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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Regulating Online Gaming Intermediaries - The Rules and their Implications

  • January 11, 2023
  • Padma Sinha
  • Ojasvi Agarwal

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.

References:

[1] https://www.indiatimes.com/explainers/news/how-rapidly-is-the-gaming-industry-growing-in-india-589059.html

[2]https://www.meity.gov.in/writereaddata/files/Draft%20notification%20for%20amendment%20to%20IT%20Rules%202021%20for%20Online%20Gaming.pdf

[3] https://g2g.news/online-gaming-laws/draft-online-gaming-rules-have-contradictory-provisions-ambiguity-can-still-continue/

[4] https://www.hindustantimes.com/india-news/govt-task-force-restarts-debate-on-status-of-online-gaming-platforms-101666896702910.html

[5] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1888143

Image Credits:

Photo by Yan Krukau: https://www.pexels.com/photo/gaming-chairs-and-computers-9072216/

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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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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Private Sector Fuels India’s Space Economy

The Indian National Space Promotion and Authorization Centre (IN-SPACe) was set up in 2020 as an independent body to oversee regulation of all space related activities in India, including the authorization of private rocket launches. The government’s decision to allow the private sector into India’s space sector was aimed at broad-basing innovation capabilities and speeding up India’s ability to compete in the global market for space technologies- a high-growth market that has historically been dominated by a small number of players from the US and Europe.

This decision seems to be paying off, because India’s private sector has already become quite active across the value chain in the space sector. Nearly 300 entities are already registered with IN-SPACe, of which 30% are startups. On 18th November 2022, Vikram-S, a small single-stage rocket developed by Hyderabad-based startup Skyroot Aerospace, was successfully flight tested. This marks the beginning of “Prarambh”, the company’s sub-orbital mission. By year-end, Chennai-based Agnikul Cosmos expects to launch its small rocket too. Pixxel, another space startup, has already launched Shakuntala, India’s first privately built earth imaging satellite and a second satellite Anand. A consortium of L&T and HAL has been awarded a contract to build five PSLVs. This is the first time anyone other than ISRO has been tasked with this key responsibility- an indication of the government’s rising confidence in our private sector. The success is testament to the robust space sector ecosystem being built as a result of close collaboration between ISRO, IN-SPACe, academic institutions, and the private sector (both startups and established companies).

 

Why the Private Sector is Important for India’s Space Economy?

The capability to launch small rockets is critical because smaller rockets can place their payloads in more precise orbits. Also, they can be produced in shorter timelines by using 3D printing technologies. Miniaturization of components means that required functional capabilities can be achieved through smaller satellites. All this means that satellites with specific functional capabilities can be quickly assembled and launched. Smaller rockets can be easily fueled by liquid propellants, which are inherently easier to manage; they are also less prone to vibrations, which can become a challenge for launch vehicles that carry sensitive payloads.

Given rising geopolitical uncertainties, there is now a higher risk of conflicts between countries arising at short notice. Increasingly, wars will be fought using cyberattacks and directed energy weapons to degrade the enemy’s vital assets such as communication satellites and missile defence batteries. Swarms of weaponized drones too will be deployed to target and destroy vital military installations in remote, hard-to-access areas. In such a scenario, it becomes critical that as a country we can launch new satellites and other space assets quickly to replace lost capacities or augment and complement new space-based capabilities that are needed.

ISRO has successfully designed, developed, and launched heavy, multi-stage rockets into space. These technologies/capabilities have helped place many satellites in orbit and in turn, these are playing a key role in India’s development. ISRO has also developed the SSLV (Small Satellite Launch Vehicle), but unfortunately, its technology demonstration mission failed earlier this year. It is this gap that the private sector can help plug at short notice.

 

Public-Private Cooperation is Vital to Power India’s Space Economy

As various countries seek to build/enhance their space-based defence capabilities, countries like India can benefit from commercial contracts to launch satellites/other payloads and conduct defence missions in space. With defence capabilities increasingly relying on assets deployed in space, the evolution of India’s private sector space capabilities will also boost our credibility as a builder of solutions and not just as a provider of reliable, cost-effective space launch services. While ISRO continues to build its reputation as a reliable partner, it needs to scale up its ability to launch satellites for its customers. In October 2022, ISRO successfully launched 36 satellites for UK-based OneWeb (partly owned by the Bharti group), marking the use of the LVM3 rocket; this was also one of ISRO’s largest commercial orders. More such opportunities can come ISRO’s way because satellite-based internet services are rapidly becoming cost-competitive and an easy way to deliver connectivity to far-flung areas where building fibre-based infrastructure is difficult due to terrain and weather conditions.

It is estimated that by 2025, India’s space business will grow to US$12.8 Billion from US$9.6 Billion in 2020 (source: https://timesofindia.indiatimes.com/india/how-indias-space-startups-are-aiming-high/articleshow/95637043.cms). ISRO is a shining example of a public sector entity that has consistently overcome huge odds (including sanctions from time to time) to indigenously develop world-class capabilities in frontier areas like space technologies. Its ability to do much more has arguably been limited by budgetary support. And although launches are the most visible part of a space economy, they are by no means the only facet: design, development, manufacturing, building technology demonstration prototypes etc. are all just as important. Now, with the innovative energies and other resources available to the country’s private sector, significant synergies can be unleashed through public-private partnerships in the space sector.

References: 

Image Credits: Photo by Pixabay: https://www.pexels.com/photo/space-technology-research-science-41006/

With defence capabilities increasingly relying on assets deployed in space, the evolution of India’s private sector space capabilities will also boost our credibility as a builder of solutions and not just as a provider of reliable, cost-effective space launch services. While ISRO continues to build its reputation as a reliable partner, it needs to scale up its ability to launch satellites for its customers.

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TRAI’s Framework for Data Centres, Interconnect Exchanges and Content Delivery Networks- An Update

Communication services such as voice, video, data, internet, and wideband multimedia have become indispensable in the modern society. Information communication technology (ICT) has become a vital resource in development of various economic sectors enabling the various participants in economic and social spheres to have a quick and easy access to information and knowledge. ICT makes communication efficient in all spheres of life- in companies fostering increased efficiency, allowing access to human resource, promoting sustainable development of entrepreneurship.

