PAYPAL enters into a Legal Battle with PayTm over Trademark Rights

In today’s era of demonetization in India Paytm has become a necessity rather than an option, but the brand has recently landed up in a controversy involving trademark issues. Paytm recently received approval from the Reserve Bank of India to launch its payments bank to make one’s payment wallet stronger. Paytm is used by shopkeepers, vegetable vendors and other big and small business enterprises for receiving and sending payments. Paytm’s demand witnessed exponential growth subsequent to the demonetization as people had minimum or no access to cash.

The immense growth witnessed by Paytm caught the attention of some global players, PayPal being one of them. PayPal has been in the market for over a decade with a global presence in over 190 countries and a capacity to execute more than 100 monetary forms. PayPal opposed the trademark application filed by Paytm in the year 2012.

Facts

PayPal has claimed the bicolor scheme used by Paytm to be similar to that of PayPal. Paytm further argued that PayPal intentionally damaged Paytm’s reputation that immerged after demonetization in India and it also contended that PayPal’s opposition was bound to be rejected as it came 4 years subsequent to the filing of Paytm. Paytm recorded its application in 2012, PayPal appears to have recorded its notice of opposition on November 18, 2016.

It can be inferred that PayPal cannot claim exclusivity over the generic term ‘pay’ and the burden of proof lies on PayPal to prove that it has acquired a secondary meaning exclusively to its use in India. Secondly, many companies use the term ‘PAY’ in their trademark or names since it is an expression of basic speech in India and many of e-wallet organizations use the term ‘PAY’ in their Trademarks.

Indian courts have regularly applied the doctrine of spillover reputation to allow foreign TM owners to protect their rights in India after SC decision in NR dongre v. Whirlpool (1996 PTC (16) 583 (SC)) and the SC also confirmed that a foreign proprietor is not required to show his goodwill in the Indian market to claim protection of a globally well-known mark. PayPal claimed the following points to its advantage i) having a presence in India since 2000 ii) using the light blue and medium blue device internationally since 2007. However, the application for light blue and medium blue device was filed internationally in 2014 but the same was filed by Paytm in 2012, which makes Paytm the prior applicant in India.

Paytm stands a reasonable opportunity to demonstrate that not only has it acquired goodwill during demonetization but many FinTech consumers have started using Paytm as a verb due to its services, the same can have the trademark lose its selectiveness and get to be Publici Juris. Due to Paytm’s strong unique Identity, it is highly unlikely for any rational individual to correlate PayPal with Paytm’s bicolor mark.

ECOMMERCE WEBSITES: THE HAVEN FOR ONLINE COUNTERFEITING

A brand infringement is selling counterfeited goods with sellers brand designs without brand authorization letter or obtaining distribution rights. It becomes a Trademark infringement where a seller uses an identical or similar trademark. Mostly all the e- commerce sites have a strict “no brand infringement” policy in place. Yet there have been cases such as Nalli silks accused Snapdeal of trademark infringement, furniture brand houseful took etailer Mebelkart to court, Flipkart against a discount listing site for copyright and trademark infringement, owner of Lacmioant sarees filed a case against Flipkart & Amazon and many more. Even, on social media sites like Facebook and Instagram, a lot of pages sell and promote counterfeited products. Few merchants are misusing the online retail platform and marketplaces are enabling them

The intellectual property rights (“IPR”) violations are taking place due to the content hosted by e-commerce sites. Content is created by third-party users, and in the absence of a specific agreement between them and copyright-owners regarding trademark, copyright and patent rights, there is an ever-present threat of infringement.^[1] The issue is further exacerbated by the fact that there are numerous business models in the e-commerce space. The multiplicity of business models makes it difficult for regulators and government to regulate these companies and ascribe liability particularly in cases where e-commerce companies claim immunity on the basis of the intermediary liability regime in India. A large percentage of the disputes that concern e-commerce companies in the recent past have involved them as intermediaries in some respect on another. They are able to escape liability due to the generic nature of the intermediary liability regime in India which fails to account for the plurality in the business models of ecommerce companies. Consequently, then, this paper will propose an alternative intermediary liability regime to achieve a greater balance between the interest of e-commerce companies on one hand and the aggrieved parties particularly the consumers on the another. The first part of the paper will describe the various business models and try to understand their working. The author in the second part will analyze the problems with the current regime in the third section. The third part will elucidate the current intermediary liability regime in India Lastly, the fourth part will be devoted to solutions where the authors will propose solutions to the problems with the current system.

