Copyright

Westland v. Flipkart – Online Marketplaces and Questions of Intermediary Liability


(Image Source: https://flic.kr/p/oZb8fu)

(Image Source: https://flic.kr/p/oZb8fu)

Intermediary liability is something that is close to our hearts here at SpicyIP, which is why we have covered it on multiple occasions, stressing its importance repeatedly. Our previous posts on this topic are available here, here, here, here and here. This post focuses on a new case that has come up in this context – that of copyright infringement liabilities for e-commerce platforms. Specifically, I’m going to be dealing with Tata Group’s Westland’s case against Flipkart for selling Amish Tripathi’s Scion of Ikshvaku on its platform. [Long post ahead]

Facts

The facts of this issue, to be frank, are a bit confusing. As per the Economic Times report, Westland has argued that it has signed a two-month exclusive deal with Amazon for the sale of the book in question, and that Flipkart has violated the Copyright Act and the IT Act by selling the same on its platform.

The ‘ridiculousness’ of this case arises from the fact that, as per the limited facts given in the report, it would seem that this is a breach of an exclusive distribution contract on part of Westland, and not even a copyright violation! (If our readers have more information on this, please do let us know!) Secondly, even if sellers were selling the book on Flipkart, that’s the point – sellers were selling the book, and not Flipkart. They are therefore not directly liable by any count. The question, therefore, becomes one of secondary liability, i.e., intermediary liability.

The Legal Position

Ever since April, no discussions on intermediary liability laws in India can be had without discussing the Shreya Singhal judgment. The judgment drastically changed the face of intermediary liability in India, switching us from and notice-and-takedown procedure to a government-order procedure. But crucially, as Rupali notes in the post linked above, the Supreme Court left S. 81 of the Information Technology Act untouched. Which makes sense – the Court was dealing with Free Speech, and S. 81 deals with copyright, and the two aren’t related at all… no, wait. That’s not quite right, is it?

But before we come back to that in just a few seconds, let’s see what the law here actually is. S. 81 starts with a non-obstante clause, and states that nothing under the IT Act shall restrict ‘any rights conferred’ under the Copyright Act which has been held to have precedence over S. 79,. Now, S. 52 of the Copyright Act itself provides certain immunities for intermediaries – but, crucially, these immunities seem to be limited to digital content, which can be ‘stored’ or ‘cached’. Thus, they arguably do not extend to the ‘sale’ of products through intermediaries. Here, S. 51 of the Copyright Act read with S. 63 of the same makes it an offence to ‘knowingly’ abet the infringement of a copyrighted a work, ‘infringement’ here including ‘sale’. Thus, arguably, Flipkart is not protected by the intermediary liability rules insofar as the infringement of the Westland’s copyright is concerned, under the Copyright and IT Acts, both – because they don’t exist.

The central requirement of S. 63 of the Act for infringement or the abetment of the same, though, is that the actions must be made ‘knowingly’; i.e., with the knowledge of the infringement. It is here, in the requirement of ‘knowledge’, that we find a bare, nascent seed of the immunities necessary for intermediaries in the modern age to be extended even to e-commerce platforms that deal in sales of physical products. A seed we can only hope will be nurtured and not uprooted.

The Problem, and the arguments

But of course, this brings us to the ‘why’ of it. The reasons for this are myriad, but let’s focus on the most relevant. As I’d touched upon earlier, there is a quite definite and quite powerful link between freedom of speech and intermediary liability, something we at SpicyIP have spoken about at length. Intermediary liability creates a chilling effect on the intermediary, making it less and less likely that they’ll host content that is legal grey areas, thereby hampering a) the speech or the speaker, here possibly the author of a book, and even the seller’s right to trade and commerce and b) the amount of choice the listener gets in deciding what to listen to, or in this case the amount of choice he has in his purchases. Thus, it is only the first of a line of dominos, the fall of which affects our fundamental rights and our daily lives.

The most crucial legal argument, here, lies perhaps in one of the oldest cases on provisions for intermediary liability and the Internet, the US Supreme Court’s Cubby v. CompuServe Inc. The SCOTUS’s conclusions are herein admittedly mostly in a free speech context, but are incredibly relevant as the Court tested CompuServe on the whether it had ‘knowledge’ of the illegal activity only, similar to the S. 63 of the Indian Copyright Act, as the US lacked proper intermediary guidelines back then. And in this context, the SCOTUS found that it would be impractical to expect CompuServe to police all the content on its website, and that it should not be held liable for the offending content since it did not have knowledge of it. There are, of course, cases from multiple jurisdictions that have found the intermediary guilty, but they would seem to be, on the basis of available facts, inapplicable under the Copyright Act.

