Category Archives: Commercial Law

A Primer On Spotting IP Issues Associated with Social Media Websites and Content

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By Charles Macedo, Partner at Amster, Rothstein & Ebenstein LLP

Most businesspeople and generalists understand that social media can be an important but risky part of doing business. This article seeks to identify how to spot potential intellectual property law issues associated with social media websites and content that can arise for a company.

I. Common Aspects of Social Media Websites

There are certain fundamental aspects that internet sites (whether they be social media websites or any other kind) have in common.

First, an internet site resides at a domain name or Uniform Resource Locator (URL). The domain name or URL is like the street address of a website. Social media websites such as Facebook and Twitter will also have specific URL pages for specific users.

Social media may be integrated into company websites directly by allowing for users of the websites to comment or share information in response to postings on the websites (like blogs) or products offered for sale (like product reviews or commentaries). Social media may also be integrated in less direct fashions, such as through sharing links which allow a user to tell his or her friends on a social media website like Facebook that the user “likes” the product, article or website, or by providing a link in a “tweet” on Twitter.

Websites are used for the sale of products, content or the display of other kinds of information.

In addition to merely displaying data or other information in response to an inquiry, websites can also obtain, process, reformat and/or display data obtained from other sources. For example, the US Patent and Trademark Office provides text and image versions of US patents at its website, http://www.uspto.gov. Other websites may use this same information and reformulate the data (sometimes along with other data) in different forms, such as at http://www.google.com/patents and http://www.pat2pdf.org.

All of these types of websites can create intellectual property rights and potentially infringe upon others’ intellectual property rights.

II. Relevant Intellectual Property Laws

Chart: Types of Intellectual Property Assets

Intellectual property is considered property of the mind. Expressions of ideas, identifying information, inventions and business relationships can all be protected (and potentially infringed) through different kinds of intellectual property laws and related legal theories.

  • Copyright law protects original expressions of ideas from being copied by others.
  • Trademark law protects identifying information (e.g., a company’s brand) from being used in a confusingly similar manner by more than one company in a related line of business.
  • Patent law protects new, useful and nonobvious ideas from being used by others.
  • Business Torts law protects against wrongful conduct such as misappropriating another’s property, unfairly competing, or tortiously interfering with someone else’s business expectation or contract.
  • Trade Secret law allows for the protection of secret formulae, patterns, or compilations of information.
  • Contract law protects business partners as the parties to the contact agree.

Social media websites and content can potentially impact a company with respect to each of these areas of intellectual property law.

A. Copyright Law

Copyright law provides legal protection for original expressions of ideas being reproduced without authorisation. Copyright protection covers a large variety of original works, including:

  • “literary works,” like books and magazines, computer software and related works;
  • “musical works,” like songs and the accompanying lyrics;
  • “dramatic works,” like plays;
  • “pantomimes and choreographic works,” like dance movements and ballets;
  • “pictorial, graphic, and sculptural works,” like paintings, pictures, jewelry, toys and statues;
  • “motion pictures and other audiovisual works,” including movies, television broadcasts and DVDs;
  • “sound recordings,” including MP3 files;
  • “architectural works,” like designs for buildings; and
  • original compilations of data.

On the internet, copyright law can be used to protect original content, articles, data compilations and other information on a website. Publication of content on a company’s website or other websites can be protected by copyright law, but failure to timely register a claim to a copyright can limit the company’s damages.

Similarly, copyright law can potentially be used to prevent others from data mining content from a company’s website and using its original content without permission.

In particular, manipulating, parsing, reorganising, and merging public data with other data can lead to potentially copyrightable data. Copyright law can be an effective way to protect a company’s data and other original content.

In addition, if careful analysis is not done upfront on how a website obtains, manipulates and presents data and other information, that website can be the subject of a copyright infringement action by others. Here again, this is an area where consulting counsel in the first instance can save a company a lot of expense and aggravation over the long haul.

In the context of social media websites, blog postings, answers to requests, “tweets”, pictures taken or created and posted on a user’s page, or other content driven expression are all potentially copyrightable. A company needs to be careful how it, its employees and others post the company’s content and content of others.

