Music on the Block: How Music Artists can Benefit from Blockchain Technology

All of us make use of music streaming services quite frequently. But have we ever stopped to wonder how the creators or artists get paid for their music? More often than not, music artists are forced to settle with modest royalty earnings. Nevertheless, the advent of blockchain technology has ushered in a new era and this technology has the potential to ensure that music artists get adequate compensation for their efforts and talent.

All have enjoyed music throughout the ages. The music industry has evolved from EP records to Cassettes to CDs to MP3s. Currently, music is enjoyed predominantly via digital streaming platforms such as Spotify, and Apple Music, and closer home services such as Airtel Wynk, Times Music, JioSaavn, etc.

However, the growth in streaming services like Spotify has not benefited individual artists who typically receive very little royalty overall because of slowing album sales. Taylor Swift, a famous musician, went to the extent of removing her music from Spotify due to the low per-stream royalty.

The advent of blockchain technology has set the stage for the music industry to undergo another evolution. With the blockchain, artists can create a token-based economy where the value is derived from an artist’s work. When a token is created, the artists convert their intellectual property into a financial asset that all of us can purchase. All holders of this token receive a portion of the artists’ revenue. Hence the more consumers of the content, the higher the token’s value. An artist thus can raise revenue through the launch of a token.

Tokenization of the asset also assists in the removal of the middleman. Currently, recording labels take away the majority of the gains. Recording labels also act as hindrances many a time for the entry of new artists into the business. A system based on blockchain eliminates the middleman, thus putting the power back into the hands of the creators. Funds are raised by fans rather than the recording label via tokenization. The flip side of this model is the lack of users.

A few platforms exist such as Theta.tv,  the YouTube of Web 3.0, or Audius (which is said to be the equivalent of Spotify or Apple Music). Having used these platforms, it is safe to say that though there is a vast scope, their success and similar platforms will depend on the consumers or users.

Artists can also utilize Non-Fungible Tokens (“NFT”) to create a new vertical of revenue generation from their work. Purchasing music as NFTs holds much value for both the creator and the collector. For one, there is a transfer of ownership.

In a world driven by music streaming, the conundrum arises of why a purchase of the rights in music would be required. The answer, as always, lies in the monetization of the asset. The purchaser sees value in buying the rights and reselling them later for a potential profit. Such music NFTs benefit artists at both the initial sale pricing and the secondary sales. Artists can earn from secondary sales in the form of royalties, especially if the underlying smart contract attached to the music NFT is so that they can earn future royalties on such sales.

Platforms such as Async.art help artists mint NFTs of their musical works, and Catalog Works let music fans bid on digital records. Award-winning artist, Ross Golan who has worked with renowned artists like Ariana Grande and Justin Bieber, and rock bands such as Maroon 5 and Linkin Park, also recently minted The World’s First NFT Musical, The Wrong Man.  

There is still much grey area regarding the synergy between blockchain and music. However, the benefits, as well as the various avenues, are something that cannot be denied. In time, we are confident of innovative music-focused NFT projects, which will hopefully allow the creators or artists to get the compensation they deserve for their craft.

Image Credits:

Photo by Matthias Groeneveld: https://www.pexels.com/photo/set-of-retro-vinyl-records-on-table-4200745/

The advent of blockchain technology has set the stage for the music industry to undergo another evolution. With the blockchain, artists can create a token-based economy where the value is derived from an artist’s work. When a token is created, the artists convert their intellectual property into a financial asset that all of us can purchase. All holders of this token receive a portion of the artists’ revenue. Hence the more consumers of the content, the higher the token’s value. An artist thus can raise revenue through the launch of a token.

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The Curious Case of the Robolawyer (No, it's not a Perry Mason Novel!)

With the advent of technology, there is a drastic increase in the use of AI (Artificial Intelligence) which has significantly altered the way technology is perceived and will have a far-reaching impact in the future. Hence, it becomes necessary to try to minimize its shortcomings and make prudent use of the technology.

I do not know how many of you have heard of Joshua Browder, the 26-year-old founder of DoNotPay, a US-based venture that has developed a “robolawyer”- essentially an AI-powered bot that helps users in use cases such as appealing vehicle parking tickets, negotiating airline ticket refunds, and contesting service provider bills. Although the app was first released in 2015, to be honest, until recently, I too had not heard of him or the app!

My curiosity was piqued when I recently read the news that his company is willing to pay a million US dollars to any person or lawyer willing to repeat verbatim in front of the Supreme Court judge all that their robolawyer asks them to. It remains to be seen whether someone will take Josh up on that offer, whether the US Supreme Court will grant permission and what the outcome will be. However, it is being reported in the media that the DoNotPay app will help two defendants argue speeding tickets in US courts next month. The company has promised to pay the fines on behalf of the users if the robolawyer loses their appeals.

The app runs on the AI model known as “Generative Pre-trained Transformer” or GPT. This is the same technology that runs ChatGPT, which reportedly hit a million users in less than a week of its launch. AI technologies are constantly improving, and there is now greater emphasis on “ethics” and “explainability.” Essentially, the software must be able to explain how it arrived at a certain conclusion or output. This is important to minimize, if not altogether eliminate, the risk of biases and prejudices that creep into AI software simply because it is trained using hundreds of millions of content elements on the web (articles, images, reports, videos, etc.) that were all created by humans, and as such, carry the individual beliefs, prejudices, convictions, etc. of their original creators.

Over the coming decades, AI will shake up many fields including legal practice, healthcare, finance, etc. Not all fields will be impacted at the same pace or to the same extent but change they will. Already, AI is being used by healthcare professionals in improving the efficacy of diagnosis and confirmation of lines of treatment. Law firms too are beginning to use AI to simplify the tedium of the process of trawling through case laws and legal judgments to identify precedents and the reasoning of the benches involved. Soon, lawyers will simply be able to type in questions into ChatGPT, which will provide well-reasoned answers in a matter of minutes. Of course, the real skill will be to ask the right questions and figure out how sensible the answers are, and decide on further courses of action. Think of it as an advocate briefing a senior lawyer before the latter argues in court.

