Bazee.com Scandal - Arrested Development

We beg to disagree with the other opinion presented on this blog re the Bazee.com scandal. Arresting the Bazee.com CEO is a hasty, poorly thought out and over-reaching act by the Indian administration. Setting aside the impact of this act on one individual (Mr. Bajaj), we believe it will have a chilling effect on the development of communications technology in the country. This is particularly harmful for a country that has carved out its niche in the global economy around IT and IT-enabled services.

Firstly, lets all agree that child pornography is an inexcusable crime. The perpetrators deserve the toughest punishment they can get.

In this posting, we will concern ourselves solely with whether a service provider, like Bazee.com, can be held responsible for the violations of its users. Since the early days of the Internet, service providers have often been sued for the illegal actions of their users, in particular, copyright infringement, defamation and pornography. The US legal system has probably spent the most time studying the issues and parsing out the many nuances. While we do not argue that US laws apply to India, we do not throw out good ideas simply because they’re “not invented here”. Assuming the US laws and precedents would apply in India, Bazee.com would not be held liable for the actions of its users, unlike Napster.

There are two key issues governing this area of the law:
1. “Service Providers” have statutory immunity for violations of their users, if they follow certain conditions.
2. To hold them liable, service providers must be found have “knowledge and material contribution” to the violations.

To facilitate healthy development of Internet-based communication and commerce Congress passed two laws: the Digital Millennium Copyright Act (DMCA) and the Communications Decency Act (CDA). Thereafter, the US courts have fleshed out the laws in many precedent-setting cases.

Some key points:
· "The Digital Millennium Copyright Act (DMCA) carves out a safe harbor for internet service providers who can meet certain criteria regarding material stored and displayed on the provider's website. The service provider must lack actual or constructive knowledge of the infringement. The service provider must not receive a direct financial benefit from the infringement, and must not have the right to control that activity. Finally, the service provider must act promptly to remove the infringing material when it is properly notified."(Ebay Case)
· Ebay meets the requirements of a “service provider” (Hendrickson vs. Ebay)
· "In the eBay case, the online auctioneer argued that it could not be held responsible for copyright infringement as a result of sales of the "Manson" documentary because Hendrickson had not notified eBay properly according to the terms of the DMCA. The court agreed. "(Gigalaw - Ebay)
· No ISP "shall be treated as the publisher or speaker of any information provided by another information content provider." (NOLO.com)
· "Another user, offended by the child pornography solicitations, sued AOL, claiming that the ISP had a duty to make sure that the service did not facilitate the distribution of child pornography. A court ruled that AOL was exempt from the claim under the CDA." (NOLO.com)
· Libraries found similar protection too. "There is a crucial distinction between providing minors with harmful matter on the one hand, and maintaining computers where minors may obtain such matter, however easily, on the other," (Gigalaw - Library)

So, why was Napster held liable for the copyright infringement of its users, and how is that different from other similar cases?
· Napster "knowingly encourages and assists its users to infringe the record companies’ copyrights and Napster materially contributes to the infringing activity"... and "has a direct financial interest in its users’ infringing activity and retains the ability to police its system for infringing activity.” (Napster - summary)
· But a similar service, Grokster, was held to be non-infringing. “If some of the uses infringe, but many of the uses do not, it would not be proper to enjoin the sale of the photocopiers completely. Such an injunction would deprive the public of the benefits of a useful invention.” Examples are the VCR and the photocopier. ( Napster, Grokster )
· “...the standard for a defendant to be found liable for contributory infringement is as follows: (1) knowledge of and (2) material contribution to the direct infringement.”

Net, Bazee.com:
· Meets the requirements of a “service provider” (like ISPs, Phone companies)
· Has “substantial non-infringing uses” (like VCR, Photocopier)
· Was not a material contributor to the infringement (unlike Napster)

Without new laws, who else could the Indian police go after: the data center that hosts Bazee.com or the ISP that provides internet access, or the fiber owners that wire up the country? Could we possibly even see, say, Mr. Ambani in jail? And what tech entrepreneur would want to develop solutions in a country where the powers-that-be would jump on you simply because some idiot out there inadvertently (or even worse, maliciously) abuses your service?

The Indian communications industry must lobby the Parliament to pass laws to protect service providers, albeit with appropriate provisions and requirements that protect the public interest. A high bar must be established to avoid frivolous persecution of service providers. And free Mr. Bajaj right away, with due apologies.

Anything short of it will cause irreparable harm to a country that aims to hitch its wagon to the IT star.