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Intermediary Guidelines and Digital Media Ethics Code: Shifting Paradigm of Social & Digital Media Platforms

It has been just over six months since the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (the “Rules“) have been notified. However, these six months have been nothing short of a roller coaster ride for the (Internet) Intermediaries and Digital Media platforms, especially Social Media platforms who have tried to muddle through the slew of compliance obligations now imposed through these eccentric Rules. Notwithstanding, some of them had to face the wrath of the Government and even Courts for the delay in adherence.

On this topic, we are trying to stitch together a series of articles covering the entire gamut of the Rules, including their objective, applicability, impact, and the key issues around some of the rules being declared unconstitutional, etc.

In our first article, we analyse the timeline, objectives, and applicability of these Rules through some of the definitions provided under the Rules and the IT Act.

Tracing the Roots of the Digital Media Ethics Code 

The initiation of this endeavour can be tracked down to July 26, 2018, when a Calling Attention Motion was introduced in the Rajya Sabha on the misuse of social media and spread of fake news, whereby the Minister of Electronics and Information Technology conveyed the Government’s intent to strengthen the existing legal framework and make social media platforms accountable under the law. Thereafter, the first draft of the proposed amendments to the Intermediary Guidelines, The Information Technology (Intermediary Guidelines (Amendment) Rules) 2018, was published for public comments on December 24, 2018.

In the same year, the Supreme Court in Prajwala v. Union of India[1] directed the Union Government to form necessary guidelines or Statement of Procedures (SOPs) to curb child pornography online. An ad-hoc committee of the Rajya Sabha studied the issue of pornography on social media and its effects on children and the society and laid its report recommending the facilitation of identification of the first originator of such contents in February 2020.

In another matter, the Supreme Court of India on October 15 2020, issued a notice to the Union Government seeking its response on a PIL to regulate OTT Platforms. The Union Government subsequently on November 9 2020, made a notification bringing digital and online media under the ambit of the Ministry of Information and Broadcasting, thereby giving the Ministry the power to regulate OTT Platforms.

On February 25, 2021, the Union Government notified the much-anticipated Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, bringing various digital entities under its purview and imposing new compliances to regulate them.

 

Objectives of the Digital Media Ethics Code

The rising internet and social media penetration in India raises concerns of transparency, disinformation and misuse of such technologies. The Rules address these concerns and bring accountability to social and digital media platforms by mandating the setting up of a grievance redressal mechanism that adheres to statutory timeframes. The Rules also address the legal lacuna surrounding the regulation of OTT platforms and the content available on them and introduces a three-tier content regulation mechanism.

Key definitions and the applicability of the Digital Media Ethics Code

The Rules add on extensively to the 2011 Intermediary Guidelines and also introduce new terms and definitions. To understand the Rules and the compliances thereunder in a holistic manner, it becomes imperative to learn the key terms and definitions. This also addresses concerns of applicability of the Rules to different entities, as they prescribe different sets of compliances to different categories of entities.

Key definitions:

Digital Media as per Rule 2(1)(i) are digitised content that can be transmitted over the internet or computer networks, including content received, stored, transmitted, edited or processed by

  • an intermediary; or
  • a publisher of news and current affairs content or a publisher of online curated content.

This broadly includes every content available online and every content that can be transmitted over the internet.

Grievance as per Rule 2(1)(j) includes any complaint, whether regarding any content, any duties of an intermediary or publisher under the Act, or other matters pertaining to the computer resource of an intermediary or publisher as the case may be.

Intermediary has not been defined in the Rules, but as per S. 2(1)(w) of the IT Act, intermediary, with respect to any particular electronic record, is any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.

The first part of the definition lays down that an Intermediary with respect to an electronic record, is any person that receives, stores or transmits that electronic record on behalf of another person.

An entity becomes an intermediary for a particular electronic record if that record is received by, stored in or transmitted through the entity on behalf of a third party. However, as the clause does not use the term “collect” with respect to an electronic record, any data that entities may collect, including IP Addresses, device information, etc., do not fall within the definition’s purview. Hence the entities would not be considered as intermediaries for such data.

Moreover, the second part of the definition lays down that those entities that provide any service with respect to an electronic record would be intermediaries. However, what constitutes “service” has been a key point of discussion in prior cases. In Christian Louboutin Sas v. Nakul Bajaj[2], the Court not only held that the nature of the service offered by an entity would determine whether it falls under the ambit of the definition, but also went on to hold that when the involvement of an entity is more than that of merely an intermediary, i.e., it actively takes part in the use of such record, it might lose safe harbour protection under S. 79 of the Act.