At present, most sectors and organizations are generating mountains of data on a daily basis. Therefore, to stay competitive, organizations are constantly working to optimize data to leverage it to their advantage. For instance, the banking sector uses data extensively to understand how their customers use data to identify potential security risks. Data plays a vital role in the real estate and property management sector by extending an improved property analysis mechanism, understanding the customers and deciphering the market trends. The telecom industry is also utilizing data to improve in several key service areas, including customer experience, fraud reduction, churn prediction, and dynamic pricing. Further, with the rollout of 5G, data plays a key role in network planning, monitoring and management. Hence, data is the central force for driving crucial innovative and advanced industry solutions for the systematic growth of the economy.

Digital advances have generated enormous wealth in record time, but that wealth has been concentrated around a small number of individuals, companies and countries. Under current policies and regulations, this trajectory is likely to continue, further contributing to rising inequality, not only at the country level between developed and developing economies but also at the level of big online players, controlling data acting as an entry barrier for new entrants, leading to near monopoly in global digital markets. The effect of globalization and the development of the telecommunication sector has also affected the Indian market vitally.

On 21 December 2021 TRAI- the Telecommunication Authority of India released a consultation paper on the ‘Regulatory Framework for Promoting Data Economy through Establishment of Data Centres, Content Delivery Networks, and Interconnect Exchanges in India’ where it discussed and opined thoroughly on the markets of data economy, its challenges and its growth and future opportunities in the sector.


The TRAI Consultation Paper and Data Centres  

 

The new era of digitization has rolled out 5G, Internet of Things (IoT), and Artificial Intelligence (AI) leading to the creation of data via widespread, geographically distributed networks and new-age devices. Further, Enhanced Mobile Broadband (eMBB), Ultra-Reliable Low Latency Communications (URLLC), and Massive Machine Type Communications (MMTC) are set to emerge as dominant storage interfaces. 5G, along with edge computing, is set to fulfil the needs for ultra-reliable, low-latency, and high-throughput communication. Use cases driven by this intelligence-centric connectivity will catalyse computing at the edge as they effectively become mini data centres and bring a completely new paradigm to storage at the edge. This brings with it a need for advanced networking, computing and storage in edge devices and endpoints.

The main theme of the TRAI consultation paper is the development of a regulatory framework to make the data market more abiding and regulated for systematic development and protection of its users. While competing with the world data economy the need for a proper regulatory framework that can encourage the development of 5G, IoT, data centres, and associated services, data analytics, edge computing, digital platforms, and applications were discussed and their effect on the growth are discussed in the paper.  For any economy to be competitive, it has become essential to become reliable and self-sufficient in terms of futuristic technology. This has bought the Indian government’s inaction to bring in various initiatives and policies to bring digitalisation to the forefront of the market. Policies like Digital India Programme 2015 and National Digital Communication Policy 2018 contributed tremendously to the development and population of the data economy and digitalization.

The TRAI paper clearly emphasized and questioned the potential of growth of data centres in India in light of various challenges in terms of economic/infrastructure and financial aspects. The paper sought views on:

(i) incentives and long-term measures to facilitate growth and investment in data centres, Content Delivery Networks (“CDN”s), and Interconnect Exchanges (“IXP”s).

(ii) building, safety, disaster recovery, and security standards for data centres.

(iii) access to facilities such as dedicated fibre and electricity, and provision of concessional tariffs or subsidies.

(iv) need for a unified data centre policy in India and centre-state coordination.

(v) need for a regulatory framework for CDN and interconnect exchanges in India.

Additionally, it was noted in the paper that the mere establishment of data centres will not efficiently meet the country’s data requirements.  Initiatives to address challenges of data penetration in Tire 2 and Tire 3 cities also has to be addressed. The paper also discussed and opened itself to comments on the green data certification, building norms for data centres and other aspects important for the development of an economically efficient data economy. The paper further discusses the impact of Covid-19 on the digital economy that resulted in a data surge arising out of increased digital social interactions and online transactions.


The Infrastructure of the Data Economy

 

The paper recognises the following three main infrastructures for boosting the data ecosystem and facilities

  • Data Centres
  • Content Delivery Networks
  • Internet Exchange Points

Together these three form the part of what can be termed as “Digital communication infrastructure and services”. It is important to note that with CDN the delivery of the data sought by the users is established and the players like Netflix, Youtube and Amazon establish their own CDN  in locations that are near to users to make the use of the internet bandwidth less which ultimately reduces the cost and make it more economical for them. These CDN networks are not adequately regulated in the Indian market. TRAI with the consultation paper has sought opinions on the same and has also highlighted the point of whether the lack of a regulatory framework for these CDN networks in India affects the growth of the CDN market in the country.

The main mission of the paper was to connect India with proper digital communication infrastructure, propel India with the latest technology including 5G, AI, IoT Cloud, and empower India by securing its digital sovereignty and data protection.

The consultation paper further analysed the idea of the dark fibre cable network, data centre and the regulatory framework or other limitations these data centre companies are facing and how these avenues can be incentivised. 


Infrastructure Requirements for Data Centres

 

The paper discussed the resources which are required for the establishment of the data centres and how their availability or shortage can add to the hardships of the establishment of economical units of the data centre. While opting for and establishing a data centre it’s essential to look into the availability of the power supply and water. India faces an energy deficit of 1,44,1 Million Units (MU). The most affected areas are the rural areas in India. The cost of power can also not be overlooked. The major cost which is approximately 50-60% of the total operating cost of these data centres is the cost of power. The power and cooling segment of the Indian Data Centre power and cooling market is expected to reach $1,065.5 million by 2025, growing at a Compound Annual Growth Rate (CAGR) of 9.4% during the forecast period 2019–2025. 

Water resources were another facility for which data centres might face challenges. The major work of the water is to cool off. As per the report around 15- megawatt of energy in a Data Centre can use up to 360,000 gallons of water a day as the scale of the data centre will rise more reliable sources of water has to be looked into. In the process of cooling off some amount of water is also evaporated leading to loss of water. The question which arose is whether India is ready to meet these power and water supply requirements for the establishment of a highly popularizing segment of data centres. This remains a question of concern to meet the cooking up future requirements

Looking into the matter the TRAI suggested developing renewable energy and development of green data centres. In Europe, the climate-Neutral Data Centre pact is the law that aims to make all of the European Union Climate-neutral by 2050. These green data centres will have low emission rates. A vision to create such data centres and emphasis on the establishment of data centres driven by renewable energy was also emphasised.


Telecom Data and its Security Issues


 

Telecom data is the first digital footprint created by any household. For proper functioning of the services collecting such user data and establishing robust infrastructure for the services providers to proffer better services becomes very essential. For this, the mechanisms of the consented sharing of telecom data and data empowerment and protection Architecture were explained in the paper.

