The High Court of Delhi has answered in positive the question as to whether the sale of a Direct Selling Entity’s products on e-commerce platforms violates the entity’s trademark rights or constitutes misrepresentation, passing off and results in dilution and tarnishes the goodwill and reputation of the entity’s brands.
The High Court observed that sellers/platforms must take consent of the Direct Selling Entities to offer, display and sell the latter’s products on their platforms, in compliance with clause 7(6) of the Direct Selling Guidelines, 2016. It also took note of the fact that under the garb of selling genuine products, completely tampered products were being sold on e-commerce platforms.
It was held that the brand equity is considerably diluted by such unbridled sales from unauthorized sources, especially when platforms are not willing to take responsibility for the sale on the ground that they are intermediaries and when the so-called sellers are unknown, untraceable, unauthorised and dubious.
The Court in the case of Amway India Enterprises Pvt. Ltd. v. 1MG Technologies Pvt. Ltd. was of the view that in order to be able to use the Direct Selling Entity’s / Plaintiffs’ marks, for advertising, promotion and to depict the Plaintiffs as the source of the products, on the websites, the products have to be genuine, untampered and consent would be required.
It was held that in the absence of the same, there is clear infringement of the Plaintiffs’ trademarks and the doctrine of exhaustion does not come to the aid of the websites/platforms.
On the question as to whether e-commerce platforms are intermediaries and are entitled to protection under the safe harbour provided in Section 79 of the Information Technology Act and the Intermediary Guidelines of 2011, the Court was of the view that in order for the platforms to continue to enjoy the status of intermediaries, subject to adjudication at trial, the due diligence requirements would have to be met and complied with, as per the platforms’ own policies, and as per the Intermediary Guidelines, 2011.
It was observed that if the intermediaries have to be exempt from liability, they ought to satisfy the conditions contained in Section 79(2) and should not fall foul of Section 79(3) of the IT Act.