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Posted on February 8, 2021 Authored by Rushil Anand* Image Source: BW Businessworld On 22nd January 2021, Competition Commission of India (“CCI”) published the “Market Study On The Telecom Sector In India” (“Study”). The study, initiated in January 2020, analyses the telecom sector from an antitrust perspective in the wake of the significant development the sector has witnessed in the past 5 years. It highlights various contemporary competition issues, partly due to Jio’s disruptive entrance, as well as upcoming competition issues as the sector is set to see further transformation and innovations with 5G around the corner. This article discusses the various concerns highlighted in the Study in four parts, namely – (a) financial stability and competition; (b) vertical integration and competition; (c) data privacy and competition; and (d) infrastructure and competition. A. Financially Stability and Competition For the telecom sector incumbents, 2016 to 2019 was a very turbulent period. The entry of Jio in the market, with its predatory prices and unlimited data scheme, caused massive disruption to their businesses. Jio managed to avoid scrutiny over its prices as TRAI’s competition analysis relies on the Significant Market Power (“SMP”) concept. SMP, as per the 68th Amendment to the TRAI Tariff Order, means a service provider holding a share of at least 30% of total activity in a relevant market on the basis of either subscriber base or gross revenue, which would trigger competition concerns. Since Jio was a new entrant, it could not have been subjected to competition analysis. As the data rates tanked from Rs.180 per GB in 2016 to Rs.6.98 in 2019, meaning India had the cheapest data rates, it became unsustainable for telecom companies to operate.[1] Many players exited the market, some were acquired by larger firms, or merged with other players such as the Idea-Vodafone merger. The market has now settled on three main operators which are Vodafone, Airtel and Jio, collectively owning about 88.4% of the market share.[2] This is in line with multiple empirical studies that show mature markets tend to support 3 main operators with rest staying on fringes of the market or targeting a niche audience[3]. Various entities demanded a floor price regime due to Jio’s disruptive pricing scheme, however on CCI’s advice the TRAI did not grant it. While the floor prices would have ensured a certain amount of profit, it could have made the operators complacent, hampering competition and innovation in the sector, hence TRAI struck with the forbearance model. Since then, there has been upward revision in prices in December 2019 by all three operators, which is beneficial for consumers in the long term as companies were functioning at an unsustainable level. Though in a better situation, the market is still reeling under some financial stress Hence, it is essential that the upcoming 5G spectrum auction is done at reasonable prices. With companies already under financial stress and prices of the 5G spectrum in India expected to be comparatively expensive to other countries, the allocation of the spectrum will play a significant part in determining the competitive landscape of the telecom sector going forward. Presently, the average spectrum holding of Indian telecom operators stands at 31Mhz, which is significantly lower than the global average of 50Mhz.[4] Furthermore, in the interest of competition, it is essential to maintain three competitors in the market as any exit now leaves a virtual duopoly. B. Vertical Integration and Competition In parallel to the falling rates, the proliferation of smartphones also led to consumption of data skyrocketing due to data intense content such as video calls, streaming etc. While India can still be considered a price sensitive market, widespread adoption of data heavy apps has meant that the competition between the operators has moved beyond the price factor, focusing on Quality of Service (QoS), data speed etc. 4G has blurred the lines between voice and data services, exemplifying the growing importance of non-price-based factors in competition between telecom companies which are increasingly influencing consumer choices. This convergence is driving a vertical integration across the market. Companies are adapting by focusing on tariff packages bundled with OTT services. While the introduction of OTT services replaced revenue sources such as SMS and Voice Calls, they also substituted their functionality with data heavy apps, opening up new revenue sources. Telecom companies and OTT services are now in “symbiotic relationship” where OTT services provide more data consumption for telecom companies resulting in more customers for OTT services. An illustration of this symbiotic relationship would be the partnership of the OTT video streaming platform Zee5 with Vodafone-Idea by providing users with free subscription on purchase of certain data packs. These inroads made by OTT services in the telecom sector have raised certain competition concerns regarding the vertical integration. While it can create consumer benefits by reducing search cost, this technological convergence can also create dependency and lock in the consumers. These strategic partnerships can hinder competition and create entry barriers for non-vertically integrated operators and OTT services. However, these effects are understudied, and due to both the anti-competitive and pro-competitive potential, they need to be scrutinized further as these integrations become more common. ‘Net Neutrality’ is a principle that can be negatively affected by vertical integration. Incumbents may try to direct traffic to its own or vertical integrated services, which may affect competition especially for operators and OTT services which lack such integration. While the TRAI regulations forbid such practices, there are various avenues where such practices can go unnoticed. For example, telecom operators utilize Content Delivery Networks (CDN) servers for faster delivery of their services. Since agreement between these companies are not disclosed, it is essential their traffic patterns are monitored to ensure they adhere to net neutrality and fair competition. Peering arrangements are another avenue, which allow two networks to exchange traffic directly, which has benefits such as lower transit costs. There have been instances reported in India where specific services under peering arrangement were being provided at faster speed. C. Data Privacy and Competition With vertical integration taking place across the market, seamless data aggregation is a very straight forward exercise. Given the rising importance of data in today’s business environment, it is important for any competition analysis to consider “combined data power” that these incumbents enjoy. Such data can be used to undermine potential competitors in a related service. Dominant platforms can strengthen their position by crosslinking data through their vertically linked digital products and can use the same to enter multiple markets. Access to data can also become a significant entry barrier for new entrants. While it can lead to efficiencies in the market, it can enhance network effects and switching cost, acting as a deterrent for any potential entrants. However, it has been cautioned that access to big data does not mean that there are entry barriers in the market. Data is of varied kind and their anti-competitive effects are contextual. There are also privacy concerns that arise from such data aggregation. Privacy is a non-price competition, meaning a factor through which firms compete that is not monetary price. Lowering of privacy standards can be considered abuse of dominance by dominant platforms, as it will affect consumer welfare. Furthermore, cross-linking allows exchange of data between different vertically integrated services, which can lead to degradation of privacy to the determinant of the consumer. Hence, till what extent consumers can consent to a dominant player’s action shall be part of competition analysis. While the existing competition tools under the Competition Act 2002 are deemed sufficient for any competition concern arising out of privacy policies, however, multiple jurisdictions around the world are formulating ex-ante regulations for digital companies. D. Infrastructure and Competition The late entrant advantage Jio enjoyed significantly helped it in managing its costs. Jio only offers 4G network, meaning all of its technologies and infrastructure are geared towards it. Airtel and Vodafone, on the other hand, still provide 2G and 3G services along with 4G services, meaning they still operate older technologies, increasing cost of operations, impacting competition. One of the suggestions under consideration to infuse more competition in the sector is unbundling the license. Currently, India follows a Unified License (UL) regime, where the licensee is responsible for building the infrastructure and providing the network and service to the consumers, with only very limited unbundling done at the infrastructure layer. Recently, TRAI has opened consultations on a new license regime proposed by TRAI for unbundling of the UL, i.e., different licenses will be introduced for the infrastructure layer as well as the network and service layer (and a proposed entry for the new ‘application’ layer as well). This proposal is currently under discussion with different stakeholders. In the author’s opinion, the proposed unbundling will greatly expand the markets as firm can now compete in different layers, making the sector more competitive. Furthermore, with limited unbundling already in place and further unbundling proposed, passive and active infrastructure sharing between companies can reduce entry barriers in the market and reduce duplication of infrastructure, especially in time of economic ill-health of the sector. *Rushil Anand is BBA L.L.B graduate from Jindal Global Law School. He is deeply interested Competition Law and Indirect Tax matters. [1] Competition Commission of India, ‘Market Study On The Telecom Sector In India’ (22 January 2021), paragraph 9. [2] Ibid. [3] Sheth, J. and Sisodia, R. (2002). The Rule of Three: Surviving and Thriving in Competitive Markets. New York: Free Press. [4] Competition Commission of India, ‘Market Study On The Telecom Sector In India’ (22 January 2021), paragraph 19.

Posted on January 21, 2021 Authored by Melita Tessy* Image Source: Hacker Noon Introduction To many in the Fintech sector, the 2018 circular[1] of the Reserve Bank of India (“RBI”), purportedly banning trade in virtual currencies would’ve come off as a rather unpleasant surprise. This is because, the RBI had published in 2015, the “Financial Stability Report” and the same included a chapter on “Financial Sector Regulation”[2] which dealt with the challenges posed by Virtual Currency (“VC”) Schemes. This chapter noted that regulators and authorities’ needed to keep pace with developments, as many of the world’s largest banks had started supporting a joint effort for setting up of private blockchains and building an industry-wide platform for standardizing the use of VCs. Additionally, in 2016, the next Financial Stability Report[3] of the RBI took note of the rapid developments taking place in FinTech globally and urged the regulators to gear up to adopt the technology. Thus, when India’s central bank, the RBI issued a “Statement on Developmental and Regulatory Policies” on 5th April 2018[4], which directed that, “the entities regulated by the RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies and exit the relationship, if they already have one, with such individuals/ business entities, dealing with or settling virtual currencies (Virtual currency)” it created confusion and a need for judicial intervention, especially since the Securities and Exchange Board of India (SEBI) had published a report in favour of the contrary in 2017.[5] To add to this, the RBI also issued a circular dated 6th April 2018[6] directing “the entities regulated by the RBI (i) not to deal in virtual currencies nor to provide services for facilitating any person or entity in dealing with or settling virtual currencies and (ii) to exit the relationship with such persons or entities, if they were already providing such services to them.” In view of the foregoing, it may be said that the excitement that surrounded cryptocurrencies until the end of 2016 waned in 2017.[7] The governmental approach towards these currencies became extremely cautionary and dismissive[8] and this led to the alleged ban in trading of cryptocurrencies through the RBI circular in 2018. Following said circular, the matter came before the Supreme Court of India in the case of Internet and Mobile Association of India and Ors. v. Reserve Bank of India[9]. It was observed by the Court that while there is reason for caution in this regard, the same only creates a need for regulation of trading in cryptocurrencies and not an outright ban which violates Article 19 of the Constitution. Therefore, the RBI ban was set aside. Despite this, however, it has been reported that the Indian government has proposed to ban trading in cryptocurrency once again[10] and the same has opened up room for discussion and speculation. The current article is written with the objective of retrospectively analyzing India’s plan to ban cryptocurrency by studying the various legal developments that have been taking place from 2018. Analysis of the Supreme Court Judgement in Internet and Mobile Association of India (IAMAI) and Ors. v. Reserve Bank of India (RBI)[11] 1. Primary Issue and Order Sought by the Petitioner The primary issue in this case was ‘Whether the impugned Circular dated 06.04.18 by the RBI is liable to be set aside on the ground of proportionality.’ The Petitioner had challenged the said Circular and had sought a direction to the Respondents not to restrain entities regulated by RBI, from providing access to banking services, to those engaged in transactions in crypto-assets. Lack of Cause for the Defendant’s Pre-emptive Action and Test of Proportionality The Court observed that the RBI had not come out with a stand that any of the entities regulated by it have suffered any loss or adverse effect directly/indirectly, on account of the interface that the VC exchanges had with any of them. It further noted that as held by the Supreme Court earlier in State of Maharashtra v. Indian Hotel and Restaurants Association[12], there must be at least some empirical data about the degree of harm suffered by the regulated entities in order to allow for a pre-emptive action of the nature given in the circular. The Court also examined whether the measure taken by the RBI was proportional, i.e., the proportionality of the measure taken by the RBI, for the determination of which, RBI had to show at least some semblance of damage suffered by its regulated entities, but there was none. Though the stand of the RBI was that they had not banned VCs, several proposals including two draft bills[13] created by committees constituted by the RBI among others, advocated exactly the opposite. Hence, it wasn’t possible for the Court to hold that the impugned measure was proportionate. 