Even though the intention of the Personal Data Protection (Bill) 2019 was to extend legislative protection to users wherein purpose-driven collection of data, user consent to sharing of personal data etc. were addressed, it is yet to be seen how the law progresses in the future. 


Telecom Industry and the OTT Platforms

 

The functioning of the telecom industry and its importance and assistance in the development of Over the Top (OTT) platforms like ‘Netflix’, ‘Amazon’, ‘Hotstar’ can be understood easily. The telecom industry provides the oil to these OTT industry players for smooth functioning and better market reach. In the recent paper released by the Competition Commission of India (CCI) on the market study of the telecom sector, it highlighted the raising trends of a partnership between the telecom Industry and these platforms and how this can act as an entry barrier. 


CCI’s Concern over the Growth of the Telecom Market and its Nexus with TRAI

 

The market study of the telecom sector released by the CCI on 22nd January 2021, highlighted various contemporary competition issues, including upcoming competition issues as the telecom sector is set to see further transformation and innovations with 5G around the corner, discussing:

(a) Financial stability and competition

(b) Vertical integration and competition.

(c) Data privacy and competition.

(d) Infrastructure and competition.

The CCI raised concerns over the data privacy of the users from deals like Jio- Facebook, where the users are robbed of their right to data privacy. Raising concerns of such kind in its study, the TRAI also channelized its discussions on similar lines in its paper where a huge threat to the data privacy of the users was discussed and a strong need to regulate and limit the data sharing and purpose-driven data collection was identified. 


Regulatory Framework for the Data Centres, Current Scenario and the Way Forward

 

A strong surge in the consumption of data has been projected for the coming years. This massive increase in the use of data shall require a robust mechanism for data management, data security, and good data infrastructure. However, India still lacks a centralized regulatory framework that properly regulates or prescribes compliance standards with respect to the establishment of such data centres. This consultation paper by TRAI is the first concrete step in this direction.

The paper received comments from various significant stakeholders. While addressing the issue of data penetration at Tier 1 and Tier 2 cities, Vodafone Idea Limited (‘VIL’), one of the stakeholders, suggested that the Government should extend tax benefits to Service Providers that are building disaster recovery sites to ensure reliable services. Development of Special Economic Zones (‘SEZ’) in TIER 2 & 3 cities should be undertaken to motivate data centre players, rationalization of electricity tariffs across all states and ready infrastructure facilities inclusive of power, transport, water supply, fibre connectivity etc. should be set up in those Tier 2 & 3 cities. VIL further observed that a central law governing data construction and operation should address aspects relating to the entire lifecycle of data centres. Since the National Broadcasting Company (‘NBC’) covers maximum data centre related guidelines, it is recommended to form a single regulatory body under NBC, which should develop India-specific building standards for the construction of data centres operating in India.

Internet freedom foundation, another stakeholder, has also provided its comments and suggestions on the considerations raised in the Paper. The foundation advocated the urgent need for the creation of a multi-stakeholder body for the enforcement of net neutrality. The need for a more efficient data policy specifically designed for the telecom industry was also put forward promoting evidence-based policymaking for the CDNs. In order to ensure a more streamlined functioning of the telecom industry, the foundation emphasized overall sectoral transparency. It raised concerns over data monetization and its threats. Additionally, it placed stress on proper surveillance of these data centres as sensitive data of users would be involved.

The National Association of Software and Service Companies (‘NASSCOM’) in their comments on the paper focused on the development of the CDN market and its growth potential in India. NASSCOM raised concerns over regulatory compliances that can potentially make the Indian CDN market less competitive and advised on initiating strategies to combat the same. It also raised concerns over the reduced network efficiency because of the regulatory requirement of interconnection with Telecom Service Provider (TSP) and Internet Service Providers (ISP) and network neutrality. It opined that both will be affected negatively by the criteria proposed by the paper. It urged TRAI to refrain from imposing ex-ante obligations for mandatory interconnection between CDNs and ISPs.

With all these regulatory challenges the stakeholders also provided their point of view on the issues and challenges of the data centres, from advocating for the establishment of special economic zones and providing some tax benefits for the establishment of the data centres to the need for proper authority for the certification of the data centre as adopted globally has been highlighted. The stakeholders also highlighted the portions wherewith not much effort skilled labour can be found and up-gradation of the existing skills can be done. Data privacy matters took the spotlight in almost all the stakeholders’ comments. They advocated for the implementation of a comprehensive law to deal with the matter at hand. Further, on compliance, the stakeholders emphasized structuring an all-encompassing competent channel for the use and availability of the resources such as power, land, and water for smooth functioning of the data centres.

In 2020, Singapore imposed a moratorium on the establishment of the data centres because of the disparity in the use of resources by 7%. India is already facing challenges in sustainable development and is aiming to become a global hub for data centres, without a practical mechanism in place. It is interesting to note that, states like Karnataka and Tamil Nadu have formulated their policy on the same. They have also sought amendments in the state legislations to incorporate congenial provisions for the establishment of the data centres but until now no steps have been taken.

As per some of the suggestions, in addition to notifying a national policy on data centres, the government should also identify and proffer various incentives for the players keen on undertaking the establishment of such data centres, especially with respect to considerations like electricity, water resources, infrastructure, technology and Research and Development. Before formulating and enforcing anything it’s evident for the government to into consideration all the aspects of labour, resources, real estate etc. before devising a perfectively addresses the challenges of the sector and works in concert towards the benefits of its stakeholders.

In 2020 the Ministry of Information Technology formulated a Data Centre Policy, 2020 discussing the challenges and how a centralised system for clearance and approval for the establishment of data centres has to be structured and new building norms specifically dealing with the construction of the data centres are to be developed. More stress on a smooth regulatory framework for ease of doing business was emphasised.

While the central government is yet to formulate comprehensive legislation to govern data centres, various state governments have undertaken the initiative to regulate the sector within their jurisdiction.

Maharashtra’s Data policy extends fiscal incentives such as stamp duty exemption, electricity duty exemption, value-added-tax refund and property tax benefits for data centres that comply with specific criteria. 

Telangana’s Policy extends fiscal incentives like power, building fee rebates and land at subsidized costs. Additionally, other non-fiscal incentives like exemption from the purview of the Telangana Pollution Control Act, exemption from statutory power cuts and from inspection under specified labour legislation and permissions to file self-certificates have also been offered.

