Minimum Contact Theory in IPR

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Introduction

Intellectual property can be characterized as the property in ideas or their expression. It is a creation of the mind, for example, a technological innovation, a poem, or a design. It protects the rights of individuals and businesses who have transformed their ideas into property by granting rights to the owners of those properties. The intellectual property rights (IPR) are intangible in nature and gives exclusive rights to inventor or creator for their valuable invention or creation. In the present scenario of globalisation, IPR is the focal point in global trade practices and livelihood across the world. 

These rights boost the innovative environment by giving recognition and economic benefits to the creator or inventor whereas the lack of IPR awareness and its ineffective implementation may hamper the economic, technical and societal developments of a nation. Hence dissemination of IPR knowledge and its appropriate implementation is the utmost requirement for any nation.

The Minimum Contact theory comes into picture when either or both of the parties seem to be outside the Court’s territorial jurisdiction. It is used as a method to establish the Court’s jurisdiction over the parties to a case by determining their quality and intensity of their contact i.e. services or transactions with the Forum State (Forum State is the State where the case has been instituted). As per Black’s Law Dictionary, (6th Ed.) p.790 In Personam Jurisdiction refers to the power which a court has over the defendant himself in contrast to the court’s power over the defendant’s interest in property (Quasi in rem) or power over the property itself (in rem). The Supreme Court observed in (India TV) Independent News Service Pvt. Limited V. India Broadcast Live LLC and Ors., (2007) ILR 2 Delhi 1231 that, a court that lacks personal jurisdiction is without power to issue an in personam judgment i.e. judgment against the individual or corporation.

In India, it has been incorporated by giving a liberal interpretation to Section 20(c) of the Code of Civil Procedure, to expand jurisdiction especially in cases of trademark infringement, passing off of trademarks, domain name infringements.

Origin of the Theory

Earlier in America, the concept of personal jurisdiction, fairness and due process of law were not in concordance. It was observed in Burnham v. Superior Court, 495 U.S. 604 (1990), that, “Non-residents could be brought to the court while they were in State, however incidental or brief the presence might be”. The modern jurisdictional analysis marked its advent, with the International Shoe v. Washington326 U.S. 310, 1945 case. Assimilating fair play and substantial justice in exercising personal jurisdiction by the courts. Incorporating the spirit of the Fourth and Fifteenth Amendments to the United States Constitution that talk about substantive due process and procedural due process, the core meaning of due process of law is to secure the principle of legality by ensuring that executive and judicial deprivations are grounded in valid legal authority.

In the famous International Shoe case, a suit to recover payments due to the unemployment fund by a Corporation which did not even have an office or shop in the State was questioned on the ground of personal jurisdiction. Service of process upon one of the corporation’s salesmen within the State, and notice being sent by registered mail to the corporation at its home office was challenged as not satisfying the requirements of due process. The Supreme Court of Washington in Pennoyer v. Neff, 95 U.S. 714, 95 U.S. 733, 1878 was of the view that the regular and systematic solicitation of orders in the state by appellant’s salesmen, resulting in a continuous flow of appellant’s product into the state, was sufficient to constitute doing business in the state so as to make appellant amenable to suit in its courts. Earlier the parties’ presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. Later a new position was developed in Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463 that, only due process is required, in order to subject a defendant to a judgment in personam, if such defendant is not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” Further, it held in the International Shoe case, that, to the extent that a corporation exercises the privilege of conducting activities within the State, it enjoys the benefits and protection of laws of the State and obligations arising out of these which require the Corporation to respond to a suit brought to enforce them can, in most instances, be held binding on it. Hence, the Corporation is bound by its ‘purposeful availability’ in that forum.

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Personal Jurisdiction

The Black’s Law Dictionary defines Personal Jurisdiction as “A court’s power to bring a person into its adjudicative power; jurisdiction over a defendant’s personal rights, rather than merely over property interests.” Personal jurisdiction concerns the power of a court to decide a case between the parties. Physical presence in a state is always a basis for personal jurisdiction. Physical presence in the forum state also satisfies the requirement of constitutional due process. Personal jurisdiction in the United States is based on the interaction between an affirmative, statutory or common-law source; law dictating the scope of the court’s jurisdiction; long-arm statutes and limitations imposed by constitutional due process rights. The Supreme Court in International Shoe v. Washington first adopted a new standard for jurisdiction over out of state residents articulating a triple test requirement: 

  1. the nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections, 
  2. the claim must be one which arises out of or results from the defendant’s forum-related activities, and  
  3. exercise of jurisdiction must be reasonable.

