Introduction

India has been a relatively new entrant to the field of Information

Technology Laws.
Challenges posed by the internet in jurisdictional capabilities
The importance of physical location of the party has been greatly
diminished as transactions in cyber space are not geographically based.
1. The power balance between the consumer and the distributor has
been altered as the consumer now has instant access to enormous
amounts of information and analytical tools.
2. The physical location of the sender and receiver even if identified,
can be masked using technology.
3. There is a fundamental incompatibility between the legal
governance being a function of territoriality and the network
governance being a function of IP addressing making it difficult to
impose local jurisdictional limitations on the global dissemination of
information.
The solution lies in private international law; domestic courts have to first
localize the transaction prior to assuming jurisdiction. India has adopted
many of the principles of law for the time being in force across various
jurisdictions, particularly in the field of jurisdiction. This has helped with
issues created by advancing technology for example, the adjudication of
cyber torts, or that of defamation that would happen online. The Indian
Courts the tests applied by American courts to deal with the jurisdiction in
cyberspace.

The tests that have been accepted and applied in Indian cases

1. The Sliding Scale Test

The sliding scale test is the likelihood that personal jurisdiction can be
constitutionally exercised, is directly proportionate to the nature and
quality of commercial activity that an entity conducts over the internet,
lead to the comparison with a sliding scale.
In Zippo Manufacturing Company v. Zippo Dot Com, Inc., the plaintiff was
the manufacturer of tobacco lighters in Pennsylvania. The plaintiff sued
the defendant, an internet subscription news service with its principal
place of business in California, for trademark infringement and dilution
arising out of defendant’s use of the domain names “zippo.com”,
“zippo.net” and “Zipponews.com” on the Internet. The court noted that
the defendant’s contacts with Pennsylvania had occurred almost
exclusively over the Internet. Dot com’s offices, employees and Internet
servers are located in California. Dot Com has entered into agreements
with seven Internet access providers in Pennsylvania to permit their
subscribers to access providers in Pennsylvania to permit their subscribers
to access Dot Com’s news service. It was held that the Pennsylvania court
was perfectly entitled to exercise jurisdiction. The court in the Zippo case
evolved a test known as Sliding Scale test when it comes to the personal
jurisdiction. At one end of the spectrum are situations where a defendant
clearly does business over the internet. The personal jurisdiction will be
said to be proper if the defendant enters into contracts with residents of a
foreign jurisdiction that involve the knowing and repeated transmission of
computer files over the internet.

In Millennium Enterprises Inc. v. Millennium Music, the court declined to

exercise jurisdiction over a South Carolina corporation that sold products
both offline and on the web. The court felt that ‘something more’ than
merely showing that the website was interactive was required. The
defendant should be shown to have consummated some transaction
within Oregon and to have made ‘deliberate and repeated contacts’ with
Oregon through the website so that it could be held that they ought to
have anticipated being hauled into an Oregon court.

Then, in the case of Mink v. AAAA Development, the defendant’s website

offered printable mail-in order forms that could be downloaded, provided
a toll-free number, a mailing and an e-mail address. the forum court
declined to exercise jurisdiction since in fact no orders were placed using
the website.
In Winfield Collection v. McCauley, the website provided an interactive
mechanism of doing online business and the plaintiff showed that auction
sales were conducted over the net with bidders in Michigan. Nevertheless,
jurisdiction was declined because the defendant was not shown as
“actively and intentionally doing business with customers in Michigan.” It
was held that the form of online sale made it impossible for the
defendant’s website to target the users of any particular state and
therefore other than the court of the state where the principal place of the
business of the defendant was located, other state courts could not
exercise jurisdiction.

However, there has been a shift from this test as almost all websites are
interactive nowadays. So, in the face of ever-changing technology this
test would be redundant. It would in fact have a ‘chilling effect’ on
international commerce of which the internet is a major vehicle in the
digital era. It would also result in a failure to provide the balance between
the interests of consumers and those of producers and marketers.

2. The Effects Test or the Intentional Targeting Test

The effects test is a shift towards objective territoriality as opposed to the

subjective territoriality employed before. Herein, the court will exercise
jurisdiction only if it is shown that effects of the defendant’s website are
felt in the forum state, that is to say that, it must have resulted in some
harm or injury to the plaintiff within the territory of the forum state.
Nowadays, since it is bound to happen given the nature of the internet,
courts have moved to stricter version of the effects test, called the
intentional targeting test.

The factors governing the application of the effects test include whether a
website has targeted the forum state and care must be taken to ensure
that would remain neutral. It is also pertinent that the criteria must not
display any bias towards either consumers, who would seek to apply the
law governing the destination of the product, or producers who seek to
apply the law of the place of origin of the goods.

The targeting of a specific jurisdiction is foreseeable depending on

contracts, the technology that would identify geographic location and
actual or implied knowledge which incorporates targeting knowledge
gained through the geographic location of tort victims, offline order
fulfilment, financial intermediary records, and web traffic.

