ARE E-COMMERCE MARKETPLACES REALLY IMMUNE AS INTERMEDIARIES-BY SHAUBHIK GUPTA (ADVOCATE)
ARE E-COMMERCE MARKETPLACES REALLY
IMMUNE AS INTERMEDIARIES
Author - Shaubhik Gupta (Advocate)
These are
interesting times as far as electronic commerce or e-commerce is concerned. Recently, Hon'ble Delhi High Court, in
case of Christian Louboutin v. Nakul Bajaj, deliberated on the protection
granted to intermediaries under the safe harbour provisions, in cases of use of
marks, logos etc. by the e-commerce marketplace or the e-commerce website or website.
Brief-Facts:
In the present case the defendant operated an e-commerce marketplace which facilitated the purchase of various products such as clothing, footwear, wearable accessories from a myriad of high-end fashion brands. The said e-commerce marketplace contained a disclaimer that there is no connection, affiliation, or economic link with the brand owner. It was also claimed that goods offered by e-commerce marketplace were imported and genuine. It also claimed that sales were made directly by the boutiques to the customers. The prices for the products were maintained and changed at the discretion of e-commerce marketplace.
Plaintiff
claimed that the goods of the Defendants listed for sale on the e-commerce
marketplace were counterfeits. The image of the founder of the Plaintiff was
used, and the names “Christian” and “Louboutin” were also used as meta-tags on
the e-commerce marketplace. By use of these meta-tags, the defendants attracted
traffic to their e-commerce website. According to the Plaintiff, the
Defendants’ website gave an impression that it was in some manner sponsored,
affiliated and approved for sale of a variety of luxury products bearing the
mark of the Plaintiff’s genuine products. That the above resulted in
infringement of the trademark rights of the Plaintiff, violation of personality
rights of Mr. Christian Louboutin and dissolution of the luxury status enjoyed
by their products and brands.
The
Defendants claimed that they merely provided services as intermediary in respect
of the goods on the e-commerce marketplace and were protected under Section 79 of
the Information Technology Act, 2000 (IT Act).
The
question posed before the Hon’ble Delhi High Court was whether the use of mark, logos, images of Plaintiff, by Defendants
operating an e-commerce marketplace, is protected under the safe harbour provisions
for intermediaries under Section 79 IT Act.
The Court dwelled
upon the position of intermediaries and the protection offered to them under
the provisions of the IT Act by analysing the position of intermediaries in
European Union (EU), US and in India. Further, the protection available to
intermediaries was also seen in the light of some significant precedents and the
provisions of the Trademarks Act, 1999 (TM Act). The above aspects are
summarised in following paragraphs.
Safe
harbour provisions for intermediaries and their scope
The safe harbour provisions for intermediaries are enshrined in Section 79 of the IT Act. The definition of the expression 'intermediary' is defined under Section 2(w) , which reads thus - "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.”
The Court
stated that protection under Section 79(2) to an intermediary is available:
(i) if
either the intermediary is merely providing access to a communication system
over which the third-party information is transmitted or temporarily stored,
or;
(ii) when
the intermediary does not play any role right from initiation, selection of
receiver or modification of information in the transmission.
Further,
the protection under sub section (1) is also available if the intermediary
observes due diligence in discharge of his duties and observes guidelines
prescribed by the Central Government.
It was
also noted that under Section 79(3), protection of sub-section (1) is not
available to an intermediary if the intermediary:
(a)
conspires or abets or aids or induces, by threats or promise, in commission of
an unlawful act;
(b) fails
to expeditiously remove or disable access to offending information, data or
communication link upon being notified by appropriate Government or its agency.
Here, the
expression 'third party information means any information dealt with by an
intermediary in his capacity as an intermediary.
The Delhi
High Court noted that Hon'ble Supreme Court did not consider the applicability
of Section 79(3)(a) in Shreya Singhal[1], especially considering the violations of
intellectual property rights. The High Court then dwelled upon the
definition of 'intermediary' under Section 2(w) of the IT Act, and observed
that the crucial words in the definition of intermediaries as per Section 2(w)
of the IT Act are `receives, stores, or
transmits a particular electronic record or provides service with respect
to the record’. e-commerce marketplaces are specifically mentioned in the
definition of ‘intermediaries’ in Section 2(w).