The liability of marketplace and e-commerce companies arises from the concept of secondary or contributory infringement which is contained in all IP laws ^[2]. This concept basically provides that in case a person is facilitating infringement of third party IP rights or is providing a space for sale of infringing products or printing advertising material etc. and such person has actual or constructive knowledge of such infringement or has reasons to believe that an infringement has occurred, such person shall also be liable for infringement.^[3]

The main weapon that brand owners can use to combat online counterfeiting is “report and delist”, notifying the platforms of infringing offers on their sites and requesting the platforms’ voluntary delisting of the products. Brand owners face a growing number of counterfeiters who rapidly regroup and come back online after a delisting. The current practices place the burden of policing the platforms’ sales almost entirely upon brand owners. A question garnering serious consideration is whether the platforms themselves should share the burden by proactively monitoring their sites.^[4]Courts in Europe are developing their own divergent approaches to online counterfeit sales. In parallel with the Tiffany case in the United States, eBay has been locked in litigation with brand companies in Europe with varying results. The French courts have expanded liability, ruling that eBay violated French trademark laws for passively permitting counterfeit sales^[5]In contrast, Belgian courts have declined to hold eBay liable for sales of counterfeit cosmetics.^[6] More recently, the European Court of Justice clarified the so-called safe harbour provision of the EU’s E-Commerce Directive, favouring brand owners. In a ruling dated July 12, 2011 in a case originating in the UK between L’Oreal and eBay, the court explained that the hosting provider’s safe harbour extends only to neutral or passive, automated third-party data processing. The court ruled that an online market such as eBay is not neutral or passive but instead optimizes and promotes offers for sale. The ruling stopped short of an outright liability determination, which must be made by the referring UK court ^[7]. Nevertheless, the narrowing of the safe harbour provision is an apparent victory for brand companies and promises to extend the power of European courts to intervene in online markets and require e-commerce platforms to adopt stricter control over their online listings.

The liability of e-commerce platforms for trademark infringement in the United States was most recently and comprehensively addressed in the leading case of Tiffany Inc. v. eBay Inc^[8]. In that case, the court stopped well short of imposing strict liability on e-commerce platforms for the sale of counterfeit goods on their websites. The court declined to hold eBay liable for trademark infringement even though a “significant portion” of the “Tiffany” jewellery offered for sale on eBay was counterfeit and eBay knew generally that “some portion” of the offered goods was counterfeit. 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 in India, where trademark infringement is alleged, it is arguable that the exclusion of the Trademarks Act from the overriding proviso in Section 81 of the Information Technology Act means that intermediaries can seek shelter under Section 79 of the Information Technology Act^[9]  and its due diligence threshold. The intent of the Supreme Court has been noble in this aspect[^10], it did not perhaps fully consider the ramifications of its decision specifically in the context of Section 79 of the IT Act and, as a result, on online counterfeiting till date. It is up to the website to carry out due diligence while allowing third-party sellers to sell their items on their platform, however they may be contributories to the crime of counterfeiting.

The commercial reality is that it is impossible to verify every product and service to ensure that it does not infringe IP rights. This also dilutes the elaborate takedown policies and procedures implemented by ISPs to remove infringing goods and content. The Delhi High Court recently restrained online retailer Brandworld from using the brand name L’Oreal to sell or supply any goods, on any website or in any other manner, after the cosmetics company alleged that counterfeit products bearing its trademark were being sold by the merchant on its shopping website www.ShopClues.com.