Half-baked knowledge is dangerous. For many years, patients (and/or caregivers) have used search engines to find information about symptoms, diagnostic tests, and lines of treatment and then argue with qualified medical professionals about their choices, at times forcing doctors to explain their hypotheses and reasoning. It is quite likely that in the foreseeable future, clients of lawyers and law firms too will be tempted to adopt a similar approach, which means lawyers too will end up spending time and effort on educating clients on matters of law and jurisprudence. Maybe it is worth coming up with new pricing models to dissuade frivolous “brainstorming” and “legal strategy” sessions!

Note to myself: Try out ChatGPT to explore the kind of responses it provides and start preparing for a future that will undoubtedly be more closely linked with AI tools.

References:

[1] Design Application Numbers 274917, 274918, 284680, 276736, 260403

[2] 24 U.S.P.Q.2d (BNA) 1614 (BPAI Apr. 2, 1992)

[3] Apple, Inc. v. Samsung Elecs. Co., 926 F. Supp. 2d 1100 (N.D. Cal. 2013) (partially affirming jury damages award).

[4] US6763497B1

[5] US10915243B2

Image Credits:

Photo by cottonbro studio: https://www.pexels.com/photo/person-using-macbook-3584994/

Over the coming decades, AI will shake up many fields including legal practice, healthcare, finance, etc. Not all fields will be impacted at the same pace or to the same extent but change they will. Already, AI is being used by healthcare professionals in improving the efficacy of diagnosis and confirmation of lines of treatment. Law firms too are beginning to use AI to simplify the tedium of the process of trawling through case laws and legal judgments to identify precedents and the reasoning of the benches involved.

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Registration of GUI as Designs: Existing Provisions and Challenges

In this article, an attempt is being made to highlight how GUIs can be protected and to ascertain the challenges faced by applicants in filing design applications for the registration of GUIs.

Introduction

A Graphic User Interface (GUI) which allows users to interact with electronic devices or machines, is widely used in the present digital age. The term was coined in the 1970s to distinguish graphical interfaces from text-based ones, such as command line interfaces (CLI), etc. Apple’s GUI-based operating system – Macintosh, Microsoft’s Windows, Mobile Touch Screens, and other 3D interfaces (Eg. Augmented Reality) are all examples of GUIs.

Protection of GUI: A Look at Locarno Classification and Designs (Amendment) Rules, 2021

Just as trademarks are classified into various classes of goods and services provided for in the internationally accepted NICE classification, Designs also have a classification of articles to which a design can be applied, known as the Locarno Classification.

The Locarno Classification, developed under the Locarno Agreement (1968), is an international classification used for registering industrial designs. India became the 57th member to be a signatory to the Locarno agreement in 2019. The changes were incorporated through the Designs (Amendment) Rules, 2021, thereby bringing the classification of industrial designs at par with the rest of the world as opposed to the previous national classification.

Subsequently, on 25th January 2021, the Ministry of Commerce and Industry notified the Designs (Amendment) Rules, 2021, which substituted Rule 10 of the Design Rules 2001, and incorporated the current edition of the Locarno Classification, which specifically created Class 14 – Recording, telecommunication, or data processing equipment, with a subclass “Class 14-04 – Screen Displays and Icons”, and further provided for Class 32, allowing for two-dimensional graphic designs, graphic symbols, and logos, to be protected under the Designs Act, 2000, provided that these designs satisfy the essentials of an ‘Article’ and a ‘Design’ as defined in Sections 2(a) and 2(d) of the Act.

Lacunae in Legislation

As per the Designs Act, 2000, a design means “only the features of shape, configuration, pattern, ornament, or composition of lines or colours applied to any article, whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate, or combined, …”

Now, this is precisely where the problem arises. Even after the Locarno Classification was introduced and the Designs Rules were amended to deal with confusion and uncertainties in the classification of industrial designs, the lawmakers have failed to amend the definition of ‘Design’ and bring the Designs Act, 2000, along the same lines. Further, the Controllers make conflicting observations and the interpretations provided by them seem to lack uniformity.

A GUI should be protected since its intrinsic purpose is to enhance the visual appeal of the program and thus build on its commercial value. The definition of a design given under the Act is limited and does not expressly provide for graphics and/or software. Due to this lacuna, the definition is open to multiple interpretations.

Practice Followed by the Indian Design Office

Before 2009, Microsoft was granted registration for some of its designs under Class 14-99, in the ‘Miscellaneous’ category. Thereafter, in the year 2014, Amazon filed a design application under no. 240305 pertaining to a “Graphic user interface for providing supplemental information of a digital work to a display screen”, which was rejected by the Design Office, on the grounds that GUIs do not qualify as designs under Section 2(d) of the Act, they lacked “consistent eye appeal” and were not physically accessible.

Over the years, several new applications for the registration of GUIs have been filed. While a few have been granted[1], most Examiners opine that the GUIs do not fall under the definition of ‘designs’ and hence, cannot be protected. Hence, applicants are wary of filing design applications for registration of GUIs due to the absence of robust precedents.

Observations made by US Courts

In Ex Parte Tayama[2], the Court made the following observations –

  1. Programmed Computer Systems would suffice to be termed as an article of manufacture.
  2. Design (GUI) is an integral part of computer programmes.

Further, the patent battle[3] between Apple and Samsung (2011 – 2018) ended with Apple being awarded $539 million for Samsung’s infringement of its initial design. Apple was all the while contending to protect its “Total User Experience”.

Various Design Patents have been granted by USTPO, such as apparatus for displaying the path of a computer program error as a sequence of hypertext documents in a computer system having display[4], device, method, and graphical user interface for adjusting content selection[5], etc.

European Union’s Position

EU also provides wide protection to designs under EU Directive 98/71/EC on Legal Protection of Designs. GUIs in the EU are generally registered under the Community Design Regulation (Council Regulation No. 6/2002/EC) but may also exist as unregistered Community Designs. The regulation, however, excludes computer programmes.

Conclusion

The current definition of a design is inadequate and does not expressly cover the aspects of graphics/GUIs. Undoubtedly, the various developments in the IT industry have made the world realize the importance of protecting graphics. However, the introducing of international classification (Locarno Classification) and bringing amendments to existing laws are not sufficient. It is imperative to establish new guidelines and provide appropriate training to the Examiners at the Design Office so that a uniform mechanism is in place to facilitate the registration of graphic symbols/GUIs.