2. Observations on Trading of Cryptocurrency Globally:] The Court stated that the argument that the Petitioner’s argument that most of the countries, except very few like China, Vietnam, Pakistan, Nepal, Bangladesh, UAE, have not imposed a ban (total or partial) is not of much value as the list of countries where a similar ban has been imposed disclosed a commonality, i.e., almost all of them were India’s neighbours. However, the Court supported the view expressed in the July 2018 Report of the European Union[14] which read, “We are not in favour of general bans on cryptocurrencies or barring the interaction between cryptocurrency business and the formal financial sector as a whole… As long as good safeguards are in place protecting the formal financial sector and general society as a whole… that should be sufficient.” The Court believed that there could also be no comparison with the approach adopted by countries such as the UK, US, Japan, Singapore, Australia, New Zealand, Canada etc. (where trading in cryptocurrency was legal), as they have developed economies capable of absorbing greater shocks than India. 3. Article 19(1)(g) of the Indian Constitution The Court held that any restriction to the freedom guaranteed under Article 19(1)(g) should pass the test of reasonableness in terms of Article 19(6). RBI raised two fundamental objections in this regard. The first is that corporate bodies who have come up with the challenge are not ‘citizens’ and hence, not entitled to maintain a challenge under Article 19(1)(g). This objection held good in respect of the Internet and Mobile Association of India( IAMAI), which is a not-for-profit association, but did not hold good in respect of the companies running VC exchanges. The second objection was that there is no fundamental right to purchase, sell, transact and/or invest in VCs and so, the Petitioners cannot invoke Article 19(1)(g). But this contention was rejected for two reasons: (i) some of the Petitioners are not claiming any right to purchase, sell or transact in VCs, but claiming a right to provide a platform for facilitating an activity (of trading in VCs between individuals/entities who want to buy and sell VCs) which is not yet prohibited by law, (ii) that in any case the impugned Circular does not per se prohibit the purchase/sale of VCs. Accordingly, it was contended by the learned Counsel for the Petitioners, that what is hit by the impugned Circular is not the actual target. The actual target is the trade in VCs. The object of hitting at trading in VCs, is to ensure consumer protection, prevention of violation of money laundering laws, curbing the financing of terrorism, and safeguarding of the existing monetary/payment/credit system from being polluted. However, since hitting the ‘target’ directly is not within the RBI’s domain, it sought to protect only the regulated entities. In the process, the RBI hit VC Exchanges (VCEs) and not the actual trading of VCs. The Petitioner urged that it is in this context that the contention revolving around Article 19(1)(g) has to be examined. The Court held that the category of citizens, namely, those who have made the purchase and sale of VCs as their occupation or trade, and those who are running online platforms and VC exchanges can certainly pitch their claim on the basis of Article 19(1)(g). It was further noted that those who have suffered a deadly blow from the impugned Circular are those running VCEs and not those who are trading in VCs. Persons trading in VCs had different options, but the people dealing in VCEs could not find any other means of survival if they were disconnected from the banking channels. Thus, both objections were dismissed. Furthermore, as explained hereinabove, the Court also used the test of proportionality and determined that the impugned Circular did not pass the same. Therefore, the Court held that while regulation of a trade or business through reasonable restrictions imposed is saved under Article 19(6) of the Constitution, a total prohibition, especially through a subordinate legislation by from RBI, of an activity not declared by law to be unlawful, is violative of Article 19(1)(g). Outcome Thus, the Petitioners succeeded, and the impugned Circular was set aside on the ground of proportionality. The Statement dated 05.04.18 though challenged in one writ petition, was not in the nature of a statutory direction and hence the question of setting aside the same did not arise. Brief Analysis of the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 and its precursor, Crypto Token and Crypto Asset (Banning, Control and Regulation) Bill, 2018 The Crypto-token Regulation Bill, 2018 initially recommended by the Inter-Ministerial Committee contained two proposals: to prohibit persons dealing with activities related to crypto tokens from falsely posing these products as not being securities or investment schemes or offering investment schemes due to gaps in the existing regulatory framework and to regulate VC exchanges and brokers where sale and purchase may be permitted. The Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 Bill, in terms of Section 3, imposes a general prohibition on mining, generating, holding, selling, dealing in, issuing, transferring, disposing of, or using Cryptocurrency by any person in the territory of India, other than (a) technology or processes underlying any Cryptocurrency for the purpose of experiment or research, including imparting of instructions to pupils provided that no cryptocurrency shall be used for making or receiving payment in such activity; and (b) use of Distributed Ledger Technology for creating a network for delivery of any financial or other services or for creating value, without involving any use of cryptocurrency, in any form whatsoever, for making or receiving payment. Section 6 further prohibits the use of cryptocurrency as a medium of exchange, a store of value, a unit of account, and as legal tender or currency at any place in India. Section 8 further lays out various offences punishable under the Bill. Conclusion The author opines that the judgement passed by the Indian Supreme Court in IAMAI v. RBI[15] is an extremely well-written judgement that upholds the constitutional protection given to businesses in India under Article 19(1)(g) of the Constitution by setting aside delegated legislation that is unconstitutional. This provides hope for a vibrant virtual currency industry in India that has the potential to revolutionize banking and by extension, society. The Banning Cryptocurrency Bill is not a part of the Parliamentary Agenda that was decided for the 2020 Monsoon session and therefore does not pose an imminent danger to cryptocurrency trading.[16] It is in the interest of India for it to continue to remain so. *Melita Tessy is a third year law student at Christ University, with a keen interest in Technology and IP Law. She published her novel ‘Battle of the Spheres’ when she was 15 and is one of India’s youngest TEDx Speakers. [1] Department of Communication – RBI, Circular, 6th April 2018, https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI15465B741A10B0E45E896C62A9C83AB938F.PDF [2] Reserve Bank of India, Chapter III – Financial Sector Regulation: Financial Stability Report (December 2015), https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/07C3EDD1BD5ED04B4207A1782587D3F63BF9.PDF [3] Reserve Bank of India, Financial Stability Report (December 2016), https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/0FSR2316BB76DB39BF964542B9D1EBE2CBC273E7.PDF [4] Department of Communication – RBI, Statement on Developmental and Regulatory Policies, 5th April 2018, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR264270719E5CB28249D7BCE07C5B3196C904.PDF [5] Department of Economic Affairs – SEBI, Report on Opportunities for the Indian Securities Market (August 2017), https://www.sebi.gov.in/reports/annual-reports/aug-2017/annual-report-2016-17_35618.html [6] Supra 1 [7] RBI, Financial Stability Report (December 2017), https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/0FSR201730210986ADDA44E2A946A3F6C4408581.PDF [8] RBI, Press Release cautioning users, holders and traders of virtual currencies, 01.02.2017; The Government of India (GOI), Ministry of Finance, Statement, 29th December 2017. [9] Internet and Mobile Association of India (IAMAI) and Ors. v. Reserve Bank of India (RBI), 2020 SCC OnLine SC 275 (India) [10] Bloomberg, India plans to introduce law to ban cryptocurrency trading, 17th Sep 2020, https://economictimes.indiatimes.com/news/economy/policy/government-plans-to-introduce-law-to-ban-cryptocurrency-trading/articleshow/78132596.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst [11] Supra 9 [12] Maharashtra v. Indian Hotel and Restaurants Association, (2013) 8 SCC 519 (India) [13] Infra 21, 22 [14] EU, Directive, 2018/843, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843&from=EN [15] Supra 9 [16] Kevin Helms, India’s Crypto Bill Omitted from Parliament Agenda While New Ban Report Appears, Bitcoin.com, Sep 16, 2020, https://news.bitcoin.com/india-crypto-bill-parliament-ban

Posted on January 7, 2021 Co-authored by Tanya Varshney and Varun Anand* Image Source: AdSpark Introduction In simple terms, ‘data localization’ means storage of data within the local limits of the jurisdiction of the data subject. With the challenges posed by the COVID-19 pandemic, people are using online services across the world and connecting with others in many different jurisdictions. Such free flow of data and information also raises questions such as applicability of national data protection laws, jurisdiction of courts, exercising the rights and remedies of data subjects in foreign jurisdictions, etc. In this regard, some jurisdictions (such as the European Union) have imposed restrictions on cross-border transfer of personal data. This article analyses the data localization versus free flow of cross-border data arguments in the context of the Indian laws. Legal Framework The primary legislation with respect to data protection in India is the Information Technology Act, 2000 (“Act”) read with the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 (“Rules”). Under the Rules, ‘personal information’ is defined as any information that relates to a natural person, which, either directly or indirectly, in combination with other information available or likely to be available with a body corporate, is capable of identifying such person. The definition does not specify whether a ‘natural person’ should be situated in India. Transfer of data is covered under Rule 7 which states that the body corporate may transfer “transfer sensitive personal data or information including any information” to entities outside India if such entity ensures the same level of data protection as mandated under the Rules. Additionally, the transfer would be allowed if (a) it is necessary for the performance of a lawful contract or (b) the data subject has consented to such transfer. The Srikrishna Committee Report, 2018 (“Report”) acknowledges that free flow of data across borders is essential for a free and fair digital economy, but certain regulations are necessary when data controllers wish to transfer personal data outside India. Referring to the White Paper of the Committee of Experts on a Data Protection Framework for India, the Report suggests that the cross border transfer of data may be subject to preconditions of adequacy and comparable level of protection for such data. ‘Adequacy’ test means whether a country possesses adequate level of protection for personal data. The White Paper recognizes that personal data is of different types (as even under the Indian scenario it is “personal data” and “sensitive personal data”) and thus a “one-size-fits all” approach would be untenable. India, being a developing country, also has the additional burden to catch up to the technological advancements of other nations. Thus, cross-border transfer of data may prove to be an attractive option for the digital economy. The Report recommends that a Data Protection Authority should draft a model contract for such transfers and mandate transferring entities to incorporate such model clauses. The model contract will contain the key obligations on transferee entities as per the Indian law, including security, purpose limitation, storage limitation and a responsibility to fulfil rights of individuals. The Report also suggests audits and self-certifications to be regularly done to further ensure that adequate protection is taken. The Reserve Bank of India (RBI) also issued the circular RBI/2017-18/153 “Storage of Payment System Data” dated April 6, 2018 under Section 10(2) read with Section 18 of Payment and Settlement Systems Act 2007[1]. The RBI observed that various system providers were storing the payment data of customers outside India and it was difficult to monitor the same. The RBI noted that “it is important to have unfettered supervisory access to data stored with these system providers as also with their service providers / intermediaries/ third party vendors and other entities in the payment ecosystem”. The RBI directed, in the said circular, that the system providers shall ensure the data relating to payment systems in only stored in India including the full end-to-end transaction details (this would mean even from the stage of initiation of the payment, adding bank details, receiving the ‘One Time Password, etc), except the “foreign leg” of the transaction. In other words, the actual receipt information generated outside India. In India, with the introduction of the Draft Personal Data Protection Bill, 2019 (“Bill”), “cross-border flow of data” finds itself in various provisions. In terms of Section 7, the data fiduciary should give a notice to the data subjects regarding any cross-border transfer of the personal data that the data fiduciary intends to carry out. Under Section 23, the data fiduciary is obligated to be transparent about the cross-border transfers of personal data that it generally carries out. Under Section 49, the Adjudicating Authority shall also monitor such cross-border transfer of personal data[2] and also has the power to suspend the same. In terms of Section 33, ‘sensitive personal data’ can be transferred outside India, but shall continue to be stored in India subject to explicit consent given by the data subject for such cross-border and the conditions laid down under Section 34, namely: the transfer is made pursuant to a contract or intra-group scheme approved by the Adjudicating Authority with such contract providing effective protection of the rights of the data subjects and lay down the liability of the data fiduciary in respect of such transfer; or the Central Government has allowed the transfer to a country or, such entity or class of entity in a country or, an international organisation on the basis of an adequacy decision and