CHAPTER 2

GOODS, SALE, RISK, QUALITY AND

QUANTITY

A little girl accompanies her grandfather to a restaurant. She asks the waiter for a Pepsi, but
he pours the content of a Coca-Cola can into a glass and gives it to her. The girl takes one sip
and realizes that it's not what she had asked for. Meanwhile, the waiter has gone back to
doing his chores. To his horror, he hears Vito Corleone's voice saying that she wanted a Pepsi
and not a Coke. He turns around to find that it is the little girl who is speaking in that rich
baritone. She says as a civilized person she would like to give him a chance to make amends.
A hush falls over the restaurant. The waiter quickly fishes out a Pepsi can and gives it to the
girl, who is finally happy. Among the crowd in the restaurant is another waiter who had been
watching the scene unfold. He was chewing on a piece of gum and blows a bubble at that
moment. As the bubble bursts, everyone in the restaurant cowers mistaking the sound for a
gunshot. Such is the might and the fright of Don Vito! This 1998 Pepsi commercial, one of
the many in a sustained advertising fight between Pepsi and Coca-Cola, is a good example of
whether a seller can serve something different than what the buyer wants without notifying
him.

We are not discussing the ethical issues of cheating as commonly understood. On the basis of
ethical norms, the waiter, undoubtedly, did something wrong. But I would like to draw your
focus to the legal perspective, particularly in a situation where the product that the buyer
wants is available but the seller discreetly tries to pass off another as the original. Sale of
goods takes place either by asking for certain specific goods by brand name or description. It
can also be by sample, which is very commonly experienced in ice-cream parlours. The
sample of a chocolate ice cream with chocolate chips should match the final product. It most
definitely cannot be vanilla (taking the illustration to one extreme), nor can it just be
chocolate ice cream; the chips are there for extra flavour.

Buying and selling of goods are integral to modern human living and there are laws in almost
all jurisdictions to take care of different situations that two parties might find themselves in.
Typically, the law goes deep into the definitions of the word’s 'sale' and 'goods'. The
interpretations have changed and are several as societies have become more complex and
transactions between the buyers and the sellers can be done without exchange of a single
word or might take place after a detailed negotiation exercise. Ins
The sale of goods is considered to be a law relevant to almost all of us as the definition of
goods has been broadened by judicial pronouncements. At times, consumers get relief from
legal fora under this law in different jurisdictions. However, in several instances consumer
law has been separated and given independent recognition. The sale of goods does not
include service, which is essentially included in the consumer protection law. Often, the
problems can be tackled by different legal tools, and in any consumer-friendly egalitarian
society the ultimate purpose is to give fair and just treatment to all. The law of the sale of
goods is only one arrow in a quiver comprising others.

For instance, the government has to decisively act against sellers cheating consumers.
Whatever the tools may be, it does not matter. A common problem in India is the quantity and
quality of petrol at retail outlets.

SEALING OF PETROL PUMPS IN UTTAR PRADESH: NOT JUST AN UP PROBLEM

Since April 2017, several petrol pumps have been sealed in Uttar Pradesh for using a
technologically advanced electronic chip that helps in dispensing a lesser quantity of petrol
than what is on the indicator display. Interestingly, this cheat chip can be installed for a few
thousand rupees only.

While owners and operators of these petrol pumps- most of them privately owned-have been
either arrested or charged on several counts, there is a deafening silence over the role of
public sector oil companies and their management and staff. This is surprising. A few
company-owned and company-operated pumps have also been sealed. More than twenty-five
years ago, I had worked in a national oil company for a short while. So, I am truly baffled at
the disclosure, which, to the uninitiated, would appear to be breaking news.

Let us try to understand the problem better, which is common all over the country and not
specific to UP. Since Independence, there has been an effort to move towards self-reliance,
which led to the formation of the public sector Indian Oil Corporation (IOC). Later, during
the mid-1970s-the heyday of nationalization- popular and well-known oil companies, Caltex,
Esso and Burmah Shell, were nationalized and Bharat Petroleum Corporation Limited
(BPCL) and Hindustan Petroleum Corporation Limited (HPCL) were formed. These
companies, along with Indian Oil, still have common products from their respective refineries
but are marketed by different companies. Thus, the petrol one is buying at the Bharat
Petroleum outlet may not necessarily have been refined at the BPCL refinery. Similarly, the
LPG cylinder one gets at home from Indane (IOC) might have been refilled at the HPCL gas
plant. There is no exclusivity in refining and other processes.
Even the prices of petrol and diesel are the same in these outlets. Reportedly, they compete
with each other only over the service provided. But which service? Is it for wiping the
windscreen and giving gift vouchers? No. That doesn't matter to a regular consumer of petrol
and diesel. What matters most is that he should not be cheated. He must get what he is paying
for. He wants to be treated fairly.

This gave rise to marketing gimmicks such as 'Q and Q' (quality and quantity), 'pure for sure'
and other such slogans. But this had simply been lip service with the common knowledge that
adulteration with subsidized kerosene and short-measurement are the norm at most petrol
pumps.

This can never be possible without the collusion of the staff of oil companies. There are
several layers of security and protection. First, at the retail outlet (commonly called the petrol
pump) management level, then at the company sales officer level, thereafter at the
government weights and measurement department level, then at the level of the checking
staff, and during investigation of a complaint. The police too have a role in cases of fraud and
cheating with application of regular criminal penal laws.

The electronic cheat chip is nothing shocking and not at all limited to the state of Uttar
Pradesh. Technology is pervasive and such devices are being used in several outlets all over
the country. After all, these are national public- sector companies with their presence in the
remotest of Indian territories. Interestingly, for administrative purposes, the companies divide
geographical territories into zones and regions not necessarily on the basis of state
boundaries. Hence, business practices, including the modus operandi for cheating consumers,
transgress state boundaries.

A national movement is necessary to save consumers not only from unscrupulous dealers and
their managers, but also from corrupt officers in the oil companies. Strict regulatory norms
and their implementation without fail are the only answer. Let's not ignore the elephant in the
room. The application of the law of the sale of goods to the problem of petrol pumps can lead
to a great deal of litigation by individual consumers, which may not be at all effective in
curbing the problem. It requires a proper understanding of the legal issues and the application
of specific laws for tackling the problem at hand.

Which law governs the sale of goods in India?

The law regarding the sale of goods in India is contained in the Sale of Goods Act, 1930. It is
one of the fundamental laws regarding business and covers all transactions related to the sale
of goods. Buying and selling of goods is the basis of commerce. It is a contract, and earlier
these transactions were covered under the contract law. In 1930, a new law was enacted for
special contracts covering buying and selling of goods for a price. Transactions related to
land and buildings are not covered under this Act; they are covered under the Transfer of
Property Act, 1882.

What is the meaning of sale? What is an agreement to sell?

The term 'sale' is used to denote a contract of sale. It is a contract between the buyer and the
seller, wherein the seller agrees to transfer the ownership of the goods to the buyer for a price.
This transfer can be immediate or sometime in the future. The transfer is made for a price,
which is the consideration of the contract of sale. The consideration must be money price-
cash, cheque, credit amount to barter. It can't be in the form of any services. It has to be
money.

In case the transfer of ownership is to be made in the there is a default in payment, the seller
can sue the buy if for the price of goods. However, in an agreement to sell the seller can sue
for damages only.

What do we mean by goods?

Broadly speaking, every kind of movable property can be understood as goods. There are
certain exceptions in the law that have been incorporated in the definition. The concept of
goods is difficult as it depends on the definition made by the legislature and interpreted by the
courts. Certain things prima facie may not appear to be goods, but have been declared as
goods by the courts. For instance, electricity and software are goods, whereas
electromagnetic waves are not goods, as has been interpreted by the Supreme Court of India.

What does property in goods mean? What is ownership?

It means the ownership of goods. Property is usually understood in conjunction with

ownership. Hence, anything which can be owned is property. It can be tangible or intangible,
and movable or immovable. Everyday goods like table, chair, mobile phone, etc., are tangible
and movable property. Patents, copyright, etc., are intangible property. Land and buildings are
immovable property as these cannot be taken from one place to another. But, once a building
is demolished, the debris becomes movable. Similarly, when a tree is cut for timber, it
becomes movable.

There are three primary attributes of ownership- posited (right to possess), utendi (right to
use) and dispodendi (right to dispose of). Ownership, thus, means the right to exclusively
enjoy something. Exclusive enjoyment includes the right of using, altering, disposing of or
destroying the thing owned.

What do we mean by res perit domino? What is the difference in ownership and possession?

Res perit domino means 'the thing is lost to the owner'. Risk passes with property. Whenever
property in goods passes, the risk passes to the buyer. So, it is often disputable when the
property in goods or ownership has passed. Ownership is the transfer of property in goods,
whereas possession might be actual or constructive with or without owning goods.
Constructive possession is legal fiction that treats it as actual possession in the eyes of law.
Often, there are issues that actual possession might be with the same person, but due to
certain changes on paper, ownership might be transferred. So, the exact time or event is to be
identified when ownership was transferred to determine as to who bears the risk involved.

