Intermediary Liability: High Court Relief For E-Commerce Platforms

In a welcome ruling for e-commerce platforms, recently the Delhi High Court cleared the air around the liability of an intermediary under the provisions of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

According to the high court, an intermediary—Flipkart, in this case—is not liable to take action against a copyright infringer just because it received a complaint from one of its users. According to the court, the IT Rules only require it to act with due care while discharging its duty.

This provides much-needed clarity on the duty of an intermediary in cases of copyright infringement, as the intermediary guidelines of 2021 do not deal with this in express terms, says Harsh Walia, partner at Khaitan and Co.

In the present case, the court was hearing a petition filed by Samridhi Enterprises, a manufacturer and seller of car covers, against the e-commerce platform Flipkart Internet Pvt. and others.

Samridhi Enterprises told the court that it has been in the business of manufacturing and selling car covers under the trademarks ‘Autofact' and ‘UK Blue' on Flipkart and other such platforms since 2018.

The business, according to it, was satisfactory until it noticed a sudden dip in sales in July 2022. This led it to discover other entities selling similarly designed products on the Flipkart portal. This amounted to copyright infringement, Samridhi Enterprises argued.

It highlighted that Flipkart didn't do anything to stop these infringers, even though the company sent several emails telling the platform about the problem. The platform, in turn, suggested they approach the court to seek redress of these copyright infringement claims, Samridhi Enterprises told the high court.

This inaction, according to it, constitutes a violation of Flipkart's obligations under the Intermediary Rules, 2021. Flipkart's grievance officer should have disposed of the complaint in a timely manner, it said.

The high court disagreed saying the 2021 rules require the platform to inform the infringer about its policies and warn them not to upload any information that might infringe the intellectual property rights of others. Flipkart, according to the court, had done what the rules required it to do and therefore cannot be held liable.

The court also looked at the erstwhile intermediary guidelines from 2011 to show that the legislature's goal had changed when it came to intermediary liability. While the erstwhile rules required them to take action against infringers within 36 hours, the present guidelines do not require them to do so, significantly diluting the liability of intermediaries, it held.

Intermediaries are not statutorily obligated to take down such non-compliant content, says Nusrat Hassan, managing partner at Link Legal. They are only required to immediately comply with any court order or a direction from appropriate government agencies, he said.

This will bring great relief for e-commerce platforms which are burdened with frivolous and excessive take-down requests, Walia said.

On the point of whether such platforms can be made liable under their own policies, the court held that such an argument can't be sustained when the policy itself is merely directory and not mandatory.

This points us towards a visible gap in the existing legislation, said Hassan.

The lawmakers should take note of this gap and provide for appropriate measures to address this issue, he said.