‘Safe harbour’ to Flipkart both for Civil and Criminal liability

Flipkart Internet Private Limited (Flipkart), the well-known e-commerce entity has filed this writ petition before the Delhi High Court to quash the First Information Report (FIR) registered against it under Sections 63 of the Copyright Act, 1957 and Sections 103/104 of the Trademarks Act, 1999, and all proceedings thereto.

The criminal proceedings were initiated on the basis of a complaint filed by Mr. Ashish Girdhar, Managing Director of Sanash Impex Pvt. Ltd, alleging that unauthorized sellers were selling DC Dermacol branded products on Flipkart and Amazon’s portal.

It is stated that DC Dermacol is an international brand that has worldwide repute in relation to skin makeup. Sanash Impex has the exclusive and absolute right to sell Dermacol cosmetic products in India, both online and off-line. It is further alleged that Flipkart in connivance with unauthorized persons were selling fake Dermacol branded products, through their portal, thus, an FIR was registered.

Flipkart contends:

  • They are an ‘intermediary’ as defined under the Information Technology Act (Intermediary Guidelines) Rules, 2011. Thus, protected under Section 79 of the I.T. Act (Exemption from liability of intermediary), which provides a ‘safe harbour’ to intermediaries from liabilities for posting of material by third parties on their platforms.
  • There is no obligation to remove any material from its portal unless there is a court order to that effect.
  • In the instant case there is no civil proceedings and no court order as such, thus, the FIR is malafide.
  • They have complied with the ‘due diligence’ obligations under the law and thus, entitled to ‘safe harbour’ protection.

Respondents counter the contentions on the following:

  1. There is no need for court order before which the offending material can be taken down. As per IT guidelines, and once Flipkart receives information, they had to take down the offending sites selling fake products. Out of the ten sites complained, Flipkart had taken down four without any court order, thus, they cannot insist on court order in relation to other six.
  2. There is no adherence to due diligence and Flipkart cannot claim immunity.

Court’s ruling

  • The Court considered and discussed the role of intermediaries, the due diligence to be exercised and the concept of safe harbour provision. The court noted that the issue in the instant matter was whether ‘due diligence’ requirement under the I.T. Guidelines would render the intermediary eligible for exemption from criminal liability also.
  • The court observed that:
    • The threshold for fixing criminal liability is on a higher pedestal than that under civil law by requiring proof beyond reasonable doubt and not on balance of probabilities.
    • Intermediaries are given ‘safe harbour’ in relation to civil liability and considering the higher pedestal necessary for a criminal prosecution, such ‘safe harbour’ should be applicable even in respect of criminal prosecution.
    • E-commerce platform can claim protection as an “intermediary” under Section 79 (Exemption from liability of intermediary) of the IT Act, when there is compliance with the “due diligence” requirement under Rule 3 (Due diligence to be observed by an intermediary) of the IT Guidelines.
    • Unless a direct role is disclosed in the allegations raised against Flipkart, it would be entitled for protection under Section 79 (exemption from liability of intermediary) of the I.T. Act.

In the instant case, admittedly, Flipkart has complied with the I.T. Guidelines by putting it on their terms of use. Moreover, the FIR has been lodged only against Flipkart and another and not against other sites or entities, allegedly selling fake and unauthorized products. Thus, without determining the rights of those other sites to sell the products, it cannot be held Flipkart has committed any offence, leave alone under the Copyright Act or the Trademarks Act.

In light of the above, the High Court concluded that the registration of the FIR against Flipkart would lead to miscarriage of justice and accordingly quashed the proceedings.

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