Latest Indian Copyright Cases – 2021 – Part 3

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Muthoot Finance Limited vs Shalini Kalra & Ors

In this case, the Plaintiff, Muthoot Finance Limited, a non-banking financial institution, provided business and personal loans against the deposit of gold jewellery. As a part of this business the Plaintiff had to maintain proprietary and confidential information related to its vast customer base in the form of a database which in turn constituted a ‘literary work’ as under Section 2(o) of the Copyright Act, 1957 and it also amounted to trade secrets of Plaintiff which ought not be disclosed to any third party. The Defendants no. 1 to 4 herein were the former employees of the Plaintiff. At the time of joining the employment, each of them had duly signed the non-disclosure undertaking as provided in the appointment letter along with a Declaration of fidelity. The main allegation in the plaint was that the Defendant No. 1 & 4, during the course of their employment, had unauthorizedly and illegally downloaded, extracted, copied and later on transmitted the confidential information of the Plaintiff’s customers to Defendant No 2 & 3 along with employees of Defendant No.5, a company engaged in similar services as that of the Plaintiff. Thus, the Plaintiff’s customer base started drifting towards the Defendant No.5. Eventually Defendant 1 & 3 on being terminated by the Plaintiff, in turn joined the employment under Defendant 5. Aggrieved by this, the Plaintiff filed a criminal complaint against Defendant No. 1 to 5 with the Joint Commissioner of Police, Crime Branch, New Delhi. However, there were similar instances of disclosure of confidential information at various other branches of the Plaintiff which in turn resulted in a loss of around 9 crore rupees to the Plaintiff. Thus, the Plaintiff again lodged an FIR at PS Special Offences and Cyber Crime under the relevant sections of IPC and IT Act. The plaint herein also averred that Defendant No.5 was poaching the Plaintiff’s employees and customers with the aid of the information illegally obtained by the Defendants.

Hence the Plaintiff moved this court seeking a decree of permanent injunction thereby restraining the Defendants and any other person acting on behalf of/through them from using/disclosing any confidential information pertaining to the Plaintiff, using/infringing any copyright or other IP rights belonging to the Plaintiff, from directly or indirectly luring/canvassing any of the Plaintiff’s customers, inducing any of the Plaintiff’s employees to quit employment or provoke them to join the Defendant No.5 or any of its businesses, and to give up all the said confidential information/trade secrets in hand. The Plaintiff also sought damages of  Rs.2,00,01,000/- payable to the Plaintiff jointly and severally by Defendants 1 to 5 together with an interest of 18% p.a. till the date of payment. The Court herein issued summons to the Defendants and gave them an opportunity to file a written statement (if any). And pertaining to the IA filed by the Plaintiff, the court ordered an interim injunction restraining the Defendants from disclosing or using any confidential information, trade secrets or any other information, pertaining to the business and operations of the Plaintiff Company, and from using proprietary content of any nature, including copyright and other intellectual property rights of the Plaintiff Company or doing any acts or deeds that will infringe/dilute the Plaintiff Company’s intellectual property rights.

Citation : Muthoot Finance Limited vs Shalini Kalra & Ors, Decided by Delhi High Court – Orders on 13th September, 2021, available at : https://indiankanoon.org/doc/22108976/, visited on 23th September 2021.

Progress Software Solutions vs Dcit 13(1)(2)

In this case, the Appellant (Assessee) was a resident company involved in the business of trading and sale of software license and development of computer software. For the assessment year 2009-10, the Assessee filed the return of income declaring Rs.89,29,099/- as loss. But originally the assessment was completed later on in 2011, which was computed after making few disallowances as u/s 143(3) of the Act. On an appeal against this assessment order to the learned Commissioner (Appeals), partial relief was granted, by deleting one of the disallowances. Still being aggrieved by the same additions repeated once again in the fresh assessment, the Assessee again approached the Tribunal.

