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The Delhi High Court recently observed that IndiaMART is not an e-commerce site, but instead a listing service similar to Yellow Pages Directory. Consequently, the Court noted that providing options to describe sellers’ products by brand name cannot constitute a dishonest business practice, despite the company’s commercial interest in engaging sellers.
“We are unable to read any intent of IndiaMART to encourage the listing of counterfeit Puma products by offering sellers to choose a specific description of their products/services by indicating the brand name associated with their products/services”.
Ultimately, the Court permitted IndiaMART to offer third-party sellers the PUMA trademark for product descriptions. However, it upheld the previous single-judge ruling directing the platform to remove all counterfeiting listings with PUMA marks upon being notified.
Background of the case
In 2021, Puma sought a permanent injunction against IndiaMART hosting third-party sellers on the platform who displayed counterfeited products bearing fake “PUMA” trademarks and registered trademarks. Accordingly, a single judge bench of Justice C. Hari Shankar directed the platform to remove all infringing listings bearing PUMA’s registered trademarks. The judge also prohibited IndiaMART from offering PUMA as a drop-down menu option.
The platform’s use of the “PUMA” mark was equated to trademark violation under Section 29 of the Trade Marks (TM) Act, 1999. Additionally, the judge rejected IndiaMART’s claim for safe harbour under the Information Technology (IT) Act, 2000, citing a lack of due diligence in verification on its part during the onboarding process of sellers. Later, IndiaMART appealed the court order on several grounds.
On the nature of the IndiaMART platform
Indiamart’s argument
IndiaMART contended that the judgement failed to acknowledge the nature of its services. Senior counsel Sandeep Sethi argued that IndiaMART functioned solely as an online discovery platform for various industries and individuals to catalogue their products and services as advertisements to prospective customers. Thereby, it connects buyers and sellers without participating in any negotiations between the two.
court’s ruling: INDIAMART NOT AN E-COMMERCE PLATFORM
As explained above, the Court agreed with this notion, holding IndiaMART’s position as a listing platform. It observed that IndiaMART was primarily responsible for ensuring accurate seller contact details instead of examining the products and services listed, akin to the Yellow Pages Directory. Additionally, IndiaMART was in charge of ensuring sellers spell brand names correctly, thereby maintaining the efficacy of search results for the brand.
In a similar vein, Justices Vibhu Bakhru and Tara Vitasta Ganju noted that the Court’s decision in the previous case of Lifestyle Equities CV & Another v. Amazon Technologies Inc. & Others was inapplicable. While the former dealt with infringement of the ‘Beverly Hills Polo Club’ through copied logos sold by Amazon, it is not applicable for the current case, as IndiaMART renders indexing (listing) services.
On the different revenue models of IndiaMART
INDIAMART’S ARGUMENT
Sethi also contended that IndiaMART derived revenue from its value-added services, which did not rely on monetising PUMA’s trademark. Instead, the platform deployed trademarks to segregate and describe product categories without generating any commercial use.
COUNTER ARGUMENT
PUMA’s counsel, Ranjan Narula, contended that while IndiaMART allows free listings, it monetises the use of registered trademarks by attracting more site traffic. Further, the use of the drop-down menu is akin to a revenue model established via software or algorithm. To explain, such algorithms allow sellers to select the PUMA mark in their listing details and enable it to be displayed whenever a consumer searches for PUMA products.
On the usage of the drop-down menu on IndiaMART
Indiamart’s argument
Further, the counsel argued that referencing PUMA shoes or PUMA in the drop-down menu describes the nature of the products and helps avoid misspelling by sellers. However, the same doesn’t classify as trademark infringement and falls under the exclusion of Section 30, subsection 1(a)(b) of the TM Act. These clauses prescribe that the usage of a registered trademark is permissible in the following cases:
- (a) Following honest practices in industrial or commercial matters.
- (b) Is not taking unfair advantage or is detrimental to the distinctive character or repute of the trademark.
Sethi also contended that PUMA had only flagged 259 of the 2,180 listings under the PUMA brand, which it thought were infringing its trademark.
counter argument
Besides claiming the drop-down feature as a revenue model, PUMA also contended that the usage of a registered trademark was not industry practice. In doing so, Narula equated IndiaMART’s categorisation practice to that of OLX, Amazon, and Flipkart, claiming that it contrasted with the Yellow Pages Directory’s process.
court’s ruling: sellers have a choice
While the platform provides drop-down options, sellers can choose to opt out and type a specific product description in the menu bar. The Court observed that in creating such features, “IndiaMART’s endeavour is merely to create sub-categories for the purpose of facilitating the search”.
On immunity under Section 79 of the IT Act
Indiamart’s argument
Sethi contended that IndiaMART has immunity from liability in cases of third-party content according to Section 79 of the IT Act. He explained that providing options to select a particular brand or trademark in the drop-down menu doesn’t amount to transmission or selection of transmission. For context, exemption from liability as an intermediary doesn’t apply in case the platform engages in the transmission by any means.
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Besides this, IndiaMART has published its rules and regulations, privacy policy, and standard user agreement of sellers following Rule 3 of the IT Rules 2021. The platform also requires sellers to furnish an undertaking, refraining from violating third-party rights. Sethi also argued against the notion of IndiaMART not undertaking ‘reasonable efforts’ under Rule 3(1)(b)(iv) of the IT Rules.
counter argument
PUMA’s counsel argued that IndiaMART didn’t classify as a passive intermediary. Instead, it actively provided sellers with various brand names and value-added services to attract more customers. Additionally, Narula alleged that the platform suggests verified leads through email and WhatsApp in the initial stages.
court order:
The Court overruled a previous order, noting that IndiaMART satisfies the provisions for availing exemption from liability under Section 79. Accordingly, the platform was allowed to continue operating its B2B portal and subsequently the identification of products/services by their brands.
On promoting counterfeited products
Indiamart’s argument
Sethi contended that the drop-down menu only facilitated genuine prospective sellers to opt for the listing. IndiaMART also argued against the proposition that trademarks cause viewers confusion in differentiating between original and counterfeit PUMA products.
counter argument
PUMA’s counsel, Ranjan Narula, referenced the Court’s findings concerning trademark use in the Google LLC vs DRS Logistics (P) Ltd case. The aforementioned judgement observed that the public must be safeguarded from purchasing products from sources other than those associated with the trademark. “Any use of a mark, which is likely to confuse or deceive the user is impermissible and is actionable”, the judgement read.
Additionally, Narula also raised the issue of IndiaMART highlighting certain sellers as “verified” and prioritising them. He explained that this representation would encourage buyers to accept the sellers’ credentials and transact with them. Consequently, the platform aids and abets counterfeiters in peddling their products.
court’s ruling: Indiamart doesn’t encourage counterfeit products
The Court found PUMA’s allegations unfounded, concluding that offering product description options did not encourage the unauthorised use of trademarks. Concerning the verification of sellers, the Judges recalled that only the phone numbers of sellers are verified. Consequently, IndiaMART should prominently indicate the same to avoid deceiving users.
The Court also recommended that IndiaMART incorporate the undertaking (against the display of counterfeit products) in the online registration process. Besides this, the platform must refrain from relisting sellers previously indicted under intellectual property rights (IPR) violations. Failure to do so would classify as defaulting on the due diligence requirements under Section 79(3)(a) of the IT Act.
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