Trademark Infringements in E-commerce: A Comparative Study of India, China & USA

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Published on June 8, 2016

Author: tabrezahmad


1. Issues of Trademark Infringement in E-Commerce: A Comparative Study of India, China and USA “IIPLA 2nd Global IP Summit London, UK, 6th & 7th June, 2016. Dr. Tabrez Ahmad, Professor & Director, College of Legal Studies, UPES Version 2

2. Agenda 1. Cybersquating-India, China and USA 2. Regulation of E-Commerce & Jurisdiction 3. Secondary Liability of ISP 4. Judicial Decisions 5. Duties of ISP 6. Conclusion Dr. Tabrez Ahmad;

3. 1. Cybersquating- India, China and USA • In most national legislations, there are several regimes for regulating cases involving domains, especially in terms of cybersquatting. In this regard, the practice of the USA, India and China is indicative. • In the United States of America, the Anti-cybersquatting Protection Act (Truth in Domain Names Act) applies since 1999. • This Act forbids behavior of individuals, who have bad faith intent to profit from someone else’s trademark, by registering or using domain names that are identical, confusingly similar or delusive of a trademark. • The most interesting aspect of this piece of legislation is 15 USC s. 1125 (d) 2 C. Pursuant to this provision, the domain names are subject to an in rem action, in the judicial district where the domain name was registered Dr. Tabrez Ahmad;

4. 1. Cybersquating- India, China and USA Cont.. • China Interim Administrative Measures on Domain Name Registration; • - China Interim Regulations on the Management of International networking of Computer Information; • - Interpretation of the Supreme People's Court on Application of Laws in the Trial of Civil Disputes over Domain Names of Computer Network. • Court decisions in China include several important cases dealing with cybersquatting and applicability of the trademark law. • If, however, the cybersquatter is a legal person, then an in personam action is filed. Some familiar cases dealing with this issue are: Kremen vs. Stephen Michael Cohen, Network Solutions et al, who disputed over the domain. Dr. Tabrez Ahmad;

5. 1. Cybersquating- India, China and USA Cont.. In India the 1st Cybersuating case was decided by the Delhi High Court in the Yahoo V. Akash Arora and later on upheld by the Supreme Court of India in 2005. The court held that the domain names are just like the trademark and the trademark holder will have priority over the similar domain names. Dr. Tabrez Ahmad;

6. 2. Regulation of E-commerce & Jurisdiction • Due to global boundary of e-commerce and its fast growth the regulation of e- commerce is a complex issue. • In e-commerce transactions due to the inseparable supports from third party service providers the joint infringement has become another hot topic in e- commerce infringement. • However, there is no essential difference in the positions between online payment service providers and the third-parties in traditional payment mode. • Also, the role of logistics service providers who assist the completion of goods delivery in e-commerce is no different from that in traditional economy. • Therefore, a lot of problems remain focused on service providers in the area of transaction information. • It is very important to do an in-depth analysis of the E-commerce in India, China and USA to provide viable solutions for E-commerce regulation for the protection of trademarks. Dr. Tabrez Ahmad;

7. 2. Regulation of E-commerce & Jurisdiction Cont.. • It is a brand new problem to identify infringers in e-commerce environment. • In practice, there are several ways to solve this problem; • to obtain information through internet real name authentication; • to obtain indirect information from internet such as the operators of relevant websites, domain name owners or information of ICP recordation; • to obtain the seller information through sample purchase; and • to obtained information from the ISP. • The basic principle to determine jurisdictions in trademark infringement is that the local court at the place of domicile of the defendant or at the place where the infringement occurs has the jurisdiction over the case. Dr. Tabrez Ahmad;

8. 2. Regulation of E-commerce & Jurisdiction Cont.. • It is difficult to get the affirmation from the majority of courts to establish jurisdiction merely by the shipping address. • However, in some cases, if the parties specified in the contract that a particular place is selected as the place of performing the contract, it is possible that such place may be deemed as the place where the sales act is taken place and the local court may have jurisdiction. • If the unauthorized use of trademark relates to transaction information, plaintiff may also consider using the location of the server of the website to establish jurisdiction. Dr. Tabrez Ahmad;

