This article has been by Srishti Verma, pursuing the Diploma Programme in Intellectual Property, Media and Entertainment Laws from LawSikho.
Table of Contents
Introduction
From Michael Aldrich who is termed as the father of e-commerce for inventing the concept of selling and buying products online in 1979 to Fabmart being introduced in 1999 with India witnessing a paradigm shift by way of liberalization of the economy in 1991, to the present scenario where Amazon and Flipkart dominate the Indian market competing with omnipresent players like Alibaba along with new players entering the global and domestic market rapidly, E-commerce is something that is still relevant and profitable from both sides of the spectrum i.e. The investors and the consumers, especially in view of COVID-19. With such a boom resulting in carving out of a sunrise sector from the conventional commerce industry, there have been countless instances of emergence of counterfeit products in the relevant online trade channels. Unauthorized copies and imitations of products are mainly dealt under the ambit of counterfeiting, piracy and infringement realms of the IP laws of India. The last three years have played a very important role in developing the legal norms of e-commerce business in the Indian landscape.
IPR issues and Applicable Laws for counterfeit on e-commerce platforms
The courts have interpreted the various e-commerce platforms as Intermediaries under Section 2 (w) of the Information Technology Act 2000 concluding the onus of tortious liability against customers, to rest upon them even with the acknowledgement of the fact that infringers mask behind the legitimacy of these e-commerce brands. The courts are of the view that protection given to the intermediaries under Section 79 can only be made applicable in a fair manner if these e-commerce companies are cautions and execute proper due diligence according to the Information Technology (Intermediary Guidelines) Rules, 2011 (“Intermediary Guidelines”); in putting up products for sale on their platforms. Direct Selling Businesses which are governed by Direct Selling Guidelines, 2016 (“DSG”) have seen to be complaining about such infringement issues argued with Clause 7(6) elaborating prior consent of the sellers coupled with violation of the Article 19(1)(g) of the Indian Constitution.
Other IPR aspects supplementing the selling of pirated products on online platforms are trademark violation, dilution and passing off. The courts have seemed to be limiting itself to not delve into the question of ‘confusion’ and ‘deception’ rather have focused on the ‘Balance of Convenience’ while applying judicial mind to the facts of the case.
The Delhi high court has been actively taking cognizance of matters related to counterfeit goods on e-commerce platforms. Following are the court’s decisions entailing standard guidelines to be followed and important observations regarding the duties of the e-commerce companies indulging in safe and transparent industry practice.
Case laws
Christian Louboutin Sas. v. Nakul Bajaj & Ors
The year 2018 witnessed a landmark judgment by the honorable Delhi high court where it scrutinized the ambit of safe harbor of Section 79 by examining the extent of active or passive participation of the e -commerce platform in question. Keeping the same in mind, the court did not award any damages to the luxury brand and accepted the defendant’s argument of not conspiring, abetting, aiding or inducing the sale of pirated products on its platform Darvey.com, as it only formulated the mechanism of placing orders. The defendants argued that their only duty was to take down the infringing product upon immediate realization, relying on the Shreya Singhal verdict. The court attempted to compartmentalize the plausible e-commerce activities into active and passive participation, thereby commenting on the very nature of the possibility of the two transcending into the domain of ‘Infringing nature’ either in isolation or in collaboration.
Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. & Anr
In 2019, The question of merging jurisdictions in the modern space of trade, commerce and business in view of e-commerce websites selling products of companies engaged in direct selling was answered. Even though this ruling is not related to the issue of counterfeiting, it is definitely a very crucial verdict for understanding the obligations of the e-commerce companies, essentially dealing with components of misrepresentation, exhaustion and tarnishing of trademarks. The honourable court found e-commerce giants such as Amazon, Flipkart, Snapdeal, 1MG to be guilty of tortious interference with the contractual relationship of the plaintiffs with their direct sellers. This judgement cleared the bargaining position of the Direct Sellers as they have the ultimate say in issuing of a consent certificate if they wish to expand their trade channels via e-commerce associations.
Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. & Others
Aggrieved from the 2019 decision, the defendants filed an appeal where the bench reversed the decision thereby allowing the e-commerce websites to sell products without any consent from the corresponding direct businesses. The court clarified that the DSG Rules have an advisory nature even when the same can attain the status of law of the and thereby invoking the question of interpretation of ‘lex specialis derogat legi generali’.
Guidelines for e-commerce platforms
Consumer Protection (E-Commerce) Rules, 2020 replaced the E-Commerce Guidelines for Consumer Protection, 2019 and has the potential to fortify the selling models adopted by the e-commerce companies in India as it also steps into the competition law domain by safeguarding the consumers from pricing influencing, unfair promotion methods or misrepresenting the quality of goods and services. The essence of the guidelines is self-declaratory and will be complementing the Consumer Protection Act of 2019. The rules are applicable to the main four traditional commerce models – B2B, C2C, B2C and C2B, their hybrid structures, foreign based e-commerce platforms under Rule 4(1)(a) and other models except those carried out in individual capacity. The e-commerce companies have to show the following to its user:
- Legal name of the e-commerce entity
- Principal address of its headquarters and all branches
- Name and details of its website; and
- Contact details for customer care and grievance officer
In the event of non-compliance, the penalty that is prescribed under the Consumer Protection will be applied. Apart from e-commerce companies and their inventories, obligations of sellers have also been outlined extensively.
Conclusion
The rationale behind the 2020 judgement allowing e-commerce websites to sell without the seller’s consent does not fit well when the same has been provided to be a necessary action in order to comply with the new rules. According to me, Shreya Singhal and Bazee.Com case are not good law in the aspect of E-commerce space as they relate to a crime against the whole public (Right in Rem) while the latter deals with contractual lapses with individuals (Right in Personam). There is an absence in harmony between DSG Rules and the 2020 E-commerce platforms Guidelines even when they pertain to the same sections of the e- business industry.
The other judgements definitely act as positive steps towards prevention of any brand’s trademark violation in the cyber domain. The demarcation of activities by the court may not hold true for long with evolving business structures and fluid dynamics of the e-commerce industry, thereby calling for constant amendments matching the regulatory and legislative needs. The concerned authorities can study the online market space and prescribe a ‘Code of Ethics’ suiting the business functioning of these e-commerce companies balancing the interest of the stakeholders.
A sui generis system to deal with counterfeiting of any product inter alia components of trademark, copyright, industrial design and patent, consolidating the various relevant provisions for such enforcement of rights and prevention of piracy in these statues may not be feasible, therefore the legislators have to promote harmony and fill in the legislative gaps with express provisions. Other than that, the implementation of such rules can be solved with prompt actions on a case to case basis.
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