Module 5

MODULE 5
INTERMEDIARY LIABILITY IN INDIA

Intermediary liability got its legal attention when the amplified internet created
a borderless domain for all the illegal activities. The concept of copyright got
importance when the printing machine was invented and lost its importance
when internet became popular. This is the current scenario and as usual law is
trying to catch up with the technological advancements. To take one of the hot
debated topics, intermediary liability, in hand my view is that Indian Courts and
legislature in Ind ia has failed to address even the bare logical requirement. The
original idea of intermediary liability dates back. Traces of it can be found in
criminal and civil jurisprudence. However, the internet age gave this concept
whole new perspective and dimension.

Intermediaries are third party organizations that offer intermediation services
between the parties trading amongst themselves. Such organizations act as
ducts for services offered by a supplier to the relevant consumer. Value
addition to the service in question is a key aspect of the trading platform
offered by such intermediaries, which is highly improbable if the trading is
done directly. Provision of a trading platform for any kind of electronic
commerce is the key link of the existence of an intermediary.

As existing in the technological age the surfaced usage includes the financial
militaries along with the insurance sector. Financial services where
insurance brokers, mortgage brokers and financial advisors offer select
intermediation services for and in the supply of financial products such as
mortgage loans, insurance premiums and investment services and products.

The intermediaries find their relevance in the Barter system in the following
manner, for in the aforementioned system, the intermediary is a person or a
group who stores valuables in practices such as trade until those are needed.
Parties to such transaction have space available to take delivery of them and
store them or until and unless the requirements that follow are met.
Facilitator of a contract between two parties is also an intermediary.

Classification of intermediaries is a very important aspect of any transaction
or for understanding purposes. Such can be classified as merchant
intermediaries and or as accountant intermediaries. The landmark case of
Baile and Bakos [1997] analysed a number of prevalent case studies and
jurisprudence and thereby identified four such rules and duties of electronic
intermediaries inclusive of information aggregating, provision of trust,
matching and meeting of minds and facilitation.1

Market is like a human body wherein information is the backbone. All
transactions in pertinence to a buyer and a seller must have the exchange of
information about the product, about the service, about the price and about
the settlement of disputes if any arose. Hence the acquisition of information
is one of the few most important aspects of a transaction. Information must
be acquired in order to make informed decisions in the purchase of both
services along with its commodity. Information is an essential component of
any recognized market. In all such transactions, buyers and sellers must
exchange information about the product, price, and adjustments of the issues

1Bailey, J. P., &Bakos, J. Y. [1997]. An Exploratory Study of the Emerging Role of Electronic Intermediariations and
Policy, 19[5], 406-417.

that might rise during the course of the transaction. Hence, individuals must
acquire information to make informed decisions in the purchase of both
goods and services2.The tagline of information economy has been recently
glued to economy yet till date the market has always relied on the exchange
of relevant information.

Neoclassical model of economics has largely ignored the importance of
information3. As per the assumptions of a neoclassical model of the market,
the market information should be perfect wherein the transaction costs are
low whereas in reality such a perfect market is impossible. Actors of such
structures are not having the adequate and asymmetric information so they
shall and they do make decisions based on bounded rationale. The
aforementioned lack of perfect information rests and results in increased
transaction costs for the sellers as well as buyers.

Traditionally the intermediaries in question have served to reduce such
information related transaction costs. An economic agent is what an
intermediary shall act as, which in turn helps buyers and sellers find each
other and help in executing a transaction stacked. In addition to that the said
intermediaries help in order to classify followed by sorting the market
information and finally distribute the market information and goods. The
role of intermediaries does not end at the behest of distribution of the goods
and services but has grown and become more specialized as advances in

2Kingma, B. R. [2001]. The economics of information: A guide to economic and cost-benefit analysis for information
professionals [2nd ed.]. Englewood, CO: Libraries Unlimited.
3Wolpert, S. A., &Wolpert, J. F. [1986].Economics of information. New York: Van Nostrand Reinhold.

transportation as technology increases the size and complexity of any such
market place.4

As for the present day, however, advances, which take us into far future,
threaten the role of a tradition intermediary. If the logs of the World Wide
Web were to be checked such technologies transform the said locale of any
such business transaction-taking place under themselves from the traditional
to the cyber market place. The Internet does exponentially expand the scope
and the size of any said market, it also gives direct link access between the
seller and the consumer. Businesses do advertise and market directly to the
consumers whilst the said consumers employ and enjoy web tech
capabilities to seek out the services they seek. Disintermediation is what is
addressed by such technological capabilities of today’s era. And thus,
eliminate the middleman in any such transaction.

Advancement of the paradigm concerned is shifting its focus on the html
space from the traditional goods to such information goods and services
thereby entering into a true information economy. Infrastructure of the
Internet adds value to such information by the enhancement of the ability to
retrieve, filter, store, repackage and distribute the same.5 Information can be
very easily and in accordance to the consumer/ seller/ retailer being turned
into a commodity and be bought or sold at a market place. Usage of Internet
for businesses now days can attract a huge client base and opportunities.

4Beniger, J. R. [1986]. The control revolution: Technological and economic origins of the information society.
Cambridge, Mass.: Harvard University Press.
5Shapiro, C., & Varian, H. R. [1998]. Information rules: A strategic guide to the network economy. Boston, Mass.:
Harvard Business School Press.

Information about credit cards/ bank accounts and other personal data.6
Online businesses, in today’s era collect consumer data and sell it for direct
marketing. Business can, truly, maximize profits and minimize transaction
costs. Thereby proving that information commodities are not only intangible
goods but also personal information is negatively politicized.

There is, however, a greater potential for the information, personal, to be
misused by such internet based businesses. Capitalizing on consumer
information compromises on consumer’s privacy rights and loss of
property.7 Consumers never have any kind of control over how their
information, personal, shall be used. Not so surprisingly, there has been a
relevant concern in pertinence to consumer privacy.8

E-commerce in India is largely governed by the provisions of the
Information Technology Act 2000 [IT Act] which was amended in the year
2008 to include a definition for the term "intermediary" and the insertion of
Section 79 into the IT Act. Section 79 is an exemption provision which
grants safe harbour to intermediaries from prosecution for illegal activities
of third parties, subject to fulfilment of certain conditions. Intermediaries,
such as hosts, transitory communication systems, information location tools
etc are widely recognised as essential cogs in the wheel of exercising the
right to freedom of expression on the Internet.9

6Larson, E. [1992]. The naked consumer: How our private lives become public commodities [1st ed.]. New York: H.
Holt.
7Larson, E. [1992]. The naked consumer: How our private lives become public commodities [1st ed.]. New York: H.
Holt.
8Cavoukian, A., &Tapscott, D. [1997]. Who knows: Safeguarding your privacy in a networked world. New York:
McGraw-Hill.
9 Center For Democracy & Technology, Intermediary Liability: Protecting Internet Platforms For
Expression And Innovation [2010].

The liability imposed on internet intermediaries is either of primary or
secondary nature. 10 Primary liability arises where the intermediary is the
primary wrongdoer due its own acts or omissions, whereas,
secondary liability arises due to unlawful user-generated content, which
the intermediary may have contributed to, or have been in recognition of it,
making it the secondary wrongdoer.11 The intellectual property laws in India
dictate that such a platform would be held liable for IP infringement each
time it hosted/published an instance of a copyrighted work, for either
contributory infringement, in the event that it had knowledge and
contributed to the said infringement, or for vicarious infringement, in the
event that it controlled and made commercial gain from the infringement.12

The amended section 79[1] states that “an intermediary shall not be liable
for any third party information, data, or communication link made available
or hosted by him.13 The protection under sub-section [1] is qualified with the
conditions provided under the following sub-section that states,”
[a] the function of the intermediary should be limited to providing a
communication system over which information made available by third
parties is transmitted or temporarily stored or hosted; or
[b] the intermediary does not initiate the transmission, select the receiver of
the transmission, and select or modify the information contained in the
transmission; and

10 Jaani Riordan, The Liability of Internet Intermediaries [1st edn, OUP 2016] 13.
11 Ibid
12 Ibid
13 Information Technology [IT] Act 2000, s 79.

