Role of Intermediaries Vis-À-Vis Safeguarding Intellectual Property of the Sellers

7th August, 2024 - 5:59 am Categories: AI 0 Comments

INTRODUCTION

The relationship between Intellectual Property and the internet has always been a point of concern when it comes to shielding intellectual property from infringement. The concern grows exponentially when the business activities of both the infringer and the rights holder are at stake, therefore, the role of E-Commerce entities becomes relevant and worth investigating, as out of nearly 8 Billion people, 5.35 Billion use the internet, and out of which nearly 2.64 Billion have used the same for e-commerce websites and particularly India’s e-commerce business is likely to grow to 20 billion euros by 2030[1]. The problem begins right here as it is virtually impossible to pinpoint infringement and even more difficult to determine culpability[2].

The role of intermediaries such as Flipkart and Amazon becomes very important on their respective platforms in regard to intellectual property protection. It involves continuous monitoring of listings, responding to accusations of infringement, and taking steps to ensure that actions performed by the entity remain within the law. Recent case laws further reiterate that these platforms must handle IP-related disputes with proper care.

CHALLENGES IN IPR REGULATION IN E-COMMERCE

Added to this are differences in jurisdiction, dynamic nature of these platforms, generation systems of user content, and inconsistency across all platforms[3]. There are major issues which are futile and endangers the entire foundation of IP protection. It requires actions from both the e-platforms themselves and from the merchants; the latter must register their goods for patents, trademarks, and copyrights and thereafter keep a vigilant eye on the infringing articles that may come across the website. The former should implement an effective zero-tolerance policy in case any infringement takes place subjected to intelligible differentia.

Trade mark infringements occur when a third party uses a registered trade mark to market goods and services without the trade mark owner`s permission. This may include selling counterfeit goods, advertising goods or services under a trademark without authorisation, or altering a mark in a way that causes confusion about the authenticity of the product or its source[4]. Once infringement is identified, rights holder must act. Many of the platforms have particular mechanisms for IP enforcement.

[Image Sources: Shutterstock]

For instance, Amazon offers a Brand Registry[5], It’s a way for sellers to record their trademarks so Amazon can find and report infringing activities also by itself and obviously via reports from the rights holders. However, you have to have a registered trademark or be in the process of getting one to do that. This is related to Amazon’s Project Zero, an initiative to proactively identify and remove counterfeits from the market.

Similarly, eBay`s Verified Rights Owner Program[6], It grants comparative advantages, but it also requires a registered trademark. Furthermore, one cannot ignore the fact that social media platforms like Facebook and Instagram have become retail locations in their own right, complete with their own IP protection mechanisms.

Sharing networks for such creative content have put in place copyright protection measures. For instance, Meta has a Rights Manager[7] on Facebook and Instagram for registering works, detecting infringing content, and obtaining consumption data. The YouTube Copyright Match Tool[8] makes comparisons by finding similarities between what’s been uploaded and what is copyrighted.

Laws Applicable

“Intermediary” is defined under Section 2(1)(w)[9] of the IT Act, as any person who on behalf of another person receives. Stores, or transmits that record or provides any services 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 main intermediary liability provision was included in Section 79[10]. Broadly, it states that an intermediary shall not be liable for third-party information it is hosting or making available if it is done under the category of access, not initiation, selection, or modification of transmissions. To avail herself of that exemption, an intermediary must also observe “due diligence” while discharging its duties under the IT Act, or the rules thereunder. Due diligence in IP would, therefore, essentially refer to the comprehensive investigation and review that binds an intermediary, particularly e-commerce platforms and service providers, in regard to allegations of IP infringement before actions aimed at delisting products are taken.

However, as per Section 79(3)[11] of the IT Act, an intermediary will not be exempted from liability if it has conspired or abetted or induced, whether by threats or promise or otherwise in the commission of the unlawful act, or upon receiving actual knowledge, or on being notified by the appropriate Government or its agency that any information, data or communication link residing in or connected to a computer resource controlled by the intermediary is being  used to commit the unlawful act, the intermediary fails to expeditiously remove or disable access to that material on that resource without vitiating the evidence in any manner.

Rule 3[12] of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 explains due diligence that an intermediary is supposed to observe in addition to what has already been provided under IT Act. An intermediary is also obligated to make available to its users privacy policies, user agreements, and laws and regulations. It should also instruct the user not to share anything that may infringe on a patent, trademark, copyright, or other intellectual property rights. The intermediary shall also disable access to the information above within a period of 36 hours when it has acquired knowledge about the same, either suo moto or from an affected party in writing.

