Trademark Infringement in E-Commerce in India: Challenges in Digital Era

16th April, 2024 - 6:29 am Categories: Trademark 0 Comments

Introduction

India has witnessed exponential growth in e-commerce and online market place in the last few years. Customers are now able to have a totally different and new shopping experience, as the E-Commerce system makes it easy for consumers to trade goods and services with the help of technology, pricing, attractive discounts, and fast delivery and that too on their fingertips through smartphones. But all these facilities also invite counterfeiters to utilise the online market and E-Commerce for promoting and selling their fake goods to generate income out of other entity’s goodwill in the market.^[1]

According to recent studies, India’s E-Commerce industry is further expected to grow rapidly, from US$ 70 billion in 2022 to US$ 325 billion by 2030. Forecasts reveal and conclude that this growth trend will continue further, which will help in the expansion of India’s e-commerce at a compound annual growth rate (CAGR) of 27%.^[2]

Despite these encouraging developments, the issue of trademark infringement and counterfeiting remains in the online marketplace. The rise of e-commerce platforms and lack of proper infrastructure have made things easier for people to commit scams, counterfeits, electronic marketing and keyword advertising. All these acts put consumer trust and company reputation at a grave risk, which makes them face severe challenges due to trademark infringement in the digital age. One of the most common forms of trademark infringement is the non bonafide copy use of trademarks, in online marketplaces that provide people to sell fake goods and services on third party platforms. For example, the use of an illegal logo or logos by someone else can cause consumer confusion. Another form of counterfeit trademark infringement is when third parties manufacture and sell products that are identical to genuine products.^[3]

1. Trademark Challenges in E-Commerce^[4]
2. Counterfeit and Unauthorized Products: The ongoing and rapid growth of e-commerce has increased the challenges of trademark infringement, especially when it comes to the proliferation of counterfeit and illegal products. Counterfeit products are often so incredibly similar with the actual products, that it not only threatens trademark owners’ earnings, but it also hampers consumers’ confidence and safety. Even if it doesn’t bypass proper distribution channels, it still manages to damage the integrity of the trademark, which leads to increase in loss of revenue and reputational damage of the brand owner.
3. Cybersquatting: Cybersquatting has emerged as a major obstacle in e-commerce, as opportunistic groups take over old trademark-like domain names to gain brand recognition in order to gain brand familiarity. Cybersquatters not only infringe trademark rights by redirecting innocent users to competing websites or extorting excessive payments from affected businesses, but they also harm brand reputation and customer loyalty.
4. Keyword Advertising: Keyword advertising in search engines is an uphill battle where trademark rights meet fair competitive criteria. Companies using keyword advertising risk infringing on competitors’ trademarks, blurring the line between acceptable and infringing marketing practices. Striking an ideal balance between safeguarding trademark owners’ rights and enabling fair market competition is a constant challenge in this domain.
5. Online Imitation/Copying: Copycat websites and social media posts pose a serious risk to trademark owners, as it spreads misinformation and undermines consumer confidence. Cybercriminals successfully imitate legitimate businesses’ online personalities, offering counterfeit goods while stealing sensitive information. Vigilance and prompt response are needed to combat these fraudulent activities, so as to protect the consumers and maintain the integrity of affected companies.
6. Content Processing: The increasing use of large volumes of content complicates trademark protection, requiring a perfect balance between brand protection and user participation. Establishing strong content regulation and putting in place secure takedown procedures are crucial for reducing intellectual property infringements while also providing an optimal online environment for brand interaction.

Legal Position of Trademark and E-Commerce in US, UK and EU

United States of America

In the United States, the Lanham Act establishes civil liability for infringement of trademark, false advertising, cybersquatting and dilution. The act gives U.S. district courts non exclusive jurisdiction over these actions, and to determine whether an unauthorized use of a trademark could lead to consumer confusion, court considers a number of factors. These include the degree of similarity between the marks used and the products of the parties concerned, if the mark user intended to deceive others, whether surveys reveal genuine confusion, and the degree of product expertise exhibited by the customers.^[5]

According to the Lanham Act, false endorsement happens when someone uses their name or identity to imply that they support a product. Another problem is dilution, which occurs when a well-known trademark is utilized without permission, causing damage to its reputation. The Lanham Act targets counterfeiting, which occurs when exact reproductions of trademarks are placed on similar goods. This Act imposes severe penalties for counterfeiting, including the opportunity for trademark holders to collect threefold damages or a predetermined amount, as well as the seizure of counterfeit goods.^[6]

In the case of Inwood Labs v. Ives Labs (1981)^[7]The Supreme Court observed that a producer or distributor can be found contributory liable for trademark infringement if they willfully induce or continue to distribute their goods to someone who is engaging in trademark infringement. This case paved the way for secondary liability in trademark infringement lawsuits throughout the supplier chain. Also in the case of Hard Rock Cafe Licensing Corp. vs. Concession Services (1992)^[8],the court extended the Inwood standard to cover secondary trademark infringement by service providers in addition to manufacturers. It established that direct control and supervision of the instrumentality used to violate a brand owner’s mark permits contributory infringement in services as well as products.

