Online IP infringement

In the second of a series of four short articles aimed at provoking discussion about possible solutions to issues experienced by businesses, Neil Sharpley highlights some of the problems of online trade and IP rights.

It is generally acknowledged that there are increasing numbers of ‘wild-west dispute resolution’ actions in relation to online trade. Some large manufacturers have realised that if they wish to suppress unwanted small business competition online, they can use IP rights to do so. There are an increasing number of cases where online platform listings have been suspended or deleted because of an allegation of trade mark or patent infringement. The scenario is that the alleged rights holder makes a complaint to the internet service provider (‘ISP’) or platform operator which then, not wishing to become liable itself, suspends the relevant listings. Many such allegations do not hold up to legal scrutiny. The listing business may protest, but if no agreement is reached with the complainant, the ISP or platform usually maintains the suspension and requires the parties to resolve their dispute between themselves. This in effect means that the complainant has obtained the equivalent of an injunction without proving its case, and that the only remedy available to the suspended SME is to go to court, a step which most SMEs cannot afford, or is in many cases disproportionate to the value of the sales lost. These scenarios frequently occur in spare parts or consumables markets where there is a consumer interest in having a vibrant secondary market rather than a manufacturer’s monopoly. The position is usually different in the USA, where listings are not necessarily suspended, and the rights holder and alleged victim of infringement has to prove its case by independent action. With regard to online commerce dispute resolution generally, there is an urgent need for fast and costeffective dispute resolution. The mechanisms for requiring platform operators and social media applications to act speedily and effectively to resolve issues are limited and ineffective. This area was addressed in the EU by the Online Intermediation Services Regulation 2019 which requires online sales platforms to have an internal complaints procedure and publish the possibility of reference to mediators. The processes of most platforms are slow and opaque. The EU Regulation was supplemented in the UK by the Online Intermediation for Business Users (Enforcement) Regulations 2020. But only certain breaches of the EU Regulation are treated as breaches of duty actionable in the event of loss and damage, and the only option for remedy is via the courts and therefore beyond the means of most SMEs. Again, the cost of court action is likely to be disproportionate to the dispute value in any event. The internal platform processes, to the extent that what occurs can be called a ‘process’, are unsuitable for resolving disputes with an IP content.

Online businesses urgently require a cost-effective and a quick dispute resolution process and mechanism, and the default position for platforms where there is deadlock should not be to maintain suspension. It is time for a holistic appraisal of how lower-value IP-related disputes should be addressed in the fast-and-furious online commerce of the 21st Century. I will return to possible solutions in my final article in this series. In the meantime, many SMEs are simply deprived of the ability to obtain justice because of the limitations in respect of the current dispute resolutions options.

Neil Sharpley is Chair Home Office & Ministry of Justice Policy (incl. Business/Cyber Crime) and IP lead re Innovation at the Federation of Small Businesses. www.linkedin.com/in/neil-sharpley-93075817