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Due Diligence Requirements For E-Marketing Websites

The digital marketplace has provided numerous opportunities for businesses and consumers alike. However, with these opportunities come challenges, particularly concerning the sale of counterfeit goods on e-marketing platforms. A pivotal issue that arises is whether e-marketing websites can be absolved from liability merely by functioning as a platform provider or if they must undertake due diligence to prevent the sale of counterfeit products. This article delves into this complex legal issue, with a specific focus on the recent case of PUMA v. INDIA MART before the Hon'ble High Court of Delhi.

PUMA, a renowned brand, initiated legal proceedings against INDIA MART, alleging that counterfeit PUMA products were being sold on its platform. The core contention was whether INDIA MART could escape liability by merely acting as a platform provider without conducting adequate due diligence on its sellers.

Analysis of Due Diligence Obligations:

The Hon'ble High Court of Delhi meticulously examined INDIA MART's operational framework. One significant observation was that INDIA MART's registration process for sellers was flawed. While sellers had the option to provide their GST/PAN numbers during registration, it was not mandatory. This omission indicated a lack of stringent verification processes in place.

The court's analysis highlighted the need for e-marketing platforms to exercise due diligence in verifying the authenticity of sellers and products listed on their platforms. The absence of mandatory verification mechanisms exposed INDIA MART to allegations of facilitating the sale of counterfeit goods.

Legal Precedents and Implications:
In arriving at its decision, the court relied on the precedent set in the case of DRS Logistics Pvt Ltd vs. Google India Pvt Ltd (2023 SCC OnLine Del 4809). The court emphasized that e-marketing platforms cannot evade liability by merely positioning themselves as intermediaries. Instead, they have a duty to implement robust due diligence measures to prevent unlawful activities, such as the sale of counterfeit products.

The ruling serves as a significant precedent, signaling that e-marketing platforms must adopt stringent verification procedures to authenticate sellers and products. Failing to do so could result in legal repercussions, including interim injunctions, as demonstrated in the INDIA MART case.

The conclusion Note:
The PUMA Vs INDIA MART case underscores the evolving legal landscape concerning the liability of e-marketing platforms in facilitating the sale of counterfeit goods. The Hon'ble High Court of Delhi's decision reaffirms that merely serving as an intermediary does not absolve e-marketing websites from liability. Instead, platforms must undertake rigorous due diligence measures, including mandatory verification of sellers and products.

The Case Law Discussed:
Case Title: Puma SE Vs India Mart Intermesh Limited
Date of Judgement/Order:03.01.2024
Case No. CS(COMM) 607/2021
Neutral Citation: 2024:DHC:20
Name of Hon'ble Court: Delhi High Court
Name of Hon'ble Judge: C Hari Shankar, H.J.

Ideas, thoughts, views, information, discussions and interpretation expressed herein are being shared in the public Interest. Readers' discretion is advised as these are subject to my subjectivity and may contain human errors in perception, interpretation and presentation of the fact and issue involved herein.

Written By: Advocate Ajay Amitabh Suman, IP Adjutor - Patent and Trademark Attorney
Email: [email protected], Ph no: 9990389539

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