In the landmark case of Tiffany vs. eBay^[9], the court expanded the concept of E-Commerce and secondary trademark infringement. In this case a lawsuit was brought against eBay for selling counterfeit items on its platform. The court dismissed the direct trademark infringement suit based on the fair use concept. However, the court went into greater detail about the contributory liability approach, applying the Inwood standard to e-commerce platforms. eBay, like Lockheed, might face liability under Inwood if it continued to provide services to sellers who engaged in trademark infringement. This case demonstrated the expanding liability of online platforms for third-party sales of counterfeit goods.

United Kingdom

The Trade Marks Act of 1994 governs trademark law in the UK. The UK Intellectual Property Office (UKIPO) oversees the trademark registration procedure in the UK. In the United Kingdom, recent cases have highlighted the liability of internet platforms such as Amazon for trademark infringement. The Court of Appeal found that overseas internet sales of branded goods to UK consumers are infringing in nature. This decision holds platform operators accountable for infringing items offered on their platforms, highlighting the importance of implementing measures to prevent unauthorized sales to the UK.

In the case of L’Oréal SA v. eBay International AG^[10], it was held that eBay was not vicariously liable for trademark infringement by sellers/vendors who used the eBay site to show and sell things. The Court based its decision on the notion that ‘simple help’ is insufficient to bring online platforms into the sphere of contributory trademark infringement. To be labelled an auxiliary infringer, eBay was more likely than not conspired with the primary infringer or acquired or encouraged his benefit from the misdeed.

In the case of Lifestyle Equities CV and others v Amazon UK Services Ltd and others(2024)^[11], the Supreme Court addressed the issue of targeting UK customers in trademark infringement claims on e-commerce platforms. The court ruled that a website can be considered to target UK consumers if it sells goods that can be transported to the country, even if it is a “.com” website headquartered outside of the UK. Displaying UK delivery alternatives, prices in UK currency, and statements suggesting delivery to the UK can all help to determine targeting. This decision clarifies what constitutes targeting and makes it easier for trademark owners to assert their rights against cross-border sales through internet platforms. It emphasizes the necessity of taking into account a variety of characteristics when deciding whether a website targets consumers in a certain jurisdiction, regardless of where the vendor is located.

In the case of Cosmetic Warriors Ltd and Lush Ltd v Amazon.co.uk Ltd and Amazon EU Sarl^[12], before the United Kingdom High Court, Amazon was found to have infringed on trademarks by using links to its site that did not include the marked item, making it unclear whether the discounted items were those of the brand proprietor or not.

European Union

The Court of Justice of the European Union (CJEU) has clarified third-party liability for marketplaces in trademark infringement issues within the EU. According to the CJEU, marketplaces cannot be held accountable for EU trademark infringement if they simply store and facilitate the sale of third-party products with no knowledge of the violation. This decision provides relief to marketplaces that sell third-party products by emphasizing that they will only be held accountable if they have actual knowledge of the infringement occurring. In the European Union (EU), contributory trademark infringement is not specifically addressed as a major concern. However, Article 14 of the E-commerce Directive requires internet service providers to swiftly remove infringing content upon notification.^[13]

In the landmark case of Louis Vuitton v Google France^[14], the court ruled that Google was not liable for trademark infringement unless it actively engaged in keyword advertising. In the case of Coty v. Amazon^[15]Coty accused Amazon of violating its trademark by holding and shipping counterfeit items on behalf of third-party sellers. However, the court decided that Amazon was not liable for infringement because it did not actively sell or offer sales of counterfeit goods.

Legal Position of Trademark and E-Commerce in India

Under Section 29 of the Trademark Act of 1999, E-commerce platforms are generally not liable for trademark infringement unless they perform specialised services such as advertising production, trust providing, or they showcase any support to vendors. Safe harbour doctrine of Section 79 of the Information Technology Act of 2000, protects third party vendors from liability for their actions as long as they are unaware of any illegal activity. To qualify for safe harbour, e-commerce platforms should operate passively, generating only information rather than initiating or modifying it. ^[16]

In 2022, the Department of Electronics and Information Technology proposed a revised version of the Information Technology (Media Guidelines and Digital Media Policy) Act, 2021, which imposed various codes of conduct on intermediaries. First, intermediaries were needed to monitor user compliance with their regulations and avoid hosting specific content. Second, they had to follow access, due diligence, confidentiality and transparency. Third, the mediators were expected to uphold the constitutional rights of citizens. Fourth, they were supposed to act promptly on content removal concerns within 72 hours. In addition, a Grievance Appellate Committee was formed to handle appeals, but users kept the right to seek remedies in court.^[17]

In the case of MySpace Inc. v. Super Cassettes Industries Ltd^[18], the division bench of the Delhi High Court dealt with the role of MySpace as an intermediary for piracy on its website. It ruled that if a mediator has “actual knowledge” of an infringement, it must promptly stop the infringing material within 36 hours of receiving notice from the affected party If it does not, which may result in the intermediary losing its protection under safe harbour.