What is price?

Price, under the sale of goods law, means money consideration. It can be by cash, cheque,
credit card, debit card or any other transaction. However, goods cannot be paid as
consideration as that shall amount to barter. For instance, in exchange for a cow, one can pay
ten goats. That would be a valid contract. But it wouldn’t genome a contract of sale under the
Sale of Goods Act. When a person buys toothpaste and a toothbrush comes free with it, he
has not bought the toothbrush with money frons deration. The consideration for the
toothbrush is the fact that he has bought the toothpaste. Hence, there has been no sale of the
toothbrush.

What is the difference between a contract of work and labour and a contract of sale of goods?

It is important to distinguish between the contract of work and labour and the contract of the
sale of goods. In most transactions where goods are bought and sold, it is clearly a contract of
sale of goods. However, in most so-called service contracts, it can be difficult to conclude
whether they are a contract of sale of goods or if the transactions of goods were just
incidental.

For instance, when a person goes to a barber for a shave, he uses a small quantity of shaving
cream. Has he sold that amount of shaving cream as goods? He also uses a shaving blade.
Has he sold the shaving blade as goods as well? To the best of our understanding, he has not
sold these as goods. He has simply used them while providing his expert services as a barber.
Thus, it has been a contract of work and labour and will be dealt under the Indian Contract
Act, 1872, and not under the Sale of Goods Act, 1930.
But does it matter? Yes, especially for taxation purposes and also for application of different
sections of the law of contract or sale of goods, as the case may be the sale of goods law is a
special law and entails specific provisions for different transactions, which may have to be
narrowed down if the mother law of contracts is applied.

What are conditions and warranties?

Conditions are primary and fundamental stipulations in a contract of the sale of goods,
whereas warranties are secondary and subsidiary stipulations. The difference between them
may give rise to business disputes, where one party labels a breach as condition, while the
other as warranty. But why are these contentious? As we can understand, conditions are
something fundamental to the transaction of sale and usually go to the root of the matter-the
very basic purpose for which something has been bought and the liability of the seller is very
high to the extent of replacing or even taking back the goods. However, for warranties, which
pertain to something secondary for goods sold, the seller's liability is lesser and paying
damages usually suffices.

What are implied conditions and warranties?

The conditions and warranties may be expressed and implied-'express' when the buyer and
seller communicate about it in any manner, whereas 'implied' is when there has been no
mention of these during the transaction. Even in the latter scenario, there are certain implied
conditions protection to the buyer. For instance, the seller must have the title in goods-either
own them or have the authority to sell them, the goods should match the description ignite or
the sample provided; goods should be of that give merchantable quality, i.e. fit for the
purpose for which they are being sold. Implied warranties include quiet possession-buy
should be able to enjoy the goods peacefully without any disturbance and free from any
encumbrance.

What does nemo data quod non habit mean?

It means 'no one gives who possesses not'. No one can convey a better title than what he has.
This is the fundamental principle of property in goods and relates to the implied condition
regarding the title in goods. As a simple example we can understand that a person who does
not own certain goods or is not authorized by the owner cannot transfer ownership to the
buyer.
What is caveat emptor?

Caveat emptor means 'let the buyer beware'. The buyer is responsible for checking the goods
thoroughly before taking delivery and should not hold the seller liable later for any fault. But
this doctrine is more of an exception in today's world with more and more goods being sold
as packed and the buyer given almost no chance to check it. The liability of the manufacturer
and the seller is much higher in these cases. However, the doctrine still works in roadside
shops or flea markets. What is the meaning of FOB and CIF?

These are some of the international terms used for the Carriage of goods. FOB means 'free on
board', which can mean rail, lorry, ship, aeroplane, etc. Property in goods passes on to the
buyer when the goods are loaded on the rail, lorry, ship, etc. as agreed by the parties. On the
other hand, CIF means 'cost, insurance and freight'. The responsibility of the seller is to
deliver the goods to the buyer and only then does the property in goods pass. It can also be by
transfer of certain documents such as the bill of lading, an invoice or a copy of insurance, etc.
Whether it is for documents or actual goods depends on the agreement between the parties.
There are numerous other methods with different stages when ownership is deemed to have
been transferred.

Let's have a look at some of the cases.

WOOD V. TUI TRAVEL PLC (TRADING AS FIRST CHOICE), UK COURT OF APPEAL

(CIVIL DIVISION), 2017

In 2011, Mr and Mrs Wood from the UK booked a two-week holiday in the Dominican
Republic with First Choice, a package-holiday provider, to celebrate their fortieth wedding
anniversary. It was an all-inclusive package with the payment made in advance. But after
consuming the food at Gran Bahia Principe Hotel, Mr Wood felt uneasy and had to be
hospitalized for three days for the treatment of gastroenteritis. Wood claimed compensation
from First Choice. The judge in the lower court found it was not the fault of the hotel.
However, the food had been the laminated and was not of satisfactory quality it was not
merchantable. In appeal, First Choice argued that it was a contract for supply of services and
hence there was question of transfer of property in goods. The Court of Appeal held that
transactions in any hotel, restaurant for cafe, for serving food are contracts of supply of
services and goods. When a customer picks up any food item and places it on his plate or
pours himself a drink in a buffet, the property in that food or drink passes on to him. The
implied conditions of the sale of goods-particularly the condition of merchantability or
suitability or satisfactory quality-applies immediately.
Interestingly, if the court had held only deficiency in service on the part of First Choice, the
protection provided by the English law regarding the sale of goods- Supply of Goods and
Services Act, 1982-would have been limited only to the service part, making it easier for First
Choice and the concerned hotel to wriggle out of the legal problem. Holding the transaction
as a sale of food also made the application of implied conditions possible in this case.

The judge also observed that the decision does not mean that for every upset stomach during
holidays the vacation company will be liable. However, when the food supplied was
contaminated with bacteria, it could easily be concluded that it was not of satisfactory quality.
But it was supposed to be proved by Wood, which was not easy. He brought in evidence
persons involved and experts and was able to prove that the food was indeed contaminated.
KONE ELEVATOR INDIA V. STATE OF TAMIL NADU, SUPREME COURT OF INDIA,
2014

A five-judge constitutional bench heard this case in the Supreme Court with the decision
being 4-1. The issue was if the supply and installation of lifts, along with civil construction,
would be a 'works contract' or 'sale of goods'. For the assessment year 1995-96, Kone
Elevator India Pvt. Ltd was taxed by treating the supply and installation of lifts as 'sale'. On
appeal, the Andhra Pradesh Sales Tax Appellate Tribunal held that it was a 'works contract'
and not sale. The Andhra Pradesh High Court affirmed the view of the Tribunal. Thereafter,
the State of Andhra Pradesh moved the Supreme Court, where the high court's decision was
overturned-it was held to be a 'sale of goods'. The state governments in Andhra Pradesh and
some other states reopened assessment cases by treating the transaction as sale. Kone filed a
petition in the Supreme Court under Article 32 of the Constitution-right to constitutional
remedies-for the matter to be decided by a larger bench as there were conflicting decisions, or
a decision made while ignoring a previous judgment.

Kone's counsel argued that it was wrong to treat installation of lifts as a contract for sale. He
said various components or goods, such as a lift car, motors, ropes, rails, etc., and expert
installation, are required to create a lift. It is a skilful task and without installation, there can
be no lift. While deciding, the court observed that simply because some elements of work are
involved in a contract for sale, it does not ipso facto become a works contract, and there is no
standard formula to distinguish the two. It depends on the intention of the contracting parties.
In case the parties agree that the contract will be a work contract then it is not sale: and if the
terms of the contract definitely say that it is not a works contract, then it is outright sale.

"The Supreme Court held that according to the terms of contract for supply and installation of
lifts or elevators, it is a sale and not a works contract. The earlier decision of the Supreme
Court was upheld. Earlier too there had been several such cases. This decision by a
constitutional bench helped bring finality to the issue.
OORJA CONSULTANTS V. PUNJAB STATE COOPERATIVE MILK PRODUCERS’
FEDERATION LTD, PUNJAB AND HARYANA HIGH COURT, 20153

The Punjab State Cooperative Milk Producers Federation Limited, or Milkfed, had invited
tenders for design, supply, installation and commissioning of a paddy straw processing plant.
Oorja Consultants had submitted the tender, which was approved in 2001. Milkfed placed the
order for the processing plant. The plant was commissioned but it did not function properly
so the purchase order was not completed. Certain modifications were suggested by external
experts from the National Dairy Development Board (NDDB), which were not carried out by
Oorja. Some payment had already been made by Milkfed and finding the plant of no use to it,
it asked Oorja to lift the materials supplied to it and refund the money paid to it. A dispute
arose and the arbitration clause was invoked. The sole arbitrator passed the award in favour
of Milkfed. Oorja challenged the award in the district court in Chandigarh; the challenge was
dismissed. Aggrieved by the order, Oorja moved the Punjab and Haryana High Court.

