Recently, a DB of the DHC passed a stay on the Amazon v. Lifestyle decision granting ₹339 crore in damages and costs on Amazon Technologies, Inc for trademark infringement. Khushi Jain and Vishno Sudheendra explain the DB judgement, discussing how it recalibrates the contours of licensor and e-commerce liability in trademark infringement disputes. Khushi is a fourth-year B.A., LL.B (Hons) student at the National Law University Delhi with a keen interest in the intersection of law and policy. Vishno is a fourth-year B.A., LL.B (Hons) student at the National Law School of India University, Bangalore with a keen interest in various aspects of IPR and technology law.
Procedure, Pleadings, and Platforms: DHC’s Stay in Amazon v. Lifestyle
By Khushi Jain and Vishno Sudheendra
A Division Bench (DB) of the Delhi High Court comprising Justice Harishankar and Justice Digpaul, in Amazon Technologies Inc v. Lifestyle Equities CV & Anr., stayed the ex-parte Single Judge judgment in Lifestyle Equities CV & Anr. v. Amazon Technologies, Inc. & Ors., which had imposed ₹339 crore in damages and costs on Amazon. The 127-page judgment marked a rare deviation from the principle against staying money decrees (Malwa Strips Pvt Ltd v Jyoti Ltd), treating this case as exceptional. The judgment noted a lack of specific claims in pleadings and the absence of Amazon Technologies’ role in infringement, amongst other reasons, warranting a stay. This blog post examines how the DB’s stay order flags serious procedural lapses and recalibrates the contours of licensor and e-commerce liability in trademark infringement disputes.
Background
Lifestyle Equities sued Amazon Technologies Inc (“Amazon Tech”), Cloudtail, and Amazon Seller Service Private Limited (“ASSPL”) before the Single Judge for trademark infringement, alleging sale of apparel with a mark similar to Lifestyle’s registered mark.
Amazon Tech was the licensor of the brand “SYMBOL” under which the licensee and retailer Cloudtail sold apparel containing the infringing mark on the Amazon e-commerce platform operated by ASSPL.
The Single Judge awarded ₹339 crore in damages against Amazon Tech, while conflating Amazon Tech as an intermediary and treating all defendants as a single commercial entity without addressing their distinct legal personalities (read more about the impugned judgment and its critique here and here, we are happy to note that our criticisms of the impugned judgement have been echoed by the DB judgment). Amazon Tech sought a stay before the DB whose judgment is discussed in this blog.
The Judgment & Analysis
Exception for Stay Against Money Decree
While Order XLI Rule 1(3) of the CPC requires a security deposit for staying money decrees as was passed by the Single judge, it is not mandatory (Malwa Strips). Stays may be granted in exceptional cases, as here, where “the principle of complete deposit is neither inexorable nor absolute.” (Para 123)
Money decrees are to be stayed only in exceptional circumstances (Sihor Nagar), and the discretion should be used judiciously (Malwa Strips). So what warranted such a stay in the given scenario, especially without requiring Amazon Tech to furnish a security deposit? Here, the absence of pleadings claiming ₹336 crore damages, combined with ex-parte proceedings conducted without summons, rendered the decree highly vulnerable (discussed in detail later). Enforcing a deposit on a decree tainted by fundamental procedural violations would have unfairly cemented the decree’s effect while the appeal challenges its validity. While caselaws have emphasised granting stays judiciously in exceptional circumstances, the given case is an illustration as to what might constitute such circumstances where grave procedural lapses lead to granting a stay and an exemption from deposit under Order XLI Rule 1(3).
No Pleadings Claiming ₹336 Crore!
The most striking aspect of the impugned award of ₹336 crore damages was the complete absence of pleadings claiming ₹336 crore, nor were the pleadings amended to incorporate it. Lifestyle unilaterally enhanced its damages claim from ₹2 crore to ₹3780 crore in written submissions (a 1,88,900% without amending pleadings or providing notice!). The DB emphasised that evidence cannot traverse pleadings. (Paras 135-138)
Amazon Tech’s Non-Liability: Implications for E-Commerce and Licensors
The DB noted no finding of Amazon Tech’s involvement in infringement, with the Single Judge’s reasoning being “largely generalized” and reflecting the view that Amazon Tech could infringe, not that it did infringe. The Division Bench also set aside the finding that Amazon Tech is an intermediary.