[c] the intermediary observes due diligence while discharging his duties
under this Act and also observes such other guidelines as the Central
Government may prescribe in this behalf.”14

Section 79[3]provides that the safe harbour protection would not apply:
“[a] if the intermediary has conspired or abetted or aided or induced,
whether by threats or promise or otherwise in the commission of the
unlawful act; and,
[b] if upon receiving actual knowledge or on being notified by the
appropriate Government or its agency that any information, data or
communication link residing in or connected to a computer resource,
controlled by the intermediary is being used to commit the unlawful act,
the intermediary fails to expeditiously remove or disable access to that
material on that resource without vitiating the evidence in any manner.15It
effectively holds an Internet intermediary liable for content, which might be
illegal or may have been published by third parties, where
the intermediary was aware or was made aware of such content. Online
intermediaries would be required to block content on the threat of
prosecution.16

The significant terms in Section 79 of the Act which exclude immunity for
intermediaries is commission of unlawful act and receipt of actual
knowledge that it is being used to commit an unlawful act. The sale of

14 IT Act, s 79[2].
15 IT Act, s 79[3].
16 IT Act, s 69[4].

counterfeit goods have been treated as unlawful and an infringement of
rights of registered owner. Under the Penal Code there are provisions to
protect consumers facing deception through sale of counterfeit goods. A
consumer can file a criminal complaint against infringers on the ground of
cheating under Section 420 IPC, for concealment of the true origin of goods
and deceiving the consumers.17 Section 485 IPC also makes it an offence to
possess any counterfeit mark to be affixed to the goods, or to possess any
kind of die, plate, or other instrument for the purpose of counterfeiting.18

The Supreme Court of India recognized the problems with the IT Act, and
the 2011 Guidelines, in Shreya Singhal v. Union of India.19 It declared
section 66A unconstitutional and upheld the validity of section 79 but
limited the purview of its application. The Court held that the prohibition
against the dissemination of information by means of a computer resource or
a communication device intended to cause annoyance, inconvenience or
insult did not fall within any reasonable exceptions to the exercise of the
right to freedom of expression. 20
Copyright infringement:
Copyright infringement is one of the major concerns of the right holders. To
protect the copyrighted content, section 81 of the IT Act provides that

17 Section 420 of the Penal Code, 1860
18 Section 485 of the Penal Code, 1860

19 [2015] 5 SCC 1.
20 https://globalfreedomofexpression.columbia.edu/cases/shreya-singhal-v-union-of-india/

nothing in the IT Act restricts a person from exercising rights guaranteed
under the Copyright Act.21

In Super Cassettes Industries Ltd. v. MySpace Inc22 the Delhi High Court
held that the provision to section 81 of the IT Act does not preclude the
affirmative defence of safe harbour for an intermediary against copyright
claims. It further held that immunity under section 79[1] of the Act would
not be available unless the due diligence requirement under sub-section 2 is
fulfilled.23

In its order dated July 16 2018 in CS [COMM] 1015/2018 Lifestyle Equities
C.V. and Ors v Amazon Sellers Service Private Limited & Anr.24, the court
directed Amazon to take down the links advertising the infringing and
counterfeit goods, as well as share all available details and information about
the identity of the person who had uploaded the links.

Draft Information Technology [Intermediaries Guidelines [Amendment]
Rules], 2018, [“Draft Rules”] [2018]:
On December 24, 2018, Ministry of Electronics & Information Technology
released the Draft Rules for amending the existing Intermediaries Guidelines
to curb the “Misuse of Social Media and spreading Fake News”. These Draft

21 IT Act, s 81.
22 2016 SCC OnLine Del 6382 : [2017] 236 DLT 478 [DB]

23 Ibid
24 CS[COMM] 1015/2018 or
https://indiankanoon.org/doc/189221153/#:~:text=It%20is%20pleaded%20that%20the,website%20of%20t
he%20defendant%20No.

Rules place several obligations on the intermediaries, some of which are
enabling traceability to determine the originator of the information for
assistance to law enforcement, proactive monitoring of content uploaded on
its platform by deploying automated tools, takedown of illegal content
within 24 hours, and mandatory incorporation of companies having more
than 5 million users in India.

The Delhi High Court's judgment dated November 2, 2018 in Christian
Louboutin SAS v Nakul Bajaj and Ors.25 was an important case in
intermediary liability jurisprudence in India, and it contained a deeper
analysis of the conditions for qualifying as an intermediary than any of the
earlier judgments. In what would become a seminal application of the
Section 79 exemption to trade mark violations, the High Court enumerated
26 possible services which may be provided by an intermediary and whether
any platform providing such services could be considered a mere conduit or
as having actively participated in the trading process. The court elucidated
the requirements and pre-conditions under Sections 79[2] and 79[3], for an
entity to claim an intermediary status and for an intermediary to be exempt
from liability. It was held that an intermediary actively participating in the
trade may be deprived of exemptions under Section 79. The court also
considered the expanse of the due diligence requirement for an intermediary
to be able to claim safe harbour under Section 79 of the IT Act indicating
that this may transcend even the scope prescribed in the relevant guidelines
under the IT Act.

25 2018 SCC OnLine Del 12215 : [2018] 253 DLT 728

In M/S Luxottica Group S.P.A & Another vs M/S Mify Solutions Pvt Ltd &
Ors [2019]26, the Plaintiff filed a trademark infringement suit alleging that
the Defendant sells counterfeit products of the Plaintiff’s brand OAKLEY.
The Court held that the due diligence and care required under the IT Act had
not been met and the Defendant was guilty of trademark and copyright
infringement. The Court herein applied the tests laid down in the Christian
Louboutin case to determine whether the ecommerce platforms claiming to
be exempted under Section 79 of the IT Act actually qualify as
intermediaries or not. The Court observed that presence of any element
which shows active participation could deprive intermediaries of the
immunities and factors such as allowing storing of counterfeit goods, using
the mark in an invoice, advertising the mark etc., would determine whether
the entity in question is an intermediary or not.

In Amway India Enterprises Pvt. Ltd. and Ors. v 1MG Technologies Pvt.
Ltd. and Ors.27, the Delhi High Court carried out a detailed examination of
the involvement of major e-commerce players such as Amazon and Flipkart
in the e-commerce lifecycle and held them to be actively involved in the sale
process in addition to identifying several malpractices in their business
models, thus disqualifying the aforesaid as intermediaries capable of
benefiting from exemption from liability for IPR violations under Section 79
of the IT Act.

26 CS[COMM] 453/2016 & I.As. 15914/2014, 5100/2018, 5101/2018
& O.A. 41/2018

27 CS [OS] 410/2018

Thus, intermediaries cannot be held liable unless they had proper
information, and unless proper order is given by the requisite authority.
Further, the information provided to the intermediaries needs to be specific
and not broad and right owners should not request intermediaries to be
vigilant about any future violations. However, the intermediaries are
expected to demonstrate “due diligence”.

5.1 INTERMEDIARY LIABILITY IN INDIA SCATTERS AMONG
VARIOUS LEGISLATIONS

Section 79 of Information Technology Act, 2000
Section 52 of Copyright Act 1957
Intermediary Liability Guidelines, 2011

The concept of intermediary according to Section 79 and 2 [w] strictly restricts
to the websites, ISPs and like intermediary.

Section 79 is one of the provisions required to be analyzed in detail since it has
a positive and a negative effect. The concept enshrined in the provision is
simple. If an intermediary has the knowledge of the alleged third-party
information, data or communication link, he will be liable. Otherwise he will be
provided with a safe harbor. As usual the words used by Indian legislature are
ambiguous and provides for a lot of room for misinterpretation.

5.2 COMPLIANCE UNDER “THE INFORMATION

TECHNOLOGY [INTERMEDIARY GUIDELINES] RULES,

2011”

Apart from the aforementioned compliance requirements, “Intermediaries”
must also adhere to the guidelines under Section 79 of the Information
Technology Act. An ‘Intermediary’ shall not knowingly host or publish any
information or shall not initiate the transmission, select the receiver of
transmission, and select or modify the information contained in the
transmission. Upon obtaining actual knowledge of a violation must act
expeditiously of the complaint, the intermediary must acknowledge the same
within thirty-six hours and then act within a reasonable time to remove
access to such information28.

An ‘Intermediary’ is under a legal obligation to:

1. publish the terms and conditions of use of its website, user agreement
and privacy policy

2. inform its users that in case of non-compliance with terms, the
Intermediary has the right to immediately terminate the access rights
of the users

3. provide information to government agencies that are lawfully
authorized for investigative, protective, cyber security or intelligence
activity

28 This has been changed by a recent notification from the High Court

4. report cyber security incidents and also share cyber security incidents
related information with the Indian Computer Emergency Response
Team.

