PUMA SE Vs. Indiamart Intermesh Limited

Introduction

In a recent landmark judgment, the Delhi High Court shed light on the pivotal role played by e-commerce giant IndiaMART, emphasizing the need for due diligence in safeguarding intellectual property rights. The case of PUMA SE v. IndiaMART Intermesh Limited (IIL)[1] brought to the forefront the implications of including PUMA’s trademark in IndiaMART’s dropdown menu, allowing prospective sellers to select the brand without requisite scrutiny. The Hon’ble Court not only discerned a prima facie case of trademark infringement against IIL but also issued a compelling directive for the removal of all infringing listings featuring PUMA’s registered trademarks on the platform. Furthermore, the judgment meticulously delineated the boundaries within which one can assert the “safe harbor” protection from intermediary liability. This significant legal development sets a precedent for navigating trademark protection and intermediary responsibilities in the dynamic landscape of e-commerce.

Background

In the current legal scenario, a conflict has arisen between Puma SE (the Plaintiff), a known sportswear brand, and IndiaMART Intermesh Ltd. (“IIL”), an online marketplace. Puma contends that IIL is violating its registered trademark “PUMA” by facilitating the listing of counterfeit Puma products through the inclusion of “PUMA” as an option in its dropdown menu. This functionality allows potential sellers on IIL’s platform to choose the brand they intend to sell, thereby allegedly contributing to violation of Puma’s intellectual property. Puma also claimed that IIL’s e-commerce website is being used to peddle counterfeit goods of the Plaintiff and IIL, by not providing any safeguards or procedure for prior verification for such practices has been “aiding, abetting and facilitating such infringement and passing off”.

Conversely, IIL asserted its entitlement to safe harbor protection under Section 79 of the Information Technology Act, 2000 (referred to as the “IT Act”), maintaining that it functions solely as an intermediary and bears no responsibility for the conduct of third-party sellers. Regarding the Plaintiff’s allegations of trademark infringement, IIL contends that one of the essential conditions to establish trademark infringement under Section 29 of the Trademarks Act, 1999 (referred to as the ‘Act’), is the demonstration of substantive ‘use’.

Issues

The Court framed the following issues for consideration of the issues involved here:

1. Whether use of the trade mark as choices in the drop-down menu amounts to the use of those marks for the purposes of Section 29 of the Act?
2. If so, whether such use is that of the seller on the IndiaMART platform or by IIL as well?
3. Whether the use of the trade mark as a search option in the drop-down menu per se amounts to infringement of the trade mark?
4. If so, whether IIL is absolved of its liability in respect of use of the trade mark as a search option in the drop-down menu by virtue of being an intermediary under Section 79 of the IT Act?

Observations Of The Court

The Court squarely relied upon the judgement of the Division Bench, Delhi High Court in the case of DRS Logistics v. Google India Pvt ltd[2] [hereinafter referred to as “DRS Case”] since both cases involved the use of trademarks in online platforms and the liability of intermediaries under the Information Technology Act and drew parallels between the dispute at hand and the observations made in the DRS Case.

Issues A & B: Whether use of the trade mark as choices in the drop-down menu amounts to use of those marks for the purposes of Section 29 of the Act? If so, whether such use is that of the seller on the IndiaMART platform or by IIL as well?

The use of the registered trade mark, in order to constitute “use of a mark” within the meaning of Section 2(2)(b) and 2(2)(c)(ii) of the Act, is not limited to use in a visual form on goods, but would also include use in relation to goods in any form whatsoever.

