Intellectual Property and E-Commerce in India (Part 1)

Economies today are constantly changing and growing and the internet, as such, is playing a pivotal role in its development. Consequently, it is critical to recognise the importance of intellectual property rights (IPR) in the process of conducting e-commerce business and its impact in the virtual as well as the real world. It is imperative to monitor E-commerce as well as the technological infrastructure so that the value of intellectual property is not disregarded or undervalued.

E-commerce is typically associated with the sale of products or services relying on intellectual property and its licensing. Music, photographs, designs, pictures, software, content, and many other types of products which are protected by some form of intellectual property can be traded through an e-commerce platform in the digital world. Understanding and protecting IP rights in this context is especially important since the economic worth of these goods must be protected. For this purpose, intellectual property laws and technological security systems are used to prevent intellectual property theft which has the potential to destroy online retailing.

Background

About 48.7 percent of the total population of India has access to internet. Despite this relatively low internet penetration, the sheer size of the Indian consumer market has heralded the e-commerce industry in India. It has been estimated that e-commerce industry in India was worth approximately 20 billion € in 2018 and is expected to reach to 320 billion € by 2030.

The industry, which was previously dominated by Amazon and Flipkart-saw increased competition from giant conglomerates such as JioMart and Tata Digital, as well as startups such as Nykaa, Meesho, Udaan, and DealShare. Furthermore, the launch of the state-backed ONDC shook the established e-commerce market. The competition has pervaded into different streams such as quick delivery platforms like BlinkIt and Dunzo, food delivery platforms like Swiggy and Zomato, pharmaceuticals delivery platforms such as PharmEasy and Tata 1mg and many more. The target audience and the nature of products and services provided might vary but the challenges related to infringement of intellectual property is a common thread problem and the most significant one is that of counterfeiting.

Since most products sold through e-commerce platforms are not physically checked and inspected, they are more prone to fraud and forgery. Products that are counterfeit not only cause consumer confusion but also significantly harm a brand's goodwill, resulting in reputational and financial loss.

Intellectual Property Rights and its role in E-Commerce

E-Commerce is an excellent business enabler. However, it is solely the owner's responsibility to protect his intellectual property rights. If the entity fails to protect the intellectual property before revealing it to the public, it inadvertently allows others to unfairly use the same.

It is important to make sure that one has taken the relevant steps to secure the proper IP rights before starting to sell, both in physical shops and online. Since IPRs are territorial in nature, it is necessary to make sure that the same is duly protected in India. Thus, if one wants to sells a product through an Indian E-commerce platform, then it requisite IPR registrations must be completed to avail the legal protection.

Therefore, it is imperative that any business especially one which relies on E-commerce must take the foremost initiative to safeguard its own intellectual property, be it by virtue of patents, copyrights, trademarks registrations, etc, before publishing the same in the open domain.

Many e-commerce companies such as ShoesKartel, Firstcopyclub and such others frequently violate copyright and trademark laws by selling fake and counterfeited products. The Indian courts not limiting to direct infringement of IPR rights by sellers of counterfeit goods have advanced the jurisprudence of intermediary liability by holding such platforms liable for actively hosting and participating in IP rights violation.

Challenges faced by E-Commerce The internet environment has grown, and counterfeiters have adapted their techniques in response. The growth of online marketplaces has also made it easier for counterfeiters to use these sites as sales channels for their phony goods. Although the marketplace operator handles transactions, many outside parties provide information about products or services in an online marketplace. It is the participating retailers or wholesalers who deliver and conclude consumer transactions after the marketplace operator have processed them. The reason why the internet marketplace gathers such traction from the Indian population is that these e-marketplaces frequently offer a larger selection, greater availability, and more affordable pricing than vendor-specific online retail sites as they pool products from various vendors. A survey shows that 38% consumers out of 6,923 respondents have received a counterfeit product from an e-commerce site in the past one year. Another survey revealed that every one out of three online shoppers has received fake products while shopping online in the past six months.

Another pertinent issue with e-commerce platforms which affects manufacturers apart from counterfeit goods is grey-market goods. The International Trademark Association states that, unlike counterfeit products, grey market goods are produced by the brand owner and distributed through unofficial channels. Grey-market channels in this context refer to independent, unaffiliated third-party sellers who offer unlicensed original products for sale on e-commerce platforms.

Scammers even create websites that mimic the look and feel of websites belonging to authentic businesses. Scammers may use fake websites to trick consumers into paying for goods they shall never receive. In addition to that, these scammers might steal the bank and credit card information of unsuspecting customers. These phony websites might seem very realistic, making it difficult to tell them apart from genuine ones.

From the customer’s view point a relevant question is how would one distinguish a fake or counterfeit product from a real or genuine one? Well, for starters the items would be offered for a significant discount from their normal retail price. It has to been checked whether the vendor is a part of the official distribution or approved channel and whether such vendor has multiple listings and apartments available. Finally, if the price for each listing varies greatly or if the particular item has been listed multiple times, chances are that the vendor is selling a fake product. These checks are applicable for not just the customers but are also applicable in raising credible doubt in the minds of authentic businesses whose products are being counterfeited or are being directly affected by such phony vendors. Great responsibility falls upon the e-commerce platform to eliminate these nuisances from their page so that genuine businesses are not affected by them.

Measures adopted by leading E-Commerce

The protection of intellectual property rights is an important consideration for policymakers and businesses worldwide in today's innovation-driven and increasingly knowledge-based global economy. For this reason, most markets have passed laws determining the responsibilities of e-commerce platforms and other online intermediaries for the infringement of IPRs by their users. As a results, and to fight the menace of counterfeit products, many online retailers have begun developing user-friendly internal governance systems that support the protection of IP and have tried to project their role as socially responsible corporates.

Major e-commerce platforms like Alibaba, Amazon and eBay have relied on technology and developed advanced IP protection systems. With the help of advanced computing technologies and big data, several platforms have built proactive monitoring and IP infringement notification system. Advanced technology involving fake product identification modelling, image recognition techniques, semantic recognition algorithms, product information databases, real-time interception systems and data collaboration platforms have made the online market a safer place.

Conclusion

IP protection in e-commerce is a complicated challenge, particularly when addressing the online sale of fake goods. It requires increased and improved collaboration, joint governance, and data and technology sharing among relevant government agencies, IP rights holders, and e-commerce platforms.

EU SMEs endeavouring to crack the e-commerce market in India must be aware of the challenges it poses and the relevant legal safeguards it can avail. More details on the legal remedies available and the necessary steps required to be taken to protect one’s IP are included in the second blog post of this section.