishing identity in the virtual world of internet.
● Domain names are protected under the law of passing off with a
personal name being no exception.
■ That the entitlement to use one’s own name stands on a higher footing
than the entitlement to use the trade mark.
■ Right to use ones own name is a personal right as against the right to use a
trade mark which is merely a commercial right.
■ Held: Trademark violation by passing off
○ Maruti Udyog v Maruti Software Pvt Ltd 2000
■ Respondent- marutionline.com- regd. With Network Solutions, Inc. (NSI)
■ Complainant- regd. Maruti under multiple, business-specific domains
■ The domain name was registered in bad faith as there was no evidence to
suggest that the respondent intended to use the domain name for legitimate
purposes.
■ Mere registration of a company under the Companies Act does not afford
any right and/or entitle the holder of the certificate of incorporation to
succeed in an action for passing off.
○ Yahoo v Akash Arora
■ This is one of the earliest and significant cyber squatting case in India. In
this case, internet search engine Yahoo (plaintiff) filed a case against a
cyber-squatter (Akash Arora & Anr.) for using the domain name
www.yahooindia.com.

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 ■ The cyber-squatter was pretending to be an extension of Yahoo in India
and was offering directory services with information specific to India. The
Delhi High Court granted an injunction against the cyber-squatter and held
that trademark law applies with equal force on the Internet like the
physical world
○ Mr. Arun Jaitley vs. Network Solutions Pvt. Ltd. (2011)
■ This was the case of abusive online registration of trademarks in India.
The plaintiff (Mr. Arun Jaitley) is a prominent public figure and current
Finance Minister of India.
■ In 2011, he was the leader of opposition in Rajya Sabha and was the
member of Parliament for last 10 years. The cyber-squatter (Network
Solutions Pvt. Ltd.) registered the domain www.arunjaitley.com.
■ The plaintiff tried to buy the domain name from the cyber-squatter but the
cyber-squatter tried to sell at an exorbitant cost. Delhi High court held that
the cyber-squatter guilty for this abusive registration of domain name of a
prominent public figure and directed the domain name to be transferred to
the plaintiff. The court also held that plaintiff is also entitled to legal costs.
from the cyber-squatter.
○ Rediff Communication Ltd. vs. Cyberbooth & Anr. (1999)
■ In this case, cyber-squatter (Cyberbooth & Anr.) has registered the domain
name as www.radiff.com, which was similar to plaintiff’s domain name
(www.rediff.com).
■ Bombay High Court observed that domain names is a valuable corporate
asset, as it facilitates communication with a customer base. The court
stated that the similarity in website names can confuse the public,
particularly new customers.
○ Tata Sons vs Manu Kosuri- 2001
■ Another high-profile case involves the Tata Group, a multinational
conglomerate. The defendant registered a series of domain names
incorporating the well-known trademark “TATA”.
■ The Court, in delivering judgement, referred to Rediff Communication
Limited v Cyberbooth and Yahoo Inc. v Akash Arora & Anr., both
mentioned above, and held that internet domain names are not merely
internet addresses but are in fact corporate assets that are extremely
important and valuable and as such, are entitled for protection equivalent
to that afforded to registered trademarks.
○ Titan Industries vs Tanishq (2000)
■ Tata’s Tanishq jewellery vs. Tan-ishq, a beauty product line
■ Confusing similarity

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 ■ To obtain relief under the ICANN Uniform Domain Name Dispute
Resolution Policy, Paragraph 4(a) of the Policy requires the complainant
to prove each of the following:
● that the domain name registered by the respondent is identical or
confusingly similar to a trademark or service mark in which the
complainant has rights; and
● that the respondent has no rights or legitimate interest in the
domain name; and
● that the domain name has been registered and used in bad faith.
■ Right/legitimate interest
● before any notice of this dispute, respondent used, or demonstrably
prepared to use, the domain name or a name corresponding to the
domain name in connection with a bona fide offering of goods or
services;
● respondent has been commonly known by the domain name, even
if no trademark or service mark rights have been acquired; or
● respondent is making a legitimate non commercial or fair use of
the domain name, without intent for commercial gain to
misleadingly divert customers or to tarnish the trademark at issue
■ Bad faith Registration
● Respondent registered and intends to use the name in good faith
for a body care business, without any intent to trade on
Complainant's good will
● There is no indication that Respondent registered the Domain
Name with the intent of selling it for profit.
● There is no evidence to contradict the Respondents assertion that it
registered the Domain Name for the purpose of engaging in a body
care business.
● Cybersquatting in US:
○ Anti- Cybersquatting Consumer Protection Act, 1999
○ Prohibits the act of registering , trafficking in or using a domain name that is
identical or confusingly similar to a mark or dilutive of a famous mark with bad
faith intent to profit.
○ Electronics Boutique vs. John Zuccarini (2000)
■ Electronic Boutique- retailer in video games & computer software
■ Registered websites – electronicsboutique.com & ebworld.com
■ Zuccarini- electronicboutique, electronicbotique.com, ebwold.com &
ebworl.com
■ Held, Zuccarini liable under ACPA

