KEY HIGHLIGHTS [Christian Louboutin & L'Oréal] - Role Of Intermediaries in E-Commerce by Delhi High Court

Christian Louboutin Case:

1) Platforms should have transparent privacy policies, takedown policies and IPR Policies.

2)  A dedicated unit dealing with complaints of IPR Owners.

3) If the e-commerce website exercises complete control over the products like identifying the sellers, enabling the sellers actively, promoting them and selling the products in India then the role of any e –commerce website becomes more than that of an intermediary.

4) ‘Safe-Harbour’ provisions for intermediaries are meant for promoting genuine businesses which are inactive intermediaries and not to harass intermediaries in any way, the obligation to observe due-diligence, coupled with the intermediary guidelines which provides specifically that such due diligence also require that the information which is hosted does not violate IP Rights, shows that e-commerce which actively conspire, abet or aide, or induce commission of unlawful acts on their websites cannot go Scott free.

5) When an e-commerce website is conspiring, abetting, aiding or inducing and thereby contributing to the sale of counterfeit products on its platform, it could be said to crossing the line from being an intermediary to an active participant.

6) So long as the e-commerce website are mere conduits or passive transmitters of the records or of the information, they continue to be intermediaries, but merely if a website calls themselves as intermediary do not qualify them to be one.

7)  Analysis of Section 79 shows that intermediary is not liable for third party information, data, links which are hosted on the platforms. However, Section 79(2) and 79(3), qualify the manner in which the said protection is granted to intermediary. The Protection is not absolute.

8) Under Section 79(2)(b) intermediary should not- initiate the transmission, select receiver of transmission and select or modify the information contained in the transmission. If any of the above is done by an intermediary, it may lose the exemption to which it is entitled.

Interpretation of Shreya Singhal[1]:

The Delhi High Court while interpreting Shreya Singhal v. Union of India in the present case, held that Shreya Singhal’s judgment was not in context of an e-commerce platform but social media platforms like Facebook, where users can post their own images and comments etc. The court further read down Section 79(3)(b). The court further held that the caveat that acts which are beyond Article 19(2) of the Constitution of India cannot form part of Section 79 of the IT Act. Thus, violation of Intellectual Property Rights was not the subject matter.

 As per the Division Bench in MySpace v. Super Cassetes[2], knowledge could be actual knowledge and constructive knowledge. Actual knowledge of the infringement was an impossibility, as MySpace did not have information of actual users who were uploading the songs. Thus the only question was whether MySpace had reason to believe i.e., constructive knowledge of the infringement and if yes, then what is the role of MySpace. Thereafter, the Court proceeded to analyse the conduct of MySpace under Section 79 of the IT Act. While balancing the rights of intermediaries the court summarized that:

 (a)  Sections 79 and 81 of the IT act and Section 51(a)(ii) of the Copyright Act have to be read harmoniously. Accordingly, it is held that proviso to Section 81 does not preclude the affirmative defence of safe harbour for an intermediary in case of copyright actions.

(b)  Section 51(a)(ii), in the case of internet intermediaries contemplates actual knowledge and not general awareness. Additionally, to impose liability on an intermediary, conditions under Section 79 of the IT Act have to be fulfilled;

(c) In case of Internet intermediaries, interim relief has to be specific and must point to the actual content, which is being infringed.”

L’Oreal v. Brandworld & Anr.

When can we say that an e-commerce website is more than an intermediary:

1) If the website fails to take any action to prevent third party counterfeiting on it’s website;

2) If the website maintains an inventory of counterfeit goods of well-known brands and lists them through various sellers, which may or may not be fictitious;

3) If the website has no document which establishes a vendor registration process involving KYC details of the vendors from its website;

4) The website collects direct revenue and interest on commission basis on ‘per product sales’;

5) If the website conducts a specific product based advertisement on third-party media;

6) If the website does not conduct due-diligence required under section 79(2)(c) of the Information Technology Act;

7) If the website’s Intellectual Property Programme shows that the due-diligence and the take down policy is not compliant enough;

 When can we say that an e-commerce website is not merely an intermediary:

1)  If the website guarantees that all the products are 100% genuine;

2)  If the website has encountered repeated sales of counterfeit goods;

3)  If the website, even after several infringement actions against it, doesn’t seem to be taking precautions to stop the sale of counterfeits;

What can be done by the e-commerce websites in order to take care of Intellectual Property Rights:

1)  Disclose complete details of all it’s sellers, their addresses and contact details on the website;

2)  Obtain a certificate from its sellers relating to the genuineness of goods;

3)  Enter into an Agreement with various sellers under which it shall obtain guarantee as to authenticity and genuinity of the products as also provide for consequences of violation of same;

4)  Upon being notified of any counterfeit product being sold on it’s platform, it shall notify the seller and if the seller is unable to provide evidence that the product is genuine, it shall take down the listing;

5)  The sites shall seek a guarantee from sellers that the products have not been impaired in any manner and that all the warranties and guarantees are applicable and shall be honored by the seller. Thus, products of sellers who are unable to provide such a guarantee shall not be offered on the e-commerce website.

-Nikhil Naren

Trainee Advocate, Scriboard [Advocates and Legal Consultants]

[1] AIR 2015 SC 1523.

[2] 236 (2017) DLT 478.