Intellectual Property and E-Commerce in India (Part 2)

Continuing from our previous post on IP and E-commerce market in India (Part 1), in the second part we will discuss furthermore on the legal protection mechanisms available in India to protect your products on Indian e-commerce platforms.

As mentioned in the earlier post (here), for most businesses around the world, intellectual property is a far more valuable asset than any tangible asset they own. In addition to protecting the creator's labour, the existence of statutes and practises that govern the operation of IP laws has promoted new creations. The law discourages people from stealing intellectual property (IP) and using it for their own financial gain without compensating the creator for their labour and invention.

In the context of E-Commerce where sellers and buyers meet at an online platform, there are broadly two aspects of IP, one that belongs to and subsits with the product which is sold and the owner of such IP is the seller and the other being the IP rights of the online platform itself. For instance a seller enlists a branded shoe on an online platform like Amazon or Flipkart; here the trade mark associated with the brand of the shoe belongs to the seller/vendor who enlists his product on the platform. Simultaneously, the online platform has certain proprietary rights which can include patents, trade marks or copyrights which enables the platform to stand out and be unique in the market of crowded online platforms.    

However, the major issue of IP infringement that impedes the growth and development of this sector takes place in the form of counterfeiting. The sellers who sell unique products online are most affected by the availability of duplicates and counterfeits. Often times the same platform displays both the original as well as the counterfeit product.

Depending on the varying estimates, the annual sales of counterfeit goods range from $1.7 trillion to $4.5 trillion, making the counterfeiting industry at least the tenth-largest economy in the world. Additionally, it's to blame for the loss of 2.5 million jobs worldwide. In India counterfeiting a serious problem that ails the online market. The only tenable plan of action against the menace of counterfeiting is through IP protection and vigilant monitoring by the genuine sellers. The online platforms have too developed technologies that aid in tracking the sellers of counterfeits so that strict legal action can be initiated against them.

Elements protected by Intellectual Property Rights in E-Commerce

Given that there are two primary aspects of IP in the E-Commerce industry, i.e, one on the part of the sellers and the other on the part of the online platform themselves, it is imperative to appreciate the role of IP laws and the protection provided by it.

A seller selling a unique product either offline or online can avail patent protection, trade mark protection or copyright protection or a combination thereof as applicable. For instance any unique brand can avail trade mark protection which differentiates their product from the rest of the competition in the market. Similarly a particular product can have one or multiple patents associated with it and the same will be protected and will remain exclusive to the patent owner for a period of 20 years as per Indian patent laws. A publisher selling books online will have a copyright over that in a similar way a copyright exists if the same book is sold in store. In essence, an entity owning any IP right is protected in the online market in a similar way it is protected in the offline market. Counterfeits have existed prior to the institution of any form of online markets, the only challenge now is that selling counterfeit products have become easier and more widespread with the induction of online platforms.

A broad categorisation of how IP laws and protection thereof can impact an E-Commerce can be understood by the following headings:

Protecting a company's commercial interests:

Everything from software to design to music can be usurped, copied, and distributed everywhere, and the creators might not be compensated for their original works of art. However, businesses can protect their rights by adhering to IPR laws in e-commerce.

Protecting vital components:

A company's vital digital and technical assets are protected by intellectual property law in e-commerce. These could include networks, routers, plans, programmes, chips, and other things. This aspect of protection is applicable for the online platforms either through websites or android/IOS applications. 

Product and patent licensing protection:

Patent and product licensing is the typical foundation for most online and e-commerce businesses. Most internet-based companies opt to outsource the research and development of specific elements or even share their technologies through licensing agreements because it requires a variety of technologies to create a single product. The agreement is basically a set of rules and guidelines for IPR protection.

Patent portfolios and trade marks protection:

An e-commerce company's most valuable asset is intellectual property, so having a portfolio of patents and trade marks they typically own increases their value. IPR laws thus provide protection for these patents, portfolios, and trade marks. This aspect applies to both online sellers as well as online marketplaces. Today several product based companies, be it dealing in tangible products or intangible products, have emerged who have chosen the online platforms as the only path of reaching customers. For them, a portfolio of IP rights which might include patents, trade marks and copyrights, ensures well rounded protection and as such legal remedy would be available in case of infringement. Similarly, the intermediary market is also getting flushed with new competition on a regular basis, therefore a portfolio of IP rights would protect an intermediary and would aid them to stand out from the crowd. For example, an online seller would want to list their product on a platform which is secure and is vigilant against counterfeit products. Therefore, an intermediary/online platform, which has developed a unique technology by which counterfeit products can be flagged and tracked with ease, would be able to project this as their unique selling point (USP) and attract more sellers to their platform. Such a unique and exclusive technology can be protected by the relevant IP heads.

Search engines, e-commerce platforms, and other crucial internet tools are covered by patents. The text-based HTML code that is used by websites is protected by copyright. An e-commerce website's overall design is also shielded by copyright laws. Copyright laws protect all of the content on the website, including any written or visual materials, videos, images, or other graphics. Companies can secure their databases using copyright laws or country-specific database regulations. Companies can use the trade mark laws to protect the names of their brands, products, logos, domain names, and other similar identifying marks that are posted on their websites.

The Indian Scenario 

India being a signatory to the Trade-Related Intellectual Property Rights (TRIPS) agreement, has a well-established statutory and judicial framework  that protects intellectual property rights in the form of trade marks, copyrights, patents, designs, geographical indications, as well as providing recognised contractual protection to trade secrets.

