Intermediaries entitled to safe harbour protection unless “active role” is revealed

Introduction

Recently, in the case of Flipkart Internet Private Ltd. v. State of NCT of Delhi & Anr, the Delhi High Court quashed an FIR against the e-commerce platform “Flipkart”. While noting that the “safe harbour” provision extends even in cases involving criminal prosecution, the Court ruled that unless an active role is disclosed in the commission of the offences, an intermediary would be entitled to claim protection under Section 79 of the Information Technology Act, 2000.

Background

In the present suit, instituted by Ashish Girdhar (hereinafter the “Respondent”), Managing Director of Sanash Impex Pvt. Ltd., an FIR was filed against Flipkart (hereinafter the “Petitioner”), alleging that unauthorized persons were selling fake products under the trademark ‘DC DERMACOL’.

As per the Respondent, DC DERMACOL is a product of a highly reputed Czech brand and Sanash Impex Pvt. Ltd had exclusive rights for sale of DC DERMACOL cosmetic products in India. It was the case of the Respondent that sale of fake DC DERMACOL products was being carried out on the Petitioner’s platform as well as through Amazon India.

Accordingly, a complaint was registered against the Petitioner for commission of offences under Sections 103 and 104 of the Trade Marks Act, 1999 and Section 63 of the Copyright Act, 1957. Subsequently, the present Petition was filed before the Court.

The Petitioner contended that since it was an intermediary, it was not liable for any third-party information data, or communication links made available or hosted on their platforms under the ‘safe harbour’ provisions. 

It was contended that in the light of the Apex Court ruling in Shreya Singhal v. UOI, the Petitioner was under no obligation to remove any material from its portal until and unless a Court order and/or notification by the appropriate Government or its agency was served upon the Petitioner. It was asserted that the Petitioner complied with the obligations under the Information Technology (Intermediary Guidelines) Rules, 2011. As per the said Guidelines, the Petitioner was only obligated to only to post a Policy indicating that certain kinds of material were impermissible to be posted on its platform.

The Respondent, on the other hand, argued that the Petitioner cannot rely on the Shreya Singhal judgment as the case was related to the ‘freedom of expression’ and Section 66A of the I.T. Act., the present case pertains to the question of ‘freedom of trade’. It was averred that under the I.T. Guidelines, once actual knowledge had been received, there was no necessity for a Court order before removing or disabling access to the offending sites through which fake products were being sold. Further, it was contended that the Petitioner had acquired actual knowledge in this case. It was affirmed that over 33 emails were sent, and the Petitioner did not choose to remedy the situation and thus, there was no adherence to “due diligence”. Therefore, no immunity could be claimed by the Petitioner.

Findings of the Court

The Court at length discussed the provisions of the I.T. Act, including the definition of an intermediary. Indeed, the e-market portals fall under the definition of intermediaries and are exempted from the liabilities as provided under Section 79 of the Act. 

The Court held that “the intermediaries have been granted safe harbour qua civil liability, and when a higher standard of culpability is required for a criminal prosecution, such “safe harbour” should be available even in respect of criminal prosecution. Thus, unless an active role is disclosed in the commission of the offences complained of, the intermediary would be entitled to claim protection under Section 79 of the I.T. Act.”

The Court further affirmed that “It is trite that the standard for fixing criminal liability is far higher than that under civil law, one requiring proof “beyond reasonable doubt” and not just a “balance of probabilities”. For instance, to establish criminal liability for negligence, the standard of proof is set much higher than for “civil liability” under the law of Torts for negligence. There is no reason why that higher standard should not be available to Courts to determine whether an intermediary would be liable under the criminal law for action or inaction”.

Accordingly, when compliance with the ‘due diligence’ requirement is evident, ex facie, the exclusion of liability would include exclusion from criminal prosecution.

The Court admitted that the Petitioner complied with the Guidelines by putting it on their ‘Terms of Use’ and thus, due diligence has been complied with. Further, the Court held that it cannot be asserted that ‘actual knowledge’ requiring removal of access can be derived on the complaint submitted by a party, without a Court order. The claim to a trademark or copyright is often a stoutly contested affair even before a civil Court and therefore, the intermediaries are certainly not situated to determine the correctness of a claim by a complainant to a trademark or copyright.

Thus, it was proclaimed that in the present case, the registration of an FIR against an intermediary would lead to miscarriage of justice. Therefore, the Court allowed the present petition and quashed the FIR against the Petitioner. However, further investigations were not barred in order to ascertain the identity of infringers and/or unauthorized sellers of the products of the Czech company.

Conclusion 

This case is a testament to the Indian jurisprudence on intermediary liability. Most often than not, courts have allowed intermediaries to seek respite under the safe harbour provision, until an active role in the commission of offence is determined. In a similar case in 2021, the Karnataka High Court quashed the criminal proceedings against the e-commerce platform Snapdeal. It was affirmed by the Court that an e-commerce marketplace being an intermediary is not liable for any action or inaction on the part of a vendor or seller. Certainly, the Delhi High judgment is significant in determining the extent of intermediary liability exemptions.

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