REGULATORY FRAMEWORK FOR ED-TECH COMPANIES

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REGULATORY FRAMEWORK FOR ED-TECH COMPANIES

March 23, 2022

A. INTRODUCTION TO ED-TECH COMPANIES

There has been a shift in educational sector with the fast pacing technological advancements all around the world, and it has had implications on the educational technology (Ed-Tech). Ed-Tech Companies use technological tools like internet to impart not only traditional education but are also providing courses for people to enhance their skills, imparting education on topics like current affairs, mental health etc. The pandemic witnessed a growing popularity of Ed-Tech companies as it was no more a choice; rather they became an only alternative to educational institutions.

While Ed-Tech companies have had a huge effect by providing excellent and inexpensive education services, their customers’ abilities to study and find work have increased as a result. As a result of the use of adaptive learning solutions, students are no longer just “knowledge receivers,” but also “knowledge creators.” The industry has also resulted in a significant increase in the employment opportunities. It is vital, however, to establish a standard code of conduct for all Indian Ed -tech businesses to ensure that ‘learners’ stay at the centre of all business operations as the sector is growing rapidly.

There could not have been a better time for India’s National Education Policy 2020. Education technology infrastructure was highlighted, and a venue for the sharing of ideas on Ed-Tech, the National Educational Technology Forum, was envisaged. It’s not surprising that the Ed-Tech industry has seen a record number of mergers and acquisitions. Byju’s, Unacademy, Vedantu, and Toppr (which was recently bought by Byju’s) are the four main players in the business, which lead the consolidations.

B. REGULATORY FRAMEWORK IN INDIA

In India there is no consolidated law regulating Ed-Tech Companies. The rules and regulations are fragmented and are discussed below:

  1. Intellectual Property Laws:

All the Ed-Tech Platforms have certain Intellectual Property which is either developed by them, or acquired from a third party [1] and has to be protected. Every Ed-Tech Platform will be dealing with the following IP Rights:

  • The Copyright Act 1957:

Every Ed-Tech Company has its own educational models that they prepare to give to their users. The Copyright Act 1957 protects the educational models prepared by the platforms as they will be considered “literary works” and come under the purview of the act. In India, copyright registration is not essential, and copyright is established as soon as the work is generated, as long as it is original. However, a registered copyright serves as an evidence of ownership, and it stays for 60 years after the author’s death.

  • Trade Marks Act 1999:

Under this act, the trademarks such as the logo, product name, logo, label, signature, word, numerical, packaging etc. are protected [2]. The Trademarks Act allows for the registration of any mark that may be “graphically represented” and is linked to the proprietor’s company, as long as it does not fall under any of the absolute or relative grounds for registration. A registration serves as a prima facie evidence; as a result, the use of a trademark’s legal proof is strongly advised. The mark is still protected, however, even if it is not registered, under common-law. An essential aspect of e-business is the use of websites and internet domains. However, Indian courts have extended the trademark protection provided under the Trademark Act and its Rules to include domain names, despite the fact that no such legislation or regulation exists [3].

  • The Patent Act 1970:

In India, any invention can be protected under the Patents Act 1970 and ‘invention’ is defined as “a new product or process involving an inventive step and capable of industrial application” [4]. In India, Software, algorithms, and business techniques are not patentable unlike in many other nations. Learning- based products and methods are not patentable in India until paired with hardware and the invention satisfies the requirements of novelty, non-obviousness, and the necessity of a claim of non-infringement [5]. The main difficulty is to identity which of the inventions in patentable and which are not. Ed-Tech platforms, they must not disclose their unique feature to the public as it may lose the chance of becoming patentable.

  • Trade Secrets:

Trade secrets and know-how are protected by the common law in India, notwithstanding the absence of particular rules and regulations [6]. Watertight agreements and policies and processes should be put in place to safeguard trade secrets and sensitive information.

2. Consumer Protection Laws:

The new consumer protection law brought e-commerce entities too under the purview of the act, and further passed the Consumer Protection (E-Commerce) Rules 2020. According to these rules an “E Commerce Entity” is any entity which offers services over the internet [7]. But this definition does not cover any seller who provides his products or services through an e-commerce marketplace. It can be understood that any Ed-Tech Company which is providing services in return of fee or some consideration will fall under the purview of the above definition, and therefore, Ed-Tech platforms are governed
by these rules.

According to the E-Commerce Rules, an e-commerce business must provide its address, contact information for customer service and grievance officers, etc. on their website and develop a grievance redressal procedure in order to be considered an e-commerce organisation. In accordance with the rules of e-commerce, there is a necessity for any foreign e-commerce company to have a physical presence within India, a business unit, a division, an outpost, or a representative body to come under the ambit of the E-Commerce Rules.