Going into the details of the contract, the high court concluded that the dispute was regarding
non-satisfactory performance of the plant and discussed the steps mentioned in the contract
that Milkfed could have taken. Besides the imposition of penalty for delay in commissioning,
Milkfed had hedged its risk by incorporating the clauses for recovery of any extra amount
paid in making the plant functional from the earnest money and pending bills. At no point in
time was the contract terminated. The question arose as to whether the acceptance of goods
by Milkfed could be treated as breach of any of the conditions or a breach of warranty. The
high court concluded that as the contract was never repudiated and Oorja never refused to
carry out the modifications-the dispute was regarding the quantum of payment to be made for
the modifications to be done-it was wrong on the part of the arbitrator to conclude that the
goods were to be rejected in toto.

The high court emphasized on the basic legal principle that when a buyer accepts goods or a
part thereof, breach of any of the conditions to be fulfilled by the seller can only be treated as
a breach of warranty and not as a ground for rejecting goods and treating the contract as
repudiated. It can only be done if it is mentioned in the contract expressly or can be implied,
as a matter of norms. TAKEAWAY FOR MANAGERS

With the changing scenario of businesses-both services and goods-it often becomes a little
difficult to find out whether the contract is truly for the sale of goods, or for both. Legal
implications are usually different and a manager must clearly understand the nature of the
contract entered into.
►

Implied conditions and warranties are an inseparable part of the sale of goods and any seller
must be extremely careful as these might not have been negotiated with the buyer at the
outset, however, they are applicable, as the name suggests.

Incoterms rules, International Commercial Terms, are used in international business, which
are predefined commercial terms, as understood by the business community internationally.
These have been published by the International Chamber of Commerce (ICC) and are widely
accepted globally. Some of the terms like FOB and CIF are commonly used during the
shipment of goods. It is advisable that the business manager makes himself familiar with
these terms, so as to understand the nuances of commercial. communication while transacting
business in general and with foreign companies in particular.

Transfer of title is the crucial moment when risk transfers, which may be different from
transfer of physical goods. Due attention must be paid by managers to understand this aspect.
CHAPTER 5

INTELLECTUAL PROPERTY
In 1951, The Man in the White Suit, a science-fiction movie about the invention of a new
fabric, was released. The inventor, Sidney Stratton (played by Alec Guinness), was a
researcher in a mill trying to improve the quality of fabrics so they would not wear out easily.
He succeeded in inventing an everlasting fabric. Of course, such a new invention could be
patented. But was he able to patent it? Was he able to commercially exploit it? Did he get
appreciation from the owners and workers in the mill? Surprisingly, he did not. Both the
owners and the workers were dead against Stratton's invention. Obviously, if the mill had
started manufacturing the everlasting fabric, then after a while no consumer would need to
buy any other fabric and the mill would have to shut down. This would leave the workers
jobless. Stratton had to run for his life and to save the invention from being destroyed. He got
a suit made from the same fabric. It was a bright white shade as it could not absorb any dye
and was slightly Juminous. Sidney could not patent his invention and was not able to get any
commercial benefits.

Does this often happen in the world of business? It might happen to those inventions which,
even if patented, do not have any commercial appeal and hence simply remain a matter of
honour for the inventor. True businesses do not see any value in such patents and, therefore,
may not like to enter into a contract for their use. The role of intellectual property in gaining
business advantage is, thus, not simply a matter of fact. Owning intellectual property ipso
facto does not result in commercial success. It is because of this reason that astute business
persons take the following four steps-registration, commercialization, protection and legal
action against infringement.

Intellectual property is primarily protected by patents, copyright, trademark, design,

geographical indications, trade secrets and confidential information, among others. The world
of business is moving away from physical property towards intellectual property. Often there
are serious issues between competitors over the commercial exploitation of intellectual
property. The usage of intellectual property is 'non-rivalrous' as it is intangible in nature and
an unlimited number of users can use it at the same time, though legally it can be used only
by the intellectual property owner. Preventing non-owners and non-licences from unlawful
usage is a function of the legal environment, which differs from place to place and is the
determining factor in the value of intellectual property. Patent protection accords exclusivity
and businesses vie for it in evolved jurisdictions. WHY PATENT MATTERS MORE THAN
EVER FOR ANY ENTERPRISE IN THE NEW ECONOMY
On 6 December 2016, the US Supreme Court decided in favour of Samsung and against
Apple in a design patent case. For a long time, the matter had been going on, with the jury
and other lower courts deciding in favour of Apple that Samsung had infringed the former's
smartphone design patents and should therefore pay them the entire profit earned in damages.
Samsung had argued that even if the design patents had been infringed upon for certain
aspects, it is neither legal nor fair to award damages to cover the entire profits as the alleged
design patent infringement had not been the sole reason for making profits.

The US Supreme Court did not agree with the decision of the lower courts to award around
$400 million and categorically ordered that the legislative intent was very clear from the
language of the statute that only that portion of the profit had to be paid which was earned
from the infringed design patent. This was a difficult task as quantifying is highly subjective,
but the lower courts were bound to follow the decision and decide accordingly.

The Apple-Samsung legal war is just one of the examples of how enterprises in the new
world economy are going to rely more and more on patents, including design patents as
known in the US, to achieve and retain the cutting edge in highly competitive markets for
technology products and services business method patterns have been discussed, loved hated
and litigated for almost two decades in the US. These are still legal and valid in the US: India
and many other countries do not recognize them. The US Supreme Court held in Bilski and
Alice Corp. cases that supreme Transformation test' is not the sole test for determining the
legal validity of a business method patent. In the year to come, I anticipate that the role of
business method patents will be enlarged due to an expansion of the digital economy, and
even India can change its present view. Software patents stand on the same footing. With
devices becoming smaller, stronger and more capable of doing many things at the same time,
which hitherto were not even dreamt of, more sophisticated software and business methods
will surely be developed leading to business wars for retaining and expanding market share.
And in any such business war, legal weapons such as patents are usually observed as
Lephalale te

So, getting a patent for each and every incremental change, which is typically not allowed in
the Indian legal set up, is the goal of most business enterprises in the developed world. And
India being at the cusp of the developing versus developed world, may have to interpret the
patent law more liberally and in a futuristic manner.

In manufacturing goods, human endeavour is to make things smaller, lighter, stronger,

durable, environment- friendly and cheaper. This desire pushes mankind to look for newer
solutions, which results in novel technology, which can best be exploited commercially by
patenting and preventing its infringement. Legal environments all over the world, in all
earnest expectation, will align themselves to this. Also, in the field of pharmaceuticals,
special efforts need to be made to strike a balance between the requirements of backward,
developing and developed nations. The geopolitical situation is extremely dynamic with new
political leaders taking the lead in different jurisdictions. Hence, the balance arrived in the
patent law and enforcement in the last twenty-five years or so may become meaningless in
the near future.

It is going to be a tough time for die-hard fans of patent protection to see global recognition
and an enforcement of national patents despite efforts made by the World Trade Organisation
(WTO) in the shape of an agreement on trade-related intellectual property rights (TRIPs) over
two decades ago in 1995. The importance of patents in the fast-changing global economy
should not be taken for granted. One must be wary of the romanticism of the phrase 'new
economy'.

Evolved intellectual property jurisdictions, for instance the US, often witness litigation on
extremely fine aspects and detailing. One such case was about the design of cheerleaders'
uniform.

CHEERLEADERS' UNIFORM: COPYRIGHT OR DESIGN

On 22 March 2016, the US Supreme Court decided the Star Athletica v. Varsity Brands case
regarding copyright protection to cheerleaders' uniform. Why should such a case reach the
hallowed portals of the Supreme Court? Primarily because of business and commerce. Profit-
making is one of the most important driving forces for companies to litigate, and so in a
highly developed country like the United States matters related to uniforms, printers,
pavements, etc., are decided by the highest court. To a large extent, it can be said that the
economic development of the US was due to the development of the intellectual property law
in the country.

For the uninitiated, and typically someone in India, an issue as mundane as cheerleaders'
uniform may not be befitting to be discussed and fought in a legal forum. Another reason is
that in India there is rampant and blatant copying of clothing designs-designer labels are sold
in air-conditioned showrooms and slavish copies are traded right outside on the pavement at
one-tenth the original price or even lesser. That being said, there has been a definite change in
the Indian context in the last ten years or so

Fashion designers Tarun Tahiliani and Rajesh Masrani fought a long legal battle over their
dress designs in the courts. Also, fashion designers are becoming extremely careful about the
designing aspects using computers and computer-aided tools. In addition, contracts with other
professionals are being tightly drafted and communicated to the parties. Still, when compared
with the legal action taken in American courts, we have a long way to go.
Anyway, back to the cheerleaders' uniform case. The issue was to find out whether the
uniform's design was protected by copyright or not. The difference between copyright
protection and design protection primarily is that of the time period. Copyright, in general, is
a much longer term all over the world as compared to design protection. Usually, it is fifty
years after the death of the author different terms in different countries author, with the work
owned by companies, authored by more than one person, etc. Design protection is much
shorter, say about fifteen years.

Businesses tend to protect their proprietary knowledge either by copyright or trademark,

which, interestingly, have no time period. Like diamonds, trademarks are forever, however,
they have to be renewed every ten years and commercially used during that time period.
Hence, and embarks of Coke, Pepsi, Singer, etc., which are over a hundred years old, are still
going strong.