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Meta Tags:
● Text coding hidden from normal view
● Located in a specially designated portion of the HTML code which generates the Web
page
● Web page designers use this hidden HTML code to designate keywords which are
communicated to search engine software
● Uses of trademarks in ways which cause search engines to improperly associate Web
pages with those trademarks have created allegations of intellectual property violations
● Deliberate use of another's trademark in the source code to throw up a web page in a
search conducted by a user for that company's goods or services
● Playboy Enterprises, Inc. v Calvin Designer Label and others, 1997, US Dist. Court
○ Playboy Inc. filed a suit before Dist. Court for preliminary injunction – Registered
Trademarks, PLAYMATE and PLAYBOY.
○ That Calvin used the said words as part of their Domain Names and embedded in
meta-tags of their websites- www.playboyxxx.com and www.playmatelive.com
○ nominative use (a type of fair use for discussing the product itself) is permitted.
○ Only so much of the mark may be used as is reasonably necessary for
identification (e.g. the words may be reasonably used but not the specific font or
logo)
○ Plaintiff pleaded- initial interest confusion
○ Observations:
■ the terms “Playboy” and “Playmate” in the metatags of the website;
■ the phrase “Playmate of the Year 1981” on the masthead of the website;
■ the phrases “Playboy Playmate of the Year 1981” and “Playmate of the
Year 1981” on various banner ads, which may be transferred to other
websites; and
■ the repeated use of the abbreviation “PMOY ′81” as the watermark on the
pages of the website
● Playboy Enterprises vs Welles, 1981
○ nominative use (a type of fair use for discussing the product itself) is permitted.
○ Only so much of the mark may be used as is reasonably necessary for
identification (e.g. the words may be reasonably used but not the specific font or
logo)
○ Plaintiff pleaded- initial interest confusion

Other firms of Infringement

● Linking
● Framing
○ Washington Post v. Total News

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 ■ Unfair competition
■ Dilution of trademark
■ Held: just case of passing off.
■ Defendants had repeatedly used the trademarks in a machine readable
code on its internet web pages in order to redirect all individuals and
internet search engines

Domain Name Dispute Resolution - ICANN - (Internet Corporation for

Assigned Names and Numbers)
● Paragraph 3 of the UDRP permits ICANN to cancel, transfer or otherwise make changes
to domain name registrations in case they receive an order from a court or arbitral
tribunal having competent jurisdiction requiring such action.
● Therefore, one may even opt for a traditional litigation, get an order for transfer of
domain name and then approach ICANN under Paragraph 3 of UDRP for transfer of
domain name.
● The UDRP permits complainants to file a case with a resolution service provider (WIPO)
specifying, mainly,
○ the domain name in question,
○ the respondent or holder of the domain name,
○ the registrar with whom the domain name was registered and
○ the grounds for the complaint.
● Grounds of complaint
○ Such grounds include, as their central criteria,-
■ the way in which the domain name is identical or similar to a trademark to
which the complainant has rights;
■ why the respondent should be considered as having no rights or legitimate
interests in respect of the domain name that is the subject of the complaint;
and
■ why the domain name should be considered as having been registered and
used in bad faith.

Elements granted protection in Intellectual Property

● E-Commerce systems, search engines or other technical Internet tools are granted
protection under Patents or utility models.
● Software includes the text-based HTML code which are used in websites and it is vested
with a shield under Copyrights Act or patents law, depending upon national law.
● Website design is protected under copyright.

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 ● All the website content in the form of written material, photographs, graphics, music and
videos are protected under Copyrights.
● Databases can be protected by copyright or by sui generis database laws.
● Business Names, Logos, Product names, domain names and other signs posted on the
website are covered under Trademarks.
● Computer generated Graphic Symbols, displays, graphic user interfaces (GUIs) &
even webpages are protected under Industrial Design Law.
● Hidden Aspect of a website like (confidential graphics, source code, object code,
algorithms, algorithms, programs or other technical descriptions, data flow charts, logic
flow charts, user manuals, data structures and database contents) are protected under
Trade Law Secrets.

