This is the era of brand building, where companies and start-ups are often seen engaging into franchisees, dealerships, and distributorship agreements with companies and entities in order to grow their brand and have a wider outreach to the consumer base.
A franchise agreement permits a franchisee to use the trademarks and brand-names of its franchisor as a part of its daily business, along with marketing and training support to help the franchisee succeed. A distributorship / dealership agreement, on the other hand, permits the distributor / dealer to only distribute or resell the products, without using the brand name and trademark of the company. The distributor / dealer does not operate under the brand name, but rather operates under its own business name.
However, in this growing ocean of franchisees and distributors, a few nuisance factors have spread their own fishing nets in the ocean to capture their targets in order to receive illegal gains.
The Fishing Net:
This barrel of fraudsters, using the loopholes in the banking and information technology system. The fraudsters, in this day and age of information and misinformation, have brought in the entangling net wherein they target small scale vendors / proprietors who are looking to enter into the business of franchisees and distributorship, and once the said vendors / proprietors show keen interest in the information being provided to them, the fraudsters lay their trap and entangle the victims by duping huge amount of money1.
The fraudsters generally adopt the following approach to make themselves look like genuine franchisors / brand owners:
- Cybersquatting i.e. they purchase domain names by making slight alterations to the registered domain names of existing brands, which makes the domain name seem genuine, keeping the brand value of the original domain name holder in view. The Cyber squatters quickly sell the domain names to other non-related entities, thereby enabling passing off and diluting of famous trademark or trade names.2 These domain names are generally dormant and perpetually showcase an 'Error 404' when one tries to access them;
- Using the said domain names, they create fake email IDs, either carrying the name of one of the directors or by using generic terms like 'info' or 'contact';
- They create bank accounts in different banks, mostly nationalized, under the name of the brand, instead of the Company;
- They use a common mobile number(s) to connect with the victims and / or chat with the said victims, over Whatsapp, Telegram, or other chatting mediums.
In some of these cases, there is a simple misuse of domain names and the intention of the registrant is to obtain monetary benefit. Some others intend to gain monetarily from the trademark owner's goodwill by selling their products using such domain names, bearing the Company's mark3. The process of registration of infringing domain names has become successive and continuous. Such domain names have now multiplied owing to the large number of country code top-level domains ('ccTLD'), generic top-level domains ('gTLD'), international country code top-level domains ('IDNccTLD') and international generic country code top-level domains ('IDNgTLD'), with various extensions that can be registered. The domain names can also be varied by making minor changes, such as changing the alphanumeric features or by addition of one or two characters, alphabets or numbers. These set of cases involve various popular brands and reliable trademarks, where consumers place their trust4.
The effect of the fishing net:
The primary issue that ascends in most cases is that the proliferation of these domain names has resulted in massive damage to innocent and gullible members of the community, who have been led to believe that the websites hosted on some 'impostor' domain names, in fact belong to the actual brand owners. The facts which have emerged from these cases show clearly that innocent persons have been deceived of crores of rupees due to registration of domain names consisting of well-known brands and trademarks.
The second issue that has arisen in all these cases is that the persons registering these domain names, on most occasions, have masked their identities. This could be voluntarily done by the registrants themselves or due to features that are enabled by the domain name registrars (hereinafter "DNRs"), that provide bundled services when registering a domain name, such as privacy protect features and proxy domain services.
The third issue is that even if such information is unmasked, the information being collected by the DNRs at the stage of registration of the domain name appears to be quite unsatisfactory inasmuch as even when Courts have directed the data relating to the registrants to be supplied to the Plaintiff, on most occasions, the details are fictitious and are not traceable.5
The fourth issue is that at the time of payment to the imposters, only the account number of the recipient reflects, however, the name in which the account stands does not reflect, thereby leaving scope for ambiguity.
Legal Remedies available with the Victims:
Criminal – The first and foremost option that any victim chooses is approaching their local police station. While the police officers, being already overburdened with the never-ending crime, may or may not register the case depending on its gravity, investigations take their own time to begin. In many cases, investigations are commenced by the Cyber Cell, Delhi Police and FIRs are registered. Due to the increase in such matters, a Special Investigation Team (hereinafter "SIT") has been constituted to investigate these matters. The investigations are, however, continuing. It has required several orders of Courts being passed, and investigations by police authorities as also Cyber Cells, to even trace the natural persons behind the said domain name registrations, through the telephone numbers and bank accounts through which payments may have been made for registering the domain names.
Civil – The second option that victims choose via the brand owners are filing Intellectual Property infringement suits before the IP division (IPD) of the concerned Courts. The IPD of Delhi High Court has in particular adjudicated an iota of similar cases, wherein vide order dated August 3, 2022, in CS(COMM) 135/2022, 30 matters have been tagged together and are being heard together, wherein interim injunction has already been granted to the brand owners. The purpose of the same was so that the investigation needs could be consolidated and comprehensive directions could be issued to the police authorities, cyber cells, the various banks, National Payment Corporation of India, RBI, MHA etc.
Most recently, in the matter of Hell Energy Magyarorszag Ktf. & Anr. Vs NIXI & Ors.6 , the Hon'ble Delhi High Court was pleased to pass an ad interim injunction against the unknown imposters while issuing directions against the Domain Name Registrants to suspend all the domain names; the concerned banks to suspend the concerned bank accounts; and the internet service providers to suspend the concerned mobile numbers. Similar orders were also passed in favour of brands like Ginger Hotels7, Kajaria8, Kinetic Green Energy9, etc.
