News & Updates

January 9, 2019

No Safe-Harbour As Intermediary For Website Actively Participating In Or Colluding In Trademark Infringement

In the civil suit titled Christian Louboutin SAS v. Nakul Bajaj & Ors., [CS(COMM) 344/2018] the Delhi High Court (Singh, J.) has, vide its order dated 2018.11.2, dealt with the issue of intermediary liability for trademark infringement in light of the safe harbour provision of Section 79 of the Information Technology Act, 2000 (“IT Act”) which exempts an E-commerce intermediary from liability for acting as an information technology-platform, hosting platform and content for third-party sellers that commit trademark infringement. The suit has been decreed in favour of the Plaintiff by the said judgement, directing the Defendants to, inter alia, cease use of meta-tags consisting of the Plaintiff’s marks and specifically directing the Defendant, Darveys.com, to disclose by filing onto the record of the suit being disposed-off, details of the identities of sellers hosted on its website whose products have been held to infringe the Plaintiff’s trademarks. The Defendants including their website Darveys.com have been denied protection under Section 79 of the IT Act.

The Plaintiff claimed that the Defendants operate the website www.darveys.com (“Darveys.com”) and sought an injunction against the Defendants’ use of its CHRISTIAN LOUBOUTIN trademarks and sale of goods-products under the said marks on this website. The Defendants claiming immunity under Section 79 of the IT Act took the plea that they are merely an E-commerce provider acting as an intermediary; that they are not involved in the manufacture, sale or purchase of the products by the sellers; that they only provide a website-portal as a technological interface to arms-length sellers with the potential and actual purchasers-customers of the sellers, and that the website provides for an adequate take-down policy for anyone complaining of trademark infringement by a hosted seller. The Defendants also submitted that no actual sales of products featuring the Plaintiff’s marks have yet transpired on Darveys.com. The Plaintiff pleaded that Defendants are themselves engaged actively in offering for sale counterfeits on their website Darveys.com, and in meta tagging, and that therefore the Defendants act together jointly as much more than a mere intermediary as claimed; that the customers are in fact of the Defendants themselves than of the hosted sellers, and that thus the Defendants themselves infringe and so are disentitled to shelter under Section 79 of the IT Act. By consent of parties, the court framed the availability of Section 79 defense as an issue to be decided as a pure question of law without any evidence as no relevant fact was in dispute. No other issue was framed except the pro forma issue of what reliefs to decree if Defendants failed on the Section 79 issue.

The question that therefore needed addressing was whether qua an E-commerce platform such as a website that happens to have an active and substantive role in the management of and control over the information, data or communication link made available by it or hosted by it, such information, data or communication link could still be treated as that of a “third party” as featuring in Section 79 (1) of the IT Act that exempts E-commerce platforms as intermediaries from liability, or whether such treatment is unwarranted? Whether it should instead be treated as of itself (of the E-commerce provider rather than of any third party) that is to say as owned by or belonging to itself (than to any third party)? A related question that arises is whether an E-commerce platform that happens to have the kind of management and control as described above would nevertheless be considered as receiving, storing or transmitting or providing services with respect to a particular electronic mere “record” as featuring in  the definition of an intermediary in Section 2(w) of the IT Act, or whether the described role is doing more than dealing with mere record?

In its decision, the Court analyzed the concept of E-commerce platforms of various business models and functioning thereof, and noted that an examination of various tasks such as provision of transportation, quality assurance, authenticity guarantees, reviews, collection of payment, advertisement and promotion of the product, enrolling members upon payment of membership fees, using trademarks through meta-tags etc., when performed by an E-commerce platform or an online marketplace, “..would be key to determining whether an online marketplace or an e-commerce website is conspiring, abetting, aiding or inducing and is thereby contributing to the sale of counterfeit products on its platform” thus rendering the conduct of the platform as more than that of merely an ‘intermediary’.

The Court analyzed the functioning of the website Darveys.com in light of the above test and noted that as per its own claims and policies, Defendants themselves take responsibility for the authenticity of the goods, themselves arrange for the transport and delivery of goods, and themselves maintain and change prices of the goods-products at their own discretion. The Court further noted that the sellers are unknown and that the Defendants, in fact, exercise complete control over the infringing products on Darveys.com.

The Court opined 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, … e-commerce platforms which actively conspire, abet or aid, or induce commission of unlawful acts on their website cannot go scot free.”. Thus, the Court while holding “The role of Darveys.com is much more than that of an intermediary.”, concluded that “… if the sellers themselves are located on foreign shores and the trade mark owner cannot exercise any remedy against the said seller who is selling counterfeits on the e-commerce platform, then the trade mark owner cannot be left remediless.”

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