Decision:
The Court
held that while the so-called 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. When an e-commerce marketplace is involved in or conducts its
business in such a manner, it could be said to cross the line from being an
intermediary to an active participant. In such a case, the e-commerce
marketplace could be liable for infringement in view of its active
participation. So long as e-commerce marketplaces 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 e-commerce marketplaces as one.
While use
for goods is broad and would include any physical or in any other relation
whatsoever to goods, even use in respect of services is quite broad i.e. it
includes the provision, performance or making availability of services. Would
services provided in respect of sale of counterfeit goods constitute use of a
mark? The answer to this question depends on Section 2(w) of the IT Act. In the
context of an intermediary, it could provide any service and enjoy
exemption only if the constituents of Section 79 of the IT Act are
satisfied.
Under
Section 81 of the IT Act, the said Act is stipulated to have overridden effect.
The provision reads as under: “Section 81
– Act to have overriding effect. – The provisions of this Act shall have effect
notwithstanding anything inconsistent therewith contained in any other law for
the time being in force. Provided that nothing contained in this Act shall
restrict any person from exercising any right conferred under the Copyright Act
1957 or the Patents Act 1970.”
The
overriding nature of the IT Act has application only if the provisions of the TM
Act are inconsistent with the provisions of the IT Act. The Intermediary
Guidelines 2011, themselves require compliance with the TM Act by the persons
to host, display or upload the products or services. The provisions of the TM
Act are not in any manner inconsistent with the provisions of the IT Act. Hence
Section 81 of the IT Act does not grant any immunity to intermediaries who may
be in violation of the provisions of the TM Act. Thus, the Court directed the Defendants
to refrain from selling Plaintiffs products on the website operated by him.
Comments:
The
definition of ‘intermediary’ comprises of two parts, viz. means and inclusive,
means part covers a person in respect of an electronic record, who on behalf of
another person receives, stores or transmits that record or provides any
service in respect of that record and the inclusive part is extended to inter
alia cover online-market places or e-commerce market places. Here, it is
interesting to note the common thread running through the illustrations
provided under the inclusive arm of the definition of 'intermediary', which
covers only such service providers who are purely service providers. The view
is also supported by the fact that the definition of ‘intermediary’, post 2008
amendment was intended to protect e-commerce marketplaces as well, however going
through the various service providers mentioned under the inclusive part only
indicates that e-commerce websites providing fulfilment services are not
intended to be covered under the definition.
By merely extending
the definition of ‘intermediary’, the protection of safe harbour provisions
under Section 79 does not seem to cover those e-commerce marketplaces offering
fulfilment services to sellers. It is too far-fetched to claim that post
amendment the definition has undergone substantial change, as the inclusive
clause may only be illustrative of the service providers covered under the
definition. A comparison of the definitions is useful here:
Pre-Amendment
|
Post-Amendment
|
"intermediary" with
respect to any particular electronic message means any person who on behalf
of another person receives, stores or transmits that message or provides any
service with respect to that message;
|
"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.
|
From above,
it may be deduced that the definition is restricted to the service providers giving
access to communication network etc., whose activity is merely technical,
automatic and passive akin to a conduit, e.g. Telecommunication and internet
service providers, search engines, communication platforms, e-commerce website
providing merely listing services or informational services as a platform of
the buyers and sellers to connect for commerce.
The above
interpretation is also inline with the provision of Section 79 of the Act,
which offers protection to intermediaries who, in the course of providing
services, handle electronic records in a passive, automatic and conduit-like fashion
without manipulating the electronic record(s).
The above
ruling is significant inter alia for:
( a) attempting to delineate the
boundaries of the immunity granted to intermediaries under safe harbour
provisions and their availability to e-commerce marketplaces, as intermediary, offering
fulfilment services to the sellers;
( b) protecting interests of trademark
owners from infringement by the e-commerce marketplaces seeking shelter of safe
harbour provisions under Section 79 and of the overriding effect of Section 81
of the IT Act;
( c) pronouncing that provision of
services relating to counterfeit/fake goods also constitutes infringement of
trademark under the TM Act.
While a
lot is still determined by the fine print in the terms of use of the e-commerce
website, terms of service agreement between the e-commerce marketplace, their
sellers and other service providers, the stakeholders will certainly be
benefited by seeking clarity on the above aspects.
The author is a practicing advocate
and may be reached at shaubhikgupta2000[at]gmail[dot]com. The views expressed here are
strictly personal and not intended to be taken as an advice on the topic. Professional
advise may be sought in this regard from a professional.
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