PATENTS
● The innate technological nature and infrastructure of e-commerce relying on computer
technologies, both hardware and software, highlights the prominence and significance of
patent system in e-business.
● Undeniably the rapid technological growth in this arena is the outcome of incentives,
provided by the patents to the researchers and innovators.
● The business intelli similar gentsia is however divided on the patenting of business
methods.
● While the proponents of the system believe that patenting leads to knowledge sharing and
offers distinctive advantage to businesses, the same practice is suspected to adversely
affect competition. It is contended that companies may exploit the system to obtain
patents for business methods that are not new and already exist in non-cyberspace.
● Nevertheless, patents have been granted to inventions pertaining to financial services,
electronic sales and advertising methods and business methods, including business
methods consisting of processes to be performed on the Internet, and telephone exchange
and billing methods.

Categories of Works

Business Method Patents

● A business method may be defined as "a method of operating any aspect of an economic
enterprise”
● According to Indian Patent act section 3, which deals with inventions which are
considered not patentable, any "mathematical method or business method or a computer
program or algorithms are not patentable". However, they are patentable if a new method
solves a "technical" problem and an apparatus/system is developed from it.
● State Street Bank and Trust Co vs Signature Financial group Services (1998)

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 ○ First case where business methods were considered patentable subject matter
○ Financial Services Software is Patentable
○ It must produce a “useful, concrete and tangible result.”
○ Signature Financial had obtained a patent on a "Hub and Spoke" method of
running mutual funds
○ In this method, several mutual funds (or "spokes") pool their investment assets
into a single investment portfolio (the "hub").
○ Software then determines the value of each fund based upon a percentage
ownership of each of the assets in the hub portfolio.
○ This information is tracked on a daily basis and is used to track fund share pricing
and tax accountability.
○ State Street Bank asked the court to declare this invention to be un-patentable as a
mere mathematical algorithm or as a business method
○ Held, anything that is “concrete, useful , produces values (tangible result)” in
real world is patentable

Software patents
● patents on software
● Gottschalk V Benson ( 1972)
○ held computer programs do not constitute a patentable process; abstract; vague;
unpredictable
● Diamond V Diehr (1981)
○ if the invention as a whole meets the requirements of patentability—that is, it
involves "transforming or reducing an article to a different state or thing"—it is
patent-eligible, even if it includes a software component.
● Amazon.com v Barnesandnoble.com (1999)
○ Amazon’s one click shopping

Position in EU
● According to European Patent Convention
○ Article 52 deals about patentable invention,
■ any "schemes, rules and methods for performing mental acts, playing
games or doing business, and programs for computers;" are not Patentable.

Position in Japan - Business Method

● In Japan Business Method are well known and comes under the patentable subject matter.
● However, patents are not issued solely for business methods and the business method
must invariably contain a technical aspect that is both tangible and real for patents to be
awarded.

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 ● Business methods are available if a process by software is concretely realized by using
hardware resources. Not "a human", but "a computer" needs to be a subject for the
operation in each step of the business method.

Position in India
● According to Indian Patent Act Sec 3, which deals with inventions which are considered
not patentable, any "mathematical method or business method or a computer program or
algorithms are not patentable".
● However, they are patentable if a new method solves a "technical" problem and an
apparatus/system is developed from it.
● Business Method Patent in India
○ Google Ads in e-mail newsletters
■ Ads based on contents published in newsletters
○ Method for determining ad spot value
■ Ads based on the requirement of the business. Eg. Nike, winzip, bookclub
● Software Patents in India
○ Software per se cannot be patented in India
○ Ericcson vs Intex 2015 (Del)
■ Anything that brings a level of technical application to the software and
therefore means that the software is not merely software, i.e. not merely
restricted to being an abstract list of commands for the computer, but gives
it a visible technical consequence, counts as a ‘technical
contribution/effect’.

TRADE SECRETS
● According to Article 39.2 of the TRIPS there are three criteria that have to be taken into
consideration;
○ The information is not, as a body or in the precise configuration and assembly of
its components, generally known among or readily accessible to persons that
normally deal with the kind of information in question;
○ The information has actual or potential commercial value because it is secret;
○ The person lawfully in control of the information has taken reasonable steps under
the circumstances to keep it a secret.
● USA : Connection with national Security- Economic Espionage Act, 1996
○ US vs Liew- Trade secret of the whitening of the cream inside Oreo
○ US vs Hanjuan Jin- Trade Secrets of Motorola
○ Exemptions- independent invention, accidental disclosure, reverse engineering
(Uniform Trade Secrets Act 1979)

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 UNIT 7 : TAXATION AND E-COMMERCE