Some social media websites claim copyright ownership over all items posted on their websites. Other social media websites recognise that the copyright remains with the author (presumably the individual or company posting the content at issue). Before a company allows for its information to be posted on social media websites, it should make sure to carefully review the terms and conditions of such websites to make sure that the company is not unwittingly giving up its copyrights to the content.

Companies also need to be careful of posting the copyrighted content of others without permission. Clearing rights to post others’ copyrighted material is an important step for any company.

Ownership of copyrights is also a difficult area for many people to fully understand. In preparing copyright applications, companies are often lulled into thinking that because the form appears so simple, they do not need expert advice on how to fill it out. However, this is an instance where the apparent simplicity can lead to disastrous results. See, e.g., “Joint Authorship of Doo-Wop Song Found Based on Disputed 10 per cent Contribution to Lyrics” [pdf], JOURNAL OF INTELLECTUAL PROPERTY LAW & PRACTICE, November 1, 2009.

Identifying authors of a particular work and source materials from which a work was derived can be complicated. Also, making sure that a particular work made either with the assistance of or by another is a “work for hire” and/or properly assigned is another area where errors often occur. Many purported copyright owners do not appreciate that not every kind of “work” qualifies as a “work for hire”.

Making sure appropriate contracts are entered into when a copyrightable work is being prepared is important, and it is worth consulting a trained copyright lawyer in the first instance.

B. Trademark Law

In general, trademarks are used to identify a single source of products and services sold on a website.

A trademark is a symbol, a word, or another readily recognisable item, such as a brief musical snippet, that uniquely identifies the source or origin of goods. In other words, a trademark identifies where a particular product comes from.
Trademark law protects against likelihood of confusion; that is, whether consumers are likely to think that the sources of two goods or services are the same.

Web pages commonly use word or logo forms of trademarks. In the multimedia world that the internet has become, it is not surprising to also visit websites where sound marks (e.g., “Hedwig’s Theme” from the Harry Potter movie playing on a Harry Potter website) are used to identify the source of the website.

Similarly, domain names for websites can also be based on a company’s trademark, e.g., http:/www.amazon.com, http://www.panasonic.com, http://www.jvc.com, etc.

In social media, not only is a company’s trademark used in the main URL address, such as the use by Facebook of its trademark in its URL address http://www.facebook.com, but users’ trademarks may be used to identify specific user pages on such social media websites. For example, Starbucks has a Facebook page to advertise a specific coffee product.

On the internet, trademark law can potentially be used to protect competitors from selling goods or services with confusingly similar marks. It may also be used to prevent the use by others of domain names and user pages that incorporate a company’s trademarks and search engines and other software that use a company’s trademarks to divert potential customers to competitors’ websites, products or services.

These are important business tools that cannot be ignored when operating a business on the internet. The role of social media in this potential attraction or diversion is increasing every day as more companies create “fan” pages, social media websites create and implement more widgets to interconnect with other web outlets, and more and more opportunities to use trademarks in URL addresses are created, with not only additional high level domain names (.com, .org, .biz, .net, .tv, etc.), but also with individual user pages on social media and other websites.

To start with, as with other businesses, the selection and use of appropriate trademarks for an internet-based business is quite important. Selection of certain kinds of marks with popular descriptive terms in them can direct the flow of internet traffic to a company’s website.

However, adoption of that same kind of trademark can also result in consumers, who are looking for that company’s products or services, being diverted to a competitor’s website in a fair and reasonable manner.
Consider, for example, one of the leading “pop-up” cases from the Second Circuit involving the mark “1-800-Contacts”. On one hand, whenever a consumer searches for “contacts,” a website containing this mark will be returned. Thus, many potential internet consumers may potentially be driven to the website.

On the other hand, when consumers search for the mark “1-800-Contacts,” consumers may be diverted to a competitor’s website since search engines can sell the key word “contacts” to competitors with minimal risk of being accused of trademark infringement.

Thus, while selecting a mark that includes the product being offered as part of that mark may direct traffic to the website, there may also be great difficulty in trying to stop others from redirecting traffic to their websites.

Another important consideration at the time of selecting a mark is whether others are already using the mark. Thus, it is prudent to do a “clearance search” prior to implementing a new mark.

