Banyan Tree Holding (P) Limited vs A. Murali Krishna Reddy & Anr. on 23 November, 2009

Banyan Tree Holding (P) Limited vs A. Murali Krishna Reddy & Anr. on 23 November, 2009

Bench: Chief Justice, S. Muralidhar

This article is written by Annu Gond, in her 5th year of B.A.LL.B from Pt.Som Chandra Dwivedi Vidhi Mahavidyalaya, Prayagraj, during her internship at LeDroit India.

List of topics covered in this article 

• Abstract 
• Introduction 
• Relevancy of the case
• Important provision 
• Facts of the case 
• Argument by the advocate 
• Issue raised in this case
• Detailed submission by the parties 
• Detailed discussion on the judgement cited by the parties 
• Opinion of the bench
• Final decision 
• Conclusion 

“IF YOUR BUSINESS IS NOT ON THE INTERNET , THEN YOUR BUSINESS WILL BE OUT OF YOUR BUSINESS”— BILL GATES

Abstract

In the case of Banyan Tree Holding (P) Limited vs A. Murali Krishna Reddy & Anr. on 23 November, 2009, the Delhi High Court was confronted with a complex issue of jurisdiction in the context of internet-related disputes. The case was presided over by Hon’ble Chief Justice and Hon’ble Dr. Justice S. Muralidhar. The dispute arose between Banyan Tree Holding (P) Limited, a Singapore-based company, and A. Murali Krishna Reddy & Anr., based in Hyderabad, India. The crux of the matter revolved around the use of the word mark ‘Banyan Tree’ and the banyan tree device by the defendants, which the plaintiff claimed was deceptively similar to their own and was an attempt to encash on their reputation and goodwill.

Introduction 

In the rapidly evolving digital landscape, where websites transcend geographical boundaries, the question of territorial jurisdiction in intellectual property disputes has become a legal conundrum. The case of Banyan Tree Holding (P) Limited vs. A. Murali Krishna Reddy, decided by the Delhi High Court on November 23, 2009, stands as a landmark judgment that addresses this challenge head-on. This case grappled with the critical issue of whether a court can assume jurisdiction over a trademark passing-off action based solely on the accessibility of a defendant’s website in the forum state, particularly when neither party is located within the court’s territorial limits.

By reframing and answering three pivotal questions, the court not only clarified the principles governing jurisdiction in internet-related disputes but also set a precedent that balances the global reach of the internet with the localized nature of legal authority. This detailed case study delves into the factual and procedural intricacies, legal issues, parties’ submissions, judicial precedents, the court’s reasoning, and the broader implications of the decision, offering a compelling narrative of law meeting technology.

Relevancy of the Case: 

Does the accessibility of a website at a particular location invite the local court’s jurisdiction in a passing-off claim?

Statutes and Provisions Involved

• The Code of Civil Procedure, 1908 (Section 20)
• The Trade Marks Act, 1999 (Section 134(2))
• The Copyright Act, 1957 (Section 62(2))
• The Information Technology Act, 2000 (Section 2(1)(j), 2 (1)(k), 11, 12, 13, 75)

Facts of the case

Plaintiff was a company involved in the hospitality business and had a registered office in Singapore. Since 1994, they have been using the word ‘Banyan Tree’ and maintained the websites, namely, ‘www.banyantree.com’ and ‘www.banyantreespa.com’, since 1996 which were also accessible in India.

Plaintiff was operating 15 spas in India in collaboration with the Oberoi group and does not hold registration for ‘Banyan Tree’ mark and device in India.

Defendant registered at Andhra Pradesh initiated a project under the name ‘Banyan Tree Retreat’ which is similar to that of plaintiff and advertised it through their website ‘www.makprojects.com/banyantree’.

Suit was filed by the plaintiff for infringement of trademark. The issue was regarding the jurisdiction of court as neither the plaintiff nor the defendant resides or have registered office within the territorial jurisdiction of the court.

Prominent Arguments by the Advocates

The plaintiff’s counsel argued that the court has territorial jurisdiction on the grounds of Section 20 of the Code of Civil Procedure, 1908. The defendant’s brochure depicts the business to be in Delhi. Their website is interactive in nature and not passive. The plaintiff also relied on the doctrine of passing off.

