Not all e-commerce websites intermediaries: Analysis of Christian Louboutin v. Nakul Bajaj & Ors.

Facts

The case Christian Louboutin SAS v. Nakul Bajaj & Ors., CS (COMM) 344/2018 was filed by the luxury shoe brand against the members-only website www.darveys.com, alleging that the website was –

• Selling impaired or counterfeit products bearing their famous CHRISTIAN LOUBOUTIN marks;
   
• Using the image and quotes of their founder Mr. Christian Louboutin in an unauthorised manner; and
   
• Using meta-tags of the same marks to attract business

The high-end brand stated that the Defendant’s website projected a false impression of approval, sponsorship and affiliation with the Plaintiff which is resulting in infringement of its trademarks, violation of personality rights of Mr. Louboutin and dissolution of the luxury status of their brand. 

It is to be noted that the Court granted an ex parte ad interim injunction against the Defendant on September 26, 2014. The present judgment was reserved on July 20, 2018, and was delivered on November 2, 2018. The whole 59-page judgment can be read here.

Issue

The most important and primary question before the Court was:
Whether every e-commerce website is an ‘intermediary’ and hence can claim the safe harbour provision under Section 79 of the Information and Technology Act, 2002 (‘IT Act’)?

What is an ‘intermediary’ and what is ‘safe harbour’?

The definition of intermediary is provided in Section 2(w) of the IT Act: “intermediary, with respect to any particular electronic records, means 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 … online- market places… ”

The safe harbour clause for intermediaries refers to Section 79 of the IT Act which provides for an immunity to an intermediary against all liabilities if inter alia

1. it has not conspired or abetted or aided or induced in commission of the unlawful act, and
    
2. upon receiving actual knowledge about a computer resource in its control being used for unlawful act it expeditiously removed or disabled access to that material.^[1]

Analysis of the Court

European Union: Justice Singh initiates the analysis of EU precedents with the judgment of Court of Justice of European Union (CJEU) in L’Oreal SA & Ors. v. eBay International AG & Ors., [Case C-324/09 decision dated 12th July 2011]. She highlighted the key aspects of the precedents and concluded that whether the operator of an online marketplace is entitled to the exemption is based on the role played by the operator i.e. active or inactive. If the operator plays an inactive role and has no knowledge or control over the data stored by it, it can get an exemption as an intermediary.

United States: Justice Singh highlights the famous test of contributory infringement developed in Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 along with its application in the e-commerce market through the decision of the Appeals Court in Tiffany v. eBay, 600 F.3d 93. The Inwood test states that “if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.” Applying the same principle in Tiffany, the Appeals Court stated that an e-commerce website (in that case eBay) cannot be permitted willful blindness. Since eBay removed the products which infringed Tiffany’s marks on being notified of the same, it did not willfully shield itself of the information and hence, could not be held liable for infringement. The underlying theme, however, remained the same as per Justice Singh that an online platform’s liability depends on its determination as active, passive or compliant.

India: Justice Singh initiates the analysis of Indian precedents with the most historic case in IT law in India Shreya Singhal v. Union of India, AIR 2015 SC 1523. Although the case does not specifically deal with the intermediary liability of an online platform, it does underline the role of Section 79 and the safe harbour provision. According to the judgment, an intermediary shall be liable if it fails to expeditiously remove or disable access to the infringing material upon receiving actual knowledge from the appropriate government or the courts in line of the Intermediary Guidelines, Rules 2011.

Justice Singh moves to the first case which discusses intermediary liability in case of copyright infringement by an online platform MySpace Inc. v. Super Cassettes Industries Ltd., 236 (2017) DLT 478. Analysing the rundown of US and EU laws by the Division Bench of Delhi HC, Justice Singh highlights the Court’s observation of the measured privilege and actual knowledge of intermediaries. If online intermediaries successfully take down the infringing material upon receiving actual knowledge of infringement, follow the Intermediary Rules of 2011 and perform due diligence as per Section 79, then, they can take the safe harbour.