Trademark law can also be useful in preventing others from adopting domain names which incorporate a company’s registered trademark. These third party domain names using a company’s marks can be harmful to its reputation (depending upon their content) or can divert potential business leads away from the company.

While procedures like lawsuits and ICANN proceedings exist to force third parties that misappropriate a company’s registered trademarks to return the domain names to the company, the easiest way to avoid such costly procedures is for the company to register the various, obvious derivatives of its marks to be directed to its website in the first instance.

Spending fifty dollars today can save a company thousands of dollars in the future. In order to ensure that a company’s trademarks remain enforceable, best practices dictate that a proper system of monitoring and enforcing those trademarks be set up and maintained. Such a system typically includes the use of watch services to review filings with the US Patent and Trademark Office, periodic internet searches, following up with cease and desist letters, and if necessary, enforcement proceedings. Using “alerts” from search engines can also help identify unauthorized use of a company’s trademark on the internet.

For social media websites and other internet venues, the role of whose duty it is to police and enforce against violations differs internationally, as evidenced by the seemingly contradictory results in the U.S. and France in actions brought against eBay for its alleged failings in protecting against the sale of counterfeit items. See, e.g., eBay: A Tale of Two Defenses [pdf], IP Law360, August 22, 2008.

Companies should set up appropriate policing mechanisms to see how their important trademarks are used on e-commerce and social media websites, and when appropriate follow such websites notice and take down procedures to protect against abuses.

While these procedures may at times seem like expensive diversions to a company, the cost of not instituting such procedures can be diverted sales, brand tarnishment, and potentially a loss of trademark rights.

C. Patent Law

Since at least the State Street decision in 1998, patent protection has been important with respect to the internet. Although over the past few years, critics have sought to limit so-called “business method” patents, the recent Supreme Court decision in Bilski v. Kappos has confirmed that such patents are here to stay, and thus cannot be ignored as a class.

Patents are issued for a limited time (20 years from earliest filing date) for new, useful and non-obvious ideas to the first and true inventor.

While patent offices around the world are struggling with this issue, at least in the United States, novel and non-obvious techniques for manipulating data can potentially be subject to patent protection. Similarly, in the United States, other novel and non-obvious business method techniques can also potentially be subject to patent protection. In the context of the internet in particular, at least in the United States, patents can be used to prevent others from copying novel and non-obvious aspects of a website such as:

  • How data is accessed and manipulated;
  • Novel and nonobvious functions of one’s software;
  • New business methods implemented by one’s website;
  • New functionality of one’s software programs;
  • New techniques used to block misappropriation of one’s data.

Because of the difficulties that the US Patent and Trademark Office has had in grappling with manpower issues, confidential subject matter and the flood of applications in this area, it should be recognized upfront that obtaining patents in this area can be more costly, time-consuming and difficult than for patents in other, more traditional subject matters.

With respect to social media websites, patents can potentially cover ways that social media websites operate, ways that a company’s website interacts with a social media website such as through advertisements or linkages, or other operability that may be developed in the future.

As new business models are developed and implemented, patent protection for new and non-obvious practical applications and particular implementations are being sought and obtained, and will be the subject of future litigations in years to come.

D. Business Torts Law

In addition to federal trademark law, there are a host of related state law causes of action (e.g., unfair competition, tortious interference, trespass to chattels, misappropriation, etc.) that can be used to address trademark-like injuries.

Unfair competition is a flexible cause of action directed to address unfair or fraudulent business practices. A cause for unfair competition can potentially address a wide range of conduct by competitors that affects a company’s business.

Examples of cases in which unfair competition claims have been invoked include false or deceptive advertisements, misstatements about a competitor’s products, and other false and misleading statements which injure a business or its reputation.

When actual or potential customers are diverted by improper means from a company’s website, a cause of action for tortious interference with contract and/or tortious interference with prospective business relations may be appropriate. However, since this is a state law claim, it important to make sure to consider the correct law and the scope of potential defences available under that law.

Tortious interference claims can address the circumstances where a company’s trademarks are misused by other websites and cause inappropriate diversion of customers or prospective customers from the company’s website.

