Online platforms have revolutionised how goods and services are bought, sold and advertised. However, determining intermediary liability has been a problem in IP infringement disputes involving marketplaces, listing platforms and search engines.
Trademark owners allege intermediaries are liable for preventing or minimising IP infringement; intermediaries say they are merely conduits of information exchange and should not have to regulate third-party conduct. Section 79 of the Information Technology Act, 2000 (IT act) exempts intermediaries from liability for third-party information, data or communication on their platforms. However, they must be neutral facilitators. They may not initiate the transmission nor modify the content and carry out due diligence. If an intermediary participates in, encourages or knowingly ignores infringing activities, it loses such protection.
Delhi High Court, in Indiamart Intermesh Limited v Puma SE, had to determine whether an intermediary was a passive host or an active participant when it dealt with a trademark infringement dispute between global sportswear giant Puma and Indiamart, a business-to-business digital listing platform. Puma sought a permanent injunction, restraining the platform from using its well-known trademark. This included using the mark in any form, as a keyword or as a drop-down menu option during seller registration. Puma claimed that it had discovered counterfeit products bearing its mark being sold on Indiamart. Sellers could select Puma from a drop-down menu as a brand descriptor.
A single judge ruled in favour of Puma, holding that Indiamart’s actions were contrary to section 29 of the Trade Marks Act, 1999. Offering the Puma mark as an option in the drop-down menu during the seller registration process was a use of the mark. Indiamart was not a passive intermediary but an active participant, thereby disallowing it safe harbour protection under the IT Act.
Indiamart appealed, arguing that it was merely an intermediary, listing business profiles and products and services. Its role was to facilitate contact between buyers and sellers and provide visibility. Brand names in drop-down menus were purely descriptive, narrowing search results. The company promptly removed counterfeit listings whenever they were brought to its notice. It therefore met the due diligence requirements of the IT Rules, 2021.
Puma argued that its trademark as a drop-down option encouraged misuse of its brand by sellers, many of whom were not authorised dealers. The lack of verification and stringent due diligence allowed counterfeiters to pose as legitimate sellers. Indiamart’s business model that included revenue generation through enhanced listing services and verified seller labels, made it a stakeholder in the commercial exploitation of the trademark.
The divisional bench found that Indiamart allowed the display of goods described as Puma products by sellers and did not proactively verify those products as genuine. However, the court drew a distinction between platforms facilitating direct sales and those that merely offer listing services. It compared Indiamart with a Yellow Pages Directory rather than to an e-commerce marketplace, holding that Indiamart did not fulfil orders or act as a retailer. Its role was limited to indexing and providing visibility.
As to the use of the trademark under section 29, the court held that merely including a registered trademark in a drop-down menu for classification purposes did not amount to use. To constitute infringement, the use of the trademark must indicate a connection between the goods and the trademark proprietor. Aiding and abetting involves an element of shared intent or collusion, which was absent. Indiamart’s provision of a drop-down menu option containing the trademark was not participation in or inducement of infringement.
Indiamart published terms of use, obtained undertakings from sellers and maintained a grievance redress mechanism. Rule 3(1)(b)(iv) of the IT Rules, 2021, requiring intermediaries to make reasonable efforts to prevent the hosting of infringing content, does not require proactive filtering or verification. Only a response mechanism to address complaints is needed. In allowing the appeal, the court took a balanced view of intermediary liability. It cautioned against extending liability to platforms whose only involvement is hosting third-party content.
