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India develops jurisprudence around intermediary liability




Vaishali Mittal and Rohin Koolwal of Anand and Anand analyse cases in which the courts have ruled on intermediary liability in the e-commerce space, evaluating when companies can benefit from the safe harbour in Section 79 of the Information Technology Act 2000

As one of the world's fastest growing economies, it is unfathomable that India could remain untouched by the paradigm shift that is e-commerce. In fact, India has emerged as one of the world's major e-commerce hubs with providers of goods and services migrating to an increasing online marketplace comprising several home-grown and multinational e-commerce players. That has been closely followed by an upswing in IPR violations through transactions conducted online, leading to questions over whether such e-commerce players may also be held liable as intermediaries. Indian jurisprudence on intermediary liability has evolved tremendously over the past two to three years due to a handful of crucial judgments. We intend to highlight this evolution in this article.

E-commerce in India is largely governed by the provisions of the Information Technology Act 2000 (IT Act) which was amended in the year 2008 to include a definition for the term "intermediary" and the insertion of Section 79 into the IT Act. Section 79 is an exemption provision which grants safe harbour to intermediaries from prosecution for illegal activities of third parties, subject to fulfilment of certain conditions. It is however only through judicial guidance that the true ambit of the safe harbour provision for online intermediaries has been etched out. As per the IT Act, an "intermediary" is defined as any person who on behalf of another person receives, stores or transmits an electronic record or provides any service with respect to that record and includes, among others, search engines, online payment sites, online auction sites, and online marketplaces.

In Shreya Singhal v Union of India, the Supreme Court delivered a landmark judgment which championed the freedom of online speech, while also interpreting the safe harbour provisions, reading down Section 79 and holding that an intermediary could not benefit from the immunity granted under Section 79 of the IT Act if upon receiving actual knowledge from a court order or on being notified by the appropriate government or its agency that unlawful acts related to Article 19 are going to be committed, it fails to expeditiously remove or disable access to such material. This judgment however considered acts which would be unlawful under Article 19, and India had to wait until 2016 before the provision of Section 79 was applied in the context of IPR violations.

The judgment of the Delhi High Court on December 23 2016 in FAO (OS) 540/2011 Myspace Inc. v Super Cassettes Industries Ltd. could be considered the first definitive application of the provisions under Section 79 of the IT Act to intellectual property right violations. Picking up from where Shreya Singhal (supra) left off, the Division Bench of the Delhi High Court applied the findings thereof to copyright infringement, holding that Section 79 of the IT Act sets up a scheme where intermediaries have to follow certain minimum standards to avoid liability for copyright infringement and that this must be construed in harmony with copyright law. It further held that in the case of illegal acts such as copyright infringement, the actual knowledge requirement under Section 79 is satisfied even through a specific notice or red flag being raised, which provides the intermediary with actual knowledge of the infringing content and that it does not necessarily have to be through a court order. This observation ushered in the take down notice regime in India, allowing IPR holders to take action through take down notices without having to seek a court order.

In its order dated July 16 2018 in CS (COMM) 1015/2018 Lifestyle Equities C.V. and Ors v Amazon Sellers Service Private Limited & Anr., the court directed Amazon to take down the links advertising the infringing and counterfeit goods, as well as share all available details and information about the identity of the person who had uploaded the links.

At this stage, the courts had begun to realise the pivotal role intermediaries can play in the prevention of IPR violation on online marketplaces. The Delhi High Court's judgment dated November 2 2018 in Christian Louboutin SAS v Nakul Bajaj and Ors. was a watershed moment in intermediary liability jurisprudence in India, and it contained a deeper analysis of the conditions for qualifying as an intermediary than any of the earlier judgments. In what would become a seminal application of the Section 79 exemption to trade mark violations, the High Court enumerated 26 possible services which may be provided by an intermediary and whether any platform providing such services could be considered a mere conduit or as having actively participated in the trading process. The court elucidated the requirements and pre-conditions under Sections 79(2) and 79(3), for an entity to claim an intermediary status and for an intermediary to be exempt from liability. It was held that an intermediary actively participating in the trade may be deprived of exemptions under Section 79. The court also considered the expanse of the due diligence requirement for an intermediary to be able to claim safe harbour under Section 79 of the IT Act indicating that this may transcend even the scope prescribed in the relevant guidelines under the IT Act.

