In an ever-changing world, the one constant that remains is the human need for consumption. We require the consumption of goods and services to survive and maintain balance in the economic system. With the change in times, we have also seen a change in the manner of consumption- with large fairs and markets being reduced to an enormous catalog that fits in the palm of our hands. Globalization and the increased interconnectedness of the world through the internet led to changes in the way business and trade are conducted and to the establishment and flourishing of e-commerce websites globally.
E-commerce platforms have seen a colossal increase in traffic and usage- particularly considering the COVID-19 pandemic, where the lockdown and quarantine guidelines do not permit one to step out of their houses. The rise of e-commerce platforms can be attributed to the simplicity and convenience they offer which makes it easy for people of all age groups and from all walks of life to use. The wide range of products, at varying prices, offered under one roof makes it appealing as compared to going from store-to-store to satiate one’s needs. Moreover, the convenience of having the goods delivered at your doorstep are some other factors that have contributed to the growth of this market in the Indian context, leading to more and more e-commerce platforms popping up catering to every user’s wishes. Post the 1991 New Economic Policies adopted in India, both the electronic as well as the economic reforms and revolution helped in making the country one of the most fertile lands for e-commerce to thrive.
If one were to equate the traditional market with the online marketplace, it is safe to say that the discrepancies and problems associated with a physical marketplace will eventually creep into the system. The sale of counterfeit goods affects not only the reputation of the e-commerce intermediary but also of the original equipment manufacturer (hereinafter referred to as ‘OEM’)-something that has not been effectively policed in markets irrespective of their mode of operation. In the case of intermediaries online, the question also arises regarding whom is the liability to be imposed- the retailer or the intermediary. An estimate by the Authentication Solution Providers’ Association (hereinafter referred to as ‘ASPA’) stated that India loses close to Rs. 1 trillion in the sale of counterfeit goods.
Through the means of this article, we attempt to target the problems currently plaguing e-commerce in terms of counterfeits and intellectual property infringement.
‘FAKE’ LOVE: ANALYSIS OF THE NIKE-AMAZON DEAL
2017 saw a paradigm shift in loyalties when Nike confirmed that they would be starting a partnership with e-commerce giant Amazon to sell products directly on the website. Prior to the deal, Nike products were only available on Amazon and it’s subsidiary Zappos via third-party merchants. Industry insiders speculated that this move was taken keeping in mind the need to curb the sale of counterfeit Nike products on the platform, also reducing the sale of the products by third-party retailers. The deal was also said to provide Nike with access to Amazon’s loyal customer base and ensure more exposure and profitability of their original goods.
Despite the ideal situation presented on paper, Nike opted out of the deal with Amazon within two years. Nike stated the reason for this to be ‘elevating consumer experiences through more direct, personal relationships,’ but speculation suggested that the reason was the second-class treatment given by Amazon in terms of check on counterfeit products sold on their platform. In a survey conducted by Morgan Stanley in 2017, Nike was the most-purchased clothing brand on Amazon, despite Nike not being responsible for any of the sales. The rampant rise of sale by third-party retailers led to not just monetary loss but also of the reputation of the brand-something which was hoped to be solved with the deal. In the past, German sandal company Birkenstock had also decided to pull their products from Amazon on similar grounds.
Amazon is not the only e-commerce marketplace that has been accused of proliferating sales of counterfeit goods- the authorization of which has led to the shift of the roadside grey markets to the comfort of our homes. The supposed legitimacy offered on platforms like Amazon, eBay, Etsy, or even social media platforms like Instagram is not only deceiving innocent consumers into the purchase of these goods but also infringing the hard-earned intellectual property rights of the legitimate product vendors. The existing system in place offers little to none protection to the IP right-holder, who may not have the time nor the resources to track down the manifold unscrupulous third-party sellers who are misappropriating these rights for their own gain. Closer home, American performance footwear brand Skechers filed a case against Indian e-commerce giant Flipkart as well as four third-party retailers for the continued sale of counterfeit Skechers products before the High Court of Delhi.
The law provides us with recourse against the wrong done oneself. The Internet, with its plethora of anonymous users, does provide not only the judges but also the plaintiff with a dilemma- who is the wrong-doer in this situation? Does one attack the intermediary, who is responsible for hosting the infringing material, or does one hunt down the third-party seller, who is taking undue advantage of the goodwill of the plaintiff?