5. not deploy or install or modify the technological measures which may
change the normal course of operation of the computer resource

6. publish the details of the Grievance Officer on its website and the
designated agent to receive notification of claimed infringements

An ‘Intermediary’ must also notify users of the computer resource not to
host, display, upload, modify, publish, transmit, update, share or store any
information that:

1. belongs to another person
2. is harmful, threatening, abusive, harassing, blasphemous,

objectionable, defamatory, vulgar, obscene, pornographic, pedophilic,
libelous, invasive of another's privacy, hateful, or racially, ethnically
or otherwise objectionable, disparaging, relating or encouraging
money laundering or gambling, or otherwise unlawful in any manner
whatever
3. infringes any patent, trademark, copyright or other proprietary rights
4. violates any law for the time being in force
5. impersonate another person
6. contains software viruses or any other computer code, files or
programs designed to interrupt, destroy or limit the functionality of
any computer resource

5.3 MY SPACE, DELHI HC AND DEATH OF SAFE HARBOR
PROVISIONS

5.3.1 The conceptual net of an intermediary and its conceptualization

Any question related to the success rate of an intermediary shall be dealt
with once the prospect of intermediaries is clear to us. Examination of the
aspect of reduction of uncertainties in digital age also has to be dealt with
caution and should be preceded by laying out a conceptual framework which
would inherently focus on uncertainties in the digital age of today. The key
aspect of the digital information is to be understood if at all we intend to find
out what role an intermediary does play in our economic system. Such
hitting the nib of concepts will serve as a basis and further when
intermediary is analyzed both in historical and present-day markets.

5.3.2 Information and how it is relevant

Information is an ambiguous aspect, which has started to affect the economy
in the last 100 years, and therefore needs to be addressed.29 Given the focus
of this thesis on the role and liabilities of an intermediary, a definition,
which aptly relates to the same, exists.30 Anything which can be exploited to

29Rose, F. [1999]. The economics, concept, and design of information intermediaries: A theoretic approach. New
York: Physica-Verlag.

remove/ reduce uncertainty in decision-making is information.31
“‘Depression of individuals’/ the subjective belief of distributions over all
state of the world is what uncertainty can be defined as”.32 Thereby
information is any diction which a user/ individual receives and that reduces
the uncertainty in prevalent in his current environment; this is referral to the
product, its price and the like.

Uncertainty has in the past created markets for information. Wherein agents
are un-aware of the future event; the quality of the product, the honesty
another person carries, they seek information to reduce uncertainty.33
Information has always decreased the risk involved in complex and
complicated transactions. Risk, as defined is “the potential for loss when
uncertain future events might cause harm to the economy”.34 The
understanding of the exploitation of information it is first, absolutely
required to remove any such queries.

Information can largely be described by properties, which hold a common
referral value. Information for one is an intangible source and resource and a
good, which does not have any materialistic value.35 In continuance,
information is a highly fungible reserve. All information can be described by
common properties.36 Information trading can be a barter system trading and

31Rose, F. [1999]. The economics, concept, and design of information intermediaries: A theoretic approach. New York:
Physica-Verlag.
32Hirshleifer, J. [1973]. Where are we in the theory of information? The American Economic Review, Vol. 63 [No. 2,
Papers and Proceedings of the Eighty-Fifth Annual Meeting of the American Economic Association], 31-39.
33Kingma, B. R. [2001]. The economics of information: A guide to economic and cost-benefit analysis for information
professionals [2nd ed.]. Englewood, CO: Libraries Unlimited.
34ibid
35Rose, F. [1999]. The economics, concept, and design of information intermediaries: A theoretic approach. New York:
Physica-Verlag.
36Sampler, J. L. [1998]. Redefining industry structure for the information age. Strategic Management Journal, Vol. 19
[No. 4, Special Issue: Editor's Choice], 343-355.

can be exchanged as a resource for another information or its source. The
value of information always does vary with the perception and requirements
of the current user.37 The nature/ significance and the value of information
vary according to its use. The production of information goods requires high
fixed costs and comparatively low marginal costs.38 Information, as we may
understand is costly to produce but very cheap to be reproduced.39
Information trading is a very profitable venture very much unlike the
tangible goods and services. Post the initial payment, information can be
used, reused and recycled any number of ways without any sort of additional
costs. In the similar manner, information can be replicated at zero value and
without any sort of limitation bar. Information never deteriorates or goes
rugged unlike tangible goods. Information, however, may become obsolete
and or untrue with the passage of time and its value may suffer because of
that.40

A common feature that creates uncertainties in markets all together is the
non-exclusivity and information is a non-exclusive product.41 For referral the
transfer of information in between a producer and a user, only one single
copy of the information is actually mortgaged. The production house keeps
the actual information. This in turn gives the producer the advantage of
sharing and/ or using that piece of information again and again. In the
similar manner, when the good is sold, the seller enjoys its subsequent

37 ibid
38Shapiro, C., & Varian, H. R. [1998]. Information rules: A strategic guide to the network economy. Boston, Mass.:
Harvard Business School Press.
39ibid
40Evans, P., &Wurster, T. S. [2000]. Blown to bits: How the new economics of information transforms strategy.
Boston, Mass.: Harvard Business School Press.
41Kingma, B. R. [2001]. The economics of information: A guide to economic and cost-benefit analysis for information
professionals [2nd ed.]. Englewood, CO: Libraries Unlimited.

benefits.42 The information given to the seller can be replicated and sold by
the buyer without him having to give any information about the
aforementioned transaction to the seller. In such cases, the seller loses the
compensation for the future use of the information so transacted. Disclosure
is also an issue in case of the information being non-exclusive because such
commercial use of the information may be revealed to others. Additional
market uncertainty develops when such agents hesitate in publishing
information and it is likelihood that the agents are likely to invest
comparatively less in the production of information and its knowledge.43

Uncertainties in markets also develop because the information’s true value
can never be predicted.44The consumer can never know the value of
information before he buys the same. The exhibition of the information by
the seller before selling has a way to create certain other uncertainties as
well. A traditional buyer is always at risk, never he shall know the surest
nature of the information being transacted, purchase. Under-development of
markets is also a repercussion of such uncertainties.

Consideration of such unique persona of a piece of information, we are
bound to ace that information does not fit comfortably in the neo-classical
market system and its economy. Boisot in 98’ pointed out that the problem
of neo-classical economics has been addressed schizophrenically.45
Information is treated as a free good by the economic system and not subject

42 ibid
43Rose, F. [1999]. The economics, concept, and design of information intermediaries: A theoretic approach. New York:
Physica-Verlag.
44Rose, F. [1999]. The economics, concept, and design of information intermediaries: A theoretic approach. New York:
Physica-Verlag.
45Boisot, M. [1998]. Knowledge assets: Securing competitive advantage in the information economy. New York:
Oxford University Press.

to trading yet on the other had it is being traded. Efficient markets gain a
perfect foresight as a support to the information-trading era and practice.46

Overcoming the problem of imperfect information and information
symmetry, a mediator can be appointed who would in –short mediate
between the buyer and the seller/ creation of any such agent is a solution, a
mediator / agent who would act in both the buyer and seller’s interests. The
repeating of dealing and reputation affects would discourage
misrepresentation of such information to the buyer. Such a solution aligns all
kinds of incentives in between producers and users. Thus, a third party -an
intermediary-reduces information asymmetry.

Neoclassical finances fail to take into attention the uncertainty of
intelligence, requiring alternate principles to explain the business of markets.
Such two theories are hereby discussed.

5.3.3 Agency Cost theory

An agency cost is a financial concept concerning the rate to a "principal" [an
organization, person or assemblage of persons], when the principal selects or
hires a "mediator" to act on its behalf. Because the two parties have diverse
interests and the manager [mediator] has more information, the major [party
with the issue] cannot directly ensure that its agent is continually acting in its
[the principals'] best welfares.47

46ibid
47^Pay Without Performance by Lucian Bebchuk and Jesse Fried, Harvard University Press 2004

Mutual examples of this cost include that which are tolerated by
shareholders [the primary], when corporate organization [the agent] buys
other corporations to expand its market, or spends currency on wasteful pet
schemes, instead of maximizing the value of the business's worth; or by the
voters of a politician's area [the principal] when the representative [the
agent] passes legislature helpful to large suppliers to their campaign rather
than the supporters.48

Though effects of help cost are near in any agency connection, the term is
most used in trade contexts.

5.3.4 Transaction Cost theory

In social science and connected disciplines, the value of a deal may be a
value incurred in creating associate economic exchange [restated: the price
of taking part in an exceedingly big/growing market].49

Transaction prices are divided into three broad categories:50

o Search and data prices are unit prices, like those incurred in
deciding that the specified functional article is accessible on the
market; that has all-time low worth, etc.

