Friday, 8 June 2012

THE TWENTY EIGHT LONG YEARS


THE TWENTY EIGHT LONG YEARS

Twenty eight years have been eaten up to discharge the waste of the union carbide disaster occurred Bhopal in the year 1984. On June 4th 2012 the Supreme Court slammed the government for not being serious on disposal of toxic waste lying in the defunct Union Carbide India Ltd (UCIL) plant, now represented by DOW Chemical Company, in Bhopal for the last 28 years and asked it to take a final decision on it soon.

Thereafter on 8th June 2012 Group of Ministers (GoM) gave its approval to the Madhya Pradesh government on Friday to dispose 350 metric tonnes of Union Carbide toxic waste in Germany. As per the decision this waste will be lifted in the time period of one year for which centre will pay cost of Rs 25 crores [less than the years of the disaster]. Home Minister P Chidambaram has asked the state government to prepare an agreement within two weeks' time. The disposal would be carried out by German agency GIZ IS.

350 tonnes of toxic waste containing of methyl iso cyanate gas leaked has been lying in the surroundings of the union carbide factory since this disaster took place on 2 and 3rd December 1984. Due to this toxic waste around 25,000 people died in the immediate aftermath and 1000,000 people are still suffering from the side effects in way of both mentally and physically.

This decision has come up as a relief. Thing to watch now is its implementation.

Friday, 3 February 2012

VODAFONE INTERNATIONAL HOLDINGS V. UNION OF INDIA & ANR

On 20.January.2012 a Bombay High Court judgment of September 8, 2010 was set aside by the three judge bench of the Apex Court of India. The bench consisted of Hon’ble Chief Justice of India S. H. Kapadia, Hon’ble Justice K. S. Radhakrishnan and Hon’ble Justice Swatanter Kumar.
It has been held in the case that the companies (Vodafone and Hutchison) are incorporated and transacted outside India and has "no underlying nexus" with tax authority in India. Vodafone has no obligation under Section 163 clause 1 (c) of Income Tax Act, 1961.
The Hon'ble Chief Justice pronounced the judgment on behalf of His Lordship and Hon'ble Mr.Justice Swatanter Kumar, while granting leave, to the following effect-

For the above reasons, we set aside the impugned judgment of the Bombay High Court dated 8.09.2010 in Writ Petition No. 1325 of 2010.Accordingly, the Civil Appeal stands allowed with no order as to costs. The Department is hereby directed to return the sum of Rs. 2,500 crores, which came to be deposited by the appellant in terms of our interim order, with interest at the rate of 4% per annum within two months from today. The interest shall be calculated from the date of withdrawal by the Department from the Registry of the Supreme Court up to the date of payment. The Registry is directed to return the Bank Guarantee given by the appellant within four weeks.”

Hon'ble Mr. Justice K.S. Radhakrishnan pronounced His Lordship's separate judgment
concurring with the judgment delivered by Hon'ble the Chief Justice as under-

"I, therefore, find it difficult to agree with the conclusions arrived at by the High Court that the sale of CGP share by HTIL to Vodafone would amount to transfer of a capital asset within the meaning of Section 2(14) of the Indian Income Tax Act and the rights and entitlements flow from FWAs, SHAs, Term Sheet, loan assignments, brand license etc. form integral part of CGP share attracting capital gains tax. Consequently, the demand of nearly Rs.12, 000 crores by way 254 of capital gains tax, in my view, would amount to imposing capital punishment for capital investment since it lacks authority of law and, therefore, stands quashed and I also concur with all the other directions given in the judgment delivered by the Lord Chief Justice".

ISSUE
The matter in the present case concerns the tax dispute involving the Vodafone group with the Indian Tax Authorities [hereinafter referred to for short as “the Revenue”], in relation to the acquisition by Vodafone International Holdings BV [for short “VIH”], a company resident for tax purposes in the Netherlands, of the entire share capital of CGP Investments (Holdings) Ltd. [for short “CGP”], a company resident for tax purposes in the Cayman Islands [“CI” for short] vide transaction dated 11.02.2007, whose stated aim, according to the Revenue, was “acquisition of 67% controlling interest in Hutchison Essar Limited (HEL for short)”, being a company resident for tax purposes in India which is disputed by the appellant saying that VIH agreed to acquire companies which in turn controlled a 67% interest, but not controlling interest, in “HEL”.
According to Appellant, the Revenue seeks to tax the capital gains arising from the sale of the share capital of CGP on the basis that CGP, whilst not a tax resident in India, holds the underlying Indian assets.