To curb down online counterfeiting, The website should strengthen their IP portfolio, obtain statutory protection for your brands and regularly audit your portfolios^[11], establish a monitoring programme to keep tabs on online misuse of your IP rights, establish a cease and desist notice programme, supported by rigorous follow-up to safeguard brands and intellectual property, conduct market and online investigations following leads presented by your monitoring programme to take appropriate action against habitual or key infringers from time to time. India is experiencing a digital revolution, fuelled by a growing young and urban population. In this scenario, a combination of technological solutions, consumer awareness/education and legal action can help to control, if not eliminate, the problem.

References:

[1] Neeraj Dubey, ��India: Legal Issues in E-Commerce-Think Before You Click!��, Mondaq, 14 March 2014, available at http://www.mondaq.com:80/india/x/299686/ IT%20internet/Legal%20Issues%20In%20ECommerce%20Think%20Before%20You%20Click

[2] Measuring Electronic Commerce, Committee For Information, Computer And Communications Policy, OCDE/GD(97)185, 1997, available at http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=OCDE/GD(97)185&docLanguage= En

[3] Lancome v. eBay

[4] Alok Deshpande, ��Snapdeal faces heat over sale of prescription drugs��, The Hindu, 18 April 2015), available at http://www.thehindu.com/news/national/snapdeal-faces-heat-over-sale-of-prescription-drugs/article7114960.ece

[5] S.A. Louis Vuitton Malletier v. eBay, Inc., Tribunal de Commerce de Paris, Premiere Chambre B. (Paris Commercial Court), Case No. 200677799 (June 30, 2008).

[6] Brussels Commercial Court (Aug. 12, 2008), Docket No. A/07/06032.

[7] Gucci Am., Inc. v. Duty Free Apparel, Ltd., 286 F. Supp. 2d 284 (S.D.N.Y. 2003)

[8] .600 F.3d 93 (2nd Cir. 2010)

[9]Section 79 of the IT Act which grants an exemption to intermediaries from being held liable for third party information which is hosted through their platforms on the internet

[10]Shreya Singhal v Union of India WP (Cr) NO.167 OF 2012

[11] World Trademark Review http://www.worldtrademarkreview.com/Intelligence/IP-Lifecycle-India/2015/Articles/Protecting-brands-in-the-digital-space 7/8

Liability of Online Intermediaries viz-a-viz Copyright Infringement

What is Copyright?

World Intellectual Property defines copyright as, “copyright (or author’s right) is a legal term used to describe the rights that creators have over their literary and artistic works. Works covered under copyright range from books, music, paintings, sculptures and films, to computer programs, databases, advertisements, maps, and technical drawing”.

Copyright provides the creator of an original work a legal right, which grants exclusive rights to make copies, grant license and otherwise exploit his or her work. Thus, it is a form of legal monopoly that protects original works which maybe both published and unpublished from unauthorized duplication without credit and due compensation. With the advent of internet in the 21^st Century, diverse creative works being taken into its digital sphere, copyright and allied intellectual property rights remain no alien to online publication and usage.

The internet has become an essential part of our daily lives, in fact it is hard to fathom a world without the internet connecting us and providing us any information we seek in a click of second. The internet comes with certain disadvantages, the one which we will divulge into is regarding the infringement of intellectual property rights.

Online Intermediaries and Their Liabilities

The internet as mentioned provides information. This information comes in varying forms such as texts, pictures, videos, etc. To make this information accessible to the public, users upload this information on the internet via intermediaries.

Section 2(1) (w) of Information Technology Act, 2000 states “Intermediary with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.”

