Ranjan Narula Associates

Delhi High Court provides safe harbour for online intermediaries
In a first ever judgement that comprehensively deals with liability of intermediaries has put the onus on IP holders to provide specific list of infringing works to intermediaries. The two judges bench (Division Bench) in an Appeal filed by MySpace has set aside the interim injunction passed by the Single Judge and directed T-series to provide MySpace with a 'specific' list of works which are made available on the website without its authorisation. The order examines issue/liability of MySpace for 'secondary infringement' i.e. whether MySpace can be held liable for content uploaded by third parties.

Brief facts:

T-series (a well known record label company) filed a suit against MySpace before the Delhi High Court in 2008 for permanent injunction and damages to restrain MySpace from reproducing, adapting, distributing on its website any content the copyright of which existed with T-series. T-series alleged that MySpace was generating revenue by including advertisements at the beginning of these infringing materials uploaded by users of MySpace website.

The single judge held T-series is guilty of copyright infringement and restrained MySpace from allowing its website to carry any copyrighted material of T-series. Further, it was held that the safe harbour provision for intermediary liability under Section 79 of the Information Technology Act, 2000 (IT Act) is not available. MySpace preferred an appeal before Division Bench against the order passed by Single Judge.

Submissions by MySpace:

  1. MySpace cannot be held liable for the acts of others. If the user accepts the User Agreement, the onus to upload the copyrighted works is on the user.

  2. The direction to remove T- series future works is not envisaged in Section 51(a) (ii) of the Copyright Act, 1957 as it talks about 'existing' work.

  3. The removal of content is possible if the content owner gives notice of the infringing works. Thus, there cannot be secondary liability of the intermediary based on deemed knowledge of the infringing material.

  4. The intermediary should be 'actually aware' of the infringing content and the onus of conveying and monitoring the infringing content is on the content owner. In case infringing content is still not removed, intermediary can be held liable. Thus, 'actual knowledge' is required to be proved and mere general awareness is insufficient to attract liability under Section 51(a) (ii) of the Copyright Act, 1957.

  5. Section 52(1) (b) and (c) of Copyright Act provide immunity from liability.

  6. Section 81 of IT Act has an overriding effect and only clarifies that IT Act shall not prevent a copyright owner from exercising its right under the Copyright Act, 1957.
Submissions by T-series:
  1. MySpace is not an ISP, but a resource centre accessible through an ISP.

  2. MySpace has knowledge and control over the contents hosted on its website.

  3. MySpace copies and stores content in its servers and has committed infringement under Section 51(a) (i) of the Copyright Act. It is also guilty of infringement under Section 51(a) (ii) of the Copyright Act for permitting its space for profit by inserting advertisements in the T-series works.

  4. MySpace cannot seek shelter under Section 79 of the IT Act because it initiates transmission of information.

  5. MySpace does not exercise due diligence and the moment it takes the licence to modify uploaded works, it possesses knowledge about infringing content.

  6. The harmonious construction of Section 79 and 81 of the Act is not possible.

  7. If the infringing content is not removed by MySpace, it would suffer financial loss despite balance of convenience in its favour.
Key issues:

Broadly, the Court identified three main issues for deciding the dispute:

  1. Whether MySpace had knowledge of infringement as to attract Section 51(a) (ii) of the Copyright Act, 1957;

  2. Does proviso to Section 81 of the IT Act override the 'safe harbour' granted to intermediaries under Section 79 of the IT Act ;and

  3. Possibility of harmonious reading of Section 79 and 81 of the IT Act read with Section 51 of the Copyright Act, 1957.
The Division Bench holding in favour of MySpace held that:
  1. Without specific information about infringing content, appellant /MySpace cannot be held liable for infringing content. It held MySpace is not liable for secondary infringement. The question of 'primary infringement' i.e. whether MySpace has on its own infringed copyright of T-series will be examined after trial.

  2. It disagrees with the 'general awareness' test applied by the Single Judge. The Court stated that 'actual knowledge' is required to be proved and mere general awareness is insufficient to attract liability under Section 51 (a) (ii) of the Copyright Act, 1957.