References:

[1] Design Application Numbers 274917, 274918, 284680, 276736, 260403

[2] 24 U.S.P.Q.2d (BNA) 1614 (BPAI Apr. 2, 1992)

[3] Apple, Inc. v. Samsung Elecs. Co., 926 F. Supp. 2d 1100 (N.D. Cal. 2013) (partially affirming jury damages award).

[4] US6763497B1

[5] US10915243B2

Image Credits:

Photo by cottonbro studio: https://www.pexels.com/photo/person-using-macbook-3584994/

A GUI should be protected since its intrinsic purpose is to enhance the visual appeal of the program and thus build on its commercial value. The definition of a design given under the Act is limited and does not expressly provide for graphics and/or software. Due to this lacuna, the definition is open to multiple interpretations.

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Regulating Online Gaming Intermediaries - The Rules and their Implications

The Ministry of Electronics and Information Technology (MeitY) has released the draft Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules to bring online gaming intermediaries within the ambit of the IT Rules, 2021.

Background

Online gaming is one of the fastest-growing industries in India with the number of gamers expected to increase by 30 million from 2022 to 2023[1]. Following the increase in the number of users, it has become imperative that appropriate laws are introduced to regularize the online gaming industry. On January 02, 2023, the Ministry of Electronics and Information Technology (“MeitY”) proposed an amendment to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”). The IT Rules, in its current structure, provide regulation for social media intermediaries and significant social media intermediaries. The Draft[2] “Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules” (the “Draft”), which is open for consultation from the public, proposes to extend its ambit to ‘online gaming intermediaries’ forming a part of Part II (that relates to other intermediaries).

The Draft defines “online gaming intermediaries” and “online games” but lacks to provide a clear distinction between “games of chance” and “games of skill”, which has been a sticky issue over the years. The Draft further proposes (inter alia) the following changes –

  • All online games would be required to be registered with a ministry-approved self-regulated body by creating a self-regulatory framework, to be registered with MeitY. The self-regulatory body will be responsible for reviewing and registering the online games offered by its members, subject to certain prescribed factors. Games approved by the self-regulatory body may be offered with a visible mark signifying their registration.
  • The proposed rules also mention certain compliances that need to be made by the social media firms such as checking the registration of the online gaming intermediary and consulting the self-regulatory officer before allowing any advertisement on their platform.
  • The online gaming intermediary shall comply with the requirement of due diligence and shall additionally ensure they do not host any online game that does not conform with Indian laws and shall make additional disclosures to the users including the refund and withdrawal policy, financial risks, and other risks associated with gaming, measures that are in place to ensure the safeguarding of deposits, etc.
  • In addition to the above, a new set of due diligence requires compliance with mandatory know-your-customer(KYC) norms for user verification as per Reserve Bank of India norms.
  • Similar to the requirement for social media intermediaries, requirements of appointment of a resident ‘compliance officer’ and ‘grievance officer’ have been mandated along with ‘nodal officers’ for round-the-clock coordination with law enforcement agencies and officers.
  • The online gaming intermediaries need to have a physical address in India and the same is required to be published on their website.

Purpose of the Draft

The purpose of the Draft, if it becomes the law, is to protect the interests of different stakeholders, ensure the safety of players and encourage responsible gaming.  The Draft is also put together to bring about uniformity of laws that online gaming intermediaries may be required to follow by reducing the burden of following state-specific gaming measures making it, not just easier for online gaming intermediaries to comply with the law, but also helps the enforcement agencies since it becomes difficult for the governments of different states to ensure geographical checks are in place. According to the ministry, the final amendments to the IT rules would be notified by April 2023.

Discussions & Implications

While the Draft seems to have been aiming at shaping a burgeoning gaming industry, the concerns around the Draft seem to be supplementing the already existing questions on the existing IT Rules.

At the outset, the question of whether ‘online gaming’ should remain a subject of the ‘States’ (as betting and gambling have traditionally been) or the ‘Centre’, remains unresolved. MeitY had earlier, in affidavits before the High Courts, consistently stated that is not within its purview and power to legislate on the subject and that rests solely on the states. Therefore, the introduction of the Draft without consultation and consensus amongst states seems not quite in line.

The ambiguity further extends to a lack of clarity on whether the Draft bans ‘gambling’. While IT Minister, Rajeev Chandrasekhar stated that “online games that allow wagering on the outcome are effectively a no-go area” there is no clear prohibition on ‘gambling’. The Rules only state, as a part of due diligence, online gaming intermediaries shall make reasonable efforts to ensure that online gaming platforms do not contravene any gambling or betting laws in India, which again differs from state to state.

An online game has been defined in the Draft as a “game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit (in cash or in-kind) with the expectation of earning winnings”- In the absence of a definition of “gambling” and “betting” in the Draft and clarity on which category of games are sought to be regulated if the online game for consideration is sought to be regulated on one hand and gambling or betting content is prohibited on the other hand, remains a question[3]. While it may be assumed that the ‘kind’ component in the definition has been introduced to cover ‘non-monetary token’ or ‘online gaming currencies’, it may lead to the consequence where games that do not require any monetary incentive may also be included within the meaning of online games here. The definition can almost broadly cover all ‘gambling games’ within the purview of ‘makes a deposit (in cash or in-kind) with the expectation of earning winnings’. Would that mean that ‘gambling’ is brought within the purview of these Rules?

The Draft classifies online gaming platforms as ‘intermediaries’. Our understanding of the term ‘intermediary’ includes one that acts on behalf of another entity. However, in the case of online gaming platforms, we notice that most of them publish the gaming content themselves and do not host games on behalf of another. In view of the above, in an earlier debate, a government task force submitted a study stating that gaming platforms should be categorized as ‘publishers’ and not as ‘intermediaries’[4]. The question that remains unanswered is why we now bring online platforms within the purview of intermediaries thereby giving them passage to ‘safe harbour protection’ under Section 79 of the IT Act.

