The Law Blog

Prathwiraj Kadam & Samikshya Rout are second-year law students at National Law University, Odisha.

Exponential growth of the internet and online infrastructure in India has brought a paradigm shift in consumer shopping behaviour. Consumers are buying through online E-commerce platforms due to an increase in disposable income, a change in lifestyle and convenience. Platforms such as Amazon, Flipkart, Blinkit, and Zomato provide services. It is expected that the E-commerce marketplace will reach USD 136 billion in 2025, growing at a rate of 19% per year. Further, by the end of the decade, it is estimated that the market will reach up to USD 385 billion.

While these Platforms have created convenience for the buyer, however it have also made it easier for third-party sellers to exploit them using unauthorised sales and misuse of trademarks, patents or copyrights through the use of domain names, Cybersquatting, and Counterfeiting of goods. This creates an adverse environment for the sellers on E-commerce Platforms. The major issue is the lack of a legal framework to regulate online e-commerce platforms’ infringement of intellectual property rights. The e-commerce platforms reduce the protection of sellers/innovators. The intermediary participant debate cannot be resolved just through formal classifications. As e-commerce platforms are increasingly exercising control over market access, product visibility and consumer autonomy, the questions of intermediary liability must be within the broader framework of platform power and digital marketplace governance. The blog examines ambiguity on the part of the law as well as the judgments by courts. It will also examine the nature of the obligation that e-commerce platforms should or can be held liable for infringement of the intellectual property rights of rightful Sellers and Innovators. Further, the blog also argues that the continued reliance on the safe harbour principle is misplaced and requires the creation of obligations and liabilities.

The Intermediary Role of E-Commerce Marketplaces

The rise of the age of the internet has created many new opportunities and challenges. Electronic Commerce (e-commerce) is now playing an important role in the global economy through e-commerce platforms such as Amazon, Flipkart, and eBay, among many more platforms. While e-commerce has emerged as a vital part of the economy and has introduced significant opportunities, it has also created challenges. The e-commerce platforms allow sellers to list their products on their platforms, acting as intermediaries between sellers and buyers. This practice creates a wide range of options for the buyers, which in turn leads to exponential popularity and growth of the e-commerce platforms among buyers. However, this growth has not been without challenges. The growth of e-commerce platforms has created a surge in sales of counterfeit products, violating the IP rights of the rightful owners. The e-commerce platforms get protection from being prosecuted as they are acting as intermediary and do not have any active role in infringement.

Challenges for Trademark Protection in E-Commerce

In the e-commerce era, trademark infringement has become a significant issue. While legal frameworks as well as judicial rulings are shaping the duties and liabilities of intermediary platforms such as Amazon or Flipkart. E-commerce platforms acting as intermediaries and merely facilitating the transaction generally escape liability for the infringement. The Trademark Act 1999 does not provide an explicit provision for the liabilities of e-commerce platforms. Under Section 29, intermediaries can be held liable if they engage in services such as advertising or providing support to sellers. Intermediaries are protected under Section 79 of the IT Act 2000, under the principle of safe harbour, if they are acting as a passive facilitator. The statutes for infringement of Intellectual property rights do not provide exclusive provisions for liabilities; thus, the liability of intermediaries is determined through judicial pronouncements. 

In the case of MySpace Inc v. Super Cassettes Industries Ltd, the Delhi High Court held that if an intermediary has knowledge of infringement, then it must actively stop such infringement. Further, if the affected party bring notice of the infringement, the intermediary must promptly stop the infringement within 36 hours.

Indian courts have dealt with the case of infringement of the rights of the rightful owners and have consistently held such platforms/ intermediaries liable. In Puma SE v. Indiamart Intermesh Ltd and L’Oréal v. Brandworld, have consistently held that platforms cannot enrich themselves through counterfeit sales and must actively remove any material or products or prevent any unauthorised use of brand trademarks. This position has been clarified and holds the marketplace or intermediaries liable if they facilitate, aid or benefit from the counterfeit sales in the case of Christian Louboutin v. Nakul Bajaj. 