FACTS
On 25.12.2006, an offer comes from Essar Group to purchase HTIL’s 66.99% shareholding at the highest offer price received by HTIL. Essar further stated that any sale by HTIL would require its consent as it claimed to be a co-promoter of HEL.
Through the USD 11.2 billion deal in May 2007, Vodafone acquired 67 per cent stake in the Hutchison-Essar Ltd (HEL) from Hong Kong-based Hutchison Group through companies based in Netherlands and Cayman Island.
To sum up, CGP held 42.34% in HEL through 100% wholly owned subsidiaries [Mauritius companies], 9.62% indirectly through TII and Omega [i.e. pro rata route], and 15.03% through GSPL route. To explain the GSPL route briefly, it may be mentioned that on 11.02.2007 AG Group of companies held 23.97% in TII, AS Group of companies held 38.78% in TII whereas SMMS held 54.21% in Omega. Consequently, holding of AG in HEL through TII stood at 4.68% whereas holding of AS in HEL through TII stood at 7.577% and holding of SMMS in HEL through Omega stood at 2.77%, which adds up to 15.03% in HEL. These holdings of AG, AS and SMMS came under the Option Route. In this connection, it may be mentioned that GSPL is an Indian company indirectly owned by CGP. It held Call Options and Subscription Options to be exercised in future under circumstances spelt out in TII and IDFC Framework Agreements (keeping in mind the sectoral cap of 74%).
OBSERVATIONS
The Hon'ble Supreme Court observed the case of Craven (Inspector of Taxes) v. White (Stephen) (1988) 3 All. E.R. 495 wherein it was held that the Revenue cannot start with the question as to whether the transaction was a tax deferment/saving device but that the Revenue should apply the look at test to ascertain its true legal nature. It observed that genuine strategic planning had not been abandoned.
Further it was argued whether Section 9 is a “look through” provision as submitted on behalf of the Revenue?
According to the Revenue, if its primary argument (namely, that HTIL has, under the SPA, directly extinguished its property rights in HEL and its subsidiaries) fails, even then in any event, income from the sale of CGP share would nonetheless fall within Section 9 of the Income Tax Act, 1961 as that Section provides for a “look through”. In this connection, it was submitted that the word “through” in Section 9 inter alia means “in consequence of”. It was, therefore, argued that if transfer of a capital asset situate in India happens “in consequence of” something which has taken place overseas (including transfer of a capital asset), then all income derived even indirectly from such transfer, even though abroad, becomes taxable in India. That, even if control over HEL were to get transferred in consequence of transfer of the CGP Share outside India, it would yet be covered by Section 9. The court found no merit on the Revenue's submission.
The court said that, to show that in the existing Section 9(1) (i) the word indirect cannot be read on the basis of purposive construction. The question of providing “look through” in the statute or in the treaty is a matter of policy. It is to be expressly provided for in the statute or in the treaty. Similarly, limitation of benefits has to be expressly provided for in the treaty. Such clauses cannot be read into the Section by interpretation. For the foregoing reasons, we hold that Section 9(1) (i) is not a “look through” provision.
The court concluded that
FDI flows towards location with a strong governance infrastructure which includes enactment of laws and how well the legal system works. Certainty is integral to rule of law. Certainty and stability form the basic foundation of any fiscal system. Tax policy certainty is crucial for taxpayers (including foreign investors) to make rational economic choices in the most efficient manner. Legal doctrines like “Limitation of Benefits” and “look through” are matters of policy. It is for the Government of the day to have them incorporated in the Treaties and in the laws so as to avoid conflicting views. Investors should know where they stand. It also helps the tax administration in enforcing the provisions of the taxing laws. As stated above, the Hutchison structure has existed since 1994. According to the details submitted on behalf of the appellant, we find that from 2002-03 to 2010-11 the Group has contributed an amount of `20,242 crores towards direct and indirect taxes on its business operations in India
PWC Indian Executive Director Sandeep LAdda said that though the government will lose out in terms of revenue, the decision is likely to act as a catalyst for future investments and has sent the right signal to the world, especially to investors who want to invest in India. "This settles a prolonged litigation which had created a lot of uncertainty for multinationals having similar structures and/or who had entered into or were proposing to enter into similar transactions.