The plaintiff’s counsel also highlighted Section 62(2) of the Copyright Act, 1957, to sue the defendant in a court within whose jurisdiction the plaintiff resides or works for gain.

Key legal positions established in the case

The court reframed the questions referred to it for its opinion as follows:

1. For the purposes of a passing off action, or an infringement action where the Plaintiff is not carrying on business within the jurisdiction of a court, in what circumstances can it be said that the hosting of a universally accessible website by the Defendants lends jurisdiction to such Court where such suit is filed (“the forum court”)?

Court while rejecting the reasoning of Casio India Co. Limited v. Ashita Tele Systems Pvt. Limited[1] and supporting Independent News Service Pvt. Limited v. India Broadcast Live Llc and Ors.[2] held that a passive website with no intention to specifically target audiences outside the state where the host of the website is located, cannot vest the forum court with jurisdiction.

For the purposes of a passing off action, or an infringement action where the Plaintiff is not carrying on business within the jurisdiction of a court, and in the absence of a long-arm statute, in order to satisfy the forum court that it has jurisdiction to entertain the suit, the Plaintiff would have to show that the Defendant “purposefully availed” itself of the jurisdiction of the forum court.

For this a conjunction of ‘effects test’ and ‘sliding scale’ is to be applied where plaintiff prima facie has to show that the nature of the activity indulged in by the Defendant by the use of the website was with an intention to conclude a commercial transaction with the website user and that the specific targeting of the forum state by the Defendant resulted in an injury or harm to the Plaintiff within the forum state.

2. In a passing off or infringement action, where the defendant is sought to be sued on the basis that its website is accessible in the forum state, what is the extent of the burden on the Plaintiff to prima facie establish that the forum court has jurisdiction to entertain the suit?

The court referred to Cybersell, Inc. v. Cybersell. Inc.[3] and Toys “R” US, v. Step Two[4] and applied the tighter version of the effects test. A mere hosting of a website or posting of an advertisement on a passive website by the defendant is not sufficient.

For the purposes of Section 20 (c) CPC, in order to show that some part of the cause of action has arisen in the forum state by the use of the internet by the Defendant the Plaintiff will have to show prima facie that the said website, whether euphemistically termed as “passive plus” or “interactive”, was specifically targeted at viewers in the forum state for commercial transactions. The Plaintiff would have to plead this and produce material to prima facie show that some commercial transaction using the website was entered into by the Defendant with a user of its website within the forum state resulting in an injury or harm to the Plaintiff within the forum state.

3. Is it permissible for the Plaintiff to establish such a prima facie case through “trap orders” or “trap transactions”?

Yes

Court referred to Bostitch Inc v McGarry & Cole Ltd[5]; Thomas French & Sons Ltd v John Rhind & Sons Ltd[6]; Pearson Brothers v Valentine & Co[7]; Procea Products Ltd v Evans & Sons Ltd[8] and observed that evidence of trap orders has been accepted by courts in both trademark infringements and passing off cases, where the nature of business and nature of goods or services offered would be relevant.

Court held that the commercial transaction entered into by the Defendant with an internet user located within the jurisdiction of the forum court cannot possibly be a solitary trap transaction since that would not be an instance of “purposeful” availment by the Defendant. It would have to be a real commercial transaction that the Defendant has with someone not set up by the Plaintiff itself.

If the only evidence is in the form of a series of trap transactions, they have to be shown as having been obtained using fair means. The Plaintiff seeking to establish jurisdiction on the basis of such trap transactions would have to aver unambiguously in the plaint, and also place along with-it supporting material, to prima facie show that the trap transactions relied upon satisfy the above test.

Detailed Submission of Parties

Banyan Tree argued that the Delhi High Court had jurisdiction under Section 20(c) CPC because part of the cause of action arose in Delhi. Their submissions focused on three factors: the nature of the defendants’ website, the defendants’ intention to market their services in Delhi, and the effect of their actions in Delhi. The plaintiff classified websites as passive, interactive, or active, asserting that the defendants’ website was “passive plus” or interactive, as it allowed users to submit feedback and access contact information. They argued that the absence of “purposeful avoidance” (e.g., geo-blocking Delhi users) implied that the defendants targeted all viewers, including those in Delhi.