The Tamil Nadu Data Centre Policy 2021 has established a single-window facilitation portal to maintain time-bound processing of applications and coordination with various agencies and departments. Further, incentives such as electricity tax subsidies on power, concessional open access charges and cross-subsidies, dual power and stamp duty concessions and permits for self-certificates pertaining to compliance with respect to statutory registrations and forms under respective labour legislation are provided. 

The Data Centre Policy 2021 of Uttar Pradesh provides incentives with respect to data centre park developers and data centre units. Interest/capital subsidy, land subsidy, stamp duty exemptions and dual power grid network, as well exemption from inspection under labour legislation and permissions to file self-certificates have also been provided for under the legislation.

West Bengal data centre policy 2021 is a 5-year plan providing various power, water and infrastructure facility for the smooth functioning of the data centres. 

Haryana and Karnataka are still finalising their state policy while the Odisha government has also rolled out a policy that needs further development and the status of its implementation is not yet confirmed.

As per some of the suggestions of the stakeholders, in addition to notifying a national policy on data centres, the government should also identify and proffer various incentives for the players keen on undertaking the establishment of such data centres especially with respect to considerations like electricity, water resources, infrastructure, technology and Research and Development. Before formulating and enforcing anything it’s evident for the government to into consideration all the aspects of labour, resources, real estate etc. before devising a perfectively addresses the challenges of the sector and works in concert towards the benefits of its stakeholders.

 

Image Credits: Photo by Ian Battaglia on Unsplash

A strong surge in the consumption of data has been projected for the coming years. This massive increase in the use of data shall require a robust mechanism for data management, data security, and good data infrastructure. However, India still lacks a centralized regulatory framework that properly regulates or prescribes compliance standards with respect to the establishment of such data centres. This consultation paper by TRAI is the first concrete step in this direction.

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India's Own Crypto Asset Regulations Soon: Plugging an Important Gap

Till last year, most people (at least in India) had probably only heard of cryptocurrencies such as Bitcoin and Ethereum; now, many other names such as Dogecoin, Solana, Polkadot, XRP, Tether, Binance etc. are being spoken of commonly in media. The global cryptocurrency market cap is estimated at over US$2.5 Trillion.

India too is witnessing a surge in investment in cryptotokens – especially by millennials. There is a correspondingly increase in the number of advertisements for cryptocurrencies on national television as well as on various web sites; mainstream media reports extensively on the daily price movement of cryptocurrencies. One estimate puts the number of crypto investors in India at between 15-20 million, and the total holdings to be in excess of US$5.3Billion. 

This surge in unregulated cryptoassets is a matter of rising concern globally. Recently, PM Modi urged democracies around the world to work together to ensure that cryptocurrencies do not “end up in the wrong hands, as this can “spoil our youth”. His exhortation came just days after RBI Governor Shaktikanta Das spoke of “serious concerns” around cryptocurrencies.

The RBI’s 2018 blanket ban on cryptocurrencies was lifted by the Supreme Court in 2020. However, the time has now come for the government and regulators to act quickly, and there are indications that regulations are just around the corner. At the time of writing, the government has already announced its intention to table The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 in parliament in the winter session.

It is expected that through this legislation, the Indian government will seek to ban private cryptoassets. This means that those trade in such cryptoassets may be liable for penalties and/or other punishment. It is also expected that there will be tighter regulations around advertising such products and platforms where cryptoassets can be bought and sold. Another regulatory salvo could be around taxing cryptogains at a higher rate (although such notifications may have to wait for the next budget due to be announced in another three months). The bill is also expected to deny the status of “currency” to cryptoassets because the prevailing ones are issued by private enterprises, and not backed by any sovereign.

The government has also acknowledged the potential of sovereign digital currencies (or CBDC- Central Bank Digital Currency, as they are officially called) in the days ahead. Countries such as China and the USA, are at various stages of launching their own digital currencies, and experts predict that such CBDC will be the “future of money”. In this context, the proposed bill is expected to create a “facilitative framework” to pave the way for the RBI to launch India’s sovereign digital currency in the days ahead by. In fact, the RBI is already working on India’s CBDC, and some media reports suggest that such a launch may happen in the next couple of months (which may also explain the timing of tabling the The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, at this time). CBDCs too require crypto and blockchain technologies that are similar to those that underpin cryptoassets, so the bill is also expected to promote these technologies for specific purposes. Indeed, not doing so would be akin to throwing out the baby with the bathwater.

Given their wide global reach, cryptoassets arguably will have a role to play in the world’s financial system. However, countries such as India must ensure proper regulation because by their very nature, cryptoassets can easily be misused for various activities that can destabilize the nation. They will allow for free inward/outward remittances that will make it harder to trace; being encrypted, the origins of such wealth too will become easier to hide. All this will make cryptoassets even more convenient ideal for nefarious activities such as money laundering, terror-funding, drugs-financing etc. In the absence of appropriate regulations, the rising supply of cryptocurrencies can hobble the RBI’s ability to perform its basic role. Its ability to manage the Rupee’s value against global currencies too will weaken, as will its ability to use domestic interest rates as a means to balance the economy’s twin needs of inflation management and providing growth impetus. This is a scary scenario, but not one that could unfold in the short-term. Even so, India needs to be prepared.

PS: The Indian government’s announcement to regulate cryptoassets has already triggered a significant (8-10%) correction in the prices of various cryptoassets. It’s therefore a good idea for resident Indians holding cryptoassets to sell them. They can decide on their future course of action once there is clarity on the specific regulatory impact of the proposed bill.

 

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Given their wide global reach, cryptoassets arguably will have a role to play in the world’s financial system. However, countries such as India must ensure proper regulation because by their very nature, cryptoassets can easily be misused for various activities that can destabilize the nation.

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Frequently Asked Questions (FAQs) on Flying Drones in India 2021

Drones have been buzzing to become the next significant tech-fascination. Owing to their sleek build, agile mobility and ability to access areas of topography beyond the reach of humans; they are increasingly relevant in today’s innovation and utility-driven technology trends. However, as with any pioneering design, the value of drones largely depends upon the intention of their use. For instance, they can be employed to perform illegal or destructive activities by terrorist groups as was evident from the June drone attack at the Indian Airforce Station in Jammu.[1] Additionally, they can easily malfunction and cause unintended harm to human life or the environment.