Conversion and misappropriation claims apply when property is taken. An interesting legal theory exists whereby a misappropriation claim may be present when goodwill is taken by improper acts, such as adopting another’s business name in a jurisdiction where that entity does not do business, but nonetheless has fame and goodwill based on that entity’s operation in other venues.

Trespass to chattel claims apply when someone improperly intrudes upon another’s property. These types of causes of action have been used, for example, to stop third parties from robot mining data from a website.

E. Trade Secret Law

Trade secret law protects a secret formula, pattern or compilation of information. One of the most famous trade secrets is Coca Cola’s secret formula, or the Colonel’s secret recipe for Kentucky Fried Chicken. Other examples of trade secrets can include a secret manufacturing process, a list of customers or trade routes who purchase or would likely be interested in purchasing a particular product or service, or the source code for a computer program.

Most companies protect some aspect of their businesses using trade secret protections. Some are better than others at doing so.

Social media and the internet can put at risk a company’s trade secrets. Since the sine qua non of a trade secret is that it is kept secret, the speed and ease in which information can be rapidly (and permanently) distributed with a click of a button in social media and internet poses a clear risk for any company seeking to maintain a trade secret. A simple posting of a company’s secret information can destroy the secret and leave that information to be available to anyone.

Consider, for a second, a company that considers its customer list to be a trade secret and seeks to protect such information. A salesperson who identifies those customers as “friends” on Facebook, or “connections” on LinkedIn, or some other similar status on another social media website, could destroy the secret nature of such a list. It also can lead to that salesperson, in essence, appropriating that information should he or she leave to go to work for a competitor.

F. Contract Law

Contract law can be used to fill gaps in intellectual property law, and obtain protection that might not otherwise be clearly available.

The best time to work out the scope of rights with a business partner is at the beginning of the relationship. At that time, parties are more willing to give and take with each other since the prospect of a successful and profitable business relationship is around the corner. Thus, at that time, provisions can be included in agreements that help ensure that intellectual property will be recognized and respected.

However, care must be taken on how the contract clauses are drafted in order to avoid the risk of such clauses becoming unenforceable.

Arm’s length agreements can be useful ways of establishing royalty rates for intellectual property. Care must be taken in specifying what is being paid for pursuant to the agreement, such as the services, goods, rights to use intellectual property, etc.

Non-compete clauses, so long as properly drafted considering appropriate state law, can provide protection that other areas of intellectual property law might not otherwise provide. For example, non-compete clauses can protect a company from key employees leaving and stealing business or trade secrets. Again, care must be taken to come within the parameters of the particular state law that governs the contract.

Agreements which license rights to use a company’s trademarks can include remedies that are broader than the law might otherwise provide. Consequently, the uses that a company tolerates by agreement can affect the uses that the company can object to in future disputes. The failure to include certain necessary clauses in trademark licenses can have adverse results on the enforceability of such marks in future contracts.

Shrink wrap/click through agreements can be used to prevent misuse of a company’s data by users. However, enforceability of such agreements may be an issue, depending upon the terms, conditions, choice of law and method and document by which the user acknowledges acceptance.

Contracts can also be used to fill other gaps that other forms of intellectual property law might otherwise leave open.

III. Conclusion

For internet business, like other business, the use of intellectual property law needs to be carefully considered.

A strategic plan should be developed on how to identify a company’s intellectual property, turn it into a tangible asset and properly enforce and protect it.


(This post is by Charles R. Macedo and was has been reproduced from IP Watch where it was  published under a Creative Commons BY-NC-ND licence.)

Ghost-writing, Plagiarism and Copyright

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Ghost writing is intriguing because it exists in a gray area. It is clearly a form of plagiarism, although it is supposedly plagiarism with the consent of the actual author (the ghost writer) of the work. Perhaps that makes it morally acceptable? In other words, does the consent of the actual author make it acceptable for the ostensible author (the person commissioning the work) to appropriate authorship of the work? It is, after all, a contractual relationship, in most cases, and one of the essential elements of a contract it be entered into voluntarily by the parties. Therefore, it could be argued, that if the actual author consented to having his work published as the work of the ostensible author, there can be no case of plagiarism really having occurred.