Apart from the few above-mentioned points, the Draft may expect push-back from various industry stakeholders on the Government’s over-arching power on issues of revocation of registration of self-regulatory bodies and exercising regulatory power for KYC. It is to be observed therefore how MeitY resolves the already existing issues on the IT Rules pending before the courts and accordingly brings about an amendment to the current online gaming Draft Rules catering to the purpose it mentioned in its notes[5] accompanying the Draft Rules.

An online game has been defined in the Draft as a “game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit (in cash or in-kind) with the expectation of earning winnings”- In the absence of a definition of “gambling” and “betting” in the Draft and clarity on which category of games are sought to be regulated if the online game for consideration is sought to be regulated on one hand and gambling or betting content is prohibited on the other hand, remains a question.

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Rooh Afza has Immense Goodwill: Delhi HC Rules in Trademark Infringement Case

The Delhi High Court gave its verdict in the trademark infringement battle between Hamdard National Foundation (India) and Sadar Laboratories Pvt. Ltd., and prohibited the latter company from using the mark “DIL AFZA” thereby protecting the trademark “ROOH AFZA”.

In a suit for trademark infringement by Hamdard National Foundation (India) against Sadar Laboratories Pvt. Ltd., the Delhi High Court held that the trademark “ROOH AFZA” possesses immense goodwill and that competitors must ensure that their marks are not similar to it. A two-judge bench, in its judgment[1] held that since the mark “ROOH AFZA” has been used for over a century, it can be considered a strong mark and, thus, restrained the Respondent from using the mark “DIL AFZA” until the suit is disposed of.

Hamdard National Foundation has filed the present appeal against the order[2] passed by a single judge bench of the Delhi High Court on 6th January 2022, rejecting an application for an interim injunction against Sadar Laboratories Pvt. Ltd. Both the marks are used with respect to sweet beverage concentrate. The Appellants claimed that the Respondents were infringing their marks “HAMDARD” and “ROOH AFZA”, and by selling these products under the mark “DIL AFZA,” they were passing off their products as those of the Appellants.

The Single Judge Bench held that the Appellants have to show that “AFZA” has a secondary meaning to claim exclusivity of their product. Therefore, the Court dismissed the application on the ground that they can claim exclusivity only for the mark “ROOH AFZA” as a whole and not just for “AFZA.”

Aggrieved by the order, the present appeal was filed by Hamdard National Foundation seeking a permanent injunction refraining the respondents from using the mark “SHARBAT DIL AFZA” or “DIL AFZA” on the ground that it is deceptively similar to the mark “ROOH AFZA.” The appellants further claimed that the use of this mark would deceive consumers and amount to passing off and also submitted that this would amount to dilution of the Appellant’s mark.

It was claimed that the marks “HAMDARD” and “ROOH AFZA” have been used for a wide range of products and constitute a well-known mark under Section 2(zg) of the Trademarks Act, 1999 owing to their widespread reputation and has therefore acquired goodwill with respect to the class of products pertaining to sweet beverage concentrates.

The Respondent submitted that by virtue of Section 29 of the Trademarks Act 1999, the allegations of infringement are not maintainable. It was submitted that the Appellants do not have an exclusive right over the word “AFZA” and that their mark has been coined by joining the terms “DIL” and “AFZA” and are not phonetically or visually similar. The Respondent submitted that there was no possibility of confusion between the two marks and every other aspect, such as the design and color scheme of “DIL AFZA” is also materially different from the Appellant’s mark. Therefore, there was no possibility of confusion between the two marks.

The Delhi High Court, after considering the arguments from both sides, stated that “AFZA” is an integral part of both “ROOH AFZA” and “DIL AFZA.” The word is neither descriptive nor normally associated with the product; hence, it is material in determining whether there is an infringement of the trademark. The Court further stated that the use of the word “AFZA” lends a certain degree of similarity, and the trade dress of both products is also similar, making the Respondent’s mark deceptively similar to that of the Appellants.

The Court reiterated that “ROOH AFZA” has been used for over a century and is entitled to protection. The mark is a source identifier with a high degree of goodwill and is susceptible to unfair competitive practices. The Court stated that prima facie, the Respondent’s mark lacks a sufficient degree of dissimilarity and hence set aside the order passed by the Delhi High court and passed an ad interim order restraining the Respondent from manufacturing and selling any product under the mark “DIL AFZA” belonging to Class 32 until the present suit is disposed of.

References:

[1] Hamdard National Foundation (India) & Anr vs Sadar Laboratories Pvt. Ltd. [Case No. FAO(OS) (COMM) 67/2022]

[2] Hamdard National Foundation (India) & Anr vs Sadar Laboratories Pvt. Limited [Case No. CS (COMM) 551/2020]

Image Credits:

Photo by Jessica Lewis: https://unsplash.com/photos/qscDBbXBGiI?utm_source=unsplash&utm_medium=referral&utm_content=creditShareLink

The Delhi High Court, after considering the arguments from both sides, stated that “AFZA” is an integral part of both “ROOH AFZA” and “DIL AFZA.” The word is neither descriptive nor normally associated with the product; hence, it is material in determining whether there is an infringement of the trademark. 

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Generative AI: Generating Legal Headaches?

The year 2022 saw major breakthroughs in the field of generative Artificial Intelligence. This field is different from the more traditional “discriminatory” AI models, whose algorithms rely on the datasets they are fed during “training” to make decisions. By contrast, “generative” AI models are forced to make conclusions and draw inferences from datasets based on a limited number of parameters given to them during training. In other words, generative AI uses “unsupervised” learning algorithms to create synthetic data. The output of generative AI includes digital images and videos, audio, text or even programming code. In recent days, even poetry, stories, blog posts and art work have been created by AI tools 

Generative AI: The Socio-Economic and Legal Problems

Like every technology, generative AI too has pros and cons. While it has made it easy to create various kinds of content at scale and in much shorter timeframes, the same technology has also been used to create “deep fakes” that then go viral on social media.  

OpenAI’s image generator platform “DALL-E 2” and automatic text generator GPT-3 have already been used to create art work and other text-based content. GPT-4, which is expected to be far more powerful and advanced, is expected to be released in 2023. Until recently, Open AI did not allow commercial usage of images created using the platform. But it has now begun to grant “full usage rights”- which includes the rights to sell the images, reprint them and use them on merchandise.  