Considering all these cases together, the e-commerce platforms can only be held liable for the violation of the Intellectual Property Rights of the seller or innovators if they actively facilitate, aid or benefit from such infringement. E-commerce today not only acts as a facilitator but, in many cases, structures the market, creates visibility and access for the sellers. Therefore, the courts are not dismantling the safe harbour principle, but are actively conditioning its applicability on the nature and extent of platform involvement. Merely hosting third-party sellers who are infringing IP rights does not create liability, but it is based on the level of control the platform exercises over the infringing party/seller. The courts are considering factors such as involvement in advertising, sponsored listings, promotion using an algorithm and economic benefits from the sale of infringing products. Scholars argue that safe harbour exists as intermediaries cannot practically monitor every seller, but at the same time, absolute immunity has harmful effects. This allows the e-commerce platforms to neglect the enforcement of IP rights while deriving commercial benefits from the infringement. The judicial approach taken by Indian courts closely aligns with these arguments. Further, it is also an attempt to distinguish neutral intermediaries from market actors who control and monetise infringing activity.

Global Perspective

The European Union introduced the Digital Services Act 2022, which created new obligations for digital platforms and marketplaces. Earlier, the e-commerce Directives shielded hosting providers and online marketplaces from the liability of user-created content if the platform acted upon notice of such infringement. Introduction of the Digital Services Act introduced stricter obligations for digital marketplaces or e-commerce platforms. The act required the e-commerce/digital platforms to proactively assess risk, moderate content, and enhance transparency during the content removal process, and an accountability mechanism for repeated infringements. These requirements increased the responsibilities of intermediaries/ e-commerce platforms and offered more effective tools for the enforcement of Intellectual Property Rights of Sellers or Innovators.

In the United States of America, Section 230 of the Communications Decency Act provides immunity to online platforms from the infringements caused by their users. The Digital Millennium Copyright Act plays an important role in the U.S. to give a framework for intermediary liability of online platforms. It recognises the need for a system which is responsive yet responsible for the content created by the users. With judicial pronouncements, the act has established a notice and takedown procedure. This procedure compels intermediaries to take down the content when an infringement notice is given. Further, if the notification is disregarded by the Online platform, another legislation is provided for the backup. The Federal Trade Commission Act makes marketplaces liable if they fail to adequately address infringement. Under Section 512(c) of the DMCA, the marketplaces can avoid responsibility for the copyright infringement if they publicise their policy on infringement, outline the procedure to address notices for infringement of IP rights and remove infringing content once noticed.

In China, the E-commerce Law of the People’s Republic of China require E-commerce platforms to verify the qualifications and authenticity of merchants and their products. Article 42 of the law provides the right to notify the e-commerce platform to delete, block or disable the link if the IPR holder believes that there is an infringement of their IP rights. Further, Article 45 provides that if e-commerce platforms know or should know of any infringement and do not take necessary steps to stop such infringement, then the intermediary will assume joint and several liability with the primary infringer.

The European Union adopts a precautionary risk-based obligation model to govern and treats large e-commerce platforms as systemic market actors, imposing an affirmative duty to mitigate the foreseeable harm. On the other hand, the United States follows an innovations-focused model prioritising platform immunity and relies primarily on reactive enforcement triggered by notice. China follows a supervisory model where platforms function as market regulators, making them directly responsible for the conduct of sellers. All these major jurisdictions reveal that they create a statutory obligation, while, on the other hand, India occupies an intermediate position, relying on judicial interpretation rather than statutes to create a conditional safe harbour on e-commerce platforms.

Way Forward

E-commerce continues to expand exponentially. This creates an urgent need to introduce policy and technological solutions to curb IP rights infringement. Marketplaces need to monitor and remove infringing goods with penalties on the infringers. The Government need to introduce legal provisions to empower IP owners to file a case against both the e-commerce marketplace as well as the seller for the damages.

It is also important that a robust notice and takedown system is created. The Marketplaces need to process the infringement claims at the earliest and maintain proper legal process. Further, to prevent IP infringement, the marketplaces must adopt an active approach towards IP infringement by the sellers rather than a passive approach.

Further, Indian law only prosecutes e-commerce platforms if they actively participate in the activity which causes the infringement. The Indian legislature must introduce provisions to create an obligation on the E-commerce platforms to actively monitor and remove infringing products or sellers. It is important to create a statutory responsibility on the platforms corresponding to the degree of control and economic benefits exercised by the platforms.

Conclusion

E-commerce platforms continuously shape market access and consumer choice. Treating e-commerce platforms as neutral intermediaries no longer reflects current realities. While judicial developments in India show a clear shift towards a conduct-based approach, where liability is derived from active participation of the e-commerce platform. It is important to effectively protect intellectual property rights while not affecting the efficiency and profitability of E-commerce platforms.  Further, it is important to recognise statutory proactive measures and duties such as robust notice and takedown mechanisms, and repeat infringer policy. A balanced shift towards responsibility instead of blanket immunity. It is important to safeguard innovators and genuine sellers and sustain the long-term integrity of e-commerce platforms.