In view of their heightened demand and novelty, governing their usage and ownership became imperative and consequently, in March 2021, the Ministry of Civil Aviation published the Unmanned Aircraft System (UAS) Rules, 2021. However, the UAS rules were perceived as restrictive and complex. Based on the feedback from various stakeholders the UAS Rules, 2021 were repealed and the new Drone Rules, 2021 were notified under the Aircraft Act, 1934;  their scope excluded the actions done or omitted before the enforcement of these rules. Here are a few pertinent questions that we have tried to answer in light of the new rules:

Do I need a drone pilot license for flying drones in India?

 

One would require a remote pilot license to fly a drone in India unless exempted. The exceptions include the operation of nano drones and the non-commercial operation of micro-drones (i.e., drones weighing between 250 grams and 2kg). 

Additionally, no remote pilot license is required for drones operated for testing purposes within the premises of a research and development entity / educational entity under the Central government, drone manufacturer with a GST, Start-up recognized by the DPIIT, or an authorized testing entity when operated within the green zone.

Are there any restrictions on flying drones at night or over people in India?

 

The current regulations are silent on the timing at which drones can be flown. However, as night-time flying of drones will have additional safety implications and may require drones to be fitted with other mandatory safety features such as anti-collision lighting, we will have to wait for further clarification/notifications from the Ministry in this regard.

Is there a last date for registering my drone in India?

 

As per the Drone Rules 2021, a person owning an unmanned aircraft system manufactured in India or imported into India on or before the 30th day of November 2021 must make an application to register the drone and obtain a UIN by 31st December 2021. But, as per the Digital sky platform, the last date to obtain a Drone Acknowledgment Number (“DAN”) for an unlisted drone is 30th November 2021. Therefore, there seems to be a conflict between the dates specified on the website and the new drone rules. Also, as per the digital sky platform and the press release by the ministry of civil aviation one must have a DAN, a GST-paid invoice and must be part of the list of DGCA-approved drones to enlist an existing drone. 

Do I need permission to fly toy drone in India?

 

Under the guidelines to enlist an existing drone, it clearly specifies that all unmanned aircraft needs to be enlisted and it has been clarified that this includes models, prototypes, toys, RC aircraft, autonomous and remotely piloted aircraft systems, etc. [2] From these guidelines on the enlistment of drones it can be inferred that unmanned aircraft also includes toys. Thus, toy drone manufacturers/operators would need to obtain the compulsory permissions under the rules.

A remote pilot license is not required to operate nano drones and micro drones (i.e., drones weighing between 250 grams and 2kg) used for non-commercial purposes.  Type certification is not required for nano drones and model remotely piloted aircraft systems (i.e., drones used for educational, research, testing, design, and recreational purposes weighing below 25 kgs and operated within the visual line of sight). All drones need to obtain a UIN except drones used for testing purposes within the green zone and premises of the testing entity.

Hence, toy drones would require a UIN and, may require a remote pilot license and type certification depending on the size and nature of the drone. It would also need to be ensured that the drone is being flown in the green zone and that there are no notifications/restriction on the digital sky platform for drone operation in the intended area of operation.

Are there any restrictions on flying drones remotely over the internet?

 

“Remotely piloted aircraft” is defined by Drone Rules as an unmanned aircraft that is piloted from a remote pilot station. One must obtain a remote drone pilot license and type certify drones unless exempted to operate drones. Model remotely piloted aircrafts have to be operated within the visual line of sight. 

Other than the type certification and the remote pilot license, all drones need to obtain a UIN. They should not carry dangerous goods or arms, ammunitions etc. unless permitted by the concerned authority. They have to fly within the permitted zones and not violate the right of way of a manned aircraft.

The current regulations are silent on the operation of drones Beyond Visual line of sight (BVLOS). However, it is observed that entities are still availing conditional exemption for BVLOS operation from the Ministry.

What are the customs regulations for entering India with a drone?

 

Under the Drone rules, import of Drones is to be regulated by the Directorate General of Foreign Trade (DGFT) or any other authorised entity. The DGFT has not released any specific import policy on drones after the release of the rules. Under the existing Import Policy by the DGFT, import of Unmanned Aircraft System is “Restricted” and requires prior clearance of the Directorate General of Civil Aviation (DGCA) and import license from DGFT.  Nano drones (i.e., drones weighing up to 250 grams) and operating below 50ft/ 15 meters above ground level are exempted from the requirement of an import clearance from the DGCA or import license from the DGFT.[3]

Although the new rules have eliminated the requirement for import clearance from the DGCA, the DGFT is yet to update the import policy and remove the requirement from the import policy.

Further, the Import Policy by the DGFT refers to the Guidelines issued by the Directorate General of Civil Aviation. These guidelines mandate that anyone wishing to import must obtain Equipment type approval from the Wireless Planning and Co-ordination Wing, Department of Telecommunication for operating in de-licensed frequency bands. [4]  An application has to be made for a Unique Identification Number (UIN) post the necessary approvals are obtained to operate a drone in India.

Can drones be used for food/package delivery/advertisements in India?

 

The current rules prohibit the carriage of arms, ammunitions munitions of war, implements of war, explosives and military stores, etc. unless permitted by Central Government. It also regulates the carriage of dangerous goods as per the Carriage of Dangerous Goods Rules, 2003. Other than the above, the current regulations are silent on the aspect of permitted payloads.

When it comes to drones, unlike aeroplanes that generally take-off from an airport, there are no specific ports from which drones are flown. The new rules mention the development of policy framework for developing corridors for safe and seamless transfer of goods by drones. As goods on a drone could have potential dangers such as accidental drops during flight and difficulty in regulation, it is possible that these will require further regulation. The 2018 CAR and UAS Rules, 2021 required drone operators to get special approval to drop/discharge substances. Such conditions are not specified in the current rules. It would be advisable to get special clarification from the DGCA on permitted payloads as there are additional safety implications associated with it.

Are there any other initiatives in place other than the liberalized Drone Rules 2021 to achieve the target of making India a drone hub by 2030?

 

In furtherance to the initiative of the liberalization of the regulations governing Drones, the Indian government approved the Production Linked Incentive scheme (PLI) for drones and drone components in India. The net fund assigned under the scheme is Rs. 120 crores over three financial years.

It provides relaxed criteria for MSMEs and startups to encourage them to avail the benefits of the scheme. The rate of PLI is fixed at 20% of the value addition throughout the scheme. Depending on the value added by the manufacturer, their eligible PLI will be 20% of the addition. The minimum addition is set at 40% of the eligible sales turnover of the FY. Value addition is calculated as the eligible sales minus the eligible purchase cost.