However this easy access to information is not without drawbacks which come in the form of infringement of intellectual property rights in the virtual world. Despite there being a plethora of laws to protect copyright, but mostly these laws are limited by territorial boundaries or are more concerned with protection of traditional IPR and do not cover the scope of the virtual or digital medium. The question thus comes into mind, who is liable? The person who uploads such copy of works? Intermediaries for hosting it? Or both? There seems to be a bit of confusion in this regard.

There are various pros and cons of extending liability of copyright infringement to intermediaries.  An important point to consider is that there is a difference between online services which provide the transmission of data and services providing the content. In the latter, intermediaries are held liable because they actively participate. The main arguments for holding intermediaries liable are attributed to the factors that they have a responsibility to scrutinize the content before publishing it and due to the fact they have deeper pockets. Opposite arguments are that intermediaries are simply messengers and they act like courier agent, just delivering a parcel without scrutinizing the content. Moreover, with the vastness of the internet and millions of content being uploaded every day, it is not possible to scrutinize each one.

Thus it is generally accepted that when intermediaries are aware of an infringement and yet fail to act, then it would be held liable and by this view most countries around the world have limited or no liabilities for intermediaries.

Legal Position of Online Intermediaries Globally

In the US, in its various judgements and legislations such as Digital Millennium Copyright Act, 1998 has stated the position that an intermediary is not liable for the acts of others in copyright infringement, if it did not have prior knowledge.

Viacom Int’l Inc. v. YouTube Inc [07 Civ. 2103 (S.D.N.Y. April 18, 2013)] is a landmark decision, the facts of the case are, the complainant based the issue on copyright infringement of a content to which Viacom claimed to be the owner, the same was uploaded by a third-party user on YouTube’s server and was available for public to view. The court held that in order to hold intermediaries liable for copyright infringement, the copyright owner has to prove that such intermediaries had specific knowledge of infringement. In addition, the court also suggested that the intermediary may be held liable if it had exerted “substantial influence” on the infringing activities of users. Viacom was unable to prove YouTube had actual knowledge or awareness of specific infringing activity on its website and the courts held that YouTube could not be held liable for copyright infringement. This lead to the formation of the “red-flag” test which stated that one had to have “actual knowledge” to be held liable and not “general awareness”.

Legal Position of Online Intermediaries in India

In India, copyright is protected by the Copyright Act, 1957 but this Act does not deal with copyright infringement in the virtual domain. The liability of intermediaries can be found in the Section 79 of the Information Technology Act, 2000. Section 79 of the IT Act exempts intermediaries from liability of the third party infringement, if the intermediary exercised all due diligence and had no knowledge about the incident. If the two exceptions are not met, the intermediaries can be held liable. Section 81 of the Act is a proviso to Section 79 and the non-obstante clause contained there has an overriding effect. This has an important significance because it provides a loophole, that even if one may satisfy the requirements of Section 79 of the Act, which provides immunity to intermediaries, an individual still has the right to approach the court against the intermediaries by using the Copyright Act.  It can be interpreted by reading section 81 which overrides Section 79 and provides the intermediaries the right to take up any defence which is available to it in the Copyright Act.

In the 2012 Amendment of the Copyright Act, Section 52(1) (b) was inserted which provided that, “incidental and transient” copies shall not amount to copyright infringement and would fall under the purview of fair use. Here, the term “incidental” refers to technical copies or unintentional copies and “transient” are temporary or cache copies. Thus any document which is present in the server of an intermediary for a temporary basis or is stored unintentionally, unless so expressly prohibited by the copyright owner, will not amount to infringement.

Super Cassettes Industries Ltd. v. Myspace Inc. and Anr [2011 (48)PTC49(Del)] is considered a landmark decision wherein Myspace permitted its users to upload work of the complainant on its website. The Court held Myspace liable for copyright infringement with respect to the music to which SCIL had ownership. Myspace claimed that they were an intermediary within the scope of section 79 of the IT Act, 2000 and thus exempted. The court held the view that Section 81 overrides Section 79 of the IT Act, 2000. Myspace claimed that it had various remedial tools to provide post-infringement curative measures (as required by DMCA), the court observed that infringement measures might be sufficient in the American framework, but not in the Indian context.  The court further stated that Myspace was aware of the infringing works as it had obtained license from the user to insert ads by modifying the content and thus showed that they had knowledge.