In Calder v. Jones, the Supreme Court in 1984 described the ‘Effects

Test’, when a State derives personal jurisdiction over a non-resident
defendant. In this case, the National Enquirer, a Corporation based in
Florida published an allegedly defamatory article on Shirley Jones, a
resident of California. A complaint alleging libel was filed by the
complainant against the National Enquirer, its distributors and
newspaper’s editor and the journalist who wrote the article in the State
Court of California. The Court held that although the article was written,
and printed in Florida, the journalist and the editor of the newspaper of
the National Enquirer had expressly aimed at the California based Jones in
California. The effects of the conduct committed in Florida were felt in
California where they were directed. So when the National Enquirer had
10 per cent of its total sales in California and the journalist had written
the story in Florida by contacting sources in California through telephonic
interviews. Although the journalist visited California on business and had
its source of news there.

In the case of Digital Equipment Corp. v. Alta Vista Technology, a

Massachusetts company sued the defendant which was its licensee
alleging infringement of its mark. Although the defendant argued that it
had structured its affairs to avoid the forum state, the court found that
the defendant’s use of its website to infringe the plaintiff’s mark did have
effects in the forum state and its purpose may be said to be targeting the
forum state and its citizens.

Moreover, in Nissan Motor Co. v. Nissan Computer Corp., the defendant

did not sell goods to its consumers on its websites (which were registered
under the domain names ‘nissan.com’ and ‘nissan.net’) it had
intentionally changed the content of its website to exploit the
goodwill of the plaintiff by profiting from the confusion created among the
consumers. It was therefore held to have “deliberately and substantially
directed its activity toward the forum state.”

3. The combined approach

This test was adopted and applied in the case of Toys ‘R’ US v. Step Two.
It is the combination of the sliding Scale and the effects test.

In this case, the trademark was used on the New Jersey based Plaintiff’s
as well as the Spanish Defendant’s website, though the defendant
operated an interactive website through which persons residing in New
Jersey, it went on to state that a commercially interactive website by
itself was insufficient to establish jurisdiction, and additionally there had
to be evidence of direct targeting of consumers in the area. The Court
also used the ‘effects test’ according to which courts can exercise
jurisdiction in cases where the acts were committed outside its
jurisdiction, but were intentionally aimed at the forum state and its effects
were also felt in the forum state. The court held that the mere operation
of a commercially interactive website should not subject the operator to
jurisdiction anywhere in the world. Rather, there must be evidence that
the defendant ‘purposefully availed’ itself of conducting activity in the
forum state, by directly targeting its website to the state, knowingly
interacting with residents of the forum state via its website, or through
sufficient other related contacts.

In Pavlovich v. Superior Court, a Texas website operator who had posted

software designed to defeat the plaintiff’s technology for encrypting
copyrighted motion pictures was subject to personal jurisdiction in
California where the motion picture, computer, and DVD industries were
centred. The court held it had no personal jurisdiction and stated that the
defendant did not know that the particular plaintiff, a licensing entity
created by the motion picture and DVD industries, was located there.

Adoption by the Indian Courts

In the case of Banyan Tree Holdings v. A. Murali Krishna Reddy, the

courts applied the Sliding scale rule and the Effects test evolved in the
cases of Zippo Manufacturing Company vs. Zippo Dot Com, Inc and
Calder v Jones respectively.
In the case of Banyan Tree, the plaintiff was part of the hospitality
business and has since 1994, used the word mark, “Banyan Tree” which
had now acquired a secondary meaning. It also maintains websites that
use the mark and are accessible in India. However, in 2007, the
defendants began work on Banyan Tree Retreat and hosted a website
which directed to a “Banyan Tree” project. The Plaintiffs contended that
the use of this mark is dishonest and aimed at encashing on the
reputation and goodwill of the Plaintiff. They also claim that it would lead
to confusion and deception if such usage was so allowed.
In this case, the Court found that the website of the defendant is
accessible in Delhi and is thus, not a passive website, as derived from
American laws. Further, the defendant also sent a brochure to Delhi
regarding their property’s sale. In this case, parties relied on the holdings
and observations of International Shoe Co., the Zippo Test of “sliding
scale”, Cybersell Inc. and the effects test in Calder, among multiple other
American cases on the same issue. It then discussed cases from Australia
and Canada before assessing the Indian Position on the same.
In Banyan Tree, on an analysis of these positions, the court found that
essential principles developed in other jurisdictions may be seamlessly
adopted into our own.
The Court chose to disagree with Casio and held that 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. Further, it observed that the degree of the interactivity apart,
the nature of the activity permissible and whether it results in a
commercial transaction has to be examined while adjudging the “effects”
test. Additionally, there is a need to assess whether the Plaintiff can
show a prima case that the specific targeting in the forum State by the
Defendant resulted in an injury or harm to the Plaintiff within the forum
state. The Court thus chose to apply the “effects” test with the “sliding
scale” taste, this reconciling the application of the Calder test with the
Zippo Test in India.

Conclusion

It is pertinent to note as was laid down that the test in Banyan Tree may
be quite descriptive, but it does not lay down a one size fits all test, in the
sense that while it is absolutely applicable for an online commercial
transaction and intellectual property issues, it does not cover the area of
torts.