Challenges before Courts:
A perusal of the status reports filed by Delhi Police in the batch matters shows that various payment methods, channels, UPI IDs and multiple bank accounts have been used to conduct fraudulent activities of collection of amounts with the enticement of dealerships, distributorships and franchisees. Accordingly, it was observed that various banks and payment gateways are required to trace the wrong doers making the cooperation of the National Payments Corporation of India (hereinafter "NPCI") essential. Cooperation of various Internet Service Providers (hereinafter "ISPs") and Telephone Service Providers (hereinafter "TSPs") is also required, as these bank accounts are connected to mobile numbers, and a lot of data can only be traced online. The cooperation of DoT and CERT-IN is also necessary as there are short timelines and fast sharing of data is paramount in these matters10.
It was further observed that NIXI cannot block domains in a blanket manner, as the same is against NIXI's policy framework, however it can block websites as per Court orders. NIXI has market operations with DNRs located both within and outside India through Registrar Accreditation Agreements (RAA), whereby all DNR is mandated to share information of the domains with NIXI. All domain name registries other than NIXI, if located in Indian territory, are bound to share WHOIS details of domains upon Court orders, however, if the domain name registries outside India, the RAA does not obligate the registries to follow Indian law.
It was clarified that since NIXI has implemented the General Data Protection Regulation, Regulation (EU) 2016/679 (hereinafter "GDPR"), NIXI has itself masked the details of the registrants. In response to a Court order or a direction by any authority or any law enforcement agency, the said details are provided by NIXI.
As for MeiTY, there are no regulations at present as to the manner in which it can be ensured that DNRs, especially those not in India, follow the orders of the Court or any Executive instructions.
In furtherance to the above, the Plaintiffs filing the said suits are encountering the following issues with DNRs:
- Serving those DNRs, who do not have offices in India;
- Seeking implementation of the orders passed including injunction orders against DNRs;
- Obtaining data relating to the registrants of the domain names including email addresses, postal addresses, telephone numbers, credit cards used for making payments etc.11
In this regard, the saving statute are the IT Rules, 202112 wherein Rule 3 requires appointment of Grievance Officers for the purposes of ensuring that complaints of individuals are duly acknowledged, and orders passed by a Court of competent jurisdiction and authorities, are duly implemented.
The said Rule 3(2) reads as under:
"(2) Grievance redressal mechanism of intermediary: (a) The intermediary shall prominently publish on its website, mobile based application or both, & the case may be, the name of the Grievance Officer and his contact details as well as mechanism by which a user or a victim may make complaint against violation of the provisions of this rule or any other matters pertaining to the computer resources made available by it, and the Grievance Officer shall –
(i) acknowledge the complaint within twenty four hours and dispose off such complaint within a period of fifteen days from the date of its receipt; (ii) receive and acknowledge any order, notice or direction issued by the Appropriate Government, any competent authority or a court of competent jurisdiction."
Considering the large sums of money that are being fraudulently obtained from various unsuspecting customers, all due to the lack of an active mechanism identification of such fraudulent parties, the Hon'ble Court observed that the following aspects need to be addressed in these matters:
- The manner in which the details of the domain name registrants, can be verified by the DNRs, at the time of registration of domain names;
- The manner in which the privacy protect feature and proxy servers are made available: whether it is only upon a specific registrant choosing the said option, rather than as a standard feature as part of a 'bundle';
- If the owner of a well-known brand or a trademark contacts any DNR, the manner in which the data related to the registrant can be provided, without the intervention of a Court, or any governmental agency;
- Whether the identity of the owner of a domain name, which consists of a registered trademark or a known brand can be verified at the time of registration itself;
- If a specific link could be provided by the CGPTDM, covering a list of well-known marks, maintained by the Registrar of the Trademarks, or declared by any Court of law, which can then be used for expedited blocking of domain names consisting of such marks;
- If there can be any agency that can be identified in India, such as NIXI, who can be made a repository of the data concerning the registrant, or an agency through which the data could be transmitted by the DNR, upon verification by NIXI, in case a trademark owner has a grievance against a specific domain name;
- If any directions are issued to the DNRs, and the same are not implemented, the manner in which the implementation of the said orders can be ensured;
- Since almost all domain names are registered only after payments are made through credit card, or other online payment methods or apps, is it possible, upon request by any identified agency, to provide the information relating to the person who has made the payment, to the trademark owners.
Conclusion:
While the issue of fraudsters duping innocent and gullible people of the society is spreading at large, the Hon'ble Delhi High Court adorned the hat of resolving this mess and accordingly, has taken significant steps to deal with this issue by bringing in requisite SoPs in place in order to be able to curb this issue by the first response team. The matter is now listed on October 8, 2024.
Footnotes
2. Manish Vij And Ors. vs Indra Chugh And Ors. AIR2002DELHI243
3. Yahoo Inc. V. Aakash Arora & Anr. 1999IIAD(DELHI)229
4. Dabur India Limited Versus Ashok Kumar And Ors. CS (COMM) 135/2022 [Order dated August 3, 2022.
5. Dabur India Limited Versus Ashok Kumar And Ors. (Supra)
6. CS (Comm) 494 of 2024
7. The Indian Hotels Company Limited vs. John Doe and Others [CS (Comm) 370/2024. order dated May 7, 2024
8. Kajaria Ceramics Limited vs. Godaddy.com LLC & Ors. [CS (Comm) 35 of 2022. order dated January 17, 2022
9. Kinetic Green Energy and Power Solutions Limited vs. National Internet Exchange of India & Ors. [CS (Comm) 533/2024. order dated September 06, 2024
10. Dabur India Limited Versus Ashok Kumar And Ors. (Supra)
11. Dabur India Limited Versus Ashok Kumar And Ors. CS (COMM) 135/2022 [Order dated September 13, 2022.
12. Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021
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