Former International Trade and Industry Minister YB Datuk Sri Mustapa Mohamed was reported to have said at an event earlier this year that Malaysia is expected to receive almost 60,000 new e-businesses in 2018 and this number is expected to increase further by 20.8% by 2020.
The high growth rate is due to the rapid evolution of technology and high internet penetration in Malaysia. It has been reported that 28% of small and medium enterprises (SMEs) had online presence and 15% were using that presence for export purposes. Nine out of 10 business establishments in Malaysia are SMEs.
Online businesses experience the same legal issues that traditional brick-and-mortar companies deals with. Online businesses also deal with different challenges in operating their businesses and transactions that occur in the digital environment, which could prompt financial liability or unauthorized exploitation of one’s intellectual property (IP) rights if they are not properly managed.
A business site is considered as an intangible property to which belongs to an individual or organization that owns and reserves all the exclusive rights to utilize the property in any legal way. However, a digitalized IP becomes difficult to control because the internet offer unlimited information which is readily attainable by individuals and businesses worldwide thus exposing online businesses to higher risks. Unfortunately, the way businesses operate has tremendously transformed since the inception of internet, this increases the risk of performing business online. The violation of rights on the internet is a significant problem and has been a critical issue since the beginning of ecommerce, thus it is important for online businesses to protect their IP.
IP protection is especially important for ecommerce merchants, says the World Intellectual Property Organization:
“Ecommerce, more than other business systems, often involves selling products and services that are based on IP and its licensing. Music, pictures, photos, software, designs, training modules, systems, etc. can all be traded through Ecommerce, in which case, IP is the main component of value in the transaction. IP is important because the things of value that are traded on the Internet must be protected, using technological security systems and IP laws, or else they can be stolen or pirated and whole businesses can be destroyed. Also, IP is involved in making Ecommerce work. The systems that allow the Internet to function – software, networks, designs, chips, routers and switches, the user interface, and so on – are forms of IP and often protected by IP rights.”
Violating someone else’s IP
The major ethical issue related to ecommerce and IP concerns how we (both as individuals and as business professionals) should treat property that belongs to others.
The proliferation of innovation has occurred so rapidly that few entrepreneurs have stopped to consider who owns the IP rights on a business technique or method their site is using. The spirit of the internet has been so free-wheeling that many entrepreneurs ignored IP rights that could easily be confused with another party’s IP rights. In short, the Internet has demonstrated the potential for destroying traditional conceptions and implementations of IP law developed over the last two centuries.
Issues with IP infringement over ecommerce platform
The biggest issue that IP owners face when they notice that there are infringing products posted on ecommerce platforms is that who do they sue i.e. the co ecommerce platform owner or the party who has posted the infringing goods in the platform or the buyer? It is not unusual that the ecommerce platform owner is based out of a country which is different from the country where the infringing party and buyer are located. It can be troublesome and very costly to initiate legal actions in multiple jurisdictions.
Some ecommerce platforms provide an avenue for IP owners to lodge a complaint if they suspect that there is a counterfeit product is being posted on the platforms. In order to do so, the IP owner must provide evidence of registration of their IP rights and details of the infringing products. Whilst the platform owners may not act swiftly or may not act at all, this option should be considered so that prompt action that can be taken in order to remove the infringing products from the platform.
It is real
In 2016, an independent artist and designer, Tuesday Bassen waged war on a mega-brand, Zara, over an IP infringement. Legal counsel cost Ms. Bassen US$2000, just for the initial cease and desist letter, and the costs keep adding up. The first response from Zara admitted no wrongdoing. Social pressure is a powerful thing and this “unknown” took her message to her Instagram followers and the media followed. Zara has since removed the offending pieces from their website.
Image sourced from Tuesday Bassen’s Instagram page
Not every artist, inventor, or entrepreneur has the benefit of large social audiences to amplify the outcry, and sadly IP infringements happen to small businesses and artists every day. Many go unreported.
Learn from Ms. Bassen’s cautionary tale: before someone else tries to take credit for your big idea, protect yourself. Smaller upfront costs can save you a bundle in legal fees on the back end.
Before you pursue a legal action, your IP lawyer will be advising you on whether the infringing product can be considered to be infringing and what type of IP rights that are being infringed under the relevant country’s IP law.
If you have discovered that a party is using or selling any of your IP on an ecommerce platform, you should immediate take action in notifying the other party to remove the infringing products from the platform and/or initiate a legal action against the party. The challenge arises, however, in proving that the IP rights belong to you, and proving that the copy is close enough to be considered IP theft.
However, if you had registered your IP rights, things will be better for you and your legal right to the IP would be more clear-cut.
IP lawyers and consultants are there to help you register IP rights. If you have not already registered your IP rights, it is the time to do so.
This article was written by Ramakrishnan Damodharan, Managing Director of Adipven (M) Sdn Bhd