48nvestopedia explains ‘Agency Costs’
49Cheung, Steven N. S. [1987]. Economic organization and transaction costs. The New Palgrave: A Dictionary of
Economics v.2 p 55-58
50Commons, J.R [1931]. “Institutional Economics”.American Economic Review21: 648–657. Retrieved February 8,
2013.

o Bargaining prices are unit specific prices in which case the buyer
needs to come back to an appropriate agreement with the opposite
party to do the dealings, draw up associate applicable contract then
on. In theory of games this can be analyzed for example with the
game of chicken. On quality markets and in market
microstructure, the dealings value is which a very few perform in
the space between the bids and rise.

o Controlling and social control prices are unit specific prices that
tend to create positive scenarios so that the opposite party sticks to
the terms of the contract, and taking applicable action [often
through the legal system] if the behavior of the opposite parties
seems questionable. For example, the customer of a brand new
automotive faces a spread-jam of various dealings prices. The
search prices are the prices of finding an automobile and deciding
the car's condition. The dialogue focuses on the diversification of
the prices thereby negotiating upon a price with the retailer.

The interpreting difficulty faced in this decision was created by the legislature
itself. Section 79 empowers an intermediary to claim the defense of knowledge
if they had no knowledge of the content posted in their website. However,
Section 81 comes into picture and when both the sections are read together,
intermediaries are not eligible to claim any such defenses in case of copyright
or patent infringements. The entire provision only applies in the case of other
offences like defamation, etc.

5.3.5 Internet Service suppliers and their liability

The DMCA defines ‘service provider’ in two such ways that, each is
applicable to totally different subsections. A ‘service provider’ as ‘an entity
giving transmission, routing or providing the relevant connections for
digital on-line communications, between or among points mere by a user, of
the material of user’s selection, without modification to the content of
material as sent or received’,51 the second half of the section states that a
‘service supplier’ is loosely outlined as‘ a provider of online services or
network access, or the operator of facilities so required.’52 This broad
definition is aimed directly on the half of the framers to embrace
universities and different establishments that offer internet access to their
students and researchers, etc. Moreover, it is conjointly broad to embrace the
current ISPs, as well as suppliers of new services in the future.53 The four
main provisions of the DMCA address varying functions of the said
associate ISP. In Section 512[a] protection is given for the passage operate
and it protects ISP for ‘transmitting, routing, or providing connections for,
material through a system or network controlled or operated by or for the
service supplier.’ Section 512[b] limits liability of associate ISP for caching
and Section 512[c] protects storage of material on the provider’s system or
network at the direction of the user and finally, ISPs who offer data location
tools such as links or directories that are also protected, subject to bound
circumstances.

5117 USC Section 512[k][1][A], http://www4.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000512-- --000-
.html[17 May 2007].
5217 USC Section 512[k][1][B], http://www4.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000512----000-
.html[17 May 2007].
53Joseph B G & Wasylik D P, Copyright issues on the Internet and the DMCA, Practicing Law Institute-Patents,
Copyrights, Trademarks, and Literary Property Course Handbook Series, 2003, 451.

Despite varied laws protecting IPR; it is still an enormous task to keep a
check on the copyright infringers on the web. Severa54l lobbying teams and
especially those who are acting as individuals in the music industry55 in
USA were in favour of holding ISPs liable for copyright infringement by the
subscribers. It is important to take note of the truth that there is a
fundamental distinction between on-line services involving transfer of
content and the services themselves providing the contents.56 Though, it
is truthful enough to hold ISPs liable in the latter situation, it is transparently
unfair to hold ISPs liable for the infringing actions of their subscribers. ISPs
can be liable for copyright infringement if they are directly concerned in the
repetition of protected material. For example, if an ISP makes offered ill-
gotten copies of latest songs on its web site it would be guilty of
copyright infringement. However, it is not truthful to hold ISP liable for the
actions of a subscriber who shares ill-gotten copies of songs over Internet
without ISP having any knowledge of these infringing actions of the
subscriber.

One of the main reasons behind involving ISPs in the method and holding
them liable is a definite result of typical contracts that they enter into with
their customers; ISPs are authorized to shut down websites as well as e-mail
addresses in case of infringement. In order to take requisite action[s] they
also have facilitated stern lines for news abuse.57 In United Kingdom,
beneath the information Protection Act, the ISPs are prevented from

54 Section 512[d] of the Digital Millennium Copyright Act [DMCA].
55Cooper R, Media law, music copyright, ISP’s liability for file sharing, http://ezinearticles.com/?Media-Law---Music-
Copyright---ISP%E2%80%99s-Liability-for-File-Sharing&id =360608 [9 May 2007].
56Wei W, The liability of Internet Service Providers for copyright infringement and defamation actions in the United
Kingdom and China: A comparative study, European Intellectual Property Review, 28 [10] [2006] 528.
57 Osborne D, Copyright and trademark infringement on the net – Looking to the Internet Service Provider first,
http://www.iprights.com/cms/templates/articles.aspx?articlei d=146&zoneid=2 [9 May 2007].

revealing the names of subscribers without their permission or an associate
order from the court to a third party. Wherefore, in the event of a copyright
infringement, a copyright owner cannot determine anything pertaining to the
address or location of the wrong doer. In order to directly sue the wrongdoer,
the copyright owner has to force ISP to disclose the offender’s name.58 Some
believe that turning to ISPs is associate, economic as well as a productive
means to deal with copyright infringers or even different e-infringers in
general, particularly in locating the culprits.59 The web permits users to
remain anonymous and consequently, it has become impossible to zero in on
the perpetrators, thus many are in favor of holding ISPs liable for the
copyright infringements by their subscribers.

Moreover, the cost of proceedings outweigh what is recovered in the end,
and holding an individual liable will fetch the same outcome, because an ISP
shall pay more damages. However, it is absurd to hold ISP liable for the
actions of its user merely as a result of ISP having deeper pockets than the
individual. Another argument in favor of holding ISPs liable was due to the
nature of electronic transmission of information; if a subscriber uploads
infringing copyright material, his ISP would have reproduced it on its laptop
servers and thereby be primarily liable for copyright infringement. But, this
argument might not hold still for long, as mentioned earlier in this paper, the
courts set that temporary electronic copies are excluded from the definition
of ‘copies’. ISPs take unit vehement in their refusal to take blame for
infringing action by the subscribers. They say that ISP’s are mere conduits

58Cooper R, Media law, music copyright, ISP’s liability for file sharing, http://ezinearticles.com/?Media-Law---Music-
Copyright---ISP%E2%80%99s-Liability-for-File-Sharing&id =360608 [9 May 2007].
59Osborne D, Copyright and trademark infringement on the net – Looking to the Internet Service Provider first,
http://www.iprights.com/cms/templates/articles.aspx?articlei d=146&zoneid=2 [9 May 2007].

of data and are no different than a post workplace that is not liable for
calumniator[s] letter that is announce through it or a phone company that is
not accountable for any obscene decision created by a user. Thus, liability of
ISPs ought to conjointly be restricted. They conjointly argue that imposing
liability on ISPs would in flip mean barricading the potential growth of web.

ISP liability for the actions of the subscribers is based on their data of the
activities of subscribers. Where, the ISP is unaware of the subscriber’s
activities, the courts are reluctant to hold ISP liable, however in cases
wherever the concerned ISP is aware of the subscriber’s copyright
infringement or wherever ISP should have well-known the activities of
subscriber’s, it is highly attainable that the courts would hold ISP liable for
copyright infringement by the subscribers.60 At present, several national
governments are of the view that ISPs ought to escape liability for
infringements on suits instituted by the subscribers on the ground that they
are unaware of such infringement; however they have a duty to take away
such content once such action is brought to their notice.61 There are varied
reasons as to why it is not feasible in applying the same to ISPs to be
accountable for cases of copyright infringement. Taking note of the immense
range of transactions that take place through ISPs, it is not sensible to expect
ISPs to monitor the content that passes through their systems. It is not
possible and economically feasible for the ISPs to police the content of the
websites used by millions. Moreover, the instant nature of the transactions

60Unni V K, Internet Service Provider’s liability for copyright infringement- How to clear the misty Indian perspective,
Richmond Journal of Law and Technology, 8 [2001] 13.ISP liability, http://www.bitlaw.com/internet/isp.html [9 May
2007].

