• Ayush Garg & Shailendra Singh

Due Diligence for IPR Infringement vis-à-vis Intermediary Rules, 2021

The Ministry of Electronics and Information Technology notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules, 2021) on February 25, 2021. These rules will supersede the existing Information Technology (Intermediaries Guidelines) Rules, 2011. The IT Rules, 2021 preserved the existing rules and guidelines for intermediaries but at the same time made some significant additions concerning Digital Media and OTT (over-the-top) platforms. Social Media intermediaries which are also significant with regard to due diligence requirements for Intellectual Property Rights (IPR) enforcement, for evaluation of these rules, they need to develop a fair understanding of the concept of due diligence requirements for intermediaries with regard to IPR infringement.


Due Diligence requirements under current Legal Regime

There are twofold due diligence requirements under Section 79(2)(c) of the IT Act. The intermediary must comply with due diligence while fulfilling its tasks under the IT Act and instruct intermediaries to meet other guidelines as set out by the Central Government from time to time. More detailed guidelines were introduced through Information Technology (Intermediaries Guidelines) Rules, 2011 (IT Rules, 2011), and due diligence requirements arise under Rule 3 of the Act.


In the matter of Shreya Singhal v. Union of India (Shreya Singhal case) the Supreme Court observed that an intermediary shall not commit unlawful actions relating to Article 19(2) after receiving real knowledge from an order of the Court or has been notified by the appropriate government or its agency. Delhi High Court in the matter of Myspace Inc. v. Super Cassettes Industries Ltd, (Myspace case) observed that “if publications are made through laws, legislation, privacy policies, or the usage arrangement by the site then its sufficient due diligence”.


Due diligence must be understood in the broad sense and not merely limited to the guidelines. The Court in the matter of Google India Private Limited v. M/s Visaka Industries Limited observed that the duty of due diligence differs from the instructions; it further looked into the dictionary meaning of due diligence in the absence of a specific meaning of due diligence in the IT Act, and concluded that the intermediary would have to show that “they have behaved like an ordinary reasonable conscientious person”, which would constitute a “question of fact”.


Intermediary Liability for Intellectual Property Infringement

Internet Intermediary is defined under Section 2(1)(w) of the Information and Technology Act (Amendment) 2008, Section 79 of the IT Act exempts network service providers or intermediaries from liability if the offense was committed without their knowledge or practiced the required “due diligence”. The Safe Harbor model for intermediary liability is being followed in India, wherein the “actual knowledge” plays a significant role in determining liability. In the landmark judgment of the Shreya Singhal case, the Court read down Section 79 of the IT Act and held that “actual knowledge” has to be either through court order or notice by the government and should comply with Article 19(2) of the Constitution. Further, in the Myspace case, the Court perceived the “actual knowledge” as “specific knowledge” due to the massive amount of content and information served by intermediaries. Therefore, intermediaries are required to remove infringing material or content only after being reported explicitly by the intellectual property right holder.


As per Section 52(1)(c) of the Indian Copyrights (Amendment) Act, 2012, intermediaries will be exempted from the storage of an infringing copy of any work or performance unless they have been made aware or have reasonable grounds to believe that such copy was infringing property rights of a holder. The intermediaries could not be provided with immunity from secondary copyright infringement when they have reasonable grounds to believe that infringing activities were taking place on its website. Delhi High Court in one of its judgment held that the benefit of “Safe Harbor” provisions could not be made available to an intermediary which actively participated in the transaction that amounted to intellectual property rights infringement. Further, in the matter of Amway India Enterprises Pvt. Ltd. and Ors. v. 1MG Technologies Pvt. Ltd. and Anr. the Court made it clear that the IPR infringement is not based on mere probability, i.e., there must be some specific knowledge and not general knowledge.


Due Diligence Provisions in the Proposed Amendment

The current amendment differentiated between the intermediaries on the basis of size for the first time. The social media intermediaries and significant social media intermediaries as business models generate colossal income from advertising. Often, these advertisements infringe the IPR of genuine products and promote fake products, and there are issues such as trademark infringement through keyword advertising of products that aren’t addressed in the amendment. The social media platforms are supposed to work as intermediaries, but often large social intermediaries assume the role of publishers or editors of information. Therefore, treating the significant social media intermediaries on a different footing will lead to increased IPR enforcement. However, there are no sufficient mechanisms for enforcement and to verify the genuineness of complaints.


Differentiating social media intermediaries and significant social media intermediaries based on user-base prima facie seems a positive step as the IT Rules, 2011 was a “one size fit for all” approach but it fails to perceive the criteria such as functional differences and role in the internet ecosystem. For instance, some websites operate in a content-neutral fashion and some actively promote the content and shall be made liable for contributory infringement in case of IPR infringement by its users. Additionally, the encryption issue would pose difficulty in tracing the flow of information for law enforcement purposes and even if it’s solved it will lead to a breach of privacy. The central government and social media intermediaries are deliberating over the traceability issue, and the matter is also pending before the Supreme Court.


The Delhi HC in Kent RO Systems Ltd. and Anr. v. Amit Kotak and Ors. opined that an intermediary is neither equipped to determine an infringement nor possesses the required prowess for such evaluation. There has been an increased compliance requirement for the significant social media intermediaries, but concerning evaluating the merits of complaints, these rules have no substantive provisions. Further, the new rules require a significant intermediary to filter content through automated mechanisms proactively. Proactive filtering or AI-based filtering is manipulatable, and it may lead to over-censoring of content by intermediaries in a bid to keep in line with the law. This general proactive filtering obligation is a form of privatized law enforcement and unreasonable interference with Article 19(2) of the Constitution.


Conclusion and Suggestions

From the perspective of IPR enforcement, the proposed IT Rules, 2021 may seem promising as the Act for the first time differentiated between intermediaries based on their size. The significant social intermediaries are treated on a different footing and subjected to a stricter compliance regime. However, the Act failed to recognize other categories of Intermediaries to incorporate differentiated standards of liability. Further, it did not define key terms such as standard of knowledge; in this regard, reference to U.S. laws can be helpful where Section 512 of the DMCA (Digital Millennium Copyrights Act, 1998 codifies the knowledge standard for intermediaries. The amendment has diluted the “Safe Harbor” provisions by increased compliance and oversight mechanisms. The jurisprudence regarding the liability of intermediaries for IPR infringement is in a nascent stage in India and the recent amendment has not sufficiently addressed this problem.



*The authors of this post are Ayush Garg & Shailendra Singh, both are law students at Gujarat National Law University, Gandhinagar. They can be reached at ayushgarg4675@gmail.com.


Image Source: S.S. Rana & Co.

Article Number: 2021/LNLR/07B24

 

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