Counterfeit products on Indian e-commerce platforms: The legal viewpoint

Reading time: 7-8 minutes.

India is one of the fastest growing economies in the world, with industrial experts projecting for a growth trajectory of 7.5% for the year 2019. The e-commerce industry hasn’t been left untouched either, with India boasting of the fastest growing e-commerce marketplace in the world with an annual growth rate of 51% as per the trends.

The boon of consumerism comes with the bane of counterfeit or fake products in the market. The local markets have traditionally been the centre of sale for such products, but with the surge in the number of consumers and retailers alike, it has become largely difficult to differentiate between the original and counterfeit.

The problem has been blown out of proportion with the advent of the e-commerce marketplace, with third party retailers flocking the online platforms with products, and e-commerce companies shifting to the marketplace model of service, counterfeit products have started to be sold on such online platforms, the problem has effectively surfaced in the Lifestyle sector particularly but is noticed everywhere as well.

Traditionally, these kinds of actions are subjected to multiple violations of Intellectual property (hereinafter as ‘IP’) rights, copyrights and trademarks, as well as designs in some cases, but therein comes the twist of liability. Who shall be liable for these violations, the vendor or the online marketplace? 

Standard of care approach: Making the intermediary liable

The Information Technology Act, 2000 (herein after as ‘IT Act’) was enacted to provide a legal framework and safeguard to people as well as the enterprises from being defrauded and played with under the guise of Technology. Though highly regressive to say the least, the act performs well on some of the major fronts, keeping in line with the global development of IP laws.

The IT Act provided for provisions of ‘Safe harbor’ to intermediaries under the purview of section 79 of the Act. Wherein the Section exempts ‘Intermediaries’ from liability in cases: for third party information, data, or communication link being hosted by the ‘Intermediary’; if it can be conclusively proved that the service provider was acting ‘without knowledge’ and subject to his exercise of ‘due diligence’ towards the prevention of commission of such offense or contravention, and, on being made aware of such offence being committed on their platform by appropriate authority, expeditiously acted to remove or disable such material.

Intermediary as a term was quite ambiguous in nature, but thanks to the legislative intent, the meaning was made clear via the IT (Amendment) Act, 2008. Intermediary has been defined as any person who receives, stores or transmits any message on behalf of any other person, or provides services with respect to that message.

Proviso to section 81 of the IT Act provides that nothing in the IT Act shall preclude a person from taking any action under the Copyright Act. This essentially established that the Copyright Act shall have precedence over the IT Act. To exhibit this change, the Copyright Act itself was amended in 2012 to extend the term ‘Fair use’ in section 52(1)(b) and (c) to include ‘transient or incidental storage of work or performance purely in technical process or communication to public’ additionally where such link or access has not been expressly prohibited by the right holder, unless the person responsible is aware of it being an infringing copy.

Liability under the Copyright Act can be categorized under the primary and secondary header. Primary, wherein, the infringing content is deliberately stored or its transmission to public is facilitated. Secondary on the other hand, arises simply by providing a platform to the infringer. Interestingly only secondary infringement is protected under section 52(1)(c) of the Copyright Act. A notice and take down period of 21 days has also been provided, wherein, on being served a notice, such platform is required to take down such infringing material for a period of 21 days, until a subsequent court order affirms the infringement, or no court order is made at all, then on expiry of 21 days the platform may continue selling the product.

In the case Super Cassettes Industries Ltd v. MySpace Inc. the Delhi High Court has affirmed that the immunity under section 79(1) of the IT Act would not be accessible if the due diligence pre-requisite hasn’t been fulfilled.

The ‘John Doe order’ trend has been on the rise in India, this being an ex parte directive issued against unidentified person, to safeguard the rights of the petitioner. This usually happens against the pirated websites, who telecast the movies being released, obviously without a copyright. Courts in India tend to usually put a blanket ban of such sites, without differentiating between infringing material and non-infringing material.

This eminently shifts the burden on the intermediaries, to monitor and filter their content continuously, to prevent being on the receiving end of such blanket bans, thus transferring on them an onerous standard of care. But the fact remains that, with the increasing number of IDs and sources uploading material, it becomes extremely difficult to access and check the authenticity of each and every material available on the platform.

