A Tussle between Amway and Amazon

A Tussle between Amway and Amazon

In the contemporary world of globalization, right after the establishment of W.T.O, Intellectual Property Laws (IPR) have been taking shape and with time these laws have become a tool of utmost significance. The most probable reason can be the feeling that industrial societies are witnessing the radical transformation from the capital and labor-based economies into knowledge-based economies as a result of the aftermath of the contemporary revolution in information technology. The features of the knowledge-based economy can be traced by the astounding speed and intensity of technology and the installation of novel technologies leading to the development of knowledge and information in an unparalleled manner. These technological developments are making way for increasing demand for strengthening IP protection.

In India, trademark infringement is defined under Section 29 of the Trademark Act, 1999, which specifies that if an unauthorized person put into use any trademark which is identical or deceptively similar in nature to an already registered trademark amounts to infringement of the trademark.

Case - Amazon Vs. Amway

In the year 2018, Amway learned about its goods/products being sold under its trademark on Amazon and various other e-commerce platforms, Products bearing Amway’s trademark were being sold directly by the direct sellers either by way of making changes in the original Amway product or by selling fake products labeling them as Amway, since Amway is a big name among its potential buyers for its quality, therefore, this was immensely deteriorating Amway’s reputation and goodwill in the market. Amway contended that he had never permitted Amazon to sell its product online, as required by clause 7(6) of the Direct Selling Guidelines which clearly explains that “any person who sells or offers for sale including on an e-commerce platform any product or service of a Direct Selling Entity must have prior permission written consent for the same”. The e-commerce platform i.e., Amazon alleged that rules, as enshrined in Direct Selling Guidelines, are purely advisory and not binding further also outside the purview of infringement since Amazon has acted as an intermediary which are exempted from any liability by the virtue of Section 79 of the Information Technology Act, 2000.

Decision

In the year 2019, a Single Judge of the Delhi High Court delivered judgment in favor of Amway and restrained e-commerce platform such as Amazon to sell products of the DSEs (direct selling entity) without prior written consent as enshrined in clause 7(6) of the Direct Selling Guidelines.

Reaching the judgment, the Judge took into consideration several issues such as

1. Whether the guidelines as mentioned in Direct Selling Guidelines are binding in nature?

2. Whether selling of DSEs products amounts to trademark infringement and results in deterioration of its reputation among its buyers?

3. Whether e-commerce platforms can be considered as intermediaries by the virtue of providing value-added services of warehousing, logistics, packaging, and delivering products, and provided immunity from liability of not fulfilling the requirement of due diligence, as required under Section 81 of the Information Technology Act?

1. As regards the first issue the Judge observed that guideless are enforceable by law or otherwise, the DSEs would not be remediated at all if there is any prima facie infringement, and

2. In regard to the second issue, the Judge stated that DSEs such as Amway, Modicare, and Oriflame is the sole owner of the products, and usage of the trademark without permission (by way of licensing) amounts to trademark infringement and tarnishing of the reputation.

3. As per Section 79, IT act intermediary is a safe harbor that grants immunity from liability for the third-party acts, as intermediaries only serve as a link to host information, data of any third party. However, Section 81 of the act takes back this immunity if intermediaries are aware of the infringement and either contributes or instigates direct infringer to commit such infringement. So, here e-commerce platforms are guilty of infringement as they actively contributed to infringement by way of providing warehousing, logistics, packaging, and delivering services and did not fulfill the requirement of due diligence.

However, on 31^st January 2020, the judgment was overturned by the Division Bench of Delhi High Court comprising of Justice S.Muralidhar and Justice Balwant Singh and observed that the Direct Selling Guidelines are purely advisory in nature and are not law.

As per the trademark issue, the Division bench stated that once the products are sold to the buyer the ownership is transferred and no further condition can be imposed on the buyer, even when there is an enforceable contract between Amway and direct selling agent, Amway can only go against the seller for tampering of the products and doesn’t have a case against the e-commerce platforms.

Lastly, the Division bench stated that Amazon has fulfilled the requirement of due diligence while selling the product and value-added services provided by Amazon, by way of warehousing, logistics, packaging, and delivering the products and it doesn’t dilute the safe harbor which is granted to intermediaries under Section 79 of the IT ACT, 2000 as Section 2(1)(w) clearly states that intermediaries could provide value-added services to third-party sellers.

Conclusion

After the Division Bench judgment the e-commerce platform can list products of the Direct Selling Entities without their consent but to avoid such conflicts there is a need to strike a balance between the legitimate interest of the two, which can be achieved by the online platforms by actively displaying the name, address and all the required details of the third-party sellers along with the products, this will verify the authenticity of the products sold by the third-party sellers which will greatly assist the consumers before buying such products.

To know more about, the battle between AMWAY and AMAZON, see the video below-

BY -

Piyush Dabral