If The Shoe Fits! Role of Intermediary in Trademark Infringement

Introduction

On 2nd November 2018 through Justice Pratibha M. Singh, the Hon’ble High Court resolved an extensive battle between Christian Louboutin SAS, leading manufacturer of luxury shoes and Nakul Bajaj, owner of an e-commerce website www.darveys.com. Christian Louboutin alleged that Nakul Bajaj and others were selling ‘Christian Louboutin’ products under the catalogue of ‘Christian Louboutin’ while claiming that all the products on the list were genuine.

Apart from this, defendants also used the image of the founder of the brand and used ‘Christian’ and ‘Louboutin’ as the meta-tags to attract traffic to their website. Defendants used the name and trademark of the brand to fulfil an undue advantage for themselves.

Arguments

Earlier on 26th September 2014, Hon’ble High Court granted an interim relief keeping in mind the balance of convenience lies in favour of the plaintiff against the defendants. As stated by the court the terms for the interim relief were:

“11. Learned counsel for the plaintiff has referred to various paras of the plaint as well as documents placed on record. It appears to the Court that the plaintiff has been able to make out a strong prima facie case for grant of ex-parte ad-interim order. In case injunction is not granted, the plaintiff will suffer irreparable loss and injury.”

As per the assertion of the plaintiff, rights in the trademarks of Christian Louboutin were prayed to be protected against any form of ill reputation. On the flip side, the defendants’ case was based on their role as intermediaries. Based on the prior arguments and proceedings the court recognized two issues to decide upon. The issues were presented as:

“8. ……..

1. a) Whether the Defendants’ use of the Plaintiff’s mark, logos and image is protected under Section 79 of the Information Technology Act, 2000?
2. b) Whether the Plaintiff is entitled to relief, and if so, in what terms?”

Intermediary

For the larger share of transaction an e-commerce website is responsible for handling the process of trade, it might not be in complete entirety; but has a potent effect on consumerism. The Hon’ble Court has explained the importance of e-commerce sites under paragraph 10 of the judgement, as stated below:

“10) . . . . . The e-commerce Company merely sources the products from the sellers and stores them in its godowns and warehouses. Inventory is maintained by the e-commerce platform. Thus, the e-commerce platform plays a much more active role.”

In the judgement, the Court derives the definition from section 2(w) of the Information Technology Act, 2000 (IT Act), which refers to an intermediary as any person who on behalf of another person receives, transmits and stores any particular electronic record or provide services.

Liability of Intermediaries in the European Union and the U.S.

The status of intermediary in the European Union establishes the exemptions from liability of such businesses, limited to technical operations and access to communication network. Although if the service provider deliberately indulges with recipient of a service, the exemptions are revoked. The European Union felicitates the automatic storage until it is transient and intermediate. If the service provider is unaware of any illegal activity the aforesaid entity can claim exemption from damages, but they must remove or disable the information once they acquire knowledge.

The Hon’ble Court observed that in the European Union the national courts determine whether the participation of the intermediary was active or not. Another observation defined the orders and injunction passed must be calculated and not blatantly imposed.

There is no uniformity on how the intermediaries exist in different jurisdictions, but there is one common aspect among the European Union and the U.S. i.e. the determination of intermediaries’ activity is the basis for determining their liability.

The Court’s observations

The Court observes that the website offered high discount on luxury brands along with an absolute guarantee over the product’s authenticity. The Court inferred that the website manages its logistics and decide the prices shown through the listings. The Court was amazed to notice the presence of a ‘seal of authenticity’ that was put under the website. The run-through statement mentioned a third party that claims to have a team of professionally trained experts that indulge into quality check of products.

The defendants claim to provide the customers with 100% authentic products that were procured from legitimate sources. But as mentioned by the plaintiff there are limited stores that are authorised to sell the products from the brand.

The Court accepts the facts where various intermediaries were granted exemptions under safe harbour but in the present case where the infringement of trademark by an e-commerce site is under question the understanding of the circumstances is still a bit far-fetched. Furthermore, the Court ponders upon intermediaries based on their nature, transparency, role in the trade but the uncertainty over the question to whether to rule exemption over such sites as an intermediary remains afloat. The Court further queries to decipher the definition or even a classification of an intermediary in the e-commerce market.

The inference of the Court revolves around the facts stated by the defendants such as where darveys.com does not disclose the details of its foreign sellers, which impliedly moves them out of jurisdiction. Darveys.com did promise a payback on sale of counterfeit products which suggested that since he was unaware of the questioned activity and thus entitled for exemption under section 79 of the Information Technology Act, 2000.

Court’s Inference

After analysing all the arguments the Hon’ble Court could not reach up to a conclusion over whether or not darveys.com was a commanding participant in the act of infringement of marks; though admitted by the defendants the images were used for marketing the product but no traceable sales were made because of which their defense of safe harbour exemption under section 79(3)(a) of Information Technology Act was disqualified. Moreover, after looking up to the defense the court determined that darveys.com was not an eligible intermediary to exemption as it was a participant in the act of infringement of the marks.

Judgement

The Court decreed on the basis of arguments from both sides and even though no severe damages were imposed, the Court directed darveys.com to disclose complete information about its sellers and provide a certificate of genuinity for all the listed products on the website. Further, the Court ordered to remove the marked data including the meta-tags so as to ensure that there is no infringement of different intellectual properties owned by Mr. Christian Louboutin.

darveys.com was guided to obtain a certificate of genuinity from all the sellers whose products were listed on the website and communicate to the domestic sellers and enter into an agreement under which they obtain guarantee as to authenticity and genuinity of the products; in case of sellers based out of India darveys.com must inform Christian Louboutin about the products bearing its marks and obtain due concurrence before offering the product on sale through its platform. In violation of any of the above-mentioned directives darveys.com shall be liable provide for the consequences.

Conclusion

India is a blossoming orchid for e-commerce platforms in terms of opportunity, but it still occurs to be a weak leg when it comes to luxury brands. Darveys is one such platform that has been managing to bring popular luxury fashion brands in a less competitive market. Various e-commerce websites are thriving based on the fact that India ranks second among the internet user base percentage. In 2014 there were 54.1 million digital buyers and by the year 2020 the figures are predicted to reach 329.1 million, with such rapid growth of user base the nation holds a humongous potential towards the online trade.

Many platforms are selling products at extremely discounted rates, this is a probable reason for the advent of faux and counterfeit products in the market. Darveys is one such brand that boasts the fact of being the largest intermediary for luxury fashion brands and provide huge discounts over the listed products. The point of concern is that the seller provides counterfeited products and it becomes difficult for the intermediaries to keep a check on the final product being sold by the sellers. Hence, this brings the onus on the intermediaries to ensure that their onboarding process is robust and minimize the chances of selling counterfeit products knowingly or unknowingly.

The dispute between Christian Louboutin and Nakul Bajaj throws light on the voids left among the clear distinction of intermediaries. The Hon’ble Court reached a verdict to establish and recognise the potential challenges that such platforms have to face eventually at some point in time. With the rise of e-commerce websites in India, it is important to ensure that proper laws are in place to prevent infringement of intellectual property.

For complete judgement visit: https://bit.ly/2RXC1EV

Authored by Dharmanshu Singh for MikeLegal