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E-commerce platform can't allow third-parties to "latch on" to other sellers: Delhi HC

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The Delhi High Court has said that an e-commerce platform permitting a third-party seller to "latch on" to the name or mark and product listings of another seller on its platform is "nothing but riding piggyback" and cannot be allowed. Justice Prathiba M Singh said that "latching on" is a mode of encashing upon the reputation of another entity and the consent and authorisation of the brand owner as well as the listing owner would be required before such conduct is permitted.

The court's observations were made on a lawsuit by an online clothes seller against an e-commerce platform.

The plaintiff alleged that the defendant's platform allowed third-party sellers to "latch on" to its product listings.

The court, in its interim order, said that prima facie, the defendant was permitting other third-party sellers to "latch on" to the best sellers in one particular segment of products and directed the defendant to disable the feature in relation to the plaintiff and restrained it allowing any third-party sellers from "latching on" to the mark and product listings of the plaintiff.

"In the opinion of this Court, permitting a third-party seller to 'latch on', in this manner, to the Plaintiff's name/mark and product listings is nothing but 'riding piggy back' as is known in the traditional passing-off sense. It amounts to taking unfair advantage of the goodwill that resides in the Plaintiff's mark and business," said the court in its order dated August 2.

"This Court is satisfied that such a feature cannot be allowed to be used or offered, to the detriment of the owner of the brand or the person who has created the original product. Consent and authorisation of the brand owner and the listing owner would be required before such conduct by any seller is permitted," it said.

The plaintiff told the court that the defendant was "encouraging and allowing third-party sellers" to "latch on" and use its mark along with the photographs of its products.

It was the plaintiff's grievance that by doing so, several third-party sellers who are not connected to it were able to portray themselves as the plaintiff and ride on its popularity, leading to the loss of business to such small and medium entrepreneurs.

The court said that while e-commerce platforms provide an alternate platform for small and medium entrepreneurs to conduct their businesses in a profitable manner, certain features on these platforms can also cause damage to them.

"A perusal of the above slides shows that whenever a seller wishes to place some listings in a specific product category, a recommendation on the basis of the business conducted on its portal is given as to which are the 'Best Seller' products. The caption "Grow your business by 3x" along with specific data, is also projected in order to entice the new seller to 'latch on' to popular product listings. The said seller is then permitted to 'ADD the LISTING' to his listing page," the court recorded.

"In the context of e-commerce, this Court has no doubt that 'latching on' by unauthorised sellers results in and constitutes 'passing off' as known in the brick and mortar world. It is a mode of encashing upon the reputation of the Plaintiff which he has painstakingly built," the court observed.

The e-commerce platform said that the mark of the plaintiff was not registered and thus there was no method of checking as to whether the mark was entitled to protection.

It nonetheless said that without prejudice to its stand, it would take down the listings.

The court granted time to the defendant to state its stand to the plaintiff's plea and listed the case for further hearing in November.

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