61Osborne D, Copyright and trademark infringement on the net – Looking to the Internet Service Provider first,
http://www.iprights.com/cms/templates/articles.aspx?articlei d=146&zoneid=2 [9 May 2007].

conjointly make it difficult to choose the content or even to edit it or
merely keep a watch over it. As per William Foster, ‘ISPs are similar to
common carriers in that they have no control over that members of the
public use their facilities, or the content, members of the public choose to
transmit.’ so, requiring ISPs to monitor transactions in order to trace
copyright violations would violate the rights of the subscribers and it would
conjointly amendment ISP business model. The latest argument is that ISPs
ought to be liable for direct copyright infringement in cases wherever they
interfere with the automatic information flow and conduct a human
screening method of objects announce to the websites they host. However,
what has to be taken note of is that in spite of human screening, it is
humanly impossible to be hundred percent correct as to there is no
infringement of copyright at all. The terribly truth that ISP has concerned a
person to check for violations in addition to the terms and conditions is
smart enough proof that ISP is doing its best to forestall subscribers from
copyright infringement. In such a case, it is morally wrong to hold ISPs
liable for the actions of the subscribers. However, there are differing views
on this point.62

5.3.1 IS NIRMAL BABA A FRAUD?

Even though the actual effect of the title is not a concern of intermediary
liability, the case is very important for the discussion. For the first time in the
history a case is filed against an intermediary for enforcing a right other than
protecting intellectual property rights. The facts are simple a website called

62Costar v Loopnet, 373 F 3D 544 [4th CIR 2004].

indijobs.com hosted contents titled “Is Nirmalbaba a Fraud?” According to the
contents the saint Nirmalbaba was a fake and his practices were fraudulent. The
plaintiff resorted to Information Technology [Intermediaries Guidelines] Rules
2011 [here in after IT rules]. The Court ordered that the websites are to be
blocked and content has to be removed since it causes defamation to the
plaintiff.

5.4 INFORMATION TECHNOLOGY [INTERMEDIARIES
GUIDELINES] RULES 2011`

IT rules are created by Ministry of Information and Technology by virtue of the
power divested in them in Section 79 of the IT Act. As the title reveals the
guidelines are to hold intermediaries liable if they are not in compliance with
the provisions. The safe harbour provisions in Section 79 are also present in the
guidelines. `The important aspect brought out by these guidelines is it
empowers third parties to flag or notify the intermediary about the contents that
are illegal. The content according to the rules can be a comment, a post or even
a link. The legal notice from such third party has to be regarded as a valid
objection. Thirty-six hours is provided to the intermediary to comply with such
notice to remove the content. If they failed to do they will be held liable
according to the rule.

The IT Rules is condemned to be violative of various constitutional rights. This
aspect I would rather not dwell upon as it is off the topic. However, one aspect
requires the attention. The time frame provided in rules is “Thirty-Six” hours. It
is a bit problematic. The intermediaries are mandated to comply with the legal
notice with in thirty-six hours on receipt of the notice. If intermediary fails to

comply with it he can be easily held liable for infringement or other liability
like defamation. The only defense available to intermediary is “Knowledge”.
Once intermediary fails to comply with the thirty-six hour time frame the
plaintiff can easily pin for the presence of knowledge. Thus 36 hours in this
scenario has a very good role to play. The rules are currently under challenge
before the Hon’ble Kerala High Court. Results are yet to be seen. A study
conducted by CIS [Center for Internet and Society] reveals that intermediary on
receipt of such notice simply remove the content without bothering to check the
validity of such complaints.

5.5 FOREIGN TREATMENT OF INTERMEDIARIES

United States as always has the laws which logically sound and adapt to the
circumstances. To keep up the marks, their Digital Millennium Copyright Act
in my view can be considered as the most apt legislation for defining
intermediary liability. DMCA and recent decision Viacom v YouTube
embarks the Whole concept of intermediary liability.

The decision is very important as far as intermediary liability is concerned. It
defines the existence different types of knowledge and general defenses
available for an intermediary in detail.

The facts of the case are simple. Viacom a media giant sued YouTube for
hosting infringing materials. So far, the US courts permitted the YouTube to
claim immunity from infringing suit as they have no knowledge of the actions.

The 2nd Circuit Court by explaining the legislation put down various standards
for the “Knowledge” namely, Actual Knowledge, Willful Blindness and Red-
Flag Knowledge. These are the normal types applicable to the defense.

Almost all the jurisdictions follow such scenario. European Union Directives63
also provides such kind of shield to the intermediaries provided they are not
rogue. Rogue intermediaries are those websites dedicated to host contents that
are against law. File sharing cites like megaupload, napster, piratebay etc can
be categorized under rogue intermediaries. ISPs around the world have been
ordered to block these sites64.

Pre-DMCA situation

Prior to the Digital Millennium Copyright Act [DMCA] once the liability of
ISPs came up before the courts, there was nothing however the copyright
law torely on. Thus, some courts relied on strict liability while others control
ISPs to be not liable at all. However, in 1996, the Congress passed the
Communications Decency Act providing immunity to ISP’s.

The Communications Decency Act, 1996

In 1996, the Communications Decency Act was enacted in the United States
and Section 230 of the Act states that ‘no supplier or user of associate

63 EU Copyright Directive Directive 2001/29/EC
64 Motion Picture Association Successfully Sued British telecommunications to prevent acess to TPB [The
pirate Bay] [[2011] EWHC 1981 [Ch]]
Culcatta HC in Sagarika Music Pvt. Ltd. & Ors vs Dishnet Wireless Ltd. & Ors on 27 January, 2012
successfully blocked Songs.pk a rogue website.

interactive computer service shall be treated as the publisher or speaker of
any data provided by another information content provider.’

Thus, it gives immunity to interactive service providers from liability
beneath state intellectual property laws.65 As a result of this provision,
holding ISPs liable for deciding to publish, withdraw or alter content is not
possible.19 Similar to DMCA provisions that shield ISPs in case of third
party copyright infringement, this provision was conjointly brought in as a
result of holding ISPs liable for communications of others would adversely
affect free speech and it would be unfair to hold ISPs liable for those actions.
Moreover, as mentioned earlier in this paper, it is not possible to monitor the
problematic content by ISPs.

In Chicago Lawyers’ Committee for Civil Rights beneath the LawInc v
Craigslist INC;66

The court adjudged that the immunity provided to ISPs beneath Section
230[1] of the Communications Decency Act, extends to claims, seeking to
hold associate ISP liable as a publisher for content authored by third parties,
and not to all claims arising out of the ISP’s role in giving public access to
such content. Thus, it will be seen that the immunity given to ISPs has
limitations and ISPs will not escapefrom its liability in all circumstances.

65CDA Section 230, Immunity covers state intellectual property-related, right of publicity claims,
http://brownraysman.typepad.com/technology_law_update/2 007/04/cda_section_230.html#more [24 May
2007].
66Chicago Lawyers’ Committee for Civil Rights Under TheLaw Inc v Craigslist Inc, Case No. 06 C 0657 [NDIll,
14November 2006] inOnline Defamation/Libel/Communications Decency Act-Internet library of law
andcourtdecisions,http://www.internetlibrary.com/topics/online_defamation.cfm [24 May 2007].

Playboy Enterprises INC v Frena67

This was one of the initial cases wherever liability of ISPs for the copyright
infringement of subscribers wasexamined. The defendant, George Frena,
operated a Bulletin Board Service [“BBS”] for those who purchased bound
product from the suspect and anyone who paid a fee might log on and
browse through totally different BBS directories to look at the pictures and
they might conjointly transfer copies of the photographs. Among several
images that the defendant created offered to his customers, one hundred and
seventy were unauthorized proprietary photographs that belonged to the
litigant. The Court noted that the intent of the BBS operator was irrelevant
and applied strict liability principle of the Copyright Act. The BBS operator
was liable for direct infringement as a result of the defendant’s system itself
equipped unauthorized copies of proprietary work and created them offered
to the public. It was irrelevant that the suspect did not create infringing
copies itself. However, with time the Court’s ruling was widely debated and
discredited.

Religious Technology Center v. Netcom68

Few years later, came the Netcom case. The plaintiffs, Religious Technology
Centre [“RTC”] control copyrights in the unpublished and revealed works
of L Ron Hubbard, the founder of the Church of Scientology. The suspect,

67 Playboy Enterprises Incv Frena, 839 F Supp 1552 [M D Fla 1993].
68Religious Technology Center v Netcom, 907 F Supp 1361 [N D Cal 1995], http://www.tomwbell.com/NetLaw/Ch07/
Religious-C.html [17 May 2007].

