GUEST POST- SUDARSHAN MOHTA- ONLINE INTERMEDIARY – LIABILITY AND OBLIGATION

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I am pleased to bring to you our next guest post by Sudarshan Mohta. Sudarshan is a Mumbai based lawyer pursuing media and entertainment laws and is currently working with Shemaroo Entertainment Ltd. He also works with SheSays India, an NGO voicing and championing women’s rights.

ONLINE INTERMEDIARY – LIABILITY AND OBLIGATION

Sudarshan Mohta

The craze of e-commerce shopping (ease in payment, return, variety – all at the touch of the finger) has encouraged shopping amongst the Indian audience. However, this has also made room for many counterfeit products being sold on such e-commerce platforms. This wrongs not only the customer, but also infringes the trademark of brands.

The Hon’ble Delhi High Court in its recent judgment in the matter of Christian Louboutin SAS vs. Nakul Bajaj & Ors. (date of decision: 2nd November, 2018) has shed light on the responsibilities, obligations and liabilities of online intermediaries.

This judgment has tapered the blanket protection sought by e-commerce platforms as intermediaries u/s 79 of the IT Act, 2000. One can safely assume an authentic shopping experience on e-commerce under this ruling.

ABOUT THE PARTIES

The Plaintiff, a world renowned luxury fashion brand, claimed that its products are sold only through an authorized network of exclusive distributors. The Plaintiff in the past has approached this Court and obtained favourable orders protecting its IP:

  1. Delhi High Court granted Rs. 20 lakhs to Christian Louboutin for trademark infringement of “Red Sole”
  2. Delhi High Court granted an ex parte permanent injunction and an aggregate damages and costs award of Rs. 10.72 lakhs to Christian Louboutin

The Defendant (www.darveys.com) claimed to be a ‘members only’ website, access whereof is available only upon payment of a non-refundable subscription fee. Its members get access to purchase products of luxury brands from across the globe at discounted prices.

COMPLAINT

The Plaintiff claimed that the Defendant is infringing the trademark rights of the Plaintiff, and has violated the personality rights of Mr. Christian Louboutin and has diluted the luxury status enjoyed by their products and brands.

ISSUES

The following issues had arisen for decision in the present case:

  1. Whether the Defendants’ use of the Plaintiff’s mark, logos and image is protected under Section 79 of the Information Technology Act, 2000?
  2. Whether the Plaintiff is entitled to relief, and if so, in what terms?

DEFENCE

The Defendant had sought shelter as an intermediary (u/s 79 of the IT Act, 2000) and had filed its written statement, which contains interesting pleadings, some of which are reproduced hereunder:

  • The goods of the Plaintiff were offered for sale on the website of the Defendants but the responsibility was taken over by the sellers, on whose behalf the goods were offered for sale.
  • The goods are imported and are based on the understanding that the products are genuine and that the manufacturers are not liable in any manner; the name, address of brand owners are displayed.
  • There is a disclaimer that the manufacturer does not have any responsibility and involvement in the sale process. There is no imitation because actual name itself is used.
  • The Defendants do not purchase any articles for sale, only book the orders on behalf of the sellers whose products they display on their platform. The names of the sellers are correctly displayed on the website.
  • It is denied that the products are fake or counterfeits. The Defendant’s website claims that only products of the original manufacturers are being sold.
  • The Defendants do not change the physical condition of the product and hence there is no impairment.
  • That the Plaintiffs should issue a warning that its goods are not for sale and in that case the Defendant will state that the goods of the Plaintiff will not be offered for sale.

WHO IS AN INTERMEDIARY?

 As per the IT Act, 2000 an `intermediary’ is defined as under:

 “Section 2(w) “intermediary”, with respect to any particular electronic records, means 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.”

IS AN INTERMEDIARY LIABLE FOR THIRD PARTY ACTIONS?

 The exemptions u/s. 79 (Exemption from liability of intermediary in certain cases) of the IT Act, 2000, would not apply if a platform is an active participant or is contributing in the commission of the unlawful act. Additionally, the Court opined that, due diligence under the Information Technology (Intermediary Guidelines) Rules, 2011, should not be limited to the guidelines only. The intermediary is obliged to have agreements requiring the seller to not infringe/violate the intellectual property rights or other proprietary rights of any party.