Introduction:
● Types of Taxes:
○ Direct Tax (Income Tax) - Basis of payment is the income
○ Indirect Tax (GST, Customs) - Basis of payment is the use of resources to provide
the goods and services.
● Method of Taxation:
○ TDS - Tax deducted by the payer making the payment to the payee (eg: salary,
rent, professional fee)
○ TCS - Tax collected by the seller while selling the product to the buyer (eg: GST)
● Taxation Issues in E-Commerce:
○ Substantial amount of State revenue which is generated through direct and
indirect taxes is lost when Internet transaction remain untaxed because:
■ Permanent Establishment is often not present for e-commerce
sites/providers
■ Nature of products bought and sold- e goods/ intangible goods

Models of E-Commerce and Taxation:

● Brick –n- mortar- no online activity. Eg. Offline stores
○ Sale of tangible goods in shops
○ Tax by retailer mentioned in the invoice/bill
● Click-n-brick- some online activity Eg. ola cabs, food delivery
○ Order online - delivery offline
○ Substantial nexus,consumption based/ origin based tax
● All- click model- entire business is online. Eg Softwares and digital goods
○ Enforcement of tax is difficult.

Consideration for Taxation:

● Business Connection (Types of Establishment)
○ According to OECD Model Treaty 1992
■ A fixed place of business through which a business of an enterprise is
wholly/partly carried out (Art. 5.1)

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 ■ Office of dependent agents contracting on behalf of business entity is
Permanent Establishment (PE)
■ Factory /office- PE only if it carries out business, ancillary work offices
not covered
■ Office of independent agents not PE
● Purposeful availment
● Fixed assets
● Targeting criteria

UN MODEL OF DOUBLE TAXATION CONVENTIONS:

● Art. 5- (Permanent Establishment)
○ Stocking of goods for delivery- PE 5(5) (b)
○ Independent agents; dependent agents 5(7)
● Art. 9- (Associated Enterprises)
○ More taxation right to source State or Capital importing state
○ Commercial and financial relations between two enterprises will result into a
taxation of profits even if they have been accrued by just one enterprise; by virtue
of association
● More taxation right to source State or Capital importing state
● Stocking of goods for delivery- PE
● Independent agents
● Dependent agents

Types of Establishment in India:

● Permanent Establishment
○ Sec 44DA Income Tax Act- Royalties Income in case of non-residents
○ Sec. 163 of Income Tax Act, 1961
■ Appointment of an agent by a foreign company in India may fulfill
business connection and can be a PE
○ Business Connection- Sec 9 (1) of Income Tax Act- income is deemed to accrue
or arise in India when it arises directly/indirectly through any business connection
in India
○ Paradigm Geophysical Ltd. Vs. CIT (DHC)
■ Revenue from supply or software; maintenance of software- taxable?
■ Supply= royalty ergo taxable
■ Maintenance= subject to determination of PE
● Virtual Permanent Establishment and Taxation

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 ○ Galileo International and Amadeus Global Travel v Deputy CIT (2008) Del
■ Held: Non- resident companies providing computerized reservation
system are liable to be taxed in India as they receive booking fees from
Indian residents, thereby having a virtual PE
● No Permanent Establishment without servers
○ ITO vs Rights Florists Ltd. (ITT ) 2013
■ Held that payments to websites like Google and Yahoo! for online
advertisements were not liable to be taxed in India
■ The tribunal held that the websites could not be construed as permanent
establishments or as taxable presence of foreign enterprises owned and
maintained in India.
■ The web servers are located outside of India, no permanent-establishment
risk to India exists

ARMS LENGTH PRINCIPLE AND TRANSFER PRICING:

● Arms Length Principle- Parties to a transaction are independent and must be on an
equal footing-
● Transfer Price- amount of money paid to the particular part of the organization for
manufacturing goods/delivering services and the cost to the part of org which purchases
those products or services
● Transfer pricing principle
○ Developed to check tax evasion
○ Entities transfer income to low tax jurisdictions and expenditure to high tax
jurisdictions
○ Principle followed- entities should bear cost/expenses of outsourcing the work to
its other units as if they outsourced it to an independent vendor
● Arms length principle is applicable to assess the profit of the foreign non-resident that are
made from business activity through its PE in India
● Cargo Community Network Pvt. Ltd. Case –
○ Use of the commercial equipment was carried out in India and accordingly, the
'payments' also arise in India.
○ Equipment royalty
○ Held: taxable in India
● Permanent Establishment and Royalty
○ DCIT v Metapath Software International Ltd (2006)
■ Income from selling hardware and software to telecom companies
■ Held; No PE to carryout sales in India
■ Sale was not of license to use the software for commercial purposes
■ Income from such sales was not taxable in India

