Delhi High Court backs L’Oréal and Skullcandy in counterfeit spats

The Delhi High Court has sided with L’Oréal and Skullcandy in their respective trademark disputes against the same online retailer.

Justice Pratibha Singh delivered both judgments on November 12.

In separate complaints, L’Oréal and Skullcandy accused online retailer Shop Clues, and third-party merchants selling on the platform, of trademark violations. They claimed that the merchants were using Shop Clues to sell counterfeit branded products.

Cosmetics brand L’Oréal has registered its name as a trademark in India in class 3, while consumer electronics company Skullcandy’s name is registered in classes 9 and 25. Skullcandy’s logo is also copyright-protected.

The disputes between the brands and Shop Clues initially reached the Delhi High Court in 2014, and the court granted L’Oréal and Skullcandy ex-parte injunctions to prevent the online retailer from advertising or using the protected trademarks in any form.

In response, Shop Clues claimed that it was just an intermediary in the sale of the goods, an argument the brands disputed.

Under section 79 of India’s Information Technology Act 2000, an intermediary is a platform where sellers conduct the sale of goods but the platform takes no role in the process. Intermediaries are not liable for third-party activities.

But L’Oréal and Skullcandy claimed that the retailer maintained an inventory of counterfeit goods and listed them through various sellers, “who may or may not be fictitious”, and had a direct revenue source from sales of the infringing products.

In addition to arguing that Shop Clues was not an intermediary, the brands contended that Shop Clues had failed to take any action to prevent third-party counterfeiting on its platform. They referred to the separate category for the sale of ‘replicas’ on the site, where lookalike branded goods are sold.

Shop Clues again claimed it had no knowledge of the alleged counterfeit products, as product listings are managed by a third-party before being delivered to the customer by the same.

In both judgments, Singh said: “In the world of e-commerce, IP owners face challenging times. This is because sellers of counterfeit of infringing products seek shelter behind the platform’s legitimacy.”

Singh recognised the damage that counterfeiting and trademark dilution can have on a brand’s reputation, before stating that section 79 is designed to protect only genuine intermediaries.

“It cannot be abused by extending such protection to those persons who are not intermediaries, and are active participants in the unlawful act,” she said.

Certain elements suggested that Shop Clues is not an intermediary, according to Singh, such as the website’s guarantee that all products are 100% genuine.

She added that the retailer had failed to take precautions to stop the sale of counterfeits, and factors such as that disqualified Shop Clues from the section 79 exemption.

Singh ordered the retailer to disclose the details of the third-party merchants; obtain certificates from sellers to prove the genuine nature of goods; and notify Skullcandy and L’Oréal when a product bearing their respective marks is listed for sale on the site.

Earlier this month, Singh used similar reasoning in a counterfeit suit brought by luxury brand Christian Louboutin. She found that the accused e-commerce site was not entitled to a safe harbour under section 79, as to do so would legalise the infringing activity.

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