IPR UPDATE | GOOGLE’S USE OF TRADEMARKS AS KEYWORDS IN ITS ADS PROGRAM DOES NOT ABSOLVE IT FROM LIABILTY OF TRADEMARK INFRINGEMENT

The Delhi High Court recently held in the case of Google LLC vs DRS Logistics Private Limited that if Google LLC (Google) through its search engine uses ``trademarks`` as keywords for its advertisement programme, the same would amount to `use` of Trademark and also lead to infringement within the meaning of Section 29(6) of the Trademarks Act, 1999 (Trademarks Act). It further held that Google cannot not seek protection as an intermediary under Section 79(1) of the Trademarks Act, 1999 (Trademarks Act) of the Information and Technology Act, 2000 (IT Act).

Background

Google had filed an appeal challenging the order dated 21 October 2021 passed by a single judge of the Delhi High Court in a suit filed by DRS Logistics Private Limited (DRS) wherein it sought to restrain Google India, Google LLC and Just Dial from using its registered trade mark either as a keyword or as a meta tag. The single judge directed Google to investigate complaints made by DRS regarding use of its trademark as a keyword resulting in diversion of traffic from their website to that of the advertiser. For example, when a user searches for the term ‘Audi’, numerous competitors of Audi are featured in the search result. These search results are set apart from the organic search results by the prefix “Ad”. Therefore, when a person enters the keyword ‘Audi’ the user will see advertisements and links of competing brands who have probably bid for the keyword ‘Audi’. The single judge also held that the use of trademarks as keywords in the Google Advertisement Programme amounts to ‘Use’ under the provisions of the Trademarks Act and may cause infringement. The single judge further held that Google is not entitled to the defence of an intermediary under Section 79 of the IT Act.

The suit instituted by DRS alleged that Google actively encouraged the use of its registered trademark as keywords to promote the sponsored advertisements of entities and websites which were infringing its trademark. It was further claimed that the said sponsored links are prominently reflected on the search engine results page of Google if they pay a higher amount to display their advertisements.

Issues

• Whether the use of trademarks as keywords was ‘use’ for the purpose of Trademarks Act?
• Whether Google is absolved of any liability by virtue of Section 79 of the IT Act?

Contention of Parties:

Google contended that the use of a trademark as a keyword is not per se infringement of a trademark. It submitted that keywords are invisible and cannot be seen or perceived by the consumers, therefore the element of confusion or likelihood of confusion is absent and therefore there can be no infringement of trademark. Google further submitted that the advertisements as well as the keywords used to trigger eligible advertisements comprise of third-party data and that the advertisement programme merely provides a platform for creating and placing advertisement on the search engine. It was further submitted that since the advertisement are created by the advertisers and Google has no role in the process therefore, Google is entitled to the protection of an intermediary under Section 79 of the IT Act.

Google India submitted that it had no control over the advertisement programme nor does it exercise any control over the search engine and was therefore not able to comply with the directions issued to it in the Impugned Judgment.

DRS on the other hand contended that keywords can be used by Google to divert user traffic from the trademark proprietor’s website to the website of the advertiser/infringer. DRS further placed reliance upon Section 29 of the Trademarks Act to contend that Google through the use of its programme informed advertisers about the registered trademark of DRS and submitted that such use would be a visible use of its trademark.

Held:

The Division Bench of Delhi High Court held that it is not acceptable that the term `use` must be restricted to use in a visual form on the goods and further held that the term ``in any other relation`` found in Section 2(2)(c) of the Trademarks Act would include use in any other relation to the goods, in any form whatsoever. The Court further held that the advertisement programme of Google is a commercial venture intended to monetize the use of its search engine for displaying the sponsored links of various advertisers. Furthermore, the Court held that the term ``in advertising`` as used in Section 29(6)(d) of the Trademark Act is not synonymous to the term ‘in an advertisement’ and that the use of trademark as a keyword to trigger display of an advertisement of any goods or services would in plain sense be a use of the mark in advertising.

The Court further found that Google is an active participant in promoting the use of trademarks as keywords for the purpose of its advertisement programme. Google actively suggests keywords that would result in display of ads, which in turn is likely to result in higher clicks which would in turn lead to higher revenue for Google.

The Court observed that prima facie Google sells the use of trademarks as keywords to advertisers and encourages its users for using search terms as keywords for display of advertisement. The Court further observed that prior to 2004, Google did not permit use of trademarks as keywords. However, Google thereafter amended its policy and also a introduced a tool which actively searches the most effective terms including well known trademarks as keywords. The Court eventually held that Google is not a passive intermediary but runs an advertisement business over which it exercises substantial control and the fact that the said business is run online and is linked with its services as an intermediary does not entitle Google to claim the benefit of Section 79(1) of the IT Act.

The Court observed that Google India claims to be a reseller for the advertisement programme in India and thus it cannot be accepted that Google India has no responsibility in ensuring that the order passed by the learned single judge is complied with.