The definition also includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places, and cyber cafes as intermediaries. In Satish N v. State of Karnataka[3], it was held that taxi aggregators like Uber are also intermediaries with respect to the data they store. Therefore, Telecom Service Providers like Airtel, Vi, Jio, etc., Network Service Providers like Reliance Jio, BSNL, MTNL, etc., Internet Service Providers like ACT Fibernet, Hathaway, etc., Search Engines like Google, Bing, etc., Online Payment gateways like Razorpay, Billdesk etc., Online Auction Sites like eBay, eAuction India, etc., Online Market Places like Flipkart, Amazon etc. are all considered intermediaries.

Social Media Intermediaries as per Rule 2(1)(w) is an intermediary which primarily or solely enables online interaction between two or more users and allows them to create, upload, share, disseminate, modify or access information using its services. This includes platforms like Tumblr, Flickr, Diaspora, Ello, etc.

Significant Social Media Intermediaries as per Rule 2(1)(v) is a social media intermediary having number of registered users in India above such threshold as notified by the Central Government. Currently, the threshold is 5 million users. Platforms that fall under this category would be Facebook, Twitter, Instagram, YouTube, Snapchat, LinkedIn, WhatsApp, Telegram etc.

News & current affairs content as per Rule 2(1)(m) includes newly received or noteworthy content, including analysis, especially about recent events primarily of socio-political, economic or cultural nature, made available over the internet or computer networks, and any digital media shall be news and current affairs content where the context, substance, purpose, import and meaning of such information is in the nature of news and current affairs content. Therefore, news pieces reported by newspapers or news agencies, shared online, on social media, or on digital media platforms are news & current affairs content. This includes contents of such nature created by any person and shared through social media platforms like WhatsApp, Facebook, Twitter etc. Digital content discussing news and the latest happenings will also come under the purview of this definition.

Newspaper as per Rule 2(1)(n) as a periodical of loosely folded sheets usually printed on newsprint and brought out daily or at least once in a week, containing information on current events, public news or comments on public news. Newspapers like The Hindu, Times of India etc. will fall under this category.

News aggregator as per Rule 2(1)(o) is an entity performing a significant role in determining the news and current affairs content being made available, makes available to users a computer resource that enable such users to access such news and current affairs content which is aggregated, curated and presented by such entity. This includes platforms like Inshorts, Dailyhunt etc.

Online curated content as per Rule 2(1)(1) is any curated catalogue of audio-visual content, other than news and current affairs content, which is owned by, licensed to or contracted to be transmitted by a publisher of online curated content, and made available on demand, including but not limited through subscription, over the internet or computer networks, and includes films, audio visual programmes, documentaries, television programmes, serials, podcasts and other such content. This includes movies and shows available on OTT platforms like Netflix, Prime Video, Disney+Hotstar etc.

Publisher of News and Current Affairs Content as per Rule 2(1)(t) includes online paper, news portal, news aggregator, news agency and such other entities, which publishes news and current affairs. This would include websites/apps such as The Wire, The News Minute, Scroll.in, Dkoding.in, The Print, The Citizen, LiveLaw, Inshorts etc.

While the Rules do not include the regular newspapers or replica e-papers of these newspapers, as they come under the Press Council Act, news websites such as Hindustantimes.com, IndianExpress.com, thehindu.com are covered under the Rules, and the Union Government clarified the same on June 10, 2021. The clarification stated that websites of organisations having traditional newspapers and digital news portals/websites of traditional TV Organisations come under the ambit of the Rules.

This does not include news and current affairs reported or posted by laymen or ordinary citizens online, as the scope is limited only to news publishing agencies.

Publisher of Online Curated Content as per Rule 2(1)(u) is a publisher who performs a significant role in determining the online curated content being made available and enables users’ access to such content via internet or computer networks. Such transmission of online currented content shall be in the course of systematic business or commercial activity. This includes all OTT platforms, including Netflix, Prime Video, Voot, Lionsgate, Disney+Hotstar, etc.

The Digital Media Ethics Code Challenged in Court

Part III of the IT Rules has been challenged by many persons in various High Courts. News platforms including The Wire, The Quint, and AltNews moved to the Delhi High Court, alleging that online news platforms do not fall under the purview of Section 87 of the IT Act, under which these Rules are made as the section is only applicable to intermediaries. Section 69A is also limited to intermediaries and government agencies. It is alleged that since such publishers are not intermediaries, they do not fall under the purview of the IT Rules.