Thursday, 19 January 2012

INNOVATIVE INDIA




GE’s Annual Global Innovation Barometer has ranked India as the sixth most innovative country.
In terms of sectors, energy, followed by healthcare, telecommunication and FMCG were the areas with the most innovation-driven growth potential, according to the survey.
The report, is based on a survey of 2,800 senior business executives in 22 countries, including 200 respondents in India, identifies the top enablers for innovation in the country as talent ('creative' talent and people with technical expertise), financial support from public authorities and long-term support from investors. 
The following countries were named as "innovation champions", 65 per cent of the global respondents identified the US, followed by Germany (48 per cent), Japan (45 per cent), China (38 per cent), Korea (13 per cent) and India (12 per cent). 
"Creating conditions for meaningful innovation requires the right blend of internal and external factors that can readily be adapted to meet individual market and customer needs," GE senior VP and chief marketing officer Beth Comstock said. 

The survey throws light on the enhancement of Intellectual Property of India.

Thursday, 5 January 2012

GAUVANSH VADH PRATISHEDH (SANSHODHAN) VIDHEYAK 2010




Madhya Pradesh Gauvansh Vadh Pratishedh (Sanshodhan) Vidheyak 2010 has received the Presidential assent following which it has become an Act.
The government had passed the amendment Bill in the Assembly in 2010 to “strengthen” the existing Cow Slaughter Prohibition Act (Madhya Pradesh Gauvansh Pratishedh Adhiniyam 2004) and forwarded it to the Union Home Ministry on September 3, 2010.

The amended Act provides that no person “shall slaughter” or “cause to slaughter” or “offer for slaughter” any cow progeny by any means. Following are the important provisions


§  That no person shall slaughter or cause to be slaughtered or offered for slaughter of any cow progeny by any means. Besides, no person including transporter shall transport or offer for transport or cause to be transported any cow progeny himself or by his agent, servant or by any other person acting in his behalf within the State or outside the State for the purpose of its slaughter in contravention of the provisions of this Act or with the knowledge that it will be or is likely to be slaughtered.
§  Moreover the amended Act also has provisions for specifying necessary actions for feeding and rearing the cow progeny.
§  Another specialty of this Act is that any police officer not below the rank of head constable or any person authorized in this behalf by competent authority shall have the power of entry, inspection, search and seizure and to present the case in the court.
§  The amended Act puts the responsibility of proving the prosecution wrong on the accused in a cow slaughter case. A person found guilty of cow slaughter would be liable for 7 years imprisonment, instead of the present 3 years, besides a minimum fine of Rs. 5,000.

Monday, 2 January 2012

INTELLECTUAL PROPERTY AND RIGHTS OF MAGIC INDUSTRY


M
agic is an art through which magicians manipulate  people through their magic tricks. These tricks have undergone transformations in respect of technology and creation since its being. The art of magic is protected under intellectual property by patents, trade secrets and copyright.  For instance, in the trick of ‘saw a person in half’ H. GOLDIN on June 12 1923[1] was granted the patent. 

After showcasing the tricks the magicians share those tricks within their community and start searching for new innovations and ideas for different trick. One of the great magicians of the 19th century Navel Maskelyne said “the difficulty of producing a new magical effect is about equivalent to that of inventing a new proposition in Euclid.”
The rights of the magicians are exposed in three ways:
·         Creating and sharing
·         Stealing
·         Public Domain

Creating and Sharing: Creating and sharing of the magic art is done between the magicians with the consent of the magicians. A magician coming with a new trick exploits it thoroughly and after exposing it he transfer the secrets of the trick to other magicians. It is very obvious that magicians do not want to put their tricks to public domain as by doing so their magic would no more be a magic. Many seasoned magicians take pride in sharing their modus operandi with the next generation of magicians.[2] This sharing of knowledge between the community helps in bringing new innovations and refinement of magic.

