Safeguarding brands online

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ESSENESE OBHAN and TAARIKA PILLAI analyze online counterfeiting, intermediary liability rules

The spread of user-generated content and e-commerce platforms, combined with competition for website traffic demands new strategies to monitor the online use of trademarks by third parties.

Misleading comments and unfavourable forwarded messages that defame trademark owners and products are freely posted online with the owners having little control. In such situations, what is the role of intermediaries in trademark infringement and product disparagement?

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Essenese Obhan

Product disparagement and defamation: In 2013, Indian consumer goods company Parle sued Facebook, Twitter and Google for a post containing false statements that its popular drink Frooti was contaminated. The court granted interim relief to Parle by directing Google and Facebook to block the web addresses and the content in question.

But, where does one draw the line between a brand owner’s reputation and an intermediary’s policing woes?

One solution is to target the intermediary so that it can control content dissemination. First, a notice and takedown action can be issued, where the intermediary may not be liable upon compliance with the action. Second, the intermediary may be sued if it has knowingly and voluntarily published defamatory content. But suing intermediaries for promoting or publishing defamatory content, especially if they are hosting it unknowingly is impractical. Indeed, the Supreme Court has held that intermediaries cannot be sued merely on a complaint that they host offensive content.

Legal position: The Information Technology Act, 2000 (act), regulates intermediaries and exempts them from liability for hosting third-party content in certain instances (section 79). Safe harbour protection is available where intermediaries merely facilitate and do not create or modify the content. The act makes intermediaries liable for conspiring, abetting, aiding or inducing the offence. Due diligence is imperative for intermediaries.

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Taarika Pillai

Intermediary liability: Courts in Indian cases have discussed various aspects of intermediary liability regarding the right to freedom of speech, and copyright and design infringement. In 2018, Delhi High Court, in a case involving Christian Louboutin SAS and e-commerce websites, defined intermediary liability for trademark infringement in online marketplaces.

Louboutin alleged that the websites used its labels on products claiming they were genuine and also used the words Christian and Louboutin as meta tags (snippets of text that describe a page’s content and appear in the page’s code) to attract traffic.

The court cited the Information Technology (Intermediaries Guidelines) Rules, 2011, under which intermediaries must have agreements with sellers to not host, display or upload products violating trademarks, copyrights or patents. Mere compliance with these guidelines would not be a sufficient defence. The unauthorized use of the Louboutin mark without ensuring product authenticity violated the owner’s rights. Such e-commerce websites must disclose information about sellers; provide authenticity certificates for listed products; and obtain the owner’s concurrence before listing products. Denying safe harbour protection, the court concluded that a website’s role not only involves linking buyer and seller but also inspecting and guaranteeing product authenticity.

Recently, the central government floated the Information Technology (Intermediaries Guidelines) Rules, 2018 (draft rules), on intermediary liability to make internet companies and social media platforms more accountable.

The draft rules make companies accountable for content posted on their platforms that can, among others, tarnish brand owners’ rights or increase the flow of counterfeit goods. These draft rules can fundamentally affect encryption models and censorship policies. Intermediaries would have to provide information demanded by authorities and trace the source of questionable content. Potentially, platforms like WhatsApp would have to monitor content and remove end-to-end encryption to continue operations. Such companies would have to scan for, and prevent sharing of, grossly offensive, defamatory, and misleading content.

With the rise of e-commerce and social media websites, proper laws and appropriate enforcement mechanisms are essential to prevent intellectual property infringement. Unfortunately, the laws and the proposed guidelines offer no reasonable solutions. Ideally, the notice and takedown regime under the IT Act should have been restructured to allow aggrieved parties to request takedowns pending final determination by an appropriate authority, and by extension, discourage frivolous notices. Until these systems are fixed, brands will continue to spend resources on monitoring content and notifying service providers of rogue merchants and counterfeit merchandise while intermediaries will have to continue to tread carefully along the path of liability and exemption.

Obhan & AssociatesESSENESE OBHAN is the founding partner of Obhan & Associates and TAARIKA PILLAI is a senior associate at the firm.