A similar petition was moved by LiveLaw, a legal news reporting website before the Kerala High Court, alleging that the Rules violated Articles 13, 14, 19(1)(a), 19(1)(g), and 21 of the Constitution and the IT Act.[4] The petitioners contended that the Rules had brought Digital News Media under the purview of the Press Council of India Act and the Cable Television Networks (Regulation) Act, 1995, without amending either of the two legislations. They also alleged that the rules were undoing the procedural safeguards formed by the Supreme Court in the Shreya Singhal[5] case. In this regard, the Kerala High Court has ordered that no coercive action is to be taken against the petitioner as interim relief.

Recently, the Bombay High Court in Agij Promotion of Nineteenonea v. Union of India[6] delivered an interim order staying Rules 9(1) and 9(3), which provides for publishers’ compliance with the Code of Ethics, and the three tier self-regulation system respectively. The Court found Rule 9(1) prima facie an intrusion of Art. 19(1)(a).

Legality & Enforceability of the Digital Media Ethics Code

Even though six months have passed since the Rules came into force, the legality and enforceability of the Rules are still in question. While most intermediaries, including social media and significant social media intermediaries, have at least partly complied with the Rules, the same cannot be said for publishers of news and current affairs content and online curated content. This will have to wait until the challenges to its legality and constitutionality are settled by Courts.

References:

[1] 2018 SCC OnLine SC 3419.

[2] 2018 (76) PTC 508 (Del).

[3] ILR 2017 KARNATAKA 735.

[4] https://www.livelaw.in/top-stories/kerala-high-court-new-it-rules-orders-no-coercive-action-issues-notice-on-livelaws-plea-170983

[5] (2013) 12 SCC 73.

[6] Agij Promotion of Nineteenonea v. Union of India, WRIT PETITION (L.) NO.14172 of 2021.

Image Credits: 

Photo by Jeremy Bezanger on Unsplash

 

Even though six months have passed since the Rules came into force, the legality and enforceability of the Rules are still in question. While most intermediaries, including social media and significant social media intermediaries, have at least partly complied with the Rules, the same cannot be said for publishers of news and current affairs content and online curated content. This will have to wait until the challenges to its legality and constitutionality are settled by Courts.

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Small Entity Status- Can Foreign Companies Claim It?

The government of India has been aggressively pushing for the development and promotion of entrepreneurship in the country. In the Intellectual Property Domain, various concessions have been made for small and upcoming entities. Organizations claiming a ”small entity” status or a “start-up” status while applying for registration are entitled to some additional benefits pertaining to fees and filing requirements.  Here, we briefly look upon the small entity status as per the Indian patent and design rules. 

Intellectual Property Related Government Initiatives to Encourage Small Entities & Startups

In 2020, the Scheme for Facilitating Start-ups Intellectual Property Protection, was launched as an experimental initiative to encourage start-ups to develop and protect their intellectual property, which was extended for a period of three years (April 1, 2020 – March 31, 2023).

Further, the Patent (Amendment) Rules, 2020[1] were notified on October 19, 2020 to simplify the procedure of submitting priority applications and their translations and filing of working statements under form 27. These changes were introduced in consequence to the Delhi High Court’s order in the case of Shamnd Bashir v UOI[2], that resulted in a stakeholder’s consultation.

On November 4, 2020 the Ministry of commerce and Industry[3], notified Patents (2nd Amendment) Rules, 2020[4], making additional filing and prosecution concessions for start-ups and small entities.  The status of start-ups was discussed critically, extending their life for up to ten years. These amendments are set to make protection of intellectual property affordable to every category and class of business. Finally, the government also notified Design Amendment Rules 2021,[5] which recognized start-ups as applicants. The current Locarno classification system[6] and simplified fee structure were introduced specifically to benefit small entities.

 

Categorization of ‘Entities’

 

1.1 Natural Person

Under the Indian Patent Act, natural person includes an individual human being. In this context, the patent application can be filed in the name of one or a group of individuals. Here, the inventorship and ownership lies solely with the inventor and he is entitled to:

  1. Sell
  2. Transfer
  3. License, or
  4. Commercialize their patent as per their want.

1.2 Small Entity

The Indian Patents Rule, 2003 under Rule 2(fa)[7] define ‘small entity’ as:

  • in case of an enterprise engaged in the manufacture or production of goods, an enterprise where the investment in plant and machinery does not exceed the limit specified for a medium enterprise under clause (a) of sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006); and
  • in case of an enterprise engaged in providing or rendering of services, an enterprise where the investment in equipment is not more than the limit specified for medium enterprises under clause (b) of sub-section (1) of Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006).

In calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other things as may be specified by notification under the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), shall be excluded.

1.3 Start up:

A start-up is an entity recognized as a ‘startup’ by the competent authority under the Startup India initiative and fulfills all the criteria for the same.

A foreign entity shall fall under the category of start-up if it fulfills the criteria of turnover and specified period of incorporation/registration, and submission of a valid declaration to that effect as per the provisions of Start-up India initiative. (In calculating the turnover, reference rates of foreign currency of Reserve Bank of India shall prevail.)

As per the Notification of Department of Promotion of Industry and Internal Trade[8], an entity is considered a start-up  

  1. Up to a period of ten years from the date of incorporation/ registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
  1. Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded one hundred crore rupees.
  2. Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.

How to apply for Small Entity Status in India:

 

Any business can apply for the status of small entity under the MSME Development Act, 2006 at udyamregistration.gov.in. Subsequent to a successful registration the business shall be issued a Udyam registration certificate, that can be furnished as proof for availing various government subsidies and benefits. 

A foreign company can also register as an MSME on the same government portal. However, as a preceding step such a company shall register itself as per the provisions of the Companies Act, 2013[9].

Any Indian entity wishing to declare themselves as small entity for the purpose of Patent registration has to furnish the following documents:

  1. Form 28 of the Indian Patent Act:
  2. Proof of Registration Under MSME Act 2006 (Micro, small and medium enterprise development Act, 2006).
  3. Form 1 of the Indian Patent Act (if Fresh Patent Application is being filed).

Any Indian entity wishing to declare themselves as small entity for the purpose of Design registration:

  1. For an Indian entity to claim the status of small entity, it must be registered under the MSME Development Act, 2006.
  2. To file an application as a start-up, the entity should be recognized as startup by a competent authority under the Union government’s Start-up India Initiative.

 

Can a Foreign Company claim Small Entity Status in India?

On a plain interpretation of the requirements under the Patent rules and Design rules, it is clear that a foreign enterprise can claim the status of a small entity or a start-up, provided it is registered and incorporated in India and is engaged in the manufacture of goods and services as specified in the first schedule of the 2006 Act.[10]

Under the MSME Development Act, 2006 an enterprise is defined as:

enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (55 of 1951) or engaged in providing or rendering of any service or services;[11]

With an objective to incentivize the incorporation of OPC (One Person Companies), the Ministry of Corporate Affairs amended the Companies (Incorporation) Rules. The move empowers OPCs to grow without any restrictions on paid up capital and turnover, thereby facilitating their conversion into any other type of company at any time. Additionally, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allowing Non-Resident Indians (NRIs) to incorporate OPCs in India has paved the way for foreign entities to enter Indian markets[12] [13].

 

Application Process for Small Entity Status in India? (Foreign Company):

Patent Rules

A foreign applicant seeking the status of ‘small entity’ for the purpose of filing patent in India, has to submit duly filled Form 28[14], along with the requisite documents of proof.

As per the requirements of Form 28, a foreign applicant has to attach evidentiary documents that verify their status as ‘small entity’ for the want of Rule 2 (fa) of the Patent Rules, 2003. For this purpose, the said documents can include a certified copy of financial statement from a Chartered Accountant, that proves that the investment in plant and machinery and the annual turnover of the entity on the date of filing the application does not exceed the limitations specifications under the MSME Development Act, 2006.

Design Rules

For the purpose of recognitions as a start-up the foreign entity should satisfy the following criteria:

  1. The entity must be a private limited company, limited liability partnership, or partnership firm.
  2. Its turnover at any point during the course of its business (from inception) should not exceed INR 100 crores (approximately USD 13.7 million as on date)
  3. The entity would be considered a start-up only for a period of 10 years from the date of incorporation.
  4. An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Start-up”

For a foreign entity to claim the benefit of being a start-up, an affidavit (which under Indian practices would need to be notarized, although this has not been explicitly mentioned in the Amendment Rules) along with supporting documents must be submitted at the time of filing the application[15], to be submitted with Form 24[16] of the Designs Rules.

