Liability of Online Service Providers

The growing e-commerce footprint in India has prompted OEMs, SMEs and MSMEs to take the route of e-commerce and establish an additional channel of distribution. The adoption rate has been much slower as compared to retail industry but the manufacturing is catching on fast. Let’s understand the glitches of the E-Commerce sector from the brand protection perspective before getting onto the bandwagon.

The journey of e-commerce in India has been phenomenal.What started as a buzzword has now become a household reality and quintessence of the business world. The country has witnessed tremendous growth in the e-commerce world, changing the way people transact. The online market space is progressing in terms of diverse off erings; ranging from travel, movies, hotel reservations and books to matrimonial services, electronic gadgets, cosmetics, apparel, footwear, fashion accessories and even groceries.

A recent Gartner report revealed that the Indian e-commerce space is growing at nearly 40 percent each year, and is currently worth around INR 45,841 crore!

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. Just a few days earlier a group of luxury goods makers sued Alibaba Group Holding Ltd. Reason? The suit was filed by the luxury brand owners contending that the Chinese online shopping giants had knowingly made it possible for counterfeiters to sell their products throughout the world. 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 the question as to 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 users of their sites

If we talk specifi cally in relation to India, recently Flipkart also came under the scrutiny for dealing in counterfeit goods. Flipkart has a long list of third party sellers, often giving unbelievable discounts on products. But the quality of the products is standard. These third-party sellers are selling counterfeit products in place of the original product and somehow Flipkart missed ensuring whether the products are authentic or not.

Recently 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.

Apple has contended that, nearly 90% of 'Genuine' iPhone chargers on Amazon are counterfeit. Apple recently fi led a lawsuit against Amazon.com supplier Mobile Star LLC for alleged trademark infringement, according to Patently Apple.

So, the big question is who is liable to this? The online service provider or the seller? 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 provider? 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 Indian Copyright act. Even 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 suffi cient steps to prevent a violation.

Section 79 when read with Section 81 gives us a glimpse at the inadequacy and ambiguity of laws defi ning intermediary liability in India. When we interpret Section 79, it talks about the provision of safe-harbour available to an intermediary. But on further assessment we can say that an intermediary otherwise found liable under Indian Copyright Act, shall not be made available with the benefi t of Section 79. The existing provisions do not clearly prescribe liability limits of service providers. The liability of service providers for infringement must be made more explicit. The Information Technology Act, 2008 must include sections that address the fi nancial 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. 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 eff orts 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 eff ort 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 diff erentiate 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 eff ort towards curbing counterfeiting. They can report from where they bought the counterfeit good. They can also voice such fi ndings 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. At present, most complaints with respect to e-commerce are referred to the Department of Consumer Aff airs. However, the sector’s operations are increasingly complex to be under the purview of any single ministry. Therefore, the need for ‘a clear demarcation of the activities of e-commerce to be handled by diff erent departments’ has been felt and thus the need to demarcate the jurisdiction of various departments.

There is an immediate need for express and stringent provisions either in the Copyright Act, 1970 or the Information Technology Act, 2000. Express provisions that state when, where and how liability of the ISPs shall arise, liability of the third parties/ sellers and the punishments should be included and implemented as soon as possible. Also, strict actions should be taken against counterfeiters. Then only the ISPs shall fl ourish otherwise the consumers will lose their confi dence in such service providers very quickly, hampering their growth as well the economies