It is the responsibility of the component manufacturers to show that the components are exclusively used in manufacture of drones. The scheme is for three years from 2021-2022 . The amount will be disbursed in the subsequent financial year to which it is claimed . An applicant is eligible for three consecutive years but up to FY 2023-2024.[5]

 

What steps are being taken for traffic management and avoidance of collision between manned and unmanned aircraft?

 

On the 25th of October the Unmanned Aircraft System (UAS) Traffic Management (UTM) policy framework was published by the Ministry of Civil Aviation. To achieve UTM-ATM (Air Traffic Management) interoperability and integration, the policy suggests aligning with the framework of the International Civil Aviation Organisation for UTMs. It invites studies/ proposals on real -time tracking mechanisms as real -time identification and tracking (RIT) via Bluetooth or wifi is not practical owing to the low operational range. As per the policy, all unmanned aircrafts may implement RIT via network for successful separation from manned aircrafts. However, it does recognise that this facility will not be available in areas without telecommunication network.

 

The Future Lies in the Sky

 

The new drone rules have liberalised and simplified the regulations pertaining to drones. Instead of having all the regulations and certifications within these rules, powers have either been delegated or separate authorities and platforms have been established to deal with specific issues. The new rules also facilitate self-certification and self-monitoring as well as provide an easier process for transfer and deregistration. Further, they have done away with the approvals required for unique authorisation number, unique prototype identification number, certificate of conformance, certificate of maintenance, import clearance, acceptance of existing drones, operator permit, authorisation of R&D organisation, student remote pilot licence, remote pilot instructor authorisation, drone port authorisation etc. Forms have been reduced from 25 to 6.  There is no specific criteria or approvals for drone ports, instead, the current rules have proposed that a policy be developed with a framework for corridors for the delivery of goods.

All these accompanied with the considerable reduction in the fees with respect to the remote pilot license and other registrations/certifications (wherever applicable) will set new grounds and open up a plethora of opportunities for start-ups, SMEs and research organisations who want to venture into the field of aviation, avionics and related interests. As an effect, the future will soon see Amazon, Zomato deliveries through drones, site verification for insurance organisations, crime patrolling, disaster assessment etc. eventually, as Union Minister for Civil Aviation, Jyotiraditya Scindia told, make India a global drone hub by 2030.

The future lies in the sky and beyond, and it is going to get crowded than ever!

References 

[1] https://www.thehindu.com/news/national/two-explosions-rock-technical-area-of-jammu-airport/article34997389.ece

[2] https://dronenlisting.dgca.gov.in/

[3] https://www.dgft.gov.in/CP/?opt=itchs-import-export

[4] F.No.05-13/2014-AED Vol. IV dated 27th August, 2018.

[5] https://egazette.nic.in/WriteReadData/2021/230076.pdf

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The new drone rules have liberalised and simplified the regulations pertaining to drones. Instead of having all the regulations and certifications within these rules, powers have either been delegated or separate authorities and platforms have been established to deal with specific issues

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Strong Tailwinds for India’s Technology Sector Entrepreneurs and Startups

Venture Capital (VC) investments in Indian startups in the period January – July 2021 were reported at around US$17.2 Billion. Although this figure is lower than the quantum of investments made in China in the same period, it is a healthy 55% more than the US$11.1 Billion VCs invested in India in the year 2020. Here’s an even more interesting data point: in July 2021, VCs invested around US$8 Billion in India, in comparison, their investments in China were approximately US$5 Billion. This was the first time since 2013 that India attracted more VC investments than China.

One swallow does not make a summer, but there are many reasons to believe that significantly higher levels of risk capital will become available to Indian entrepreneurs- and especially to those in the tech space. While most of these have to do with India’s intrinsic strengths, there are also some external forces at work. Here is what I believe will fuel India’s tech entrepreneurs over the course of the next five years or so.

  • Steep increase in the number of Indian unicorns:

The first 9 months of 2021 alone have seen 28 new unicorns (a term that denotes startups with valuations of US$1Billion or more) emerge in India. This number stood at 38 at the end of 2020.

  • Fintech innovation:

India has seen several innovative fintech come up in the last ten years, many of which are already unicorns or on their way there. As the global banking and financial services industry look for disruptive solutions and new ways of building ecosystems, many of these “Made in India” innovations will become globally relevant and hence attractive investment opportunities.

  • The rise and rise of Edtech:

As a result of the pandemic and the emergence of interactive technologies, the learning and education space has undergone a massive transformation in the last two years. Not just in the early school years but also coaching for various entrance exams. Byju’s for example, is valued at almost US$16.5 Billion, and has already acquired 9 other Edtech companies in recent months. Like fintech, the Edtech opportunity too has the potential to tap global business opportunities.

  • Rising interest amongst western VC funds:

Existing investors are looking to expand their Indian portfolio, with some big-name investors like Tiger Global making 25 investments in India between January and August 2021 (in 2020, they invested in 18 startups). New VC firms that have not previously invested in India too are also entering the market. Andreessen Horowitz (a16z) fund, for example, recently closed a US$260 Million investment in crypto player CoinSwitch Kuber (valuing it US$1.9 Billion). Reports suggest a 60% increase in participation by US investors in Indian fintech startups over the last three years. The Unacademy group, another major Edtech player in India, recently raised US$440 million (investors included non-US funds as well)- valuing the startup at almost US$3.5 Billion.

  • Many global giants already have an Indian presence:

It was recently reported that one in 12 global unicorns have their technology centers based in India (source: August report of the IVCA). As Indian ventures and their innovations gain global visibility, I believe many more global organizations will set up shop in India (As elaborated in my earlier blog – Global Captive Centers in India: Can add Value If Set Up Differently).

  • Strong talent base:

India has a large, trained pool of tech and managerial talent that can be attracted to startups both by higher compensation made possible by Venture Capital backing and the thrill of creating something new. Such talent can form the crucial leadership and middle layers as these startups scale and grow rapidly.

  • Entrepreneurship on the ascent:

Increasingly, young graduates are turning entrepreneurs– and choosing this avenue instead of the safety of “safe” jobs with established companies. And of course, there are senior leaders from various companies who are also getting bitten by the startup bug and leaving to start/mentor various early-stage ventures.