However, if one were to look at the contexts within which ghost-writing contracts are generally signed, it is apparent that as a general rule, the ghost-writer is a person whose socio-economic status is lower than that of the ostensible author. Whether or not there can be true consent in such circumstances is debatable. While there may be no coercion in the legal sense of the word which would invalidate any specific contract, the broader picture may clearly demonstrate that socio-economic constraints cause actual authors to consent to the publication of their work under the names of other persons. As such, it may be possible to consider ghost-writing contracts to be unethical despite being legal.

Further, leaving aside arrangements which involve concrete ghost-writing agreements, it is also pertinent to note that the line between editing and ghost-writing is sometimes extremely thin, as many editors would be able to attest to. This is because when “authors” produce badly written texts those texts may require not merely editing but re-writing before they are suitable for publication. In most cases, the editor would not even be credited as a joint author despite possibly having entirely written the final text. This is especially true if the ostensible author happens to be a well-known person, and the editor is not.

Another route through which an actual author may become a ghost writer is when he is a person working within an organisation, possibly as an assistant of a researcher, or at some other analogous lower-rung position (in comparison to the ostensible author). For example, describing the process through which a person could besome a ghost-writer, Debora Weber-Wulff says, “First an assistant prepares some material. Then something is written by an assistant and rewritten by the researcher before publishing. Then under the pressure to publish more and more and more a text gets passed through without change, but the true author is kept hidden, and the researcher does not even find anything wrong with this.”

As such, ghost-writing arrangements may not involve express contracts, and could well involve merely implicit consent, which consent may be forced. That is to say that the actual author may be required by circumstances to consent to the appropriation of his work by the ostensible author. Consent may not be voluntary, or for that matter, even exist. It may simply be assumed, and the actual author may not be in a position to complain about the loss of his right to be attributed for his work. In such circumstances, it is clear that there is no true consent, and thus, without the circumstances being changed, it is unlikely that it would be possible to consider ghost-writing to be above the board from either an ethical or legal point of view.

Coming back to express ghost-writing agreements though, leaving aside the issue of consent, it is unclear what their legal position would be under Indian law. This is because under the Copyright Act, the first owner of a copyrighted work is determined according to the provisions of Section 17. Although this Section contemplates works made for hire (or commissioned works), under Indian copyright law, the work-for-hire doctrine as it exists in Title 17 of the United States Code does not exist. In India, the person commissioning a work may become its first owner but the commissioner cannot become the “first author”.

Therefore, the actual author or the ghost writer would continue to be the author of the work. Under Section 57 of the Copyright Act, the author of a work has the right to be attributed as the author of his work. It is unclear whether an author may waive the right to attribution as contemplated by Section 57. Relying on the 2006 Centrotrade judgment of the Supreme Court, it may be argued that the right to attribution can be waived by an author since this judgement states: “A person may waive his right. Such waiver of right is permissible even in relation to a benefit conferred under the law. But it is trite that no right can be waived where public policy or public interest is involved.”

However, this judgement does not pertain to copyright, much less to Section 57 rights. As far as moral rights are concerned, it would be possible to argue that they cannot be waived, and that any supposed waiver of moral rights is invalid. The crux of the matter is that the question of the waiver of moral rights has not specifically been determined by an Indian court, and the statute is silent on the issue. As such, the possibility of the waiver of the moral right to attribution exists in an extremely gray area of copyright law. Should it transpire that the moral right of an author to attribution cannot be waived, it would appear that ghost-writing contracts would be ultra vires the Copyright Act, and thus be invalid under Indian law.

Leaving aside the question of validity of ghost-writing agreements, there is also the question of public perception. Ghost-writing could be considered to be fraud in the popular sense of the word since the intention of a ghost-writing arrangement is to blind the audience to the fact that the ghost-written work is not a work which has been written by its ostensible author. To some, that in itself, would make ghost-writing arrangements unethical, particularly considering that ghost-writing arrangements generally serve to increase the “prestige” of the (usually “more powerful”) ostensible author by misappropriating the “prestige” which should have been accorded to the actual author (who has comparatively less “power”).

(This article is by Nandita Saikia and was first published at LawMatters.in.)