The famous company Varsity Brands owns many copyrighted designs used for cheerleaders'
uniforms, some of which were copied by a smaller competitor, Star Athletica. When Varsity
sued Star, the latter argued that the different lines, zigzags, braids, etc., were not protected by
copyright as the copyright was wrongly granted. These could not have been given copyright
protection under the law. The lower court decided in favour of Star, but the appellate court
reversed the decision. Star appealed in the Supreme Court.

The Supreme Court decided that the cheerleaders' uniform passed the test of being able to
exist as its own pictorial, graphic, or sculptural work', which made it 'copyrightable'. It was
also separated from the utilitarian principle. More than sixty years ago, in 1954, the Supreme
Court had upheld in Mazer vs. Stein the copyright protection in statuettes used as bases for
fully equipped electric lamps. The utilitarian function of the electric lamp was very different
as it was easily separable from the base of the lamp, which was in the shape of afigurine. The
same principle was applied to the uniform case.

These are landmark judgments evoking fascination and awe from the rest of the emerging
economies. We in India need to fine-tune and apply copyright protection to a variety of such
artistic works that are easily separable and used in different types of dresses. Artists and
businesses will undeniably benefit.

The benefits of intellectual property in biotechnology and molecular research typically

depend on the courts' decisions on patent rights. One such example is the Crispr case.

CRISPR, PATENTS AND BUSINESS

Crispr is the acronym for 'clustered regularly interspaced short palindromic repeats', which is
a genome-editing tool. On 15 February 2017, the US Patent Trial and Appeal Board (PTAB)
decided patent rights related to Crispr in favour of Harvard-MIT's research centre- Broad
Institute-and ruled that the University of California's patents regarding Crispr were separate
and did not overlap. This was a landmark decision and will quite possibly be appealed as it
has huge commercial applications all over the world with tonnes of money at stake.

Before proceeding further and trying to think about its anticipated impact on India, let us
understand what Crispr is. It is a natural process used by bacteria to fight viruses. Without
getting into the scientific details, we must understand that Crispr has immense uses in
repairing and deleting genes cutting,

this technology is faster, cheaper and easier as compared to other gene-editing techniques. Its
applications are numerous with the obvious being in the fields of human numerous
agricultures, biotechnology etc. Also, relative uses of the technology can open many an
innovative was closed so far. Without any doubt, it is a goldmine.

And that's precisely one of the primary reasons why there has been a bitter legal battle
between research institutes in Cambridge, Massachusetts, and California, Interestingly, it was
first invented in the University of California-known as the technique's birthplace-and the
patent application was also filed by the university seven months before the application by
Broad Institute, not very long ago, the US moved from the first- to-invent to first-to-file
system. Prior to this, even if an inventor had filed the application first and fulfilled all the
criteria, he could not be assured of being granted a patent as the challenge was open to any
other inventor who could prove that he had 'invented' it first and filed the application later.
That system created many problems, the most troublesome being the production of evidence,
and so the US Patent and Trademark Office (USPTO) adopted the system followed almost all
over the world of 'first to file'.

Although University of California had filed it earlier, Broad Institute paid for expedited
consideration-a method of accelerated examination of patent application, something similar
to 'tatkal' passport applications in India that resulted in faster decision-making of its
application. Aggrieved by grant of patents to Broad, University of California appealed and
the PTAB rejected it on the ground that the patents filed by both the research itotutes, though
on the same subject, were different and did not overlap. Hence, Broad's patents surverent and
diadversity of California had every right to pursue patent prosecution, i.e. its application for
grant of patents. prerequisites for grant of

a patent-non-obviousness (others being novelty, utility and enablement) was the clinching
aspect in favour of Broad Institute. Researchers at University of California had demonstrated
the path-breaking technique in a test tube and published a paper in 2012. It triggered research
globally to find applications to human, animal and plant cells. Broad Institute was the first
one to get success in finding applications in cells that have nuclei. For these applications, a
series of patents was granted. However, the University of California team argued that once it
was demonstrated in a test tube, it could be applied to human and plant cells with slight
modification, and so Broad's inventions were 'obvious'. But PTAB did not agree that the
demonstrated applications by Broad were so obvious.

The impact of this tool on India will be observed in the long run. With a 1.3-billion
population, human healthcare in India is in dire need of cutting-edge, more effective and
inexpensive technology. The same is true for agriculture. The role of the government in
controlling the intellectual property regime is important. In India, the government of the day
has high confidence in negotiating with patent-holders in making useful technology
accessible to Indians with multiple players varying versions of the same technology, it can be
simpler to negotiate and might also provide some leeway to work around. It also sends the
message loud and clear-pushing the technology frontier is neither cheap nor without legal
hassles. India should prepare for both.wm

The role of patent protection for pharmaceuticals has wide ramifications for making drugs
accessible and affordable. An interesting case was decided by the UK Supreme Court.

ELI LILLY WINS CANCER DRUG PATENT CASE

In July 2017, the Supreme Court of the United Kingdom decided a case related to the patent
protection of a cancer drug in favour of the American pharmaceutical giant Eli Lilly against
another American company Actavis, which has been taken over by the Israeli pharmaceutical
multinational Teva.

This case highlights the importance of patent protection granted according to respective
geographical territories, irrespective of the global advantages of the World Trade
Organization's TRIPs agreement, which aims at the harmonization of laws and their universal
application. For a long time, efforts have been made in most evolved jurisdictions and
developed economies to recognize patent rights on the basis of the principle of reciprocity.
However, such efforts have been impacted by calls of either true globalization or
protectionism, making the pendulum swing in extreme directions. The facts of the case are
simple. Eli Lilly had developed a drug 'pemetrexed' for cancer treatment. The drug has
therapeutic effects on cancerous tumours. But it could have damaging side effects when used
on its own. These side effects could be effectively managed if the compound pemetrexed
disodium was administered together with vitamin B12. Eli Lilly had been selling it under the
brand name 'Alimta' quite successfully since 2004.
Instead of using pemetrexed disodium, Actavis used the compounds with active agents such
as pemetrexed diacid or pemetrexed ditromethamine or pemetrexed dipotassium. It contended
that as the compounds used were different, there was no infringement of Eli Lilly's patent.
According to media reports, Alimta was one of the bestselling cancer-treatment drugs and
generated sales of more than $2 billion in 2016. Clearly, Eli Lilly had to fight the generic
drug manufacturer in a court of law, and as the jurisdictions involved were the United
Kingdom, France, Italy and Spain-according to the jurisdictional reach of the European
patent-patent infringement cases were filed in the British courts.

In the lower court and the court of appeal, the companies had mixed decisions a little in
favour of both-that resulted in cross appeals in the UK Supreme Court. The primary question
was whether there was an infringement of the patent in a direct or indirect manner, or if there
was any infringement at all. The British Supreme Court took a rather strict view and decided
unanimously that this was an indirect infringement of the patent.

A similar view was taken by an American court earlier in 2017 over the same issue, and in
case Eli Lilly loses the appeal there, it is quite certain that it will be taken up in another
appellate court.

From an Indian perspective, this legal fight is absorbing as well as a bit intriguing for the
simple reason that multinational pharmaceutical companies have often blamed Indian patents
and the judicial system of tilting interpretations too much in favour of generics and not giving
much credence to incremental changes made to awarded patents, which result in the alleged
evergreening of pharmaceutical patents.

A question arises: what would have happened had the same deviation been made by the
original patent-holder and thereafter applied to the patent office for grant of a patent based on
novelty and utility? Was it possible for the well-known lenient intellectual property systems
of the Western countries, particularly the United States, not to grant the patent for the
incremental change? In all probability, such deviations, maybe with a little more ingenuity
thrown in, would have been granted protection for a further term of twenty years, making it
possible for the company to commercially exploit it and also restrict everyone else in the
world from making generic drugs.

Pharmaceutical patents, if interpreted too liberally, may not serve the purpose of the masses
and can undoubtedly inhibit the development of generic drugs causing great harm to a large
section of the global population, which is heavily dependent on highly affordable and
accessible generics usually manufactured in developing countries like India. A strict
interpretation of existing patents is in India's interest, and this case is not a good role model.
We need to carefully watch the legal developments in this field.
Stealing of ideas has serious copyright issues. Big film studios are repeatedly dragged into
controvers, Big developed countries. Hollywood is the favourite target.

DISNEY, INSIDE OUT, AND MOODSTERS

In October 2017, it was reported that Disney and Pixar were the targets of an amended
petition seeking compensation for stealing ideas for their hit animation film Inside Out. Such
cases are not new and will never come to an end. Stealing of ideas, or one may call them
'inspiration', is unavoidable due to the contentious nature of the fundamental principle of the
copyright law-the idea-expression dichotomy.

According to copyright law, ideas cannot be protected by copyright, only expressions can.
However, a further extension of copyright protection includes moral copyrights, which go
several steps further than the ordinary legal protection of copyright.