Erlich was a former minister of religion who had later on become a vocal
critic of the Church. On associate on-line forum for discussion and criticism
of religion, Erlich announce portions of the works of L Ron Hubbard. Erlich
gained his access to the web through BBS that was not directly joined to
web, however was connected through Netcom On-Line Communications
INC. After failing to win over Erlich to stop his postings, RTC contacted
BBS and Netcom. The owner of BBS demanded the litigant to prove that
they owned the copyrights of the works announce by Erlich therefore that
he would be unbroken off the BBS. The plaintiffs refused BBS owner’s
request as unreasonable. Netcom similarly refused plaintiffs’ request that
Erlich not be allowed to gain access to web through its system. Netcom
contended that it would be not possible to pre-screen Erlich’s postings and
that to forestall Erlich from victimization the web meant doing the same to
hundreds of users of BBS. Consequently, plaintiffs sued BBS and Netcom in
their suit against Erlich for copyright infringement on the web. The Court
reasoned that even though ‘copyright is a strict liability statute, there ought
to be some part of volition or causing that is lacking wherever a defendant’s
system is simply used to produce a copy bythird party.’

The Court additional noted that, when the subscriber is directly liable it is
senseless to hold different parties [whose involvement is simply providing
Internet facilities] liable for actions of the subscriber. The Court conjointly
noted that the notice of infringing activity of service supplier can implicate
him for contributory negligence as failure to forestall associate infringing
copy from being distributed would constitute substantial
participation.

Substantial participation is wherever the suspect has data of primary
infringer’s infringing activities and induces, causes or materially contributes
to the infringing conduct of primary infringer. The Court rejected the
argument of the suspect that associate ISP is similar to a common carrier and
so entitled to exemption from strict liability written in Section III of the
Copyright Act and declared that carriers are not sure to carry all the traffic
that passes through them. Nevertheless, the Court did not impose direct
infringement liability on ISP as that would result in liability for every single
server transmitting information to each different laptop.

Sega Enterprises Ltd v Maphia69

In this specific case, the BBS Operator wittingly created his BBS to enable
users to transfer the plaintiff’s proprietary video game package therefore that
users might transfer and use the package uploaded by different users for free.
The Court noted that simply because the suspect is not liable for direct
infringement, however, will not mean that he is free from liability. Although,
the Copyright Act will not expressly impose liability on anyone different
than direct infringers, courts have long recognized that in bound
circumstances, liability for conducive infringement will be obligatory. The
Court discovered that conducive copyright infringement stems from the
notion that one who directly contributes to another’s infringement should be

69Sega Enterprises Ltd v Maphia, 948 F Supp 923, 932 [N D Cal 1996], http://www.tomwbell.com/NetLaw/Ch07/
Sega.html [17 May 2007].

control liable. Such liability is established where the defendant, ‘with the
knowledge of infringing activity, induces, causes or materially contributes to
the infringing conduct of another.’ Thus, the Court took note of the data of
BBS operator and his material contribution in the copyright infringement by
subscribers and control BBS operator contributory liable.

Three years once the Netcom case, the DMCA was brought in. The on-line
Copyright Infringement Liability Limitation Act11 was conjointly enacted
as half of the Digital Millennium Copyright Act of 1998.However, the
DMCA was associate update of the general law governing copyright, viz, the
Copyright Act,1976, that restricted the potential liability of ISPs regarding
bound activities, and subject to their complying with bound conditions
however did not exempt ISPs from liability.70 In addition to limiting the
liability of ISPs in bound instances, the DMCA conjointly lays down
wherever ISPs will be control liable for infringement of copyright by their
subscribers. The DMCA permits ISPs to avoid each copyright liability and
liability to subscribers by adhering to certain tips set out in this that are
legendary as ‘safe harbours’. Through these safe harbour provisions, DMCA
limits ISP liability to four categories, viz., firstly, temporary digital
network communications, secondly, system caching, thirdly, information
residing on systems at the direction of subscribers; and fourth, data location
tools. The DMCA accepts the ruling of the Netcom case and provides
categorical protection to ISPs, hence, as long as the information is
mechanically transmitted through the server and the ISP is not concerned in
sterilization the content, the ISP cannot be liable for mere transmission of

70Final Report of the Inter-Governmental Copyright Committee, http://www.unesco.org/culture/copyright/images/
IGC1971XII9e.pdf [9 May 2007].

infringing information through its server. The DMCA conjointly exempts
ISPs from direct liability for reception or temporary storage of fabric in their
networks if bound measures are taken by ISPs. The DMCA in Section
512[i][1] states that the limitation of liability of the ISP beneath this Section
is provided only if such ISP:-

‘[A] has adopted and fairly enforced, and informs subscribers and account
holders of the service provider's system or network of, a policy that provides
the termination inappropriate circumstances of subscribers and account
holders of the service provider's system or network WHO are repeat
infringers; and

[B] accommodates and doesn't interfere with standard technical measures.’

Thus, firstly, ISPs have to follow a policy wherever it terminates access to
subscribers who are repeat offenders;71 second, they have to place in place
technical measures to forestall infringements.72 There are further needs in
the individual sections of the activities protected.3The DMCA has a system
of ‘notice and take down’ under that once associate ISP receives a
notification from a right-holder informing it that a breach of copyright had
been committed through its system, the ISP disobliged to take account of
that data and to act to prohibit all access to the offensive data through its

71http://www4.law.cornell.edu/uscode/ html/uscode17/usc_sec_17_00000512--000-.html [27 August 2007].USC
512[i][1][A],
72http://www4.law.cornell.edu/uscode/ html/uscode17/usc_sec_17_00000512--000-.html [27 August 2007].
http://www.murdoch.edu.au/elaw/ issues/v9n4/mercurio94. html [9 May 2007]. Francisco Castro, The Digital
Millennium Copyright Act: Provisions on circumventing protection systems and limiting liability of service providers,
Chicago-Kent Journal of Intellectual Property, 3 [2004] 3.USC 512[i][1][B],

system. The ISP is place beneath pressure of either proscribing access to
user at the risk of being sued for breach of contract in case of false
notification or for being sued by the alleged copyright owner for not taking
action once advised of a copyright violation by the user of ISP. however, if
ISP follows the statutory procedure in such a scenario, he is protected by the
law. therefore in such a scenario, the ISP will repost the material taken down
if the user files a counter notice stating that his posting of material will not
infringe anyone’s copyright. However, this will be done solely if the
copyright owner has not filed associate infringement action seeking a
preparation order against the user.73

Initially, USA was to adopt a procedure wherever ISPs were to be liable for
the content that was transmitted and as transmission was regarded to be
equivalent to reproduction. However later on in 1996 they adopted a policy
that provided that ISPs are not liable for content that they unwittingly
transmit. However, ISPs would be control accountable for taking down
content that copyright holders will show to violate their copyright rights.
This puts the burden of monitoring the content on the house owners of
intellectual property and not on the ISPs. It is associate attention-grabbing
solution that will be adopted by national governments in dealing with
copyright infringement problems on the Internet.

What is to be noted is that USA Congress has not granted general immunity
to the ISPs through DMCA, but it has restricted the liability of the ISPs

73http://www4.law.cornell.edu/uscode/html/ uscode17/usc_sec_17_00000512--000-.html [27 August 2007].USC
512[g].

based mostly on their data and involvement of the infringing activity.74 The

ISPs square measure willing to adhere to DMCA provisions, and request

refuge in the safe harbours therefore that they square measure warranted of

non-liability.75 This system of limiting the responsibility of ISPs has enabled

USA to produce associate even-handed balance among the interests of all

parties involved.76 Thus, ISPs do not escape liability at all prices and

copyright holders conjointly cannot harass ISPs where the sole

responsibility for infringing action is on a subscriber.

Post DMCA

Costar v Loopnet77

Costar, a copyright owner of numerous photographs of business real

estate brought a suit of copyright infringement against Loopnet Iraqi

National Congress, an ISP, for direct infringement because Costar’s

copyrighted pictures were denote by Loopnet’s subscribers on Loopnet’s

web site. If a subscriber includes a photograph for a real estate listing, he

must fill out a type and agree to the ‘terms and conditions’, along with

associate degree further specific warrantee that the subscriber has ‘all

necessary rights and authorizations’ from the copyright owner of the

photographs. The subscriber then uploads the photographs into a folder in

Loopnet’s system, and the photograph is transferred to RAM of one of the

74http://www.legalservicesindia.com/articles/isp_in_us.htm [9 May 2007].
75http://www.murdoch.edu.au/elaw/issues/v9n4/mercurio94.html [9 May 2007].
76http://www4.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000512--000-.html [27 August 2007].
77Costar v Loopnet, 373 F 3D 544 [4th CIR 2004].

Loopnet’s computers for review. Then a Loopnet employee quickly reviews
the photograph first off to determine whether or not the photograph in truth
depicts commercial real estate, and second to establish any obvious proof,
such as, a text message or copyright notice, that the photograph might have
been copyrighted by another. If the photograph fails either one of these
criteria, the worker deletes the photograph and notifies the subscriber.
Otherwise, the employee clicks associate degree ‘accept’ button that
prompts Loopnet’s system to associate the photograph with the web page for
the property listing, creating the photograph out there for viewing.