With regard to the disallowance of Rs.23,50,466/-, the Assessee put forth the contention that by merely being a distributor, the payment so made to Savvion, USA (a non-resident company) for the purchase of a copyrighted article for the purpose of reselling was not in the nature of royalty under either U/A 12 of Indo-USA tax treaty or u/s 9(1)(vi) of the Act, and therefore tax deducted at source as u/s 195 of the Act was not required. Thus, the court analysed whether a copyrighted article was genuinely purchased for the purpose of resale/distribution or whether it was done for some internal use or according to the convenience and own will of the Assessee. After verifying the reseller agreement, the court concluded that the license granted therein was not for purpose of any internal use. The Court found that the agreement also restricted the reseller/any other third party from translating, modifying, extending, de-assembling or reversing the said copyrighted article (the software program herein). The reseller too acknowledged and agreed that on occasion of any unauthorized use/disclosure/copying of the software program, it would be liable for remedies and consequential actions from Savvion, USA. Citing few judicial pronouncements of the Hon’ble SC, it was averred that when a non-transferable and non-exclusive license to resell a copyrighted article without actually transferring the copyright in the said article was provided to the ultimate end-user/distributor, then there was no additional right granted to sub-license/transfer/reverse/reproduce/modify anything, other than that allowed by virtue of the license given to the ultimate user. It was agreed by the Tribunal that payment made for the purchase of copyrighted article for the purpose of distribution was not in the nature of royalty and hence the grounds were allowed and thus the concerned disallowance was thereby deleted.

Citation : Progress Software Solutions … vs Dcit 13(1)(2), Mumbai, Decided by Income Tax Appellate Tribunal – Mumbai on 30th August, 2021, available at : https://indiankanoon.org/doc/177640115/, visited on 13th September 2021.

Cristina Maiorescu vs M/S Nishangi Enterprises Pvt. Ltd. and Ors.

The Plaintiff, a professional photographer filed a suit against the Defendants seeking direction from the Bangalore District Court for payment of a sum of Rs.1,56,025/- towards an invoice for services provided by her, with interest at the rate of 12% per annum. The Plaintiff entered an agreement with the Defendants for providing photography services with respect to products to be sold by the Defendant No.1, a company operating a chain of eateries/beverage stations under the name and style ‘Frootality’ in Hyderabad and Bangalore. As per the agreement, a sum of Rs.2,23,000/- was to be paid by the Defendants to the Plaintiff, who had to provide 62 photographs in two phases. Further, in pursuance of the agreement, the Defendant No.1 paid a sum of Rs.1,00,000/- to the Plaintiff as advance.

It was alleged by the Plaintiff that after completion of her assignment, she raised an invoice and Defendants neither raised any objections regarding the completion of the assignment nor made the payment. It was also the case of the Plaintiff that the Defendants No.1 and 2 utilized various services of the Plaintiff outside the scope of photography assignment and she also permitted the Defendant No.3 to reside with her. The Plaintiff alleged that she incurred an expense to the tune of Rs. 3,85,000/- in fulfilling these and that the Defendants blatantly violated her intellectual property rights.

The Court held that owing to the facts and circumstances of the case, the burden was on the Plaintiff to prove that she provided photography services to the Defendant and that the Defendants were liable to pay damages and compensation for the additional services rendered by the Plaintiff and for unlawful use of photographs clicked by her. The Plaintiff placed on record evidence which included a copy of email communications between Plaintiff and Defendants, a copy of the invoice, a C.D. containing photographs, screenshots of websites of defendants, and a copy of the notice. The Court, after examining the evidence, concluded that the Plaintiff successfully established that she provided the services to the defendant, who agreed to pay the amount that was claimed by her and the interest amount was also held to be appropriate. However, with regards to the additional services and unlawful use of photographs, except the issuance of notice no other evidence was available. The Court held that in absence of any cogent material, Plaintiff was not entitled for damages and compensation as claimed in the plaint.

Citation: Cristina Maiorescu vs M/S Nishangi Enterprises Pvt. Ltd, on 24 September, 2021, available at: Maiorescu vs M/S Nishangi Enterprises Pvt. Ltd, last visited on 6th October, 2021

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Please note that these case updates have been put together from different sources, primary and secondary, and BananaIP’s reporters may not have verified all the decisions published in the bulletin. You may write to contact@bananaip.com  for corrections and take down.

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