Justice Singh then moves to the case of Kent Systems Ltd. and Ors. v. Amit Kotak and Ors., 2017 (69) PTC 551 (Del) which stated that e-commerce websites like eBay cannot be burdened with devising a mechanism to filter out IP infringing products, they can only be held responsible for removing an infringing product when it comes to their knowledge. However, this decision was appealed and later was held to be determined at trial by the Division Bench.

After the said analysis, Justice Singh concludes that the extent of protection/exemption of e-commerce websites as intermediaries is still an unexplored area and hence furthers her concentration on the nature of e-commerce business in the country. She highlights that e-commerce websites exist in a varying scale of extremes: some with transparent IPR and takedown policies and dedicated logistical services while others who don’t even reveal the name of the sellers or provide warranties. The learned Judge acknowledges that online marketplaces are specifically mentioned in the definition of ‘intermediaries’ in Section 2(w), however, she questions the ambit of services which would be covered under the said Section. Enlisting the 26 services which form part of a modern e-commerce platform (as provided in pages 41-42 of the judgment), she questions if such websites should get protection as an intermediary. 

For all the issues she enlists the following factors to be determined:

1. The terms of the agreements entered into between the sellers and the platform;
    
2. The manner in which the terms are being enforced;
    
3. The consequences of violation of the terms;
    
4. Whether adequate measures are in place to ensure that rights in trademarks are protected;
    
5. Whether the platforms have knowledge of the unlawful acts of the seller;

Holding of the Court

Applying the same principles to the case at hand, Justice Singh clarifies that “Darveys.com exercises complete control over the products. Darveys.com is, in fact, identifying the sellers, enabling the sellers actively, promoting them and selling the products in India. The role of Darveys.com is much more than that of an intermediary.”

“The seller is not known, the person from whom the seller purchases the goods is not known. It is also not known if the product is genuine, though Darveys.com represents to be same to be genuine. In view of these factors, Darveys.com cannot be termed as an intermediary that is entitled to protection under Section 79 of the IT Act.”

On the question of use of meta tags, the Court relied on the case of Kapil Wadhwa v. Samsung Electronics Co. Ltd.I, 194 (2012) DLT 23, and observed that “Darveys.com website is amongst the search results and an analysis of the code shows that the marks of the Plaintiff are used as meta-keyword-tags, with a view to increasing the hits which the Defendant’s website obtains from search engines like Google.” The Court directed that meta-tags consisting of the CHRISTIAN LOUBOUTIN marks be removed with immediate effect.

Takeaways

1. The due diligence required to be an intermediary is that it does not indulge in conspiring, abetting, aiding or inducing and is thereby contributing to the sale of counterfeit products on its platform. When an e-commerce website is involved in or conducts its business in such a manner, its actions are seen in the light of the 5 factors listed above based on which it should be decided if has crossed the line from being an intermediary to an active participant and hence, liable for infringement.
    
2. In order to decide whether there is abetment, aid, inducing or authorizing communication of an unlawful act, Sections 101 and 102 of the Trade Marks Act, 1999 would also be relevant. The e-commerce site, by falsifying/falsely applying a trademark to goods exposed to sale is aiding and further trademark infringement.
    
3. Usage of meta-tags consisting of trademarks belonging to another was disallowed reaffirming the previous judgments on the same.
    
4. As per Section 79(2)(b), to qualify as an intermediary an e-commerce website should not:

• Initiate the transmission
   
• Select the receiver of transmission and
   
• Select or modify the information contained in the transmission 

Although the IT Act mentions e-commerce websites as intermediaries, the role these websites play has changed so much that there existed a need to draw the line. This judgment has succinctly chalked out the parameters which decide whether an e-commerce website will be called an intermediary or not.
 

DISCLAIMER: The information provided in this article is for educational purposes only. The same cannot be construed as legal advice.

^[1] Section 79(3) of the Information and Technology Act, 2002.