A patent is a potent tool that can stop competitors from committing acts of infringement. A patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. For an e-commerce platform a patent may cover particular methods or inventions that make it quicker, simpler, and more enjoyable for customers to make online purchases. Sales and purchasing methods, online auctions, consumer reward systems, financial transactions, advertising, infrastructure, directories, and search engines can be covered by the  patents . For example, Amazon Technologies has been granted an Indian patent for a method to automatically authenticate mobile transactions, including billing and payments, based on the user’s location in correlation with the predetermined proximity of a merchant location. Furthermore, patents do not only cover the inventions related to e-commerce platforms, but can also protect the patented-products being sold on these e-commerce platforms from infringement.

As customers remember a product's trade mark, they will search for it, and they will continue to buy it from the seller/company selling on the internet. It will contribute to the improvement of the company's or seller's brand recognition and product appeal. Unique trade marks will be well known worldwide. India allows for trade mark registration which enables the owner to safeguard the brand and prevent others from using it.

Databases, software, website design, and creative content like text, images, audios, videos, and graphics are all protected by copyright. Copyright protection in the e-commerce sector obliges financial penalties for those who use another person's work without their permission or license.

Trade secrets as such so do not have any statutory protection in India but the general laws of contract permits the execution of non-disclosure agreements and confidentiality agreements to legally bind the parties to maintain trade secrets.

Legal protection available against counterfeiting in e-commerce

There are general penal provisions against counterfeiting. The trade mark laws specifically deals with counterfeiting where if a vendor is selling a product by falsely applying for a trade mark, it would constitute trade mark infringement and such counterfeiters may be subject to penalties as well. Again, under copyright laws, if an original work is copied or a work is sold without authorisation while copyright is still in effect, a person may file a criminal complaint against the person selling the counterfeit work.

The consumer protection laws (The Consumer Protection (E-Commerce) Rules, 2020) provide protection against price rigging, inappropriate networking tactics, and misrepresenting the quality of goods and services. Additionally, it stipulates that every E-commerce platform must provide comprehensive information about the vendor in a way that is understandable to all users, so that in an event where harm caused to an unsuspecting customer, the harmed party may be able to initiate appropriate measures to get compensation. The rules further call for e-commerce businesses to exercise due care at all material times and to keep vigilance over the network of vendors listed on their page. It also stipulates that each seller provide an assurance that the product details, images, and other content are accurate and authentic.

Challenges and measures for EU SMEs

Counterfeiting is one of the biggest problems that any e-commerce faces, and it hits at the very root of a business, i.e., sale. For brand protection managers, who are responsible for helping and supporting the brands, the task of eliminating this evil is one daunting task. Several EU SMEs are desirous to eliminate counterfeiting, but they are unsure of how to commence. They lack the know-how and fail to take the elementary steps, both legal and non-legal.

Counterfeit products that are sold online are first procured offline either primarily from China or Bangladesh, though some products are often made in India. After procurement, these products enter the country through the customs and are then appropriately distributed internally throughout the country via a strong network of vendors.

For every EU SME wanting to sell products in India must ensure that their trade mark is registered in India. An EU SME can register domain names to reduce the possibility of a counterfeiter using the trade marks and associated products. A zero-tolerance policy must be implemented, and EU SMEs must take matters seriously. This means that registering or protecting e.g. a brand is only the first step to secure adequate IP protection: being ready to take active measures to enforce their rights is just as important, as registration without enforcement may be of limited efficacy to combat counterfeiting.

Online platforms have given ready access to counterfeit sellers to make quicks profits by enabling them to hide behind a veil. The credibility of an intermediary is questioned both by online sellers and buyers when the platform gets infested with counterfeit products.

Major E-commerce platforms have a mechanism to report counterfeit products. EU SMEs selling IP protected products via such such platforms must be prompt to report infringement to the concerned platform. To solve this crisis major Indian E-commerce platforms are heavily relying on technology. For example, with the help of its Anti-Counterfeiting Exchange (ACX) programme, Amazon is assisting retailers in labelling and tracking marketplace forgeries. In order to find scammers and learn their techniques, the new programme imitates data exchange programmes used by the credit card industry. Stores and Amazon marketplace sellers can use a third-party database to identify counterfeiters and report them anonymously, or they can use the database to filter out the bad actors and stop doing business with them.

 Amazon provides a detailed method to report counterfeit products. According to the "Brand Gating" policy of Amazon, a merchant must submit three official invoices and/or a letter from the brand owner before they can sell a branded products. An online anti-counterfeiting programme called "Brand Shield" was introduced by one of the top e-commerce platforms, Snapdeal, to assist brands in alerting consumers to any instances of fake goods being sold on the platform. Alibaba had introduced "Big Data Anti Counterfeit Alliance", in which it partnered with global brands like Louis Vuitton, Swarovski, etc., and provided alliance members cutting-edge technical assistance and protection against counterfeiting. Flipkart maintains a zero tolerance policy for fake goods it.

Conclusion 

Without a doubt, intellectual property laws are necessary for the fair and ethical compliance of digital practices and activities, particularly in a sector as diverse and dynamic as e-commerce. IPR in e-commerce aids in safeguarding companies that use online platforms. The EU companies engaged in e-commerce business should adopt an effective IP protection and enforcement strategy that tailor fits their requirements to protect and safeguard their intellectual property from infringement and counterfeiting.