References:

[1] https://pib.gov.in/Pressreleaseshare.aspx?PRID=1668081

[2] writ petition No. WPC- 5590

https://www.scconline.com/blog/post/2020/10/28/patents-amendment-rules-2020-patentee-would-get-flexibility-to-file-a-single-form-27-in-respect-of-a-single-or-multiple-related-patents/

[3] https://ipindia.gov.in/writereaddata/Portal/Images/pdf/Patents__2nd_Amendment__Rules__2020.pdf

[4] https://ipindia.gov.in/writereaddata/Portal/Images/pdf/Patents__2nd_Amendment__Rules__2020.pdf

[5] https://www.foxmandal.in/wp-content/uploads/2021/08/Indian-Designs-Amendment-Rules-2021.pdf

[6] https://www.wipo.int/classifications/locarno/locpub/en/fr/

[7] https://ipindia.gov.in/writereaddata/Portal/IPORule/1_70_1_The_Patents_Rules_2003_-_Updated_till_1st_Dec_2017-_with_all_Forms.pdf

[8] https://dpncindia.com/blog/wp-content/uploads/2019/02/DIPP-Notification-dated-19-Feb-2019.pdf

[9] https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00008_201318_1517807327856&sectionId=185&sectionno=2&orderno=2

[10] https://www.startupindia.gov.in/content/sih/en/bloglist/blogs/How-a-foreign-national-from-China-can-start-and-register-company-in-India.html

[11] https://www.indiacode.nic.in/show-data?actid=AC_CEN_46_77_00002_200627_1517807324919&sectionId=9884&sectionno=2&orderno=2

[12] http://164.100.117.97/WriteReadData/userfiles/Notification%201.pdf

[13] http://164.100.117.97/WriteReadData/userfiles/Notification%202.pdf

[14] https://ipindia.gov.in/writereaddata/Portal/IPOFormUpload/1_40_1/form-28.pdf

[15] https://www.foxmandal.in/wp-content/uploads/2021/08/Indian-Designs-Amendment-Rules-2021.pdf

[16] https://www.ipindia.gov.in/writereaddata/Portal/IPOFormUpload/1_109_1/Form_24.pdf

Image Credits: Photo by Startup Stock Photos from Pexels

 

On a plain interpretation of the requirements under the Patent rules and Design rules, it is clear that a foreign enterprise can claim the status of a small entity or a start-up, provided it incorporates itself under the relevant schemes and statutes and is able to furnish documents for proof to the same effect

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Why filing of Provisional Patent Application keeps you ahead in the Patenting race?

With an additional focus to build an Innovation based entrepreneurial eco system, innovation is happening at the drop of a hat. However, the floodgate of invention around the race does not seem to be limited to an ingenious mind but also requires a go-getter attitude. As we know, Patent protection works on a “first to file” basis and not on “first to invent” which means it is granted to the one who files the Patent application first, subject to fulfilling other patentability criteria.

A Patent application has to be filed along with certain Specifications (details/working of the invention). These specifications are of two types i.e. Provisional and Complete. Therefore, the application can be filed along with the Provisional or Complete Specification. If filed with Provisional, the Complete specification needs to be filed within 12 months.

 

Provisional Specification is very basic in nature and does not require details about the invention, unlike Complete Specification. Perhaps the difference between the two specifications is clear from the preambles of the specifications itself i.e.:

Preamble of the Provisional Application: “The following specification describes the invention”.

Preamble of the Complete Specification: “The following specification describes the invention and the manner in which it is to be performed.”

 

Even though, the Provisional Specification does not require claims, detailed descriptions, drawings etc., however, due care needs to be taken to ensure that the specification is broad enough so the objectives of the invention is covered as Complete Specification cannot be broader than what was disclosed in the Provisional.

 

Many times, during the office action as well as during the infringement or revocation attack, it is the provisional specification, which is first scrutinized to check if the invention was covered clearly. Therefore, even though it is provisional, taking professional guidance while drafting would be advisable to avoid possible mishaps in the future.

 

In order to stay ahead in the competition of technological advancement, R&D companies and other IP sophisticated companies around the globe, work on new inventions and file applications with the bare minimum information to get a priority date for their inventions. This is done before deep diving into specifics such as looking at the prior art or doing the feasibility test for the product/process etc.

 

Ideally, if an inventor comes up with an invention, she should not wait for the invention to be fully developed or for the feasibility test to be done. Needless to mention, millions of researchers around the globe are working on similar subjects and one never knows who might be coming up with similar invention in some part of the world and perhaps may be moving faster to file the patent application to claim priority.

