IPRMENTLAW WEEKLY HIGHLIGHTS (October 2 -8, 2023)

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Netflix could move tribunal against Rs 196-crore tax demand

In a strategic move indicative of their stance on financial matters, Netflix is poised to file an appeal before the esteemed Income Tax Appellate Tribunal. This decision comes in response to the substantial Rs 196-crore tax demand asserted by the Income Tax department, stemming from alleged tax evasion practices. The backdrop of this legal standoff involves the earlier ruling by the Dispute Resolution Panel (DRP) in favour of the department, validating the tax demand raised by its international taxation wing.

The crux of the matter lies in the department’s assertion that Netflix Entertainment Services (India) LLP functioned as a dependent agent permanent establishment (DAPE) of Netflix. The financial landscape under scrutiny reveals that between April 2020 and December 2020, the company amassed a staggering revenue surpassing Rs 1,145 crore. Notably, the profit margin reached a commendable Rs 1,008 crore, with an attribution to Indian operations calculated at Rs 503 crore.

A pivotal argument presented by the department centres around Netflix’s Open Connect Appliance (OCA), an innovative content distribution network specifically crafted to seamlessly deliver its array of TV shows and movies while mitigating congestion and associated fees. The core of contention is the OCA’s operational base in India, which, according to the department, warrants tax liabilities within the nation’s boundaries.

Netflix Entertainment Services India’s financial data, curated by Tofler, illuminates the fiscal trajectory, revealing a commendable closure to the financial year 2021 with gross revenue tallying at Rs 1,529.36 crore. This fiscal imbroglio resonates with India’s initiation of the ‘Google tax’ in 2016, primarily targeting digital advertisements, a tax ambit broadened in 2020 to encompass e-commerce supplies or services. This legislative evolution aimed to address the pertinent issue of digital conglomerates amassing substantial revenues from a vast user base while evading national taxation.

Evidencing the growing significance of India in the global over-the-top (OTT) services sector, an EY media report underscores the country’s distinction as the largest market based on time spent on these platforms. Experts foresee a substantial surge in subscription revenues for the Indian OTT market, poised to reach a staggering $3 billion by the year 2024. The intricate interplay of tax laws and streaming dynamics underscores a nuanced economic landscape, one where Netflix is determined to assert its position with unwavering resolve.

India’s prominence on Netflix’s global stage burgeoned significantly in 2022, credited to a robust pricing strategy inaugurated in December 2021. This strategic manoeuvre was buttressed by an impressive portfolio of Indian originals and licensed movies, propelling the nation to record the highest net subscriber additions worldwide.

Delhi HC halts pizza outlet from using ‘Dominick Pizza’ due to trademark infringement by Domino’s

The Delhi High Court has issued a permanent injunction, barring a Ghaziabad-based pizza outlet from utilising the trademark ‘Dominick Pizza’, deeming it an infringement on the trademark of multinational pizza giant, Domino’s Pizza.

The bare perusal of the comparison of the two marks is given below:

The Delhi High Court has issued a permanent injunction, barring a Ghaziabad-based pizza outlet from utilising the trademark ‘Dominick Pizza’, deeming it an infringement on the trademark of multinational pizza giant, Domino’s Pizza.

Justice C. Hari Shankar, presiding over the case, stressed on the phonetic similarity between ‘Domino’s Pizza’ and ‘Dominick’s Pizza,’ characterising them as deceptively similar.

The case stemmed from a trademark infringement lawsuit filed by Domino’s against Dominick Pizza for employing an identical name and employing registered trademarks like ‘Cheese Burst’ and ‘Pasta Italiano.’

The judge pointed out that confusion was highly likely to arise when a customer of average intelligence with an imperfect memory visits a Domino’s outlet and subsequently frequents a Dominick’s Pizza outlet.

The court further stressed the responsibility of courts to prevent such imitative attempts in trademarks, particularly in the context of consumable items or eateries.

In August 2022, the court had issued an interim order against Dominick Pizza. In the final order, Justice Shankar expressed disapproval of operating an eatery with a mark deceptively similar to a well-known mark.

Moreover, the court clarified that the determination of whether an infringing mark may cause confusion is primarily a matter of subjective discretion for the court and not a matter to be decided based on customer evidence. The court found that Dominick Pizza had unmistakably infringed Domino’s Pizza’s trademark. Hence, it restrained Dominick Pizza from using the name ‘Dominick Pizza’ as well as the marks ‘Cheese Burst’ and ‘Pasta Italiano.’