Case Citation: Centrotrade Minerals and Metal. Inc. v. Hindustan Copper Limited; (2006) 11 SCC 245

Wherever, Whenever, Whatever

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Lunar libration

It isn’t unusual to have a contract which assigns “all rights in perpetuity throughout the world”. Obtaining worldwide rights isn’t enough to satisfy some entities though and they’ve begun to have contracts drafted in which rights are assigned “throughout the universe”.

The phrase “throughout the universe” isn’t commonly used in India but seems to be becoming relatively common in some parts of the world. It seemed like a massive overkill, so the first time I saw it (in a Publishing Agreement), I discussed it with a lawyer who gave me a rather strange look and then told me that she usually defines the territories to which a contract pertains in terms of countries or continents, adding that that should pretty much cover it.

A recent article in the WSJ – Lawyerese Goes Galactic as Contracts Try to Master the Universe – might explain the phenomenon though: “Paranoia is Paramount”. So, when you’re trying to ensure that you’ve covered every possible base, you define your territory as “the Universe”. And you might also come up with other manifestations of Paranoia by using phrases like “from the beginning to Time”.

Such overkills are sometimes defended by saying that they are “efficient and reliable” methods to ensure that there are no limitations or restrictions. However, personally, I think I’d prefer to use terms like “without territorial limitations” than to use futuristic terms like “the Universe” in defining a territory.

Of course, “without territorial limitations” has its limitations too: would without territorial limitation refer to Earth alone and not apply to, well, outer space? And if one were to use a phrase such as “all over the Earth and in space”, would that mean that the rights granted in a contract could not be exercised on Neptune because it may not technically be “space” since it is an “ice giant”? If a lawyer suspects that these are issues which may cause litigation in future, he would probably do well to define the territory as “the Universe”.

However, considering that we’re probably nowhere near conducting inter-galactic commerce, or even inter-planetary commerce within our own solar system, it would probably not be necessary to define a contractual territory so broadly. That being said, today, there are often situations in which parties to contracts find themselves embroiled in disputes because contracts which they signed thirty years ago did not take into consideration the development of the Internet or the creation of a number of “new” methods to exploit various rights such exploitation through DVDs with reference to the copyright in Films. When it comes to IP contacts, it’s now almost standard practice to say that the rights granted “may be exploited using any technology currently known or developed in the future”.

Talking about the Universe does nothing beyond taking into account massive technological advances that would change the territory in which rights could be exploited. After all, the possibility of there being human settlements on the far side of the moon in less than a century’s time may not be nil.

Perhaps using terms which now seem futuristic isn’t about Paranoia but about Prudence. Who knows? Just maybe, the world (?) portrayed in Star Trek will be reality in the not too distant future.

Addendum: After all, scientists already seem to have found water on the moon. And there are debates beginning to emerge about whether the resources on the moon can be exploited by any country — the Treaty of the Moon has been ratified by less than two dozen States, and none is them is really into exploring space. As such, it isn’t the most effective treaty which has ever been signed.

(This article is by Nandita Saikia and was first published at LawMatters.in.)

Reciprocal Common Transport Agreement

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The Governments of Delhi, Haryana, Rajasthan, and Uttar Pradesh published a transport agreement for the unrestricted movement of contract carriages in the National Capital Region on December 11, 2008
to facilitate development in the region.

The agreement which was entered into on October 14, 2008 could not be published earlier because of the restrictions imposed by the election code of conduct. It is restricted to contract carriages which run on clean fuel. It lays down provisions regarding the issue of permits and connected matters. It is valid for a period of ten years although it may be reviewed after five years.

Permits for Autorickshaws, Taxis and Motor Cabs

These non-temporary permits are to enable autorickshaws, motor cabs and taxis which are registered in the NCR to move unrestricted within the region. Permit charges are to be paid only in the State of
registration.

The vehicles are to be given a colour code and logos so that they are easily recognised. Their exact number is to be dependant on the demand/potential and on the relaxation of the ceiling number of autos by the Supreme Court.

Permits for Other Vehicles

Contract carriage permits can also be obtained for other vehicles such as the buses of educational institutes used only to transport students and staff. These too must be registered in the NCR. They will have colour codes and logos, and be subject to speed controlled devices.