9. 2. Regulation of E-commerce & Jurisdiction Cont.. • Another problem that the right owners frequently encounter in trademark enforcement is the sale of parallel imported goods in e-commerce. • These goods are usually “genuine”, but are supposed to be sold in other countries. • Legislation is silent on whether selling goods through parallel import and breach of contract constitute trademark infringement, the majority of courts or enforcement authorities take a reserved attitude toward this issue. • The typical acts of such infringement include: selling products on e-commerce platforms which, according to the agreement, could only be sold directly; • selling products on e-commerce platforms which, according to the agreement, could only be sold in a certain regional territory; and • selling products (such as products of luxury brand) on e-commerce platforms which should be sold in certain circumstances selected and restricted strictly by the trademark owners. Dr. Tabrez Ahmad;

10. 2. Regulation of E-commerce & Jurisdiction Cont.. • It is always difficult to stipulate whether these acts are legitimate or not. • At present, trademark owners still face tough problems in their trademark protection on the internet. Due to lacking of legal basis, ISPs usually will not deal with these goods. • Some cases in Europe expressly support the trademark owners, such as Copad SA v. Christian Dior couture SA. • But no favorable precedent follows in India. • In American Zippo v. Wang Lei, the court determined the defendant’s act constituted trademark infringement. • In general, regarding the use of others’ trademarks in the decoration of online shops, courts focus on whether such use is fair and proper; whether such use will cause confusion to the public, and whether such use will cause damages to the trademark owners. • Currently, some ISPs will respond by taking actions to complaints regarding these kinds of act. An act may still be deemed an infringement based on trademark dilution or unfair competition. • In the case of Cartier v. Yihaodian and Mkela Company, a Chinese court has made a bold verdict favoring the trademark owner Dr. Tabrez Ahmad;

11. 2. Regulation of E-commerce & Jurisdiction Cont.. • Given the meteoric rise of e-commerce companies like Flipkart and Snapdeal in India, one may safely conclude that e-commerce is here to stay. • Legal disputes in the e-commerce sphere are already cropping up dime a dozen. • These disputes are unique in this that unlike traditional businesses which are permanently established in a particular geographical region, • e-commerce businesses enjoy a virtual/online presence and this inevitably leads to questions of jurisdiction being pondered by the Court. Dr. Tabrez Ahmad;

12. 2. Regulation of E-commerce & Jurisdiction Cont.. • Recently, the Delhi HC in World Wrestling Entertainment, Inc. v. M/S Reshma Collection decided conclusively that jurisdiction in e- commerce cases involving trademark and copyright disputes would be determined by the buyer’s place of residence. • The Court specifically interpreted the meaning of the phrase “carries on business” as set out in Section 134(2) of the Trademarks Act,1999 and Section 62(2) of the Copyright Act, 1957; both these sections deal with the institution of suits in case of violation of any provision of the aforementioned Acts. Dr. Tabrez Ahmad;

13. 2. Regulation of E-commerce & Jurisdiction Cont.. • Court’s Analysis: • The Delhi HC delved into the interpretation of the phrase “carries on business” mentioned in Section 134(2) and Section 62(2). • The Sections state that as suit for infringement under the said Acts is to be instituted in a District Court having jurisdiction to try the suit. • Further, the Courts specify that “District Court having jurisdiction” would “include a District Court within the local limits of whose jurisdiction…the person instituting the suit or proceeding…carries on business or personally works for gain.” • The Division Bench of the HC examined the Dhodha case where the SC laid down a 3-pronged test to determine whether the plaintiff could be said to “carry on business” in a particular place; the SC was also of the view that a person may carry on business not necessarily by himself but through a servant or an agent. Dr. Tabrez Ahmad;

14. 2. Regulation of E-commerce & Jurisdiction Cont.. • The 3 conditions are: • (i) the agent must be a special agent who attends exclusively to the business of the principal and carries it on in the name of the principal and not as a general agent who does business for any one that pays him; • (ii) the person acting as agent, must be an agent in the strict sense of the term and a manager of a Joint Hindu Family cannot be regarded as an ―agent within the meaning of this condition; and • (iii) to constitute ―carrying on business at a certain place, the essential part of the business must be performed at that place. Dr. Tabrez Ahmad;

15. 2. Regulation of E-commerce & Jurisdiction Cont.. • “Because of the advancements in technology and the rapid growth of new models of conducting business over the internet, it is possible for an entity to have a virtual presence in a place which is located at a distance from the place where it has a physical presence.” • Based on the above reasoning, the Court was of the opinion that the plaintiff could be said to carry on his business (to some extent) in Delhi and therefore, fulfilled the condition “carrying on business” as laid down in Dhodha case. Consequently, the Court set aside the order of the Single Judge, thereby allowing the appeal in the present case. Dr. Tabrez Ahmad;

