As e-commerce is slowly but steadily gaining ground and more consumers are going on-line for purchasing not only their daily needs but also home appliances and electronic products. In the current scenario, the IP owners are increasingly concerned with widespread availability of counterfeit and look-alike products on e-commerce platform. While IP owners would like that in order to curb this activity e-commerce platform owner should be made jointly liable with the seller for infringement, the e-commerce platform often takes refuge under safe harbour provisions as an intermediary under the Information Technology Act, 2000. The liability of intermediaries was recently set out by the two judges bench (Division Bench) of the Delhi High Court in Myspace Inc. vs. Super Cassettes Industries Ltd.

This post covers a recent case brought by Kent RO Systems Limited (hereinafter Kent) against the seller, Amit Kotak and eBay before the Delhi High Court. The question considered by the court was whether the intermediary can be held liable for failing to exercise diligence by detecting and removing the infringing content posted by third parties on its portal or it must have actual knowledge by way of notice from the IP holder with specific URLs to take action.

Brief Facts:

Kent RO Systems Limited (Kent) manufacturer and seller of water purifiers owned registered designs in respect of water purifiers brought a suit for infringement of design, seeking injunction, rendition of accounts and damages alleging that manufacture or sale of water purifiers by the defendants, Amit Kotak and unknown parties impleaded as John Doe with deceptively similar get up, shape of plaintiff’s water purifiers design amounts to infringement under the Designs Act, 2000. The water purifiers manufactured/sold by the Defendants were offered for sale on the website run by defendant no. 2 i.e. eBay India Private Limited (eBay). Kent urged the Court to pass an order to delist the infringing material and issue prohibitory injunction to prevent sale of water purifiers bearing similar shape or design by other parties in future on eBay’s website.

The court at the time of admission of the suit passed an ex-parte injunction order against eBay directing it to block access to URL’s from which the infringing products were sold and directed it to furnish details of the sellers of infringing products on its website. Subsequently, the seller (Amit Kotak) being defendant no. 1 agreed to suffer a decree of permanent injunction and the suit was disposed off qua defendant no. 1. eBay contested the claims made by Kent alleging that intermediaries are not under an obligation to screen and remove the infringing material on its own which is posted by 3rd parties on their portal.

Submissions by Kent:

1. 1. eBay is an intermediary within the meaning of Information Technology Act, 2000 (IT Act) facilitating the transaction between a seller and buyer. The intermediaries are expected to observe due diligence while discharging their duties and inform users not to host, display, upload, publish, transmit information that infringes the IP rights of any party as well as take steps to avoid sale of infringing products. Kent referred to Rule 3 of the Information Technology (Intermediaries Guidelines), 2011 dealing with due diligence to be observed by the intermediaries.
   2. eBay is guilty of design infringement under Section 22(1)(c) of Designs Act, 2000.
   3. Kent informed eBay about sale of infringing water purifiers on its website. Although ebay confirmed that it had removed all the products complained of and undertook to remove infringing products in future, a large number of infringing products were still offered for sale on eBay.
   4. Once the complaint has been lodged with the intermediary/eBay with respect to offending product sold by a particular seller, eBay before listing any other water purifier of another person in future should verify if it infringes the registered design of Kent. If infringing products are still offered for sale, eBay is guilty of offence under Section 79(3) of IT Act.
   5. Exemption to intermediaries under Section 79(3) of IT Act is not applicable if the intermediary has conspired, abetted, aided or induced commission of unlawful act. eBay by allowing sale of infringing products from new URL’s is deemed to have conspired, abetted, aided infringement as per Section 79(3) of IT Act.
   6. eBay should devise programmes to detect infringements and piracy. Kent cannot be expected to maintain a vigil to monitor availability/sale of infringing products on the website of eBay.

Submissions by eBay:

1. 1. On receipt of complaints lodged by Kent, it removed the offending products from its website. eBay further undertakes to remove offending products in future from its website on receipt of the complaint from Kent.
   2. eBay has removed 16 infringing products from their website and the name, addresses of such parties has been provided as part of their reply to the Court.
   3. eBay is not liable under Section 79 of the IT Act as it had observed due diligence while discharging its duties under the IT Act and other guidelines prescribed under the law.

Court Ruling:

1. 1. If the intermediary is required to verify that the offending product infringes the IP right of any person, it would convert the intermediary into a body to determine whether there is any infringement of IP rights or not which they are ill-equipped to perform.
   2. The intermediary is required to remove the information posted on its website only on receipt of the complaint. eBay is not expected to maintain a vigil at all times to screen all the information being hosted on its website to determine infringement.
   3. Considering no obligation to screen the infringing content made available in the newspaper/magazines is imposed on the publisher or on the owner of immovable property that the person permitted by him to use the premises is indulging in infringing activities, it would not be appropriate to impose obligation on the intermediaries to screen the infringing content on its own.
   4. The intermediaries are only bound to apprise users of their privacy policy/ rules, regulations and disable infringing content on receipt of the complaint within 36 hours.

The suit was disposed off binding eBay to the statements/undertakings furnished in the Court.

Our comments:

The ruling makes it clear that the onus is on rights holders to inform the intermediaries each time they come across the infringing content. The intermediary is not bound to identify the information on its own posted by third parties on its website to determine whether it amounts to infringement of the rights of IP holder. While legally the ruling is in line with provisions of the IT Act, the huge number of online e-commerce portals and many of the smaller and local ones not even maintaining easy process to report infringements and take down procedures, the practical reality is a completely different. It does mean IP holders are left to perform the policing task and take corrective measures.