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TAXATION OF E-GOODS
● Only Tangible goods subject to tax
● TCS vs State of AP (2005)
○ Branded software which comprise of IPR become tangible when stored in
physical media
● CIT vs Oracle Softwares Ltd (2010)
○ Manufacturing is a process that makes articles fit for use and duplicating activity
which makes a CD fit for use is a manufacturing activity
● Scope of E-Goods:
○ Definition of Goods in India
■ Art. 366 (13) – Constitution of India
■ Sale of Goods Act, 1930- movable property except actionable claims,
money
■ Central excise and salt Tax Act, 1944- anything which can be bought and
sold
○ E-goods- goods which are bought and sold online. It is delivered onlines eg.
Softwares, e-books etc.
● Twentieth Century Finance Corporation Limited v State of Maharashtra (2000)
○ Where place of sale has not been agreed or determined through legal rules of a
statute, the place of sale will be the place where property in the goods passes to
the buyer
○ Destination based rule- places of consumption- is not applied

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 UNIT 8: JURISDICTIONAL ISSUES IN
E-COMMERCE

INTRODUCTION:
● Meaning
○ Official power to make legal decisions and judgements
○ Categories of Jurisdiction
■ Subject matter
■ Personal
■ Pecuniary
● Prerequisite for enforceable judgement of a Forum State:
○ Jurisdiction to Prescribe- apply a law on particular category of persons
■ Sec 1(2), 75 of IT Act, 2000
○ Jurisdiction to Adjudicate- Decide a dispute concerning a person/thing
○ Jurisdiction to Enforce- Enforce the judgment
■ Sec 13 CPC, Sec 44A CPC
● Theories:
○ Subjective Territoriality
■ Particular Act/ conduct committed within the boundaries of the State
■ Territory Specific
■ No extra-territorial application
■ Yahoo Inc case- banning of French Nazi Propaganda in France only
● LICRA vs Yahoo Inc and Yahoo France (2000)
○ Can mere accessibility of a website from a Forum State
suffice to exercise jurisdiction?
○ French Court assumed jurisdiction over Yahoo US which
had no physical presence in France for auction of Nazi
Memorabilia on its auction site
○ Held yahoo liable only in Yahoo France website-
interactivity
■ where a State asserts its jurisdiction over matters commencing in its
territory, even though the final event may have occurred elsewhere.
■ In this sense jurisdiction is certainly territorial; it cannot be exercised by a
State outside its territory except by virtue of a permissive rule derived
from international custom or from a convention.
○ Objective Territoriality

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 ■ where a State exercises its jurisdiction over all activities that are
completed within its territory, even though some element constituting the
crime or civil wrong took place elsewhere.
■ Also Known as Effect Jurisdiction
■ Act outside the territory but effect in the Forum State
■ Effect could be direct or indirect
■ Sec 177, 178 and 179 Cr. PC
■ United States vs Thomas (1996)
● Facts: Posting of obscene content on an online bulletin board
which could be viewed only on subscription
● Held : Court has jurisdiction by applying effect test
● The Effect of the defendant’s criminal conduct reached the Western
Districts and that district was suitable for accurate fact finding
■ Playboy Enterprises, Inc. v Chuckleberry Publishing, Inc. (1996)
● Facts: Defendant operated website in Italy and offered viewership
to Customers in US
● Violated the Trademark of Plaintiff in US
● Held: US could Block access to website in US alone
● Landmark decision for cross border jurisdictional dispute on the
internet
○ Nationality
■ Defendant is a national of the Forum State
■ Sec 1 (2) and 75 of IT Act, 2000
■ Sec 3 and 4 of IPC
■ It is for each State to determine under its own law who are its nationals.
■ Any question as to whether a person possesses the nationality of a
particular State shall be determined in accordance with the law of that
State.
■ Under the garb of nationality principle, a State may exercise jurisdiction
over its own nationals irrespective of the place where the relevant acts
occurred.
■ A State may even assume extra-territorial jurisdiction.
○ Protective Principle
■ Action Taken by Forum State to secure its National Integrity
■ Hacking, money laundering etc
■ Defendant could be another person or State
■ US vs Rodriguez (1960)- False statements made in immigration
documents
■ A State relies upon this principle when its national security or a matter of
public interest is in issue.

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 ■ A state has a right to protect itself from acts of international conspiracies
and terrorism, during trafficking, etc.
○ Passive Nationality
■ Based on the complainants nationality
■ Usually used with active nationality
■ Defendant should also fall within the jurisdiction
■ It extends the nationality principle to apply to any crime committed
against a national of a State, wherever that national may be.
■ It in a way provides that the citizen of one country, when he visits another
country, takes with him for his “protection” the law of his own country
and subjects those, with whom he comes into contact, to the operation of
that law.
○ Universality
■ Also know as Universal Interest Jurisdiction
■ Jurisdiction assumed by any State to prosecute an offender for acts which
are known universally by International Law as heinous crimes.
■ Cyber Crime Convention 2001- cyber criminals can be prosecuted by any
country.
■ A State has jurisdiction to define and prescribe punishment for certain
offences recognized by the community of nations as of universal concern.
It includes acts of terrorism, hijacking of aircraft, genocide, war crimes
etc.
■ A state may assert its universal jurisdiction irrespective of who committed
the act and where it occurred.
■ The perspective is broader as it was deemed necessary to uphold
international legal order by enabling any State to exercise jurisdiction in
respect of offences, which are destructive of that order.

