Background

E-commerce has brought many opportunities for brands to expand their footprint and tap into global markets. However, it has also given rise to a myriad of intellectual property (IP) infringement issues for companies, particularly for trade mark infringement and counterfeit activity. As the e-commerce market has matured, new trends have emerged, posing fresh challenges for IP rights holders and making brand protection even more complex in practice.

Emerging e-commerce trends often start in China, the country with the world’s largest e-commerce market estimated to be USD 1,115,842 million (approximately AUD 1,580,000 million) in 2020. Driven by major tech innovations, the constant release of new online platforms and apps is one factor facilitating potential counterfeit sellers, and brand infringers, developing creative and novel ways to make counterfeit sales. Unsurprisingly, new e-commerce trends can spread quickly around the world as brands adapt to access the spending power of China’s enormous consumer market of 1.4 billion people. In this update we discuss some of the latest new trends for these online sales and provide some options for brand owners to consider to minimise the potential for counterfeit sales and infringement of their IP.

Sales through live streaming

Live streaming has become one of the new and entertaining ways for consumers to explore products, driven largely by the adoption of the video medium as a more immersive and engaging way for brands to interact with potential customers. Live streaming sessions will usually feature celebrities and/or influencers who demonstrate how products work, test them live and answer questions in real time. Consumers are then able to purchase featured items through embedded links.

Live streaming can assist brands with reaching large numbers of active and engaged consumers. However, it poses new challenges for companies from a brand protection perspective as it also opens up the opportunity for increasing counterfeit or infringing product sales through live streaming. The video host may feature and sell numerous (potentially infringing) products over the course of one live streaming session. Sometimes shrewd sellers will embed one or two illegitimate items amongst a number of legitimate products in order to pass them off as genuine.

Due to the transient nature of live streaming videos, policing and taking enforcement action against illegitimate sellers is an enormous headache for brands. Unlike traditional online shopping forums where products are listed permanently on a webpage, live streaming videos are available only during the live stream or for a limited time following the end of the stream. This makes it harder for brands to identify with precision parts of the video that contain the counterfeit products, a necessary precondition to e-commerce platforms taking down the infringing video. Furthermore, in the event that a video or a section of video is taken down, it is very easy for sellers to create a new video and embed counterfeit products in another live streaming session. Unlike traditional online listings where sellers would often use the same photos to re-list their counterfeit products, new live streaming videos that differ from the content previously removed for infringement makes it extremely difficult for companies to use AI technology to monitor illegitimate re-listings. The videos would need to be watched in full to re-identify the infringing sections. As a result, trying to enforce IP rights in this space is like playing a game of whack-a-mole.

The re-commerce market  

Re-commerce or resale commerce is the sale of second-hand products to consumers, a re-emerging trend driven by growing demand for greater product variety, affordability and sustainability. Sellers mask their illegitimate activity by claiming that the counterfeit products are second-hand and listing them on re-commerce platforms such as Xianyu (by Alibaba), Pai Pai (by JD.com) and Zhuan Zhuan (by Tencent). They would often match the re-sale price of genuine second-hand products to pass the counterfeits off as real, and/or sell fake products wrapped in genuine packaging so that it is more convincingly “genuine”.

The difficulty for brand owners is in distinguishing between real and counterfeit resellers/sellers. Counterfeit sellers would generally list multiples of one or more items, while real resellers would usually list only one. Whilst this can be useful in differentiating between legitimate and illegitimate sellers, some counterfeit sellers have adapted and started to list a small number of items from a large number of different accounts to appear legitimate. An additional layer of difficulty for brand owners arises from the fact that many tech companies have introduced new anti-scraping policies, which prevent AI programs from scraping data and running software to identify infringing activity. In addition, many re-commerce platforms are app-access only, which cannot be accessed by AI scraping programs. Therefore, brands need to revert to the slower and more traditional methods of enforcement, such as manually reviewing prices, images and customer reviews to determine whether to make test purchases, then reporting counterfeit sellers to the platforms and waiting for illegitimate sellers to be removed. Naturally, this creates headaches for brand owners as counterfeit sellers can pop up faster than they can be removed.

