If you browse through Amazon while shopping for something, you’d notice that apart from some unbelievable discounts, most of the brands offering these products are relatively obscure and that you are coming across such a brand name for the first time even though their product with its specs and features looks like it belongs right in your cart. If you are someone who has been using Amazon for a few years now, you’d have also realized that there is a significant increase in the number of sellers. Further, you no longer just buy an XYZ phone online, you buy an XYZ phone on Amazon with its Amazon guarantee. Not only this but India’s two biggest e-commerce platforms – Amazon and Flipkart have their own brand line in Amazon Basics and Flipkart’s Billion.
These changes bring forth certain questions – are we moving from trademarks for consumer protection, to trademarks for being listed higher on e-commerce platforms? Is registrability becoming the main purpose of brand names rather than recognizability? And with growing number of merchants and products selling on e-commerce platforms, the issue of a certain loss of purpose of what trademarks represent and the issue of intermediary liability of e-commerce platforms arises.
The Thesis, Antithesis, and Synthesis of Trademarks on E-Commerce Platforms
The Thesis – E-commerce platforms have gathered an enormous market over the last decade and a half. In India, initially, these platforms were about customers being able to find different products offered by various brands at the click of a button and having the convenience of home delivery, and of course, the incredible discounts e-commerce offered. Once a substantial market-base was created, these platforms themselves became a brand. In that, what they sold was not just the product, but with it, the brand name they had created for themselves over the years. Trademarks, then, hold major value for e-Commerce platforms, for the product is now branded as both the seller’s and the platform’s.
Naturally, the liability of e-commerce platforms for counterfeits and frauds then becomes a pressing question. The position of law in India on intermediary liability of e-commerce platforms was discussed in the case of Christian Louboutin SAS v. Nakul Bajaj and Ors (you can read Divij’s post on the judgment here and here). While the judgment is significant for being the first to discuss the same, it created more uncertainty than otherwise. It determined that there is a list of 21 ‘tasks’ that can be used to identify how platforms influence online brands. Out of these 21 tasks, the creation of listings and enrollment of members are also important functions. These functions are more accessible on a platform like Amazon if you have a registered brand. So, the push here is not to create a brand name for the product to foster consumer trust but to have registered trademarks.
The Antithesis – There are many benefits to having a trademark if you want your product on an e-commerce platform. Apart from the obvious ones of being able to compete with other branded products, being in the same line-up as them and having a testing ground for your new product, e-commerce platforms give out incentives if you are enrolled in their brand registries.
What is the Amazon Brand Registry?
The Amazon Brand Registry is a program that allows registered brand owners access to enhanced marketing and reporting tools and gives them more control over listed branded products on Amazon. The other benefits include higher ranking in their search list, text placement, and additional brand content such as brand story, etc. It also allows IPR violation reporting and proactively preventing such violations. Hence, there is a bigger reason for you to get your ‘brand’ name trademarked even if you don’t have a budding brand yet or have a brand at all.
The prerequisite for being a part of the registry is to have a “registered and active text or image-based trademark”.
Ostensibly, this requirement could be linked to the increase in the number of applications that the Indian Trademark Office has seen in 2018 and 2019. Attached below are top brands that show up on Amazon for various products. A search on QuickCompany.in would show that these brands have all been registered in India recently (mostly from 2015 onwards) and a Google search of the brand name would show that they are almost exclusively sold online. Evidently, the results for a product search on Amazon throws up some unheard-of brands, with quite the interesting names.
(Searches from Amazon – Image 1 is the top brands for mobile phone covers; Image 2 is the listed brands for shoes; Image 3 is the listed brands for socks; Image 4 is the listed brands for hairdryers.)
The USTPO also saw a radical increase in trademark filing from foreign domiciled traders who sold their products on e-commerce platforms. Brands from Shenzhen, China that accounted for almost half of Amazon’s top sellers, held trademarks over brand names that perhaps have no discernable meaning apart from the fact that they were super-registerable made-up names. Further, many of the trademark claims were identified to be fraudulent, with these brand names just being photoshopped on to products in their application. However, after this surge, and after having identified fraudulent claims of use, the USTPO brought in stricter standards for trademark applications.
As Uncle Ben said, with more power comes more responsibility. Counterfeiting and fraud bog e-commerce businesses down. Taking note of the same, the Department of Consumer Affairs released the Model Framework for Guidelines on e-Commerce for consumer protection which outlines the liability of the e-commerce entity and the seller and necessitates a grievance redressal mechanism for consumers. In December 2019, the DIPP also issued new rules reviewing the FDI policy in e-commerce. With the new rules, it is compulsory for e-commerce companies to submit a yearly audit report. This apart, e-commerce platforms themselves regulate for counterfeit products and fraud through their employees and under special projects such as Amazon’s ‘Project Zero’.
The Synthesis – With the increase in trademarking of registerable signs and words, and with sellers picking e-commerce platforms, the question then arises if there is an imminent and pending shift from trademarks for recognition, to trademarks purely for the purposes of getting listed on an online marketplace. This is to say that e-commerce platforms may be altering what brands mean to us, in that the Amazon or Flipkart ‘brand’ promise may be more valuable than the actual brand of the product purchased.
What about Trademark Infringement? The Fair and Proportionate Way Forward
Given this changing nature, the concern of intermediary liability has a greater significance for customers. This has been recognized both by the government and the courts. However, the differences between a physical market and an online market bring into the picture some fundamental questions about enforcement. In a physical market, a trademark is associated with the physical product itself and the seller, whereas online, the amount of information available and the number of sellers increases exponentially, with there being many new added steps in the transaction in terms of selecting and identifying the trade partners, which then becomes an integral part of the process. This will then require the determination of joint liability for the infringement of the platform and the seller.
Post the Louboutin case, e-commerce intermediaries have a higher threshold to meet when it comes to claiming exemptions from liability for the sale of infringing products. The Louboutin case’s test was applied in L’Oreal v. Brandworld and Skullcandy v. Shri Shyam Telecom to determine the e-commerce platforms’ intermediary liability, thus setting the precedent for using the test and determining liability on a case-to-case basis. Amway India Enterprises v. 1MG Technologies went even further to study the online marketplace and their active involvement in the sale process, given their price-setting strategies, refund policies, etc. However, with the overruling of the same, the position of law regarding intermediary liability for trademarks infringement remains unclear.
India’s developing jurisprudence on e-commerce platform liability is tilting towards holding these platforms responsible for the infringement. While this is a seemingly reasonable move to protect consumer interests, it is necessary to recognize that the measures must be fair and proportionate and must not be excessively costly and they must not create barriers to legitimate trade.This metric identified by the CJEU may, in fact, provide for a standard to be emulated.