TESTS TO DETERMINE JURISDICTION:

● Minimum Contact Test
○ Washington v International Shoe Company (1945)
■ for a defendant to be hailed into court in a particular jurisdiction it must
have at least a minimum level of contact with that state that it could
reasonably expect to be sued in the courts of that state.
○ State can sue a non-resident corporation if
■ the Corporation Satisfies the Minimum Contacts with the Forum State
■ Principles of justice and fair play have been duly considered

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 ■ Minimum Contacts means physical contacts or presence within Forum
State
○ Burger King Corp v Rudzewicz (1985)
■ Three Criteria for Minimum Contacts Test
● Purposeful availment of privilege of transacting business within
the Forum State
● Cause of Action arisen from the defendants activities within the
Forum State
● Exercise of jurisdiction is fair and reasonable
○ Non-resident should have continuous and systematic contact- Targeted Contact
○ Asahi Metal Industry Company Ltd. V Superior Court California (1987)
■ If defendant is aware that through his business his product may be
transferred into Forum State , it will not satisfy purposeful availment
unless he has advertised or solicited business in the Forum State
■ Awareness of business connections with a state does not establish a legal
connection;
■ Long-arm statute cannot defy the traditional notions of fairplay and
substantial justice
■ Grounds of reasonableness:
● defendant’s burden
● Forum state’s interest
● Plaintiff’s interest
● Judicial system’s interest in efficient resolution of controversies
● Furtherance of social policies
○ For the Internet:
■ CompuServe Incorporation v Patterson (1996)
● Plaintiff in Ohio, defendant in Texas
● Minimum Contact Test will apply with equal force in disputes
involving internet transactions
● Applying the Three criteria for Minimum Contact Test
○ The defendant must have purposefully availed himself of
the privilege of acting in the state
○ The legal action must have arisen from defendant's
activities there
○ The acts of the defendant or consequences of his actions
must have a sufficiently substantial connection to the state
● Effect Test
○ Calder v Jones (1984) {California v Florida}
■ In Calder, a California resident in the entertainment business sued the
National Enquirer, located in Florida, for libel based on an allegedly

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 defamatory article published by the magazine. While the article was
written and edited in Florida, the Court found that personal jurisdiction
was properly established in California because of the effects of the
defendants' conduct in that state. As the article concerned a California
resident with a career in California and relied on California sources, the
Court found the defendants' "intentional, and allegedly tortious, actions
were expressly aimed at California."
■ Applied the effect test
● Purposeful direction :
○ Intentional action
○ Expressly aimed at the forum State
○ Knowledge that the injury would be felt in the forum State
○ Panavision International v Toeppen (1998)
■ Simply registering someone else's trademark as a domain name and
posting a website on the Internet is not sufficient to subject a party
domiciled in one state to jurisdiction in another.
■ Whether the defendant's conduct had an effect in the forum state (an
effects test) would also be seen
● Sliding Scale Test
○ Test decides the level of contact of the defendant to decide jurisdiction
○ Provides a scale- level of interaction and commercial nature of the exchange of
information
○ Passive website- no personal jurisdiction
○ Intermediary websites- may have jurisdiction
○ Active websites- jurisdiction exists
○ Zippo Manufacturer v Zippo.com (1997) - ZIPPO TEST
■ Infringement of Trademark ‘Zippo’ in Pennsylvania
■ Held: there was active purposeful contacts with the Forum State as Zippo
Dot contracted with local service providers and with residents of
Pennsylvania who were its customers
■ Personal jurisdiction proportional to the nature and quality of online
commercial activity conducted.
■ A passive webpage is insufficient to establish personal jurisdiction, but an
interactive site through which a defendant conducts business with forum
residents, such as Zippo Dot Com's, is sufficient to establish personal
jurisdiction.
○ Resuscitation Technology Inc v Continental Healthcare Corporation (1997)-
Joint Venture in Indiana
■ If only one or two emails regarding few products then no interaction by
applying Zippo test