Temporary Permits

The Transport Authority of any State can issue a Temporary Permit without the concurrence of other States according to the need of commuters or passengers. The permits must mention the route and the passengers of the vehicles concerned, and the vehicles themselves are subject to speed controlled devices.

Taxation

Although the agreement speaks of a tax regime, it provides no details further than saying that single point (passenger) and uniform tax applies to all vehicles with contract carriage permits.

Sign Only What You Mean

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When was the last time you signed a contract without reading it?

If you think you’ve never done that, have you ever read the terms and conditions which are in a little scrolly box before you’ve signed up for an eMail account? Do you know what Orkuts terms of service are? Or for that matter Facebook’s or Twitter’s are?

Whether or not one thinks of it, they are legally binding contracts. One recent example where such a contract was used against someone was in Megan Meier’s suicide case. Megan killed herself at the age of thirteen after being rejected online by a person she thought was a sixteen year old boy. That person, however, turned out to be Lori Drew, the mother of one of her friends.

Strangely enough, there were no laws which could readily be applied to prosecute the woman so she was ultimately charged with violating MySpace’s terms of use which, among other things, do not allow ‘promoting information users know to be false or misleading, or soliciting personal information from anyone under the age of 18 or using information gathered from the Web site to ‘harass, abuse or harm other people’.’

Presumably Ms Drew had no idea of what the terms of service were although in all probability, knowing them would not have stopped her from acting in the way she did.

The point, though, is not merely that she didn’t know what she signed up for but that the contract was treated as being binding on her and was given the ‘force of law’.

This is, by no stretch of the imagination, the only case in which a contract has been given such force. In the recent case of the overweight air hostesses the single judge bench of the Delhi High Court described the employment contract the air hostesses has signed as their nemesis. And in that case, it appears that the air hostesses did in fact know what they had signed.

Nonetheless, despite knowing what the pitfalls of signing agreements without knowing what their contents are or signing agreements without wanting to be bound by them, it’s something most people do without thinking twice.

Think of all the times people have signed loan agreements which say that they will repay money at 20% interest just because their money lender says, “But I’ll charge you only 14%, just let this be there on paper.”

The problem with just letting things be on paper is that if you sign them, they will bind you. It doesn’t matter if you have a separate oral agreement with different terms. It doesn’t matter if the other party claims that he won’t enforce the terms on paper.

The law of evidence very clearly says that oral evidence is excluded by the existence of documentary evidence. There are a few exceptions and provisos but they apply so rarely that it’s hardly worth taking them into consideration at all. For example, if you do not write your whole agreement down, while interpreting it and deciding whether or not you can give oral evidence about a supplementary oral agreement which you have not written down and which does not go against anything you have written down, the court will take into consideration ‘the degree of formality’ of the contract i.e. basically, who drafted it. And the contract will be interpreted differently depending on whether it was drafted by two laymen over coffee or by two dozen overpaid lawyers.

As a general rule, the only thing which a court will take into consideration is your written contract.

The moral of the story: sign what you mean, and mean what you sign.

IT Auction Sales Sacrosant

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In an appeal filed by Janatha Textiles, a partnership firm of Radhey Shyam Modi, Pawan Kumar Modi, Padmadevi Modi and Indira Chirmar, a firm that had been in tax arrears, the Supreme Court not only said that the IT department could attach the property of defaulters to recover the debt but also that if it sold the property, the sales were sacrosanct.

A Bench of the Supreme Court comprising Justices Ashok Bhan and Dalveer Bhandari held that auction sales by the Income Tax Department could not be interfered with unless there were grave irregularities in the process of sale. It said that it was necessary to extend such protection to such sales to ensure that auctioned property fetched the market value or fair price of the property.

Auctions are usually governed by Sections 64 and 20 of the Sales of Goods Act, and relevant case law. There are also provisions in the Port Trust Act and the Code of Civil Procedure which deal with certain kinds of auctions although the provisions in these two statues are not universally applicable.

In addition to statutory provisions, the terms of the auction concerned also play a role of vital importance. Auctions are merely a kind of sale, and the terms of the auction are a reflection of the intention or to parties. Although goods are usually sold by an auctioneer on behalf of the owner, there is nothing to stop a person from selling his own goods in an auction.

