Intermediary liabilities for IP infringements and passing off in the age of e-commerce.

Intermediary liabilities for IP infringements and passing off in the age of e-commerce.

Introduction

The onset internet shopping has resulted in the gradual whittling away of the traditional brick-and-mortar shops and e-commerce platforms are on the rise. Today, most people prefer to shop online as they offer variety, convenience and often a cheaper price. As much as it has made life convenient for everyone, e-commerce platforms have also given a huge window of opportunity for counterfeiters and infringers.

A huge amount of counterfeit/duplicate/ infringing goods are sold on various e-commerce platforms, which is not just against public interest, but is also violating the intellectual property rights of brand owners.

When a brand owner discovers that goods infringing its trademarks/copyrights are being sold on an e-commerce platform, ideally a takedown notice is sent to that platform requiring the taking down of the infringing listings. Some e-commerce platforms like www.amazon.com have their own grievance redress mechanisms for dealing with IP infringement, while with many platforms, take-down notices have to be addressed.

As convenient as it may sound, the response of these e-commerce platforms with respect to Intellectual property infringement is grim and unsatisfactory. Practical experience of the experts in the industry has shown that the e-commerce platforms do not take down products infringing the IP of a brand owner on being asked by the rights owner and hide behind the cloak of their intermediary status[1].

Intermediaries Status- Information Technology Law, 2000 (IT Act)

In India, the internet intermediaries are governed by the IT Act. Section 2(w) of the Act defines intermediaries as,

“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”

Under the Information Technology Act, 2000[2], intermediaries have been given a special status and exemption from any liability for any third-party information, data, or communication link made available or hosted by them.  As per section 79(3)(b) of the IT Act and Rule 3(4) of the Intermediary guidelines[3], intermediaries are not obligated to act against illegal or infringing content unless they receive “actual knowledge” of the same. Thus, Intermediaries can not be adjudicatory bodies and they cannot adjudicate upon the intellectual property rights of any party, or determine complex legal issues. As soon as an intermediary will attempt to adjudicate, it will lose its status as an intermediary.

The obligation to act only arises upon the receipt of actual knowledge by intermediaries. The term “actual knowledge” was interpreted by the Supreme Court of India in the case of ‘Shreya Singhal v. Union Of India[4]’, wherein actual knowledge was held to be knowledge by means of a court order as an intermediary cannot be placed in the role of an adjudicator to determine complex legal issues. However this requirement of a court order was only restricted to acts in violation of Article 19(2) of the Constitution of India, which prescribes restrictions on free speech and expression.

Further the Delhi High Court in Kent RO Systems Ltd. & Anr. v. Amit Kotak & Ors[5] has observed that an intermediary’s obligation to remove/disable information hosted on the portal arises only on receipt of a complaint. The IT rules do not oblige an intermediary to of its own screen all information being hosted on its portal for infringement.

Thus, intermediaries in India, usually take recourse to the above two judgements while refusing to take down the weblinks of infringing products. In spite of the fact that the requirement of a court order is only limited to situations where allegations of violation of Article 19(2) of the Constitution of India are involved, brand owners are forced to take recourse to Court proceedings for obtaining takedown orders against infringers; as intermediaries refuse to act otherwise.

However, the Delhi High Court on a number of occasions has held otherwise. In the case of Facebook Inc. v. Surinder Malik[6], the Delhi High Court has held that the intermediaries have a duty to take down the posts that have been bought to their notice by the Plaintiff in terms of section 79(3)[7] by following due diligence and that the requirement of a court order is strictly confined to subject matters laid down under Article 19(2). Similar observation was made in Myspace Inc. vs Super Cassettes Industries Ltd.[8],  wherein the Court gave the concept of ‘actual or specific knowledge’ and held that intermediaries can be held liable if they have actual or specific knowledge of the existence of infringing content on their website from content owners and despite such notice, they do not takedown the content. There is no necessity of a court order in such cases. The Division Bunch further pronounced that “in case of internet intermediaries, interim relief has to be specific and must point to actual content, which is being infringed”.

Liability in case of active participation of intermediaries 

In cases where the intermediaries have any active participation in intellectual property infringement, they lose the protection granted under the IT Act. The High Court of Delhi in Christian Louboutin SAS v. Nakul Bajaj and Ors. [9]held that the Defendant’s role herein was more than an intermediary as it was identifying the sellers, enabling the sellers actively, promoting them and selling the products in India. It was also observed that so long as they are mere conduits or passive transmitters of the records or of the information, they continue to be intermediaries, but merely calling themselves as intermediaries does not qualify all ecommerce platforms or online market places as one. The Court also held that the conduct of intermediaries, in failing to observe ‘due diligence’, could amount to ‘conspiring, aiding, abetting or inducing’ unlawful conduct and would disqualify them from the safe harbour exemption, as per Section 79(3)(a).

Conclusion

Intermediaries in India are not obligated to act in case of Intellectual property infringement unless they receive ‘actual knowledge’ of infringement, which can be in the form of a court order or even a brand owner’s specific intimation regarding infringement. However for all practical purposes, usually the intermediaries do not act on brand owners request unless a court order is presented to them.

[1] Based on commercial experience

[2] Section 79 of the IT Act, 2000

[3]https://www.meity.gov.in/writereaddata/files/Intermediary_Guidelines_and_Digital_Media_Ethics_Code_Rules-2021.pdf

[4] [(2015) 5 SCC 1]

[5] CS(COMM) 1655/2016

[6] CM(M) 1263/2019

[7] Information technology Act, 2000

[8] FAO(OS) 540/2011

[9] CS (COMM) 344/2018