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.”

Disclaimer: Views, opinions, interpretations are solely those of the author, not of the firm (ALG India Law Offices LLP) nor reflective thereof. Author submissions are not checked for plagiarism or any other aspect before being posted.

Copyright: ALG India Law Offices LLP.

Rejecting an application by Defendants to dismiss for want of territorial jurisdiction at the threshold itself a commercial suit titled Burger King Corporation vs. Techchand Shewakramani and Ors., [CC (COMM) 122/2017 in CS (COMM) 919/2016], the Delhi High Court (Singh J.), vide its order dated 2018.8.27 has clarified that actions such as promotion, advertising, publicity etc. of trademark by a Defendant is also be liable to be construed as ‘use’ of trademark for the purposes of Section 2 (2)(c) of the Trade Marks Act, 1999 read with Section 20(c) of the Civil Procedure Code, 1908 (CPC).

The suit was filed in Delhi seeking permanent injunction restraining infringement, passing off, damages and related reliefs in respect of the Plaintiff’s trademark ‘Burger King’. Territorial jurisdiction of the Court was challenged on the ground that the plaint fails to aver the Mumbai-based Defendants as residing or working for gain in Delhi or as operating even a single outlet under the ‘Burger King’ brand in Delhi. It was countered that even if there is no territorial jurisdiction under Section 134 of the Trade Marks Act, 1999 over infringement there is still territorial jurisdiction under Section 20(c) of the CPC over not only infringement but also over passing off by the plaint averring the Defendants have ‘used’ the trademark in Delhi forming part of the cause of action. The plaint alleged use – “a) by promoting the mark Burger King in Delhi; b) by entertaining franchisee queries from the territory of Delhi; c) by seeking franchise requests through the website theburgerking.in; d) by openly and publicly expressing their intention to expand all across the country including Delhi; e) by allowing would be franchisees to apply through the website by filling a form.”

The question before the Court was whether at the preliminary pre-trial stage itself, the aforesaid alleged acts of the Defendants even if true as proven eventually in trial, are insufficient to constitute ‘use’ by them of the trademark for the purposes of Section 2 (2)(c) of the Trade Marks Act, 1999 thereby forming ‘part of the cause of action’ under Section 20(c) of the CPC, or whether instead they are sufficient? Is it that only if Defendants would have actually entered into a franchise agreement with some person in a place and possibly further that through that franchisee actually opened an outlet under the trademark in that place, that the mark would have been ‘used’ by them in that place for the purposes of the aforementioned statutory provisions, or whether that is not a necessary ingredient of those statutory provisions?

The Court took note of the definition of ‘use of a mark’ as provided by Section 2 (2)(c) of the Trade Marks Act, 1999 which states that ‘use’ could either be in a physical form or ‘in any other relation whatsoever to such goods’. The Court observed: “The phrase `in relation to’ has been interpreted to include advertising, promotion, publicity, etc. Thus, in addition to actual sale of goods and providing services, if a person advertises his or her business under the mark in a territory, promotes his or her business under the mark in a territory or for example invites franchisee queries from a particular territory, sources goods from a particular territory, manufactures goods in a particular territory, assembles goods in a particular territory, undertakes printing of packaging in a particular territory, exports goods from a particular territory, it would constitute `use of a mark’.” Accordingly, the Court proceeded to a prima facie finding subject to final determination in trial that the plaint along with documents does disclose use of trademark in Delhi by Defendants and thus that the Court in Delhi is vested with the necessary territorial jurisdiction.

The Court distinguished the judgements relied upon by Defendants to urge a contrary statutory interpretation. It found the reliance misplaced for only interpreting Section 134 of the Trade Marks Act, 1999 but not diluting the principle of or the position under Section 20(c) of the CPC, a separate independent gateway for territorial jurisdiction.

On this aspect, the judgement held: “ the provisions of Section 134 of the TM Act and Section 62 of the Copyright Act are in addition to and not in exclusion of Section 20 of the CPC. If the Plaintiff can make out a cause of action within the territorial jurisdiction of this Court under Section 20, no reference needs to be made to Section 134.”