assessment that the transfer shall not prejudicially affect the enforcement of relevant laws by authorities with appropriate jurisdiction; or the Adjudicatory Authority has allowed transfer of any sensitive personal data or class of sensitive personal data necessary ‘for any specific purpose’. In terms of Section 33(2) ‘critical personal data’ can only be processed in India. However, Section 34(2) any critical personal data may be transferred outside India if: the transfer is made to a person or entity engaged in the provision of health services or emergency services where such transfer is necessary for prompt action; or the transfer is made to a country or, any entity or class of entity in a country or, to an international organisation, where the Central Government has deemed such transfer to be permissible and where such transfer in the opinion of the Central Government does not prejudicially affect the security and strategic interest of the State. While ‘sensitive personal data’ has been defined under the Bill to include a wide range of information such as financial data, health data, sexual identity and orientation, biometric data, caste, religious beliefs, etc., ‘critical personal data’ has not been defined. The explanation to Section 33 states that the Central Government may notify the categories of personal data to constitute ‘critical personal data’. The Bill has given the Government authorities significant discretion to monitor and regulate the cross-border flows of data. The Bill also does not set out any parameters for the Central Government to make its decision for categorization of critical personal data. This may indicate the Government’s slight bias towards data localization, especially in light of the recent take down orders and bans. (See here and here). In the European Union, Chapter 5 of the General Data Protection Regulations (“GDPR“) governs the transfers of personal data to third countries or international organization. The cross-border data transfer is only permitted if the data processor and the controllers comply with Articles 44-50 of the GDPR (in addition to the other basic obligations thereunder)[3]. Firstly, cross border transfer is permitted where the European Commission (EC) decides that such third country ensures an “adequate level of protection”[4]. In other words, the EC examines the adequacy of the data protection laws and data security standards of other countries and gives them a “green light” to go ahead. The EC has given this green light to a few jurisdictions including Canada, Japan, New Jersey, amongst others[5]. Secondly, cross-border transfer is permitted where controller or processor has provided appropriate safeguards, and on condition that enforceable data subject rights and effective legal remedies for data subjects are available in such third countries.[6] Thirdly, cross-border transfer is permitted where there is an international agreement with the third country and the data is required by any judgment of a court or tribunal and any decision of an administrative authority of a third country.[7] Aside from the above, certain derogations are permitted for cross-border transfers under Article 49 such as where the data subject has been made aware of the security risks and has explicitly consented to the proposed transfer, transfer is necessary for the performance or conclusion of a contract between the data subject and controller, public interest, legal defense, transfer is necessary in order to protect the vital interests of the data subject or where the data subject is incapable of giving consent, and by the Government. Conclusion and Recommendations There are many policy-based arguments which can be made favoring both data localization and free flow of cross-border data transfers. In an age where cyber security and threats of that nature are far more likely than the older notions of battle or war, data localization helps prevent foreign surveillance by maintaining a higher standard of control over who gets access. Two, it allows local law agencies to monitor and get access to data with ease, for example, they could use their access to the data to either maintain a watchlist of potentially dangerous individuals, or look through conversations or posts to determine who might pose a threat to the country and its sovereignty, which in turn helps them to detect crimes or any similar violations of the law. The localization of data may help local industries grow and develop, and likely increase jobs and provide a competitive edge to local businesses over their foreign competitors. This could also attract investors and result in economic development. Further, the growth of AI technologies is heavily dependent on harnessing data, so for the country to remain competitive in that arena, it would require that the data was processed within the country using local infrastructure built for specifically that purpose. On the other hand, data localization also requires the creation of widespread infrastructure to store data in the Indian jurisdiction, requiring hefty investment and generating a barrier to trade. This would likely also result in increased prices on the data users, as companies attempt to pass the burden of the cost onto them or deter companies from providing services to Indian users. Presently, the internet’s functioning architecture is underpinned by the free flow of data, for example, cloud computing, which spreads data across various data centers to make affordable and convenient on-demand access to a shared pool of processing or storage facilities, while the actual physical location of the data remains largely invisible to users. This means that localization would prevent global companies from launching their products and services in India, cutting its citizens off from the latest global innovation engines and giving us a comparative disadvantage. Lastly, in terms of the user experience, instead of choosing a fast and cheap data service provider, data users would likely be forced to choose local data service providers who have next to no incentive to provide high quality services when faced with a lack of competition in the landscape. With respect to concerns about national security, localization might not help local agencies if they do not have the necessary encryption key, especially when most communication (like WhatsApp for example) functions with end-to-end encryption. Also, localization of data may give a domestic government extensive control over the data of individuals, greatly increasing the likelihood of government surveillance, resulting in a potentially Orwellian violation of our right to privacy. In any case, India’s legal framework with respect to cross-border data transfers is still relatively in the nascent stage with the Personal Data Protection Bill still being under Parliamentary review. *Tanya Varshney, Founder and Chief Editor of IntellecTech Law, is a practicing lawyer based in New Delhi focusing on Intellectual Property, Technology-Media-Telecommunications, Data Protection, Commercial Disputes and Corporate-Commercial work. *Varun Anand, a final year law student at Jindal Global Law School, is interested in Technology-Media-Telecommunications and Data Protection laws and has undertaken and completed internships at leading law firms and think-tanks in these areas. [1]RBI/2017-18/153 “Storage of Payment System Data” dated April 6, 2018. Available at <https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11244> [2] Section 49(g), Personal Data Protection Bill, 2019 [3] Article 44, General Data Protection Regulations. [4] Article 45, General Data Protection Regulations. [5] European Commission, Adequacy Decisions. Available at <https://ec.europa.eu/info/law/law-topic/data-protection/international-dimension-data-protection/adequacy-decisions_en> [6] Article 46, General Data Protection Regulations. [7] Article 48, General Data Protection Regulations.

Posted on December 23, 2020 Authored by Aditya Krishna* Image Source: The Sociable Introduction With the advent of the 21st century, technology began to develop in leaps and bounds, leading to the eventual creation of a plethora of AI or Artificial-intelligence applications and solutions. It has been forecasted in a study by the Stanford University in 2016 that over the coming decades AI is bound to drastically alter no lesser than eight broad sectors, including that of the legal sector.[1] With the question now being more of ‘when’ than ‘if’, it becomes extremely important to analyse and contextualise the role that AI could play in the legal system and AI’s capability to replace human-judges in the near future and its ability to perform legal interpretation. When it comes to legal interpretations, two tasks usually need to be fulfilled. The first being that of describing the law and predicting how the same would be interpreted by others; and the second being that of selecting a specific legal interpretation, in case of legal indeterminacy, from the repertoire of the existing interpretations. Hence, for an AI-system to take over the role of a judge, it would necessitate that the algorithm effectively performs both tasks. While we may envision AI taking over legal interpretation to the extent of providing descriptions or prognostications on the law, the real conundrum lies in the idea of such AI-systems engaging in moral judgements on the law. From a jurisprudence and policy perspective, this brings up two important questions for discussion, namely, the role of morality in legal interpretation and whether AI would be capable of performing the role of judges? This paper aims to conceptualise the use of AI as judges through a jurisprudential analysis of law and morality. AI and The Judicial Process While AI in the judiciary may seem like a pipedream, it is interesting to note that such systems have already found application in countries around the world. One such notable example is seen in the case of China, which established three special AI Internet Courts back in 2017. The said AI adjudicates upon disputes concerning online transactions of services and goods, copyright and trademark disputes, trade disputes, e-commerce product-liability claims and other such claims. It is interesting to note that the said courts operate 7-days a week and 24-hours a day and have average case disposal time of around 38-days.[2] The courts have also been reported to have adjudicated upon over 3.1 million cases from March to October of 2019 alone![3] This aside there has also been a recent trend in the past-decade around the world indicating the movement towards the use of AI in the adjudication process. While as of now, AI is only being used in the digitisation of court filings/processes, judgement-prediction, as algorithmic-tools in criminal court decisions and in online dispute resolution mechanisms, it has been argued that the same could also be easily adapted so as to allow AI-systems to also step into the role of judges in the future.[4] Take, for example, its current application in judgment-prediction. Considering AI is already able to predict judgments delivered by the courts with a considerable accuracy,[5] it begs the question as to what really prevents such AI-systems from assuming the role of judges? Another pertinent example is seen in the case of risk-assessment algorithms, which are already being used extensively in the US to aid in the judicial decision making in criminal cases on issues of bail, parole, and sentencing.[6] Such systems, with time, are believed to only become better and more accurate and hence, AI functioning as judges is a lot closer than one might imagine. The question that may now prop up is on how one could possibly test whether an AI-system could accurately perform a judge’s role? A glimpse at a possible solution to this is provided in Prof. Eugene Volokh’s recent paper, ‘Chief-Justice Robots’.[7] In his paper, Volkoh argues that the substitution of human-judges by AI would be contingent on the AI passing what he called the “Modified John Henry Test”. The test is described to be a judgment/opinion writing test wherein the AI-system’s performance is compared to the performance of ten average performers in the said field. If the said AI-system performs at least as good as the average performer, it is said to pass the test and can serve as an adequate substitute for a human.[8] The question of whether the system passed the test or not is to be decided by a panel of ten human-judges (experts on the said subject) who evaluate the performance of the participants, without knowing which is human and which is an AI-system. The determining factor in such a test would be subjective and based on the persuasiveness of the judgments pronounced by the said AI-systems. But one would now question what this persuasiveness could be based on? This discussion, in the authors opinion, tends to motivate an inquiry into jurisprudence on the role of morality in interpreting the law.[9] Jurisprudential Inquiry The study of the current jurisprudential inquiry would help elucidate on what is expected of a judge pronouncing a judgment in terms of integrating morality into their legal interpretations and help us theorise the role of AI based on different schools of thought. In answering the question on the role of morality in legal interpretation, one could possibly discern the possibility and extent to which AI could possibly replace human-judges in the future. What is quite ironic here is the fact that even after all this time, to answer a so called “modern technological conundrum”, one finds the need to go back to the traditional and pivotal debate in jurisprudence on the role of morality in legal interpretations. This debate stems mainly from the long-standing rift between legal positivism and natural law.[10] While multiple branches exist under legal positivism, as a school of thought it broadly tends to derive a distinction between law and morality.[11] Exclusive legal positivism recognizes that morality should and can have a role in the law creating process, both when they are enacted by the legislature and when new laws are made by judges, but the same is distinguishable from the task of ascertaining what the law is, where in they believe morality has no role.[12] . Inclusive legal positivism diverges from this and allows for a contingent role of morality in law.[13] Inclusive legal positivism is usually defined by the analysis of the social facts, since it postulates that the substance of the law is essentially dependent on social facts, which in turn may make morality pertinent to legal judgments, hence, integrating morality into the law. Natural law theorists on the other hand, tend to oppose this distinction between law and morality such that moral facts play an ultimate role in identifying the content of the law.[14] Moral judgment is viewed as being necessary in instances to render legal judgment. Natural law theorists like Ronald Dworkin advocated for an “interpretivist” view that incorporated “substantive moral judgments with descriptive judgments in legal interpretation.”