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After winning exclusive ownership of its trademark “Red Sole” design in an infringement suit, Christian Louboutin has yet again made headlines in another trademark infringement suit against e-commerce website www.darveys.com, which allegedly sold counterfeited or fake products on their website claiming them to be original products of the world-renowned luxury brand. This latest judgment has come in the wake of urgent need of IP owners who are facing challenges from online marketing websites by way of sale of fake or counterfeited products which is leading to heavy goodwill as well as monetary losses. Such sellers on the e-commerce websites are able to protect themselves by seeking shelter behind the platform’s legitimacy, without incurring any liability, such as in the present case.
Plaintiff, Christian Louboutin, is a world-renowned brand, known for luxury products and the Defendant is an e-commerce website, which exclusively sells luxury products, to its members only. Plaintiffs alleged sale of its “impaired and counterfeited” products on Defendant’s website under their trade name ‘Christian Louboutin’. Plaintiff asserted proprietary rights in the name in the image of Christian Louboutin, in the name Christian Louboutin, in the Red Sole design, in the logo of Christian Louboutin and in the write up thereof. Defendants pleaded exemption under Section 79 of the Information Technology Act, 2009 (“IT Act”) stating to be mere “intermediaries” who only book orders. The actual supplies being made by various sellers.
When can E-commerce websites or online marketplaces be considered as intermediaries?
Most frequently pleaded ground of defence by E-commerce websites in IP infringement suits is claiming exemption as an ‘intermediary’ under Section 79 of the IT Act. In the present case, the Court has clarified the position of e-commerce websites or online marketplace as intermediaries. Placing reliance on various judgments, the Court observed that, in general, in India intermediaries have been given exemption in various fact situations including in the case of uploading of content by users, copyright infringement and violation of design rights. The Court held that definition of intermediaries under Section 2(w) of the IT Act specifically includes online marketplaces or e-commerce websites since they provide services to the customers on behalf of the actual sellers but “while the so-called 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 requires that the information which is hosted does not violate IP rights, shows that e-commerce platforms which actively conspire, abet or aide, or induce commission of unlawful acts on their website cannot go scot free. So long as they are mere conduits or passive transmitters of the records or of the information, they continue to be intermediaries, but merely calling themselves as intermediaries does not qualify all e-commerce platforms or online market places as one”.
Section 79 of the Information Technology Act
The Section does not apply if a platform is an active participant or is contributing in the commission of the unlawful act. The words conspired, abetted, aided or induced have to be tested on the basis of the manner in which the business of the platform is conducted and not on a mere claim by the platform. Section 79(3) (a) limits the exemption only to those intermediaries i.e. platforms and online market places who do not aid or abet or induce the unlawful act. Any active contribution by the platform or online market place completely removes the ring of protection or exemption which exists for intermediaries under Section 79.
The Court made the following observations:
www.darveys.com, the Defendant, is involved in the promotion and sale of luxury products. The seller is located on a foreign shore and it is not clear as to whether the seller is selling genuine products. The Defendant promotes the products to its members who sign up on their website and without becoming a member, one cannot affect a purchase on Darveys.com. In such cases granting exemption under Section 79 would amount to legalizing the infringing activity. 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 the Defendant represents to be the 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. The use of the mark, Christian Louboutin, the name, the photograph of the founder, without the permission of the Plaintiff, and without ensuring that the products which are sold are in fact genuine, would constitute a violation of Plaintiff’s rights.
Meta-tagging allows the infringing party to ride on the goodwill of the IP owner, who shall not only face monetary loss but also huge loss of customer base, goodwill and its reputation due to the sale of counterfeit products especially in sector of luxury products, Moreover, if the sellers themselves are located on foreign shores and the trademark owner cannot exercise any remedy against the said seller who is selling counterfeits on the e-commerce platform, then the trademark owner cannot be left remediless.
The Court ruled in favour of the Plaintiff and against the Defendants without costs. This judgment has clarified the position of ‘intermediaries’ under IT Act and has significantly changed the vulnerable position of IP owners regarding e-commerce websites, online sales of fake products and liability of parties.