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UNRAVELING THE LEGAL COMPLEXITIES OF COUNTERFEITING IN INDIAS E-COMMERCE LANDSCAPE BY JANVI JOHAR
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UNRAVELING THE LEGAL COMPLEXITIES
OF COUNTERFEITING IN INDIA'S E-COMMERCE LANDSCAPE
AUTHORED BY - JANVI JOHAR
5th Year Law Student - B.A.LLB
(H)
Amity Law School, Amity University,
Noida
9873592025
INTRODUCTION
The prevalent effect of information
and communication technology has had a substantial impact on many aspects of
human existence, with commerce being no exception to the same. India is now
experiencing a digital revolution, marked by ubiquitous internet access,
notably via mobile devices, with a significant drop in internet use prices.
This shift has significantly impacted urban living and provided unequaled
convenience for purchasing and selling products and services via the internet.
E-commerce in layman's terms can be
described as the purchase and sale of goods or services over electronic systems
such as the Internet and other computer networks. The Asia Pacific Economic
Cooperation ("APEC") however, has expanded the definition of
e-commerce to cover any economic activity that uses a mix of electronic
communications as well as information processing technologies.[1]
E-commerce, which can be said to have
originated in the 1960s with the introduction of Electronic Data Interchange,
has grown at an exponential rate. Presently, it would not be wrong to conclude
that India is a powerful force in the e-commerce sphere, with expectations of
enormous expansion[2]. According
to the E-Commerce Industry Report (August 2023), the Indian e-commerce sector
is expected to develop at a CAGR of 27%, reaching US$ 163 billion by 2026.[3]
Recognizing ecommerce's critical
position in India's economic landscape, the menace of counterfeit products is a
glaring issue that needs attention. Countries globally have endeavored to
combat it by addressing loopholes and enacting legislations and India is no
exception to it. India, being a member of Trade Related Aspects of Intellectual
Property Rights (“TRIPS”) is bound to provide legal remedies in case of any
intellectual property infringement[4];
but the paramount question that arises here that can E-commerce platforms be
held liable for the sale of counterfeit/fake products sold by third party
sellers on their website?
Recently, the Delhi High Court in its
recent judgement made a pertinent observation that “An e-commerce platform
cannot become a haven for infringers. Men are not angels and where easy money
is evidently visible, the conscience at times takes a nap.”[5]
Hence, in light of these observations, the author in this research paper shall dwell
on the extent of liability of e-commerce platform in relation to counterfeit
products. Additionally, the author shall shed light on the
drawbacks/disadvantages caused to both the consumers and businesses. Lastly, the
author shall also highlight the concept of intermediary as prescribed under the
Information and Technology Act, 2000 along the judicial stance on these issues.
NAVIGATING
INTELLECTUAL PROPERTY RIGHTS IN THE DIGITAL MARKETPLACE
According to the Oxford Dictionary,
intellectual property is defined as “an idea, a design, etc. that somebody has
created and that the law prevents other people from copying[6],”
implying they are intangible assets emerging from human innovation. In the realm of
e-commerce, where sellers and buyers meet on an online platform, there are
essentially two aspects of intellectual property to be considered -First,
there is the intellectual property connected with the things being sold, which
normally belongs to and resides with the vendor. Second, there are the
intellectual property rights inherent to the digital platform itself.
Section 28 of the Indian Penal Code
(IPC) 1860 explains “Counterfeit” as that: “A person is said to counterfeit
who causes one thing to resemble another thing, thereby intending by means of
that resemblance to practice deception, or knowing it to be likely that
deception will be practiced”. [7]
Further, as an illustration, when a
seller advertises a branded footwear on a site such as Amazon or Flipkart, the
seller/vendor owns the trademark associated with the shoe brand. Concurrently,
the digital platform retains some property rights, which may include patents,
trademarks, or copyrights, boosting its uniqueness in the congested online
marketplace.[8] Hence,
it would not be wrong to assume that the link between IPR and e-commerce is both
complex as well as mutually beneficial.
THE
DETRIMENTAL IMPACT OF COUNTERFEITING
Even though E-commerce is a thriving
and continually expanding business area that offers several income
opportunities, the intellectual property infringement, particularly
counterfeiting, is a serious concern for most e-commerce businesses. Estimates
vary, but yearly sales of counterfeit products range between $1.7 trillion and
$4.5 trillion, making the counterfeiting sector one of the world's greatest
economies. To add on, it is also responsible for the loss of 2.5 million
employment throughout the world.[9]
Apart from this, it would not be
wrong to say that repercussions of counterfeiting extend way beyond monetary
loss.[10] For
instance, when a consumer, with a perception of buying a legitimate product,
buys a counterfeit, then the inferior quality of the products, leads to
disaffection, ultimacy causing erosion of the brand value, associated with the
product. Hence, even though businesses invest significant time and effort in
building trust, but counterfeits weaken this very foundation by linking
unpleasant experiences with legitimate merchandise.