WHOSE WRONG IS IT ANYWAY: INTERMEDIARY LIABILITY
The Internet is a collection of human and non-human agencies who are coming together helps provide it with its current shape and structure. It is the multiple intermediaries available online, who help in completing the transaction between two communicating parties and per Indian law, Section 2(w) of the Information Technology Act, 2000 (hereinafter referred to as the ‘IT Act’) defines an intermediary as a 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, network service providers, internet service providers, web—hosting service providers, search engines, online payment sites, online-auction sites, online-market places, and cyber cafes.’
As mentioned earlier, in the instances of IP infringement over e-commerce platforms and generally over the Internet, it becomes difficult on part of the law enforcement agencies to put the onus of blame on one particular entity. Intermediary liability has been the issue of contention, with both sides putting forth strong arguments in the debate. On the one hand, most regimes in the world have held intermediaries liable for allowing the continued flourishing of individuals engaging in scrupulous activities by continued hosting, transmission, and location of counterfeit goods, on the other hand, one could argue that an intermediary is merely a messenger and not the creator of the infringing content which warrants punishment. The principle of ‘safe harbor protection’ developed and is in place under both Indian and foreign jurisprudence.
Legal Provisions regarding intermediary liability
- Indian Law
The functional difference between various intermediaries does not warrant differential treatment under the Indian legal system. Section 79 of the IT Act provides the aforementioned ‘safe harbor protection’ to intermediaries, primarily on grounds of acting as a facilitator and not in the creation or modification of the data available on them. Under the explanation to the section, network service providers are to be included within the ambit of ‘intermediary’, The standard for due diligence, as stated in Section 79(2)( c) of the IT Act have been elaborated under the Information Technology (Intermediary Guidelines) Rules, 2011 (hereinafter referred to as ‘the Rules’). To prevent misuse of the ‘safe harbor principle’, the intermediary was made liable under the Rules to remove a data/information being used to commit an unlawful act, including infringement, within 36 hours of receipt of information of said infringement in order to claim protection under ‘safe harbor’. In the case of Facebook Inc. v. Surinder Malik , the High Court of Delhi decreed the suit against Facebook and Instagram, two popular social networking websites, to take down any material posted on these platforms which would violate the Plaintiff’s trademark ‘DA MILANO’ and in the event of a doubt, the platforms are under an obligation to inform and confirm with the Plaintiff. The taking down of the infringing content is to be in compliance with the Rules.
On the face of it, these practices may appear contrary to the principles of natural justice, as it does not provide the allegedly infringing party with an opportunity to put forth their arguments, but due to the widespread and somewhat anonymous nature of the Internet, this was willing to be overlooked and the measures were seen as pro-complainant.
- Foreign Law
o European Union
The European Commission, in an attempt to bring together e-commerce intermediaries and right holders, drafted the EU Memorandum of Understanding (hereinafter referred to as ‘MoU’) on the Sale of Counterfeit Goods via the Internet. The stated purpose of the MoU was ‘to establish a code of practice in the fight against the sale of counterfeit goods over the Internet and to enhance collaboration between the signatories including and in addition to Notice and Take-Down procedures.’ The signatories to the MoU included multinational companies like Nike, Mattel, P&G, Amazon, e-Bay, among others.  Under the Directive on Copyright in the Digital Single Market (hereinafter referred to as the ‘EU Directive’), Articles 12 to 14 state that the Member States have the right to mandate intermediaries to prevent or end known infringement.
Case Analysis- Christian Louboutin SAS v Nakul Bajaj 
In the case of Super Cassettes Industries Ltd. v MySpace Inc. and Anr, a Division Bench of the High Court of Delhi held that intermediary liability can only be attracted under the following grounds:
- The intermediary has actual or specific knowledge and not mere constructive knowledge of the infringing material on their website;
- Despite such knowledge, the intermediary has taken no steps towards the removal of such content from their website.
Synonymous with luxury, Christian Louboutin is a French luxury fashion brand synonymous with their black stilettoes with a red sole. Protected as a trademark in several jurisdictions, the ‘red sole’ has been the subject of various litigation across the world to protect their intellectual property- such as the legal battle between Louboutin and Yves Saint Laurent over the use of the color red on the shoe designs of the latter, with the US District Court granting an exclusive right to Louboutin for the use of the color red on the sole of the shoe, but also granted Yves Saint Laurent the right to continue selling shoes with red soles as long as the entire shoe is red in color.