Stealing: In the late 1870s, magician Buatier deKolta performed a memorable trick on the stages of Paris whereby he produced a copious number of paper flowers from inside a previously empty piece of rolled up paper. One night at the Eden Theatre, a draft of wind carried some of the paper flowers onto the floor in front of the stage. Seizing the opportunity, a magician in the audience picked up a flower and rushed out of the theatre. The flower’s ingenious design circulated among magicians, and many others were soon performing deKolta’s signature trick. Today, any magician can purchase “deKolta flowers” for a few bucks[3]. These types of circumstances are referred to as stealing with magicians. It could be referred to as exposure of others magic without the consent or knowledge or permission.

Public Domain: The biggest threat to the magicians is when their tricks are exposed to public as public exposure discloses their knowhow of the trick and it no more remain a magic or interesting or entertaining to the people.
According to magician Jon A. Hand ‘real damage is that exposure teaches people not to respect magic as an entertainment anymore[4]
If a magic is exposed to the general public it is true that it will kill the curiosity behind it for the public, and directly it effect the creativity of the magicians.

Legal Rules Protecting the Rights of the Magicians
Copyright:  In U.S. the Federal Copyright Act of 1976 provide the copyright protection for dramatic and choreographic works[5]. This means that a script can be copyrighted, stage directions, and video recordings of the performance of the performance can also be copyrighted (magicians).
It also says u/s 102 (a) that copyrights subsists in tangible medium from which they can be perceived, reproduced or otherwise communicated either directly or indirectly with the aid of machine.
Patent: While granting of patent to the magicians they need to reveal their secret of the trick through specification to the public which most of the magicians not willing to do so hence few magicians patent their innovations. One of the patented tricks has been mentioned on the first page of the writing. Another trick which was patented was ‘Cigarette up the nose’[6] granted on July 12, 2004.

The method is a magic trick device which provides an illusion of a performer inserting a cigarette into his nostril.
Another Magic trick by Taisheng (Andrew) Han  Jung-Fa Hsia  for unwrapping a solid ring in a solid chain was granted patent having USPC class 472 69.[7] USPTO even has a class dedicated to Amusement Device (472) and various subclasses such as illusion or stage device (472/57).[8]

Yigal Mesika v. Sean Bogunia[9]et al is the first case to ever prevent imitation of a magician’s device of performing tricks. In the case the patented device was ‘significant improvement of similar designs used by magicians in the past for creating the illusion of levitating objects[10].’ Mesika claimed that Sean (defendant) has incorporated his device to new iThread, Deck TR, and iThread X products without Mesika’s knowledge or consent.
Under the terms of the settlement agreement, Sean Bogunia now will no longer create his iThread, Deck TR, and iThreadX products in their current configuration. Bogunia also agreed that for future sales of products that use Mesika’s design, if any, he will pay Yigal Mesika an agreed upon royalty payment for each such use and acknowledge on the packaging for any such product that it incorporates Mesika’s patent design.

Trade secret:  Without any doubt magic methods are the forms of trade secrets and the best way to protect the magic secrets as it does not expire and grant confidentiality. A magician before sharing his trick with anyone can come to an agreement of confidentiality with that person to not to disclose his tricks to any third person.
"Trade secret" means information, including a formula, pattern, compilation, program device, method, technique, or process, that: [11]
(i)                derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(ii)               Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Trade secret law holds that[12]
(1) Liability for violating a trade secret only attaches to those violators who obtain the secret through “improper means.”
(2) This requires outright theft or the breach of a “duty to maintain secrecy”

Trade secret in magic industry is mainly in between magicians to not to disclose the secret to the public. In the case of Andre Kole v. Nash Entertainment,[13] the magic community tried to sue the Fox Network for displaying magic tricks in “Masked Magician” for the violation of Trade Secret. It was alleged by the magician Andre Kole that Fox was exposing an illusion of his called the “Table of Death.” The suit failed.
In another case of Harrison v. SF Broasdcasting[14] similar action was passed by group of magicians seeking to vindicate their “collective” right to magicians’ trade secrets was also failed.