The Court in its judgment dives deeper into understanding who does and does not fall under the protection offered to an intermediary by way of their conduct. Some of the key points highlighted in the judgment for consideration of an entity as an intermediary are as follows:

If the e-commerce platform:

  1. is providing identification details of the seller;
  2. is providing quality assurance of the product;
  3. is providing authenticity guarantees;
  4. is promoting its own affiliated companies on the basis of more favourable terms than other sellers;
  5. is using trade marks in its meta tag or in the source code of its website;

 SAFE HARBOUR

Safe harbour provisions for intermediaries are meant for promoting genuine businesses which are inactive intermediaries, and not to harass intermediaries in any way, the obligation to observe due diligence, coupled with the intermediary guidelines which provides specifically that such due diligence also requires that the information which is hosted does not violate IP rights, shows that e-commerce platforms which actively conspire, abet or aide, or induce commission of unlawful acts on their website cannot go scot free.

 INDIAN JUDGMENTS ON INTERMEDIARY LIABILITY

  • Shreya Singhal vs. UOI: The aforementioned case was more specific to social media platforms and restrictions under Article 19(2) of the Constitution of India, and not e-commerce websites, however, section 79(3)(b) of the IT Act, 2000, discussed therein can be discussed with respect to this case i.e. upon receiving actual knowledge that a court order has been passed asking the platform to remove certain content, must then expeditiously remove or disable access to that material.

 

  • Myspace Inc. vs. Super Cassettes: In this case the Division Bench opined that a harmonious reading of the Copyright Act and the Information Technology Act is necessary keeping in mind the traditional copyright guaranteed and the emergence of newer technologies. The Court opined that it is sufficient for the e-commerce platform to receive specific knowledge of the infringing works in the format provided for in its website from the content owner without the necessity of a court order.

ARGUMENTS AND ANALYSIS

The Plaintiff brought to the attention of the Court, the text on the Defendant’s website, i.e. it provides what is called an ‘authenticity guarantee’, which states that –

“We have a tie up with only A-listed authorised luxury local boutiques form across globe, who have been operational for over five years. Our authenticity guarantee extends up to return of twice of the money to our members in case of lapse in our judgment of a fair deal. So you can ease your stress and rejoice shopping with our transparent dealing.”

The term used in this authenticity guarantee, in effect, means that genuinity of the product is being guaranteed by the website.

It is also made to understand that without becoming a member, one cannot effect a purchase on the Defendant’s website. Thereafter, details of the seller are not disclosed, the person from whom the seller purchases the goods are not known. It is also not known if the product is genuine, though the Defendant represents the same to be genuine. In view of these factors, the Defendant cannot be termed as an intermediary that is entitled to protection under Section 79 of the IT Act.

The Court also records that when an e-commerce website conducts its business in a way which meets many of the points identified in this judgment, it is crossing the line of that of an intermediary, to that of an active participant.

INTERNATIONAL JURISPRUDENCE

 The Court discusses the principles of intermediary liability in the following international jurisdictions-

  • Position in the European Union- In the EU, the national courts have to determine whether the service provider has played an active role or not, and whether it has knowledge or control all over the data which is stored by it. If the service provider has no knowledge, then upon obtaining knowledge of the unlawful data, if it failed to expeditiously remove the data or disable access, then the service provider could be liable. The test established to determine whether the service provider is liable or not; whether the role of the service provider is neutral or not?

 

  • Position in the United States of America- There is no uniformity in the manner in which intermediaries have been treated in different jurisdictions. In fact, some intermediaries such as eBay have faced varying kinds of decisions. However, the underlying principles appear to be the same, in order to determine whether the intermediary is active or passive, negligent or compliant. All these questions are to be determined on the basis of role of the operator or the internet service provider but the trend is clearly that genuine intermediaries are saddled with lesser responsibilities of compliance upon notice and those intermediaries, which played active roles, have been held to be liable to pay monetary compensation.

DISPLAY OF COUNTERFEIT PRODUCTS LEADS TO TRADEMARK VIOLATION

 The judge gave a few illustrations which amounts to falsifying the trademark of a party –

  1. Any service provider, who uses the mark in an invoice thereby giving the impression that the counterfeit product is a genuine product.
  2. Displaying advertisements of the mark on the website so as to promote counterfeit products.
  3. Enclosing a counterfeit product with its own packaging and selling the same or offering for sale.
  4. Application of the mark without the consent of the proprietor.

All these acts would aid the infringement or falsification i.e. show an active participation on behalf of the e-commerce platform and would therefore bring the e-commerce platform or online market place outside the exemption provided under Section 79 of the IT Act. 