There have been very few circumstances where Ed-Tech companies have been sued under the Consumer Protection Act. In 2019 a deficiency of service case has been filed against Byju’s in the District Consumer Dispute Redressal forum. The complaint was unhappy with the company’s style of teaching and repeatedly requested that the service be terminated [8]. The company, on the other hand, paid little attention and continued to deduct money from the applicant’s account on a regular basis. Byju’s was found guilty of deficiency in service and harassment by the consumer forum. The forum further mandated that the applicant be reimbursed for any deductions made and be held harmless for any litigation costs incurred.

3. Data Protection Laws:

The growth of the Ed-Tec sector puts a lot of pressure on them in handling the data of their users which includes their students, teachers etc. with utmost care and caution as there are very high chances of cyber-attacks [9] where their data might get stolen. Data breaches and cyber security events have been on the rise in recent years in the business.

According to a report in September 2020, the personal information of over 2 million EduReka members, including their age, gender, phone number, and parents, was made public because of server vulnerability [10]. Users are at danger of being targeted by hackers, tricked into financial scams, targeted by exploitative advertising, and subjected to personal abuse as a result of these breaches.

The present Information Technology Act 2000 has not been able to keep up with the changing technology, and therefore, Indian Government issued the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules 2011 along with the clarification dated August 24, 2011 (hereinafter referred to as Data Protection Rules).

These companies will be having personal information and also sensitive personal information which consist of passwords, financial information, health conditions and medical history etc. [11]. As per the above mentioned regulations, the body corporate must take the consent of the user prior to collection of such personal and sensitive information [12]. But these regulations are applicable to body corporates collecting such information through electronic medium located in India. Therefore, there is an imminent need for having a wider data protection laws to bring in Ed-Tech Platforms located outside India.

4. Education Specific Laws:

In India, Education is governed and regulated by two main statutory bodies: University Grants Commission (hereinafter referred to as UGC) and All India Council for technical education (hereinafter referred to as AICTE).

In the year 2020, UGC came up with new guidelines governing Open and Distance Learning Programmes & Online Programmes [13]. According to these UGC Online Regulations, only undergraduate and postgraduate degree and certificate programmes are allowed to be taught online. Engineering, medical, law, dentistry and pharmacy programmes as well as research-based programmes like a PhD are not included in this list [14], unless the regulatory authority involved allows such programmes to be offered in open distance learning or online form, and then the UGC then sends out an order to notify students of the existence of such programmes [15]. These regulations further permitted Higher Educational Institutions (hereinafter referred to as HEI) to offer certain courses in the online mode through various Ed-Tech Platforms provided these platforms must have been approved by the statutory bodies [16].

Recently, in 2021 AICTE published certain guidelines which opened the way for certain technical courses to be delivered online as well [17]. But these guidelines are limited to management and linked sectors, computer applications and artificial intelligence and data science in the engineering and technology domain, logistics, and travel and tourism. The AICTE Online Guidelines declare that the regulations of the UGC would apply to specific areas, such as e-learning materials and platforms for providing online programmes [18]. Ed-Tech platforms may now collaborate with Indian HEI’s for a wide range of courses, including some technical ones.

But in January 2022 UGC passed a public notice whereby they prohibited HEI’s from entering into any kind of franchise agreement with Ed-Tech platform [19] as they themselves should take the sole responsibility of the online courses they offer. According to the notice, HEI’s have been offering Online, and Open & Distance learning programmes under franchise agreements and some Ed-Tech businesses are advertising in newspapers, on social media, and on television that they are partnering with universities and institutions to provide degree and diploma programmes in ODL/Online modes. But as per UGC Guidelines these kinds of franchise agreements are prohibited and punishable under the law.

5. Laws applicable to an Intermediary:

An Ed-Tech company may or may not be considered as an “intermediary” depending on the business model which has been adopted by the company [20]. An intermediary is an “any person who on behalf of another person receives stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web hosting service providers, search engines, online payment sites, online-auction sites, online market places and cyber cafes” [21]. Once an Ed-Tech is considered an intermediary it will have to comply with the Information Technology Act 2000 and IT (Intermediaries Guidelines and Digital Media Ethics Code) Rules 2021 which supersedes the earlier rules passed in 2011 else they will be charged for the non-compliance.

According to Section 79 of the IT Act 2000, intermediaries which adhere to the due diligence provisions given in the IT (Intermediaries Guidelines and Digital Media Ethics Code) Rules 2021, a safe harbour from the liability for content produced by third parties and hosted on their platform. But in the case of “Fermat Education v. M/s Sorting Hat Technologies Ltd.” Madras High Court has recently passed a judgement where it held that the defendant (Unacademy) does not fall under the purview of ‘intermediary’ as they themselves have control over the content they are uploading [22], and therefore cannot claim protection under Section 72 of the IT Act.