Conclusion

The recent legislations aim to provide a balanced position for online intermediaries and the respective right holders. However the laws are still emerging, holding intermediaries liable for third-party generated content could lead to a system where intermediaries would be forced to restrict the availability of content to the public in order to avoid any liability. Such form of censorship could adversely impact one’s freedom of speech and expression.

Dunkin Donuts Sued for Alleged Trademark Infringement

Life isn’t so sweet for Splenda in what could turn into a bitter courtroom battle.

Heartland Consumer Products, the Carmel-based company behind Splenda, is suing Dunkin’ Brands Inc., alleging the company is misleading consumers into thinking they are getting the real Splenda when it’s just a knockoff.

According to the complaint filed in federal court this week, after Dunkin’ and Heartland ended their business relationship in April, the restaurant chain turned to “Chinese-made, off-brand sucralose” in packaging that Heartland claims is similar to Splenda’s.

Both sweeteners come in pastel-yellow paper packets.

The Dunkin’ version does not include any brand name for the sucralose it contains, but the new packaging indicates it is manufactured for Dunkin’ by Chicago-based Merisant.

Additionally, the company claims Dunkin’ employees tell customers that Dunkin’ uses Splenda products.

“Investigators revealed that a clear majority of stores affirmatively represented, through their agents or employees, that non-Splenda sucralose sweetener was used instead Splenda brand sweetener,” the complaint states.

Heartland has applied for an injunction to stop Dunkin’ Donuts from representing that it uses Splenda products, as Dunkin’ is “irreparably damaging the value of Heartland’s iconic Splenda trademark and other marks,” according to the 22-page complaint.

The company is claiming other damages arising from Dunkin’s “violations of trademark and trade dress infringement, dilution and unfair competition under the Lanham Act, the Indiana State Trademark Act, the common law of the State of Indiana and the Indiana Crime Victims Act.”

Splenda is a low-calorie sweetener derived from sugar using a patented process to create a sweetener that tastes like sugar, according to its website.

It was introduced to American markets in 1999. and Heartland and owns 62% of market share as of 2007. The company’s U.S. trade sales this year are expected to be $163 million.

Legality of Parallel Imports in India viz a viz Kapil Wadhwa Judgment

Intellectual Property Rights (IPR) exist to incentivize innovation & trade and provide exclusivity of usage to authors/innovators/trademark holders. In the present scenario where right holders are vigilant and aggressive in asserting their claim over their intellectual property, the issue of Parallel Imports is assuming an ever greater importance towards determining the limits of Enforcement of IPR in India.

What is Parallel Import? – The Concept, Explained

Parallel Import occurs when goods belonging to right-holders are legitimately acquired/bought by a third party in country A and are then imported to and sold in country B without the express consent of right holders. These goods are legitimately bought in country A where the goods may be available at a lower price than Country B and the same goods are then sold in Country B at a price higher than the authorized sellers of the right-holder, thereby making the same goods available at a lower price to consumers (through parallel channels). This trade practice is carried out to take advantage of differentiation of price of goods between different countries which may be due to various factors including different taxation regime(s), subsidies, market trends, etc.

“For easier understanding, a product which may be priced at $60 in Nepal is imported into India and is sold for $70 in India whereas the actual right-holder of the product has priced the same product at $ 80 for Indian markets. Consumers, in this case, are getting two products of the same brand but at different prices (parallel channels turning out to be cheaper).”     

