The term ‘intermediary’ in legal terminology and as per the Information Technology Act, 2000 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, internet service providers, online-auction sites, online market places, etc.

A Single Judge of the Delhi High Court on January 18, 2017 deliberated on the extent of liabilities and rights of an intermediary in the case of Kent RO Systems Ltd & Anr. v. Amit Kotak & Ors. Kent RO and Mr. Mahesh Gupta (Chairman and Managing director of Kent RO Systems Ltd.) had sued for permanent injunction to restrain one Mr. Amit Kotak from infringing its registered designs and e-Bay India Private Limited for channelizing and aiding in the design infringement by Mr Amit Kotak and others by being an intermediary. Besides the relief of injunction, Kent RO had also sought the relief of rendition of accounts and recovery of damages from the two Defendants. On December 21, 2016 the Single Judge directed eBay by way of ex-parte order to block access to all the URLs from which the infringing products were claimed to be sold and issued summons to the two Defendants. The Single Judge, on the next hearing date, while delivering its judgement mainly discussed the powers/limits of an intermediary while hosting any contents on its portal which might be infringing.

Brief facts:

Kent RO Systems Ltd and Mr. Mahesh Gupta (Plaintiffs) are the manufacturer of water purifiers and have several design registrations under the Designs Act, 2000 (Design Act) in respect of the aesthetic appearance of its water purifier systems. The Plaintiffs have a huge presence in the online market and various e-commerce websites including eBay.

Mr Amit Kotak (Defendant No. 1, manufacturer) is a manufacturer and/or trader of water purifier systems whose shape, look and appearance are deceptively similar to the water purifiers of the Plaintiffs. Mr Kotak sells its goods to various customers through the website of e-Bay India Private limited (Defendant No. 2).

The Plaintiffs before instituting a suit for permanent injunction, had brought into the notice of e-Bay, the infringement caused by Defendant No. 1 as well as of e-Bay and several others who were similarly offering for sale and selling water purifiers which were infringing the Intellectual Property Rights of the Plaintiffs. E-Bay responded to the Plaintiffs stating that they had removed all the products complained of. However, the Plaintiffs found that a large number of other infringing products were still being sold and offered for sale on the website of e-Bay.

In view of the above factual background, the Plaintiffs filed the suit for permanent injunction against the Defendants seeking the following reliefs:

  1. To restrain the Defendant No. 1 from infringing the registered designs of the Plaintiffs;
  2. To issue directions against e-Bay to take down all products infringing the registered design of the Plaintiffs;
  3. To issue prohibitory injunction against e-Bay, from allowing products infringing the registered design of the Plaintiffs to be offered for sale and sold from the portal of e-Bay;
  4. To render the accounts of profits made by both the Defendants.

The suit first came up on December 21, 2016, where summons were issued to both the Defendants and by way of an ex-parte order e-Bay was directed to block access to the Uniform Resource Locators (URLs) from which the infringing products were claimed to be sold.

The beginning of the judgement by the Single Judge on January 18, 2017, made clear that the Defendant No. 1 had no objection to the suit instituted by the Plaintiffs as long as they give up their claim for damages and accounts, which was agreeable by the Plaintiffs. Thereafter and therefore, the Single Judge passed a decree in favour of the Plaintiffs and against the Defendant No. 1 and directed both these parties to bear their own costs.

The Single Judge, however, did not issue any directions which were sought by the Plaintiffs as against E-Bay after taking into account the facts and after deliberating on the provisions and rules of the Information Technology Act, 2000. The different arguments taken by these parties and the reasoning of the Single Judge in coming to this conclusion are discussed below.

Contentions of the parties:

E-Bay contended that immediately after the receipt of the complaint from the Plaintiffs they had started removing the offending products from their website from time to time and were agreeable to remove any offending products from its website, on receipt of any future complaint from the Plaintiffs.