The Court adjudged that direct liability attaches solely when there is
some conduct that causes the infringement. The Court took note of the truth
that the infringing activity is initiated by the subscriber and therefore he is
the direct infringer. The majority control that associate ISP ought to not be
liable as a direct infringer when its facility is used to infringe a copyright
however when it engaged in no intervening conduct.78 With regard to
Loopnet’s gate keeping apply, the Court observed that ‘the employee’s look
is therefore casual as to be insignificant’. The Costar call additionally
created it clear that DMCA will not limit ISPs to the safe harbour provisions
statute in the statute. Rather, ISPs might believe on either DMCA safe
harbor provisions, unwritten defences or each.79

5.6 JUDICIAL SAFE HARBOR

78http://jip.kentlaw.edu/art/volume%206/6%20Chi-Kent%20J%20Intell%20Prop%201.doc [9 May 2007].
79ibid

There are two cases accounted under this aspect. One is a US origin namely
Field v Google80 and the other is a German reference case Vorschaubilder II81.
Both the cases have identical question of law and similar facts.

5.6.1 FIELD V. GOOGLE82

Field is a blogger and a lawyer from Nevada. Google’s WebCrawler software
without his consent used the contents and added the same to its search database.
Field sued Google for copyright infringement as he had not give consent to
Google to use his blog in any manner possible. The Court in this case held that
Google is not liable. Court said that a blogger and usual netizen, field had the
knowledge of Google’s web crawlers and he could have easily avoided such
detection by including a simple html code. The court held that Google had
implied license from Field since he failed to take necessary steps to prevent the
caching of his website.

5. 6.2 VORSCHAUBILDER II

In this case a photographer was the victim of Google’s WebCrawler. Plaintiff
sued Google for copyright infringement as his photograph was used for
Google’s search result without the consent. Proprietary search database of
Google refreshes and updates automatically. During such a process Google’s
crawler stored the photograph in its memory and showed as a search result. The
Court on reference held that the plaintiff knew about the existence of Google’s
technology and hence by posting the picture on the net impliedly consented to

80 412 F.Supp. 2d 1106 [D. Nev. 2006]
81 case reference I ZR 140/10 of 19 October 2011-
82 412 F.Supp. 2d 1106 [D. Nev. 2006]

the Google to use the picture for search results. Decision of the court can also
be justified to a certain extent because the search results will only provide for a
smaller resolution [quality] of the original picture and hence it will also fall
within the ambit of fair use.

5.7 THE INDIAN PERSPECTIVE

India is bit by bit developing its data technology market and the variety of
web subscribers is increasing everyday. On with this development, there is
would like to have higher and a lot of comprehensive laws to tackle the
problems that might arise in close to future. The Copyright Act, 1957 will
not deal with the liability of the ISPs at all. However, the liability of ISPs
finds mention in Section 79 of the Information Technology Act, 2000 [IT
Act] as follows:

‘Network service providers not to be liable in certain cases- For the removal
of doubts, it is hereby declared that no person providing any service as a
network service provider shall be liable under this Act, rules or regulations
made there under for any third party information or data made available by
him if he proves that the offence or contravention was committed without
his knowledge or that he had exercised all due diligence to prevent the
commission of such offence or contravention.

Explanation: - For the purposes of this Section, - [a] ‘network service
provider’ means an intermediary;

[b] ‘Third-party information’ means any information dealt with by a
network service provider in his capacity as an intermediary’83

Section 79 of the IT Act exempts ISPs from liability for third party info or
knowledge created available by him if the ISP had no data of the offence
committed or if the ISP had exercised ‘all due diligence’ to stop any
infringement. This in flip means that unless the case in hand falls below
these two exemptions:

ISPs are liable for copyright infringements as well as any different
violations that take place in their websites, even if the act is done by the
subscribers. Section seventy nine is very loosely worded and there is a risk
that these exceptions mentioned in the IT Act will be used additional as a
tool of harassment of firms by the authorities.84 The Section exempts ISPs
from liability if the ISP has exercised ‘all due diligence’. What is due
diligence? It ought to have been worded clearer since the manner in
completely different ISPs perceive ‘all due diligence’ can be completely
different and one will perpetually say that disregarding of the measures
taken by ISPs that it is not ‘all due diligence’. The clarification to Section
seventy nine conjointly has the risk to be loosely interpreted and thereby
making almost any intermediary a ‘network service provider’. A better
definition ought to have been given to the term ‘network service provider’.
One will presumably argue that this broad definition permits several
completely different sorts of service suppliers to be enclosed, however at the
same time there is conjointly the risk of it being understood in a manner

83 Section 79, IT Act [2000]
84http://cyberlaws.net/cyberindia/liablity.htm [15 May 2007].

broader than what was contemplated by the framers. According to some
legal specialists on Indian law, caching amounts to reproduction and such
unauthorized copy would be equal to infringement. Since caching is done by
ISPs themselves, ISPs could notice it troublesome to plead ignorance. ISPs
would sure be liable if the owner of the copyright informs ISP regarding
such infringement and no action is taken by the ISP. As in any different
jurisdiction the truthfulness of the copyright owner’s claim is Associate in
Nursing issue in Republic of India as well. whereas Section seventy nine of
the IT Act, 2000 liberates ISPs of its liability if it will prove its cognitive
content and due diligence, it will not specify who would be heldliable for
such contravention in such Associate in Nursing event. Therefore, this
provision can cause issues once Associate in Nursing offence regarding third
party info or provision of knowledge is committed.85therefore it will be
ascertained that the existing legal provisions do not clearly visit the extent of
the ISP’s liability in cases of copyright infringement by the subscribers.86

The liability of ISPs can arise in a number of cases by application of
different statutes. This can be criminal or civil in nature depending on
various factors. However, it is impractical to find out the liability if ISPs
which could arise in various forms at one place. Equally impractical could
be to amend all our laws which could hold ISPs liable, in order to limit their
liability.87 The later has not been attempted in any Indian Legislation
including Copyright Act, 1957 till date. Therefore, by Information

85http://www.sudhirlaw.com/cyberlaw-itact.htm [10 May 2007].
86http://www.legalservicesindia.com/articles/isp_in_us.htm [9 May 2007].
87S.K. Verma& Raman Mittal, “Legal Dimensions of Cyberspace”, [2004, Indian Law Institute, Delhi]

Technology Act, 2000 the attempt is to supply a mechanism which works as
a filter for all such ISPs for the purpose of determining their liability. To
clarify, we take an illustration, if an ISP is accused of illegally distributing
pirated copies of music or videos then his liability be first determined under
Section 51[a][ii] and Section 63 of the Copyright Act, 1957. If he is found
liable then his liability would be tested on the touchstone of Section 79 of
the Information Technology Act, 2000. Under the Information Technology
Act, 2000 itself ISPs can qualify exemptions under two grounds i.e. Lack of
Knowledge and Exercise of Due Diligence.88 These exemptions work as
Safe Harbour for these intermediaries. Nonetheless, the extents of the safe
harbours allowed under the Act are limited. 89

There can be potentially three types of liability on an intermediary which
can be imposed, it include, [1] direct; [2] vicarious; and [3] contributory
liability which might be civil or criminal in nature.90 Existing liability
schemes generally join traditional fault-based liability and strict liability
rules with broad Internet-specific liability exemptions.

The amendment Section 72[2] protects the identity of subscribers to the
services of an intermediary. Under this the intermediary should [i] gain
access to any material or other information relating to a subscriber who

88K. Mani‟s, “A Practical Approach to Cyber Laws” ̧ [2009 Edn., Kamal Publishers, Delhi]
89Diane Cabell, “Unlocking Economic Opportunity in the South Through Local Content Appendix A: Potential
Liability Concerns for an Open Content Exchange Network”, Berkman Center for Internet & Society [January 2002],
available at http://cyber.law.harvard.edu/openeconomies/oknliability.html#n86, Last visited on 1stMarch, 2010.

90Apar Gupta, “Liability of Intermediaries in India — From troubled waters to safe harbors”, [2007] PL May 3,
www.ebc-india.com/practicallawyer, Last visited on 1stMarch, 2010.

avails his services; [ii] discloses such information or material to any other
person; [iii] without the consent of such subscriber; and [iv] with intent to
cause injury to him.91 In case of breach of confidentiality and privacy the
liability by way of compensation under the draft is not exceeding Rs 25
lakhs.