Furthermore, legitimate producers
deal with an uphill struggle against counterfeiters, who flood the market with
low-quality knockoffs, ultimately reducing market share and profitability.
Combating counterfeiting necessitates major investment in anti-counterfeit
technologies, thereby increasing operating costs and potentially affecting
product affordability. Last but not the least, counterfeits can infiltrate
supply chains, making it difficult for merchants as well as customers to
distinguish between genuine and counterfeit products, thereby jeopardizing the
integrity of the entire distribution process.[11]
UNDERSTANDING
THE CONCEPT OF “INTERMEDIARY”
In 2008, an amendment to the
Information Technology Act, 2000 established the statutory provisions with
regard to intermediary liability. According to Section 2(1)(w) of the IT Act, an
"intermediary" is defined as “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”.[12] Hence, E- commerce platforms due to its nature
of business is an intermediary as per the said provision.
It is to be noted that the primary
rule concerning intermediary responsibility is contained in Section 79(4) of
the IT Act, which states that intermediaries are not accountable for
third-party information hosted by them if their duty is restricted to merely providing
access and they do not initiate, choose, or change the transmission initiated
by the third party and in order to qualify for this exemption, intermediaries
must undertake due diligence.[13] Rule
3 of the Information Technology (Intermediary Guidelines and Digital Media
Ethics Code) Rules 2021, specifies how intermediaries must exercise due
diligence. They are obliged to disclose guidelines, publish a privacy policy,
and a user agreement that instructs users not to transmit material that
violates patents, trademarks, copyrights, or other property rights. Intermediaries shall swiftly limit
access to such material upon acquiring knowledge or complaints. Furthermore, the
intermediary must clearly display the Grievance Officer's name and contact
information, as well as a method for users to report infractions. The amendment
also requires the Central Government to create a Grievance Appellate Committee
within three months, which would allow disgruntled citizens to challenge
judgements issued by the Grievance Officer. The committee strives to handle
appeals quickly, usually within 30 days of receipt.[14]
However, it is paramount to mention that under Section 79(3) of the said Act,
intermediaries that are found to aid in unlawful acts or despite receiving
actual knowledge failed to delete or remove access to such illegal content will
be held liable for the same.[15]
A bare perusal of these statutory
requirements showcases the commitment to enhance accountability and ensure
swift action against violations, reinforcing the legal framework governing
intermediary liability in the context of e-commerce platform; however, critics
view these provisions as legal "subsidies" benefiting e-commerce
companies, enabling rapid scalability with minimal legal compliance.
THE
JUDICIAL STANCE
One of the most significant legal
precedents concerning internet intermediaries' accountability for copyright infringement
was in the case of Super Cassettes Industries Ltd. vs. Myspace Inc.[16]
Herein the court emphasized that in order to be protected under section 79 of
the Information and Technology Act, 2000 , intermediaries must not be involved
in initiating transmission, selecting receivers, or modifying information, and
they must follow the due diligence provisions as outlined
under section 79(2)(c) of the Information and Technology Act 2000 read
along with Rule 3 of the Information Technology (Intermediary Guidelines)
Rules, 2011.[17]To
further strengthen the commitment of protection of customer, the Delhi High
Court in the case of Luxottica Group SPA vs. Mify Solutions (P) Ltd.[18] mandated
the defendant to disclose complete seller information on its website, obtain
certificates confirming product authenticity from sellers, and to promptly
remove listings upon notification of counterfeit products, in accordance with
the provision of the Information Technology (Intermediaries Guidelines) Rules
of 2011.