To better understand the idea-expression dichotomy, let us take the example of stories and
film scripts. A common theme in a lot of movies is the victory of an underdog over a ruthless
dictator or organization. Everyone loves such a story.

But can such an idea be copyrighted? Of course not. The expression of such an idea can be
copyrighted such as Lagaan, Sholay, and many other Bollywood hits, which flourished on the
idea of dispensing poetic justice. So when Disney and Pixar were sued by a child
psychologist, Denise Daniels, the primary defence used by the companies was the idea-
expression dichotom Daniels works with children who have undergone Daniional turmoil due
to natural calamities, such as emoamis, earthquakes, volcanic eruptions, etc., and due to
personal problems, such as the divorce of their parents, domestic violence, etc. She developed
a model using bold colours that depicted various human emotions such as anger, love, fear,
etc., and discussed it with several executives in Disney.

Such a sharing of ideas, even without the existence of a formal contract, resulted in an
implied contract according to the California law, which relies on the conduct of the parties.
Such is the case in India as well. However, enforcement depends on the legal environment,
and it is not easy to enforce even written contracts in India. The US, however, provides a
much better protection of ideas under the copyright law. In this case, Disney did not find
Daniels' ideas good enough for further development. This is what it told her. But after almost
a decade, it released the animated movie Inside Out allegedly based on the same theme of a
combination of human emotions and colours. Daniels had called the characters she had
developed the 'moodsters', which became a brand in
itself as toys and other children's goods. Prima facie it appears to be a case of stealing an
idea. However, the legal test is not so simple and one has to prove that the thoughts were not
generic and the alleged stealing was of specific characters and plot. This can be difficult to
prove in a court of law, but expert lawyershave been able to file similar cases and win them
for their clients. Usually, such cases result in settlements.

The situation in India is quite different. Here, it would be almost impossible to find evidence
to convince the court sufficiently. Some time ago, the Delhi High Court permitted legally
copying of material from books for students, which surely hits at the fundamental protection
to copyrighted material.

The Disney-Daniels case is going to be gripping even in India as we want to move in the
direction of strengthening the intellectual-property regime.

TAKEAWAY FOR MANAGERS

► Intellectual property has to be registered, exploited, protected, and enforced in case of

breach.

► Legal environment determines the strength of intellectual property in a jurisdiction. ►

International treaties protect intellectual property

globally. However, local law finally defines the

practical aspects. ► Sovereign rights of different countries result in non- uniformity of

intellectual property in the world.

▸ Awareness of intellectual property is increasing but businesses prefer profit-making as

compared to its strict legal protection.
CHAPTER 8

CONSUMER PROTECTION
Consumers have often been at the receiving end due to lack of choices as a consequence of
monopoly or because of low-quality goods and services. The legal environment in different
jurisdictions uses either the contract law or a specialized law, such as the Consumer
Protection Act, 1986, in India, to provide relevant legal tools for safeguarding consumer
interests.

However, despite such laws in the developing and the developed world, businesses exploit
innovative methods as technology evolves to move ahead in business, which can adversely
impact consumer rights by limiting their choices and compelling them to conduct themselves
in a particular manner. For example, Amazon received a new patent to enhance its business,
not the online one but the newly developed brick-and-mortar store business.

AMAZON'S NEW PATENT: SERIOUS IMPLICATIONS FOR CONSUMER RIGHTS

On 30 May 2017, Amazon was granted a patent by USPTO. It was quite contrary to the basic
premise on which Amazon had amassed a lot of wealth by snatching business from so many
physical stores. The patent was called 'physical store online shopping control' and, ironically,
prevented prospective customers present in Amazon's physical stores from comparing prices
of goods available in online stores.

It has become almost a habit for shoppers in physical stores in major cities, even in India, to
check and compare online prices while making a purchasing decision, particularly for
expensive branded items. It happens very often for electronic gadgets. Thereafter, they may
not buy at all from these physical stores, which, however, facilitate the decision-making
process by providing physical access to the product, detailed description and answers to
numerous queries by a salesperson. All this doesn't come free for the store. To make matters
worse, customers may not finally buy from the store's online division. Hence, for certain
physical stores, this is a loss-making proposition. The question is: how to handle this
problem?
Amazon found a unique solution, which appears to be ridiculous but is true. The abstract of
the patent numbered 9,665,881 describes it:

Systems and methods for controlling online shopping within a physical store or retailer
location are provided. A wireless network connection may be provided to a consumer device
at a retailer location on behalf of a retailer, and content requested by the consumer device via
the wireless network connection may be identified. Based upon an evaluation of the identified
content, a determination may be made that the consumer devices attempting to access
information associated with a competitor of the retailer or an item offered for sale by the
retailer. At least one control action may then be directed based upon the determination,

This patent signifies the extent to which stores in the developed world can go to compete or
to simply survive or thrive in a business. It is a highly technical and complicated patent
taking care of so many possibilities related to the use of the smartphones in a store that one
may possibly think it better to just concentrate on the business rather than trying to either
selectively insulate the prospective customer from the outside information or bombard him
with gift coupons and woo him to buy one's goods only. Such a patent, if put into practice,
may be on the verge of clashing with consumers' rights to be fully informed while making a
purchasing decision.

There is a possibility that this patent will never be used by Amazon and it could have been a
defensive action, which means that it might have gone out of its way to secure it before its
competitors. These are only conjectures and there may be some other possible uses thought of
by the company. But one thing is for certain: patent abuse in the US, which has given rise to
patent trolls, is not declining any time soon. Hyper-technical patents that are in direct
collision with consumer rights may never be able to see practical applicability. Also, there is a
catch that Amazon can use this technology only when prospective customers are using its in-
store Wi-Fi services. If they use their smartphone data through an Internet service provider,
which all mobile companies offer, there is no way that Amazon can stop access to price
comparison across online stores.

Also, if Amazon tries to use the newly patented technology after tweaking it to take care of
the mobile service providers' Internet data, it will directly hinder the contract between the
mobile company and its subscribers, which shall be interference in the performance of a
contract between two parties. It will attract legal action and typically the damages awarded in
the US are on a very high side, which serve as effective deterrent prompting companies to
settle outside the court.

So for several reasons, the possibility of Amazon using the new patent in its physical stores in
the near future is quite low. We, in India, can easily continue comparing prices online while
shopping in any brick-and-mortar store.
In India, consumer courts have been working for the last three decades with the sole purpose
of protecting consumer interests. Usually, individual consumers, or even small groups of
individual consumers, do not have enough bargaining power vis-à-vis big corporate entities.
It is at that very moment and for this very purpose that the consumer law in India, and
elsewhere, comes to their rescue by providing the much-needed level playing field and easy-
to-manoeuvre landscape. A decision by the National Commission against the builders' lobby
is a case in point.

NATIONAL COMMISSION: BUILDERS AND CONSUMER INTERESTS

On 13 July 2017, the National Consumer Disputes Redressal Commission-NCDRC or

National Commission-decided that arbitration clauses in contracts between builders and
buyers (consumers) would not force the latter to use only arbitration as means of dispute
resolution, and that the doors of consumer courts would remain open for them. This order is,
undoubtedly, in favour of buyers. However, legally speaking, this will, in all probability, be
challenged in the Supreme Court.

A little information on the issues involved will help us better understand the implications.
The consumer courts were set up under the Consumer Protection Act, 1986, and, as the name
suggests, the basic purpose of this law is to protect consumers. Who is a consumer? Anyone
who buys goods or avails services is a consumer; the meaning of the term was initially much
more restrictive and with the passage of time, judicial pronouncements made it more
inclusive. There are three levels of courts: district forum, state commission and National
Commission. Typically, regular civil courts are bypassed and only the Supreme Court can be
moved against the decision of the National Commission. Remember, protection of consumers
is at the core of the consumer law and buyers of homes are without any doubt consumers
under the ambit of this law.

As mentioned earlier, arbitration is a method of resolving disputes without going through the
procedure in regular courts and that's why it is called an alternative dispute-resolution
mechanism. The contract between the two parties, for instance the builder and the buyer in
this case, is the foundation on which everything stands. Usually, builders, companies, banks,
sellers, etc., incorporate an arbitration clause in their contracts, which obligates the other
party to only invoke the arbitration clause in case of any dispute. The other party cannot
move the court. This is absolutely legal, an exception when the right of a person to move the
court can be waived by a contract.