Dominick Pizza was also directed to withdraw its application from the Trade Marks Registry for the registration of the contested mark and transfer its internet domain names to Domino’s.

Read order here.

Spotify Threatens Uruguay Exit Amid Proposed Changes to Music Copyright Law

Music streaming giant Spotify is considering withdrawal from Uruguay over proposed amendments to music copyright law in the market.

The modifications were initiated by the Uruguayan Society of Performers (SUDEI) earlier this year, advocating for revisions to the nation’s music copyright regulations.

The Parliament of Uruguay is voting on a budget bill that includes these proposed changes.

According to local publication El Observador, SUDEI successfully lobbied for the inclusion of two articles in Uruguay’s ‘Rendición de Cuentas’—Articles 284 and 285 — through the Executive Branch of the government.

SUDEI spokesperson told El Observador at the time that the group is not against the platforms, but is campaigning for the fair distribution of revenue.

As explained by Bloomberg, Article 284 would see ‘social networks and the Internet [added] as formats for which, if a song is reproduced, the performer is entitled to financial remuneration’. Further, introduction of the broader focused Article 285 would set into copyright law the ‘right to a fair and equitable remuneration’ for all ‘agreements entered into by authors, composers, performers, directors and screenwriters with respect to their faculty of public communication and making available to the public of phonograms and audiovisual recordings’.

As reported by news outlet El Pais, Spotify sent a letter to the Minister of Education and Culture, in July arguing that the proposed changes imply “an additional mandatory payment for music services”. In other words, Spotify argues that if the amendments are made, it would potentially be required “to pay twice for the same music” – a move which could jeopardize its operations in the Uruguayan market.

A statement from Spotify read that it pays nearly 70% of every dollar it generates from music to the record labels and publishers that represent and pay artists and songwriters, and we are their largest revenue driver, having contributed more than $40 billion to date. They further claim that music industry in Uruguay has grown 20% in 2022 alone and that Spotify wants to continue giving artists the opportunity to live off their art and Uruguayan fans the opportunity to enjoy and be inspired by it.

Spotify issued a warning in its letter to Uruguay’s Ministry of Education and Culture, cautioning of its potential withdrawal from the market if the proposed changes are enacted.

While only a smaller player in the global music business, the debate around introducing Equitable Remuneration into copyright law in Uruguay will be watched closely in other markets.

In the UK for example, the notion of introducing ‘Equitable Remuneration’ has been a matter of serious contention.

ER was previously supported by artists including Paul McCartney, Coldplay’s Chris Martin, and Stevie Nicks – but fiercely opposed by indie and major labels, who argued it would “dramatically shrink the total pool of royalties available to labels and artists”.

Applying ER to streams would align the way artists are paid their streaming royalties with the way royalties are paid to artists from radio play in the UK.

Currently, a portion (50%) of recorded music royalties from radio in the UK is paid directly to performers via a collection society – bypassing artists’ record label deals, and therefore also bypassing any recoupment charges those artists might owe their label/s for previously-paid advances.

In November 2021, in a draft Bill titled Copyright (Rights and Remuneration of Musicians, Etc), there was proposal that ‘Equitable Remuneration’ should be introduced into UK law. That so-called ‘Brennan bill’ was rejected by the British Parliament in early December 2021.

Amitabh Bachchan’s Flipkart ad ‘biased’, ‘misleading’, says CAIT, seeks withdrawal

The Confederation of All India Traders (CAIT) on October 2 issued a statement that condemns actor Amitabh Bachchan for a “biased” and “misleading” advertisement for e-commerce platform Flipkart.

The traders’ body, in a strongly-worded letter, said Bachchan’s ad “affects livelihood” and “hurts local businesses”, and that it would approach the Ministry of Information & Broadcasting if the ad is not withdrawn.

While Bachchan is seen in a couple of short ads posted by Flipkart on its YouTube channel, the one that has sparked a row pertained to mobile deals offered by the platform in its upcoming ‘Big Billion Days’ sale.

In the ad which is now unavailable on Flipkart’s YouTube channel, Bachchan was reportedly heard as saying that the mobile deals offered by the e-commerce portal are not available at the retail outlets.