The Plaintiffs argued that the statement of e-Bay regarding removal of any future offending products from its website on receipt of the complaint shall not serve their purpose. The Plaintiffs contended that once they lodge a complaint with e-Bay with respect to the offending product of any other seller/retailer, e-Bay should, before hosting the same verify if it infringes the registered designs of the Plaintiffs or not. The Plaintiffs asserted that e-Bay being an intermediary within the meaning of Information Technology Act, 2000 is required to device a mechanism to verify whether a product infringes the Intellectual Property Rights of any other person before hosting the same for sale on its system/website. The Plaintiffs relied on Rules 3(1), 3(2)(d), 3(3) & 3(4) of the Information Technology (Intermediaries Guidelines) Rules, 2011 (IT Rules) along with Rules 3(5), 3(6), 3(7), 3(8) & 3(11).

The Plaintiffs further relied upon Section 22(1)(c) of the Designs Act and contended that e-Bay is also guilty of piracy of registered design because even after knowing that a registered design was infringed, it published or exposed or caused to be published or exposed for sale, the article infringing the registered design.

E-Bay sought defence under Section 79 of the Information Technology Act whereby e-Bay cannot be held liable for any third party information, data or communication link made available or hosted by him as long as its function is limited to providing access to a communication system over which information made available by third parties is transmitted or temporarily stored or hosted and does not initiate the information contained in the transmission, select the receiver of the transmission or modify the information contained in the transmission.

The Plaintiffs argued that according to Section 79(3) of the Act, the above contention does not apply because e-Bay has abetted and conspired in the infringement of the registered designs of the Plaintiffs within the meaning of the said section.

Decision of the court:

The Single Judge was of the view that the IT Rules that were relied upon by the Plaintiffs only require the intermediary to publish the rules, regulations and privacy policy and ensure that sufficient safeguards are in place. The Rules direct the intermediary to inform the users of its computer resources not to host, display, uphold or publish any information that infringes any patent, trademark, copyright or other proprietary rights. The Rules further mandate that the intermediary, only upon receipt of written complaint of the infringing products, must disable the infringing information within 36 hours. The Court, however, observed that the contention of the Plaintiffs was neither regarding the publications of the privacy policy by e-Bay nor regarding the removal of the infringing information in spite of receipt of complaints by the Plaintiffs as the removal was admittedly performed.

The Court observed that the Plaintiffs not only wanted e-Bay to remove the infringing contents upon issuance of the complaint but also to suo-motu screen other contents being hosted on its portal and determine whether such contents/products amount to infringement. The Single Judge held that to say that an intermediary is required to satisfy itself before posting any information on its computer resource, that the same does not infringe the intellectual property rights of any person, would amount to converting the intermediary into a body to judge whether there is an infringement of intellectual property rights or not. The IT Rules only oblige the intermediary to remove/disable the information hosted on the portal on receipt of any complaint.

The Single Judge further held that for a case to be made under Section 79 (3), the Plaintiffs have to plead and prove conspiracy or abetment or aiding or inducing within the meaning of Section 79 (3) of the Information Technology Act, 2000. The Plaintiffs needed to plead and furnish proof of common intention, which they had not and therefore this argument had no merit.

The Single Judge after thorough deliberation and after taking into account all the factors of the case held that merely because an intermediary has been obliged under the IT Rules to remove the infringing content on receipt of complaint it cannot be said that the intermediary had suo motu detect and refuse hosting of infringing contents. To require an intermediary to do such screening would be unreasonable interference with the rights of the intermediary to carry on its business. Furthermore, an intermediary would be considered as acting wilfully negligent only when it has been given information of infringement and ignores the same.

On the basis of the aforementioned, the Single Judge disposed of the suit against e-Bay and directed the Plaintiffs and e-Bay to bear their own costs. The court did not issue any directions sought by the Plaintiffs against e-Bay.

Analysis

It is quite germane to understand that the Indian Legislature only requires the intermediaries to declare to all its users its policy and advise them not to host any information regarding the infringing products on their website and further to remove any information regarding the infringing products within 36 hours of receipt of a complaint by an aggrieved right holder. The intermediaries are, however, not equipped to screen all information being hosted on their portal for infringement of the rights of all those persons who have at any point of time complained to them.