However, the judicial stance saw a
shift in its approach, which was prevalent in the case of Kent Systems Ltd. vs. Amit Kotak[19];
herein the Court made an observation that at if intermediaries are required to
scrutinize all information uploaded by third -party sellers in order to
determine whether it constitutes an infringement of intellectual property
rights, then the same would impose a heavy burden on them by transforming
intermediaries into a body that examines whether any information hosted by the
platform constitutes an infringement. Consequently, in Amazon vs. Amway while
exempting Amazon from intermediary liability, the Court held that there can be no
distinction between passive and active intermediaries under Section 79 of the
Information and Technology Act, 2000. Further, it observed that Amazon in no
way can be denied the status of an intermediary merely on the grounds that it
provides logistical support and other services to its third-party sellers.[20]
Then again, the most recent
pronouncement in PUMA SE vs. India Mart Intermesh Ltd.[21]
is noteworthy to highlight the need to balance between the safe harbor
protection doctrine and intellectual property infringement. Herein while
granting an injunction against India Mart, thereby prohibiting them from the
use of “PUMA” Trademark as an option in its drop-down menu, the Hon’ble Bench
relied on the precent laid down in Google LLC vs. DRS Logistics (Private) Limited[22]. This
decision emphasized that the definition of "use of a mark" under the Trade Marks Act 1999 went beyond visual
representation to include any form associated with commodities. Consequently,
the use of “PUMA” in drop-down menu in this present case constituted
"use" under the Trade Marks Act 1999.Further, the Court went on
to emphasize that including the plaintiff's trademark in the drop-down
selection increased the probability of consumer fraud by allowing
counterfeiters to present their items as authentic. It was determined that such
usage had the potential to unfairly benefit the mark "in a manner which
would be detrimental to its distinctive character and repute.
In lieu of the same, it would not be
wrong to assume that this decision might result in increased monitoring of
content on online marketplaces, thereby increasing costs as well
as affecting user-generated content. It could additionally alter the
relationship between platforms and vendors, causing platforms to exert greater
control over merchants. Furthermore, it may raise awareness of counterfeiting
and drive platforms, sellers, and customers to maintain greater levels of
product authenticity.[23]
More importantly, it represents progress towards the idea that courts must
carefully apply safe harbor protection to balance the rights and interests of
intermediaries and consumers, with the goal of finding a fair and equitable
solution to the various issues surrounding marketplace e-commerce entities in
India.[24]
CONCLUSION
AND RECOMMENDATIONS
While the adoption of the Consumer
Protection (E-commerce) Rules, 2020, represents a step forward in addressing
concerns of intellectual property infringement and consumer protection in the
online marketplace, there is still a pressing need for clarity and refinement.
The issue of intermediary liability must be addressed with caution, ensuring
that e-commerce platforms perform their obligations without unreasonably
limiting innovation and market growth. Hence, the following recommendations
must be considered:
·
Legal
Clarity and Compliance: Regulatory authorities should offer precise guidance on
how to apply present legislations, such as Section 79 of the Information and Technology
Act 2000, alongside new rules, such as the Consumer Protection (E-commerce)
Rules, 2020. This is because clarity in legal interpretation and compliance
standards can help e-commerce companies navigate the regulatory landscape
successfully.
·
Enhanced
communication and Transparency: E-commerce platforms should develop transparent
channels of communications with Intellectual Property owners in order to
swiftly acknowledge and respond to allegations of infringement. This step is
paramount as transparency in the takedown process is critical for building
confidence among all necessary stakeholders.
·
Procedural
Fairness: Through a systematic method for dealing with infringement claims,
such as temporarily removing infringing items and giving the distributor a
chance to dispute the claim, thereby promotes not only procedural fairness but
also protects the interests of all parties involved.
·
Stakeholder
Engagement and Review Mechanisms: Regular stakeholder engagements and
regulatory framework reviews allow policymakers to modify legislation to
changing industry dynamics and developing concerns. Collaboration among
government agencies, business groups, and consumer advocates encourages
informed decision-making and keeps regulatory interventions current and
successful.
In conclusion, striking a healthy
balance between consumer protection, intellectual property rights enforcement,
and intermediary accountability in the e-commerce ecosystem necessitates a
multidimensional strategy based on legislative clarity, procedural fairness,
and stakeholder involvement. By accepting these principles and proactively
resolving regulatory issues, regulators may create a climate conducive to
long-term growth, innovation, and consumer trust in the digital marketplace.
[1]“A. Didar Singh, “Electronic
Commerce: Issues for the South” Trade-related Agenda, Development and
Equity, Working Paper, South Centre, October 1999, p. 4.
[2] Mohd. Danish, Trade Promotion
Council of India, “India, the next powerhouse of global e-commerce?”
(Oct 11, 2023), https://www.tpci.in/indiabusinesstrade/blogs/india-the-next-powerhouse-of-global-e-commerce/.
[3]Indian Brand Equity Foundation
(IBEF), “E-Commerce Industry in India”, (Aug. 2023),
https://www.ibef.org/industry/ecommerce
(Last Updated Feb 2024).