 

Post filing of a Patent Application along with the Provisional Specification, an inventor has 12 months’ time to complete the research and file the Complete Specification. Since this option has been provided under the Patent law, availing it to claim the priority date would be a wise thing to do rather than wait for the research to complete where one would be running the risk of losing everything if someone else files before them. 

 

Ideally these 12 months period are given so one can carry out the patentability/ prior art search, which help the inventors tremendously in working around similar inventions.  Further, the Companies/inventors could also use the (provisional) Patent Application number to discuss the invention with potential investors, partners, licensee, etc. with due caution. 

 

In a situation where the inventor is unable to file the Complete Specification within the due date due to unavoidable circumstances, there is an option to file a request to post-date the application for a maximum period of six months subject to non-disclosure of the invention in the public domain.  

 

Considering these obvious advantages, filing a Patent Application along with a Provisional Specification could and would prevent a genuine effort from being a day late and a dollar short.

 

 

 

Image Credits: Photo by Med Badr Chemmaoui on Unsplash

Post filing of a Patent Application along with the Provisional Specification, an inventor has 12 months’ time to complete the research and file the Complete Specification. Since this option has been provided under the Patent law, availing it to claim the priority date would be a wise thing to do rather than wait for the research to complete where one would be running the risk of losing everything if someone else files before them. 

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Liabilities of Intermediaries In Trademark Infringement Cases In India

The boon and bane of market vis-à-vis consumers has further intensified with the shift of the current generation to e-commerce. The boon has been the ease, economy, and the time efficiency that online trade offers while the bane has been the easy trafficking of counterfeits and threat to customer data. Although efforts are being made by the government to address the issues from a consumer/buyer point of view, not much has been done from a business/seller point of view. One worrying concern for businesses is the constant infringement of their trademarks which is suffering in the lack of necessary legislation or a decisive judicial pronouncement. Most businesses believe that intermediaries must be liable for allowing infringers sell goods on their platform without adequate due diligence, however, liability has not been conclusively attributed in this regard yet.

One prominent case that addressed the liability of online marketplaces in trademark infringement was Christian Louboutin SAS vs Nakul Bajaj & Others[i] decided on 2nd November 2018 by the Hon’ble Delhi High Court. But before we delve into the particular case or understand the liability of intermediaries, let us first understand who falls within the ambit of intermediaries and when is an intermediary exempted from liability.

 

Definition of Intermediaries

 

The term “intermediaries” is defined under section 2(w) of Information Technology Act, 2000 which says

 “Intermediary” – with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.

 

Exemption from the liability/ Safe Harbour Provision

 

Section 79 of the Information Technology Act provides certain immunities to the intermediaries. That the intermediary shall not be liable for any third-party information, data or communication link made available or hosted by him. Section 79 of the Information Technology Act, 2000 is extracted below:

  • Notwithstanding anything contained in any law for the time being in force but subject to the provisions of sub-sections (2) and (3), an intermediary shall not be liable for any third party information, data, or communication link made available or hosted by him.

 

  • The provisions of sub-section (1) shall apply if– (a) the function of the intermediary is limited to providing access to a communication system over which information made available by third parties is transmitted or temporarily stored or hosted; or (b) the intermediary does not– (i) initiate the transmission, (ii) select the receiver of the transmission, and (iii) select or modify the information contained in the transmission; (c) the intermediary observes due diligence while discharging his duties under this Act and also observes such other guidelines as the Central Government may prescribe in this behalf.

 

  • The provisions of sub-section (1) shall not apply if– (a) the intermediary has conspired or abetted or aided or induced, whether by threats or promise or otherwise in the commission of the unlawful act; (b) upon receiving actual knowledge, or on being notified by the appropriate Government or its agency that any information, data or communication link residing in or connected to a computer resource controlled by the intermediary is being used to commit the unlawful act, the intermediary fails to expeditiously remove or disable access to that material on that resource without vitiating the evidence in any manner.

Section 79 of the Act elaborates on the exemption from liabilities of intermediaries and Section 79(2)(c) mentions that intermediaries must observe due diligence while discharging their duties and observe such other guidelines as prescribed by the Central Government. Accordingly, Information Technology (Intermediary Guidelines) Rules, 2011 were notified on 11th April 2011.

Though the Indian Courts have reviewed Section 79 of IT Act, 2000 (Safe Harbour Provisions) on various facts and situation including in the cases of protecting online free speech (Shreya Singhal V. Union of India[ii]), uploading content and copyright violations (My Space Inc Vs. Super Cassettes Industries Limited[iii]) and design infringement (Kent Ro Systems Limited & Anr Vs. Amit Kotak and Ors[iv])etc, the position that is considered by Indian courts on violation of trademarks rights by e-commerce platforms and the extent of protection awarded to them was unclear till recent past.  