[15] Theorists like Lon Fuller also shared a comparable view in some regards though he did tend to emphasise more on a “special class of moral values that arise distinctively in legal systems” which he called law’s “inner-morality”.[16] Hence, it can be seen that by and large natural law necessitates that judges mandatorily employ aspects of morality while interpreting the laws. Thirdly, a newer school of thought, which was theorised by Prof. Joshua P. Davis and was created as a solution to the long-standing debate between positive and natural lawyers, is legal dualism.[17] It postulates that the nature of law is not monistic but dualistic. As Shapiro correctly recognised in his book legality,[18] a main impediment for positivism exists in offering an account of the nature of law when it bears moral obligation. Accordingly, natural law struggles to do the same when the when the law “lacks moral legitimacy”. It is a school of jurisprudence which essentially explores a two-state solution, with “natural law and positivism each assigned to its appropriate terrain”.[19] Moving with the general assumption that AI-systems are capable of undertaking descriptive and predictive legal judgment,[20] (and may even outperform humans in this regard) but are incapable of providing substantive moral judgments,[21] the perspective on the role of morality in law would play almost a pivotal role on the extent AI may replace human-judges in the future. AI as Judges? If exclusive legal positivism is the prevailing jurisprudential consensus, AI-systems would most likely be able to surpass and largely replace humans by make more accurate and purely positive legal judgments (It is important to note here that the author refrains from accepting that AI can completely replace human-judges at this point in light of the fact that many exclusive legal positivists like Scott Shapiro, do concede that morality does play a role in adjudication especially in the context of the law-making role of judges).[22] This may be inferred considering that the law necessitates only an appraisal of social facts, which AI is more than capable of. Assigning such a role to AI would also lead to a more precise, efficient, and consistent interpretation of the law. In doing so AI judges could take over legal interpretation but human-judges would be needed for judicial law making. In contrast thereto, if inclusive legal positivism were the dominant theoretical understanding, it could possibly lead to the preservation of a larger human role in adjudication. Since the school of thought tends to accept moral judgments possible integration with the law, humans would play a role in saying what the law is to the said extent. None the less much like in exclusive legal positivism, AI would still have a large role in legal interpretation when it does not necessitate substantive moral judgments. What is interesting to note is that even if we do assume exclusive legal positivism is correct on the nature of law and morality and even if it is the prevailing notion, human-beings would still not be completely replaceable and would still play a role, though in a limited capacity, as judges. Even in the situation where AI-systems are able to make purely predictive and descriptive judgments required to interpret the law, human-judges would still be needed to fill the gaps and render moral judgments at least in the judicial law-making process. As per legal dualism, moral judgment in legal interpretation is only required when the law serves as a “source of moral guidance”.[23] If one were to believe that judges did not derive moral guidance, in line with the thinking of Oliver Wendell Holmes, Jr. (“the only concerns to which law gives rise are prudential, not moral”),[24] then even with the application of dualism, AI would be allowed to completely take over the role for human-beings in interpreting the law. If one were to believe that judges did derive moral guidance from the law, as did Prof. Joshua P. Davis who conceptualised dualism, it would mean that the judges in interpreting the laws were obligated to exercise moral judgment. Hence, this would curtail AI’s role as judges due to its inability to make the substantive moral judgments required. Another way to look at legal dualism, which the current author subscribes to, is to look at the intention of the interpreter of the law. As per legal dualism, “Natural law provides the best account of law’s nature when a legal interpreter seeks moral guidance from the law and legal positivism provides the best account when a legal interpreter seeks merely to describe the law or to predict how others will interpret it.” To illustrate an interpretation of the theory, AI could assume the role of judges when the adjudication merely requires describing the law or predicting how others will interpret it, (much like in the cases of the small-causes or lower courts) and humans could assume the role of the judge when the judge is required to seek moral guidance from the law or engage in a judicial law-making process (as in the case of higher courts). Such a system can decrease the case disposal time in the lower courts and decrease the burden on the judiciary. In such a manner legal dualism, in the author’s opinion, can be used to implement the best aspects of the individual theories (while also overcoming their shortcomings)[25] and can also downplay its own criticism,[26] by creating an ideal balance between the use of AI and human-judges to get the most optimum and efficient solution. Conclusion AI-system may very well replace human-judges in providing descriptive and predictive judgments in the near future, but it is uncertain whether such systems can ever be programmed to make the substantive moral judgments (in light of the limitations created by the Poulomi’s paradox)[27] so as to completely replace human-judges. Clearly, even with the said technology developing exponentially, AI-systems are still likely to hit an unsurmountable impasse and will not completely replace human-judges at any point in the foreseeable future. Such systems, however, may be able to do so to a limited extent. In creating this distinction between what can be adjudicated upon by humans and AI, we create a new understanding of natural law, which can be characterised as requiring legal interpretation to be undertaken by natural and not artificial intelligence. Morality could also be divided into substantive morality or natural morality (Judgment on what morality really entails and not merely a prediction of how others would evaluate morality in the case) and descriptive/predictive morality or artificial morality (Act of describing, as a matter of social fact, the dominant moral beliefs of the people in order to foresee the moral judgments people would most likely make in the situation). Assuming AI-systems can extend their capabilities to even passing purely descriptive and predictive moral judgment in the future, a jurisprudential understanding of morality would be fruitful in developing the nature of law and accordingly the role of AI as judges, to reconceptualise and change the traditional jurisprudential landscape. *Aditya Krishna is a third-year law student from Jindal Global Law School and is currently pursuing his B.A. LL.B. (Hons.) degree. He has a keen interest in Intellectual Property Law, Technology Law and Constitutional Law. He currently serves as a Contributing Editor at IntellecTech Law. [1] Stanford University, Artificial Intelligence and Life in 2030: One Hundred Year Study on Artificial Intelligence, (2016). Available at: http://ai100.stanford.edu/2016-report (last visited on 15th Nov. 2020) [2] Guodong Du, China Establishes Three Internet Courts to Try Internet-Related Cases Online: Inside China’s Internet Courts Series -01, China Justice Observer, (16th December 2018) https://www.chinajusticeobserver.com/insights/china-establishes-three-internet-courts-to-try-internet-related-cases-online.html [3] Yan, China reforms judicial courts using internet technologies: white paper, Xinhuanet, (5th December 2019) http://www.xinhuanet.com/english/2019-12/05/c_138605955.htm [4] Cary Coglianese and Lavi M. Ben Dor, AI in Adjudication and Administration, Faculty Scholarship at Penn Law 2118 (2020). https://scholarship.law.upenn.edu/faculty_scholarship/2118 [5] As is seen in a recent study in 2017, where it was found that a machine-learning system was able to predict the outcomes of over 70% of 28,000 U.S. Supreme Court decisions accurately. See: Matthew Hutson, Artificial Intelligence Prevails at Predicting Supreme Court Decisions, Science (May 2, 2017), https://www.sciencemag.org/news/2017/05/artificial-intelligence-prevailspredicting-supreme-court-decisions. [6] Andrew C. Michaels, Artificial Intelligence, Legal Change, and Separation of Powers, 88 U. Cin. L. Rev. 1083 (2020), https://scholarship.law.uc.edu/uclr/vol88/iss4/4; Arnold Ventures, Public Safety Assessment Faqs (“PSA 101”), Arnold Ventures (Mar. 18, 2019), https://craftmediabucket.s3.amazonaws.com/uploads/Public-Safety-Assessment101_190319_140124.pdf. [7] Eugene Volokh, Chief Justice Robots, 68 Duke L.J. 1135, 1138 (2019). [8] ibid., 1318-1319. [9] Considering AI would not be able to enter into substantial moral judgment and can only enter into predictive and descriptive judgments, the persuasiveness would depend on the role the judges of the test ascribe to morality in legal interpretation and hence a study of the role ascribed to morality would help in predicting the possible role AI could have as judges. [10] Joshua P. Davis, Legality, Morality, Duality, 2014 Utah L. Rev. 55, 61- 63 (2014). [11] SCOTT SHAPIRO, THE “HART-DWORKIN” DEBATE: A SHORT GUIDE FOR THE PERPLEXED, IN RONALD DWORKIN 22 (Arthur Ripstein ed., 2007) [12] SCOTT SHAPIRO, LEGALITY, (Harvard University Press, 2011) [13] SCOTT SHAPIRO, THE “HART-DWORKIN” DEBATE: A SHORT GUIDE FOR THE PERPLEXED, IN RONALD DWORKIN 22 (Arthur Ripstein ed., 2007) [14] RONALD DWORKIN, JUSTICE FOR HEDGEHOGS 405 (2011). [15] RONALD DWORKIN, JUSTICE FOR HEDGEHOGS (2011). Dworkin argued that legal interpretation involved two kinds of judgment, namely “fit” and “justification”. Fit was descriptive and included any “non-normative claims relevant to legal interpretation”, like the possible definitions of the terms in a statute, “possible rules that might make sense of binding precedents, or accounts of the workings of political institutions in a jurisdiction.” Justification on the other hand was prescriptive and involved “moral claims pertaining to legal interpretation”, this included which definitions of the laws, which rule applied, and “which accounts of political institutions would make the law most just.” Dworkin believed that legal interpretation involved both fit and justification hence necessitating the presence of morality or substantive moral judgment in legal interpretation. [16] LON L. FULLER, THE MORALITY OF LAW (1964). [17] Joshua P. Davis, Legality, Morality, Duality, 2014 Utah L. Rev. 55, 61- 63 (2014). [18] SCOTT SHAPIRO, LEGALITY, (Harvard University Press, 2011) [19] Joshua P. Davis, Legality, Morality, Duality, 2014 Utah L. Rev. 55, 61- 63 (2014). [20] Considering AI systems are already largely able to perform the same as has also been stated earlier. Refer to Section II. [21] The usage of Substantial morality is stressed here since it is the type of morality which had been contemplated by theorists when creating the said theories. The impact on our understanding of morality in light of the developing technologies and AI assuming the role of judges is addressed briefly towards the end of part V. [22] SCOTT SHAPIRO, LEGALITY, (Harvard University Press, 2011) [23] Joshua P. Davis, Legality, Morality, Duality, 2014 Utah L. Rev. 55, 61- 63 (2014). [24] Oliver W. Holmes, Jr., The Path of the Law, 10 Harv. L. Rev. 457 (1897). Oliver Wendell Holmes, Jr. characterised the law as “prophecies of what courts will do in fact, and nothing more pretentious.” In the context of his “Bad Man” theory of the law, he suggested that law gives rise only to prudential and not moral concerns. [25] Joshua P. Davis, Legality, Morality, Duality, 2014 Utah L. Rev. 55, 61- 63 (2014). Davis provides a compelling account on how employing such a dualistic theoretical framework will cause the main challenges Shapiro identifies to legal positivism and natural law to get resolved. Evil Law would not serve as a hurdle to natural law and Hume’s Law would not impede legal positivism. Each theory on the nature of law works within its own domain. While any theory may be used in the future, the current author most prefers the application of a dualism framework as explained in Section IV (B) with the interpretation that factors the intention of the legal interpreter. Such a form of dualism would be keeping the best aspects of the positivism and natural law while addressing its shortcomings. “As Shapiro recognizes, a main difficulty for legal positivism lies in providing an account of the nature of law when it gives rise to moral obligations. Legal positivism then struggles to explain how legal interpretation can proceed without moral judgment. On the other hand, a primary challenge for natural law is to offer an understanding of the nature of law when it lacks moral legitimacy. Evil Law appears to leave no room for moral judgment……..Shapiro’s insight about core challenges to legal positivism and natural law suggests a possible natural boundary in the jurisprudential landscape. Natural law may provide the best account of law when it imposes moral obligations and legal positivism when it does not. The content of the law may vary depending on which of these approaches is appropriate for a particular act of legal interpretation……Different legal interpreters—by virtue of their roles within the legal system—should use different interpretive methodologies……Perhaps law does not have the same nature for all purposes but instead consists of two (or more) complementary understandings of the nature of law.” [26] While the dualistic structure proposed could be criticised for coming in conflict with the principle of Occam’s Razor, the current author believes that the theories contributions in the said context tend to outweigh the possible criticism on the said grounds. [27] David Autor, Polanyi’s Paradox and the Shape of Employment Growth (September 2014) (NBER Working Paper No. w20485), Available at: https://economics.mit.edu/files/9835. Polyani’s Paradox was devised by a Hungarian-British polymath named Michael Polanyi who in his book Tacit Dimension, explored the concept of ‘tacit knowing’ in human knowledge. In the book he argues that our knowledge and capabilities are usually beyond our understanding and cognition. He based this on the fact that we learn a lot of tasks through experience, which we cannot explain. He uses the example of us recognising people but not knowing how we do it to explain the concept. This forms the basis of the paradox which in essence states that “we can know more than we can tell.” The paradox creates a constraint on the number of functions/ tasks we can code and teach a AI system to perform.