Generative AI has the potential to open a Pandora’s Box of litigation. A class action suit has already been filed against OpenAI, Microsoft and Github alleging copyright violations by Copilot, Github’s AI-based code generator that uses OpenAI’s Codex model. The argument behind the suit is this: the tool uses hundreds of millions of lines of Open-Source code written, debugged, or improved by tens of thousands of programmers from around the world. While these individuals support the Open- Source concept, code generators like Copilot draw on their code (which was fed to it during its training) to generate code that may well be used for commercial purposes. The original authors of the code remain unrecognized and do not get any compensation.  

A similar situation can easily occur with art work created using AI-based tools because all that such tools need to create a digital image is a text prompt. For example, Polish artist Greg Rutkowski, known for creating fantasy landscapes, has complained about the fact that just typing a simple text like “Wizard with sword and a glowing orb of magic fire fights a fierce dragon Greg Rutkowski” will create an image that looks quite close to his original work. The smarter text recognition and generative AI get, the simpler it will be for even lay people to use. Karla Ortiz, a San Francisco based illustrator is concerned at the potential loss of income that she and her fellow professionals might suffer due to generative AI.[1]

 Sooner than later, this challenge will be faced by playwrights, novelists, poets, photographers and pretty much all creative professionals. Indeed, AI tools could conceivably put writers out of business in the next few years! AI generators are “trained” using millions of poems, images, paintings etc that were created by persons dead or alive. Their creators or their legal heirs do not currently have the option to exclude their works from the training datasets. In fact, they do not even usually know that their works have been included.  

The creative industry itself is taking various steps to protect the rights of various categories of creative professionals. Such measures include the use of digital watermarking for authentication, banning the use of AI-generated images, and building tools that allow artists to check if their works have been used as part of any training datasets and then opt out if they so choose.  

A more pernicious problem could conceivably arise when deliberately or inadvertently, misleading content is created and posted- and consumed by innocent users. Some early examples of such misuse have already emerged, and there is a genuine concern that if these activities are not nipped in the bud and information on the internet is not somehow authenticated, serious, unexpected, and large-scale damage may be caused.  

Overhauling the Laws

In the US, AI tools may, for now, take legal cover under the fair use doctrine. But that applies only to non-commercial usage. Arguably, the current situation where researchers and companies building AI tools freely use massive datasets to “train” their tools violate the spirit of ownership and protection of IPR because these AI generators are also being used for commercial benefit. Also, as various lawsuits are already underway, changes to IPR and related laws will need to be made to explicitly enable AI. Not doing so will only impede the use of AI in various fields where such algorithms can deliver significant benefits by speeding up innovation.  

References:

[1] https://www.technologyreview.com/2022/09/16/1059598/this-artist-is-dominating-ai-generated-art-and-hes-not-happy-about-it/

Image Credits:

Photo by Tara Winstead: https://www.pexels.com/photo/robot-fingers-on-blue-background-8386369/

Like every technology, generative AI too has pros and cons. While it has made it easy to create various kinds of content at scale and in much shorter timeframes, the same technology has also been used to create “deep fakes” that then go viral on social media.  

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Appointment of Sole Arbitrator: Two Sides of the Same Coin

Almost every commercial contract contains an arbitration clause in order to circumvent the traditional trajectory of dispute resolution through litigation. It is common to encounter myriad project financing documents between a lender and a borrower bearing arbitration as a means of settling any dispute or difference. The concerning question raised in such a scenario is whether the lender of facilities exercises an upper hand in designating an arbitrator devoid of any recourse to the borrower; thereby bringing us to the crucial question: Have the clauses similar to All disputes and differences of whatsoever nature arising out of this agreement, whether during its term or after expiry thereof or prior termination shall be referred to arbitration in terms of the Arbitration and Conciliation Act, 1996. The arbitration shall take place before a sole arbitrator, to be appointed by the Lender.been obliterated?

The law in case of appointment of the sole arbitrator by a party has been settled by the Hon’ble Supreme Court in the case of Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd.[1] (Perkins case). HSCC (India) Ltd. (Respondent), the executing agency of the Ministry of Health and Family Welfare, issued a Letter of Award (LOA) to the consortium of Applicants for the appointment of Design Consultant for All India Institute of Medical Sciences (AIIMS) proposed at Guntur in Andhra Pradesh. The dispute resolution clause in the contract between the parties provided that if Applicants were dissatisfied with the decision of Director (Engg.), HSCC (India) Ltd. (HSCC) they were at the liberty to issue a notice to the Chief Managing Director (CMD), HSCC for the appointment of an arbitrator within 30 (thirty) days of receipt of the decision.

Furthermore, the contract also prohibited any other person except appointed by CMD, HSCC to act as a sole arbitrator thereby entirely vesting the power of appointment of an arbitrator on the Respondent. When disputes arose, the Applicants invoked the dispute resolution clause in the contract and the Chief General Manager, HSCC appointed the sole arbitrator. Thereafter, an application was filed by the Applicants under Section 11(6) read along with Section 11(12)(a) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”) which envisages appointment of an arbitrator by the court. The Hon’ble Supreme Court examined if it could exercise the power of appointment of an arbitrator in this case dehors the procedure set out in the arbitration agreement.

The Hon’ble Supreme Court referred to the judgement of TRF Limited v. Energo Engineering Projects Limited[2] (TRF case) in which the Apex Court examined the issue wherein the Managing Director of the Respondent was titled as the sole arbitrator and was also vested with the authority to nominate a replacement. The Apex Court by virtue of Section 12(5) of the Act that deals with the arbitrator’s relationship with the parties or counsel or subject matter of dispute, affirmed the ineligibility of a person falling under the purview of Seventh Schedule of the Act to perform the role of an arbitrator. Therefore, the Managing Director was ineligible to act as an arbitrator due to which his ability to nominate another person as an arbitrator was annihilated. The Apex Court in this case differentiated the dual power of the Managing Director, one to adjudicate as an arbitrator and second, the capacity of the Managing Director to appoint a nominee in his place.  