The impugned judgment had introduced uncertainty by conflating the roles of all three defendants while also negating safe harbour protection despite Amazon (e-commerce intermediary) being struck off the record from the list of parties (read more here). The DB judgment has brought about significant clarity by correcting the Single Judge’s error of identifying Amazon Tech as an intermediary.
The Single Judge had also pierced the distinct legal personalities of all three defendants and had considered them cohesive commercial entity (Para 99 of Lifestyle Equities). This had also introduced uncertainty in terms of licensors’ and e-commerce liability for trademark infringement by licensees and retailers respectively. However, the DB reaffirmed the distinct legal personalities of the three defendants and noted that the relevant question was not to examine the interlink between these entities, but to assess the involvement of Amazon Tech in infringement, which was not found in the given case.
The Line Between Licensing and Complicity
The Court found that the License Agreement was misread, as it only covered the mark ‘SYMBOL’ and had clauses against third-party infringement. A licensor is not liable for a licensee’s infringing acts unless authorised by the licensor. (Paras 147-150)
The judgment clearly confines the liability of the licensor to only licensed marks and the subject matter of the agreement. This is a positive development for trademark licensors since the conduct of licensee leading to third-party trademark infringement in conjunction with licensed mark use shall not make the licensor liable. The Court’s focus on exempting licensors liability from “any illegal or infringing acts by the licensee” unless there is evidence of such authorization significantly reduces licensor’s liability and confines it to well-defined contours of authorized activities. This is in contrast with the Single Judge’s observations, which might have rendered licensors liable for the infringing conduct of licensees for merely using the licensed mark along with an infringing mark.
Moreover, this case also reaffirms thresholds regarding contributory infringement – knowledge (My Space) and active contribution (Christian Louboutin). This judgment highlights that there must be authorization by, or involvement of, the licensor in the infringing activity to be held liable for complicity in infringing the trademark. Mere use of the licensor’s mark by the licensee along with an infringing mark may not fulfill the thresholds of complicity in infringement or contributory infringement.
Separate Damages Could Not Be Awarded
The plaint sought consolidated damages of ₹2 crore against all defendants, and a prior DHC order had decreed damages against Cloudtail alone. The Single Judge erred in awarding separate damages against Amazon Tech without any independent infringement claim. (Paras 165-167)
Stick to Procedure!
No summons were served on Amazon Tech, making the ex-parte proceedings legally untenable. Service of papers by the plaintiff does not substitute summons, and ex-parte proceedings cannot proceed without them. (Paras 170, 173)
The Court has reaffirmed procedure i.e., claim and basis should be asserted in the plaint, and mailing documents/plaint does not constitute service of summons. Such procedural omissions formed part of the DB’s major reasoning in staying the impugned judgment. Therefore, the DB judgment underscores the indispensability of procedural compliance which is prioritised over substantive claims.
E-infringement not explicitly reaffirmed
Previously, we had pointed out that e-infringement is merely an academic distinction, and the existing provisions of the Trademarks Act, 1999 sufficiently address online infringement without needing a new “e-infringement” category. The DB has seemed to have had the same view against having this new category.
Conclusion
The DB judgment staying the impugned judgment is rather rare, since the general principle is to not stay money decrees, and in this case, staying without security/deposit. The DB’s reasoning reaffirms the importance of procedural requirements like claims and its basis being pleaded, and amended if changed, in addition serving proper summons before proceeding ex-parte. However, as noted by the DB, its observations are merely prima facie since it is an application for stay of operation of the decree and judgment (Para 184), thus, the final outcome of this case depends on the judgment in the appeal.
We thank Praharsh Gour and Swaraj Barooah for reviewing this blog and for their valuable inputs.