Posted on December 16, 2020 Authored by Tanya Varshney* Image Source: Eyerys It is an established principal of contract law across jurisdictions that, regardless of the form of the contract, certain essentials such as offer, acceptance, capacity to contract, consideration, etc. should be met. Unlike e-mail where parties have several exchanges of written communications, click-wrap agreements such as terms of service, user agreements, privacy policies obtain the acceptance or consent by selecting an “I Agree” option. Where acceptance to any such online agreements is deemed by sharing an external link or allowing the user to browse the website, it is a browse-wrap agreement. The question that arises is whether there is a clear communication of notice and mutual assent to be bound by the terms of the e-contract. This article aims to examine whether click-wrap and browse-wrap agreements are valid e-contracts, and if so, what are the essentials for the enforceability of these e-contracts, through the case studies of Uber and Viacom’s e-contracts in the United States. Uber’s Terms of Service In Meyer v. Uber Technologies[1] in the United States, Uber sought to enforce the arbitration clause contained in the terms of service while users contended that they had not entered into a legally enforceable agreement. In this case, when users created an account on Uber, they agreed to be bound by the terms of service of Uber. The Court examined the operation of the app. When a user downloads this app, the first screen is a “Register” screen. Upon filling in the relevant details to register or sign up, the user is then directed to provide their payment data. Below the input fields and buttons on the Payment Screen is black text advising users that ʺBy creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.ʺ The said text was a hyperlink which would direct the users to view the Terms of Service and Privacy Policy. The District Court had found that there was a “lack of reasonably conspicuous notice or an unambiguous manifestation of assent” with Uber’s Terms of Service. The Appellate Court noted that this agreement has to be analysed with respect to the principles of contract law, one of the most important being – mutual assent. The Appellate Court in the Uber case analyses various judicial precedents concerning e-contracts. The Court quotes the following excerpt from the judgment in Sgouros v. Trans Union Corp[2]: “Courts around the country have recognized that an electronic ʹclickʹ can suffice to signify the acceptance of a contract,….there is nothing automatically offensive about such agreements, as long as the layout and language of the site give the user reasonable notice that a click will manifest assent to an agreement.” The Appellate Court distinguishes between click-wrap agreements and browse-wrap agreements – “clickwrapʺ (or ʺclick‐throughʺ) agreements, which require users to click an ʺI agreeʺ box after being presented with a list of terms and conditions of use, or ʺbrowsewrapʺ agreements, which generally post terms and conditions on a website via a hyperlink at the bottom of the screen.” The Appellate Court finds that courts have previously upheld clickwrap agreements for the principal reason that the user has affirmatively assented to the terms of agreement by clicking ʺI agree.ʺ[3] However, browse-wrap agreements operate on a different footing and the determination of the validity of a browse-wrap contract depends on whether the user has actual or constructive knowledge of a websiteʹs terms and conditions.[4] The Appellate Court also acknowledged that there are other types of e-contracts as well, such as where online agreements require the user to scroll through the terms before the user can indicate his or her assent by clicking ʺI agree” (scroll-wraps); or agreements which notify and advise the user that he or she is agreeing to the terms of service by using the website (sign-in-wraps). The Appellate Court first sought to examine whether there was a reasonable notice from the perspective of a reasonably prudent smartphone user – “a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information will be found…. We conclude that the design of the screen and language used render the notice provided reasonable as a matter of California law. The Payment Screen is uncluttered, with only fields for the user to enter his or her credit card details, buttons to register for a user account or to connect the userʹs pre‐existing PayPal account or Google Wallet to the Uber account, and the warning that ʺBy creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.ʺ The text, including the hyperlinks to the Terms and Conditions and Privacy Policy, appears directly below the buttons for registration. The entire screen is visible at once, and the user does not need to scroll beyond what is immediately visible to find notice of the Terms of Service. Although the sentence is in a small font, the dark print contrasts with the bright white background, and the hyperlinks are in blue and underlined.” The Court also found that the language used was clear and unambiguous, and that a reasonably prudent smartphone user would have constructive notice of the terms. The Appellate Court secondly sought to examine whether there was “manifestation of assent” to the contract. The Court found that since there was an objectively reasonable notice of the terms, Meyerʹs assent can be said to be unambiguous. The Court noted that use of the app, where it is clearly said it is subject to the specified terms, would be indicative of the user’s choice to employ such services subject to additional terms and conditions that may one day affect him or her. The Court states: “a reasonable user would know that by clicking the registration button, he was agreeing to the terms and conditions accessible via the hyperlink, whether he clicked on the hyperlink or not…. The registration process allowed Meyer to review the Terms of Service prior to registration, unlike web platforms that provide notice of contract terms only after the user manifested his or her assent. Furthermore, the text on the Payment Screen not only included a hyperlink to the Terms of Service, but expressly warned the user that by creating an Uber account, the user was agreeing to be bound by the linked terms. Although the warning text used the term ʺcreateʺ instead of ʺregister,ʺ as the button was marked, the physical proximity of the notice to the register button and the placement of the language in the registration flow make clear to the user that the linked terms pertain to the action the user is about to take…. Meyer located and downloaded the Uber App, signed up for an account, and entered his credit card information with the intention of entering into a forward‐looking relationship with Uber. The registration process clearly contemplated some sort of continuing relationship between the putative user and Uber, one that would require some terms and conditions, and the Payment Screen provided clear notice that there were terms that governed that relationship.” Thus, the Appellate Court concluded that Uber’s arbitration clause was enforceable. Viacom’s User License Agreement In Rushing v. Viacom Inc.[5], the United States District Court of California examined whether the arbitration agreement contained in Viacom’s End User License Agreement (“EULA”) is valid and enforceable. The EULA, which contains an arbitration clause, states that users agree to be legally bound by it “by installing, accessing and using the Software.” The Court found that since Viacom is the party seeking to enforce the arbitration, the burden to prove “the existence of an agreement to arbitrate by a preponderance of the evidence” would be on Viacom. Viacom argued that the Plaintiff, in its complaint, had relied upon a section of the EULA which, according to Viacom, is indicative of the fact that Plaintiff is well aware of the EULA and the arbitration clause contained therein. The Court observed that this argument does not have much merit because it does not indicate that the Plaintiff would have accessed and viewed the entirety of the EULA. The Court observed – “But the undisputed state of the evidence is that the section of the app description in question became visible only when a user clicked on a hyperlink titled “more,” and that it was not necessary for a user to click on that “more” hyperlink to “get” the app.” Explaining the nature of browse-wrap agreements, the Court referring to the excerpts from Nguyen v. Barnes & Noble Inc. stated: “Browsewrap agreements do not “require the user to manifest assent to the terms and conditions expressly,” and a party “instead gives his [or her] assent simply by using the website.” “The defining feature of browsewrap agreements is that the user can continue to use the website or its services without visiting the page hosting the browsewrap agreement or even knowing that such a webpage exists.” Where, as here, the proponent of the arbitration agreement has failed to provide sufficient evidence of actual notice, the validity of the browsewrap agreement “turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract.”. The burden is on website owners to “put users on notice of the terms to which they wish to bind consumers.”.” The Court found that Viacom’s browse-wrap agreement fails the test as the arbitration clause was not visible to users unless they clicked on “more,” and there was no need for users to click on the “more” button in order to start downloading the game. The Court observed that in situations where the users would be “unlikely” to see a browse-wrap agreement, the Courts would be keen to refuse to enforce such agreements. The Court also observed – “The parties do agree that there was a “Privacy Policy” link on the home screen of the app, which a child presumably would have encountered each time he or she launched the game but that is a far cry from “an explicit textual notice that continued use will act as a manifestation of the user’s intent to be bound” by the EULA.” Therefore, the Court concluded that despite having a visible link, the same did not amount to a reasonable notice to be bound by the terms of the EULA. Conclusion The contrast in the decisions of the courts in the Uber and Viacom case above demonstrates that e-contracts in the forms if click-wrap, browse-wrap, shrink-wrap, scroll-wrap, etc. should have a clear and ‘reasonable’ communication to the user that they are agreeing to be bound by the terms of such e-contract and a clear manifestation of assent. In India, in regards to contracts made by electronic means, such as email, click-wrap and browse-wrap agreements, the Information Technology Act, 2000 of India (“IT Act”) under Section 10A has acknowledged the validity of the contracts where offer, acceptance or revocation are expressed in electronic forms. Specifically, it mentions that a contract cannot be deemed invalid solely on the basis of it being an online exchange of offer and acceptance. Further, Sections 85A, 85B and 85C under the Indian Evidence Act, 1872 which were introduced by the IT Act, also deal with electronic records and signatures. It is provided that agreements in electronic form containing an electronic signature shall be deemed to be concluded when the parties have affixed their electronic signatures. Agreements in electronic forms would nonetheless have to comply with the essential requirements of a contract under the Indian Contract Act, namely – offer, acceptance, intention to be legally bound, lawful object, lawful consideration and free consent. While legal recognition has been given to contracts made through e-mails, Indian laws still don’t specifically provide any rules or regulations governing click-wrap, shrink-wrap or browse-wrap agreements. It is advisable to opt for an e-contract through email or a click-wrap agreement containing free and clear communication of acceptance. The validity of the e-contract is further reinforced if the party has affixed an electronic signature. Under the Evidence Act, electronic records are admissible in courts as documents. However, it is certain there should be clear mutual assent to such contracts. *Tanya Varshney, Founder and Chief Editor of IntellecTech Law, is a practicing lawyer based in New Delhi focusing on Intellectual Property, Technology-Media-Telecommunications, Data Protection, Commercial Disputes and Corporate-Commercial work. [1] 868 F.3d 66 (2d Cir. 2017) [2] 817 F.3d 1029 , 1033‐34 (7thCir.2016) [3] Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 837 (S.D.N.Y. 2012) [4] Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177 (9th Cir. 2014) at 1176 [5] Case No. 17-cv-04492-JD

Image Source: Times Now News On November 24, the Ministry of Electronics and Information Technology banned 43 more apps under Section 69A of the Information Technology Act, 2000 read with various other relevant provisions of the Information Technology (Procedure and Safeguards for Blocking of Access of Information by Public) Rules, 2009. This was done in view of the comprehensive reports received from Indian Cyber Crime Coordination Center, Ministry of Home Affairs. The government has blocked these mobile apps, mostly Chinese, for activities that are “prejudicial to sovereignty and integrity of India, defence of India, security of state and public order“. Four apps owned by China’s retail giant, the Alibaba Group, are on the latest banned list. The present ban is not shocking as the government had banned various other mobile apps earlier. The government had first banned 59 Chinese apps in June as tension with China peaked following the deaths of 20 Indian soldiers in a clash with Chinese troops in eastern Ladakh’s Galwan Valley. In September, the government banned 118 more apps saying they posed a threat to the country’s sovereignty. A total of 220 apps now stand blocked, including the viral video platform TikTok and the popular mobile shooting game, PUBG, in what ministers have described as a “digital strike”. List of apps that have been blocked for access in India in the recent order are provided below: AliSuppliers Mobile App Alibaba Workbench AliExpress – Smarter Shopping, Better Living Alipay Cashier Lalamove India – Delivery App Drive with Lalamove India Snack Video CamCard – Business Card Reader CamCard – BCR (Western) Soul- Follow the soul to find you Chinese Social – Free Online Dating Video App & Chat Date in Asia – Dating & Chat For Asian Singles WeDate-Dating App Free dating app-Singol, start your date! Adore App TrulyChinese – Chinese Dating App TrulyAsian – Asian Dating App ChinaLove: dating app for Chinese singles DateMyAge: Chat, Meet, Date Mature Singles Online AsianDate: find Asian singles FlirtWish: chat with singles Guys Only Dating: Gay Chat Tubit: Live Streams WeWorkChina First Love Live- super hot live beauties live online Rela – Lesbian Social Network Cashier Wallet MangoTV MGTV-HunanTV official TV APP WeTV – TV version WeTV – Cdrama, Kdrama&More WeTV Lite Lucky Live-Live Video Streaming App Taobao Live DingTalk Identity V Isoland 2: Ashes of Time BoxStar (Early Access) Heroes Evolved Happy Fish Jellipop Match-Decorate your dream island！ Munchkin Match: magic home building Conquista Online II While doing so, the Centre said that “The government is committed to protect the interests of citizens and sovereignty and integrity of India on all fronts and it shall take all possible steps to ensure that.” Reported by Ujjawal Bhargava, Student Ambassador [ORIGINALLY REPORTED ON NOVEMBER 28, 2020]