The principles emanating from the TRF case were reflected in the present case wherein the capacity of CMD, HSCC to appoint an arbitrator was analyzed. The Hon’ble Supreme Court held that in the TRF case the ineligibility of the Managing Director arose due to his interest in the outcome of the dispute. The same ground would be applicable in the scenario irrespective of the binary power of the arbitrator. In other words, if the appointed arbitrator has an interest in the dispute or in the outcome or decision thereof, he shall be incompetent to adjudicate the dispute as an arbitrator and/or disentitled to appoint any other person as an arbitrator.

The Hon’ble Court stated that the facet of exclusivity shall encompass the party that unilaterally appoints the sole arbitrator of its choice and discretion in spelling the course of the proceedings. Thus, the essence of the Act along with the TRF case was retained by upholding that it would be incongruous to confer the power of appointing an arbitrator in the hands of a person who has an interest in the outcome or decision of the dispute. The appointment made by the Respondent who was empowered in accordance to the dispute resolution clause was annulled and the Hon’ble Court exercised its power under Section 11(6) resulting in the appointment of a sole arbitrator to preside over the disputes between the parties.

The Hon’ble High Court of Delhi echoed this principle in the case of Bilva Knowledge Foundation and Ors. v. CL Educate Limited[3] where the court conceded with the view, followed by the case of Proddatur Cable TV DIGI Services v. SITI Cable Network Limited[4] wherein the distribution agreement vested a unilateral right to appoint the sole arbitrator on the Respondent Company which disagreed with the nomination of arbitrator proposed by the Petitioner. The High Court held that test of having an interest in the outcome of the dispute will be exhibited by the Respondent Company acting through its Board of Directors thereby vitiating the unilateral appointment. The High Court clarified that though party autonomy is a touchstone in arbitration, one cannot overlook the underlying principles of fairness, transparency and impartiality that are also fundamental in an arbitration. While the parties may agree to the procedure mentioned in the dispute resolution clause by free will, this agreement should not eclipse the facet of fairness and impartiality in an arbitration proceeding.

Concluding remarks

In cases where both parties can nominate their respective choice of arbitrators the power derived by one party is counter balanced by an equal power with the other party as seen in the Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV)[5].  Though it may seem that the law governing the right of the lender to appoint the sole arbitrator as upheld in the case of D.K. Gupta and Ors. v. Renu Munjal[6] is now settled through the Perkins case, one has to be prudent in drafting and interpreting the clauses for the appointment of sole arbitrator that may be reached by mutual consent or by court appointment or any other alternative thereby balancing party autonomy and the tenets of fairness, transparency and impartiality.

 

References:

[1] AIR2020SC59

[2] (2017)8SCC377

[3] Arb. P. 816/2019

[4] 267(2020)DLT51

[5] 2020(1)ALT70

[6] O.M.P. (T) (COMM.) 106/2017 & IA No. 14824/2017

 

 

Image Credits: Photo by Sora Shimazaki from Pexels

In cases where both parties can nominate their respective choice of arbitrators the power derived by one party is counter balanced by an equal power with the other party as seen in the Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV).

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Food Safety Compliance System (FOSCOS) - A game-changer for Food laws Compliance and Enforcement Mechanism

With increased awareness, globalization and technological advancement, people are becoming more and more conscious of their eating choices. In fact, COVID-19 has changed the food habits of many individuals eager to fight against the pandemic by adopting a more balanced and nutritious diet to improve immunity.

Accordingly, Indian Food laws are changing in line with global food laws/standards through the amendment of various regulations based on the changing scenario. Food Safety Standard Act, 2006 (“the Act”) is also evolving and transforming in consonance with the “One Nation One Food Law” initiative.

 

The Food Safety and Standards Authority of India (FSSAI) established under the Act is now not only responsible for monitoring food safety standards but is also governing the entire food supply chain. With this mandate, the FSSAI has taken various steps towards easing the process of registration and licensing.

 

A new step in that direction is the replacement of the present online application system i.e. Food Licensing and Registration System (FLRS) to provide licensing and registration with an upgraded, advanced, controlled, improved, and developed open-source platform called Food Safety Compliance System (FoSCoS).

 

It was initially launched in the States/UTs of Tamil Nadu, Puducherry, Gujarat, Goa, Odisha, Manipur, Delhi, Chandigarh, and Ladakh in June 2020. FSSAI is now launching the second phase of FoSCoS in the remaining 27 States/UTs on 01st November 2020. Consequently, the FLRS portal has been closed w.e.f. 21st October 2020. FoSCoS is a more user-friendly and effective IT platform that seeks to connect Food Business Operators (FBOs), Designated Officers (DOs), and Food Safety Officer (FSOs).

 

FoSCoS is an upgraded and comprehensive solution that also connects with FSSAI’s other existing IT platforms such as Food Safety Compliance through Regular Inspection and Sampling (FoSCoRIS), Food Safety Connect-Complaints Management System, Online Annual Return Platform, Food Import Clearing System (FICS), Indian Food Laboratory Network (InFoLNet), Audit Management System (AMS), Food Safety Training and Certification (FoSTaC), Food Safety Mitra (FSM), etc.

 

FoSCoS has been rolled out to achieve the following objectives:  

 

  • Transform from the present FLRS which is only a licensing platform to a central food safety compliance regulatory platform.
  • Facilitate a hassle-free and user-friendly IT platform to connect Food Business Operators and Food authorities.
  • Build a technically advanced integrated application to achieve interoperability with other applications, capable of higher user traffic, and has potential for future upgrades and functionalities.
  • Enhance user performance of the application and make the application process simpler and efficient to promote ease of doing business amongst FBOs.
  • Achieve minimal physical documentation and streamline business process flows for FBOs for online applications.
  • Achieve and enable the application to have a standardized product approach rather than a text box approach for manufacturers.
  • Enable the application to seed business-specific details such as CIN No., PAN No. and GST No. to ensure effective profiling and validation of FBOs.

 

The FSSAI expects FoSCoS to be a game-changer for the implementation and enforcement of food laws in India. It is necessary to create awareness among Food Business Operators and the general public to achieve the goal of the Swastha Bharath Mission.