Hidden-link sales

Hidden-link sales have risen in popularity as brands have gotten smarter with policing and enforcing their rights. They are often used in cross-border sales of infringing products where consumers are brought to listings on e-commerce platforms like eBay from advertisements on other platforms such as Facebook Marketplace. These listings show an entirely different product to the external advertisements as a cover for the counterfeit item. In the external advertisements, illegitimate sellers would list photos of the counterfeit products with their respective product codes, and also include instructions on how to make the order, such as by typing in the product code into the ‘special request’ section of the cover listing. As an example, a consumer might see an advertisement for a counterfeit Gucci keyring on Facebook Marketplace and be directed to make the purchase on eBay from a listing for an unbranded T-shirt by typing in the product code for the Gucci keyring.

Brands find it particularly difficult to enforce their rights against sellers engaging in hidden-link sales because the instructions for purchase would generally ask the purchaser not to write reviews or comments on the listing page. When the listing is reported, it would be rejected by the platform due to lack of evidence as the cover listing is completely unrelated to the alleged counterfeit product. Whilst difficult to enforce, identifying and accumulating seller information can help dig up the infringement network for cross-border sales, which would assist with IP enforcement once sufficient evidence is gathered.

Practical considerations

These emerging e-commerce trends can open up greater opportunity to increase sales, but they can also make it even harder to police against counterfeit goods and brand infringements online. As these trends become more popular, brand owners need to adapt their policing and enforcement methods to match the speed of change in the global online e-commerce markets.

Brand owners therefore increasingly need to adopt a proactive approach to monitoring and managing their IP rights online. Any strong IP policy should consider the following:

• Know the value of your IP and how it drives your business’ revenue – A necessary precursor to establishing an effective IP management system is ensuring you understand the value of your IP and know which aspects of that IP are most important to drive your revenue. Invariably, trade marks and brand play an important role in driving sales. However, product design, look and feel, and aspects of packaging can also be important aspects of your IP and capable of protection.
• Establish a strong internal IP management plan – This plan should take into consideration the strategic direction of the business, focus on those aspects of your IP that drive revenue (identified above) and also consider the global marketplace. Ideally, a strong IP management plan will include a decision matrix to help triage and determine how any identified risks or infringing activities should be addressed so this can occur quickly and efficiently. For example, the decision matrix should make it easier for the business to determine a stronger approach needs to be taken in relation to critical IP potentially being infringed in a core market;
• Ensure appropriate IP protection in all relevant jurisdictions – If businesses have operations in or are intending to expand into China, trade mark registrations should be filed at the earliest possible time to ensure protection in China’s first-to-file system. This should include protection for both English language and local character trade marks. The same naturally applies to all countries where the business and brand has a market and a potential revenue stream as registered ownership of any IP is the strongest precursor for brands wanting to enforce their rights against infringing third-parties;
• Set up trade mark, domain name and other relevant watches – Watches are useful for identifying, managing and reducing risks of third-party infringements of IP. The watching program should sit within the IP management plan mentioned above so any watch results are triaged effectively and efficiently. This is a proactive mechanism which helps brands identify and take action before third-party activities take root. In particular, trade mark watch programs are a simple and effective tool to prevent any third party trade mark applications of concern progressing to registration, which will make the issues harder to manage later on;
• Establish web-monitoring and app-monitoring across a wide range of online platforms – This helps to identify and track infringing activity, including counterfeiting, which then enables businesses to take appropriate actions such as take downs to protect their IP rights. Again, this should sit within the IP management plan discussed above to aid in effective and efficient triaging of any online issues identified;
• Implement long-term monitoring and enforcement strategies – Long-term strategies are useful for identifying broader infringement trends in the market. Companies can use this information to develop tailored strategies to protect their brand in the long run.

These are just some aspects of a strong IP and brand monitoring and protection system. Please get in touch with our team if you have any questions about implementing effective strategies to protect your brand.