The question, then, turns on ‘knowledge’. Like CompuServe and any other intermediary, Flipkart here, cannot police each and every product that is put on its site for sale for copyright infringement – and it doesn’t make economic or practical sense for it to do so. Flipkart can also quite definitely, in my opinion, not keep an eye out for every exclusive licensing contract in India – contracts it isn’t even a party to – and ensure that the users of its platforms don’t violate that! This would harm not only the e-commerce platforms, but the consumers as well, in the long run.

Of course, all the facts about the Flipkart case are not clear yet, and the actual events may reveal some complicity on part of Flipkart. But switch ‘Flipkart’ for Amazon or any other online marketplaces that deals with sales of physical products, and the argument still holds true. The Shreya Singhal judgment brought to us in India a sort of clarity and freedom in online speech that we desperately needed. I would argue that we need stronger intermediary Safe Harbour principles for e-commerce platforms under Copyright laws, with or without sale of physical content, just as badly.

12 comments.

  1. Prashant ReddyPrashant Reddy

    Hi Kartik,

    Don’t you think the issue of ‘first sale’ and exhaustion are perhaps more relevant than the issue of intermediary liability in this case? The Copyright Act recognizes the first sale doctrine – it gives the copyright owner the limited right “to issue copies of the work to the public not being copies already in circulation”. So once Westland has put the books into circulation by selling it to retailers, those retailers are entitled under the law to sell the book as they wish to without any encumberances. Whether they wish to sell it on the internet or the real world is up to them – they are not bound by the contract Westland has with Amazon (no privity of contract).

    Of course, it would help if we had more clarity on the facts.

    Regards,
    Prashant

    Reply
  2. Kartik Chawla Post author

    Hey Prashant!

    First sale would definitely be relevant, but I didn’t go into it for two reasons:
    a) Since the facts of the case are not exactly clear, I’m not sure what locus Westland is using for it’s copyright case. My essential doubts here are due to a lack of confirmation regarding if Flipkart is charged as a seller or simply as a platform, and in the either case, what role the contract plays (as you note, there is no privity of contract). Given the problems with the first sale doctrine in Indian law (in re: the Wiley cases), I didn’t want to go into questions of First Sale without having all the facts. I’ll do a follow-up post on the issue of First Sale as soon as I have the relevant details.

    b) Furthermore, the issue of first sale is based on the copyright infringement claim itself. So if the rules of intermediary liability are implemented properly, the online marketplace won’t be liable for a infringement claim to begin with. The marketplace won’t have to raise a defense of ‘first sale’ at all, as the case would only lie against the sellers themselves. Thus, arguably, the order of the claims would require the ‘intermediary’ issue to be decided before the infringement claim can be made, and the question of ‘first sale’ comes in.

    The latter point is actually particularly important in my opinion, as even getting to the stage where you have to raise a ‘first sale’ defense will involve a lot of litigation costs for the marketplace. Multiply this litigation cost with the multitude of possible claims that will come up if the intermediary liability rules are not applied, and the operating costs for an intermediary in just dealing with these cases become quite immense.

    Reply
    1. Prashant ReddyPrashant Reddy

      Hi Kartik,

      I’m confused as to why you give so much importance to intermediary liability – in your post you seem to argue that its pretty much a non-issue because as you say: “Thus, arguably, Flipkart is not protected by the intermediary liability rules insofar as the infringement of the Westland’s copyright is concerned, under the Copyright and IT Acts, both – because they don’t exist.”

      Regarding your interpretation of Section 63, that is a criminal provision which is not at issue in this case. Since this is a civil suit, we only have to look at section 51 which uses the word “permits for profit any place”. The MySpace judgement has interpreted that provision to cover websites. So either way, wouldn’t it be tough if not impossible for Flipkart to argue that it is not liable?

      Prashant

      Reply
      1. Kartik Chawla Post author

        Hey Prashant,

        Exactly, ‘intermediary liability rules’ per se do not exist, and I’m arguing that they should. What does exist is a requirement of ‘knowlege’/’awareness’. That is why I make reference to CompuServe, where proper intermediary liability rules did not exist, but were in a sense read into the law through this requirement. Intermediary liability , broadly speaking, builds on this interpretation of the ‘knowledge’ standard only. So though the rules themselves are non-existent, they are not a non-issue – they’re necessary here, and can be introduced, though at a very basic level, through this interpretation.

