The Middle-man Liability Conundrum-An analysis of the judgement of Delhi High Court in Kent RO Systems Ltd. vs. Amit Kotak & Others

July 4, 2017

 

The Plaintiff, Kent RO Systems Ltd., is a manufacturer of water purifiers and has sought protection of its water purifier systems by obtaining design registrations under The Designs Act, 2000. Defendant No.2, eBay, is an e-commerce platform/portal through which sellers of various products carry on their business by showcasing as well as selling their products. Defendant No.1, Amit Kotak, is a manufacturer and/or trader of water purifier systems who sells his goods to various customers through the website of the Defendant No.2.

 

 

The Plaintiff drew the attention of Defendant No.2, to the water purifier systems being sold on its platform; the shape, look and appearance of which were deceptively similar to the water purifiers of the Plaintiff, thus constituting piracy under The Designs Act, 2000.  The Defendant No.2 stated that it had removed all the products complained of and also undertook to, in future, remove all the infringing products complained of by the Plaintiff. However, the Plaintiff found that a large number of other infringing products were also being offered for sale/sold on the portal of the Defendant No.2. The Plaintiff argued that Defendant No.2 has not taken steps for removal of the other infringing products.

 

The dispute between the parties rests on the issue that whether the Defendant No.2, is under an obligation to verify, suo moto, whether a product posted on its platform infringes any intellectual property rights of an alleged holder of such rights and to remove all infringing content, before hosting a product of any other sellers/retailers.

 

The Plaintiff relied on Rule 3 of the Information Technology (Intermediaries Guidelines) Rules, 2011 to contend that, being an intermediary, the Defendant No. 2 is required to conduct due diligence before hosting any content. It also relied on Section 22(1)(c) of the Designs Act and contended that even a person who, knowing that the content is infringing, without the consent of the registered proprietor, publishes or exposes or causes to be published or exposed for sale that article, is guilty of piracy of the registered design.

The Defendant No.2 in this regard, relied on Section 79 of the IT Act which shields an intermediary from legal liability for any third party data hosted by him as long as the intermediary’s function is limited to providing access to a communication system over which information made available by third parties is hosted and does not initiate or modify the information contained in the transmission and so long as it observes due diligence while discharging his duties under the Act and the IT Intermediary Rules prescribed in this behalf.

 

Decision on Liability of the intermediary

 

Justice Endlaw of the Hon’ble High Court of Delhi observed:

 

  • The IT Rules only require the intermediary to publish the rules and regulations and privacy policy and 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. It is not the contention of the Plaintiff that the Defendant No.2 has not complied with this requirement.

  • The IT Rules further require the Defendant no.2 as an intermediary to; upon any person as the Plaintiff approaching it in writing, of products infringing that person’s patent, trademark or copyright rights; within 36 hours disable the infringing information. It is not the contention of the Plaintiff that the Defendant No.2, on receipt of such complaints, has not disabled the infringing content.

  • The counsel for the Plaintiffs reads into the IT Rules aforesaid an obligation on the intermediary to, after having been once informed by any person of any content hosted on the portal of the Defendant no.2 infringing the intellectual property rights of that person, not only remove the said contents but in future also screen other contents being hosted on its portal for such infringement. To hold that an intermediary, before posting any information on its computer resources is required to satisfy itself that the same does not infringe the intellectual property rights of any person, would amount to converting the intermediary into a body to determine whether there is any infringement of intellectual property rights or not.

  • The IT Rules only oblige the intermediary to remove/disable the information hosted on the portal only on receipt of complaint. The IT Rules do not oblige the intermediary to, of its own, screen all information being hosted on its portal for infringement of the rights of all those persons who have at any point of time complained to the intermediary. The provision in the Rules requiring the intermediary to on receipt of complaints take action is different from requiring an intermediary to of its own take a call as to what is infringing and what is not.  It cannot be read as vesting in the intermediary suo motu powers to detect and refuse hosting of infringing contents.

  • Had the intention of the Legislature been to require the intermediaries to be vigilant as the plaintiff reads the IT Act and the Rules to require it to be, the Legislature would have merely observed that the intermediary will not permit to be hosted on its website any information infringing intellectual property rights of any other person if such person had informed the intermediary of the same. However, the Legislature has not done so and has required the intermediaries to only declare to all its users its policy in this regard and advise them not to host any infringing information on the website of the intermediary and to on receipt of complaint remove the same within 36 hours.

  • To require an intermediary to do such screening would be an unreasonable interference with the rights of the intermediary to carry on its business.

 

The Court’s interpretation of the IT Intermediary guidelines and the relevant provisions of the IT Act is commendably precise and the decision has come as a relief to intermediaries. However, it is pertinent to note that the Supreme Court in its recent order in Sabu Mathew George Vs. Union of India, referred to the doctrine of “auto block” and constitution of an “In House Expert Body” by intermediaries to detect on their respective platforms, advertisements of prenatal sex selection diagnostics. Therefore, this selective obligation of content removal, upon the intermediaries depends upon the very nature of content hosted by the intermediaries. However, as regards the infringement of intellectual property rights, the Court rightly concluded that an intermediary is obliged under the IT Rules to remove the infringing content only on receipt of a complaint and not suo moto.

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