This is the tension between consumer courts, which aim to protect the consumer, and the
enforcement of the arbitration clause that shuts the doors of other judicial forums. Arbitration
has been quite popular in India and the current law of 1996, i.e. the Arbitration and
Conciliation Act, 1996, was amended in 2015 to make it more effective by giving it a fillip as
court proceedings in India have, unfortunately, become synonymous with delay. Foreign
investors and even Indian businesses were asking for plugging all loopholes that made
'interference'- some prefer 'intervention' as a slightly softer word-by courts and other judicial
fora in arbitration proceedings difficult, if not impossible. Also, contract adherence and
dispute resolution are important indicators in the ease of doing business indices around the
world.na

It is true that the bargaining power of the builder vis- à-vis buyers is immensely high, and
making consumer courts inaccessible to the buyers because of the presence of an arbitration
clause in the contract will not at all help the cause of homebuyers. But there are legal
technicalities involved. A contract is based on a voluntary consent by the parties, and legally,
it can always be argued that the builder is not forcing anyone to agree to buy a house. But
then, this could be a situation of almost monopoly-from whom shall the buyer buy? From
another builder! What if the other builder too has a similar clause? All builders can have a
silent understanding a sort of a cartel-on this issue. N to AntiSo what's wrong with arbitration
and why do buyers want to approach consumer courts? Theoretically, arbitration is supposed
to be a speedy, inexpensive and effective method, but experience tells us that it may take a
very long time as the decision of the arbitrator can be challenged in a court of law. Moreover,
arbitrators are typically chosen from the same fraternity, due to an expertise in the subject
matter, which raises issues about their neutrality.

This is a tricky issue, which is often raised in other jurisdictions as well. In a recent AT&T
matter, the arbitration clause has been upheld in the US, compelling subscribers to go for
arbitration. Senators have raised the issues of monopoly and of not providing enough choices
to subscribers.

The fight is going on and the battle between corporate interests versus public interest is
eagerly followed by curious onlookers. Similar treatment was given by the Supreme Court of
India to a construction company that did not keep its promise. The court did its best to protect
the consumers.

SINK OR DIE: HARD WORDS INDEED!

In early September 2017, the Supreme Court ordered a builder, Supertech, to refund money to
the buyers of its residential houses who did not want to continue waiting to get their flats and
instead wanted their money back. When the builder's counsel pleaded that it had no money as
everything had been invested in the building, the court used extremely harsh words, ... sink or
die... pay back the money...' It has not been the usual tone and tenor of orders from the
country's highest court in the recent past as far as builders were concerned.
There have been numerous instances of collusion between builders and people in power to
dupe hapless investors, who invested their life savings in the hope of having an abode during
their twilight years. Many might have invested at an early stage of their careers in the hope of
living in their own homes and saving on rent. Usually young couples plan on having babies
later as they are busy paying instalments for a house by burning the candle at both ends.
Unscrupulous builders entice such buyers with rosy pictures and drawings of the buildings,
but later with the express or implied consent of the municipal authorities make so many
changes in the original plan that the new plan becomes very different from the one proposed.

In the present legal environment, such buyers have no effective judicial remedy. And in its
absence, the middlemen or the so-called property dealers, small-time local politicians, and
government officers at almost all levels involved in shady dealings have a field day. Legal
processes are painfully slow, particularly with a huge imbalance in the bargaining power
between builders, who have the capacity to engage the best of the legal brains, and individual
buyers. This decision by the Supreme Court is therefore welcome.

But the real question is: will it serve as a deterrent for other builders?

Maybe not. The real legal environment for business depends on speedy and effective
enforcement of orders It had been observed long ago by the Privy Council, and stands true
even today, that after winning a long legal battle, a new journey begins for getting any order
executed or any decree enforced. There is often a slip between the cup and the lip. No one
can understand it better than a decree holder running from pillar to post to get it enforced.
You have it but you don't have it. This is, at times, the manner in which court orders get
circumvented or simply made into a nullity. Political patronage and interference also create
many problems in execution.

However, there is hope that a strict view by the court would set things right to a certain extent
and compel builders to rethink their business plans while formulating business strategies.
Coupled with reforms in corporate law, a major chunk being taken care of by the New
Companies Act of 2013, newer and tighter Sebi norms of corporate governance, and vigilant
and cautious bankers, there is a definite tilt towards adhering to contracts and keeping
promises made. It will become progressively difficult for builders to make false promises,
which ab initio they know they can't keep. The role of the real estate regulator is going to be
crucial in making dreams of homebuyers come true. With these changes, hopefully
transactions made in unaccounted money, read black money, will decline...

We welcome the court order. Now, timely execution of the order will set the stage for future
projects and dealings between builders and buyers. Certainty of action against erring builders
will make things predictable and give tremendous confidence to homebuyers. Homebuyers
and residents, however, don't just have complaints against builders and construction
companies, but also against municipal authorities, who play the dual role of providing civic
amenities and regulating the affairs of the safety of buildings. The question is whether
residents are consumers or not. Strictly speaking, the legal interpretation of the consumer law
does not bring them under the ambit of the definition vis-à-vis administration. However, with
the growth and development of administrative law in most evolved jurisdictions, sovereign
immunity is being diluted and administrative bodies are becoming more and more answerable
in a court of law. The fire in a London building in June 2017 emphasizes on the expansion of
the definition of consumer in the practical world.

LONDON'S GRENFELL FIRE: FOR WANT OF A NAIL

In June 2017, investigators concluded that the fire in the Grenfell Tower in London, which
had resulted in the death of around eighty people, was caused by a faulty refrigerator. This is
simply incomprehensible. I am reminded of the old proverb 'for want of a nail' which has
many variations and one of them is as follows:

For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a
horse the rider was lost.20 For want of a rider the message was lost. For want of a message
the battle was lost. For want of a battle the kingdom was lost. And all for the want of a
horseshoe nail.

Eighty persons died because of a faulty refrigerator, that too in a First World country like the
UK-unbelievable! For an Indian reader, immediate comparison with the situation at home
becomes inevitable. Even in a Third World country like India, there are simple mechanisms
by which power trips in case an electronic or electrical device is faulty and creates a spark or
short circuit. These are very common and used in most places. Assuming the power had
tripped and the spark had already been caused, a fire alarm should have gone off, as is
common in most developed nations, which is loud enough to wake up people to take
necessary action to extinguish the initial small fire by using a readily available and simple-
to-operate fire extinguisher.

Such fire alarms and fire extinguishers are typically

absent in most buildings in India due to a variety of

reasons. Although new buildings usually provide them,

there are issues regarding their operation. In most

developed nations, fire drills are conducted and residents,

especially those living in high-rises, are trained or at least

made aware of the steps to be taken in case of a fire.

It is beyond comprehension that nothing of this sort

happened in Grenfell and the fire spread so fast that it

engulfed the entire building in a short period of time.

Why were the fire alarms not working? What about the

fire extinguishers? Also, in most buildings in developed nations, there are sprinklers installed,
which get switched on as a bulb breaks due to the high temperature, to douse the fire and nip
it in the bud. Sprinklers are absent in most buildings in India and very few modern
constructions are installing them.

The temperature in India during the summers is sizzling-40 or even 45 degrees Celsius-which
causes many short circuits, exacerbated by poor-quality wiring and stealing of electricity that
increases the load on the circuit. This is not the case in developed countries. At the time of the
Grenfell fire, London's temperature was a cool 15 to 20 degrees Celsius. If buildings in
London are also suffering from poor-quality wiring or stealing of power, or both, then there is
surely a serious failure of regulatory mechanism. Was it an issue of corruption at that level-
unfortunately, very common in India-in London that led to the turning of a blind eye to the
lack of safety measures?

If so, then heads must roll as England has been the beacon of the rule of law and theoretical
and practical developments in the growth of administrative law. Even in the absence of signs
of corruption and intentional ignorance, negligence and dereliction of duty can easily be used
as the legal guiding principles to handle this fire. Such principles are rarely-fortunately, they
are not totally absent in the Indian legal system-used by the
courts in India. ! олдида There is a lot to learn from this fire. Kingdoms may be lost for want
of a nail, but human lives are too precious to be lost for want of a fire alarm and a fire
extinguisher.am

DILLI CHALO: DOCTORS AND PATIENTS AS CONSUMERS

Should patients be given the status of consumers under the law? This question haunted
lawmakers and enforcers for quite some time. Patients were not considered consumers under
the Consumer Protection Act, 1986, in India. However, after a few years, it was because of
the wider interpretation given by the Supreme Court to the word 'consumer' those patients
came under the ambit of this law. Since then, the medical profession has been cautious and at
times, unfortunately, harassed by powerful and well-connected patients and their attendants.

In early June 2017, the Indian Medical Association (IMA) had called a nationwide movement
of doctors to Delhi under the slogan 'Dilli Chalo'. The words bore similarity to the clarion call
given by Netaji Subhash Chandra Bose in 1942 to oust the British from India. The difference
lies in the protection of doctors rather than the public at large, and in fighting with our own
government rather than a foreign ruler.

Of late, doctors have been physically manhandled by attendants of patients in several

hospitals in the country, compelling them to demand safety and security while on the job.
Also, there have been tweaking and tightening of different laws regarding the medical
profession and a focus on regulations already in place, either by giving them a little more
tooth; or by enforcing them strictly, or both.

For example, there have been issues regarding the prescription of branded drugs versus
generic drugs, fixing a cap on pathological testing charges and stent prices, higher levels of
compensation being awarded by the courts and consumer forums in cases of medical
negligence, deeper scrutiny of the cozy relationship between pharmaceutical companies and
medical professionals, excessive and avoidable testing and medication, and others that
somehow give rise to the perception of lack of accountability and responsibility on the part of
hospitals and doctors.

The government and law-enforcing agencies must take necessary action to instil confidence
and trust in the medical fraternity so that they're able to do their job properly without any
fear.