The landmark judgment passed by the Hon’ble Delhi Court in Christian Louboutin SAS vs Nakul Bajaj & Others tried to establish the liability of intermediaries on trademark infringement cases and the same is discussed below:

 

Christian Louboutin SAS vs Nakul Bajaj & Others

 

The Plaintiffs (Christian Louboutin), manufacturer of luxury shoes well known for their red soles filed a trademark infringement suit against an e-commerce website www.darveys.com (Defendants). The Plaintiffs had also obtained trademark registration for the word mark, device mark CHRISTIAN LOUBOUTIN and also for their red sole mark in India. The Plaintiffs claimed that their products were sold only through an authorized network of exclusive distributors.

The Defendants were selling various luxury products on their website including the Plaintiff’s products by claiming that they were 100% authentic. The Plaintiffs alleged that apart from selling and offering counterfeit products on the Defendants website, the image of the founder of the Plaintiff and the names Christian and Louboutin were used as meta tags. Further, the Defendants’ website gave an impression that it was in some manner sponsored, affiliated and approved for sale of variety of luxury products bearing the mark Christian Louboutin and this resulted in infringement of trademark rights and violation of personality rights of Mr. Christian Louboutin.

On perusal of the pleadings the Hon’ble Court observed that no factual issues arose in the determination of the case as the Defendants had not disputed the proprietary rights of the Plaintiff over their brand Christian Louboutin. The only defence put forth by the Defendants was the safe harbour provision under Section 79 of the Information Technology Act, 2000 that they were mere intermediary who enabled booking of products from any of the 287 boutiques/sellers across the globe using their online platform.  The Defendants contended that the products sold through their website was genuine, however, they were not providing after sales warranty or services.

The only aspect to be decided was whether the Defendants’ use of the Plaintiffs’ mark, logo was justified under Section 79 of the Information Act, 2000 or not.

The Hon’ble court perused the Defendants’ website and observed that customers were required to pay a membership fee in order to shop from the Defendants’ website and the said website also provided an authenticity guarantee to return twice the money if the products turned out to be fake or not of expected quality. Furthermore, in the terms and conditions, the Defendants claimed that they facilitated the purchase of original products and the prices of the products were maintained and changed at the discretion of the Defendants. Quality checks of the products were carried out by a third-party team who examined the precise details of the products that were shipped to the customers. The invoices generated were those of the website (defendant) company.  

In order to determine whether an online marketplace or e-commerce website is an intermediary, the Hon’ble Court elaborately examined the nature of services (provided a detailed list of 26 possible services that could be performed by intermediary) that would fall within the ambit of service contemplated in the definition of intermediary. Accordingly, entities that performed tasks such as identification of the seller, providing transport for seller, employing delivery personnel for delivering the product, accepting cash for sale etc and the measures taken by the online platforms  to ensure that unlawful acts were not committed by the sellers were taken into consideration for determining the role of the online marketplace. Considering the services played by the Defendant in the case, the Hon’ble Court was convinced that the Defendant exercised complete control over their sale of products and they were much more than just an intermediary.

The Hon’ble Court further noted that the e-commerce website and online marketplaces were required to operate with caution if they wished to enjoy the immunity provided to the intermediaries under Section 79 of the IT Act. When an e-commerce website is involved in or conducts its business in such a manner which would see presence of large number of elements (services and measures taken by sellers referred above), it could cross the line from being an intermediary to active participant. In such cases, online marketplace could be liable for infringement in view of its active participation.  The conduct of intermediaries in failing to observe due diligence with respect to IPR could amount to conspiring or abetting, aiding or inducing unlawful conduct and may lose the exemption to which intermediaries are entitled. When an e-commerce company claims exemption under Section 79 of IT Act, it ought to ensure that it does not have active participation in the selling process. The presence of any elements which indicates active participation could deprive intermediaries of the exception.

Finally, the Hon’ble Court ascertained whether there was any falsification of Plaintiff’s trademark under Section 2(2)(c), 101 and 102 of the Trademarks Act, 1999.  These provisions were being looked at to ascertain what constituted conspiring, abetting, aiding, or inducing, the commission of an unlawful act, in the context of trademarks rights. The Hon’ble Court concluded that the use of Plaintiffs’ mark in respect of genuine goods would not be infringement and in respect of counterfeit goods, it could constitute infringement. Thus, any online marketplace or e-commerce website which allows storing of counterfeit goods would be falsifying the mark.