Need of IP in Magic
Mostly magicians avoid using IP rights for the protection of their work because of the following reasons:

·         Copyright does not protect as per the trick but merely its presentation
·         Patents protect their innovations of the trick but it also displays or exposes the trick through specifications which magicians doesn’t want to reveal
·         Trade secret being not a very good defence as it is difficult to show the infringement of the trade secret

Therefore magicians prefer to make their own norms and behold with them. The largest organization of such norms is the International Brotherhood of Magicians (IBM) which has its own ethical codes.

The first category of norms deals with attributing credit to innovators and inventors:[15]

(1)    The first person to publish or prominently perform a trick gets credit for inventing it.
(2)    People are encouraged to publish improvements and new versions of previously shared work, but derivative works should acknowledge and credit the original.

The second set of norms governs the use of a new idea once it has been created. Here, there are at least four major use norms:

(1)   If a secret method or dramatic presentation has not been widely shared, published, or sold, nobody else can use it.
(2)    If a secret method has been widely shared, published, or sold, it may be used freely. Although many of these rules are codified in various codes of ethics, this section draws heavily on my own experience and observations as a member of the magic community.
(3)  If a dramatic presentation has been widely shared, published, or sold, it may be used, but using it will be considered bad form.
(4)  If a trick was originally published or shared but has not been used for a long time the person who re discovers it should be treated as she invented it.

The third and final category of norms governs the exposure of the magic community’s secrets to the lay public:
      (1) Never expose a secret to a non-magician.

In the same way society of America magicians codes of ethics have been built as follows:[16]
All members of the Society of American Magicians agree to:

1) Oppose the willful exposure to the public of any principles of the Art of Magic, or the methods employed in any magic effect or illusion.

2) Display ethical behavior in the presentation of magic to the public and in our conduct as magicians, including not interfering with or jeopardizing the performance of another magician either through personal intervention or the unauthorized use of another's creation.

3) Recognize and respect for rights of the creators, inventors, authors, and owners of magic concepts, presentations, effects and literature, and their rights to have exclusive use of, or to grant permission for the use by others of such creations.

4) Discourage false or misleading statements in the advertising of effects, and literature, merchandise or actions pertaining to the magical arts.

5) Discourage advertisement in magic publications for any magical apparatus, effect, literature or other materials for which the advertiser does not have commercial rights.
6) Promote the humane treatment and care of livestock used in magical performances.

Conclusion

Magician can protect their tricks through patents, copyright and trade secret, but these rights do not seem to be sufficient in protecting the rights of the magicians which they do not want to exposé to the world. If we think from a magicians point of view than certain loopholes can be found in the existing protection regime like revealing of the secret through specification, or only protection of right in way of artistic work. Therefore to overcome these loopholes magicians have made certain norms or code of conduct for themselves according to which they protect their rights.  Due to lack of protection by legal remedy and also due to stealing of their tricks as mentioned above magicians had to come up with professional code of conduct to defend their ideas.
These norms are an approach towards their legal rights if they are enforced properly. Neither the norms of the magicians nor the IP is able to protect fully the secrets of magicians, hence a mechanism is needed to protect them fully by implementing the law for magicians so that their secrets could be protect completely.


BY: Varnika Singh


[1] Patent num 1458575
[2] papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1005564_code627178.pdf.
[3] Id.
[4] http://pages.cs.wisc.edu/~roy/magictalk-wisdom/discussions/exposure.html
[5] 17 U.S.C. sec 102(a)(3)-(a)(4)
[6] Application  num 10/890,560
[7] http://www.faqs.org/patents/app/20080207343
[8] http://www.tecesq.com/news/
[9] CV09-1580 JFW (C.D. Cal. 2009)
[10] U.S. Patent Num 7311609
[11] Uniform Trade Secrets Act, 1985, Sec 1(4)
[12] Uniform Trade Secrets Act sec 1(1) (1985).
[13] BC190153 (Cal. Sup. Ct. 1998).
[14] 1998 WL 355462 (E.D. La.).
[15] Jacob Loshin, J.D., 2007, Yale Law School, Available at papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1005564_code627178.pdf?
[16]http://www.magicsam.com/ethics.asp