Posted on November 25, 2020 Authored by Manika Dayal* Image Source: Truth on the Market Introduction Standard Essential Patents (“SEP’s”) and FRAND (fair, reasonable, and non-discriminatory) terms under licencing agreements in recent times have exponentially risen to prominence, especially in the Information and Computer Technology ( “ICT”) sectors as well as the telecommunications industry. The myriad of issues that have been springing up at an national and international level has inevitably served as a trigger to all the stakeholders involved. SEPs have been discussed by us earlier here and here. The subject matter emerges out to be of utmost importance, predominantly because of three reasons. First, it’s evident overlap between securing intellectual property rights and encouraging free competition. Secondly, the impact of rising monopolies in the market. Lastly, with a stagnant increase of patent-related disputes in the automotive industry such as the dispute between Nokia and Daimler, coupled with the ongoing pandemic, the likelihood of the disputes being restricted to the ICT and the telecommunications sector keeps decreasing. In furtherance of our analysis of SEPs here and here, the present author writes this article to analyse the decision of the United States Court of Appeals for the Ninth Circuit in Federal Trade Commission v. Qualcomm Incorporated and its impact on the discourse concerning SEPs, FRAND licensing and antitrust claims. As the realm of SEPs grows increasingly volatile with fresh disputes and new issues, FTC v. Qualcomm[1] serves as an exceptional subject for an analysis with regard to the ongoing evolution of SEPs and FRAND licensing. Brief Background Qualcomm essentially is a corporation that is deemed to be the largest chipmaker in the telecommunications industry that provides communication ability to mobile phones. Qualcomm holds various patent portfolios, in fact, some of Qualcomm’s SEPs and other patents relate to CDMA and premium LTE technologies which is the way cellular devices communicate with the 3G and 4G cellular networks. While there are others that relate to cellular and non- cellular applications and technologies, such as multimedia, cameras, location detecting etc[2], Qualcomm’s licensing and modem chip business which comprises of two thirds of the company’s value, functions out of separate divisions. The first being, Qualcomm Technology Licensing, which is solely responsible for granting licenses to Qualcomm’s patent portfolios and calculating what royalty rates that are to be charged for those licenses[3]. The second division is, Qualcomm CDMA Technologies, which is responsible for manufacturing, pricing, and selling Qualcomm’s CDMA and premium LTE modem chips[4]. Qualcomm commits to two standard setting organizations ( “SSOs”) – the first is the Alliance for Telecommunications Industry Solutions ( “ATIS”) and the second is the Telecommunications Industry Association ( “TIA”). They require Qualcomm to license Qualcomm’s patents, which are essential to practicing the ATIS and TIA standards, to other modem chip suppliers on FRAND terms[5]. Further, another key point of consideration is that Qualcomm licenses its patent portfolios exclusively at the original equipment manufacturer ( “OEM”) level. An OEM licensing agreement entails licensing of software to an OEM for bundling with one or more other OEM components and distributing it to end users as part of an integrated product. Hence, as part of its “no license, no chips” policy, under which it prohibits selling its chips to OEMs that do not entail licenses to practice its SEPs, Qualcomm determines the royalty rates on its CDMA and LTE patent portfolios as a percentage of the end-product sales price[6]. In 2017, the Federal Trade Commission ( “FTC”) bought an action against Qualcomm at the United States District Court for the Northern District of California. FTC argued that Qualcomm is in violation of Section 1 and 2 of the Sherman Act ( “the Act”). Further, it argued that Qualcomm being a baseband supplier of two kinds of wireless chips used its monopolistic position to promote anticompetitive supply and consciously compelled the handset makers to pay exorbitant amount of fees for the use of its patents. Subsequent to a 10 day hearing in 2019, the District Court ruled in favour of FTC stating that Qualcomm was indeed in violation of various federal antitrust laws as it was engaging in anticompetitive behaviour. Primarily, through its practice of refusing to sell chips to phone manufacturers unless they license its patents, this practice was ordered to be entirely forsaken. Secondly, Qualcomm was liable for charging rival chip makers unfairly through licensing of its patent. Lastly, it was prohibited from entering into exclusive agreements. The subject case, FTC v. Qualcomm, arose out of the appeal that was filed by Qualcomm at Ninth Circuit Court of Appeals. Ninth Circuit Court’s Decision Issue 1: Whether Qualcomm’s practice of refusal to license to rival chip manufacturers was an antitrust violation ? The Ninth Circuit Court (“the Court”) whilst adjudicating upon the issue cited the exception outlined in Aspen Skiing Co. v. Aspen Highlands Skiing Corp[7] which the District Court had relied upon to substantiate its conclusion. The exception requires: (i) the unilateral termination of a “voluntary and profitable course of dealing”; (ii) the only rationale or purpose of which is to “sacrifice short-term benefits in order to obtain higher profits in the long run from the exclusion of competition”; and (iii) the refusal to deal pertains to products that the defendant already sells in the existing market to other similarly situated customers. The Court held that the facts of the present case weren’t in conformity with any of the elements of the Aspen Skiing exception. Consequently, District Court had erred in holding that Qualcomm was bound by any antitrust duty to license rival chip manufacturers. The Court, further, was of the view that Qualcomm’s OEM-level licensing policy, was an ‘industry standard’ and was not an antitrust violation of the Sherman Act[8]. Issue 2: Whether excessive royalty rates are anticompetitive? The Court vehemently rejected FTC’s argument of Qualcomm’s imposition of an “anticompetitive surcharge”. Further, the Court disagreed with the allegation of anticompetitive harm which, according to FTC, was based on Qualcomm’s exorbitant high royalty rates, resulting in Qualcomm’s unlawful monopoly. The Court rationed it by stating any harm from the rates was to OEMs and not to Qualcomm’s direct competitors. Hence, the rates had no “direct impact on competition”[9]. The Court also held that Qualcomm’s policy of “no license, no chips” is permissible and that it is excluded from the purview of an ‘antitrust injury’. The FTC argued that by determining “unreasonably high” royalty rates, Qualcomm was able to control its rival chip manufacturers’ prices by increasing the “all-in” price of its rivals’ chips to include the nominal chip price and Qualcomm’s royalty surcharge. According to the Court, the result of the policy might have raised the price and harmed the customer base however, it won’t have an effect on its rivals in the relevant market. The Court while referencing the Act also propounded that it did not place a bar on Qualcomm from either licensing SEPs separately from the chip sales and collecting royalties or restricting their chip customer base to licensed OEMs. The policy would be contrary to law, if it was the other way around i.e. if the policy would engage in exclusionary conduct in the form of “no chips, no license”, where Qualcomm refuses to license its SEPs to OEMs unless they agree to purchase Qualcomm’s chips prior. Issue 3: Whether there was an antitrust violation for breach of SSO commitments? The Court held that the FTC failed to establish that Qualcomm was in breach of contractual SSO obligations and hence in violation of the Act. SSOs often impose contractual restrictions on SEP holders’ freedom to seek injunctive relief. However, according to the Court, FTC has failed in adducing evidence that shows the breach impaired the potential opportunities of its rivals in the CDMA and LTE chip markets. The Court in conclusion stated that any alleged harm that may have arisen from Qualcomm’s contractual breach was borne by OEMs and not rival chip manufacturers. Substantiating this conclusion, the Court stated that, Qualcomm’s royalties were “chip-supplier neutral”. Consequently, the royalty rates are based on the portfolio chosen by the OEM customer regardless of where the OEM sources its chips. With regard to the CDMA and LTE chip markets, the Court pointedly noted that the FTC “identifies no such harm to competition,” as Qualcomm’s rival chip suppliers are permitted to practice Qualcomm’s SEPs royalty-free[10]. Issue 4: Whether exclusive dealing arrangements with Apple were Anticompetitive? While recognizing the merit in the District Court’s conclusion that Qualcomm’s agreements with Apple in 2011 and 2013 were structured similar to exclusive dealing contracts rather than volume discount contracts, the Ninth Circuit held that the agreements did not have a practical effect of wholly foreclosing competition in the CDMA modem chip market. Further, the Court found affirmation in the fact that no specific competitor or even potential competitor was affected by either of the agreements, as there were no viable competitors to Qualcomm prior to 2014[11]. Analysis This case proved to be a turning point and a major win for SEP owners who are in constant tussle with the implementers. One can’t help but notice the stark difference in this case law and its European counterparts. Historically, if one traces the trajectory of cases in the EU it’s evident that there has been lack of clarity as to what constitutes as abuse of a dominant position. Yes, there are cases such as Huawei V ZTE that provide a set of compliances that need to fulfilled in order to file for injunction against the licensee or theMotorola EC case which essentially states that it would not amount to abuse of dominance if the licensee is unwilling to negotiate on FRAND terms or the Ericsson cases in India which, relying primarily on the EU approach, find that threats of infringement suit by the SEP holder may amount to abuse of dominance if it is done to compel the implementer to accept the license on non-FRAND terms. However, a devil’s advocate argument would be that all these statements can be deemed to be vague and ambiguous. The Qualcomm case clarifies what would be abuse of dominance in certain unforeseen situations owing to Qualcomm’s unique policy. However, this case was settled based on contract law (being the terms of the SSO) and not patent or competition law specifically (being the Act solely). The author opines that due to the difference in interpretation of certain concepts, differentiation in nature and content of pieces of legislations all over the world, the assumption that SEP issues can be effectively dealt with by contract law rather than antitrust or competition laws, may be ineffective. Therefore, the author opines that a contract law based approach for balancing and enforcing both patent owners and users’ rights and obligations relating to SEPs would not prove to be the most efficient. Conclusion The Ninth Circuit’s reversal of the District Court’s decision reinforces the principle of law that plaintiffs seeking to allege antitrust violations entail the onus of showing anticompetitive harm to the relevant market. However, in this case, that does not seem like the best outcome. FTC failed to provide evidence pertaining to Qualcomm’s practice of licensing exclusively to OEMs which would result in a violation of the Sherman Act, as Qualcomm has no antitrust duty to license its rival chip manufacturers. Further, the Court leniently noted that Qualcomm, by charging non-FRAND royalty rates, comes under the purview of contract and patent law, not antitrust. Lastly, Qualcomm’s “no license, no chips” policy was novel, to the say the least and not an antitrust violation as no harm was afflicted in the relevant markets. In the author’s opinion, it is evident from the facts of the case that, due to Qualcomm’s unusual policy and ability to take advantage of loopholes, it is able to exercise monopoly over the relevant market. Qualcomm had a huge role to play in the evolution of smartphones. Its’ patents are part of the standard for modern wireless broadband systems, and the company is now the world’s largest producer of baseband processors which is solely the modem chip that allows phones connect to data networks. With the onset of 5G-enabled products, Qualcomm and other modem providers will be eyeing that new market as well. Unsurprisingly, Qualcomm is all set to dominate it with this judgement in its corner. If Qualcomm is indeed operating a monopoly, they could drive up the price of any 5G devices. Concluding, FTC in October has requested for an en banc from theNinth Circuit Court of Appeals. It is also notable that Qualcomm is involved in various suits all over the world for anti-competitive practices including being fined to pay $975 million to China in 2015, $854 million to South Korea in 2016, and $1.2 billion to the EU in 2018 for a specific deal with Apple. Qualcomm settled a $774 million fine from Taiwan in mid-2018 as well. Hence, it is safe to say Qualcomm presents itself to be a driving force in the relevant market and the stakeholders involved should be mindful of its evolution. *Manika Dayal, Senior Editor and Board Member at IntellecTech Law, graduated with B.A LL.B (Hons) from Jindal Global Law School with a specialization in Intellectual Property, Data Privacy and Media law [1] FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020). [2] Id. at 11-12 [3] Joshua D. Wright, SSOs, FRAND, and Antitrust: Lessons from the Economics of Incomplete Contracts, 21 GEO. MASON L. REV. 791 (2014) [4] Id. at 75-669 [5] FTC v. Qualcomm Inc., No. 17-CV-00220-LHK, 2018 U.S. Dist. LEXIS 190051 [6] Id. at 13-14 [7] Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) [8] Id. at LEXIS 190051, 33-34 [9] Id. at LEXIS 190051, 30-31 [10] Id. at LEXIS 190051, 37-38 [11] Id. at LEXIS 190051, 49-53

