Intellectual Property Rights for counterfeit on e-commerce platform

The courts have explained the several e-commerce sites as Intermediaries under Section 2 (w) of the Information Technology Act, 2000 (“IT Act”) finalising the burden of tortious liability against consumers, to rest upon them even with the acceptance of the fact that violators mask behind the legitimacy of these e-commerce brands. The courts are of the opinion that safeguards provided to the intermediaries under Section 79 of the IT Act can only be made relevant in a just way if these e-commerce enterprises are careful and carry out proper due diligence as per the Information Technology (Intermediary Guidelines) Rules, 2011 (“Intermediary Guidelines”); in putting up products for sale on their platforms. Direct Selling Businesses which are controlled by Direct Selling Guidelines, 2016 (“DSG”) have seemed to be opposing such infringement issues for their products. They have aided the cause with Clause 7(6) elaborating prior permission of the sellers coupled with violation of Article 19(1)(g) of the Indian Constitution.

Other IPR areas supplementing the wrongdoing of infringement are trademark violation, dilution and passing off. The courts have seemed to be restricting themselves to not delve into the point of ‘confusion’ and ‘deception’ instead of having itself concentrating on ‘Balance of Convenience’ while putting judicial mind to case facts associating with e-commerce counterfeiting.

The Delhi High court has been diligently taking notice of such affairs. Below are the court’s decisions requiring standard guidelines to be observed and important observations related to the duties of the e-commerce companies involved in safe and transparent industry exercise.

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CASE LAWS

Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. & Anr

In 2019, the query of merging jurisdictions of stakeholders in the modern space of trade, in view of e-commerce websites selling products of enterprises involved in direct selling was responded. Even though this ruling is not linked to the problem of counterfeiting, it is definitely a very vita verdict for comprehending the commitments of the e-commerce firms, mainly dealing with areas of misrepresentation, exhaustion and tarnishing of trademarks. The Honorable court asserted 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 lighted the bargaining position of the Direct Sellers as they have the eventual say in making a consent certificate if they like to widen their trade channels via e-commerce associations.

Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. & Others

Resentful of the 2019 decision, the defendants filed an appeal where the bench altered the decision thereby permitting e-commerce websites to sell products without any permission from the corresponding direct businesses. The court clearly stated that the DSG Rules have an advisory aspect even when the same can have the status of the law of the and thereby invoking the fact of explanation of ‘lex specialis derogat legi generali’.  

Guidelines for e-commerce platforms

Consumer Protection Rules, 2020 (“E-Commerce Guidelines 2020”) refreshed the E-Commerce notions for Consumer Protection, 2019 and has the capacity to protect the selling models taken by the e-commerce companies in India as it goes to the competition law domain by safeguarding the consumers from pricing effect, unfair promotion ways and misrepresenting the quality and quantity of goods and services. The gist of the guidelines is self-declaratory and will be complementing the Consumer Protection Act of 2019 (“CPA 2019”). The rules are levied to the primary four traditional commerce models – B2B, C2C, B2C and C2B, their hybrid forms, foreign build e-commerce stage under Rule 4(1)(a) and other models except those carried out in individual capacity. The e-commerce firms have to display the below-listed terms to their users:

1. The legal name of the e-commerce entity
2. The principal address of their  headquarters and all branches
3. Name and details of its website; and
4. Contact details of customer care and grievance officer

In the happening of non-compliance, the consequence that is prescribed under the CPA 2019 will be levied. Apart from e-commerce firms and their inventories, the duties of sellers have also been outlined extensively heeding to the proneness of infringers posing as authentic sellers in the online e-commerce space.

Conclusion

The customers can now file their cases for product liability against service givers and sellers along with manufacturers on video conferencing owing to ‘No Territorial Jurisdiction Rule’ in E-Commerce Cases.  Though there is not really any stated clause for the process of law in cases of counterfeit goods received by customers in the new consumer act and/or correlated guidelines, the courts may take notice of the same vide misleading advertisements and product liability clause of the CPA 2019 read in agreement with the E-commerce 2020 guidelines.

The Amway India (2019) and Amazon Seller (2020) orders related to the DSG and E-Commerce are in peace as the new steps ask for taking consent from Direct sellers to sell their products digitally, thereby attaching an authentic factor in the form of certification. Shreya Singhal and Bazee.Com cases are not suitable to law with respect to interpretation of the E-commerce space as they are linked to a crime against the whole public (Right in Rem) while the other deals with contractual lapses with individuals (Right in Personam).

A sui generis system to allocate with counterfeiting of any product inter alia components of trademark, copyright, industrial design and patent, consolidating the several relevant clauses for such enforcement of rights and avoidance of piracy in these statues may not be practicable, hence the legislators have to encourage harmony and fill in the legislative gaps with indicating clauses and deterrent judgments. Apart from this, the execution of such rules can be addressed with prompt actions on a case to case basis. The courts should take reasonable measures towards avoidance of any brand’s trademark violation in the cyber domain in light of many infringing and passing off activities. The distinction of activities by the court may not hold true for a long time with evolving business structures and fluid dynamics of the e-commerce industry, thereby calling for continuous amendments matching the regulatory and legislative needs. The registered authorities can see the online market space and give a ‘Code of Ethics’ suiting the business functioning of these e-commerce companies stabilizing the interest of the stakeholders.

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BY - SHRUTI KULSHRESTHA