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 ○ Bensusan Restaurant Corporation v King (1996)- Blue Note Jazz Club (NY vs
Missouri)
■ Only Information website so no contact
○ UEJF and LICRA vs Yahoo Inc and Yahoo France (2000)
■ Can mere accessibility of a website from a Forum State suffice to exercise
jurisdiction?
■ French Court assumed jurisdiction over Yahoo US which had no physical
presence in France for auction of Nazi Memorabilia on its auction site
■ Held yahoo liable only in Yahoo France website- interactivity
● Targeting Approach Test
○ Where the website targets a particular jurisdiction
○ People vs World Interactive gambling (1999)
■ A licensed gambling website in Antigua had customers in NY;
■ Gambling is illegal in NY; fictitious address outside NY from a resident of
NY
■ Website targeted residents of New York for illegal gambling
○ Cybersell Inc vs Cybersell Inc and others (1997) (9th circuit)
■ In this case Cybersell Florida was alleged to have infringed the mark of
Cybersell Arizona which advertised for commercial services over the
Internet.
■ Cybersell, Florida conducted no commercial activity over the Internet in
Arizona and did nothing to encourage people in Arizona to access its site
and there is no evidence that any part of its business was sought to be
achieved in Arizona.
■ There must be something more to demonstrate that the defendant directed
his activity towards the forum state.
● EU Approach-
○ Brussels Regulation 2002- that deals with principles of jurisdiction, recognition
and enforcement of judgements in civil and criminal matters. Further the liability
is based on domicile and area of residence, and this is irrespective of the
nationality of the offender
○ Rome Convention 1980- This lays down the aspect of how contractual
relationships establish liability and jurisdiction of cyber disputes and incase there
is not mention about the same, then the cases are to be adjudicated based on the
closely connected state/party principle.

JURISDICTION IN INDIA
● Based on the US model majorly.
● Sec.1 of the IT Act- deals with prescriptive jurisdiction along with following the

88
● universality principle.
● There is territorial and extra territorial jurisdiction that it applicable as well.
● S1. and S.75 are interrelated- this deals with the intermediary liability
● Sec 20 CPC- place of business/residence of D, where cause of action arose
(wholly/partly)
● Rajasthan High Court Advocates’ Association v Union of India (2001 SC)- cause of
action
● Other principles include- Long arm Statute rule, effect test, sliding scale test
● Major drawbacks are that India is not a signatory to the Budapest convention,
● along with lacking extradition provisions.
● Personal Jurisdiction in India
○ Principle of autonomy- parties free to decide
○ Jurisdiction in more than one court- Parties free to choose
○ Conflict of jurisdiction- plaintiff decides based on convenience unless excluded
by law, violation of due process of law or against public policy
● Principle of autonomy- parties free to decide
○ British India Steam Navigation v Shanmugha (1990)SC
■ The jurisdiction of the court may be decided upon the parties themselves
on the basis of various connecting factors
■ Parties should be bound by the jurisdiction clause to which they have
agreed unless there is some strong reason to the contrary.
○ NTPC v Singer Company (1992) SC
■ Indian Company contracted with foreign company
■ As per terms, laws of India and jurisdiction of courts in Delhi
■ Held dispute to be decided by courts in Delhi alone
■ The place where the contract was made, the form and object of the
contract, the place of performance, the place of residence or business of
the parties, reference to the courts having jurisdiction and such other links
are examined by the courts to determine the system of law with which
the transaction has its closest and most real connection.
● Modi Entertainment Network v WSG Cricket Ltd (2003)
○ In case where no jurisdiction exists, the parties cannot confer jurisdiction by
expressly choosing a court of a different jurisdiction
○ Connection between parties, selected forum for dispute resolution and clause must
be reasonable
● Provisions of law governing jurisdiction in India:
○ Sec 134 of Tm Act, 1999- place of residence/ work of plaintiff
○ Sec 1(2) read with Sec 75 Information Technology Act, 2000
○ Sec 20 CPC- place of business/residence of D, where cause of action arose
(wholly/partly)

