We’re pleased to bring to you a guest post by Eashan Ghosh on the recent Delhi High Court Division Bench’s decision that set aside the Single Judge’s order restraining various e-commerce platforms (including Amazon, Flipkart and Snapdeal) from enabling sale of products of ‘direct selling’ companies without their consent.
Eashan has practicing as an intellectual property advocate and consultant in New Delhi since 2011, and teaches a seminar on intellectual property law at National Law University, Delhi. Eashan writes about Indian intellectual property law, including a monthly review of Delhi High Court judgments, on his Medium page. He has written several guest posts for us in the past as well (see here, here, here, here, here, here, here and here).
Amazon v. Amway: A Growing Appellate Scrutiny Problem
In this post, I discuss some trade mark issues arising from Delhi High Court’s recent appeals judgment in Amazon Seller Services v. Amway India Enterprises. The case more centrally concerns the applicability of the 2016 Direct Selling Guidelines, Section 79 of the Information Technology Act, and contentions regarding inducement of breach of contract and tortious interference. Latha’s post on the judgment offers an excellent summary of these issues.
Reversing the first court’s positive finding of trade mark infringement, the appeals court finds in favour of the Defendant-Appellants. It does so by attacking the negative actions of the Defendants (in their capacity as e-commerce platforms) which the first court found to be consistent with trade mark infringement viz., product tampering and failing to furnish full details of the sellers. These activities had supplied the first set of reasons for the first court to rule in favour of the Claimant-Respondents (in their capacity as direct sellers) against the Defendants.
The approach adopted by the appeals court here is critical. It is restricted to rebutting the first court’s conclusions by diverting the discussion either to facts not considered or adjudicated differently by the first court. At least five categories of materials answer to this description. These are:
- Insufficiency of material in Local Commissioner reports to sustain a finding of product tampering by the Defendants;
- Accuracy of MRP listings on products sold by the Defendants;
- Accessibility of seller information by consumers on products sold by the Defendants;
- Instances of the Claimants’ own discounts being passed onto consumers; and
- Withholding of buyer information from sellers until the conclusion of the sale.
The appeals court does not, therefore, ask whether, on the material before it, the first court could reasonably have come to its conclusion. It asks, instead, whether, in view of existing material either not considered by the first court or capable of different interpretation, the first court’s opinion ought to be revised.
This is supported by the appeals court’s view that the first court was in error in its reading of precedent to find that the Defendants’ actions would not be saved under the second sale exception to trade mark infringement under sub-sections (3) and (4) to Sections 30 of the Trade Marks Act.
The first court’s trade mark infringement case against the Defendants, however, ran deeper. The first court had found that the platforms of the Defendants offer several routes of facilitating second sales: by running advertisements, offering their own guarantees, endorsing and name associating themselves with the Claimants, and instituting their own refund and return policies. These are what I referred to last July as the performative actions of the Defendants that are consistent with trade mark infringement. Had the intention of the appeals court been to nullify the ruling of the first court, these points surely ought to have been answered.
They are not. Instead, based on its own review of the materials available to the first court, the appeals court overrules the first court’s factual finding that the Defendants were tampering with the Claimants’ products. On the material before it, concludes the appeals court, a positive finding of product tampering against the Defendants “was too sweeping a conclusion to arrive at.”
Even so, the appeals court is forced to admit that this is, almost to a fault, a factual question. It can, therefore, only be settled through evidence. To be clear, its conclusion that it was premature for the first court to rule that there was positive evidence of product tampering is not without merit. However, once again, this turns on what the appropriate standard for appellate scrutiny of factual findings should be. Was there a good faith basis for the first court to believe that there had been product tampering? Was there enough material on record to suggest that a de novo consideration would point away from a conclusion of product tampering? The answer to both questions could well be in the affirmative, and the absence of a disciplined and repeatable basis for its appellate scrutiny certainly damages the appeals court’s ruling.
“Outside the Purview”
The trade mark discussion is also book-ended by the appeals court’s conclusion that there is no case to answer on trade mark infringement or passing off at all. This is because, in their view, there has been no assertion of trade mark claims by the Claimants and that any case for relief on this basis is “outside the purview and scope of the pleadings in the suits.”
If this is to be taken at face value, all other discussion on the trade mark issue is moot. However, applying the same standard to the appeals court, upwards of 4,000 words of its own judgment has no significance, by its own admission. To set it out “in any event”, as the appeals court does here, is unsatisfactory.
The first court’s ruling in July 2019 had been a mixed one: it had set out a factual yardstick for assessing trade mark dilution claims in online sales cases but had obscured the foundation of those very claims. Now, the appeals court in January 2020 presents another a mixed ruling for reasons that are neatly aligned: it overwrites the factual yardsticks for the assessment of trade mark dilution claims in such cases but denies that the foundation of those claims exist at all.