6. Self-regulation Mechanism by Ed-tech Companies:

Last year has seen an increase in complaints against the Ed-Tech Companies accusing them of luring customers in the name of free services but are having them sign the Electronic Fund Transfer Mandate which has an auto debit feature [23]. The Central Government is on a pathway in formulating a policy to limit the monopolies in order to stop the exploitation of students from the unrealistic claims being made by the Ed-Tech Companies [24].

In response to the advisory issued by the Central Government with respect to do’s and don’ts for students while signing up for online courses, the leading Ed-Tech Companies came together and formed the India EdTech Consortium (hereinafter referred to as IEC) under the backing of Internet and Mobile Association of India (IAMAI). The object of setting up IEC is to ensure every student will have access to excellent and affordable education that enhances academic performance and prepares them for their future. Companies in the Ed-tech sector have agreed to develop a two-tiered grievance process and to adhere to a shared “code of conduct” to ensure that the advantages of the business reach every deserving customer while also safeguarding their interests and advocating for their rights [25]. Under this grievance mechanism any aggrieved party can submit a complaint with Tier 1, and if it isn’t resolved within 30 days, they may then go to Tier II [26]. Any decision made by a member after the Tier I procedure can be appealed to Tier II by the party that was wronged [27].

CONCLUSION
The past few years has seen a fast increase in the number of clients on the platforms of Ed-tech companies. Thus, Ed-Tech platforms must be mindful about the promises they make on the platform regarding the services they provide. There are many critics of Ed-Tech because of the Indian ethos, which has been upheld by several court rulings over the years, and since it is viewed as a non-profit activity in the country. Ed-Tech may be both labour-intensive and technology-intensive at the same time, and it often is. There must be a fair, transparent, and equitable way for this economic activity to take place. India Ed-Tech Consortium (IEC), a self-regulatory group founded a few days ago, has pledged to “adhere to the Code of Conduct and develop a two-tier Grievance Redressal Mechanism” following the flurry of advisories and warnings.

In a nutshell, it can be said that an effective data protection laws, definite consumer protection laws, and effective functioning of the IEC is needed to ensure sector’s long-term viability as well as safety of the users of such Ed-Tech Platforms.

End-Notes

[1] EdTech: From IT to AI: Legal Perspective, Nitish Desai Associates,
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/EdTech_From_IT_to_AI.pdf. [2] Section 2 (zb) of the Trade Marks Act 1999.
[3] supra note 1.
[4] Section 2(1) (j) of the Patents Act 1970.
[5] supra note 1.
[6] supra note 1.
[7] Consumer Protection (E-Commerce) Rules 2020, Section 3(1)(b).
[8] Joginder Singh Saini v. Byju’s Think & Learn Pvt. Ltd., Consumer Complaint No. 207 of 2019.
[9] Gaurav G. Arora, Need for data protection framework for Ed-tech Sector, TOI,
https://timesofindia.indiatimes.com/blogs/voices/need-for-data-protection-framework-for-edtech-sector.
[10] Id.
[11] supra note 1.
[12] Data Protection Rules 2011.
[13] Available at:: https://www.ugc.ac.in/pdfnews/221580.pdf.
[14] Id.
[15] Id.
[16] supra note 1
[17] AICTE (Open and Distance Learning Education and Online Education) Guidelines 2021.
[18] Id.
[19] Available at: https://www.ugc.ac.in/pdfnews/5156905_UGC-Public-Notice-DEB.pdf
[20] Ashima Obhan, Anubhav Chakravorty, Self-Regulation: EdTech’s Solution to Increased Regulatory
Intervention, Obhan & Associates (March 4, 2022, 01:15PM), https://www.obhanandassociates.com/blog/self-
regulation-edtechs-solution-to-increased-regulatory-intervention/?utm=newsletter012022&email=a….
[21] The Information Technology Amendment Act 2008, Section 2(w).
[22] Fermat Education v. M/S Sorting Hat Technologies Ltd., CS (OS) 330 of 2018.
[23] Sourav Roy Barman, Edtech Sector’s self-regulation bid: How, why and why now, THE INDIAN EXPRESS, January 7 th, 2022.
[24] Prashant K. Nanda, Government to bring policy to regulate edtech companies, MONEY CONTROL (March 7, 2022, 10:30 AM), https://www.moneycontrol.com/news/business/startup/exploitation-of-students-govt-to-bring-policy-to-regulate-edtech-companies-7895001.html.
[25] supra note 20.
[26] Id.
[27] Id.

Author: Abhishek Gupta, Senior Associate.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at abhishek@samistilegal.in

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