E-Commerce Websites with Active Participation in Selling Process Can’t Claim Immunity Provided To Intermediaries, Says Delhi HC [Read Judgment]

 ‘E-commerce websites and online marketplaces ought to operate with caution if they wish to enjoy the immunity provided to intermediaries.’

In an important judgment dealing with the violation of trade mark rights by e-commerce platforms and the extent of protection/exemption enjoyed them; the Delhi High Court has held that when an e-commerce company claims exemption under Section 79 of the Information Technology Act, it ought to ensure that it does not have an active participation in the selling process.

The presence of any elements which shows active participation could deprive intermediaries of the exemption, Justice Prathiba M Singh observed while decreeing a suit against Darveys.com filed by Christian Louboutin.

The main contention raised by the defendant Darveys.com in this case was that they are protected under Section 79 of the Information Technology Act, 2000, as they are ‘intermediaries’. Section 2(w) of the IT Act includes online-market places in the definition of intermediaries.

The court, after referring to international and Indian case laws on the subject, observed that while the so-called safe harbour provisions for intermediaries are meant for promoting genuine businesses which are inactive intermediaries, and not to harass intermediaries in any way, the obligation to observe due diligence, coupled with the intermediary guidelines which provides specifically that such due diligence also requires that the information which is hosted does not violate IP rights, shows that e-commerce platforms which actively conspire, abet or aide, or induce commission of unlawful acts on their website cannot go scot-free.

The court added that when an e-commerce website is involved in or conducts its business in such a manner, which would see the presence of a large number of elements enumerated above, it could be said to cross the line from being an intermediary to an active participant and in such a case, the platform or online marketplace could be liable for infringement in view of its active participation.

It added that e-commerce websites and online marketplaces ought to operate with caution if they wish to enjoy the immunity provided to intermediaries. “So long as they are mere conduits or passive transmitters of the records or of the information, they continue to be intermediaries, but merely calling themselves as intermediaries does not qualify all e-commerce platforms or online market places as one,” the judge said.

Referring to provisions of the Information Technology (Intermediaries Guidelines) Rule, 2011, the court said the guidelines would not offer protection to any ‘intermediary’ that have ‘conspired’, ‘abetted’ or ‘aided’ or ‘induced the commission’ of an unlawful act. “It cannot be argued that anyone who complies with the guidelines is automatically not conspiring, abetting, aiding or inducing commission of an unlawful act. Following the guidelines may in certain cases satisfy that the online market place is behaving as an intermediary but the same is not conclusive. What is lawful or unlawful depends on the specific statute being invoked and the Guidelines cannot be considered as being exhaustive in their manner of application to all statutes,” the court said.

The court gave an illustration is this regard and said: “Thus, for illustration purpose, any online market place or e-commerce website, which allows storing of counterfeit goods, would be falsifying the mark. Any service provider, who uses the mark in an invoice thereby giving the impression that the counterfeit product is a genuine product, is also falsifying the mark. Displaying advertisements of the mark on the website so as to promote counterfeit products would constitute falsification. Enclosing a counterfeit product with its own packaging and selling the same or offering for sale would also amount to falsification. All these acts would aid the infringement or falsification and would therefore bring the e-commerce platform or online market place outside the exemption provided under Section 79 of the IT Act.”

The bench then decreed the suit and issued certain directives to Darveys.com.