Image Source: Telecomlead On 16th November, the Italian Data Protection Authority (Garante per la protezione dei dati personali) announced its decision to impose a fine of €12.2M on Vodafone Italia SpA (“Vodafone”) on account of unlawful processing of personal user data for its telemarketing activities. The Authority concluded the investigation, which originated from the receipt of hundreds of complaints and reports of repeated unsolicited promotion phone calls by Vodafone, by holding Vodafone’s conduct in violation of Articles 5(1) and (2), 6(1), 7, 15(1), 16, 21, 24, 25(1), 32, and 33 of the General Data Protection Regulation (“GDPR”) (Regulation (EU) 2016/679). The transfer of contact lists to Vodafone from its partners was carried out without the mandated free, informed and specific consent of users. In addition to violation of consent requirements, the Authority held Vodafone’s conduct to be violative of key principles of accountability and data protection by design contained in the EU GDPR. The complaints received by the Authority also stated that customers were asked to send their IDs through WhatsApp by operators purporting to act on behalf of Vodafone. Considering this to be related to spamming and phishing activities, the Authority found Vodafone’s customer resource management security measures to be inadequate. The investigation also brought to light Vodafone’s questionable practice of using fake telephone numbers that were not registered with the National Consolidated Registry of Communication Operators to make the marketing calls. In addition to the imposition of a €12.2M fine, the Italian Authority ordered Vodafone to adopt a series of measures to ensure data protection compliance. The Authority prohibited Vodafone from further processing data for marketing or commercial activities, where the data is obtained from third parties that do not have free, specific, and informed consent to disclose such data. The company was also directed to implement systems to demonstrate compliance with consent requirements in its telemarketing activities and strengthen security measures to prevent unauthorized access to customer data. Further, the company must prove that contractual arrangements are activated only through calls made by registered numbers belonging to their sales network. The Italian Authority has previously taken similar action in the case of unlawful processing of personal data of consumers for marketing by TIM SpA, wherein as many as 20 corrective measures including injunctions and prohibitions were imposed along with the €27.8M fine. This is also not the first time Vodafone has been penalized for flouting EU’s data protection law. In August this year, in a similar investigation carried out by the Spanish Data Protection Authority, La Agencia Española de Protección de Datos (AEPD), Vodafone España was fined €75,000 for processing the claimant’s data for telemarketing post the claimant’s exercise of his right to erasure, thereby violating Article 6(1) of the GDPR. Furthermore, earlier this year, the AEPD had also imposed fines of €48,000 and €9,000 on Vodafone for the violation of Article 32 and Article 5(1)(d) of GDPR respectively. Reported by Priyanshi Rastogi, Student Ambassador [ORIGINALLY REPORTED ON NOVEMBER 19, 2020]

Image Source: Computing.co.uk On 12th November, Rekabet Kurumu, the Turkish Competition Authority, announced its decision in the investigation against Google Advertising and Marketing Ltd., Google International LLC, Google LLC, Google Ireland Limited and Alphabet Inc. (“Google“) for abuse of dominance in the online search market. The Board unanimously ruled to impose an administrative fine of 196.7 million lira or 25.6 million USD on Google for abusing its dominant position in the market for search services. It was held that Google’s intensive and uncertain placement of the text ads at the top of the general search results stands foul of Article 6 of the Turkish Competition Law No. 4054 as it leads to difficulty in operating in the content services market of organic results that do not produce advertising revenue. The Turkish competition watchdog further added that Google must, within six months from notification of the reasoned decision, undertake necessary measures to ensure effective competition in the market. The reasoned decision in the case, which is appealable in the Ankara Administrative Courts, is yet to be notified. This move comes with the increased scrutiny of anti-competitive conduct of big tech companies across jurisdictions. However, this is not the first instance of imposition of fines on Google in Turkey for its abuse of dominance. Following the footsteps of the European Commission, earlier this year, the Turkish authorities imposed a 98 million lira fine on the tech giant for violating Article 6 of the Turkish Competition Law No. 4054 through abusive exclusionary conduct and distortion of competition in the general search services and online shopping comparison services markets. Similarly, in 2018, Google was fined 93 million lira for abuse of dominance in the licensable mobile operating systems market based on its agreements with mobile device manufacturers. Reported by Priyanshi Rastogi, Student Ambassador [ORIGINALLY REPORTED ON NOVEMBER 17, 2020]

Posted on November 12, 2020 Authored by Sarah Sanchez* Image Source: Netflix Can emotions be copyrighted? The famous Sherlock Holmes would have never thought he would be involved in such a mystery. As it turns out, Arthur Conan Doyle’s family, the family of the creator of Sherlock Holmes, is making him the center of it all. Well, not Holmes specifically – his emotions. The Arthur Conan Doyle Estate has brought a claim against Nancy Springer, Penguin Random House LLC, Legendary Pictures Productions, LLC, Netflix, Inc., PCMA Management and Productions LLC, EH Productions UK Ltd., Jack Thorne, and Harry Bradbeer; all involved in one of Netflix’s newest releases, Enola Holmes, for the unauthorized use of Conan Doyle’s copyrighted Sherlock Holmes stories. On the face of it, this seems to be a typical case of copyright infringement. But in the words of Sherlock Holmes “it is a capital mistake to theorize before one has data”. Doyle’s Literary Works Conan Doyle brought life to the character of Sherlock Holmes through his sixty literary works between 1887 and 1927. Any work published prior to 1978 received copyright protection for 95 years upon its creation, therefore, any literary work created by Doyle before 1925 is now in the public domain. However, the 17 U.S. Code Title on Copyright (“Copyright Law”) allows for an infringement claim within the preceding three years[1], thus allowing for claims for works created by Doyle after 1922. Although the first fifty literary works now belong to the public domain and, as such, can be used without permission, the remaining ten (“Copyrighted Stories”) are still under copyright protection in the United States.[2] As the plaintiff has put it, not only is Sherlock Holmes known for his great knowledge, attention to detail, and ability to solve mysteries, but another equally important characteristic attributed to him is his lack of emotion towards others. This is, at least, the Holmes that was portrayed in the first fifty stories. It was after World War I, when Conan Doyle lost his eldest son and brother, that he decided that he needed to add the human trait to the atypical character. He felt the need to develop his character to form connections and show empathy towards others. This clear shift in personality can be seen in the Copyrighted Stories, which leads us to the claims at hand. In a judgment from 2014, the estate filed for claims regarding the use of the Sherlock Holmes character. More specifically, claiming whether the copyright protection for derivative works involving the same character would extend to those derivative works. The Seventh Circuit Court ruled that once the time has expired regarding the first original work, and is in the public domain, the derivative works involving the same character also fall in the public domain. However, this has not stopped the estate from litigating a second time concerning similar subject matters. It is a settled position that an author may use their work to create derivative works. It is also known that works that are in the public domain do not require authorization for its use. Therefore, Doyle estate’s claim is not based on either of these factors. The estate’s subject matter, thus, entails the ten remaining Copyrighted Stories, which that are still copyrighted and, more specifically, the change in personality traits throughout the Sixty Stories written by Doyle. Following the line of judgement of the Seventh Circuit Court, if the author creates derivative works with the same character throughout the works, and the original story is in the public domain now, so would be stories involving those characters in those derivative works. Copyright in the New Holmes The writer of the Enola Holmes series, Defendant Springer, used Sherlock Holmes, Dr. Watson, and others, as well as the setting and plot, from the public domain and Copyrighted Stories, and created a new character, Holmes’ sister, Enola. The plaintiff claims that the most extensive infringement was the use of Conan Doyle’s transformation in Sherlock Holmes’ character. Springer placed Enola Holmes at the heart of the story. This is not infringement, as she is a fictional character inspired by stories that are in the public domain. But, Sherlock shows off his unemotional and coldhearted side towards her at the beginning, only to evolve into a warm and kind person for the rest of the story. This, the plaintiff claims, is the cause of action: the Copyright Stories are the only ones that portray such a shift in personality, and therefore, there is clear infringement. The question is if such a claim can be upheld. As the Copyright Law defines it, a work may be copyrightable if it is considered an “original work(s) of authorship fixed in a tangible medium of expression”[3]. Of course, amongst other things, this includes literary works. However, what the Copyright Law does not protect are an author’s creative ideas. More specifically, Section 102 (b) of the Copyright Law dictates that protection shall not be granted to an idea, or concept, “regardless of the form in which it is described, explained, illustrated, or embodied in such a work”[4]. This leads us to Netflix’s argument that how Sherlock Holmes’ character was developed and portrayed in the Copyrighted Stories was just an idea. In fact, Netflix is claiming that the use of such characteristics is too general to be protected. As stated earlier, derivative works of an original work in the public domain, shall also be in the public domain. Netflix is asserting that because the shift in the personality of Holmes’ character is too generic, it should be attributed to the derivative works in the public domain, thus it cannot be copyrightable if the character expressing those characteristics is already in the public domain. Although Copyright Law does not explicitly mention the possibility of having fictional characters as subject matter of copyright, because they would be protected within the context of the work in which they appeared, the courts throughout the years have evolved various tests to determine whether the character in a particular literary work can be copyright protected. For example, the “character delineation” test, created in Nichols v. Universal Pictures Corporation, based on the idea that the more developed a character is, the more it embodies protectable expression. This approach requires that the character possesses physical and conceptual attributes; that it is identified as the same character in multiple scenarios; and that it shows unique elements of expression that it is distinctive. This may be a sign of relief for the plaintiff. The Seventh Circuit, in 2014, remarked the rather derisory demands on the part of the estate for licensing over almost – if not yet – expired stories. Now, six years later and hit with a lawsuit, Netflix and others are stating that it is an attempt to extort. An interesting addition to this lawsuit, as a second count, is the infringement of trademark. The trademark claim is based on the notion that using Sherlock Holmes, in the way that Enola Holmes does, creates a notable confusion in the minds of the people. However, this seems highly unlikely, as this claim should have been brought against Springer upon the release of Enola Holmes novels, almost fifteen years ago. All in all, it seems more like a witch hunt on the estate’s part to squeeze out and exploit what is left of Doyle’s copyright protected stories, rather than an actual case of copyright infringement. Most of the writers that wish to use Doyle’s characters would already agree it is part of the public domain, and that the emotions of a character should not be subject to copyright infringement. The case is estimated to continue through the end of 2021 into 2022. Sarah Sanchez is fifth-year student at IE University in Spain, pursuing her Dual Degree in Business Administration and Law. She shows great passion for Intellectual Property Law and Competition Law, and is one of the IntellecTech Law Student Ambassadors [1] 17 U.S.C. § 507(b). [2] Jessica L. Malekos Smith Sherlock Holmes and the Case of Contested Copyright 15(2) Chicago-Kent Journal of Intellectual Property 538 (2006). [3] U.S. Code Title 17 §102. [4] U.S. Code Title 17 §102 (b).