        I take your point about S. 63, but I make a reference to it to in an attempt to cover all bases, including ‘abetment’, as I did not want to limit the argument to this case alone. While discussing the source of the ‘knowledge’ requirement, I also refer to S. 51 (though I should have repeated that later as well), where they’ve used the term ‘permit’, which implies an active or passive ‘knowledge’ of the infringing actions. This interpretation is bolstered further by the next part of the sub-clause, where it states “unless he was not aware and had no reasonable ground for believing”. So the intermediary is still required to have some knowledge/awareness of the act to permit it, and therefore to be liable for it.

        But yes, even so, it is admittedly a tough position for Flipkart. Which is my point – it really should not be, for all the reasons that make intermediary liability rules necessary in the cyberspace in the first place.

        Reply
  3. Vincent

    Hi Kartick, Prashant

    Not sure how “First Sale” or “Exhaustion” would apply in case of a copyright infringement suit. Are you referring to them in context of distribution channel control?

    Reply
  4. Prashant ReddyPrashant Reddy

    Hi Vincent,

    Yes, that’s correct – once the books are released into the distribution channel, the publisher can’t control which platform sells the book.

    Prashant

    Reply
  5. Jagdish Sagar

    (1) I’m not sure exhaustion applies to sale by a publisher to a retailer. What is meant by putting a copy into “circulation”? Is it “already in circulation” while it is on the retailer’s shelf? The Act could have said “copies once sold”, but it says “copies already in circulation” which is not as narrow a term. (2) Again, what is the particular contract between the publisher and the retailer? It might make a difference if the contract provided for return of unsold books to the publisher (such contracts do exist). (3) I don’t think intermediary liability per se is relevant here.

    Reply
  6. Prashant ReddyPrashant Reddy

    Hi Mr. Sagar,

    That’s an interesting point – I guess the issue of when it enters into circulation will depend almost entirely on the wording of the contract. It will great to have some law on the point – I’m not aware of any case law on this point.

    Regards,
    Prashant

    Reply
  7. Jagdish Sagar

    Prashant, I don’t think there is any case law on this. I do my research strictly on a need to know basis, given time constraints. I agree that the contract between the publisher and retailer could possibly settle the point in a particular case; and it would establish a precedent. Absent a determinative contract, there’s still a good argument to be made either way (depending on who one’s client is).

    Reply
  8. Kartik Chawla Post author

    Hi Mr. Sagar,

    I take your point about the importance of the contract(s) between publishers and retailers, but I’m unclear on why you think intermediary liability is unimportant? In fact, your argument would make for a stronger case for intermediary liability here, as an online marketplace cannot ideally be expected to go into all the contracts of all of the resellers using its platform to check for the legality of their products.

    My argument is not that the intermediary liability is relevant in re the question of publishers-resellers, and their liability. Intermediary liability is not important in that regard. My argument is that Flipkart is neither of those, is not even privy to their contract, and should not be liable for its violation unless it was directly involved. Moreover, it should not have to deal with the risk of being found liable for such a violation, in order to actually be able to function properly as a online marketplace. It is here that intermediary liability is important.

    Reply
  9. Jagdish Sagar

    Kartik, I could be wrong but I think of “intermediary” in terms of the definition in the IT Act, The question of intermediary liability can, surely, arise only where the extent of the intermediary’s control over digital inputs and outputs is debatable, i.e. where the intermediary is or, at least claims to be, a passive conduit or at most a platform for on-line third-party transactions. I don’t feel (subject to correction, of course) that the term “intermediary” can usefully be applied to sites that directly sell products to the public.

    Reply
  10. Kartik Chawla Post author

    Hi Mr. Sagar,

    You’re right, the term ‘intermediary’ does not apply to sites that directly sell products to the public. Flipkart, however, contends that it does not sell these books directly, and to quote the Economic Times article cited above “is a marketplace which helps sellers connect with customers across the country.” That is part of where the ambiguity of this case lies, insofar as the facts are unclear on if Flipkart was actually directly involved in selling the book itself.

    If it was directly selling the books, then of course intermediary liability would not be relevant. The argument I am making here, though, is in the context where Flipkart was only functioning as an aggregator, and was not selling the books directly. That is, my argument is broader one, for intermediary liability protection under the Copyright Act for aggregators, which is why in the last paragraph I allow for the fact that the facts may actually reveal that Flipkart was complicit in the sales, and might therefore be liable. But online marketplaces, if not directly or indirectly involved in such sales, should not be liable for any legal violations on the part of the sellers.

    Reply

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