Sunday, September 25, 2005

Many deals are made by people who believe that the only time you should think of tax is when you have no choice but to pay.

So the tax consequences of transactions are seldom worked out before signing agreements.

Tax is then viewed like the weather in business- irrelevant and unpredictable. So in negotiations where even exchange rate safe harbors are "libor"-iously worked out, taxes which can alter the effective return on investment and bite into the bottomline, are ignored.

Some tax law posts will surface on this blog soon- and like boring plays, this prelude is probably the best of what will follow.

Thursday, September 22, 2005

A register not kept, can lead all officers of a company to jail. And so you enter the cage, boss first, for heirachies can be manitained when registered aren't.
And that is the register (format Form D) of the Indian Equal Remuneration Act, and Rules.
The Labour Commissioner is watching.

Thursday, September 15, 2005

A well-known offshoring vendor is in trouble with a Labor Commissioner because it did not obtain licensing required for hiring contract labor. The Contract Labour (Regulation and Abolition) Act, 1970 has to be taken seriously. This is one of the most forgotten laws in the small and mid-sized Indian software community. Many Indian software companies “employ” people as contractors.

The Government explains this law here:
An extract:-
"Every contractor is required to obtain a licence and not to undertake or execute any work through contract labour except under and in accordance with the licence issued in that behalf by the licensing officer. The licence granted is subject to such conditions as to hours of work, fixation of wages and other essential amenities in respect of contract labour as laid down in the rules."

Monday, September 12, 2005


Non-compete law in India and the US is enmeshed in public policy. So when a non-compete clause finds itself in court, interesting things happen. One of these involves how the court chooses to read the disputed contract.

In the US, some courts follow the red pencil approach when looking at a non-compete agreement. So if one clause is bad in law, the entire agreement with all its other safeguards, is also struck out. In effect, the contract is read in invisible ink.

Other jurisdictions 'blue-pencil' parts of the non-compete contract which are valid, and strike out the rest. Still others use a hybrid approach so if they find the contract made in good faith, or reasonable, then the blue-penciling rule is followed.

This issue is noticed often in stock forfeiture contracts.
When a forfeiture of stock options clause is challenged in court, and this clause happens to reside in a non-compete agreement (as opposed to the incentive plan for instance) then a lot depends on which pencil the court uses to read the contract.

Red-pencilling is the more extreme form of reading a contract. For the party in a contract for whom enforcing the non-compete matters more- most likely the employer, or the bigger company, depending on the context- it would therefore be a good idea to ensure that the applicable law of contract is not a red-pencilling jurisdiction. That way, even if a clause or two of the non-compete agreement are hacked off by the court, atleast the rest remains.

Disclaimer: This does not constitue legal opinion or advice.

Saturday, September 10, 2005

It a domain-name a trademark in India? The implications, if it is a trademark, is that it can be registered, and a suit for infringment can be filed if the trademark is violated by a third person. And an action for "passing off" can also be inititated against a third party who is intentionally misleading potential clients by a domain designed to sound similar.
The Supreme Court of India has held in 2004 that a domain is not a trademark, but it is "like a trademark." This decision confirmes that a domain name owner can sue for passing off.
But are all domains "like a trademark"? If not, then the domain-name is not entitled to proceed under a theory of passing off. This case hints otherwise. However, it endoreses other Indian cases which seem to suggest that the answer is yes. This decision, like most recent decisions on technology law, relies of principles developed by US courts.
Though this isssue is not discussed in the Indian Supreme Court decision, courts in the US have have mostly used a functional analysis to determine if a domain has the characteristics of a trademark. If a domain serves just as a phone number, then some courts have held that it is not like a trademark, and accordingly is not protected as such. There are a few rulings which indicate that the website should be given a prominet place in marketing materials including a place of prominence in business cards of employees, so the domain name rises beyond a source of information such as a telephone address- and swims into the terriotory of a trademark.
The same approach would seem to work in India, after the recent Supreme Court decision.

Friday, September 09, 2005

The delete e-mail facility is a bad shredder. Like bad memories, some e-mails stay to haunt, and are triggered by random events, such as forensic experts and aggressive prosecutors.
If an e-mail would have been admissible as evidence to prove guilt, then the person who has deleted the e-mail to hide evidence can be in trouble. And this destroyer of e-mails according to Indian law can be anyone, and not just the person against whom proceedings are initiated.

Here is the provision, as amended by the Information Technology Act, 2000
S. 204 Indian Penal Code:-
Whoever destroys any... electronic record which he may be lawfully compelled to produce as evidence in a Court of Justice, on in any proceedings held before a public servant, as such, or obliterates or renders illegible the whole or any part of such document or electronic record with the intention of preventing the same from produced or used as evidence before such Court or public servant as aforesaid... shall be punished with imprisonment of either description of either description of a term which may extend to two years, or with fine, or with both.

A click, and a button, and then "chakee peesing and peesing."

Thursday, September 08, 2005

If you brand and market your software in the public bazaar, you will attract attention- and then some sales tax.
A 2005 judgement of the Supreme Court of India has held that "off the shelf" software attracts sales tax. On desktops or discs, if marketed to the public, there's sales tax to be paid.
So what is not "off the shelf" software? It is software that is customized, and "tailor-made according to the customer's particular requirements." (Congratulations if you got that right.) Think software solutions that require "specs" from the client. The Supreme Court also used the term "unbranded" to describe this kind of software. Having said so, the apex Court refrained from ruling about sales tax liabilities of unbranded software.
In any case, designing the transfer of software as a licence and not a sale may make a difference. To use the two favorite words of lawyers- "it depends."

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