The Delhi High Court considered the question of trademark infringement pertaining to the use of trademarks as keywords in the Google Ads Program in the case of Google LLC v. MakeMyTrip (India) Private Limited & Ors^[19]. The court decided that the presumption of confusion can be challenged with evidence and that Section 29(4) only applies where the goods or services are not similar to those for which the trademark is registered. It was made clear that just using trademarks as keywords does not mean that they are being applied to any materials that are meant to be used for packaging, labeling, or advertising products or services. The Trademarks Act’s applicability to certain situations was further explained by the court, which held that Section 29(8), does not apply when there is no deception or confusion.

In another case, Christian Louboutin SAS v. Nakul Bajaj^[20] observed that e-commerce websites should exercise discretion to maintain their role as intermediaries and not become active participants in the breach. The court emphasised that, although the IT Act supersedes the Trade Marks Act only when there is an inconsistency, the use of meta-tags to use another’s trademark name does not give protection under Section 79 of the IT Act.

Furthermore, in Kent RO Systems Ltd. v. Amit Kotak & Ors^[21], the court clarified that intermediaries are not needed to assess whether the products on their website violate intellectual property rights. Instead, they must immediately remove such products upon receiving a complaint from the original IP right owner.

Conclusion

In conclusion, in cases regarding secondary responsibility and the role of online platforms in aiding trademark infringement, courts have struggled to strike a balance between the interests of trademark owners, platform operators, and consumers. Effectively preventing trademark infringement in the digital age will be made possible by improving existing framework, due diligence, improving regulatory clarity, and fostering cooperation between stakeholders. E-commerce will continue to expand in the future, posing both opportunities and difficulties for trademark protection. Furthermore, it is expected that further legislative changes and court decisions would improve the legal environment, offering more direction and clarity when handling trademark infringement disputes in the digital ecosystem.

Author: Animesh Raizada, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[1] Singh, Meenakshi, Meenakshi Duggal, and Gaganpreet Kaur Ahluwalia. “Assessing the Growth of E-commerce in India: A Study of Flipkart’s Performance, Viability, and Future Prospects.” The Online Journal of Distance Education and e-Learning 11(2): 135-148 (April 2023).

[2] Government of India, IBEF  (India Brand Equity Foundation) Report, “E-commerce Industry in India” (Accessed on March 20, 2024)

[3] Shantanu Raman, “Perils of Ecommerce Transaction for Customers: A Review of the Availability of Counterfeit Goods on Marketplace Platforms,” 10 JETIR 394 (June 2023).

[4] Indulekha T M, “E-Commerce and Trademark Challenges in the Indian Retail Sector” (November 24, 2023), available at: https://aishwaryasandeep.in/e-commerce-and-trademark-challenges-in-the-indian-retail-sector/ (Visited on November 24, 2023).

[5] Michael Harbone, The History & Evolution of Ecommerce, PAY KICK START, https://paykickstart.com/the-history-and-evolution-of-commerce/ (Last Modified Dec. 07, 2020).

[6] U.S. Dept of Homeland Security, “Combating the Trafficking in the Counterfeit and Pirated Goods – Report to the President of the United States,” U.S.A, (Dec. 08, 2020, 02:00 PM), available at: https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf.

[7]Inwood Laboratories, Inc. v. Ives Laboratories, Inc, 456 U.S. at 853-54 (1982)

[8] Hard Rock Cafe Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143 (7th Cir. 1992)

[9] Tiffany (NJ) Inc. v. eBay Inc, 600 F.3d 93 (2d Cir. 2010)

[10] L’Oréal SA v. eBay International AG, [2009] EWHC 1094 (Ch), [2009] RPC 21

[11] Lifestyle Equities CV and others v Amazon UK Services Ltd and others [2022] EWCA Civ 552

[12] Cosmetic Warriors Ltd and Lush Ltd v Amazon.co.uk Ltd and Amazon EU Sarl [2014] EWHC 181 (Ch)

[13] Naumovski, Goce, and Dimitri Chapkanov. “Convergence of Trademark Law and E-Commerce: Overview of US, EU and China Regulations on Trademarks and Domain Names.” African Journals Online, pg. 424-438 (2014)

[14] Louis Vuitton v Google France, C-236/08 to C-238/08 (2010).

[15] The Coty vs Amazon case, EU: C: 2020:26, (2020).

[16] Ana Pokrovskaya, “Liability for Trademark Infringement on E-Commerce Marketplaces” 2 Int’l JILI 87-101 (2023).

[17] Ministry of Electronics and Information Technology, Notification, New Delhi, the 25th February, 2021, G.S.R. 139(E), available at: https://mib.gov.in/sites/default/files/Digital%20Media%20Ethics%20Code%20Rules%20%20Notification%20%281%29.pdf

[18] 2016 SCC OnLine Del 6382

[19] 2023 SCC OnLine Del 7965

[20] 2018 SCC OnLine Del 12215

[21] 2017 SCC OnLine Del 7201