In Civil Suit No. 1063/2018, Glenmark Pharmaceuticals Ltd. v. Curetech Skintech and Galpha Laboratories Ltd., alongwith Notice of Motion (L) No. 1890/2018 therein jointly by the parties for a consent decree of compromise, Ld. Single Judge (Kathawalla, J.) of the Bombay High Court has, vide judgment dated 2018.8.28 decreeing the suit under consent, also imposed exemplary costs of Rs.1,50,00,000 (Rupees One Crore Fifty Lakhs) on the second Defendant to be paid towards the Kerala Chief Minister Distress Relief Fund. No ordinary costs of suit appear to have been awarded towards legal expenses or lost sales.

The suit alleged infringement and passing-off of trademark CANDID-B in respect of pharmaceutical goods, drugs in class 5, by the impugned trademark CLODID-B seeking injunction, damages and costs. Defendant No.1 submitted through Counsel that it is a mere contract manufacturer for and on behalf of the other Defendant and offered to submit to a consent decree of permanent injunction. Defendant No. 2 submitted before the Court that CLODID-B was adopted by it by mistake, furnished information that it had sold goods under the impugned mark worth Rs. 2.92 Crores in the last 10 years, and also offered to submit to a similar consent decree. The Plaintiff, however, during the hearing before the Court, sought exemplary costs on Defendant No. 2 beyond the scope of the compromise between all the parties jointly placed on record with a joint application for a consent decree in terms thereof.

The scope for penal or otherwise exemplary costs as over and above or within the costs ‘of’ and costs ‘incident to’ a suit, calls into question whether or not the Court has such power under Section 35 of the Code of Civil Procedure, 1908: “Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incident to all suits shall be in the discretion of the Court, and the Court shall have full power to determine by whom or out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid.” Section 151 is a relevant supplementing provision: “Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court.”

Analysing whether or not exemplary costs were warranted, the Court concluded: “It is clear that the Defendant No.2 is not only indulging in infringing activities by repeatedly copying brands of other companies but also appears to be in complete violation of the FDA regulations. The conduct of the Defendant No.2 shows that this Defendant has no regard or respect to the rule of law. The consumers and general public are being repeatedly cheated by the Defendant No.2. I am of the opinion that had this Defendant been imposed with exemplary costs at the very beginning of their infringing activities, this Defendant would not have been audacious in repeating its infringing activities.”

The Court did not examine the ambit of Section 35 read with Section 151 of the CPC. The Court also did not specifically elucidate the existence or lack of statutory basis of costs for actions qua non-Plaintiff third parties or for actions reportedly in violation of regulations of a foreign government agency. The Court did not specifically point out that it was only the audacious infringement of this suit that was exclusively the occasion and basis for the exemplary costs and that its remarks about previous actions outside the scope of the suit were merely non-motivating observations. The Court also did not specifically comment on the source of its power to award exemplary costs even when the relief of ordinary costs itself as one of the prayers in the plaint had already been compromised in the negative and the Court was already seized with a joint application under Order XXIII Rule 3 of the CPC by all parties who, having placed the compromise on record, were seeking a consent decree in terms thereof.

It was the public health aspect of public interest that was commented upon as relevant motivation: “Drugs are not sweets. Pharmaceutical companies which provide medicines for health of the consumers have a special duty of care towards them. These companies, in fact, have a greater responsibility towards the general public. However, nowadays, the corporate and financial goals of such companies cloud the decision of its executives whose decisions are incentivized by profits, more often than not, at the cost of public health. This case is a perfect example of just that.”

 

In Snecma V. Union of India & Anr., W.P.(C) 3250/2017 & C.M. No.26210/2017, while allowing the writ on 2018.3.19, a Ld. Single Judge (Shakdher, J.) of the Delhi High Court has dealt with the scope of Rules 137 and 138 of the Patents Rules, 2003 as they stood prior to the amendment in 2016.

India National Phase Application “Blade and Blade Dihedral Angle”, under Chapter III of the Patent Rules, 2003 was entered on 2015.11.6 claiming priority from its French parent dated 2013.3.20. This filing was accompanied with petitions under Rule 137 and 138 of the Patents Rules, 2003 for condonation of the delay in filing. The National Phase was not filed within the statutory period of 31-months from the date of priority as per Rule 20(4)(i) falling in Chapter III of the Patent Rules, 2003. The writ petition itself was against the Request For Examination (RFE) being treated as time-barred.