 

Conclusion

 

Of course, there’s also the elephant (more accurately, the dragon) in the room. The Chinese Communist Party leadership has, in the past year or so, made a number of major policy changes with the apparent intention of targeting China’s home-grown Big businesses (tech and others). The Chinese government’s seeming unwillingness to come to the rescue of defaulting real estate majors is another event that has muddied waters for investors. Western investors have significant exposure to many of these companies whose wings have clearly been clipped. Strains in diplomatic and economic ties between China and the west are expected to trigger a slowdown in fresh investments, if not cause an exit from Chinese businesses.

Capital chases the best risk-adjusted returns and so will always gravitate to where investors expect the best outcomes. India, with its relative political stability, acknowledged track record of democracy, continuing commitment to reforms, and growing stature as a global innovation hub makes it an attractive alternative.

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Capital chases the best risk-adjusted returns and so will always gravitate to where investors expect the best outcomes. India, with its relative political stability, acknowledged track record of democracy, continuing commitment to reforms and growing stature as a global innovation hub makes it an attractive alternative.

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Liabilities of Intermediaries In Trademark Infringement Cases In India

The boon and bane of market vis-à-vis consumers has further intensified with the shift of the current generation to e-commerce. The boon has been the ease, economy, and the time efficiency that online trade offers while the bane has been the easy trafficking of counterfeits and threat to customer data. Although efforts are being made by the government to address the issues from a consumer/buyer point of view, not much has been done from a business/seller point of view. One worrying concern for businesses is the constant infringement of their trademarks which is suffering in the lack of necessary legislation or a decisive judicial pronouncement. Most businesses believe that intermediaries must be liable for allowing infringers sell goods on their platform without adequate due diligence, however, liability has not been conclusively attributed in this regard yet.

One prominent case that addressed the liability of online marketplaces in trademark infringement was Christian Louboutin SAS vs Nakul Bajaj & Others[i] decided on 2nd November 2018 by the Hon’ble Delhi High Court. But before we delve into the particular case or understand the liability of intermediaries, let us first understand who falls within the ambit of intermediaries and when is an intermediary exempted from liability.

 

Definition of Intermediaries

 

The term “intermediaries” is defined under section 2(w) of Information Technology Act, 2000 which says

 “Intermediary” – with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.

 

Exemption from the liability/ Safe Harbour Provision

 

Section 79 of the Information Technology Act provides certain immunities to the intermediaries. That the intermediary shall not be liable for any third-party information, data or communication link made available or hosted by him. Section 79 of the Information Technology Act, 2000 is extracted below:

  • Notwithstanding anything contained in any law for the time being in force but subject to the provisions of sub-sections (2) and (3), an intermediary shall not be liable for any third party information, data, or communication link made available or hosted by him.

 

  • The provisions of sub-section (1) shall apply if– (a) the function of the intermediary is limited to providing access to a communication system over which information made available by third parties is transmitted or temporarily stored or hosted; or (b) the intermediary does not– (i) initiate the transmission, (ii) select the receiver of the transmission, and (iii) select or modify the information contained in the transmission; (c) the intermediary observes due diligence while discharging his duties under this Act and also observes such other guidelines as the Central Government may prescribe in this behalf.

 

  • The provisions of sub-section (1) shall not apply if– (a) the intermediary has conspired or abetted or aided or induced, whether by threats or promise or otherwise in the commission of the unlawful act; (b) upon receiving actual knowledge, or on being notified by the appropriate Government or its agency that any information, data or communication link residing in or connected to a computer resource controlled by the intermediary is being used to commit the unlawful act, the intermediary fails to expeditiously remove or disable access to that material on that resource without vitiating the evidence in any manner.

Section 79 of the Act elaborates on the exemption from liabilities of intermediaries and Section 79(2)(c) mentions that intermediaries must observe due diligence while discharging their duties and observe such other guidelines as prescribed by the Central Government. Accordingly, Information Technology (Intermediary Guidelines) Rules, 2011 were notified on 11th April 2011.

Though the Indian Courts have reviewed Section 79 of IT Act, 2000 (Safe Harbour Provisions) on various facts and situation including in the cases of protecting online free speech (Shreya Singhal V. Union of India[ii]), uploading content and copyright violations (My Space Inc Vs. Super Cassettes Industries Limited[iii]) and design infringement (Kent Ro Systems Limited & Anr Vs. Amit Kotak and Ors[iv])etc, the position that is considered by Indian courts on violation of trademarks rights by e-commerce platforms and the extent of protection awarded to them was unclear till recent past.  

The landmark judgment passed by the Hon’ble Delhi Court in Christian Louboutin SAS vs Nakul Bajaj & Others tried to establish the liability of intermediaries on trademark infringement cases and the same is discussed below:

 

Christian Louboutin SAS vs Nakul Bajaj & Others

 

The Plaintiffs (Christian Louboutin), manufacturer of luxury shoes well known for their red soles filed a trademark infringement suit against an e-commerce website www.darveys.com (Defendants). The Plaintiffs had also obtained trademark registration for the word mark, device mark CHRISTIAN LOUBOUTIN and also for their red sole mark in India. The Plaintiffs claimed that their products were sold only through an authorized network of exclusive distributors.

The Defendants were selling various luxury products on their website including the Plaintiff’s products by claiming that they were 100% authentic. The Plaintiffs alleged that apart from selling and offering counterfeit products on the Defendants website, the image of the founder of the Plaintiff and the names Christian and Louboutin were used as meta tags. Further, the Defendants’ website gave an impression that it was in some manner sponsored, affiliated and approved for sale of variety of luxury products bearing the mark Christian Louboutin and this resulted in infringement of trademark rights and violation of personality rights of Mr. Christian Louboutin.

On perusal of the pleadings the Hon’ble Court observed that no factual issues arose in the determination of the case as the Defendants had not disputed the proprietary rights of the Plaintiff over their brand Christian Louboutin. The only defence put forth by the Defendants was the safe harbour provision under Section 79 of the Information Technology Act, 2000 that they were mere intermediary who enabled booking of products from any of the 287 boutiques/sellers across the globe using their online platform.  The Defendants contended that the products sold through their website was genuine, however, they were not providing after sales warranty or services.

The only aspect to be decided was whether the Defendants’ use of the Plaintiffs’ mark, logo was justified under Section 79 of the Information Act, 2000 or not.

The Hon’ble court perused the Defendants’ website and observed that customers were required to pay a membership fee in order to shop from the Defendants’ website and the said website also provided an authenticity guarantee to return twice the money if the products turned out to be fake or not of expected quality. Furthermore, in the terms and conditions, the Defendants claimed that they facilitated the purchase of original products and the prices of the products were maintained and changed at the discretion of the Defendants. Quality checks of the products were carried out by a third-party team who examined the precise details of the products that were shipped to the customers. The invoices generated were those of the website (defendant) company.  