[4] Ruchi Singh, Rommel Pandit,
Parmita Nandy Gupta, Sonu Shaji, World Trade Mark Review, “India: Bolstered
anti-counterfeiting regime champions stricter market regulation and enhanced
consumer awareness” (Sept. 29,2023),https://www.worldtrademarkreview.com/guide/anti-counterfeiting-and-online-brand-enforcement/2023/article/india-bolstered-anti-counterfeiting-regime-champions-stricter-market-regulation-and-enhanced-consumer-awareness.
[5] Shruti Kakkar, The Hindustan
Times, “HC: E-commerce platform cannot be haven for infringers, liable for
selling fake products” (Jan. 07, 2024), https://www.hindustantimes.com/india-news/hc-e-commerce-platform-cannot-be-haven-for-infringers-liable-for-selling-fake-products-101704567826463.html.
[6] “Intellectual property”, Oxford
Learner’s Dictionaries,
[7] The Indian Penal Code, §28, No.
45, Acts of Parliament,1860 (India).
[8] European Innovation Council and
SMEs Executive Agency, European Commission,
“Intellectual Property and E-Commerce in India”, (June 29,2023),
https://intellectual-property-helpdesk.ec.europa.eu/news-events/news/intellectual-property-and-e-commerce-india-part-2-2023-06-29_en.
[9] Keith Goldstein, The Forbes, “The
Global Impact of Counterfeiting And Solutions To Stop It”, (Aug. 02, 2020), https://www.forbes.com/sites/forbesbusinesscouncil/2022/08/02/the-global-impact-of-counterfeiting-and-solutions-to-stop-it/?sh=bd2ded31ca27.
[10] The Business Standard, “Counterfeiting,
smuggling develop into substantial threat to global economy” (Dec. 16,
2022), https://www.business-standard.com/article/economy-policy/counterfeiting-smuggling-develop-into-substantial-threat-to-global-economy-122121600599_1.html.
[11] Ankit Agarwal, ET Retail, “The
menace of counterfeiting in FMCG Industry & its detrimental impacts on
consumers, business” (Sept. 14, 2023),https://retail.economictimes.indiatimes.com/blog/the-menace-of-counterfeiting-in-fmcg-industry-its-detrimental-impacts-on-consumers-business/103663107.
[12] The Information and Technology
Act, § 2(w), No. 21, Acts of Parliament, 2000 (India).
[13] The Information and Technology
Act, §79(4), No. 21, Acts of Parliament, 2000 (India).
[14] Rule 3 of the Information
Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021.
[15] The Information and Technology
Act, §79(3), No. 21, Acts of Parliament, 2000 (India).
[16] Super Cassettes Industries Ltd. vs.
Myspace Inc. (2011) 48 PTC 49 (India).
[17] Rule 3 of the Information
Technology (Intermediary Guidelines) Rules, 2011.
[18] Luxottica Group SPA vs. Mify
Solutions (P) Ltd. (2018) 254 DLT 472 (India).
[19] Kent RO Systems Ltd. vs. Amit
Kotak (2017) 240 DLT 3 (India).
[20] Nilanshu Shekhart & Rishabh
Manocha, SCC Blog, “Implementation of IP vis-à-vis IT Law and E-Commerce in
India” (May 25,2023), https://www.scconline.com/blog/post/2023/05/25/implementation-of-ip-vis-vis-it-law-and-e-commerce-in-india/.
[21] PUMA SE vs. India Mart Intermesh
Ltd 2024 SCC On Line Del 17(India).
[22] Google LLC vs. DRS Logistics
(Private) Limited FAO(OS)(COMM) 2/2022(India).
[23] Neha Iyer, World Trade Review, “Delhi
High Court restrains Indiamart from including PUMA marks in drop-down menu
search options” (Jan.31,2024), https://www.worldtrademarkreview.com/article/delhi-high-court-restrains-indiamart-including-puma-marks-in-drop-down-menu-search-options.
[24] Sumanthi Chandrashekaran, Obhan
& Associates, “Online marketplaces and intermediary liability: New rules of
the game” (Nov. 21,2018), https://www.obhanandassociates.com/blog/online-marketplaces-and-intermediary-liability-new-rules-of-the-game/.
Article Information
UNRAVELING THE LEGAL COMPLEXITIES OF COUNTERFEITING IN INDIAS E-COMMERCE LANDSCAPE BY JANVI JOHAR
Authors: JANVI JOHAR
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/02/24
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
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