By Diana Muller
Covid-19 has dramatically changed the way retailers and fashion brands conduct their business in the United States and many countries of the world. Due to stay home and locked down orders, online retail outlets have seen close to a 200% increase in e-commerce purchases since the early part of 2020.
While mobile devices are the most popular devices for online shopping, in the fashion world, retailers are still relying on their “brick and mortar” presence in countries of the world where the pandemic is becoming less devastating or consumers (due to their culture) prefer to visit stores to appreciate the quality and look of the merchandise. Fashion houses will continue to offer the experience of visiting their stores in the future. These fashion stores are conducive to showcase high quality branded products. However, even if some consumers decide to venture to the physical stores, more than likely the transaction will be consummated at home by ordering online and using digital platforms. There is a general belief that although stay -at home orders will eventually be lifted, especially due to the vaccines, consumers’ behavioral patterns will continue: produce, groceries and items of clothing, etc. will continue to be purchased online or by using mobile applications. Sophisticated AI (artificial intelligence) and machine learning algorithms are being used to understand, customize and follow the consumer’s behaviors and experiences.
Intellectual property in e-commerce is evolving and requires constant evaluation to ensure appropriate protection and to understand the problems that are likely to be encountered if e-commerce websites contain information, product description and images that they are not legally allowed to be used. Brand owners’ e-commerce websites contain all types of materials depicting their trademarks, service marks, logos, images as well as photos, music or sound effects, art and valuable software programs and domain names. How much of the content has been scrutinized by the website owner as to its availability before it has made public is always questionable. The interaction of the websites with the consumers is very important in order to facilitate the transaction and to make sure that the experience is gratifying and successful. Unfortunately, many young companies and entrepreneurs deal with intellectual property in a very relaxed manner not appreciating that whatever appears on the Internet is not free to use and that the use of such content could result in serious copyright, trademark, trade dress and patent violations.
There is no question that proper protection requires a serious investment in IP. Not everyone has the financial resources to obtain proper IP worldwide protection, especially in such a difficult year. However, companies should be prioritizing their IP policies to have better rights and less legal exposure. Sometimes evidence of IP protection is requested and/or demanded by third parties before they will enforce the IP owner’s rights. For instance, a well-known fashion brand and retailer in the United States was exploring the possibility of opening a digital flagship with T-Mall Luxury Shops (an online marketing place created specifically for Chinese consumers which are operated by Alibaba). In order to open on their platform, T-Mall required evidence of ownership by the U.S company of a Chinese service mark registration covering retail and online retail store services featuring clothing, footwear, handbags, etc. and /or similar acceptable services in International Class 35.
Through the pandemic, we also learned that large companies, especially in the fashion field, have increased their Domain Names portfolios on a worldwide basis. It is also interesting to note that in 2020, The U.S. Supreme Court issued a ruling on the protectability of certain domain names used on websites as trademarks. It determined that Booking.com is eligible for federal protection even though it is based on a generic term. The well-regarded Justice Ruth Bader Ginsburg stated: “We have no cause to deny Booking.com the same benefits Congress accorded other marks qualifying as non-generic.” There are others such as Hotels.com that are in the same category. Not everyone will be able to register domain names consisting of generic terms plus a top-level domain as federal trademarks, but extensive use and recognition of a domain name used online as a source identifier could result in trademark protection.
There are 3 types of Domain names:
gTLD (General Top- Level Domain) such as .com; .net;.org; .biz; .info; etc.
ccTLD (Country Code Top Level Domain) such as .eu; .it .uk ; etc.
sTLD (Sponsored Top Level Domain) such as .store ; .museum; .jobs; etc.
Organizations such as Network Solutions offer the ability to search to determine if a domain name is available. The approach of many companies is to register their brands and variations thereof as domain names on a worldwide basis since having a strong portfolio of domain names is one way to protect against third parties engaging in the unauthorized registration of domain names incorporating one’s trademark.
There are different ways to pursue actions against the violation and unauthorized appropriation of a legitimate trademark as a domain name through the UDRP (mediation by using the Uniform Domain Dispute Resolution Policy). Proceedings under the UDRP are administered by several entities but the World Intellectual Property Organization (WIPO) is perhaps the best known. To determine if a domain name has been registered in violation of the UDRP, three factors are evaluated: 1) whether the domain name is identical or confusingly similar to the legitimate brand owner’s trademark; 2) if the domain name was adopted in bad faith; and 3) if the domain name registrant has any legitimate interest in the domain name.
Trademark infringement could also be considered in the event that there is the use of the domain name in commerce and there is a likelihood of confusion between the domain name and a trademark previously registered and owned by a legitimate proprietor. In the United States, the Anti-Cybersquatting Consumer Protection Act can also be applied where the domain name incorporates a trademark that was distinctive or famous (or both) at the time of registration and where the domain name was registered in bad faith. If a violation is found, the court has the ability to award statutory damages.
Why it is so important to have not only a collection of traditional and non-traditional trademark registrations on a worldwide basis but also a good portfolio of domain names? Covid-19 has resulted not only in a virus pandemic but also in a pandemic of scammers. The scams include “Phishing” attacks or the practice of sending emails purporting to be from reputable companies in order to induce individuals to reveal personal information such as passwords and credit card numbers. Phishing messages may use trademarks, domain names and variations thereof and links. They mimic names, logos and domain names in a way that consumers believe they come from legitimate owners. Owners must take steps to protect their rights and if needed, report the scammers to the Department of Justice. As a result of the increase in phishing attacks, there has been a corresponding rise in the number of UDRP proceedings brought against domain names used in phishing attacks.
Courts have been more active in protecting the legitimate owners’ rights online. In 2020, a Ninth Circuit decision made clear that online service providers cannot ignore the activities of a website that is being used to offer and sell infringing goods. In Louis Vuitton Malletier S.A. v. Akanoc Solutions, Inc. the defendant hosted a website used to sell fake products and did nothing to stop such sales after it was put on notice. Obviously, the decision of the above court is a great precedent to stop other service providers that harbor the activities of infringers. Moreover, Amazon, eBay, Alibaba and others have policies to protect the rights of legitimate owners but since they do not want to be in the position of adjudicating whether a party has trademark rights, they require that complaining parties provide evidence of ownership of registered trademarks when submitting a complaint to these organizations. Amazon has policies to remove counterfeit products and entire storefronts and request that right owners file proper infringement claims.
Social media has also seen an increase in participation by consumers. These platforms have helped brand owners in creating promotions and advertising campaigns for their products and services. However, the intellectual property restrictions on the use of unauthorized content are also evident in social media. Legal violations of copyrighted material, rights of publicity, or interference in contractual relationships have created additional “nightmares” for users. For instance, after posting images of themselves on Instagram, famous celebrities such as Ariana Grande and Jennifer Lopes were sued for copyright infringement by the photographers who took the pictures. Additionally, there are FTC (Federal Trade Commission) regulations that require the disclosures of any business relationship between the Influencers/bloggers and brand owners in the event that they are promoting the brand owners’ products subject to financial arrangements.
Given the growth of e-commerce, it is doubtful that the purchasing behavior of consumers will change even after Covid-19 is defeated. Hence, a good policy of protection of IP in e-commerce is highly recommended. Consulting with an IP lawyer now to make sure that you are protected may help avoid unpleasant disputes later relating to IP violations involving the content of a website or mobile application and the material intended to be depicted on social media.