The Indian e-commerce industry is ready to take the world by storm. As per reports published in Economic Times it will surpass China soon to become the biggest e-commerce market in Asia.1 However, amidst this happy ecommerce tune, one note that requires special attention is the protection of intellectual property and the liability of e-commerce as intermediaries for it, with an alarming number of counterfeits which are now infesting online markets.2
The issue in the spotlight over here is whether these online marketplaces can be held liable as an intermediary for counterfeit goods being sold on their websites, if yes to what extent? The legal jurisprudence has travelled its own journey, via several court decisions, in this regard with the latest position being that the e-commerce portal do have shield of safe harbor provisions, however in certain situations where the e-commerce portals are an active participant, they cannot claim exemption under Section 79 of the Information Technology Act, 2008 (hereinafter referred to as ‘IT Act’).
Section 2 (w) of the IT Act defines ‘intermediaries’ with respect to any particular electronic records, 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, webhosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.
The safe harbor provisions are imbibed under Section 79 of the IT Act3. The section lucidly explicates the liability of the intermediaries. It is this section which is time and again tested in the court of law and its interpretation has been reformed to balance the legal and technological progressions in Indian e-commerce space.
This was the first stop in defining intermediary liability for e-commerce portal. In probably one of the first ever judgements that comprehensively deals with the liability of intermediaries and had put the onus on IP holders to provide a specific list of infringing works to intermediaries.
T-series (a well-known record label company) filed a suit in the Delhi High Court against MySpace before the Delhi High Court in 2008 for a permanent injunction and damages to restrain MySpace from reproducing, adapting, distributing on its website any content the copyright of which existed with T-series.
On an interim application, the Single Judge found that the protection which can be availed by intermediaries under Section 79 of the IT Act cannot be availed in cases of copyright infringement due the proviso of Section 81 of the Copyright Act, 1957 that explicitly states that the IT Act does not restrict any right granted under the Patents Act and the Copyright Act.
The case was then appealed before the Division Bench (DB) of the Delhi High Court. The DB reversing the decision of the Single
Bench held that the MySpace is merely a neutral platform for user-generated content and functions without contributing any information on its own. The intermediary can only be held liable when it is proven that they have actual knowledge that the content is being uploaded on their platform.
The jurisprudence on intermediary liability was further expanded upon with this case. In this matter, Kent RO systems, a manufacturer and distributor of water purifier systems alleged that certain products infringing their registered designs were being posted on the ecommerce website eBay.in. E-bay in its defense submitted that it had taken down such products from their website once they were notified about the infringing products.
Kent RO argued that in addition to Ebay’s duty to remove the goods upon receiving a complaint against the parties, it had an additional obligation to devise a mechanism that prevents further posting of any listing that may infringe its registered designs.
The Delhi High Court held that an intermediary who does not have actual knowledge of infringing goods hosted on their platform cannot be held liable. As long as the intermediary follows ‘due diligence’ as required under Rule 3 of the Information Technology (Intermediaries Guidelines) Rules, 2011 and duly informs the consumers its usage policy as E-bay had proved to have done in this case, they are exonerated from liability.
This case can be seen as a milestone in the journey of intermediary liability in India. It precisely scrutinized Section 79 of the IT Act and highlighted the thin line of distinction between liability and safe harbor provisions, under two heads, namely:
The matter arose when Christian Louboutin (hereinafter referred to as ‘the Plaintiff’), a famous designer of high-end luxury products, brought an action before the Delhi High Court against the Nakul Bajaj and others (hereinafter referred to as ‘the Defendants’), who operated an e-commerce website ‘www.darveys.com’ (hereinafter referred to as ‘impugned website’) alleging that the Defendants were offering for sale and sold various products on their website, bearing the luxury brands/names of the Plaintiff. It was also alleged that the impugned website contained complete ‘Christian Louboutin’ product catalogue. They were also using the image of the founder of Louboutin company, and the names ‘Christian’ and ‘Louboutin’ were used as meta tags.
It is the Plaintiff’s allegation that The Defendants’ website contains the complete “Christian Louboutin” product catalogue. The website further claims that the products are 100% authentic.
Nakul Bajaj tried to evade liability claiming that they are a mere intermediary, which had no dealings with the plaintiff directly or indirectly, and that action lies only against the sellers on whose behalf the goods are being sold on the defendant website.
The court here rejected the argument that the defendants were mere intermediaries and held that the nature of working of www.darveys.com does not make it an intermediary. It held that ‘When an ecommerce company claims exemption under Section 79 of the IT Act, it ought to ensure that it does not have an active participation in the selling process. The presence of any elements which shows active participation could deprive intermediaries of the exemption’.
Regarding the liability of E-commerce platforms the court held that ‘While the socalled 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 ecommerce platforms which actively conspire, abet or aide, or induce commission of unlawful acts on their website cannot go scot free… 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’
Further the court listed certain situations which define the role of an online market place to be active:
The case can be seen as a new point in the discussion concerning intermediary liability in India and it will interesting to see its impact on the Indian e-commerce businesses.
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