The CAIT were reported saying that this advertisement was unjust, unethical, and is misguiding customers solely for Flipkart’s benefits, thereby causing significant harm to the business of local shopkeepers. They further urged Flipkart to withdraw the advertisement and also said if the concern is not addressed, then they shall seek intervention from the Ministry of Information & Broadcasting through the Confederation of All India Traders (CAIT) New Delhi.

Before the CAIT marked its objection to Bachchan’s ad, the All India Mobile Retailers Association (AIMRA) slammed the actor for the “misleading” promotion of Flipkart.

The association, which represents 150,000 mobile retailers, asked the leading smartphone brands to issue “issue either a joint or individual statement in prominent news media outlets”, stating that the content of the controversial ad is not accurate.

These advertisements have been influencing the buying behaviour of customers through false and misleading statements, such as the one promoted by Flipkart with the endorsement of the mega star, Mr Amitabh Bachchan, stating, ‘yeh Dukan per nahin milne wala’ (This will not be found in stores),” AIMRA stated in its letter to the smartphone brands.

Ranbir Kapoor Summoned In Mahadev Gaming App Case

Actor Ranbir Kapoor has been summoned by the Enforcement Directorate in a case involving an online gaming app.

Ranbir Kapoor appeared in the promotions for the Mahadev Online Book App. The ED has claimed that he was given a large amount of money in exchange, which was from the proceeds of a crime.

The agency said 12 other actors, from Bollywood and Tollywood, are on the agency’s radar. At least 100 influencers are also under the scanner and all of these people may be summoned as part of the investigation.

The promoters, Sourabh Chandrakar and Ravi Uppal, hail from Bhilai in Chhattisgarh but the app was being run from the company’s headquarters in UAE. It has call centres in Sri Lanka, Nepal and UAE.

The agency claimed the Mahadev app is part of an umbrella syndicate arranging online platforms for illegal betting websites to enrol new users, create user IDs and launder money through a layered web of benami bank accounts.

An ED official said the promoters ran 4-5 such apps, which have been raking in profits of ₹ 200 crore every day.

Last month, the agency had conducted searches against the money-laundering networks linked with the Mahadev app in Kolkata, Bhopal and Mumbai, among other places, and retrieved incriminating evidence. It had also frozen or seized proceeds of crime worth ₹ 417 crore.

Ranbir Kapoor has sought two weeks time to appear before the Enforcement Directorate in connection with the Mahadev betting app case.

Disney+ Hotstar Vs AIDCF: OTT Platform Is Not A TV Channel, Says TDSAT

In a landmark judgement, the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) has ruled that a streaming platform is not akin to a TV channel.

The tribunal made the observation on October 4 while hearing a plea filed by the All India Digital Cable Federation (AIDCF) against Star India. In its petition, the industry body urged the tribunal to direct Star India to stop streaming cricket matches for free on its OTT Platform, Disney + Hotstar.

The All India Digital Cable Federation argued that Star India is charging them to broadcast Star Sports while the broadcast giant is streaming cricket matches for free on Disney+ Hotstar

The AIDCF urged the tribunal to direct Star India to stop streaming cricket matches for free on its OTT platform.

Rejecting “interim relief” to the AIDCF, the TDSAT judgment stated, “Prima facie, the OTT platform is not a TV channel, nor is the respondent requiring any permission or a license from the Central Government. Moreover, looking at the provisions of the Information Technology Act, 2000, and the rules framed thereunder for the year 2021, and looking at the provisions of the TRAI Act, 1997, there is no prima facie case with this petitioner.”

The next hearing is scheduled for December 18.

In June, Disney Star announced it will make Asia Cup and ICC World Cup available as free-to-view to all mobile phone users accessing Disney+ Hotstar. Earlier, JioCinema had offered FIFA World Cup and more recently Indian Premier Leauge matches for free.

Read order here.

Govt notifies amendments to decriminalise Cable TV law

In a bid to boost investor confidence, the government on 05th October, 2023 notified amendments to the Cable Television Networks Rules that provide the operational mechanism for implementation of the decriminalised provisions of the Cable Television Networks (Regulation) Act.

Section 16 of the Cable Television Networks (Regulation) Act, 1995 dealt with the punishment for contraventions under any of its provisions. This section had provision for imprisonment, which might extend up to two years in case of the first instance and five years for every subsequent offence.

The imprisonment provisions have been now replaced with a monetary penalty and other non-monetary measures like advisory, warning and censure, an official statement said.

