The role of an Intermediary

Palak Katta | Unitedworld School of Law, Gujarat | 18th June 2020

Kent RO Systems Ltd & Anr. v. Amit Kotak & Ors.(2017)

It is said, “With great power comes great responsibility”. This statement appropriately applies to the online business stages, which have gained a wide range of exchange, trade and organizations. The commitment of internet business has given the world sharp number of chances and resources. However, there are sure protects that should be followed in order to guarantee that current organizations and exchanges are not antagonistically affected by the development of online business, without imperative checks set up. The current case features the contention that can emerge between one such existing type of business/exchange viz., Direct Selling Businesses and web based business stages. The legal complexities in this conflict involve intellectual property rights, information technology laws and other applicable guidelines.

An ‘intermediary’ has been defined in Section 2(w)^[1] of the Act as “any 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, web-housing service providers, search engines, online payment sites, online auction sites, online market places and cyber cafes”. 

BACKGROUND:

On Jan 18,2017 a solitary Judge of Delhi High Court pondered on the degree of liabilities and privileges of an intermediary on account of Kent RO Systems Ltd and Anr. v. Amit Kotak and Ors. Kent RO and Mr. Mahesh Gupta (Chairman and Managing executive of Kent RO Systems Ltd.) had sued for perpetual order to control Mr. Amit Kotak (Defendant 1) from encroaching its registered designs and e-Bay India Private Limited (Defendant 2) for channelizing and supporting in the plan encroachment by Mr Amit Kotak and others by being a mediator. Other than the relief of injunction, Kent RO had likewise sought the relief of rendition of accounts and recuperation of harms from the two Defendants. On December 21, 2016 the Single Judge directed eBay by method of ex-parte order to block access to all the URLs from which the encroaching items were professed to be sold and given summons to the two Defendants. The Single Judge, on the following hearing date, while conveying its judgment for the most part talked about the forces/furthest reaches of a middle person or an intermediary while facilitating any contents on its gateway which may be infringing.

FACTS:

The Plaintiff, Kent RO Systems Ltd., is a producer of water purifiers and has looked for protection of its water purifier frameworks by getting design registrations under The Designs Act, 2000. Respondent No.2, eBay, is a web based business stage/entryway through which dealers of different items carry on their business by exhibiting just as selling their items. Defendant No.1, Amit Kotak, is a producer and additionally merchant of water purifier systems who offers his merchandise to different clients through the site of the Defendant No.2. 

The Plaintiffs before recording a suit, had brought into the notification of e-Bay, the infringement brought about by Defendant No. 1 just as of e-Bay and a few other people who were comparably offering available to be purchased and selling water purifiers which were infringing the Intellectual Property Rights of the Plaintiffs. E-Bay reacted to the Plaintiff, expressing that they had evacuated all the items complained of. However, the Plaintiffs found that countless other encroaching items were all the while being sold and offered available to be purchased on the site of e-Bay.

The Plaintiffs filed the suit for permanent injunction against the Defendants seeking the following reliefs:^[2]

1. To restrain the Defendant No. 1 from infringing the registered designs of the Plaintiffs;
2. To issue directions against e-Bay to take down all products infringing the registered design of the Plaintiffs;
3. To issue prohibitory injunction against e-Bay, from allowing products infringing the registered design of the Plaintiffs to be offered for sale and sold from the portal of e-Bay;
4. To render the accounts of profits made by both the Defendants.

For the first time the suit came up on 21st Dec, 2016, where court issued order to both the Defendants and by method of an ex-parte request e-Bay was directed to square access to the Uniform Resource Locators (URLs) from which the encroaching items were professed to be sold. 

The start of the judgment by the Single Judge on January 18, 2017, clarified that the Defendant No. 1 had no issue with the suit instituted by the Plaintiffs as long as they surrender their case for harms and accounts, which was agreeable by the Plaintiffs. From there on and subsequently, the Single Judge passed a decree in favour of the Plaintiffs and against the Defendant No. 1 and guided both these parties to endure their own expenses. 

Nevertheless, no directions were given by the Single Judge against the e-Bay which were looked for by the Plaintiffs in the wake of considering the realities and after deliberating on the provisions and rules of the Information Technology Act, 2000. Both the parties took different arguments.

The issue that prevails is- 

Whether the defendant being an intermediary can be obligated to remove content or refrain from publishing a content of infringing character on its own.^[3]

The Plaintiff argued relying 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 such manner, depended on Section 79 of the IT Act which shields an intermediary from lawful obligation for any outsider information facilitated by him as long as the mediator’s capacity is restricted to giving access to a communication system over which data made accessible by third parties is hosted and doesn’t initiate or alter the data contained in the transmission thus long as it sees due ingenuity while releasing his obligations under the Act and the IT Intermediary Rules endorsed for this benefit.^[4]

COURT’S DECISION:

The Delhi HC said that under the IT Act, an intermediary is obligated to remove / disable the goods / information hosted on its portal only on receipt of an order from the relevant governmental agency or pursuant to a court order. The Delhi HC held that an intermediary should not “on 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 Delhi HC likewise held that, it is the court’s power to decide if an IP right has been encroached or not, and an intermediary is not in the position to decide this, nor it is had with the necessary ability for such an assessment. The Court also accepted the fact that an obligation imposed on intermediaries to proactively remove infringing listings would bring the business of the intermediaries to a halt. The Delhi HC also interpreted the IT Act and stated that the intent of the legislature to place a limit on such intermediary liability was clear as an intermediary is only obligated to perform its due diligence obligations such as informing its users not to host, display, upload, modify, publish, transmit, update or share any information that is obscene, defamatory, unlawful or is infringing the intellectual property of third parties, etc.

Based on the previously mentioned, the Single Judge discarded the suit against e-Bay and guided the Plaintiffs and e-Bay to hold up under their own expenses. The court did not give any headings looked for by the Plaintiffs against e-Bay.

ANALYSIS:

It must be understand that intermediaries are required to announce its strategy and exhortation its clients not to have any data in regards to the encroaching items on their site and further to evacuate any data in regards to the infringing items within 36 hours of receipt of a complaint by an oppressed right holder. 

The intermediaries are, however, not equipped to screen all information being hosted on their portal for infringement of the rights of all those persons who have at any point of time complained to them.

CONCLUSION:

The Court’s interpretation of the IT Intermediary rules and the applicable provisions of the IT Act is commendably exact and the decision has come as a help to intermediaries. In any case, it ought to be noticed that SC in its order in Sabu Mathew George Vs. Union of India, referred to “auto block” and constitution of an “In House Expert Body” by middle people to recognize on their particular stages, commercials of pre-birth sex determination diagnostics. Therefore, this specific commitment of content expulsion, upon the intermediaries relies on the very idea of content facilitated by the intermediaries. In any case, as regards the infringement of IP rights, the Court appropriately inferred that an intermediary is obliged under the IT Rules to expel the encroaching content just on receipt of a grievance and not suo moto.

^[1] Information Technology Act, 2000

^[2] https://www.lakshmisri.com/insights/articles/design-infringement-liability-of-intermediary-and-information-technology-act/# accessed on 22 May, 2020

^[3] http://libertatem.in/law/intermediary-act-not-required-take-action-ipr-infringement/ accessed on 22 May, 2020

^[4] https://www.candcip.com/single-post/2017/07/04/The-Middle-man-Liability-Conundrum-An-analysis-of-the-judgement-of-Delhi-High-Court-in-Kent-RO-Systems-Ltd-vs-Amit-Kotak-Others accessed on 22 May, 2020