In order to determine whether an online marketplace or e-commerce website is an intermediary, the Hon’ble Court elaborately examined the nature of services (provided a detailed list of 26 possible services that could be performed by intermediary) that would fall within the ambit of service contemplated in the definition of intermediary. Accordingly, entities that performed tasks such as identification of the seller, providing transport for seller, employing delivery personnel for delivering the product, accepting cash for sale etc and the measures taken by the online platforms  to ensure that unlawful acts were not committed by the sellers were taken into consideration for determining the role of the online marketplace. Considering the services played by the Defendant in the case, the Hon’ble Court was convinced that the Defendant exercised complete control over their sale of products and they were much more than just an intermediary.

The Hon’ble Court further noted that the e-commerce website and online marketplaces were required to operate with caution if they wished to enjoy the immunity provided to the intermediaries under Section 79 of the IT Act. When an e-commerce website is involved in or conducts its business in such a manner which would see presence of large number of elements (services and measures taken by sellers referred above), it could cross the line from being an intermediary to active participant. In such cases, online marketplace could be liable for infringement in view of its active participation.  The conduct of intermediaries in failing to observe due diligence with respect to IPR could amount to conspiring or abetting, aiding or inducing unlawful conduct and may lose the exemption to which intermediaries are entitled. When an e-commerce company claims exemption under Section 79 of IT Act, it ought to ensure that it does not have active participation in the selling process. The presence of any elements which indicates active participation could deprive intermediaries of the exception.

Finally, the Hon’ble Court ascertained whether there was any falsification of Plaintiff’s trademark under Section 2(2)(c), 101 and 102 of the Trademarks Act, 1999.  These provisions were being looked at to ascertain what constituted conspiring, abetting, aiding, or inducing, the commission of an unlawful act, in the context of trademarks rights. The Hon’ble Court concluded that the use of Plaintiffs’ mark in respect of genuine goods would not be infringement and in respect of counterfeit goods, it could constitute infringement. Thus, any online marketplace or e-commerce website which allows storing of counterfeit goods would be falsifying the mark.

In view of the above, the Hon’ble Court noted that the Defendant was not entitled to protection under Section 79 of the Information Technology Act. Further, the use of the Plaintiffs’ mark, the name and photograph of the founder without permission and the sale of products without ensuring genuineness constituted violation of the Plaintiffs rights. Pertaining to the contention of meta tagging, the Court held that Defendants’ use of the meta tagging would constitute infringement as upheld by the Delhi Court in another case (Kapil Wadhawa v. Samsung Electronics[v]).

In the above circumstance, the suit was decreed directing the Defendant to disclose the details of all its sellers, their addressee, contact details on the website, and prior to uploading a product bearing Plaintiffs’ mark, Defendant was required to obtain concurrence before offering for sale on its platform.

It is apparent that the legislative intent is to protect genuine intermediaries and it cannot be extended to those persons who are not intermediaries and are an active participants in the unlawful act.

 

Post Louboutin Case

 

The test laid down in Christian Louboutin case containing the detailed list of 26 possible tasks/services that could be performed by intermediaries were applied to various other cases such as Loreal v. Brandworld and Another[vi] and in Skull Candy Inc v. Shri Shyam Telecom and Others[vii] to ascertain the liability of intermediaries in online marketplace or e-commerce website.  

In this regard, it is pertinent to note the case of Amway India Enterprises Private Limited v. 1Mg Technologies Private Limited and Another[viii] where a single bench of the Delhi High Court passed an order restraining numerous e-commerce platforms such as Amazon, flipkart, snapdeal etc from the sale of direct selling products without the consent of direct selling entities. This decision of the single bench was set aside by the Division bench of Delhi High Court on 31st January 2020 and with this again the position of law pertaining to the intermediary liabilities in trademark infringement cases remains unclear. However, it is observed from various intellectual property rights cases that courts have placed higher responsibility to take down the contents that infringes the IP rights and is titling towards making these e-commerce platforms more responsible for their content.

Now that the Information Technology (Intermediary Guidelines Amendment) Rules, 2018 framed to make social media platforms accountable for their contents is on the verge of being notified, it is apparent that internet intermediaries won’t be able to  take shelter under the safe harbour protection of the IT Act, 2000 effortlessly.  The new rules intend to tighten the noose by filtering out information that threaten public health or safety. The rules make it mandatory for intermediaries to provide information or assistance to government agencies within 72 hours of formal communication,  enable tracing out of originator of information on its platform by deploying technology based automated tools for proactively identifying and removing or disabling public access to unlawful information and by removing access to unlawful content within 24 hours upon receiving a court order or being notified. It also requires intermediaries to incorporate a company if they have more than 5 lakh users in India and to have a permanent registered office in India as well as appoint a nodal person for contact with law enforcement.  

From an IP perspective, the roles and responsibilities of intermediaries are likely to become more crucial in IPR infringement cases. The safe harbour protection must be granted to intermediaries only if they play the role of a facilitator.  Since e-commerce has flourished like a green bay tree in the massive Indian market, the government is mooting the idea of having a separate regulatory body and a separate e-commerce law that provides for periodic audit, storage of data,  consumer protection,  export promotion and other provisions for promotion of e-commerce. The new law supposedly proposes to impose joint liability for counterfeit products on e-commerce entity as well as sellers. If approved, this would substantially address the trademark concerns and ensure fair competition.

 

 

References

[i] CS (COMM) 344/2018, I.As. 19124/2014, 20912/2014, 23749/2014 & 9106/2015

[ii] AIR 2015 SC 1523

[iii] 236 (2017) DLT 478

[iv] 2017 (69) PTC 551 (DEL)

[v] FAO(OS) 93/2012

[vi] CS(COMM) 980/2016 & I.A. 24186/2014

[vii] CS(COMM) 979/2016 & I.A. 24578/2014

[viii] CS (OS) 410/2018

 

Image Credits: Photo by Mark König on Unsplash

From an IP perspective, the roles and responsibilities of intermediaries are likely to become more crucial in IPR infringement cases. The safe harbour protection must be granted to intermediaries only if they play the role of a facilitator.  Since e-commerce has flourished like a green bay tree in the massive Indian market, the government is mooting the idea of having a separate regulatory body and a separate e-commerce law that provides for periodic audit, storage of data,  consumer protection,  export promotion, and other provisions for promotion of e-commerce.

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