The Christian Louboutin judgment considerably raised the bar e-commerce-based intermediaries need to meet in order to claim exemption from liability from any sale which would be violating provisions of the Trade Marks Act, and has turned out to have far-reaching effects on intermediary liability jurisprudence in India.

In CS (COMM) 980/2016 L'Oreal v Brandworld & Anr., CS (COMM) 979/2016 Skullcandy Inc. v Shri Shyam Telecom & Ors. (Shopclues), and CS (COMM) 453/2016 M/s Luxottica Group S.P.A & Another v M/s Mify Solutions Pvt Ltd & Ors., the Delhi High Court applied the tests laid down in Christian Louboutin to determine whether the e-commerce platforms claiming to be exempted under Section 79 of the IT Act would actually qualify as intermediaries or not.

In its detailed judgment in CS (OS) 410/2018, CS (OS) 453/2018, CS (OS) 480/2018, CS (OS) 531/2018, CS(OS) 550/2018, CS (OS) 75/2019 and CS (OS) 91/2019 Amway India Enterprises Pvt. Ltd. and Ors. v 1MG Technologies Pvt. Ltd. and Ors., the Delhi High Court carried out a detailed examination of the involvement of major e-commerce players such as Amazon and Flipkart in the e-commerce lifecycle and held them to be actively involved in the sale process in addition to identifying several malpractices in their business models, thus disqualifying the aforesaid as intermediaries capable of benefiting from exemption from liability for IPR violations under Section 79 of the IT Act. Moreover, in addition to scrutinising the e-commerce chain, the court also looked at whether the intermediary had stepped into the shoes of the seller itself, setting its own retail prices, discounts, return/refunds policies etc. and had thus violated the Direct Selling Guidelines issued by the government to which the plaintiff had undertaken to be bound. In doing so, the intermediary had threatened the rights of the plaintiff who is the right-holder and therefore could not seek refuge under the Section 79 exemption.

The e-commerce industry looks completely different from 10 years ago. While the Shreya Singhal judgment of the Supreme Court brought the IT Act to life, the credit for reviving public faith in intellectual property litigation must go to procedural reforms such as the enactment of the Commerial Courts Act, 2015 which has tremendously helped speed up IPR enforcement in Indian courts. Judgments by the Delhi High Court such as Christian Louboutin and Shopclues have spurred the Indian government into action. With Amway, the courts have ventured into unknown territory, blurring the line between judicial interference and judicial activism. The matter is sub judice and therefore the Indian position on intermediary liability still has potential to further evolve.

There are also several policy and legislative developments on the horizon which promise to have a deep impact on India's intermediary liability regime. Proposed amendments to the IT Act and rules along with the publication of a draft e-Commerce policy provide mechanisms for further tightening the noose on online violations of IP rights. The role of intermediaries is about to become even more pivotal in the process of IPR enforcement and while the Section 79 exemption is set to continue to grant much needed protection to responsible but passive intermediaries, India appears to be on the path of building a trustworthy e-commerce space where IPR holders remain assured and in control of their rights.

Vaishali Mittal
  Vaishali Mittal, a partner at Anand and Anand, works in the litigation department of the firm. She is a law graduate from Jamia Millia Islamia University and has a BA (Hons) history degree from Delhi University where she was a gold medallist in her subject. She has been associated with the firm since 2003. She has over 16 years of experience with a strong background in IP law and experience in litigation, prosecution, consultation and drafting. Ms Mittal has strong appreciation and valuable knowledge of critical strategies for litigation of IP issues in the Indian courts having acted for several highly reputed international and national clients. Besides litigation, she also has extensive experience in securing the best interests of the firms’ clients through negotiating deals, including licensing of standard essential patents and other IP as well as acquisition of intangibles. Dispute resolution through alternative means including mediation, arbitration and conciliation are also some of Ms Mittal’s additional skills.

Rohin Koolwal
  Rohin Koolwal is a senior associate in the litigation department at Anand and Anand. He is a qualified engineer-turned-litigator with a master's degree in computer science from the University of Edinburgh. He attended law school at the Rajiv Gandhi School of IP Law in IIT, Kharagpur. He has rich experience in highly contentious patent litigation matters, and specialises in standard essential patent disputes. He has a critical mind honed through a top-notch technical education and is armed with a keen sense of the fundamentals of law. His interests are diverse and range from IPR laws to IT laws and alternative dispute resolution. He is a qualified patent agent and his areas of practice include patent and trademark litigation, patent prosecution and IP licensing.


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