The medical profession is very demanding. The highest level of concentration is needed
while attending to a patient, particularly during surgeries. Such professional skills are
developed with years of work, patience and dedication. Society does not deny the respect and
position commanded by medical professionals, but due to certain black sheep in the
profession, there has been a lack of trust. Often there are reports in the media about medical
negligence-both in public and private hospitals and also about the action taken by patients
and their attendants in claiming compensation in consumer courts.

Social media has created a lot of awareness- again, there are negative and unnecessary
ramifications sometimes-about the holistic approach towards being medical healthy and
curing a number of diseases, especially lifestyle ones, by following different branches of
science. For instance, Ayurveda, Unani, homoeopathy, nature cure using traditional
knowledge and methods, yoga, etc., have been found to be quite successful if used singularly
or in combination with other well-established and mainstream methods of medical science.
There has, however, been stiff resistance from mainstream medical professionals in adopting
and incorporating some of these scientifically proven methods, which sounds bizarre, and
obviously can be inferred as protection of one's turf by shutting out other good things.
Protectionism, in the long run, will prove to be detrimental to the cause of medical
professionals.

The medical fraternity is demanding that policy formulation at the top level should primarily
be by the democratically elected body called the Medical Council of India, rather than the
government-nominated National Medical Council and other government bodies. People in the
country very well know, based on information in the public domain, as to how corrupt,
inefficient and ineffective the Medical Council has been in the past, and there has been very
little change in the way it functions now.

A balance needs to be achieved between the interests of the doctors and hospital
administration on the one hand and the people on the other. The government should not tilt
more towards any one side; public interest should be the primary concern. Similarly, courts
should try to find the right balance between the proven medical negligence and the
compensation the is not alone-sided game. Mechanical application of consumer- protection
laws and guiding principles will not work as a doctor-patient relationship is based on trust,
faith and confidence; it is not a commercial transaction.

TAKEAWAY FOR MANAGERS

► Consumer protection laws provide speedy and effective dispute-resolution methods.

► Consumer courts in India are consumer-friendly, though the dockets are full and matters
are delayed.
► The definition of consumer has been given a wider interpretation over a period of time,
and hence businesses find it, at times, convenient to handle a plethora of consumer disputes.

► As there is no court fee to be paid, a large number of frivolous petitions are filed by so-
called consumers, and judicial forums are taking strict action against such petitioners by
imposing fines.

► For business managers it is not always possible, and also not desirable, to litigate. It is
better, on most occasions, to settle and focus more on business.
CHAPTER 11

ADVANCING FRONTIERS OF
TECHNOLOGY

Technology precedes, law follows. Whether it is cloning or space travel, technology develops
and the law tries to provide the legal and regulatory framework with the passage of time.
Business managers dealing directly or indirectly with technology have to keep themselves
updated on technological developments and legal interpretation.

ANTICIPATING TECHNOLOGICAL AND LEGAL CHANGES: WHO'S RESPONSIBLE?

In August 2017, Bask Iyer, the chief information officer and executive vice president of Dell
and VMware, warned information technology employees that they must update themselves
and upgrade their skills to continue in their jobs, and that the company would not be
responsible for doing that. This came as a surprise, not only to Dell's employees, but also to
many people working in the information technology sector, both at the lower hierarchical
level and in the top management. Though the warning was meant for people working in the
technical department, there was a certain element of truth for almost everyone dealing with
business and responsible for the growth and development, and sometimes even the survival,
of the company.

It has often been seen that technically qualified people possessing a certain set of skills are
adept at using them and consistently try to achieve excellence, and perfection in their
practice. With the rapid changes taking place in the world of technological developments, at
times it becomes important to push the productivity frontier in a direction that might make
existing skills redundant. In such a situation, it is quite obvious that new skill sets- which
keep on changing with the passage of time-are required, irrespective of the emotional bond
that a person may develop with an organization. As any other cog in the wheel, a particular
individual may no longer be required in an organization until and unless he is able to adapt.

The important question to be asked at this juncture is: is the employer responsible for
upgrading the skill set of his existing employees, or at least providing a productive and
encouraging learning environment that makes it possible for people to march with the
changing times? It is difficult to comprehend and agree with what Iyer has said that the entire
onus is on the employee to educate himself. For a simple reason: an employer cannot make
the employee legally liable to upgrade his skill set- almost all the productive time of an
employee is spent under the direct control of the employer, which makes the task of
upgrading his skills the responsibility of the This is the precise reason as to why a large
number of training programmes are organized by almost all companies, both public and
private. Almost twenty- five to thirty years ago, at the time of introduction of computers in
workplaces, extensive training programmes were organized for employees to upgrade their
skills, make them fit to survive and at the same time more productive. The introduction of
computers was a tectonic shift and one simply cannot say that employees at that time would
have been able to upgrade their skills without the contribution of their employers.

There is, however, some merit in Iyer's statement. Proactive employees who, on their own,
are willing to learn new things, are valuable assets for the employer; but any employee who,
despite all efforts made by the employer to train him, does not respond positively, must be
ready to leave.

Interestingly, this does not hold true for the top management, which cannot depend on the
employee to train it and upgrade its skill set. They have to take the initiative and develop the
acumen to learn new techniques of management and the finer aspects of the ever-changing
legal environment.

Indian companies, of late, have had their share of bickering at the top-management level,
which highlights the failure of senior business leaders to anticipate changes in a timely and
proper manner. Financial transparency and accountability are keywords in corporate
governance practice with proper backing of the dynamic legal framework. Being a little
further from strict legality, business leaders must necessarily anticipate the changing norms of
propriety, as understood and practised in different parts of the world.

What is sauce for the goose may not be sauce for the gander in such cases.

But anticipating won't help unless followed by proper action. Of course, actions speak louder
than words! And there can't be any excuse for inaction if things are written clearly on the
wall. The Equifax case illustrates such inaction where technology was miles ahead of the
legal and managerial aspects.

EQUIFAX, EQUIPOISE AND EQUANIMITY

In early September 2017, it was reported that Equifax, the credit reporting bureau, had
compromised the personal data of over 143 million Americans, a little less than half the
population of the US. At a time when efforts were being made for stringent control of data
through data- protection laws in most developing countries, it was rather shocking that
Equifax was so lackadaisical about the critical data it possessed. Harsher penalties and
stringent laws were being talked about. What is incomprehensible is the fact that while the
bureau had talked about taking the utmost care and not sharing any personal details with any
unauthorized person, in reality it has been extremely casual about it. This is going to result in
class action suits and legal repercussions that may change the business

landscape in the US and in the rest of the world too. More and more companies are using
data, which at times are personal and can lead to certain unintended and unimaginable
situations-invasion of privacy. Digital tools for handling big data and data mining are akin to
a child's play of connecting the dots and completing the picture in a jiffy. For instance, a few
years ago, the father of a teenage girl (unmarried) was shocked to receive some sort of
promotional material meant for pregnant women from a store. Horrified, he questioned the
store and was told that the promotional mails were sent on the basis of the shopping
preferences of his daughter in the recent past. Later on, the daughter disclosed that she was
indeed

expecting a baby. Ran ang be love stop kite Such is the world of big data, which is swarming
with hackers. There are certain ethical ones-who primarily hack to find loopholes in cyber-
security and help plug them before any malicious hacker can find and exploit them. But the
world is full of unethical and unscrupulous hackers who can go to any extent to make money
or to simply cause trouble. At times, they also take it as a

challenge just to prove a point.

Equifax knew about the attack on its data system four months before the news broke and
didn't do anything. Four months is a long period in the digital world, where data can be
analysed in the fraction of a second. There are data aggregating and analysing sites that pick-
up stock-market data or other proprietary data and make it public and freely available in
minutes. With the personal information of an individual-social security number in the US,
date of birth, driving licence number, credit history easily available, either gratis or for a
price, miscreants or malfeasants can do almost anything. Sometimes, certain individuals,
inadvertently, share their personal details on social networking sites. Now, if someone uses
that information with malaise intention, who will be responsible? Of course, any publicly
available information shared by mistake is not to be misused by anyone.

However, if someone-whether an individual or a company-responsible for protecting

information, including personal data, is not careful enough to protect it reasonably, it is
deemed to be an intentional act. The greater the importance and value of the property
protected, the higher must be the level of protection used. Despite the legal principles well-
settled for fixing the responsibility, it is going to be difficult to really hold certain Equifax
officials liable as they are well-insulated by indemnity clauses and availability of golden
parachutes in case they are forced to leave the company. So, the company was in a state of
equanimity for a sufficiently long period of time. There appears to be equipoise of different
powers- political, consumer, employee protection, etc.

Hopefully, the legal quagmire will not adversely impact consumer interest.

PRIVACY AS FUNDAMENTAL RIGHT IN INDIA IN THE NEW TECHNOLOGICAL

AGE

Although the pronouncement of the Supreme Court on 24 August 2017 in the landmark
privacy rights of citizens' case¹ was historic, it came on expected lines. From the very
beginning of the hearing in July 2017, it was a foregone conclusion that privacy would be
held by the Supreme Court as an important facet of the fundamental rights granted to the
citizens by the Constitution of India. So, there has been nothing dramatic in the judgment of
the nine-member bench.