Constitutional due process is thus satisfied if the defendant, even if he is not present within the territory of the forum, has ‘minimum contacts’ with the forum state so that subjecting the defendant to suit in that state satisfies considerations of ‘fair play and substantial justice.’  Asahi In Metal Indus Co v Superior Court, 480 US 102, 107 S. Ct. 1026, 94 L. Ed. 2d 92 (1987) it was stated that ‘mere awareness’ is not sufficient to satisfy the test of minimum contacts.

In India, Personal Jurisdiction can be deducted from Section 2 of the Indian Penal Code, 1960, it  states that the provisions of the code are applicable to ‘every person’ who commits an act or omits to do an act within the territory of India which is in contravention to the provisions of the Act. In Indian TV Independent News Service Private Limited v. India broadcast live LLC and Ors. the court noticed the decision of a federal district court in Zippo Mfr. Co. v. Zippo, Inc. 952 F. Supp. 1119 (W.D Pa. 1997) and other judgments in the United States, cited before it. The court, speaking through another single judge, (Kaul J) held that: 

As regards to exercise of personal jurisdiction in cases involving internet activities, the position appears to be that mere ‘passive posting’ of a website does not give restriction to the court within whose jurisdiction the complainant company is present. Thus, personal jurisdiction cannot be exercised over non-residents merely because their website is accessible within the jurisdiction of the court. There has to be something more to indicate a purposeful direction of activity to form a state in a substantial way.”

Application of ‘Minimum Contact Theory’ in India

Businesses in India are expanding their horizons internationally and in consequence with that the use of Minimum Contact Theory is being used to enlarge the jurisdiction of Courts in cases of trademark infringement through domain name and in cases where there is involvement of some non-residents. In the case of (India TV) Independent News Service Pvt Limited Vs. India Broadcast Live LLC and Ors. (2007) ILR 2 Delhi 1231 and Banyan Tree Holding (P) Limited vs. A. Murali Krishna Reddy and Anr. 2010 (42) PTC 361 (Del), the court took reference from the foreign precedents like the Shoe case to provide the justification for exercising jurisdiction over the defendants. As jurisdiction in our courts is defined by territorial and pecuniary jurisdiction, a liberal interpretation of Section 20(c) of Code of Civil Procedure by the Courts allowed this.

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In the Banyan Tree case, it was held that, “creating a site, was like placing a product into the stream of commerce, which may be felt nationwide or even worldwide but, without more, it was not an act purposefully directed towards the forum state.” In Ballard v. Savage 65 F.3d 1495 (1995) it was held that  ‘Purposeful Availment’ means that it has to be actively intentional.  For the purpose of ensuring that this method of exercising jurisdiction did not violate the codified method of territorial jurisdiction, the Courts, in both of the above cases used Section 20(c) of the Code of Civil Procedure, i.e. the case can be instituted where the cause of action arises. Courts held that even if neither the plaintiff, nor the defendant were within the local jurisdiction of the Court where the case was instituted, but it was proved that the domains of the defendant were accessed by the people belonging to the plaintiff’s market under the impression of the defendant being the plaintiff, because of similar trademarks or domain names, then cause of action will deemed to have arisen in that market and the case could be instituted there. Mere avoidance to restrict the access of their sites outside the defendant’s local jurisdiction could not be an excuse if people would take services from it, therefore harming the other similar Corporation.

Conclusion

In the emerging scene of conflict originating from Internet communication channels, the courts around the world face the difficult question of deciding whether to develop a new body of jurisprudence to deal with a novel legal problem, or to identify analogous legal precedents that best fit the facts at par.

The minimum contacts test is a balancing test that seeks to balance the totality of a defendant’s contacts with the forum state with the fairness of compelling the defendant to travel to the forum state to defend against a lawsuit in that state. Thus, from mere establishment of contact with the forum state the theory gradually required deliberate direction from the defendant and harm to the plaintiff so as to be applicable in modern times. The difference in Indian use of this theory and International use is that here, it is restricted by territorial jurisdiction and cause of action needs to arise at the place where case is instituted. Whereas, international use of the theory shows how objective territorial application of jurisdiction without the restrictions of territorial application helps in extending jurisdiction of courts to a wide degree, thus serving the interests of justice in the society.

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