E-commerce is a valuable sales channel, but it is not without risk for brands, particularly in terms of counterfeiting. An interesting case was decided by the High Court of Delhi on January 3 2024 on the subject of online counterfeiting – Puma SE v. Indiamart Intermesh Ltd. Here, the intermediary was prima facie found guilty of trademark infringement based on the use of a proprietary mark in its dropdown menu search options.
Puma, a renowned global sportswear manufacturer, owns numerous registrations in India for the word mark ‘Puma’ and a distinctive logo, the earliest of which go back to 1977. Sales in 2019 alone topped INR 14 billion and Puma was declared a well-known trademark by the Trade Marks Registry on February 24 2020.
The defendant, IndiaMart IndiaMesh (IIL), is the owner of an e-commerce website on which the merchandise of various manufacturers is available for purchase.
Puma’s allegation and IndiaMart’s defence
Puma alleged that if one entered the search word “Puma” on the IIL site, various counterfeit goods bearing Puma’s registered trademarks were displayed for purchase. According to Puma, as IIL’s website facilitated the sale of counterfeit goods bearing its trademarks, and the latter had not exercised necessary due diligence in verifying third-party sellers offering goods on its platform, it was guilty of aiding and abetting infringement under Section 29 of the Trade Marks Act, 1999 and passing off counterfeit goods as the goods of Puma.
IIL admitted that if a seller registered on its platform wanted to sell merchandise, it was presented with a dropdown menu listing various brand names, including Puma, under which products could be sold. However, it only served as an intermediary between buyers and vendors, and stated its inability to verify vendor claims or product quality and authenticity.
It emphasised that it followed the Information Technology Act, 2000's (the IT Act’s) requirements for due diligence – sellers of counterfeit goods were expressly prohibited by their terms of service. Furthermore, upon receiving legitimate reports from right holders, IIL took proactive and effective measures to remove infringing postings. It argued that Puma's requests for proactive seller verification and the pre-emptive removal of “Puma” from product descriptions went beyond statutory obligations for intermediary platforms.
Moreover, not only would implementing such policies be difficult and expensive, it could restrict the ability of legitimate merchants to provide truthful product descriptions. To counter the claim of abetting infringement and passing off, it submitted that IIL was not involved in the actual sale of goods and did not charge sellers or users for choosing “Puma” in the dropdown menu, which differentiated its actions from actively profiting from infringing activity.
Ruling by the High Court of Delhi
The court identified two issues for consideration:
Was IIL infringing/passing off Puma’s trademarks?
If IIL was doing so, was it entitled to safe harbour under Section 79 of the IT Act and thereby insulated from the consequences of infringement/passing off?
The court began its analysis by referring to the Division Bench ruling in Google LLC v DRS Logistics (P) Ltd. & Ors. on August 10 2023. Using this decision as a reference point, the court stated that IIL’s use of Puma’s registered trademark as one of the dropdown options that a seller had access to when registering on the IndiaMart platform would constitute ‘use’ of the trademark under the Indian trademark statute. Furthermore, even though the dropdown menu option was only visible to sellers during the registration process on the IndiaMart platform and not to consumers intending to make purchases, this fact was irrelevant to the issue of ‘use’.
The court reasoned that IIL consciously took part in the process of selecting options to be offered on the dropdown menu. And while it did not charge users for choosing a suggested option from the dropdown menu, it still profited from the ultimate sale of the users’ products on its platform. As a result, a prima facie case of infringement was made out.
As to safe harbour under the IT Act, it was noted that IIL’s role extended beyond the provision of mere access – it actively facilitated sales and profited from them. Also, in the opinion of the court, IIL had failed to demonstrate the requisite due diligence as it relied solely on the terms of use and seller undertakings to ensure statutory compliance and made no reasonable efforts to enquire into the genuineness of sellers or efforts to verify the credibility of the sellers or their details.
Thus, IIL was ineligible for the safe harbour exemption under Section 79(1) of the IT Act.
Consequently, the court granted Puma’s injunction request, restraining IIL from including Puma’s registered trademarks as a search option to prospective sellers at the time of registration on its platform, and directing it to take down infringing listings, upon such listings being brought to its notice by Puma. However, the injunction did not have to continue ad infinitum – IIL could seek modification or vacation of the order, subject to proving that it had adopted sufficient regulatory and protective safeguards to render impossible the further abuse of its platform by counterfeiters.
Significance of the decision
After the Google LLC v. DRS Logistics (P) Ltd. & Ors. decision, there have been a number of decisions on intermediary liability that have looked at the issue from different angles. This ruling is significant as it tackles the scourge of counterfeiting and may lead online platforms to exert greater control over sellers in an effort to curb this menace.