Religious Technology Centre v. Netcom Online Communications Services
Inc92

The court observed that lack of knowledge or intent was often emphasized
by the ISPs. The Court has found out in many judgments that a lack of
intention to infringe is not a defense in copyright actions. In this case the
judge expressly rejected the allegations that the ISP has infringed directly
and refused to follow Playboy Enterprises v. Frena, on the ground that
Netcom could only be guilty of direct infringement if it has caused the
infringing copies to be made:

“...the mere fact that Netcom‟s system incidentally makes temporary copies
of plaintiff‟ works does not mean Netcom has caused the copying.”

The Singapore Electronic Transactions Act, 1998 under Section 10 gives
various liabilities of network service providers. Under Section 10[3] of the
Act it does not grant immunity for hosting third party resources, because

91Proposed Amendments to the IT Act, 2000, Expert Committee on Review of the IT Act, 2000, “Report of the Expert
Committee: Full Text” [Proposed 29-8-2005], available at http://www.mit.gov.in/itact2000/ITAct.doc [hereinafter
proposed Amendments to the IT Act, 2000], Section 72[2].
92907 F Supp 1361 [ND Cal, 1995]

such hosting would be automatic and temporary storage of those resources.
It recognizes some kind of immunity from liability for the content the ISP
carries if national ambitions for e-commerce are to be achieved. In similar
fashion German Multimedia Law 1998 Article 593 gives responsibilities
which need to consider by the Service Providers on Cyberspace. There is
certainly extensive requirement of such legislations in India which can
govern the jurisdictional aspects and extensive immunities for ISP‟s and
other internet intermediaries extending to copyright infringement and
criminal law as well as to civil actions for torts such as defamation.

Google Inc v. Louis Vuitton Malletier94

It was observed that the Commission's first report on the application of
Directive 2000/31 shows by stating:-

'...the Commission will, in accordance with Article 21 [of Directive
2000/31], continue to monitor and rigorously analyse any new
developments, including national legislation, case-law and administrative
practices related to intermediary liability and will examine any future need
to adapt the present framework in the light of these developments, for
instance the need of additional limitations on liability for other activities
such as the provision of hyperlinks and search engines'.

93Trans. Christopher Kuner, www.kuner.com, Last visited on 1stMarch, 2010.
94Opinion of Advocate General PoiaresMaduro, delivered on 22nd September 2009, Joined Cases C-236/08, C- 237/08
and C-238/08, www.manupatra.com, Last visited on 1stMarch, 2010.

Hence from the above explanation we observe that considerable variations in
laws relating to: [a] intermediary liability; [b] safe harbour regimes; [c]
notification regimes must be seen in future since its the need of the hour.
There are too many uncertainties in application of intermediary liability law
in all jurisdictions which must be resolved through amendments. We must
have a detailed compliance regime for intermediary liability and
jurisdictional disputes. For all above said suggestions we require to maintain
litheness to counter to changes in technology & not be controlled by
exhaustive and detailed Treaty responsibility.95

Need for higher legislation on ISP liability India has a long approach to go
in delivery of a comprehensive legislation on the liability of ISPs in cases of
copyright infringement in digital context. It is of utmost importance for a
country such as Republic of India with an increasing range of net users
Associate in Nursing thereby increasing the threat to infringing the rights of
copyright holders. At the same time, Republic of India is apace becoming
digitalized and if new laws are not brought in to defend ISPs from copyright
infringement by subscribers and the connected aspects, it would adversely
affect the ISP business as a whole although cases regarding the same are
nevertheless to come back before any court of law in Republic of India.
Moreover, it is conjointly necessary for India to update their laws
concerning this facet to remain in competition with different Asian countries
such as Singapore that have come back up with comprehensive laws
limiting the liability of ISPs. Some argue that taking note of the borderless
nature of the net, all nations ought to develop a set of rules for ISPs that are

95SSRN-id1800837; Sonia Verma, B.Sc., LL.B [Corporate Hons.], IV Year, National Law University,
Jodhpur.UpvanMadhurPrakash, B.A., LL.B [Corporate Hons.], IV Year, National Law University, Jodhpur.

universally applicable. Given the variations in the systems, different
countries can come back up with completely different approaches regarding
the liability of ISPs and consequently ISPs operating in multiple countries
can face completely different liabilities in completely different countries.
Another facet is that there can be clash of varied domestic laws on ISPs
where Associate in Nursing ISP is operational a internet hosting web site in
one country and wherever it has allegedly committed copyright violations in
another country wherever the web site has been accessed.96 Thus, a universal
set of rules to be made applicable in the context of the net is being
suggested.

5.8 SOME SOLUTIONS

5.8.1 Double mind perspective when screening content

The unnerving effect can primarily be ascribed to the requirement for private
intermediaries to achieve subjective judicial determination in the course of
ordering the takedown. From the retorts to the takedown notices, it is
outward that not all intermediaries have sufficient legal fitness or resources
to un-hurried on the legality of an countenance, as a effect of which, such
intermediaries have a predisposition to err on the side of caution and chill
lawful expressions in order to edge their liability. Even if such intermediary
has ample legal competence, it has a tendency to prioritize the allocation of
its legal resources according to the professed importance of assailed

96http://www.isoc.org/inet97/proceedings/B1/B1_2.HTM [9 May 2007].

expressions. Further, if such subjective fortitude is required to be done in a
controlled timeframe and in the want of adequate facts and contexts, the
intermediaries have no choice but to mechanically [without application of
mind or proper judgment] comply with the takedown notification.

5.8.2 Outlook to the aforementioned issue

It is suggested that the need for private intermediaries to subjectively verify
the lawfulness of associate expression gets replaced with associate objective
test. Such associate objective check is introduced by dynamic the data
requirement. For instance, for the ‘hosting’ category of intermediaries, the
target check ought to be to work out “whether or not the third-party supplier
of data is willing to defend his expression in court”. By legal fiction, Actual
data is attributed to the intermediator given that the third -party supplier of
data refuses to defend his expression or fails to reply with a counter notice
among the notice point.

Problem in understanding and or interpreting the criterion laid down in the
concerned statute.

The content policy [criteria for administering the takedown] uses terms that
are not outlined to explain prohibited expressions. The responses of the
takedown notices demonstrate that multiple interpretations of identical term
can create uncertainty and thus a chilling impact - as it induces the
negotiator to adopt the broadest attainable interpretation of the term and to
err on the aspect of caution.

It may be possible that every single terminology used in the content policy
[criteria for administering the takedown] be clearly outlined or be replaced
with a statement that prohibits all expressions and would be unlike “violate
any law for the nowadays in force” so that only specific legislatively barred
expressions, within the scope of ‘cheap/adult’ restrictions as pictured within
the Constitution of India, will be taken down and used.

5.9 CONCLUSION

There seems to be a world movement towards adopting a “notice and take-
down” policy [the EU regime, the Digital Millennium Act, etc.]. Such a
regime passes the prices of judgment on to personal parties [who
successively square measure possible to pass them on to users] and will
additionally inhibit free speech. The shortage of judicial oversight will be a
problematic issue, particularly within the case of tiny businesses or short-run
censorship.

The Indian law at first took a step forward with the passing of the IT
Modification Act in 2009 however with the introduction of the go-between
tips, the safe harbour provided by Section 79 of the Act has been worn
therefore on be much non- existent. The Asian country position at the instant
looks unreasonable particularly the maximum amount of the content
accessed in India is formed abroad, which implies Indian intermediaries can
bear the forcefulness of any liability claims.

The issue of a way to wear down intermediary liability is thus one that
there's no straitjacket answer. However, I think that any palm system should

be designed on the subsequent principles that square measure additional
compatible with the improvement of the inter-internet as a medium of
communication:

Self-regulation by intermediaries appears to guide to suboptimal social
control of the law and promotes whimsicality and reduces transparency by
promoting private action during a public sphere.

The law must differentiate between intermediaries on the premise of
practicality and will offer immunity wherever the go-between wasn't during
a position to regulate or assess the offence [practically or in law].

The law should differentiate between varied crimes on the premise of
harshness and maltreatment and wear down every class appropriately [and
probably through changes in alternative relevant statutes like the Copyright
Act, Indian legal code, etc]. For instance, within the case of threats to
national security, commission of knowable offences, etc, a notice and
takedown regime ought to be acceptable. This might change such claims to
be proscribed efficiently and stop harm. Even within the event executive
action is found necessary in extreme cases [say involving terror threats],
there should be judicial consciousness of the action inside such a time,
failing that the makes an attempt to censor should stop. Just in case of
copyright, defamation and obscenity- connected claims, there's no reason for
a different commonplace to be applied compared to ancient ways of
dissemination of data. It might thus be appropriate if any complaints
received square measure place through a judicial method before censor-
ship. In any event, damages in such scenario square measure possible to be