There has been a paradigm shift in the enlargement by interpretation of the fundamental
rights since the late 1970s, post-Emergency, when the judiciary, particularly the Supreme
Court, started taking a much more proactive approach, commonly known as judicial activism.
Public interest litigation-PIL-was the famous judicial tool forged during that time. Since then,
the interpretation given to Article 21-right to life and liberty-was excessively broad,
expanding its scope to almost anything directly related to the life of a human being. Life does
not mean living in a vegetative state, but with complete freedom, dignity, and opening up all
the opportunities to rise to one's full potential.

Since then, there has been no doubt that right to privacy had been-whether stated or not-an
important and essential aspect of the fundamental rights granted to citizens. However, no
fundamental right in the Constitution can be said to be absolute in nature as reasonable
restrictions can always be imposed in conjunction with other Constitutional provisions and an
enforceable legal framework. Also, fundamental rights are only enforceable against the
mighty state, as defined in Article 12 of the Constitution, which loosely means the legislature
and executive at all levels, including all the instruments of the state. For all practical
purposes, one can understand the state as the government, the entire public sector, and.
almost all government-aided institutions. Typically, with a few rare exceptions, fundamental
rights are not enforceable against private entities. With ever-increasing security threats and
issues related to anonymous dealings, both of which require government intervention and the
government in turn requires personal data to manage them, it would be rather surprising if
there should be a massive change in the manner in which privacy has so far been treated and
dealt with by the government. One should not expect any sudden melodramatic changes,
whether related to Aadhaar or any other personal-data-collection mechanism.

Privacy issues in the fast-developing technology era will increasingly become more ticklish
with the newer applications of artificial intelligence (AI). The impact of Al on employability
will also be unavoidable. Legal vistas have to be expanded to take care of developing AI, and
business managers will do well to keep a tab on them.

ARTIFICIAL INTELLIGENCE AND EMPLOYABILITY: BUSINESS, POLITICS AND

LAW

In January 2017, it was reported in the media that Infosys had released around 9000
employees from low-end jobs due to automation in the previous year. This has been
confirmed by the company with additional information that these people were to be better
used by giving necessary training to make them fit for new challenges, including the use of
artificial intelligence.

Interestingly, in January 2017 some of the world's top business leaders-Nadella from
Microsoft and Ginni Rometty from IBM-were pushing the AI agenda at the World Economic
Forum at Davos, Switzerland. They advocated the creation of 'new-collar jobs' a term

signifying a new type of job that neither blue-collar

(manual) nor white-collar (managerial) employees could

embrace. Obviously, training in new and cutting-edge

technology is required for manning such job profiles.

Such technology will be owned by companies by investing

heavily in research, development and innovation. This

will lead to a regular flow of revenues and the opening

up of newer avenues for business. This is in line with the purpose of technology firms to push
the productivity frontier to achieve better, safer, more convenient and cheaper solutions to
problems faced by the human race. So, the moral high ground of doing something for the
betterment of human beings is well used to advance business interests as well. However,
there arises the serious problem of making a large number of individuals unemployed as the
employability bar is raised. Due to automation and the use of Al at all levels-low- level jobs
are not the only ones threatened-individuals are expected to equip themselves with newer
skill sets

Loss of jobs is never welcome news for the public at large and for political leaders.
Protectionism is usually the norm for politicians as it helps them in keeping the electorate
contented and in increasing, and not diminishing, their chances of getting re-elected. Business
leaders, on the other hand, do look forward anxiously to grab any opportunity to cut the
workforce without a negative impact on production. It is only because of workers' unions and
socially beneficial and protective legislation that businesses are not able to adopt automation
to the extent made possible by technological advancement. There is always a stiff resistance
in most democratic countries; monarchies and dictatorships follow a different set of rules.

With the world population increasing every day, although in some developed and rich
countries the population is stagnant and even on the decline, a greater pressure is exerted on
developing and backward countries with human resources at a low level. The use of AI is
expected to further widen the gulf between individuals just fit to be employed at the lowest
level and those who can transcend the technology barrier and make a quantum jump. The
infrastructure and manpower required to provide requisite training to all to catapult them to
the next levels of employability are woefully inadequate in all countries. So, the political will
to bite the bullet is needed, which is a bit too much to expect from politicians typically
interested in the low- hanging fruit.

The courts in countries with a written constitution, declared to work for the interest of the
people, will surely have a say in such a situation. For instance, higher courts in India-the
Supreme Court and the high courts-will definitely question the legal feasibility and
constitutional validity of any such decision made by the government to push the
employability bar higher. Also, in other vibrant democracies with independent and fair
judicial systems like the US, the question of social good vis-à-vis employment will gain
traction. The moral high ground, which expectedly shall be used by political and business
leaders, of making the present generation better prepared to face the uncertainties of
tomorrow, may cut no ice with the people and even the courts, which at times can be heavily
populist.

The development of Al is uncertain and the law will find it very difficult to regulate it.
Governments in different parts of the world have sometimes kept the evolution of technology
under close watch and kept a role, howsoever small it may be, for themselves while scripting
the legal and political saga. Despite its very open policies, the US subtly controlled Internet
domain names, etc. But it decided to let that control go and allowed private players to
regulate it the way they liked. This is a fantastic development depicting immense faith in free
technological development.

ICANN: FROM AMERICAN OVERSIGHT TO MULTI-STAKEHOLDERISM

On 30 September 2016, the US allowed the contract between the Internet Corporation for
Assigned Names and Numbers (ICANN) and the US Department of Commerce to lapse. This
was a momentous decision taken by the American government to let go of its right of
oversight on the working of ICANN and fulfil its promise to democratize and privatize the
corporation fully.

1 ICANN was incorporated in 1998 in California as a non-profit organization to manage the

Internet's domain name system. As the name suggests, it was formed to manage the Internet's
address system, comprising names like .com and linking them with numbers that make the
system function. At that time also, it was created primarily as a private organization without
the control of any state players. However, as it all had started in the United States, the US
government maintained an indirect control through an oversight contract with the ICANN. It
was decided that the US would complete its role of oversight and leave the Internet
governance within two years, which quite obviously was unrealistic and had the US done
that, it would have been too hasty a departure. Now, after two decades, the time is ripe for the
US to take the plunge.

One should not mistake the American move as magnanimous and charitable. There are
reasons for this decision. In the last few years there have been serious allegations made
against the US government for using its subtle control over the Internet to gain access to
confidential and private information on the grounds of safety and security of the country and
world peace. There may be merit in what the US stated as reasons, however, the level of
confidence globally in the American control over accessible data has been subsiding. The
manner in which the Internet can be controlled to advance a country's interests has been
portrayed in various science- fiction works, books and films. But who knows how long it will
take for the reel to be real? The way the Internet rules our lives, it will be a disaster if any
country is allowed to control it. Being the leader of the unipolar world post- Soviet Union
disintegration since 1991, the US had been calling the shots on most global matters and was
considered

to be responsible enough to care for global welfare. That is precisely the reason why during
the initial days of ICANN, global technological giants, and organizations involved in non-
profit and non-governmental work, national governments, and several other stakeholders
agreed upon the American involvement and indirect control of the Internet names and
numbers.

Letting go of this control, howsoever small, indirect and subtle it may have been, must not
have been easy for the US. There have been voices in the country vehemently opposing this
decision as it has been viewed as handing over certain American property to the world. In the
year 2000, the Internet had become too important for the US to leave control, but today the
importance has transformed into a necessity and a vital strategic tool. Given a choice, the US
would like to control the Internet forever, but in a globalized economy with the absence of a
global sovereign, mutual benefits between sovereign nations guide policymaking and
implementation. Wishes do not let any country rule the world, and the United States in no
exception.

The same arguments in favour of control by the US for the last two decades were used against
making ICANN controlled by multi-stakeholders. Countries like China, Russia and others
might want to take control of the Internet by hook or by crook to wreak havoc in the digital
world. And as our lives today are dictated to a large extent by digital control, this may create
chaos in the physical world. These arguments were made in courts in several American states;
however, the court decisions went against the continuance of American control and
dominance. The fact of the matter after 30 September 2016 is that the ICANN became private
with control by

multiple stakeholders. This is good news for India, simply because of Indian superiority in
the digital world. We Indians can make the best of this change and look forward to long-
lasting dividends. Indian software companies are looking forward to doing high-quality work,
rather than being the derogatively called 'cyber coolies' of the world. Given fair opportunity
to try their hand at the high-end work, which can have a true impact on the world, Indian
companies are poised to do a fantastic job.

TAKEAWAY FOR MANAGERS

► For business managers, moving ahead with technology is mandatory; it's not an option.

► Legal developments-by legislature or judicial interpretation-typically follow technological

innovations.

► Technology usually flows across international boundaries, but law has territorial effect.
► Regulating information technology gains priority over privacy and public interest.

Business applications of technological developments have to abide by the legal framework

determined by sovereign nations.