India – IP Legal Updates.

29 May, 2018

 

Supreme Court-Section 70 of the IT Act to be read in conjunction with relevant provisions of the Copyright Act 

 

This is an appeal filed by B.N. Firos, (“Appellant”) against the dismissal of a writ petition by the Kerala High Court challenging a notification dated 27th December, 2002 (the “Notification”), issued under Section 70 (1) of the Information Technology Act, 2000 (“IT Act”) declaring the computer, computer system and computer network specified in the schedule of the Notification to be “protected systems” under the IT Act. The writ petition also challenged the vires of Section 70 of the IT Act. The dismissal by the Single Judge was also affirmed by the Division Bench and the review filed by the Appellant was also dismissed.

 

The Appellant is the proprietor of Comtech IT Solutions, Thiruvanathapuram an information technology entity which is a member of Microsoft Developer Forum, a professional group of developers technically supported by Microsoft Corporation (India) Private Limited (“Microsoft”). In 1999, the State of Kerala (“1st Respondent”) through the Centre for Development of Imaging Technology (C-DIT), Thiruvananthapuram, a total solution provider (“4th Respondent”) had conceptualised a single window multiple agency bill collection software which was abbreviated as FRIENDS. As the Appellant was the member of Microsoft’s Developer Forum, the Appellant was instructed by Microsoft to carry out the system study and to develop the pilot project for the FRIENDS project.

 

After completion of the preliminary work by the Appellant, Microsoft placed orders which were handed over to the 4th Respondent and the software was implemented as a pilot project at the FRIENDS centre. Due to the success the project was further extended to 13 district centres. The 4th Respondent informed the Appellant, through a communication, that as the FRIENDS project was successful, the Government had decided to establish FRIENDS Integrated Citizens Service Centres in all the other 13 districts and the 4th Respondent would like to associate with the Appellant for customisation of the FRIENDS application software. Thereafter the Appellant and the 4th Respondent entered into an Agreement cum Memorandum of Understanding dated 19th February, 2001 (“Agreement”). The Appellant contended that the 4th Respondent was in the process to transfer some essentials of the FRIENDS application software to another entity namely M/s. Stanhop Technology (“Stanhop”) and therefore the Appellant instituted a criminal proceeding against Stanhop. Further, the Appellant filed an application for registration of his copyright in the FRIENDS application software before the Registrar of Copyrights, New Delhi.

 

The 4th Respondent filed a suit before the District Court, Thiruvananthapuram, seeking a declaration that the 4th Respondent is the exclusive owner of the copyright and the sole owner of the intellectual property rights of the FRIENDS application software. Due to the suit filed by the 4th Respondent, the Registrar of Copyright rejected the Appellant’s application for registration of the copyright in the FRIENDS software. Further, the 4th Respondent also instituted a criminal case against the Appellant for infringement of the application software. During the pendency of these proceedings, the State Government issued the Notification which led to the filing of the writ petitions wherein the impugned orders were passed by the High Court.

 

The Appellant before the High Court contended that the Appellant has the copyright in the FRIENDS software by virtue of Section 17 of the Copyright Act, 1957 (“Copyright Act”) and that the Notification was an infringement of his copyright. Further, the challenge to the vires of Section 70 of the IT Act was based on the argument of excessive delegation of the legislative power. The High Court was of the view that the provisions of Section 2(k) of the Copyright Act which defines “Government Work”, Section 17(d) of the Copyright Act and Section 70 of the IT Act should be read harmoniously. The High Court further stated that if the said provisions are to be read and construed harmoniously the power of declaration of a “protected system” would be only in respect of “Government work”, the copyright in which of the Government is acknowledged by Section 17 (d) of the Copyright Act. On this basis the Appellants contention with respect to the invalidity of Section 70 of the IT Act was dismissed.

 

With respect to the challenge to the Notification based on a claim of a copyright, the High Court held that the registration of copyright sought by the Appellant was refused by the Registrar of Copyright and that the civil suit in this respect was pending. The High Court further stated that if the Appellant was the first owner of the copyright, the Appellant could file a suit for infringement under Section 60 and 61 of the Copyright Act or take recourse through arbitration in accordance with the Agreement. 

 

The High Court further referred to Clause 10 of the Memorandum of Understanding between Total Solution Providers for E-Governance and Government of Kerala (“MoU”) which stated that all intellectual property rights of the system developed by the Total Solution Providers and Departments would vest with the Government of Kerala. As the 4th Respondent was a government agency created by the Government for developing the software, the 4th Respondent was bound by clause 10 and the Appellant would also be bound by that clause by virtue of the Agreement with the 4th Respondent. The High Court held that there is no specific clause in the Agreement under which the intellectual property rights in the FRIENDS software has been assigned to the Appellant by the 4th Respondent and therefore the Government held the copyright in the FRIENDS software and was entitled to declare it as “protected system” under Section 70 of the IT Act.

 

The counsel for the Appellant referred to the amendments made to Section 70 of the IT Act which states that power to declare any computer resource as “protected system” would be possible only if it directly or indirectly affects the facility of Critical Information Infrastructure. Critical Information Infrastructure means: the computer resource, the incapacitation or destruction of which, shall have debilitating impact on national security, economy, public health or safety. The counsel further stated that the amendment further reinforced the contention of the Appellant regarding the constitutionality of Section 70 of the IT Act.

 

The Appellant’s argument was further on the point that the computer programs, tables, compilations including computer databases have been included in the definition of “literary work” under Section 2(o) of the Copyright Act with effect from 10th May, 1995 and that the Appellant must be acknowledged as the first owner of the copyright in accordance with the Copyright Act.

 

The 1st Respondent’s contention was that as the Appellant had developed the software for Microsoft, which provided the software to the 1st Respondent through the 4th Respondent free of cost and the Appellant was paid consideration by Microsoft, Microsoft could be considered as the first owner of the copyright and by virtue of clause 10 of the MoU, the intellectual property rights vest with the Government, and therefore the claim of the Appellant does not subsist. Pursuant to hearing both the parties, the Hon’ble Supreme Court stated that the High Court had rightly held that Section 70 of the IT Act and Section 2(k) and Section 17 of the Copyright Act are to be read conjointly to give effect to the related provisions of the two different enactments. The Supreme Court further held that Section 70 of the IT Act as in force at the relevant time and even after the amendment bars access to a person from a system declared as “protected system”. The Supreme Court further held that the amendment to Section 70 of the IT Act, made the power of declaration of a protected system even more stringent and is an attempt to circumscribe the power even further than what was prevailing under the pre amended law by narrowing down the ambit of “government work” related to the facility of Critical Information Infrastructure.

 

The Supreme Court held that the Appellant was entrusted the work by Microsoft and was paid consideration by Microsoft.

 

Therefore, by the Appellant’s own pleadings it would not be entitled to copyright in the FRIENDS application software under Section 17(a) of the Copyright Act. The Supreme Court dismissing the appeal held that the copyright claim of the Appellant being the first author of the software is unfounded both on basis of provisions of Section 17(a) of the Copyright Act and Clause 10 of the MoU.