Even though provisions like section 63, 63A, 65A of the Copyright Act punishes copyright infringement by virtue of viewing, downloading, exhibiting and duplicating contents. But these provisions lack clarity in their implication and invocation, for e.g. section 63 provides for any person who ‘knowingly’ infringes copyright or abets the infringement of the same may be punished or fined, but if the same is being done ‘unknowingly’ then the literal interpretation leaves a gap which takes the form of imperative immunity. 

Immunizing the intermediary

Section 2(w) read with section 79 of the IT Act, 2000 explicates the concept related to the safe harbor protection under which the third party shall not be liable under section 79 if they are able to provide unerring proof relating to the offence or contravention which was committed without his or her knowledge or that he or she had exercised all due diligence to prevent the commission of such act.

In the cases of Google India Private Limited v. M/S Visaka Industries Limited it was held in the second appeal that defendant is not guilty as they don’t have any ascendancy as they are just a subsidiary of the google.

With the advent of century and expansion of technology new aspects are entering the field of e-commerce and with all these trends, infringement and passing off is becoming a major concern. In the case of Vyakti Vikas Kendra & other v. Jitender Bagga & Google (2012) where the plaintiff (Art of Living Foundation) filed for interim relief against the defendant, a blogger and the intermediary Google owner, for removal of all the defamatory content within 36 hours.

There are instances where the defendant is liable, if the defendant follows up all the relevant conditions explicated under the section 79 of the IT Act, 2000; Christian Louboutin Sas v. Nakul Bajaj & Ors, in this case, few instances were followed on the basis of which the intermediary will be expected to be infringing the sale of goods and services in e-commerce and in the instances where such act was conducted without the knowledge of intermediaries they will not be considered liable. The facts of the case are that the complainant, a manufacturer of luxury shoes filed for the injunction against an e-commerce portal for indulging in Trademark infringement, along with the seller of spurious goods.

In the case of M/S Luxottica Group S.P.A & … v. M/S Mify Solutions Pvt Ltd & Ors., on the basis of the facts that the plaintiff chose not to lead any evidence as to damages, the relief of damages/rendition of accounts was deteriorated. Consequently, the suit was decreed in the subsequent standings against the defendants; where few directions were given to the defendant such as, it was directed with immediate effect to disclose the complete details of all its sellers, their addresses and contact details on its website; and was also  directed to obtain a certificate from its sellers that the goods are genuine;  and before uploading any goods or services containing the plaintiff’s marks, it shall notify the plaintiff and obtain concurrence before offering the said goods and services for sale on its e-commerce platform and so on.

In the landmark judgment of Shreya Singhal v. Union of India, the court explicitly upheld the Freedom of Speech and Expression being used on the Internet and repealed the regressive provisions of law restricting them, and among other things also constricted down the provisions of the law concerning protection of online intermediaries like “Twitter,” “Facebook”, “WhatsApp” and other social media platforms (‘Intermediaries’ – explicated under section 2(w) of the IT Act) from liability as provided under Section 79 of the IT Act, in this case the Court also stated that Intermediaries are required to strike down or block content on receiving of a notification (which can only be provided by the concerned government agency or an order of court) and not on the discretion of the intermediary or on receipt of request by an affected party in the circumstances.

In conclusion…

India is a developing country, more so in terms of the jurisprudence relating to IP laws. Wherein different courts at different levels prefer to follow multiple lines of reasoning related to such laws in India. In particular, laws relating to e-commerce are ambiguous, with inherent contradictions being found in the IT Act and the Copyright Act, thus resulting in inconsistent precedents. Intermediary liability calls for them to disable the sale of a product and/or its information on receiving knowledge regarding infringing material.

This comes in conflict with the rights of the seller of the ‘alleged’ infringing good from pursuing his livelihood; the adjudicating opportunity for the seller to be heard is lost in the transaction, and no opportunity is given to him to be heard. There needs to be an ‘equilibrium approach’ in terms of denoting liability towards infringers in terms of counterfeit products on e-commerce marketplace; wherein equal precaution and equal deterrence should be used by and against both the seller and the intermediary, with the adjudication being done in the light of promoting business opportunities with no reasonable harm to IP rights of the owners, unlike the extremes that the Indian lawmakers have sided themselves with under the IT Act and the Copyright Act. The prime need is a ‘flexible burden of proof’ in cases involving infringement of IP on e-commerce marketplaces, where the court shall decide on the first hearing as to ‘on whom’ the burden of proof shall lie based on individual facts and circumstances.

-This article is brought to you in collaboration with Neha Meena and Tathagat Sharma from National Law University and Judicial Academy, Assam.

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