In the case of Christian Louboutin SAS , the Court while adjudicating the alleged infringement on part of the Defendant, www.darveys.com, for permitting the sale of counterfeit goods on their website when the company had been solely selling their products in the country via their authorized dealerships. The Defendant, on the other hand, operated on a membership-based model, where users were granted access solely on the basis of payment of a non-refundable membership fee. However, the High Court of Delhi held that the platform had more responsibility than the conventional ‘intermediary’ within the ambit of the IT Act, as the defendant had control over what can be sold on their website. the continued use of the ‘Louboutin’ trademark as ad-words was an indicator of the knowledge of the trademark previously and currently being held by another entity. The continued sale of the counterfeit goods on the website would amount to aiding and abetting to the infringement, thereby rejecting the defendant’s claims of exemption under the principle of ‘safe harbor protection.’ In the case of L’Oréal , a division bench of the High Court of Delhi opined that whether the e-commerce platform would be liable to be considered as an intermediary is a matter to be decided at the trial stage of the matter and not on the basis of arguments and evidence put forth by both parties.
RECOMMENDATIONS AND THE WAY FORWARD
The easy accessibility to the Internet and the infinite growth opportunities it presents has allowed several individuals and organizations to flourish, but often at the cost of someone’s right. The efforts by the e-commerce platform, no matter how genuine and prudent they might be, have only led to the creation of loopholes using the infinite opportunities provided over the internet. If one were to report a third-party retailer for trading in counterfeit goods on Amazon, their privilege of sale over the platform could be jeopardized, as per the terms and conditions of the company’s Anti-Counterfeiting Policy. It could also potentially lead to withholding of funds or disposal of inventory in possession of the company. But the way around it is as simple as it sounds- create a new retailer profile under different details and continue the sale of the counterfeit goods.
To prevent and prohibit the sale of counterfeit goods on their platform, Amazon announced the launch of a Counterfeit Crimes Unit to proactively go on the offensive against counterfeits sold by third-party retailers and not just block them. The unit is said to comprise of ‘former federal prosecutors, experienced investigators, and data analysts.’ In order to prevent the loss of massive deals with companies like Nike and Birkenstock, a stringent approach to deterrence ought to be adopted.
The current intellectual property regime in India, despite being as well-intentioned as they are, are seemingly inadequate in terms of according protection to not only the sellers but also to the consumers of these goods. Applying the principle in Christian Louboutin SAS, the burden of proof ought to be shifted on the e-commerce platform to ensure the sale of authentic goods. A number of measures such as the issue of certificates of authentication, details of identification, and making the entire approach more consumer-friendly can also be taken. The provisions prescribed in the Draft National E-Commerce Policy, 2019 also propose to shift the burden on the e-commerce platforms, asking them to bring to public knowledge the relevant details of third-party retailers using their platform to sell their products and also provide certificates of authentication.
As a consumer, one can also take precautionary steps towards distinguishing genuine goods with counterfeit goods. One can take into consideration factors such as ratings, price, and most importantly, user reviews.
Through the means of this article, it appears that the role of an intermediary in the case of an e-commerce platform should be both stringent and careful. Despite measures like ‘Brand Gating’ and ‘Amazon Brand Registry’, e-commerce platforms ought to take more a proactive role in terms of protection provided for the sale of genuine goods. However, the ultimate fight against counterfeit goods and infringement of intellectual property requires a collective effort by consumers, the IP rights holders, the retailers, and e-commerce platforms. As good as it may sound on paper, the wild goose chase against e-commerce platforms to prevent and prohibit these wrong makes for good news, but does little to solve the problem. It is only with the collective strides taken that this battle can be fought successfully.
