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E-COMMERCE WEBSITES AND TRADEMARK INFRINGEMENT: SELLERS 'LATCHING-ON' TO GOODWILL?

January 15, 2023

* Mr. Paarth Samdani

The past decade has witnessed a rapid transition in terms of technological advancements. With the advent of such developments, the growth of e-commerce and m-commerce platforms remains unforeseeable. The increased accessibility, comfort and efficiency have prompted users to prefer such platforms over traditional businesses operating solely out of physical stores.

Due to the nature of the internet, while there are inherent boons, it also serves as a breeding ground for illegal activities such as violation of the exclusive rights awarded to the creator of the original work in the form of intellectual property rights. Owing to the shift of business onto such platforms, naturally, the duties and liabilities placed upon e-commerce and m-commerce intermediaries have gone through several changes.

The Information Technology Act, 2000 (IT Act) defines 'intermediary' as "any person who on behalf of another person receives, stores or transmits that record or provides any service 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."

It is sufficiently clear from the repeatedly amended IT Act that e-commerce platforms do fall within the purview of the statutory definition of the term 'intermediary'. While an intermediary is made liable for any illicit activities that it propagates, it was deemed necessary to provide certain liability exemptions to intermediaries for activities that were conducted by third parties on their platforms without their knowledge.

Accordingly, Section 79 of the IT Act lays down an exemption allowing intermediaries to forsake liability for any third-party information, data, or communication link in cases where the intermediary only provides access to third-party information, does not initiate the transmission of such information or does not select or modify the receiver of such transmission. The IT Act, read with the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 provides for certain requirements that must be fulfilled by an intermediary in order to avail protection under the 'safe-harbour' provision of Section 79 such as the deletion of infringing content within 36 hours of a corresponding court order, assisting law enforcement authorities with the information required for the purpose of investigation, etc.

In recent times, there have been several complaints regarding the listing of counterfeit products or falsified/unauthorized usage of trademarks on such e-commerce platforms. While the position on copyright infringement and the subsequent liability of e-commerce platforms has been expounded upon on several occasions by the judiciary (MySpace Inc vs Super Cassettes Industries), the legal position around trademark infringement and the subsequent liability remained unclear.

The Delhi High Court in Christian Louboutin SAS v Nakul Bajaj & Ors. judgment dealt with the liability of such intermediaries in matters of trademark infringement. The Plaintiff, a manufacturer of luxury shoes, filed a suit for trademark infringement against an e-commerce platform, www.darveys.com alleging that the Defendants sold the Plaintiff's luxury shoes under their brand name making use of meta-tags without their permission.

Although the Defendants claimed an exemption under the 'safe-harbor' provision as enunciated under Section 79 of the IT Act, the Delhi High Court was of the view that the Defendants were not mere intermediaries, but also active participants of the selling process due to the manner in which they conducted business. Thus, a higher level of caution and due diligence had to be conducted by such active participants, failure to adhere to which could lead to an intermediary losing out on protection under the 'safe-harbor' provisions.

The Court reiterated the principles of the Kapil Wadhwa v Samsung Electronics judgment, holding that the act of meta-tagging the products with the Plaintiff's marks or names would amount to infringement under the Trade Marks Act, 1999. Further, any sale of counterfeit products would amount to the falsification of a mark, thus, constituting the conspiring, abetting, aiding or inducing the commission of an unlawful act. The ratio in the Louboutin case was further applied and upheld in the case of L'Oreal v Brandworld & Ors.

More recently, the Delhi High Court dealt with complaints regarding certain features offered by the e-commerce website, Flipkart. In this case, Mr. Akash Aggarwal, the proprietor of the trademark 'V TRADITION', alleged that Flipkart introduced a feature which allowed third parties to list their goods under the name of popular sellers. Flipkart allowed users to add listings under the 'Opportunities' tab, thus, showcasing them as 'More Sellers' of a popular brand.

Justice Pratibha Singh observed that due to the growth of e-commerce, a new dimension of passing-off was created in the context of such platforms. The Court held that the feature of 'latching-on' to a popular brand's name was nothing more than 'riding piggyback' on the goodwill and popularity of the brand and amounted to passing off. The opportunity to 'latch-on' enticed new sellers to associate their products with popular brands. Allowing such unauthorized third parties to 'latch-on' without the consent of the proprietor of the goods was taking unfair advantage of the goodwill residing in the plaintiff's mark and business.

Thus, it is evident that due to the unprecedented rise of e-commerce platforms, a new dimension for infringement of intellectual property rights has been created. However, the courts in India have adequately evolved the legal position to ensure that there is more strenuous liability put onto such large-scale intermediaries, especially in matters of trademark infringement.

It is evident from the very objective of the Trade Marks Act, 1999, that it enables consumers to distinguish a product or service offered by one brand from another. The falsification and unauthorized usage of a registered trademark clearly misleads consumers, defeating the very purpose of registration and protection under the Act. The trend of intermediaries attempting to hide behind the 'safe-harbor' provisions has been frowned upon by the Courts, who have attempted to stifle such practices by ensuring intermediaries are conducting the required due diligence adequately.

E-commerce websites are evolving to become more consumer-friendly, however, this cannot happen at the expense of a brand's reputation or goodwill. To keep this intact, it is the duty of such platforms to actively monitor and curb any instances of infringement, thereby facilitating the growth of fair business practices. It is also the duty of relatively smaller platforms to keep a strict quality check on the brands that are being listed to prevent the breeding of anti-competitiveness.

References:
  1. The Information Technology Act, 2000, s.2(w).
  2. MySpace v Super Cassettes Inc., FAO (OS) 540/2011.
  3. Meta-tags are part of a web-page's source code, showing up as snippets of text that describe the content showcased by a web-page. A meta-tag often helps in search-engine optimization activities, thus, allowing users who have made use of such keywords to find relevant pages easily.
  4. L'Oreal v Brandworld, CS (COMM) 980/2016.
  5. Akash Aggarwal v FlipKart Internet Private Limited, CS (COMM) 492/2022.
Author:

* Mr. Paarth Samdani
5th Year Student - B.B.A. LL. B.(Hons.)
Alliance School of Law, Alliance University

Disclaimer: The opinions expressed in the article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of the Alliance Centre for Intellectual Property Rights(ACIPR) and the Centre does not assume any responsibility or liability for the same.