 

 

 

 

Fox Mandal is planning to publish a series of articles/blogs to create awareness on the food laws in India and related compliance under the FoSCoS Platform.

 

 

Image Credits: Photo by Mat Brown from Pexels

The FSSAI expects FoSCoS to be a game-changer for the implementation and enforcement of food laws in India. It is necessary to create awareness among Food Business Operators and the general public to achieve the goal of the Swastha Bharath Mission.

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Revenue Records Do Not Create or Extinguish the Title

With land or property related litigation accounting for two-thirds of all civil cases pending in the Indian courts, evidence to establish legal title has taken a centre stage. Conflicting laws, administrative incompetence, and a lack of awareness among the population is clogging the judicial pipeline. Courts have therefore been conferred with multiple opportunities to analyse the legal implications of the various documents involved in property transaction and an unwavering opinion on the lack of standing of ‘Revenue Records’ in an ownership claim has emerged.

Mutation Entry in the Revenue Records does not Create or Extinguish Title Over Land/ Property

In practice, often, in a dispute over title of a land/property, it is seen that the parties assert their title by placing reliance upon their name being reflected in the revenue records. On this point, recently, the Supreme Court, with characteristic clarity in Prahlad Pradhan & others Vs. Sonu Kumhar & others which was decided on October 16, 2019,[i] reiterated that the mutation entry in the revenue records does not create or extinguish title over the land, nor such entry has any presumptive value on the title of such land.

In reaching the above conclusion, the Supreme Court relied upon the following judgments:

  • In In Smt. Bhimabai Mahadeo Kambekar (D)Th. LR Vs. Arthur Import and Export Company which was decided on January 31, 2019[ii] as well as in Sawarni (Smt.) Vs. Inder Kaur[iii], the Supreme Court had held that the mutation of a property in the revenue record does not create or extinguish title nor does it have any presumptive value on the title. It only enables the person in whose favour mutation is ordered, to pay the land revenue in question.
  • In Balwant Singh & Anr. Vs. Daulat Singh (dead) by L.Rs. & Ors.[iv], similar observations were made by the Supreme Court, where it was held that a party is not divested of his title in the suit property as a result of mutation entry.
  • In Narasamma & Ors. Vs. State of Karnataka & Ors.[v], the Supreme Court reiterated the above position by observing that it is true that the entries in the revenue records cannot create any title in respect of the land in dispute.

Importance of Mutation Entries

In view of the findings of the Supreme Court in the present case, and as per the law already laid down by the Supreme Court, it is an inevitable conclusion that mutation entries in respect of any land on the revenue records do not create or extinguish title. What is then the need for mutation entries?

Mutation entries are maintained for fiscal purposes, to ensure that the land revenue is paid by the person whose name is recorded thereon. Although they are not a direct evidence of legal title, they nevertheless could be used for corroboration. Further, apart from assisting authorities in fixing taxpayer’s liabilities, they are of significance while resale of a property. Also, non-filing would attract penalties. Furthermore, the procedure, cost, and documents required while applying for mutation differ from state to state. States now provide for e-mutation services to ease the process.

Mutation entries are generally challenged on the ground that they were made surreptitiously or fraudulently or a sale deed relating to a particular transaction was fraudulently made and therefore void.

Difference Between ‘Revenue Records’ and ‘Title Documents’

Primarily, lands get transferred/conveyed from one person to another through a registered sale deed (a record of the property transaction between the buyer and seller). Other documents used to establish ownership include the record of rights (document with details of the property), property tax receipts, and survey documents. Hence, there appears two terminologies i.e., (1) revenue records of the land and (2) title documents which describes the owner of the property or land. To understand better “Revenue Record” is a generic expression that includes documents such as the Index of Lands, Record of Rights, Tenancy and Crops, Mutation Register, Disputed Cases Register, etc. It also includes geological information regarding the shape, size, soil type of the land, and economic information related to irrigation and crops. Whereas, a title deed/document talks about the rightful ownership of a person over a land. Apart from the ownership, title deed also speaks of the rights, obligations, and mortgage obligations of the owner.

Land Title is a document that determines the ownership of land or immovable property.  Having a clear land title protects the rights of the titleholder against other claims made by anyone else to the property.  In India, land ownership is determined through various records such as title documents that are registered and survey records issued by the Government. 

Currently, land can be transferred from one party to another through sale, gift, inheritance, mortgage, and tenancy. The Transfer of Property Act, 1882 provides that the right, title, or interest in immovable property (or land) can be transferred only by a registered instrument.  The Registration Act, 1908, is the primary law that regulates the registration of land-related documents.  Therefore, currently, all sale deeds/title documents relating to land or immovable property transfer are registered under the Registration Act, 1908. 

 

 

Reference 

[i]     2019 SCC Online SC 1416

[ii]   (2019) 3 SCC 191

[iii]  (1996) 6 SCC 223

[iv]  (1997) 7 SCC 137

[v]   (2009) 5 SCC 591

 

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“Revenue Record” is a generic expression that includes documents such as the Index of Lands, Record of Rights, Tenancy and Crops, Mutation Register, Disputed Cases Register, etc. It also includes geological information regarding the shape, size, soil type of the land, and economic information related to irrigation and crops. Whereas, a title deed/document talks about the rightful ownership of a person over a land. Apart from the ownership, the title deed also speaks of the rights, obligations, and mortgage obligations of the owner.

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Impact of Supreme Court ruling pertaining to calculation of Provident Fund contribution on Allowances

The Hon’ble Supreme Court, in a recent judgement, answered the question of whether “special allowances” would fall within the expression “basic wages” for Provident Fund (PF) contribution in the affirmative. Interpreting the provisions of Employees Provident Funds and Miscellaneous Provisions Act, 1952 (“PF Act”) as a beneficial social welfare legislation, the Court affirmed the PF authorities’ factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution to the provident fund account of the employees.

In essence, the Court reiterated the principle laid down in prior rulings that where the wage is universally, necessarily and ordinarily paid to all across the board, such emoluments are basic wages and employers had to expressly prove the special treatment in the special allowance for it to be kept out of the purview of calculations for PF purposes.