In view of the above, the Hon’ble Court noted that the Defendant was not entitled to protection under Section 79 of the Information Technology Act. Further, the use of the Plaintiffs’ mark, the name and photograph of the founder without permission and the sale of products without ensuring genuineness constituted violation of the Plaintiffs rights. Pertaining to the contention of meta tagging, the Court held that Defendants’ use of the meta tagging would constitute infringement as upheld by the Delhi Court in another case (Kapil Wadhawa v. Samsung Electronics[v]).

In the above circumstance, the suit was decreed directing the Defendant to disclose the details of all its sellers, their addressee, contact details on the website, and prior to uploading a product bearing Plaintiffs’ mark, Defendant was required to obtain concurrence before offering for sale on its platform.

It is apparent that the legislative intent is to protect genuine intermediaries and it cannot be extended to those persons who are not intermediaries and are an active participants in the unlawful act.

 

Post Louboutin Case

 

The test laid down in Christian Louboutin case containing the detailed list of 26 possible tasks/services that could be performed by intermediaries were applied to various other cases such as Loreal v. Brandworld and Another[vi] and in Skull Candy Inc v. Shri Shyam Telecom and Others[vii] to ascertain the liability of intermediaries in online marketplace or e-commerce website.  

In this regard, it is pertinent to note the case of Amway India Enterprises Private Limited v. 1Mg Technologies Private Limited and Another[viii] where a single bench of the Delhi High Court passed an order restraining numerous e-commerce platforms such as Amazon, flipkart, snapdeal etc from the sale of direct selling products without the consent of direct selling entities. This decision of the single bench was set aside by the Division bench of Delhi High Court on 31st January 2020 and with this again the position of law pertaining to the intermediary liabilities in trademark infringement cases remains unclear. However, it is observed from various intellectual property rights cases that courts have placed higher responsibility to take down the contents that infringes the IP rights and is titling towards making these e-commerce platforms more responsible for their content.

Now that the Information Technology (Intermediary Guidelines Amendment) Rules, 2018 framed to make social media platforms accountable for their contents is on the verge of being notified, it is apparent that internet intermediaries won’t be able to  take shelter under the safe harbour protection of the IT Act, 2000 effortlessly.  The new rules intend to tighten the noose by filtering out information that threaten public health or safety. The rules make it mandatory for intermediaries to provide information or assistance to government agencies within 72 hours of formal communication,  enable tracing out of originator of information on its platform by deploying technology based automated tools for proactively identifying and removing or disabling public access to unlawful information and by removing access to unlawful content within 24 hours upon receiving a court order or being notified. It also requires intermediaries to incorporate a company if they have more than 5 lakh users in India and to have a permanent registered office in India as well as appoint a nodal person for contact with law enforcement.  

From an IP perspective, the roles and responsibilities of intermediaries are likely to become more crucial in IPR infringement cases. The safe harbour protection must be granted to intermediaries only if they play the role of a facilitator.  Since e-commerce has flourished like a green bay tree in the massive Indian market, the government is mooting the idea of having a separate regulatory body and a separate e-commerce law that provides for periodic audit, storage of data,  consumer protection,  export promotion and other provisions for promotion of e-commerce. The new law supposedly proposes to impose joint liability for counterfeit products on e-commerce entity as well as sellers. If approved, this would substantially address the trademark concerns and ensure fair competition.

 

 

References

[i] CS (COMM) 344/2018, I.As. 19124/2014, 20912/2014, 23749/2014 & 9106/2015

[ii] AIR 2015 SC 1523

[iii] 236 (2017) DLT 478

[iv] 2017 (69) PTC 551 (DEL)

[v] FAO(OS) 93/2012

[vi] CS(COMM) 980/2016 & I.A. 24186/2014

[vii] CS(COMM) 979/2016 & I.A. 24578/2014

[viii] CS (OS) 410/2018

 

Image Credits: Photo by Mark König on Unsplash

From an IP perspective, the roles and responsibilities of intermediaries are likely to become more crucial in IPR infringement cases. The safe harbour protection must be granted to intermediaries only if they play the role of a facilitator.  Since e-commerce has flourished like a green bay tree in the massive Indian market, the government is mooting the idea of having a separate regulatory body and a separate e-commerce law that provides for periodic audit, storage of data,  consumer protection,  export promotion, and other provisions for promotion of e-commerce.

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