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 ○ Rajasthan High Court Advocates’ Association v Union of India (2001 SC)-
cause of action
● Zippo Test in India:
○ Casio India Company Limited v Ashita Tele Systems Private Limited (2003)
■ Accessing of website attracts territorial jurisdiction
■ Defendant operating from Bombay; registered domain name
casioindia.com
■ Held: the Delhi court had jurisdiction
○ India TV, Independent News Service Pvt. Ltd v India Broadcasting Live, LLC
(2007)
■ Application of Zippo test
■ When website allows subscription to access information – interactive to
attract jurisdiction
■ The defendant operating from Arizona had registered the domain name
www.indiatvlive.com
■ Held: Delhi court had no jurisdiction
○ The defendant must purposefully avail himself of acting in the forum state or
causing a consequence in the forum state
○ The cause of action must arise from the defendants activities there
○ The acts of the defendant or consequences caused by the defendant must have a
substantial enough connection with the forum to make exercise of jurisdiction
over the defendant reasonable.
○ Renaissance Hotel Holdings Inc. v B. Vihaya Sai (2009)
■ Online booking from Delhi for a Hotel in Bangalore which violated Tm of
a hospitality company in US
■ Held: No jurisdiction with Delhi Courts as room bookings are made in US
or Bangalore
● Target Test in India:
○ Banayan Tree Holdings (Pvt.) Ltd v Murali Krishnan Reddy (2009)
■ Held: In passing off and infringement case where defendant is out of State
and no long arm statute exists, the plaintiff will be required to prove …
Targeting of customers in the forum State
■ Mere hosting of an interactive website without targeting will not suffice
■ A mere hosting of a website accessible in the forum state, or a posting of
an advertisement or a passive website that does not result in a commercial
transaction with a viewer in the forum state, cannot give rise to a cause of
action and therefore the court does not have jurisdiction.
■ Clarified the disparity that had arisen from the two judgements before.

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 ■ “A passive website, with no intention to specifically target audiences
outside the State where the host of the website is located, cannot vest the
forum court with jurisdiction. ”
■ “It is not enough merely to show that the website hosted by the Defendant
is an interactive one. It would have to be shown that the nature of the
activity indulged in by the Defendant by the use of the website was with
an intention to conclude a commercial transaction with the website user.”
○ Super Cassettes Industries Ltd v Myspace Inc 2011
■ Sec 62 of Indian Copyright Act, 1957
■ Suit to be filed at the place where the plaintiff carries on business/ works
for gain
■ Sec 20 CPC also applicable
■ Downloading- in India so cause of action in India
■ Uploading- transfer of work without the authority of P in India
■ Banayan Tree case not applicable as Cr infringement are governed by
special law.
○ WWE Inc vs Reshma Collections (2014)
■ Case for infringement of Trademarks and Copyrights
■ A in US, R in Mumbai
■ Whether Delhi courts have jurisdiction
■ Held: Programs screened in Delhi too, sale transaction concluded in Delhi
so plaintiff carries on business in Delhi

CLICKWRAP AGREEMENTS
● No cases in India regarding jurisdictional issue in click-wrap agreements
● Indian Contract Act applies unless:
○ Contrary to Sec-23 – public policy
● Burdensome to plaintiff- cases for small claims
● Test for Enforcement
○ Bremen v Zapata (1970)
■ Two kinds of clauses
● Reference might be to a particular court in a jurisdiction agreed
upon by the parties
● Clause might refer to a specific kind of dispute resolution process
○ If there is an express selection, this choice will be respected so long as it is made
bona fide, i.e. the subjective intention prevails unless the purpose is to:
■ evade the operation of some mandatory provisions of a relevant law,
■ there was an element of fraud or duress or undue influence involved in the
signing of the contract, or

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 ■ there was some other evidence of mala fides
○ There are many reasons why parties may select a forum
■ the forum has established significant expertise in the relevant areas of law,
e.g. shipping, charter parties, carriage by air, etc.;
■ the standard of judicial decision making may be high:
■ there may be no corruption or other outside influence to affect the fairness
of the judgments;
■ the procedures may be efficient and minimize losses arising through any
delay in arriving at a judgment;
■ all the major witnesses may be resident within the jurisdiction making the
forum convenient

FORUM SHOPPING BY ENTITIES:

● Comb vs Paypal Inc 2002
○ Arbitration as means of dispute settlement
○ Seat of arbitration as American Arbitration Association
○ Held: unconstitutional as the amount to be claimed was small , customers were
unsophisticated and had no clarity on recourse to other dispute settlement
mechanisms.
● Indian Approach:
○ Sec 23 of Indian Contract Act, 1872
○ Clause may be unconscionable and void where at the making of the contract there
is gross disparity between parties giving one an excessive advantage over another
○ Undue influence
○ Similar to American approach
● EU Approach:
○ Brussels Regulation, 2002
■ Applicable to non-EU members conducting business with EU
■ Art. 2- domicile State of defendant
■ Art. 5.1- in Contract, place where contract has to be performed (Sec 20
CPC place of defendant/Cause of action)
■ Art. 5.3- in torts cases , where harmful conduct carried out and place were
damage actually occurred (Sec 19 CPC defendant or place where tort is
committed)
○ Rome Convention
■ Art. 3 Freedom to choose forum
■ But cannot escape mandatory provisions of the State which is substantially
connected with the contract

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■ Art. 5 – B to C transaction clauses cannot take away rights and protection
of the consumer under the law of their residential State.

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