The punishments specified under Section 16 of the Cable Television Networks (Regulation) Act, 1995 were decriminalized through the Jan Vishwas (Amendment of Provision) Act, 2023, the Ministry of Information and Broadcasting said.

The amendments are expected to encourage compliance with the Act without resorting to harsh punishments and sensitivity to minor or unintended contraventions, the statement said.

The inclusion of advisory, censure, and warnings in the range of penalties suggests the focus is on educating and encouraging compliance rather than solely punishing contraventions, it added.

The amended provision allows for the use of a range of penalties, which provides flexibility in addressing different types of contraventions. It allows for a more proportional response to the nature, specificity and severity of the contravention, the statement said.

The amendment in the rules defines a “designated officer” for imposing penalties and also streamlines the enforcement process by making it simple in addition to unburdening the criminal justice system.

It addresses subsequent contraventions and in addition to the provision for higher penalties, includes the provisions for suspension or cancellation of registration. This promotes consistency and discourages habitual or repeated contraventions.

The inclusion of an appeal mechanism provides individuals or entities the opportunity to challenge penalties or decisions. This ensures a fair and transparent process and safeguards against potential abuse of power.

The definition of common terms in the cable industry, like “platform services” and “local cable operator” have been defined in the rules for the first time to bring about uniformity in their usage.

Disney said to be in talks with Adani, Sun TV to sell India business

Walt Disney Co. is holding preliminary discussions with potential buyers for its India streaming and television business including with billionaires like Gautam Adani and Kalanithi Maran, according to reports.

The US entertainment giant’s senior executives have also gauged the interest of private equity funds considering the company is exploring a range of options, which could involve selling part of the Indian operations or a combination of the unit’s assets including sports rights and regional streaming service Disney+ Hotstar.

Disney has been weighing strategic options for its business in India including an outright sale or setting up a joint venture, Bloomberg News reported in July after the unit lost its streaming rights to the Indian Premier League cricket tournament to Viacom18 Media Pvt.

A potential acquisition could complement Maran’s broadcasting company, Sun TV Network Ltd., while for the Adani Group, it could help expand its newly acquired New Delhi Television Ltd., the people said. They added that deliberations are still at a very preliminary stage and any deal may not happen.

The discussions around the sale of Disney’s India unit show how the market dynamics have been disrupted ever since Ambani’s conglomerate scooped up the streaming rights to the Indian Premier League for $2.7 billion and chose to broadcast it for free earlier this year. Ambani scored another win by bagging a multi-year pact to broadcast Warner Bros Discovery Inc.’s HBO and other content that was previously with Disney.

Disney is now using Reliance’s playbook and streaming the ongoing Cricket World Cup in India for free — a move aimed at clawing back some subscribers even if it means sacrificing revenue in the cricket-crazy nation of 1.4 billion people.

Disney, however, is likely getting a boost as marquee global brands line up to tap India’s massive consumer base, with advertising slots being sold at $3,600 a second.

Even as Disney Star has battled sliding subscriber numbers after losing the streaming rights to the Indian Premier League, the media group hasn’t ceded the entire cricket business, securing the television rights through 2027.

Last year, Disney Star agreed to license the TV rights for International Cricket Council men’s matches to ZEE Entertainment Enterprises Ltd. for four years, with Disney+ Hotstar retaining the digital rights.

Delhi HC rejects plea to ban distasteful anti-tobacco imagery in ads

The Delhi High Court has dismissed a petition seeking prohibition on the display of anti-tobacco health spots containing “graphic or gross images” during films in cinemas, TV or OTT platforms.

Justice Subramonium Prasad observed that the graphic description given in the Government issued advertisements are meant to be “eye-openers for the people” to not use tobacco and tobacco products and therefore, is in public interest.

Calling the plea a gross misuse of process of law, Justice Prasad dismissed the petition. But warned the lawyer about not filing such kind of frivolous petitions in future.

The Petitioner was aggrieved by incorporation and prevalence of “distasteful, gross and graphic anti-tobacco imagery” in the health spots played during the screening of movies and TV programmes.

Noting the harmful effects of smoking on the health, the court said that the Government of India brought in the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003, which provides for statutory warning on the packets of cigarettes and other tobacco products and also the manner in which the specified warning has to be made.

Rejecting the plea, the court said that the plea has been backed by the “tobacco industry lobby” to prevent the Government from creating awareness against tobacco, which is the sole cause responsible for a number of ailments among men and women.

Read order here.

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