By: Kalyani Chandola, Associate at Qui Prior Law Associates 

Online shopping is the new trend. Consumers want everything right ‘now’ and with the ongoing pandemic, it makes it easier to be at home and comply with the social distancing guidelines. The demand for convenience has led to the birth of giants like Flipkart, Amazon, EBay, Snap deal etc. these online service providers have made the life of consumers very easy and convenient. Over time along with the growth of internet commerce, new legal challenges have also been created. Of these challenges, dealing with counterfeit goods is one of the biggest concerns.

A few years earlier a group of luxury goods makers sued Alibaba Group Holding Ltd. On imploring the complaint, it was found that the luxury brand owners contended that the Chinese online shopping giants had knowingly made it possible for counterfeiters to sell their products throughout the world with no heed to the customer’s right to an original product. The lawsuit was filed in Manhattan Federal Court by Gucci, Yves Saint Laurent and other brands owned by Paris based Kering SA seeking damages. This raises an alarming question the question on the liability of online service providers. While on one hand Intellectual Property owners are trying to effectively protect and enforce their rights, on the other hand, online providers are trying to avoid liability for infringements committed by the counterfeiters on their sites.

If we talk specifically in relation to India, numerous brands have been under scrutiny for dealing in counterfeit goods for a lot of time. However, no stringent measures have been specifically undertaken by the brands to curb such activity. Most of these brands have a long list of third-party sellers, often giving unbelievable discounts on products of sub-standard quality which is a direct violation of the prevalent and applicable anti-competitive practices. With no standard operating procedure or checks established to ensure the authenticity of the products being sold on these websites these giants further get a leeway to avoid any responsibility.

A few years back Flipkart was dragged to the Court by Scion of ‘Ikshvaku’ written by Amish Tripathi, published by Westland over copyright violation. Westland Ltd., the publisher, has alleged that Flipkart is violating copyrights by selling the novels on its platform when Westland had signed a two-month deal with Amazon.

 In another case, allegedly fake Xiaomi Mi Power Banks that were being sold on Amazon India last year were counterfeits, as verified by the consumers.

So, the big question is whose liability is it? The Online Service Provider’s? The Seller’s? There are no express solutions for such unprecedented issues in the existing Indian Law. This gives rise to various questions such as – What is the liability of the Online Service Providers or Intermediaries? Can they be held responsible for any infringement practiced by the third parties on their site? To what extent can they be held liable? What laws are there for the consumer’s protection from such counterfeit goods?

If we look at the Indian scenario, the liability of service providers for copyright infringement is not expressly covered by Copyright act, 1957. In the year a major amendment was made to the Copyright act, 1957. As per the amendment, Section 52 specified a number of scenarios which were not to be considered an infringement of copyright and were to be exempted. Section 52(1)(c) states as follows:

52 (1)(c)transient or incidental storage of a work or performance for the purpose of providing electronic links, access or integration, where such links, access or integration has not been expressly prohibited by the right holder, unless the person responsible is aware or has reasonable grounds for believing that such storage is of an infringing copy”

Section 52(1)(c) talks about intermediary liability and states that such intermediaries are not responsible unless they are aware or have reasonable grounds for believing that such storage is of an infringing copy. In the event that the original owner of the copyrighted work shares a formal written complaint with the person responsible for the storage of the copy and complaints of such transient or incidental storage being an infringement of his copyrighted work, such person responsible for the same shall refrain from utilizing such access for a period of 21 days or until a further order is received from a competent court. In case no order is received within a period of 21 days then the alleged copyrighted work may be utilized in the previous manner with no relief to the alleged owner of the copyrighted work.

The Information Technology Act, 2000 also exempts Internet Service Providers from liability if they can prove that they had no knowledge of the occurrence of the alleged counterfeit act and that they had taken sufficient steps to prevent a violation. Section 79 of the Information Technology Act, 2000 when read with Section 81 gives us a glimpse at the inadequacy and ambiguity of laws defining intermediary liability in India. When we interpret Section 79, it talks about the provision of safe-harbor provision available to an intermediary which grants conditional immunity to intermediaries from liability for third party acts. Section 79 of the Information Technology Act exempts network service providers or intermediaries from liability if it is proved that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence or contravention. While the Section provides protection to the intermediary, it contains an important caveat to this protection which is that such protection under Section 79 can be availed only in the scenarios where the intermediary was not aware that the information hosted it was infringed material. The provision provides a loophole wherein an intermediary can escape responsibility in almost all scenarios.

On assessment and analysis of the Information Technology Act, 2000, and the Copyright Act, 1957 it can be clearly inferred that an intermediary otherwise found liable under Indian Copyright Act, shall not be made available with the benefit of Section 79. The existing provisions do not clearly prescribe liability limits of service providers and it is vital that the liability of service providers for infringement must be made more explicit. The Information Technology Act, 2008 must include provisions that address the financial aspect of the transaction and the relationship between an Internet Service Provider and a third party. This is extremely important in determining the identity of the violator. The American concept of contributory infringement must be adopted to effectively deal with this menace and to protect the consumer as well as maintain a balanced competition. All the Internet Service Providers must practice due diligence in order to be exempted from any liability. When the laws are not binding it is evident that counterfeiters will take advantage of the situation and when Internet Service Providers can just shrug off their liabilities easily then why will they take the initiative to either practice due diligence or to take efforts to prevent such an act. The Act does not give the meaning of the word “due-diligence”. Such loopholes in the legislation can have a very disastrous result.

An effort can be made by brand owners as well to prevent counterfeiting of their products. Quality checks and surprise checking of the products at various warehouses is an essential aspect of curbing counterfeiting. The general public should also make aware of methods to differentiate between original and fake products. Holograms, packaging, and serialization should also be upgraded from time to time. In case an online service provider is found selling counterfeit products through their website then an immediate injunction or a, seize and desist order should be procured against such an infringer. On subsequent counterfeiting, the online service provider should be banned from dealing their products. Consumers can also make an effort towards curbing counterfeiting. They can report from where they bought the counterfeit good. They can also voice such findings on a public platform where others can also make themselves aware. Consciously they should not purchase counterfeit goods. They should always be vigilant and aware in such matters. Consumers should not settle for counterfeit products knowingly just because they are cheaper than the original. In the long run, counterfeit goods cost more, sometimes, even more than your life.

There is an immediate need for express and stringent provisions to prevent the infringement and to hold the intermediaries accountable for the products being sold on their portals. Express provisions that state when, where, and how the liability of the ISPs shall arise, the liability of the third parties/ sellers, and the punishments should be included and implemented as soon as possible. Strict actions should be taken against counterfeiters. Then only the ISPs shall flourish otherwise the consumers will lose their confidence in such service providers very quickly, hampering their growth as well the economy’s.

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