• The phrase “in advertising” as employed in Section 29(6)(d) does not imply “in an advertisement” and that a registered trade mark can be used as a keyword to trigger an advertisement of goods or services and the same would amount to use of the trade mark in advertising.
• The use of the Plaintiff’s registered trade mark as one of the drop-down choices would amount to “use” of trademark as when it appears as such, the PUMA mark is in fact being visually represented.
• The Court after reviewing the procedure prescribed for a seller to register himself on IndiaMART, concluded that IIL plays an active role in promoting the use of trademark by suggesting the choices available to the sellers in the drop-down menu.
• The mere fact that the decision to display seller’s product whenever the consumers seeking to purchase “PUMA SHOES”, is automatic, does not absolve the role played by IIL in the entire exercise, as it is IIL who is the architect of its website and also of the drop-down menu feature contained on the website.
• The Court found that IIL’s participation in the entire exercise is active and not limited to merely providing tools and the technical framework for prospective sellers to choose an option from the drop-down menu, since IIL determines, by use of its software and algorithms, the products which are displayed for sale on the IndiaMART platform.

Issue C: Whether the use of the trade mark as a search option in the drop-down menu per se amounts to infringement of the trade mark?

• On this issue, the Court deviated from the decision rendered in the case of DRS logistics and differentiated the present case with the said case.
• It stated that Google, in the DRS case cannot be held liable for infringement U/S 29(1) as “the keyword as used by Google does not perform any primary function of identifying the source of the goods or services”. On the other hand, the use of PUMA in the drop-down menu by IIL is obviously intended to indicate a connection in the course of trade between the goods of the seller, who selects the “Puma” option and the Plaintiff, as the owner of the PUMA trade mark.
• For instituting case of infringement U/S 29 of the Act, the “use” must have resulted in internet user being confused, which is exactly what has happened in the present case. IIL’s IndiaMART platform lacks verification for potential sellers of PUMA merchandise, leading to confusion and counterfeit products being displayed, as there is no verification process for the authenticity of sellers.
• The Court while rejecting IIL’s argument that mere offering the Plaintiff’s registered trademark as a drop-down option is unlikely to cause confusion as there is no “invitation”, observes that there may not be any invitation for counterfeiters to register as genuine PUMA dealers, but IIL has not put in checks place to minimize misuse thereby not fulfilling the requirements of Rule 3(1)(b) of IT Rules, 2023.
• Thus, the Court held that the likelihood of consumer deception is considerable as a consequence of IIL providing the Plaintiff’s registered trade mark as one of the drop-down options to a prospective seller. The Court accordingly concluded that there is a prima facie case of infringement of Plaintiff’s registered trademarks by IIL.

Issue D: If so, whether IIL is absolved of its liability in respect of use of the trade mark as a search option in the drop-down menu by virtue of being an intermediary under Section 79 of the IT Act?

• IIL’s function extends beyond providing access to the communication system for consumers on the IndiaMART platform. It also facilitates sellers selling their products and receives a portion of the proceeds. Therefore clause (a) of Section 79(2) of the IT Act would not be applicable.
• Clause (b) would also not apply, as IIL by providing select trademarks of reputed brand owners as options in its drop-down menu, to prospective sellers, effectively initiates and selects the receiver of the transmission.
• Clause (c) of Section 79(2) is also not applicable as IIL has clearly not observed due diligence while discharging its duties under the IT Act
• The Court noted that there is a prima facie indication that IIL actively facilitated the commission of the illegal act of counterfeiting by serving as a platform for such activities. As a result, the applicability of section 79(1) of the IT Act was deemed inappropriate in this context.

Conclusion

This case provides a holistic perspective on the sellers evading liability for selling counterfeit products and underscores the active involvement of e-commerce platforms in fostering the infringement of registered trademarks. The Court, with this judgement, presents a balanced view and observed the need for e-commerce websites to have proper safeguard mechanisms, by clarifying that-

“There is nothing inherently illegal in IIL providing a drop-down menu from which prospective sellers, on the Indiamart platform, can select the brand which they intend to sell. If, however, there are not, in place, sufficient checks and balances to prevent counterfeiters from misrepresenting themselves as genuine sellers, the protocol cannot withstand judicial scrutiny.”

[1] CS(COMM) 607/2021.

[2] 2023 SCC OnLine Del 4809.