16. 3. Secondary Liability of ISP • ISP’s joint liability in trademark infringement has been a hot issue. At present, the safe harbor doctrine and the red flag standard are still commonly-used. • The conflicting issue is how to apply them, and it is always closely related to the facts of individual cases. • An important recent case is Eland Company v. Du Guofia and Taobao in which a Chinese court made a verdict favoring the trademark owner. • Although the nature of e-commerce under the Trademark Law is the same as traditional economy, it requires serious attention to provide well established legal environment for healthy growth and development of e- commerce. Dr. Tabrez Ahmad;

17. 3. Secondary Liability of ISP cont.. • Secondary liability in China for trademark infringement online can be best understood in the context of the three periods of e-commerce development that took place in the country. • During the embryonic stage (1999 to 2002), there were very few netizens and online business operators, and a number of enterprises, including 8848—China’s e-commerce enterprise flagship—rose but then quickly fell • In the rising phase (2003 to 2007) that followed, small and medium-sized ecommerce platforms like Alibaba • —an e-commerce company that eventually established and other businesses—began to make profits and a number of e-commerce providers, including E- Commerce China Dangdang and EachNet, rose rapidly. Dr. Tabrez Ahmad;

18. 3. Secondary Liability of ISP cont.. • There are several questions on the subject of online trademarks in China: • How can trademark owners’ rights be protected when merchandise is distributed online as opposed to through brick-and-mortar shops? • Once trademark owners’ rights are infringed, are Internet service providers (ISPs) responsible for infringements on their servers? • Although the future impact of technological innovations on China’s legal framework remains uncertain, the judicial practice in China is currently to examine secondary liability for trademark infringement mainly in relation to search engines and platform providers. • The courts have not yet paid as much attention to the responsibilities of banks, credit card companies or payment institutions. The paper tracks and identifies the main issues in both Chinese judicial developments and legislative responses to secondary trademark infringement online and attempts to summarize the policy issues behind them. Dr. Tabrez Ahmad;

19. 3. Secondary Liability of ISP cont.. • Throughout this period, the number of online vendors increased from • 4 million to 35.5 million.3 An e-commerce boom began in 2008, • and Alibaba, NetSun, Suning Appliance Company, GOME Electrical Appliances and other traditional retailers became publicly traded companies. • Meanwhile, Redbaby and Beijing Jingdong Trading Co. entered into and started the competition of businessto- consumer (B2C) marketing. Dr. Tabrez Ahmad;

20. 4. Approach of Judiciary • Courts in China generally demonstrate skepticism of secondary liability claims for trademark infringement against online intermediaries. • As early as 2006, the Shanghai First Intermediate People’s Court ruled that online intermediaries are not able to control counterfeiting online by third parties. • The court noted that the defendants, as online marketplace operators, had established an intellectual property rights reporting system in order to stop online intellectual property violations, and therefore held it had reasonably exercised their duty of care. Dr. Tabrez Ahmad;

21. 4. Approach of Judiciary cont.. • Moreover, the court noted that there are large numbers of Internet users and online merchandisers, and consequently it would be unrealistic to require online intermediaries like eBay to investigate every piece of merchandise sold on their Web sites to ensure it is legitimate. • Furthermore, the court stated that even if the defendant has made an ex ante investigation, it would still not be able to guarantee the legitimacy of the commodities actually delivered offline—i.e., third parties could post pictures of legitimate products online but then deliver infringing products instead Dr. Tabrez Ahmad;

22. 4. Approach of Judiciary cont.. • The Guangzhou Intermediate People’s court decided a similar case in 2006 that was filed against Taobao. • The court held that, because the online network extends globally, ISPs might not be capable of ensuring the legality of goods sold through its networks, and that it was therefore beyond the capacity of ISPs to be held responsible for possible infringement of all of the goods sold by online vendors. • Taobao—an online shopping site operated by Alibaba that is similar to Amazon or eBay— had taken efforts in drafting and implementing rules with sanctions against counterfeiting. • As a result, the court held that Puma’s accusations that Taobao had failed to exercise ex-ante investigations and ex-post remedial obligations and had assisted the direct infringer Chen in violating Puma’s registered trademark rights were not justified. • After this decision, the same reasoning was applied to similar cases by other courts in China. Dr. Tabrez Ahmad;