Whether such imports are legal or illegal depends on the Principle of Exhaustion followed in the country of import. Article 6 of TRIPS (Trade-Related Aspects of Intellectual Property Rights) read with foot note 6 of Article 28 and Article 5(d) of Doha Declaration makes it clear that it is open for countries to determine the principle of exhaustion they want to follow. The Principle of Exhaustion followed by a country determines the country’s stand on whether or not the right holder’s exclusive right over a product is “exhausted” after its first genuine sale to a customer or whether the right holder can control further re-sale or distribution of the goods after first sale. Broadly, two types of exhaustion principles are followed by countries – 1) National and 2) International. In case of national exhaustion principle (followed in USA), the goods can be legally resold only within the territory where they are first sold, which means that the interest of the right holder will exhaust only in the country of first sale and further re-distribution by imports of such goods from other countries is illegal. In case of International Exhaustion Principle (followed in India), after the first sale, the right holder exhausts all the rights over that unit of product internationally and such product can be legally imported/distributed further anywhere in the world.

Under the current Indian law, legislations pertaining to each IPR provides for parallel imports differently such as Parallel imports are expressly prohibited under the Designs Act, 2000 and that the Geographical Indicators Act, 1999 doesn’t cover the issue of parallel imports at all. Since the Section 2(m) had been dropped from the Copyright Amendment Bill, 2012 India still follows principle of national exhaustion with respect to Copyrighted material. In so far as Patents are concerned, Section 107A (b) of The Patents Act, 1970 expressly provides for parallel imports. In addition, Section 30(3)(b) of the Trade Marks Act, 1999 also provides for the issue of parallel import and was discussed in great detail in the case of Kapil Wadhwa v. Samsung Electronics[2013 (53) PTC 112 (Del.)].

A Division Bench of the Delhi High Court, in this case, re-considered the question of whether the Trade Marks Act,1999 embodies the International Exhaustion Principle or the National Exhaustion Principle when the registered proprietor of a Trade Mark places the goods in the market under the registered trade mark. The court held that the earlier finding -that there was legislative intent to put barriers on importation-was premature and went on to interpret Section 30(3) as follows:

“(1) Where goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market by that person is not infringement of the trade mark by reason only of the registered trade mark having been assigned by the registered proprietor by some other person after the acquisition of those goods. (2) Where goods bearing a registered trade mark are put on the market and are lawfully acquired by a person, the sale of the goods in the market by that person is not infringement of the trade mark by reason only of further sale in the market. The two situations are distinct and operate in mutually exclusive areas and the question of any one being interpreted in a manner to render the other otiose does not arise.”

While defining what “lawful acquisition” is, the court stated that there is no law which stipulates that goods sold under a trade mark can be lawfully acquired only in the country where the trade mark is registered. In fact, the legal position is to the contrary. Lawful acquisition of goods would mean the lawful acquisition thereof as per the laws of that country pertaining to sale and purchase of goods. Trade Mark Law is not to regulate the sale and purchase of goods. It is to control the use of registered trademarks.

Thus the division bench held that the Trademarks Act embodies the principle of International Exhaustion and the term “market” Section 29 and 30 of the act refers to international market and not the domestic market. The only condition imposed by the court on parallel import, in relation to trademark, is that the imported goods should state they have been imported and that after sales service and warranty is not provided by the right holder but rather by the importer.

Despite different principles followed in different countries, Right holders can avail remedies like Injunctions, Damages etc. in cases where unauthorized parallel import amounts to infringement. On the other hand, in a case where parallel import has been declared illegal, provisions of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 and the Customs Act, 1962 are also provided for. Under these Enforcement Rules, a right holder may apply to a Commissioner of Customs at a port where the goods infringing his IPR are likely to be imported. If the Custom authorities arrive at the conclusion that the goods being imported are infringing in nature and are liable to be confiscated under Section 111 of the Customs Act then they may Sub-rule (9) of Rule 7 of the said Rules seize the goods. Penalty can also be imposed on importer in terms of Section 112 of the Customs Act. This ensures that the protection of right-holders’ interest remain paramount in the eyes of law.