Furthermore, According to Rule 3(2)(a), the intermediary shall prominently display the name of the Grievance Officer, his contact information, and the manner in which a user or victim may file a complaint regarding any violation of its provisions or any other issue relating to the computer resources it makes available on its website or mobile application or both, as the case may be. The complaint shall be resolved within fifteen days of its receipt and acknowledged within twenty-four hours of its receipt. It is further provided in the newly introduced amendment that the Central Government shall, within three months from the enactment of the amendment, constitute a Grievance Appellate Committee. An appeal against the decision of the Grievance Officer may be filed before the committee by any person aggrieved by his decision within a period of thirty days from the date of receipt of communication from the Grievance Officer. The Grievance Appellate Committee shall consider this appeal at the earliest and shall try to find a final solution within 30 days from the date of receipt of the appeal.

Also, as per the Consumer Protection Rules (E-Commerce), 2020[13]; Rules related to safeguards against misrepresentation and other fraudulent gimmicks used by sites to scam people are mentioned. It has explicitly referred to the necessity of going ahead and acting with caution, together with due diligence, in the process of identifying such scams, not only for the legitimacy but also for the dependability of the merchandise that is displayed on their website.

Judicial Stand in India

Recently, In Pushpendra Patel & Anr v. Amazon Seller Services Pvt. Ltd. & Anr., the Hon`ble Delhi High Court noted that Amazon had wrongfully delisted products based on a complaint from alleged competitor, and despite the proof as submitted by the Plaintiff therein showcasing that the plaintiffs were prior adopters and users of the designs in question with respect to water purifier cabinets, the same were not being re-listed by Amazon, thereby causing substantial loss to the Plaintiffs. The Court ordered Amazon to re-list total 49 products which got wrongfully delisted.

In Christian Louboutin v. Nakul Bajaj[14], the Hon`ble Court held that even e-commerce platforms cannot claim immunity for willfully concocting schemes, facilitating, or provoking the act of committing illegal crimes on their website. The obligation to exercise due care is associated with the intermediate rules, which categorically state that such due care also requires that the information housed therein does not infringe on IP rights. It was due to such a rigorous interpretation of Section 79 that Darveys.com was held not to be an intermediary and, therefore, not granted the immunity afforded to intermediaries under the IT Act.

Also, in Kent RO Systems Ltd. V. Amit Kotak[15], It has been ruled that on an issue of design infringement, as in the Myspace case[16], the Hon`ble Court requires that the intermediary should not be under an obligation to determine whether the products being sold on its website are or are not infringing but should remove them when a complaint from the original IP right owner gets to them.

In Cartier International AG v. Gaurav Bhatia[17], It was averred and the permanent injunction was granted and the defendants were restrained from manufacturing, selling, or offering for sale anything on its internet platform. It also ordered punitive damages up to Rs. 1 crore for the plaintiff. Further, the Court has said that in view of the bald piracy written on the face of the record and concerted effort of the defendants to keep themselves away from participating in the process of the court, this is a case of dishonesty written loud and clear.

Implications of Non-Compliance

1. Loss of Business: It is usual practice that the products sold by the sellers on e-commerce platforms are neither Original nor patented. This sometimes leads to the wrongful delisting of products which are patent registered and are sold by the original owners, which leads to significant financial losses, especially if they rely majorly on Online sales.
2. Reputational Damage: One of the reputational damages businesses face in an IP-related dispute is when they are considered, wrongly, as infringing on others. This issue becomes very relevant to cases in which action by intermediaries—for example, e-commerce platforms—may have reputational implications for legitimate sellers.

Key Responsibilities of Intermediaries in IP Infringement

1. Confirming Allegations of Infringement

Intermediaries must be extremely careful about confirming the validity of allegations of infringement prior to taking action on any complaint and delisting of products. For example, In Pushpendra Patel & Anr. v. Amazon Seller Services Pvt. Ltd. & Anr., Amazon delisted the plaintiffs’ products based on a complaint from a competitor without considering the plaintiffs’ prior use and ownership of valid design registrations. This, in itself, resulted in delisting without reason and therefore, substantial business losses to the Plaintiffs therein.

2. Openness with Sellers

Intermediaries must maintain clear and concisely articulated communications with sellers, justifying every step taken against the listing of a seller. In the above-mentioned case, Amazon’s lack of transparency worsened the alleged arbitrariness and carelessness in dispute resolution.