23. 4. Approach of Judiciary cont.. • It is important to keep in mind, however, that these early judgments were made with regard to ISPs’ duty of care. • Courts pointed out that the judiciary would not be permitted to impose a duty of care on ISPs to verify the legality of online goods because such an obligation was not stipulated statutorily. • Courts did not therefore initially rely on concepts of secondary liability or even contributory liability and instead approached the issue as one of direct infringement. • Subsequent decisions, however, were based on secondary liability and applied the safe harbor rule of copyright law by analogy, • and courts have now formally introduced a doctrine of secondary or indirect infringement into trademark infringement cases through the stipulation of contributory liability. Dr. Tabrez Ahmad;

24. 4. Approach of Judiciary cont.. • When viewed together, these decisions suggest that Chinese courts usually rule based on a theory of contributory infringement—a form of joint tort—and that they focus at least in part on whether the accused secondary infringer has the capacity to monitor or control the direct infringer. • This indicates that courts have, to some extent, made efforts to base their decisions on a theory of vicarious liability. • The courts, however, have not been successful in applying applicable statutory rules or applying satisfactory reasoning to such decisions. Both Chinese legislation and some scholars take a narrow approach to vicarious liability, arguing that the theory should be applied only in the context of finding an employer liable for its employee’s act. • On the other hand, Chinese copyright law has detailed provisions on contributory liability comparable to Chinese tort law. Courts are therefore willing to approach copyright cases from a contributory liability angle, since which rules are applicable is more clear than in the trademark context. Dr. Tabrez Ahmad;

25. 4. Approach of Judiciary cont.. • After the State Council promulgated the Regulation on the Protection of the Right to Network Dissemination of Information (the Dissemination Regulation) in 2006, courts began to refer to the relevant provisions of copyright law on secondary infringement. • Drawing upon the laws of the United States and other developed countries, the Dissemination Regulation describes specific circumstances under which ISPs cannot be held liable for damages caused by Internet users and specifies how a safe harbor should be applied. Dr. Tabrez Ahmad;

26. 4. Approach of Judiciary cont.. • Chinese judges seldom analyze concepts such as “use in commerce” when analyzing online trademark infringement cases, in contrast with American courts. • One explanation for this is that the Chinese trademark regime is based on registration, not on use; registered trademarks are protected by Chinese law even if they have not yet been put into commercial use. • Moreover, trademark holders in the United States are more likely to file suit on grounds of both direct and indirect infringement, requiring judges to decide whether the ISPs use the trademark in commerce as direct infringers. • In contrast, most Chinese courts will first examine the role ISPs play in the specific circumstances of the case at issue, and define the duties of ISPs based on their conclusions. • ISPs are not held liable if they act as intermediaries, but otherwise can be held to a level of liability similar to that of direct infringers. Dr. Tabrez Ahmad;

27. 5. Duties of ISP • Although courts usually consider ISPs intermediaries, ISPs still assume some responsibility for online users’ conduct. • As in other jurisdictions, Chinese legislation and regulations have set thresholds ISPs must meet in order to claim immunity via the safe harbor rule and avoid liability. • In India the ISPs are not liable in certain defined situations but are duty bound to ensure the proper utilization of the network. Dr. Tabrez Ahmad;

28. 6.Conclusion • Although the Trademark Law of the People’s Republic of China does not include specific provisions about secondary liability for trademark infringement online, the Tort Liability Law has generally stipulated liability for infringement online. • The application of this provision has yet to be examined further. Courts have gathered much experience regarding how to decide cases on secondary liability for trademark infringement online, while decisions on secondary liability for copyright infringement online have provided much insight into the validity of criticisms and accolades brought by the practice of search engine advertising. • Overall, both Chinese legislation and judicial practices have imposed comparatively lighter duties on online intermediaries than on primary infringers, and only rule against online intermediaries under specific circumstances: • (1) when the intermediary has not taken measures after being made aware of suspected infringement; • (2) when the measures taken by the intermediary are not effective enough to prevent further infringement or (3) when the intermediary has shared the proceeds of transactions with a direct infringer, yet has failed to exercise a relatively higher duty of care than would be required of a non-profit-sharing intermediary. Dr. Tabrez Ahmad;

29. 6.Conclusion Cont.. • It seems that the legal framework regulating Internet Intermediaries’ liability in India, China and in the United States is globally consistent , it has however received very different interpretations from different Courts in India, China and in the United States. • There are different bills and reforms recently introduced in India, China and USA to address this problem but a more consistent interpretation of our current legal frameworks and the implementation of a wide range of business-driven solutions are required. Dr. Tabrez Ahmad;

30. Thank You for your Attention Dr. Tabrez Ahmad; Please get back to me for any further clarifications or doubts ;

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