Image Source: ProPublica On November 10th, the European Commission (“EC“), European Union’s antitrust authority, announced that Amazon “has breached EU antitrust rules by distorting competition in online retail markets”. The concern raised by the EC was that Amazon has been giving preferential treatment to its own retail offers by relying on non-public business data of independent sellers who sell on its marketplace and using such data for the “benefit of Amazon’s own retail business, which directly competes with those third party sellers”, thereby abusing its dominant position under Article 102 of the Treaty on the Functioning of the European Union (“TFEU“). The EC notes that Amazon has access to non-public business data of third party sellers such as the number of ordered and shipped units of products, the sellers’ revenues on the marketplace, the number of visits to sellers’ offers, data relating to shipping, to sellers’ past performance, and other consumer claims on products, including the activated guarantees. There is also preliminary evidence which suggests that this data is being provided to Amazon’s own retail business which is being used to make such business and commercial decisions which is competing with independent sellers. In July 2019, the EC had launched a formal investigation into Amazon’s practices to assess whether Amazon’s use of sensitive data from independent retailers who sell on its marketplace is in breach of the TFEU, and specifically Article 101 which prohibits anticompetitive agreements and decisions of associations of undertakings that prevent, restrict or distort competition within the EU’s Single Market and Article 102 which prohibits the abuse of a dominant position. The EC has now opened a second antitrust investigation into Amazon’s business practices that might artificially favour its own retail offers and offers of marketplace sellers that use Amazon’s logistics and delivery services (the so-called “fulfilment by Amazon or FBA sellers”). The EC will also be looking at Amazon’s services such as “Buy Box” and the criteria to select the winner of the same as well as the loyalty programme offering products to “Prime” users with speedy deliveries and authenticity guarantees to certain sellers. Executive Vice-President of the EC, Margrethe Vestager, said: “We must ensure that dual role platforms with market power, such as Amazon, do not distort competition. Data on the activity of third party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers. The conditions of competition on the Amazon platform must also be fair. Its rules should not artificially favour Amazon’s own retail offers or advantage the offers of retailers using Amazon’s logistics and delivery services. With e-commerce booming, and Amazon being the leading e-commerce platform, a fair and undistorted access to consumers online is important for all sellers.” Reported by Tanya Varshney, Chief Editor

Posted on November 4, 2020 Authored by Anunay Kumar Sharma* Image Source: Medium Introduction In 2019, Warner Music, the 3rd largest music label in the world with artists such as Led Zeppelin, Ed Sheeran, Madonna signed on – not an artist, but a bundle of code – Endel. Endel is the byproduct of a startup based out of Berlin which consists of an Artificial Intelligence (“AI”) software which creates music based on the time of the day, weather, location and the music choices which it has studied.. The contract has been signed for up to 20 albums to be released on a 50-50 distribution deal. This is not the first time that software has been used by record labels, Sony has been working on its ‘Flow Machines’ project which uses an algorithm to compose music and has been credited officially as one of the songwriters along with several people who feed in the lyrics and different inputs, Aiva Music was the first AI to be registered with a collection society (SACEM). The point of difference between these previous occurrences is that Endel does not require any human collaboration apart from creating the AI itself. No human editorial control is required during the creation phase therefore the AI is not just generating music but creating the sound frequencies at the same time. The system was created by Dimitri Evgrafov and he explains that what people might think as music being created at the click of a button is the culmination of 1.5 years of developing the algorithm. Can AI Be Credited With Authorship? The Philosophical and Legal Stance This is an issue which arises organically out of any creative work being created, who will be attributed as the author? Since the early 1970s, when the use of software to create pieces of art was rising, it made sense to attribute the person making the art or controlling the machine to be attributed as the author and owner of the art while the machine or the computer was more of a tool to be used for creation. A similar decision was made by Warner Music and Endel, the owner of the company and the engineers who built the system have been credited as song writers even though hardly anyone of them know how to make music. It does make sense to attribute ownership of the music coming out of a system to the creator of the system. But, it gets interesting when the system is self-learning and after creating a few pieces of music with the help of the developers, it starts making something which the creators themselves hadn’t even thought of. In that case, a pertinent question arises – would the owner of the company be credited as songwriter for perpetuity for every piece of music coming out of Endel? If coders and engineers are credited as composers and the use of AI will only increase, at what point of time will the majority of song writers consist of coders rather than actual musicians? Attributing authorship to AI also leads to the problem of who will be liable in case of infringement. For instance, if a software studies Beyonce’s music and creates something which infringes the original work and the authorship has been attributed to the software itself, then who would the artists like Beyonce or the record labels holding the title to her music look to sue? The engineers can argue that as the creation of the song did not require any inputs from their end and thus question how they can be held liable. Thus, AI is slowly moving away from being just a tool to create art but something capable of making independent creative decisions. For AI to claim authorship it needs to be determined whether it can create original and creative work or not. Under Section 13 of the Copyright Act, 1957 (“Act”), the work needs to be original for it to be protected as a copyright work. Courts have come up with certain tests to decide whether something can be protectable as there is no definition of the word ‘original’ in the Act. If the work was created using skill and labor (Sweat of the Brow doctrine) [Feist Publications, Inc. v. Rural telephone Service Co., 499 U.S. 340 (1991)] If the work involves some form of creativity (modicum of creativity doctrine) [Eastern Book Company v. D.B Modak, (2008) 1 SCC 1] If the AI is to be able to claim authorship over any art, it would have to pass through the above mentioned tests. Although so far, any AI software mostly works on the information already available to it, it can be argued that it merely compiles different sounds and information (although philosophically it can be argued that any music or art has been inspired by some preexisting art). Even if AI is merely compiling rather than creating it, it was decided in Eastern Book Company & Ors vs D.B. Modak & Anr. (2008) 1 SCC 1) that compilation works can also be copyrighted if it is shown that it involved some skill and judgment. Most of the music coming out today involves, to a large extent, compilation of different samples and sounds to create something new. If any software is doing the same, it does require some creativity and judgement to make something which sounds new from pre-existing pre-sets. In countries like Australia (Acohs Pty Ltd v Ycorp Pty Ltd [2012] FCAFC 16), and in Europe (C-5/08 Infopaq International A/S v Danske Dagbaldes Forening) it has been stated multiple times that only a human can own a copyright. Similarly, it was recently decided by the US Courts in Naruto v. Slator that a monkey or any other animal cannot sue for infringement of copyright and therefore cannot own a copyright even though they have a constitutional standing. Although no such statement has been made against a software, but it would be hard to argue in case of software when it has been refused for a monkey. For an AI to claim authorship or to own a copyright, it would have to be recognized as a separate legal entity or a legal person. Further, complications arise in terms of infringement by an AI. Under Section 51 of the Act, only a ‘person’ can infringe copyright and as an AI is not yet recognized as a separate legal entity it would create problems for fixing liability on a particular person, considering the particular software did not require any human intervention for creating that material. Under the Act, there are certain rights which are attributed to an author which would lead to further complications in case of an AI claiming authorship. For instance, Section 17 states that an author is the first owner of the copyright and therefore can transfer the ownership of his or her work, this would become complicated as an AI cannot authorize or execute any transfer (yet). Furthermore, Section 57 pertaining to moral rights including rights to paternity and integrity, these rights may become redundant with an AI. An AI system may not be able to ascertain whether its honour or reputation has been affected or not. Another issue which might arise is with licensing its work, who will be responsible for determining the licensing deals and royalty structures? The Way Forward An AI generated work can be divided into two broad categories – works created by AI involving human input and works created without human input. In case of the former, the ownership of the work can be attributed to the person who manages the input and the authorship can be shared by the AI as well as the person. In case of the latter where AI works independently, then the authorship can be solely attributed to the AI, but the ownership can be attributed to the person who created the system or the company which owns the system. In such a way, in case of infringement, there will be a clear entity for people to go after. For this to happen, the Act will have to recognize AI as a separate entity or the work being created by an AI will have to be classified differently. It can be argued that the work created independently by AI can be given authorship as any AI (working at the moment) operates based on certain parameters, codes and previous information provided by the developer, as the system evolves it creates new work based on those parameters and information even if the work involved compilation instead of pure creation it involves a certain level of skill, judgment and creativity to come up with something new. No legal system in the world at the moment is equipped well enough to tackle the issue of AI creating work independently without human input. In countries like Australia, Spain and Germany, it has been briefly discussed to classify all the art created independently by any AI as open-source as no human factor is involved in any of those pieces of art. But, this leads to another problem, as why would investors and corporations develop some program if anything created by them belongs to the public domain? The world of AI is changing and evolving every day and new technologies, which felt like science fiction a few years back, are now a reality. Slowly, in almost every industry, the culture is shifting towards works created by AI in some form or the other and the legal discourse needs to appropriately move forward to create a balance of rights and liabilities related to the work created by AI. Also see our ongoing ‘AI and Authorship’ series: “The Messiah or the Mirage: Analysing Shenzen Tencent Vs Shanghai Yinxun’s Contribution to the Discourse on AI and Authorship” by Aditya Krishna. “Yet Another Paradox of Schrödinger’s Cat: India and the Discourse on AI and Authorship” by Aditya Krishna. *Anunay Kumar is a 4th-year law student at O.P. Jindal University and it was during the lockdown that he got interested in the field of IPR and decided to pursue it as his specialization