Banyan Tree further contended that even a passive website could confer jurisdiction if its effects were felt in the forum state, such as harm to the plaintiff’s goodwill. The brochure sent to a Delhi resident was cited as evidence of the defendants’ commercial activity in Delhi, reinforcing the claim of purposeful availment. The plaintiff relied on a plethora of foreign and Indian precedents, including U.S. cases like Zippo Mfg. Co. v. Zippo Dot Com, Inc. and Indian cases like Casio India Co. Limited v. Ashita Tele Systems Pvt. Limited, to argue that website accessibility and interactivity were sufficient to establish jurisdiction.

The defendants, while their specific submissions are not detailed in the judgment, contested the court’s jurisdiction, arguing that their operations were confined to Hyderabad and that mere website accessibility did not create a cause of action in Delhi. They likely emphasized the lack of evidence showing specific targeting of Delhi residents or substantial commercial activity in the city, challenging the plaintiff’s reliance on a single brochure and the website’s universal accessibility. The defendants’ position aligned with U.S. cases like Cybersell, Inc. v. Cybersell, Inc., which required clear evidence of purposeful availment for jurisdiction.

Detailed Discussion on Judgments Cited by Parties

The court’s analysis was enriched by an extensive survey of judicial precedents from the U.S., Canada, the U.K., Australia, and India, which provided a comparative framework for addressing internet-based jurisdiction. The key judgments cited, their complete citations, and their context in the case are as follows:

• International Shoe Co. v. Washington, 326 U.S. 340 (1945): This U.S. Supreme Court decision established the “minimum contacts” test for jurisdiction over non-resident defendants, requiring that they “purposefully avail” themselves of the forum state’s privileges and that exercising jurisdiction aligns with fair play and substantial justice. The court used this to underscore the need for a defendant’s deliberate connection with the forum state.
• Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985): The U.S. Supreme Court held that jurisdiction could be exercised over a non-resident defendant whose actions were “purposefully directed” toward the forum state, even without physical presence, if a substantial connection existed. The court applied this to emphasize that random or fortuitous contacts do not suffice for jurisdiction.
• Asahi Metal Industries v. Superior Court, 480 U.S. 102 (1987): The U.S. Supreme Court ruled that merely placing a product into the stream of commerce does not constitute purposeful availment unless the defendant’s actions are directed toward the forum state. The court used this to caution against assuming jurisdiction based solely on the global reach of a website.
• Inset Systems Inc. v. Instruction Set Inc., 937 F. Supp. 161 (D. Conn. 1996): A U.S. District Court held that a defendant’s website with a toll-free number constituted purposeful availment in Connecticut, given its accessibility and advertising. The court noted this early, liberal approach but contrasted it with stricter subsequent rulings.
• Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996): A New York court declined jurisdiction over a Missouri defendant’s passive website, holding that creating a website accessible globally does not equate to purposeful availment. The court endorsed this stricter approach, aligning it with the need for targeted activity.

Opinion of the Bench

The mere fact that a website is accessible to a specific place will not invite the court’s jurisdiction to a passing-off action. Factors like the level of interactivity and undertaking of commercial activity will also play an imperative role.

The bench analysed the position in the US with the help of Zippo Manufacturing Co. v. Zippo Dot Com, Inc. Drawing inspiration from the UK, it referred to the case of 1-800 Flowers Inc v. Phonenames.

The bench believed a division bench should decide this case and settle the issue with authority.

The bench passed an order to transfer the case to a division bench.

Final decision 

The Division Bench answered the reframed questions and referred the case back to the learned Single Judge to determine whether Banyan Tree could prima facie establish the Delhi High Court’s jurisdiction based on the principles laid down. The court did not decide the merits of the passing-off claim, limiting its ruling to the jurisdictional issue. The matter was listed before the Single Judge on December 7, 2009, for further proceedings.

Conclusion 

The case of Banyan Tree Holding (P) Limited vs A. Murali Krishna Reddy & Anr. is a significant one as it delves into the complex issue of jurisdiction in internet-related disputes. The court’s observations and references to the development of the law in other jurisdictions provide a comprehensive understanding of how jurisdiction is determined in such cases. The case also highlights the importance of the nature of a website, the intention of the website’s host,and the effect of the website’s actions in determining whether a court has territorial jurisdiction.