IP in the e-commerce sector in Latin America (pt.1) - Europe

IP expert at the Latin America IP SME Helpdesk

E-commerce is a relatively new phenomenon, having entered the mainstream and consumers’ shopping habits no more than 25 years ago. It was already at the time recognised as a game-changer and some of the fastest-growing businesses in the world during the last 20 years have been wholly or at least partially centered around activities involving the offering for sale of goods or services via internet platforms.

Doing business via e-commerce, be it through dedicated e-commerce platforms or a company’s own website presents distinct advantages. Firstly, it constitutes a relatively cheap way of opening a business, with fewer costs than those associated with running a physical business (rent, personnel, etc), and it provides excellent flexibility regarding where the business can be run. Secondly, said flexibility combined with the global reach of the internet means that an e-commerce business can reach potential customers the world over without having to physically be present in far-away countries, and the activities can be scaled up in a much more dynamic way without the need to worry about logistics related to physical shops. All these elements make e-commerce an extremely interesting option for EU SMEs with limited economic power, especially those selling consumer goods.

When it comes to Latin America, e-commerce has experienced a boom in the past few years, boosted by the Covid-19 pandemic which has led people around the world to prioritise online commerce over physical shops. While this boom is a global phenomenon, Latin America has the fastest-growing e-commerce market in the world, with 37% annual growth and a market estimated to be worth €97 billion in 2020, and expected to reach €200 billion by 2025! Brazil, Mexico, and Argentina are three of the top 10 growing e-commerce markets in the world. With “only” 57% of the population in Latin America being users of mobile internet access, there is ample room for growth and a low risk of saturation on the market, therefore providing great opportunities for European SMEs willing to enter the Latin American market through these channels.

This new form of doing business has reshaped the world economy and the way in which local, national, and transnational sales are operated, but has not been without challenges, even accentuating some crucial aspects of any customer-facing business such as questions relating to confidence in the provider and certainty as to the veracity of the claimed source of the products being purchased.

Intellectual Property Rights and e-commerce

As such, intellectual property rights play the same role in the online world that it does in physical business: it serves to protect the image, innovation and original creation of businesses, large and small, against competitors trying to unlawfully copy their products or to gain market shares through acts leading to the consumer being confused as to the real origin of a product.

IP rights protect products and businesses in different aspects:

trade marks protect the brand of a company in its different aspects (logo, company name, product name, etc.);

copyright protect original creations which can be copied on a physical support (think music, books, notices, photos but also in some cases clothing designs!);

design rights protect the external aspect of the whole or part of a product provided that it is new and has an individual character in the sense that this external feature, be it the shape, the texture, colors or a combination of these elements, create an overall impression which is quite distinct from that created by other similar products;

finally, patents and utility models protect the innovation behind the products which are being sold.

It is important to keep in mind that with the exception of copyright, the IP rights mentioned are only fully protected when they have been registered.

IP infringement is, unfortunately, an all-too-common occurrence in the modern world, and the e-commerce phenomenon has proven to be a catalyst for the production of counterfeits (by providing easy access to anyone with access to internet to the catalogs of products offered by businesses located all around the world) as well as a medium through which said counterfeits can be sold to unsuspecting – or uninterested – customers.

It is therefore particularly important for EU SMEs willing to enter new markets through e-commerce platforms to be aware of the do’s and don’ts, the traps and best practices in order to limit the risk of finding themselves in the unpleasant situation of having their competitors copy them or passing off counterfeit products as genuine.

As always, protect before you go

One of the most repeated phrases here at the international IP SME Helpdesks is “protect before you go”: any business that seeks to grow by entering into new markets (be it geographical markets, or different sectors) must absolutely, as part of its preparation to entry, determine which aspects of its business and products or services can be protected, how they can be protected, and where they should be protected.

As mentioned above, most IP rights are best protected when they are registered. It is however important to keep in mind that these registered IP rights are territorial in nature, which means that they are only valid in the territories in which they have been registered. While this may seem redundant to state, it is a common error made by European SMEs to assume that since they have registered e.g. their trade mark in their home country, their brand is now safe and cannot be copied by competitors in another country. It must therefore be reminded that IP rights should be registered in the territories in which a company plans to sell its products and/or to have an actual presence on the market.

In addition to all the commonly known benefits of IP registration, the act of registering your IP rights can be particularly useful, also in the case of infringement of your rights on e-commerce platforms.

IP enforcement in e-commerce platforms: best practices

Given the rise in market share occupied by e-commerce, and the relevance of IP infringement taking place on these platforms, the major players in the sector have all been forced to adapt and take measures to try and curtail the phenomena. European SMEs with plans of expanding their activity to Latin America, must be aware of the following tools that have been set up by e-commerce platforms, such as:

notifications systems which allow users and IPR holders to notify the platform that infringing products are being sold on the platform;

internal IP protection programs run by the e-commerce platforms themselves, through which IPR holders can benefit from simplified infringement detection and notification mechanisms;

contact points to whom issues encountered by sellers on the platform can be communicated, whether they are IP-specific or not, and through a designated reporting system or normal email. 

Amazon for example has created a Brand Registry in which sellers on the platform can include their own brands in order to facilitate the detection and reporting of suspected trade mark infringing postings on the platform. Here’s the catch though: you can only sign up to Amazon’s Brand Registry if you have a trade mark which has already been registered, or which is pending registration in each relevant country if you wish Amazon to take swift action. Failure to register can therefore prove costly!

Likewise, eBay for example runs a Verified Rights Owner Program which brings similar benefits to IP owners, but once again limited in the case of trade marks to those who own a registered right on their trade marks. Major social media channels such as Facebook and Instagram have also grown to mutate into fully fledged shops on which users can, in addition to seeing and reacting to posts, also buy products. These channels also have put in place specific IP enforcement mechanisms (here and here).

Expanding to the Latin American market through e-commerce

All of the above elements apply to any company that is interested in doing business in Latin America through e-commerce channels.

Here at the IP SME Helpdesks, it is not uncommon to meet SMEs and start-ups who believe that since they will only be doing business from their home country and will only be selling and/or advertising their products to foreign markets on global or local e-commerce platforms, there is no need for them to protect their IP rights through registration in these destination markets.

It should be clear by now that for any SME who wishes to enter the Latin American market on any scale beyond minimal, such a strategy is hardly sound: lacking IP protection in destination markets creates risk related to counterfeiting and the inability to efficiently act against them. Furthermore, since some e-commerce platforms actually require IP registrations in the relevant country to take action against potential infringers, relying on protection in your home country when dealing abroad is hardly the best solution.

Therefore, European SMEs should ensure that the following two-step process is followed:

Once they have ascertained which aspects of their business and products are protectable via IP rights, make sure that these IP rights are registered in all relevant countries. The territorial nature of registered IP means that if you wish to sell your products in Brazil and Argentina, you should ensure that your IP rights are registered in both countries!

Familiarise themselves with the e-commerce platforms through which they are going to sell their products on the local market. While global options such as Amazon or AliExpress exist, local online marketplaces also exist which can give to these companies better visibility in the target market, such as MercadoLibre (for the whole Latin American continent), Fravega (Argentina), Americanas (Brazil), Linio (several countries in Latin America). Knowing how to use these platforms includes understanding how IP owners can best protect and enforce their rights on these platforms.

In part II of this series on the protection of your IP on e-commerce platforms in Latin America, we will look into the specifics of these platforms, with a guide on how to ensure that your IP rights are best protected when doing business online in Latin America.