The Court therefore dismissed the appeal filed by Google and upheld the findings arrived at by the single judge.

MHCO Comment:

The verdict places legal responsibility on Google for trademark infringement when employing trademarks as keywords in its advertisement program. This landmark ruling carries significant implications, potentially reshaping the operational dynamics of Google's advertising program. It further establishes a precedent that underscores the importance of upholding trademark rights in the ever-evolving realm of online commerce, setting a crucial legal precedent for future trademark infringement cases in the digital domain.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

IBC UPDATE | MAINTAINABILITY OF DEBT BASED ON THE ORIGINAL NATURE OF TRANSACTION 

The recent judgement of Shreepati Build Infra Investment vs Abhiyan Developers, NCLT illustrates amendments to the Insolvency and Bankruptcy Code, 2016 (IBC) can significantly impact the maintainability of insolvency proceedings. This case revolves around a dispute stemming from a real estate transaction and hinges on the crucial provisions of the IBC that dictate the eligibility of applicants to initiate Corporate Insolvency Resolution Process (CIRP).

BACKGROUND

The dispute centres on a real estate transaction between Abhiyan Developers Private Limited (Financial Creditor) and Shreepati Build Infra Investment Limited (Corporate Debtor). The Financial Creditor entered into an agreement to purchase a flat for consideration of INR 3,50,00,000. However, due to inadequate permissions and approvals, the Corporate Debtor was unable to proceed with construction. Subsequently, the amount was restructured into a loan account, with an agreement for repayment, inclusive of a 15% cumulative interest, compounded quarterly. Despite these terms, no payment was forthcoming.

On 10 August 2018, the Financial Creditor filed a company petition under Section 7 of the IBC, which was admitted on 29 October 2021. However, the Corporate Debtor challenged the admission order, leading the NCLAT to set it aside and remand the case back to the NCLT.

Thereafter, the Corporate Debtor filed an Interim Application (IA) under Section 60(5) of the IBC, along with Rule 11 of the NCLT Rules, 2016 to bring forth the NCLAT's order and to consider the objection regarding the maintainability of the case, particularly in light of the amended provisions of the IBC.

HELD

The NCLT allowed the IA while holding that the CIRP application filed by the Financial Creditor is not maintainable. The NCLT’s decision was profoundly influenced by the amended provisions of the IBC, particularly Section 7, which reads in the following manner:

“7. Initiation of corporate insolvency resolution process by financial creditor.—

(1) A financial creditor either by itself or jointly with 5 [other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. ….

Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten percent of the total number of such allottees under the same real estate project, whichever is less: …”

Nature of Transaction: The NCLT affirmed the core nature of the transaction as a builder-allottee relationship, as per the agreement dated 15 February 2011. According to the NCLT, even in the presence of subsequent agreements, the fundamental nature of the transaction remained unaltered. Consequently, the Financial Creditor retained its status as an allottee within the purview of Section 2(d) of the Real Estate (Regulation and Development) Act, 2016 (RERA). This classification positioned it as a "financial creditor" to whom a "financial debt" is owed, as per Section 5(7) and Section 5(8)(f) of the IBC respectively.

Amendment to Section 7: The NCLT drew attention to the critical amendment to Section 7 of the IBC, which came into effect on 28 December 2019. This amendment, as extracted hereinabove, stipulated that applications for initiating CIRP against Corporate Debtors involved in real estate projects must be filed by not less than 100 allottees under the same real estate project or not less than 10% of the total number of such allottees, whichever is less.

Non-Maintainability: The pivotal outcome was that the main Company Petition had been filed by a single allottee, without complying with the revised provisions, rendering it non-maintainable. The Financial Creditor had not taken the necessary measures to ensure that the application was jointly filed by the required number of allottees.

MHCO Comment:

The above-mentioned case underscores the critical significance of the amended provisions in the IBC, particularly the requirement for not less than 100 allottees or not less than 10% of the total number of such allottees to initiate CIRP proceedings against a Corporate Debtor in the context of real estate transactions.

However, the Hon’ble NCLT seems to have forgone one of the cardinal rules of contractual relations i.e., parties to the contract are free to alter its terms by mutual consent as long as such alterations are permissible by law. Despite the Corporate Debtor having consented to change the amount given as a loan transaction, the NCLT chose to stick to its original nature. This draws attention to the extent to which the NCLT can go in order to determine the true nature of a debt and where it falls under the scope of IBC. In essence, it highlights the need for stakeholders to stay abreast of changes in the law and adapt their strategies accordingly to navigate the complex terrain of insolvency in the real estate sector.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

    LEGAL UPDATE: THE JAN VISHWAS (AMENDMENT OF PROVISIONS) ACT, 2023

The Jan Vishwas (Amendment of Provisions) Act, 2023 (Act), was approved by the President on 11 August 2023. Its enforcement will be determined by the Central Government through notification, with varied dates for amendments in the Schedule. The Act led by the Commerce and Industry Minister, seeks to ease daily life and business operations by amending 183 provisions in 42 Central Acts under 19 Ministries. It aims to decriminalize these provisions for a more business-friendly environment.