META TAGS AS TRADEMARK VIOLATION

A single judge of the Delhi High Court held illegal the use of a trademark in a code, though invisible to the customer (Kapil Wadhwa Vs. Samsung Electronics Co. Ltd.), as it enables the defendant to ride on the reputation of the plaintiff.

It was brought to the attention of the Court that upon conducting a search of the Plaintiff’s mark on the internet, the website of the Defendant would appear in the results. Further analysis of the code of the Defendant’s website showed the use of meta-keyword-tags. The purchase of a counterfeit product dilutes the trademark owner’s brand equity, which does not affect the seller at all. It held that such immunity is beyond what is contemplated u/s 79 of the IT, Act, 2000, and such exemption should not be allowed to be abused by those who are actively participating in an unlawful act.

RULING

The suit was decreed in the following terms:

  1. Disclose complete details (address and contact details) of all its sellers on its website.
  2. Obtain a certificate from the seller with respect to the genuineness of the goods sold.
  3. For sellers located outside India, obtain permission from the opp. party (Plaintiff) with respect to sale of its products.
  4. For sellers located within India, enter and execute agreements wherein genuineness and authenticity of the products are guaranteed and also consequences of violation.
  5. Upon being notified by the Plaintiff of any counterfeit product, and upon the seller failing to provide evidence to prove the genuineness of the product, it shall take down the said listing and notify the Plaintiff.
  6. Guarantee from the seller that the products are not impaired and that all warranties and guarantees of the plaintiff are applicable and should be honored by the seller. Those failing to provide such guarantee shall not be offered to sell on the platform.
  7. Remove meta tags of the Plaintiff’s marks.

Relying on the Defendant’s statement, the Court did not award damages in favour of the Plaintiff as no product of the Plaintiff were sold via the Defendant’s website.

PRACTICES FOLLOWED BY SOME OF THE MAJOR E-COMMERCE PLATFORMS

AMAZON

  • Sale of genuine products- Amazon on its website makes available an assurance that products being sold on its website are 100% genuine. Text under the header Genuine Products is reproduced hereunder:

“Sellers are committed to sell only genuine products to customers on Amazon.in. All  sellers listing their products on Amazon.in are required to enter an agreement to list and sell only genuine products.”

A bare perusal of this assurance would imply that products being purchased on Amazon are genuine and in case of any discrepancy, Amazon would assist its customer with a suitable remedy.

  • Reporting intellectual property infringement

Amazon also makes easy for intellectual property right owners to report an infringement on its platform by way of submitting a Notice Form. Submission of this Notice Form also provides for an implied indemnity which the person/entity submitting the Notice Form provides in favour of Amazon in connection with submission of the Notice Form.

An interesting observation is the ‘Note on Third Party Seller Listings’, text whereof is reproduced hereunder:

Please keep in mind that Third Party Seller listings are merely hosted on Amazon.in and are posted solely at the direction of Third Party Sellers who may be contacted via their “Seller Information” page, accessible from any of their listings.

A perusal of the text mentioned also rubs off a disclaimer that such third party hosting on its platform is solely at the discretion of the third party, hence waiving off any liability or direct knowledge.

FLIPKART

  • Zero tolerance policy to sale of fake products

Flipkart under its Flipkart Assured badge conducts a more stringent check of the products being sold on its platform to meet its extensive quality and packaging guidelines. However, when read into, Flipkart only seems to highlight two deliverables: quality and speed. It mentions that products sold with the Flipkart Assured badge undergo 6 quality checks at every stage from storage to packaging, however, there is no mention as to what these checks are. Also, it mentions that to avail the Flipkart Assured badge, sellers need to adhere to stringent seller guidelines, which also were not available for perusal.

  • Reporting intellectual property infringement

A person/entity wanting to report infringement of its intellectual property rights can write to Flipkart at infringement@flipkart.com along with necessary information available here.

CONCLUSION

Under this judgment the Court has opined on the blanket protection sought by e-commerce platforms under section 79 of the IT Act, 2000. It has also distinguished between a passive and active intermediary and its ability to waive liability or shield behind the safe harbor provision.

Going forward an e-commerce platform may opt to revisit its practice in order to claim protection as a passive intermediary, the judgment has listed down some points which may serve as an additional guideline with respect to usage of trademark of other parties without their permission or in a discreet way to ride on their goodwill.

That being said, it is safe to assume that a customer (or even a brand) can get remedy against e-commerce platforms making inaccurate and/or false representations knowingly or actively.