 Patricia Nakache, Why e-commerce is flourishing, Forbes, Aug 3, 2010, https://www.forbes.com/2010/08/02/groupon-facebook-shopstyle-technology-ecommerce-social-media.html#30f895c212be.  Louis Columbus, How COVID-19 is transforming e-commerce, Forbes, Apr 28, 2020, https://www.forbes.com/sites/louiscolumbus/2020/04/28/how-covid-19-is-transforming-e-commerce/#64dbc9d93544.  Supra at 1.  Dr. Rajeswar S. and Sweta Agarwal, A study on impact of e-commerce in India, 6 IJDR 7253, 7254-7256 (discussing the benefits of e-commerce in India).  Ibid.  S Murlidharan, The sale of counterfeit goods is not just an online matter, The Hindu Business Line, Mar. 26, 2020, https://www.thehindubusinessline.com/opinion/columns/s-murlidharan/the-sale-of-counterfeit-goods-is-not-just-an-online-one/article31171431.ece.  Ibid.  A closer look at the Amazon-Nike transformation, Forbes, Jun 23, 2017, https://www.forbes.com/sites/greatspeculations/2017/06/23/a-closer-look-at-the-amazon-nike-partnership/#1ca61915f795  Ibid.  Ibid.  Jason Del Ray, Nike’s breakup with Amazon is a lose-lose situation for everyone — including you, Vox, Nov. 14, 2019. https://www.vox.com/recode/2019/11/14/20965434/nike-amazon-partnership-deal-breakup-counterfeits  Mark Bain, Why Nike will stop selling on Amazon, Quartz, Nov. 13, 2019, https://qz.com/1747795/why-nike-will-stop-selling-on-amazon/  Ibid.  Ari Levy, Birkenstock quits Amazon in US after counterfeit surge, CNBC, Jul 20, 2016, https://www.cnbc.com/2016/07/20/birkenstock-quits-amazon-in-us-after-counterfeit-surge.html.  Roomy Khan, Counterfeits – Amazon, Etsy, eBay, Instagram, And Others Duping Consumers And Damaging Innovation, Forbes, May 10, 2019, https://www.forbes.com/sites/roomykhan/2019/05/10/counterfeits-amazon-etsy-ebay-instagram-and-others-duping-consumers-and-damaging-innovation/#5bf0f47c6002  Ibid  Sagar Malviya, Skechers takes Flipkart sellers to High Court over Fakes, The Economic Times, Dec. 25, 2017, https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/skechers-takes-flipkart-sellers-to-high-court-over-fakes/articleshow/62235842.cms  Talat Fatima, Liability of Online Intermediaries: Emerging Trends, 49 JILI 155, 156 (discussing the role of the intermediaries over the internet).  The Information Technology Act, No. 21 of 2000, India Code (2000).  Supra at 20.  Ibid.  Supra at 19.  Ibid.  Facebook Inc. v. Surinder Malik ,2019 SCC OnLine Del 9887 (India).  Pritika Rai Advani, Intermediary Liability in India, 48, EPW 120, 120-123 (discussing intermediary liability of various facets over the Internet in India). Madeiga T, Reform of the EU liability regime for online intermediaries, EUROPEAN UNION, (2020), https://www.europarl.europa.eu/RegData/etudes/IDAN/2020/649404/EPRS_IDA(2020)649404_EN.pdf  Ibid.  Ibid.  Christian Louboutin SAS v. Nakul Bajaj, CS (COMM) 344/2018 (India).  Super Cassettes Industries Ltd v. MySpace Inc. and Anr, 2011 (48) PTC 49 (Del) (India).  Christian Louboutin S.A. v. Yves Saint Laurent Am. Holding, Inc.,696 F.3d 206 (2d Cir. 2012).  Supra at 29.  L’Oreal v Brandworld and Anr., CS (Comm) 980/2016 (India).  https://sellercentral.amazon.com/gp/help/external/201165970#:~:text=Anti%2DCounterfeiting%20Policy-,Amazon%20Anti%2DCounterfeiting%20Policy,of%20inventory%20in%20our%20possession.  Ibid.  Alana Semuels, Amazon may have a Counterfeit Problem, The Atlantic, Apr. 20, 2018, https://www.theatlantic.com/technology/archive/2018/04/amazon-may-have-a-counterfeit-problem/558482/ Chaim Gartenberg, Amazon launches Counterfeit Crimes Unit to fight knockoffs on its store, The Verge, Jun 24, 2020, https://www.theverge.com/2020/6/24/21302114/amazon-counterfeit-crimes-unit-knockoffs-store-online-investigators  Supra at 29.  Kritika Suneja, Cracking the whip: E-comm policy to deal with online counterfeits, The Economic Times, Jan 29, 2020, https://economictimes.indiatimes.com/news/economy/policy/cracking-the-whip-e-comm-policy-to-deal-with-online-counterfeits/articleshow/73717367.cms?from=mdr  Ganda Suthivarakom, Welcome to the era of fake products, WireCutter, Feb. 11, 2020, https://www.nytimes.com/wirecutter/blog/amazon-counterfeit-fake-products/