BACKGROUND

The Minister of Commerce and Industry spearheading this initiative suggests that the focus might be on creating a more business-friendly environment and fostering a culture of entrepreneurship. By decriminalizing provisions within these Central Acts, the government may intend to encourage risk-taking, innovation and investment by providing greater legal clarity and reducing the fear of unintended legal consequences.

However, while the proposal to decriminalize provisions is aimed at streamlining processes and fostering economic growth, it is important to carefully consider the implications of such amendments. Striking a balance between promoting ease of business and ensuring accountability and responsible conduct is crucial. Some provisions might be related to public safety, consumer protection, environmental safeguards, and more, which need to be assessed thoroughly to prevent any negative consequences. The effectiveness of this legislation would depend on the specifics of the amendments, the clarity of language used, and the mechanisms put in place to ensure that the intended benefits are realized without compromising on the larger interests of society.

PURPOSE OF THE ACT

The Act serves a twofold purpose; one to elevate both the quality of everyday life and second to promote the business environment in the nation. By targeting a wide array of sectors like agriculture, media, health, and the environment, the proposed amendments aim to address outdated or problematic aspects of these Acts. The Act’s intent is to streamline and modernize these regulations, fostering a more business-friendly climate and simplifying the lives of citizens. The Act reflects a comprehensive effort to harmonize legal frameworks with contemporary needs, thereby promoting ease of living and facilitating smoother business operations across diverse sectors.

KEY HIGHLIGHTS

1. Fines and penalties in multiple provisions to increase by ten percent of the minimum amount every three years.

2. A total of 183 provisions across 42 Central Acts, overseen by 19 Ministries/Departments, to be decriminalized.

3. Decriminalization achieved through various methods:

   • Elimination of both imprisonment and/or fines in certain provisions;
     
     
   • Removal of imprisonment while retaining fines in select provisions;
     
     
   • Elimination of imprisonment while increasing fines in specific provisions;
     
     
   • Conversion of imprisonment and fines to penalties in some cases;
     
     
   • Introduction of compounding of offenses in a few provisions;
     

NATURE OF AMENDMENTS

The changes suggested in the Act aim to make certain provisions less focused on punishment by taking actions like eliminating imprisonment and increasing the fines, and introducing penalties or alternatives. These changes aim to streamline punitive measures within the legal framework to achieve desired outcomes.

For example, some of the proposed amendments in the Drugs and Cosmetics Act, 1940 (Drugs and Cosmetics Act) are: the current provisions of Section 27(d) and Section 27A(ii) of the Drugs and Cosmetics Act mandate imprisonment of up to 2 years and a minimum fine of INR 20,000 for spurious cosmetics, adulterated drugs, certain drug and cosmetics-related convictions. Proposed amendments suggest a compounding option for violations, through an addition to Section 32(B) of the Drugs and Cosmetics Act. Similarly, Section 29 of the Drugs and Cosmetics Act provides for penalties for misusing a government analyst's report for drug/cosmetic advertising. The Act proposes to increase the penalty for the above mentioned violation from INR 5,000 to INR 1,00,000. The amendment to Section 30(2) of the Drugs and Cosmetics Act proposes replacing imprisonment with a fine of INR 5,00,000 for subsequent offenses involving the same violation. These changes aim to provide legal clarity and streamline penalties.

Under the proposed amendments to the Trade Marks Act, 1999 (Trade Marks Act), the Act aims to strengthen penalties for specific offenses and introduce two new sections concerning penalties and appeals. It grants authority to a designated officer for adjudication and penalties related to Trade Marks Act violations. Proposed Section 112B outlines the appeal process, requiring the aggrieved party to appeal within 60 days, and the appellate authority to address appeals within 60 days of filing. Additionally, the Act empowers the Central Government to create rules for inquiry and appeals.

Further, under the Customs Act, 1962 (Customs Act) the Commissioner of Customs can request information on goods with false trademarks, and non-compliance results in a fine of INR 10,000. The Act extends this power to the Customs Act authority for penalty imposition and collection.

MHCO Comment:

In conclusion, the Act marks a significant step towards fostering a business-friendly environment and enhancing ease of living. By decriminalizing provisions and introducing streamlined penalties, it aims to encourage innovation, investment, and entrepreneurship. This proactive approach has the potential to boost economic growth and simplify legal processes. However, the challenge lies in striking the right balance between promoting ease of business and ensuring answerability, especially in cases involving public safety and consumer protection. While the Act holds promise for improving the regulatory landscape, careful implementation and monitoring will be crucial to prevent any unintended negative consequences and to maintain societal interests.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.