  3. The onus of identifying the specific infringing content on MySpace website is on T-series and should be communicated to MySpace before knowledge can be attributed under Section 51(a) (ii) of the Copyright Act, 1957. The court directed T-Series to provide an updated catalogue of "specific" works in which it holds copyright along with the location/ URL of such work on the Appellant MySpace's website to the Appellant as and when T-series detects infringement. On receiving such notice from T-series, the Appellant/MySpace shall within 36 hours remove/ block access to such content as per Rule 3(4) of the Intermediary Guidelines Rules of 2011.

  4. MySpace shall also keep an account of all such content removed pursuant to such requests as well as other details such as the number of viewings of such content, till it is removed, the advertisement revenue earned from it etc. to calculate damages.

  5. T-Series's contention that insertion of advertisements or modification of content by MySpace disclosed knowledge of the infringing content was rejected by the court. The court was of the view that insertion of advertisements by MySpace is through an automated process. Further, the modification of the work is only to the format and not the content uploaded. Thus, it cannot be said that MySpace had knowledge about the infringing content. The level of actual/manual control applied by the Appellant/ MySpace will be determined at trial stage. The court while determining the above observed:

    1. MySpace is a 'neutral platform' whereby it enables users to freely exchange data without adding or contributing information on its own.

    2. Section 79 of IT Act is a non-obstante clause and contains safe harbour provision for intermediary liability. It precludes applicability of all other laws. The only restriction is placed under sub section (2) and (3) of Section 79.

    3. Section 79 of IT Act does not provide blanket immunity from liability to online intermediaries. The provisions of Section 79 and 81 of IT Act and Section 51(a) (ii) of Copyright Act, 1957 need to be harmoniously construed. Section 51(a) (ii) envisages actual knowledge in case of internet intermediaries as mentioned above. Thus, to impose liability on intermediary conditions under Section 79 need to be fulfilled. The proviso to Section 81 of IT Act does not preclude safe harbour defence of intermediary in case of copyright action.

    4. The Division Bench directed single judge to expeditiously hear the matter and decide the case by the end of 2017.
Our comments:

The judgement provides clarity on liability of online intermediaries and clears the ambiguity which had arisen after the broad injunction order passed by Single judge in favour of T-series and directing MySpace to remove infringing works of T-series. It can be inferred from the judgement if online intermediary has specific knowledge or has reasonable belief based on information supplied by rights holder about the infringing content and if online intermediary fails to act on it despite such knowledge, online intermediary can be held liable for infringement.

The judgement though sound on legal interpretation of the provisions of IT Act and Copyright Act has put heavy onus on IP holders to prove that the intermediary had actual knowledge of the infringement. This is obviously difficult, if not impossible to prove. The judgement in effect has left it to the IP holder to trawl through all content on a social media website and/or an e-commerce portal to identify and report the infringing content. Thus resort to what is popularly known as "take down" notice route. It is arguable if an online intermediary is asked to identify infringing content from non-infringing content, it could curb free speech. However this may not apply in all situations. As an example if a well known brand owner e.g. Coke informs an intermediary that it does not manufacture/sell mobile phone covers thus all of such products sold/available on its website/portal are counterfeit and must be removed, the intermediary (an e-commerce portal) on the basis of this judgement, can insist that he must be provided specific URLs to act upon the request. In other words IP owners will need to put resources to constantly monitor the online space to report to the intermediary seeking its removal.

Also considering, the current investment policy of government of India permits foreign direct investment in the business-to-business (B2B) e-commerce sector, but not the business to-consumer (B2C) sector. Thus, most e-tailers - including Amazon, Flipkart, Snapdeal and Jabong - use a marketplace business model, with suppliers storing goods on the e-tailer's behalf and then delivering them once orders have been placed, so as not to fall under the B2C category. This model depends on e-tailers expanding their supplier base in order to provide goods at competitive prices. In the process, due diligence of suppliers often takes a back seat, meaning that availability of counterfeit and infringing goods have become increasingly common. However, e-tailers have no liability as per this judgement so long as e-tailers while approving a supplier have done their due diligence by having supplier sign an agreement that stipulates he will not sell counterfeit goods on their portal. Thus once again leaving it to IP owner to monitor and send take down notices to the e-tailers.
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