 

Background

The PF Act is a social security legislation enacted to help ensure that both employees and employers contributed towards a superannuation fund for the purpose of retirement benefits. Per the PF Act, all employees are required to contribute 12% of their basic wages, dearness allowance, cash value of any food concession and retaining allowance, if any with the employer contributing a matching 12%.

 

Basic Wages under Section 2(b)(ii) read with Section 6 of the PF Act is defined as “all emoluments which are earned by an employee while on duty or [on leave or on holidays with wages in either case] in accordance with the terms of employment and which are paid or payable in cash to him, but does not include:

  • the cash value of any food concession;
  • any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or any other similar allowances payable to the employee in respect of his employment or of work done in such employment;
  • any presents made by the employer.

The phrase “or any other similar allowance” has not specifically been defined in the PF Act or related schemes and has thus been a subject of litigation for several decades. Over the year, companies have been structuring the salary paid to employees to include various allowances, including special allowance. However, in all instances per the understanding of the PF Act, employers have only been paying contribution on Basic Salary, Dearness Allowance and Retaining Allowance or such equivalent components. The PF authorities have usually contended that ‘special allowances’ should be included for the purpose of calculation of contribution. The Hight Courts in India have taken varying views on the subject matter pertaining to contribution on allowances which had resulted in various appeals pending before the Supreme Court of India.

 

Supreme Court Decision on 28th February, 2019[1]

Various appeals[2] were preferred before the Supreme Court questioning whether various types of allowances such as special allowance, travel allowance, HRA, food allowance, etc. were to be construed as ‘basic wages’ for the purpose of calculation of contribution. The petitioners/employers had used the argument that the term ‘basic wages’ had certain specific exceptions and only such payment that had been earned by the employee in accordance with the terms of the employment was to be included for calculation of provident fund. The PF authorities, on the other hand used the principle of ‘universality’, stating that only incentive payments linked to output could be excluded from the calculation of provident fund.

 

The Hon’ble Supreme Court dismissed the appeals by the employers (except the appeal by the RPFC in the Vivekananda Vidyamandir case) and concluded, relying on the principle of universality, that all payments which were made to all employees or categories/classes of employees without discrimination and which are not specifically ‘variable’ in nature and fact or linked to certain incentive for greater output, would be construed as ‘basic wages’ and thus provident fund contribution was to be made on them. For an amount to be construed as variable in nature it would need to be demonstrated that the said amounts were payable on account of employees contributing beyond any normal work that would usually be expected of them; or that it would be payable to employees only if they availed certain opportunities.

 

The Supreme Court relied on some of its previous decisions for its conclusions, namely:

  • Whatever is payable by all concerns or earned by all permanent employees had to be included in basic wage for the purpose of deduction under Section 6 of the Act. It is only such allowances not payable by all concerns or may not be earned by all employees of the concern, that would stand excluded from deduction.[3]
  • Any variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from the term ‘basic wages’.[4]
  • Where the wage is universally, necessarily and ordinarily paid to all across the board such emoluments are basic wages. Where the payment is available to be specially paid to those who avail of the opportunity is not basic wages. Conversely, any payment by way of a special incentive or work is not basic wages.[5]
  • That the Act was a piece of beneficial social welfare legislation and must be interpreted as such.”[6]

Impact of Supreme Court Decision

The principles laid out by the Supreme Court, although not new, are a welcome clarification on the position of allowances with respect to the calculation of provident fund contribution. From an employee perspective, employees’ net take home salary is also likely to be impacted by the decision.

 

However, the possibility of the decision having a retrospective effect might exasperate employers. This is on account of the fact that the judgement interprets an existing provision in the law and does not create any new provisions. The retrospective effect may require employer to cover the shortfall in contribution for the past year but additionally pay interest and damages as well.

 

It may also be noted that the Supreme Court decision to include allowances as part of basic wages has primary financial implications in connection to those domestic employees whose salary (on which PF contributions were being paid i.e. basic salary and dearness allowance) is less than INR 15,000 per month, as well as all international workers.

 

Employers are advised to revisit their policies and salary structures and start ensuring that all components of salary which are not discretionary or variable in nature are included for the purpose of PF contributions. Employers are also recommended to conduct audits to ascertain potential past non-compliances / shortfalls in contributions.

 

The matter is also currently sub judice with the management of Surya Roshni Ltd. having filed a review petition before the Supreme Court. It also remains to be seen if the EPFO would take a more lenient stance and allow employers to rectify past non-compliances without incurring the additional cost of interest and damages.

 

References:

[1] In connection with Civil Appeal no. 6221/2011, 3965-66/2013, 3969-70/2013, 3967-68/2013 and Transfer Case no. 19/2019 (arising out of TP(C) no. 1273/2013)

[2] Appeals considered jointly: (i) The Regional Provident Fund Commissioner (“RPFC”), West Bengal v/s Vivekananda Vidyamandir and Others (Kolkata High Court); (ii) Surya Roshni Ltd. vs. Employees Provident Fund and others (Madhya Pradesh High Court); (iii) U-Flex Ltd v/s EPF and another; (iv) Montage Enterprises Pvt. Ltd. v/s EPF and another (Madhya Pradesh High Court); (v) The Management of Saint-Gobain Glass India Limited v/s The RPFC, EPFO (Madras High Court).

[3] (i) Bridge and Roof Co. (India) Ltd. vs. Union of India, (1963) 3 SCR 978

[4] Muir Mills Co. Ltd., Kanpur Vs. Its Workmen, AIR 1960 SC 985

[5] Manipal Academy of Higher Education vs. Provident Fund Commissioner, (2008) 5 SCC 428

[6] The Daily Partap vs. The Regional Provident Fund Commissioner, Punjab, Haryana, Himachal Pradesh and Union Territory, Chandigarh, (1998) 8 SCC 90

Image Credits: Image by Shutterbug75 from Pixabay 

Employers are advised to revisit their policies and salary structures and start ensuring that all components of salary which are not discretionary or variable in nature are included for the purpose of PF contributions. Employers are also recommended to conduct audits to ascertain potential past non-compliances / shortfalls in contributions.

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