An auction is not in itself an offer, it is merely an invitation to treat. In other words, each bid made at an auction is an offer and it is open to the auctioneer to accept or reject that offer provided that he acts in accordance with the terms of the auction. The general principle of the auction is, however, that every higher bid supersedes the previous bid.

The concept of an auction Section 64 of the Sale of Goods Act is a guiding factor on the principles of an auction. It says:

In the case of sale by auction–

(1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale;

(2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid;

(3) a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction;

(4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer;

(5) the sale may be notified to be subject to a reserved or upset price;

(6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.

The section similar to Section 58 of the English Act, and can therefore be construed in similar terms. It is however important to bear in mind that the statutory provisions contained in Section 64 may be subject to a contract to the contrary. This effectively means that it would be the terms of the auction concerned which would prevail.

Reference materials and relevant cases:

  1. Pollock and Mulla, The Sale of Goods Act 
  2. (1869) LR 9 Eq 60
  3. [1895] All. E.R (Rep) 829
  4. [1907] 2 K.B. 1
  5. AIR 1961 Cal 54
  6. AIR 1961 MP 274
  7. [1963] Suppl. 2 S.C.R. 608
  8. Ouchterloney Valley Estates Ltd. v. State of Kerala (23.10.1964 – SC)
  9. AIR 1980 SC 1468
  10. AIR 1989 All 64
  11. AIR 1992 MP 250
  12. 2005(190)ELT161(Cal) 

The Case of the Overweight Air Hostesses

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Four air hostesses, Sheela Joshi, Shivani Mathur, Anne Patricia Dyook and Kiran Chaudhary filed writ petitions against Indian Airlines Ltd. which had grounded them for being overweight and told them that they would be treated on leave if there is any to their credit or otherwise on ‘leave without pay’ till they reduced their body weight so that it was within limits prescribed by the airline.

The airhostesses said that this order was unreasonable, unfair, without sanction of law and contrary to the Indian Airlines Employees Service Regulations. They also viewed it as an affront to their dignity, honour and womanhood.

The airline didn’t agree.

The appointment letters of the airhostesses inter alia said:

8. While undergoing Training in the Indian Airlines and the appointment as Air-Hostesses, you will be governed by the Indian Airlines Service Regulations applicable to the Flying Crew and Standing Orders concerning discipline and appeals as framed/ amended by Indian Airlines from time to time.
9. During the training period and on appointment as Air Hostesses, your services are liable to be terminated under the following circumstances
I) in the event of your getting married before the specified period
II) If you (a) fail to maintain vision without Glasses
(b) do not maintain weight within the prescribed limits
(c) develop air sickness.

On May 31, 2007, Justice Rekha Sharma of the High Court of Delhi held that they had no case. She said that their appointment letters were their nemesis; they agreed to the terms contained in them.

She also observed, “[I]t is not without rationale that the flying Crew has been subjected to certain standards of height and weight. Their job profile demands it. The aircrafts fly at a very high altitude. Quite often emergency situations arise because of air turbulence or on account of aircraft developing snag. The Cabin Crew including the Air Hostess are expected to handle the situation deftly, with alacrity and presence of mind. All this will be possible only if the Cabin Crew possesses the highest order of physical and mental fitness. And let us not forget that in this era of cut throat competition no Airlines can afford to remain lax in any department whatsoever, be it the personality of its crew members, their physical fitness in all respects or the air worthiness of the air craft or in relation to other facilities such as catering etc. If keeping in view this kind of job performance the Air Hostesses are asked to battle their bulge, control their girth and keep at desired level the affluence of their body weight as per the norms, it is not understood how it is in any way unfair, unreasonable and insulting to their womanhood. It is not the Air Hostesses alone which are put to these rigours. The other Members of the flying crew are also required to maintain a particular weight standard. If by perseverance the snails could reach the ark, why can’t these worthy ladies stand on and turn the scale.”

In 2008, a Division Bench of the High Court of Delhi comprising Justices A.K. Sikri and J.R. Midha affirmed her decision.