ISP liability for third-party offences online

As the Internet grows in importance, Internet service providers need to tread carefully to avoid acting as intermediaries for others that may be breaking the law. Munish Mehra and Nishchal Anand explain the situation in India.It’s a small world, they say, but as it is getting smaller, the ‘cyberworld’ is getting larger and larger. The Internet has become integral to every sphere of our lives, to the degree that the virtual life can seem more comfortable, quick and convenient. Unfortunately though, the same applies to pirates, counterfeiters, unscrupulous traders and manufacturers, and even a few intermediaries, including Internet service providers (ISPs), that are out to make a quick buck.

As the centre for innovation in technology has moved eastwards, so have illegal counterfeiting activities over the Internet. Though the problem is still nascent in India, trademark and copyright owners are generally ignorant of the scale of infringement over the Internet. However, as counterfeiters get smarter and rights holders get wiser, it will not be long before Internet service providers start to find themselves caught in the middle of disputes between the actual infringers and aggrieved parties. It seems that situations similar to those seen in the West (e.g. with Napster, eBay and Pirate Bay) are likely to arise in India in the coming years.

Though there is no reported Indian judgment or case law to throw light on the subject of ISP liability, it has lately become a hotly debated topic among private practitioners as well as the Indian legislature. The law has evolved very rapidly over the past couple of years, owing to acertain ambiguity in past provision dealing with this subject and also a few instances of online infringement where the role and liability of ISPs became difficult to ascertain. With this in mind, the legislature has very recently amended the section on ISP liability in the Information Technology Act, 2000, making the law clearer.

While considering the liability of ISPs for trademark infringement in India, The Trade Marks Act, 1999 and The Information Technology Act, 2000 are relevant.

Trade Marks Act, 1999

Clause (6) of Section 29 of the Trade Marks Act, 1999 sets out what constitutes use of a registered trademark. Subsection (b) states that use is when an entity that “offers or exposes goods for sale puts them on the market, or stocks them for those purposes under the registered trade mark, or offers or supplies services under the registered trade mark”.

This can be interpreted to include service providers, whether they are ISPs or auction or e-commerce websites, that facilitate infringement by stocking the goods bearing the registered trademarks.

Information Technology Act, 2000

Previously, Section 79 of the Information Technology Act, 2000 provided that no networkservice provider would be liable for any thirdparty information or data made available if it could prove that the offence or contravention was committed without its knowledge or that it had exercised all due diligence to prevent the commission of the offence. This provision was plagued by vagueness and ambiguity.

The explanation provided for this section was equally hazy, defining a ‘network service provider’ to mean an intermediary and ‘third-party information’ to mean any information dealt with by a network service provider as an intermediary.

The provision left much to the imagination of infringers, aggrieved parties, law enforcement agencies and the judiciary. The confusion could have led to situations where trademark owners claimed that auction and e-commerce websites illegally profited at their expense by displaying and/or offering for sale brand name products without permission, while earning revenue through advertisements.

The ISP could have countered that it has no control over what the public (primary infringer) might upload to its website, to try and escape liability. This would have left the judiciary and enforcement agencies conflicted over how to interpret the law.

One recent case concerned Bazee.com, an auction website owned by eBay, which also hosts a direct link to the eBay website. Shortly after the site had been caught allegedly facilitating the peddling of pornographic material involving minors, the police sent a notice to its office about a seizure of fake branded goods allegedly sold over its website.

Acting on information received from an activist, the police raided various shops in Mumbai and arrested 42 shop owners, confiscating counterfeit goods worth more than R1 million ($21,000), including brand names such as Mont Blanc, Piaget, Cartier and Baume & Mercier. According to the police, these shop owners were passing off these goods as genuine and selling them via Bazee.com. However, the police remained undecided about whether or not an action could be initiated against the website. This could be attributed to the unclear nature of the law.

Evolution of IT law in India

To resolve the confusion, the legislature recently amended Section 79 of the act, broadening the definition of an intermediary to specifically include telecom service providers, web-hosting service providers, Internet service providers, search engines, online payment sites, online auction sites, online market places and cybercafes.

The amended section further provides that an intermediary shall be held liable for infringement if it:

• Initiates the transmission

• Selects the receiver of transmission

• Selects or modifies the information contained in the transmission

• Does not observe due diligence

• Conspires or abets or aids or induces the infringement of the copyright

• Fails to expeditiously remove or disable access to infringing material on that resource, without damaging any evidence, on receiving notification of the infringement.

Therefore, the new provision in effect shifts the burden of proof to the accuser, and ISPs will be deemed innocent as long as they adhere to all the other conditions of the law.

However, if on receiving actual knowledge of an offence, the intermediary fails to expeditiously remove or disable all the infringing material without compromising the evidence, liability is bound to arise.

Lastly, there is no standard of ‘due diligence’ prescribed under the act and therefore each case needs to be evaluated on its own merits. It is advisable that companies take basic precautions to ensure that they filter out content that could be in violation of a party’s rights.

Contributory and vicarious liability

Under the general rule, a party is directly liable if it knowingly manufactures or sells infringing products or services.

However, a supplier of components that end up in an infringing product may still be liable under the doctrine of contributory liability, if it has knowledge of the infringement.

The same is true for businesses manufacturing or producing packaging material for infringing products or owners of business premises where infringing products are sold. In the recent case of Fonovisa v. Cherry Auction, landlords in flea markets were held to be liable for counterfeit products because they had:

• Knowledge of the infringing products being sold

• Charged premium rents due to this knowledge and therefore profited from the business

• The power to prevent the wrong and did not do so.

The legislature’s intent seems clear from the similarity between Section 79 of the Information Technology Act, 2000 and the common law principles of contributory liability laid down by courts throughout the world.

Conclusion

Though there is no case law in India as yet that deals with the issue of ISP liability, in future, if the judiciary is faced with such a situation, the legislature has armed it with a provision that can be interpreted liberally when looking into the particular facts of each case.

Munish Mehra is a managing associate at Anand and Anand. He can be contacted at:  munish@anandandanand.com

Nishchal Anand is an associate at Anand and Anand. He can be contacted at: nishchal@ anandandanand.com