The case involves the question whether the scope of the Saving expressly stipulated in the unamended Rule 138 of the Patents Rules, 2003 “Save as otherwise provided in the chapter III…the time prescribed…for doing of any act…may be extended…for a period of one month, if he thinks fit…upon such terms…”, read with Rule 137, applies to the time-period permissively prescribed for filing a PCT National Phase in Rule 20(4)(i) falling in Chapter III, or not. Rule 137 provides in relevant part: “…any irregularity in procedure…in the opinion of the Controller may be obviated without detriment to the interest of any person, may be corrected…upon such terms…” The question, therefore, was whether the power to condone the delay beyond the 31-month period is unavailable for being within the Saving-restriction preface of the unamended Rule 138 or is such power, instead, outside the scope of the Saving and hence within the competence of the Controller under the unamended Rule 138 read with Rule 137.

The Court decided that the Controller did have the competence and power to condone the delay. It explained the wider scope of the Rules along with the narrower scope of the Saving:  “…if the Controller reaches a conclusion that an amendment could be ordered in a document qua which there is no special provision in the Act or any irregularity in procedure could be obviated, he may order correction without causing detriment to the interest of any person on terms thought fit by him. It is precisely for this reason that on behalf of the petitioner applications have been filed both under Rule 137 and under the unamended Rule 138.”  

Prior to the amendment in 2016 of Rule 138, an application thereunder for extension of expired time limit for entering national phase, amounting to condonation of delay beyond the time period prescribed under the relevant provision of the Patent Rules, 2003, was thus treated as allowable. It was also treated as inherently being under Rule 137 for curing and obviating a mere irregularity.

This is made clear by the Court: “…the applications for obviating irregularity were maintainable and the limitations contained in unamended Rule 138 had no application qua provisions other than those referred to therein.”

In Federal Express Corporation v. Fedex Securities Ltd. & Ors [2017 (71) PTC 155 (Del)], the Delhi High Court (Gauba, J.) has, vide order dated 2017.04.11, returned the plaint-suit for infringement and passing off of the Plaintiff’s trademark FEDEX, allowing the interlocutory application of the Defendants challenging territorial jurisdiction.

Plaintiff invoked the jurisdiction of the Delhi High Court pleading that it has a subordinate office in Delhi and that the Defendants’ website www.fedsec.in is accessible in Delhi at which they offer and advertise their services, that the documents publicly accessible and issued to public at large on the Defendants’ website show that they are acting as the manager/merchant bankers to various entities/companies in Delhi. Defendants, on the other hand, alleged forum shopping asserting that the averments in the plaint simply do not suffice to establish territorial jurisdiction.  

The Court examined whether the phrases “carries on business” and “cause of action, … in part, arises” in Section 20 of the CPC are attracted by the Defendants merely having an interactive website in that territory or instead that there is an additional requirement that the website intentionally target that territory or also that it do so in a commercially viable manner.

This issue has been analyzed thus in the judgement: “…’carries on business’ at a certain place …means having an interest in a business at that place, a voice in what is done, a share in the gain or loss and some control thereover…insignificant or trivial part of the ‘cause of action’…cannot be the decisive factor on the question of jurisdiction…”

Having thus interpreted the scope of the Section, the Court examined the adequacy and sufficiency of the pleadings in the plaint for establishing territorial jurisdiction.

The Court found the pleadings in the plaint as not enough for invoking territorial jurisdiction: “As regards the…averment concerning the advertisement of service on website,…there is no averment that the websites are specifically targeting customers in Delhi or that the website is an interactive one from which it would be or has been possible to conclude commercial transactions. The advertisements published of the offers made by them to the public at large in the capacity of merchant bankers or merchant intermediaries have come with clear declarations of their location in Mumbai, which is the place where they have their registered offices…there is not even a single illustration given of any such commercial transaction having been entered into by the defendants with any user of their website within the territorial jurisdiction of this court…Plaintiff would have to show that the Defendant “purposefully availed” itself of the jurisdiction of the forum court. For this it would have to be prima facie shown that the nature of the activity indulged in by the Defendant by the use of the website was with an intention to conclude a commercial transaction with the website user and that the specific targeting of the forum state by the Defendant resulted in an injury or harm to the Plaintiff within the forum state.”