3. Putting in Place Fair Processes

The platforms should have clear regulations that permit sellers to contest delisting and provide proof of their intellectual property rights; only then will the marketplace remain fair and one that consumers can trust. Right here, too, in the above-mentioned case, the Hon`ble Court judgment has pointed out that Amazon had not given the plaintiffs a reasonable opportunity to contest the delistings and make their case.

Legal Steps Against Wrongful De-listing/ Re-listing/ Complaints:

1. C&D Notice: A Cease and Desist Notice is sent to the e-commerce platform demanding it to take down the counterfeit products from its platform and also demanding name and address of the seller. Similarly, notices can be issued in case of wrongful delisting of the products clarifying the stand to such intermediaries. In case the platform does not take any action or acknowledge the request, taking legal action is the only remedy left.

2. Injunction Application accompanied with Suit for infringement: As an interim measure, an ex parte temporary injunction application under Order 39[18] is filed along with the infringement suit in order to restrain the platform from selling counterfeit products, which can be further crystallised into permanent injunction after due process of law. Additionally, the sellers therein can be sued for damages and/or renditions of their accounts in consonance with the profits made from the infringing activities.

Conclusion

This thereby presents some emerging challenges for the protection of intellectual property in the growing e-commerce industry in India. Thus, the growth of Amazon, Flipkart and other similar intermediaries requires that they develop a robust monitoring system and a proper response to allegations of infringement for maintaining IP laws and consumer trust in the products sold through these platforms. The courts have called, time and again, for intermediaries to exercise due diligence and transparency in their acts to prevent wrongful actions and fair processes.

Non-compliance with IP regulations can result in financial losses, reputational damage, and legal penalties. This means that, among other things, e-commerce platforms have an obligation to clearly communicate their notices to sellers, to create procedures for contesting delistings, and to allow for legal redress in the form of cease and desist notices and injunctive relief.

The crux of e-commerce success lies in striking a fine balance between innovation and IP protection. Adherence to legal frameworks and the implementation of proactive measures—as put forth—will see platforms offer much more secure and trusted environments for all concerned. Continued improvement in the mechanisms for IP protection will ensure that e-commerce remains on a growth trajectory with integrity maintained over time.

Author: Kaushik Das, A Student at RMLNLU, Lucknow, 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] Kiren Willy, India: e-commerce market size 2030, Statista, https://www.statista.com/statistics/792047/india-e-commerce-market-size/

[2] Arturo Ancona, INTELLECTUAL PROPERTY AND E-COMMERCE WIPO-WASME SPECIAL PROGRAM ON PRACTICAL IP ISSUES Geneva , October 6 to 9 , 2003 (2003).

[3] Kirsty Phillips et al., Conceptualizing Cybercrime: Definitions, Typologies and Taxonomies, 2 Forensic Sci. 379 (2022).

[4] “Enforcement of Intellectual Property Rights on E-Commerce Platforms.” IP Helpdesk, 14 June 2024, https://intellectual-property-helpdesk.ec.europa.eu/news-events/news/enforcement-intellectual-property-rights-e-commerce-platforms-2024-06-14_en

[5] “Amazon Brand Registry: Help Protect Your Brand on Amazon.” Amazon, https://brandservices.amazon.com/brandregistry?lang=en

[6] “Verified Rights Owner Program.” eBay, https://www.ebay.com/sellercenter/ebay-for-business/verified-rights-owner-program

[7] “Meta Rights Manager.” Meta, 17 Feb. 2023, https://rightsmanager.fb.com/

[8] “Use the Copyright Match Tool – Youtube Help.” Google, https://support.google.com/youtube/answer/7648743?hl=en

[9] S. 2(1)(w) of IT Act, 2000.

[10] S. 79 of IT Act, 2000.

[11] S. 79(3) of IT Act, 2000.

[12] Rule 3 of IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

[13] E-Commerce Guidelines for Consumer Protection 2019, https://consumeraffairs.nic.in/sites/default/files/E%20commerce%20rules.pdf

[14] Christian Louboutin Sas v. Nakul Bajaj, (2018) 253 DLT 728.

[15] Kent RO Systems Ltd. v. Amit Kotak, (2017) 240 DLT 3.

[16] Super Cassetes Industries Ltd. v. Myspace Inc, (2011) 48 PTC 49.

[17] Cartier International A.G. v. Gaurav Bhatia, (2016) 226 DLT 662.

[18] O39 R.1, Civil Procedure Code, 1908.