COVID-19has changed the lives of many as businesses closed down and employees began working from home, with many even losing their jobs. While government subsidies have helped keep some people afloat during the pandemic, many are searching for new ways to make money online while staying at home. Over the past few years, interest in e-commerce as a source of revenue and business has been steadily increasing, however, once the pandemic lockdowns began, interest in related areas skyrocketed. Google Trends data shows that searches for e-commerce and drop shipping topics drastically increased following the beginning of the lockdown.
The availability of many online tutorials and videos related to teaching how to open an online Shopify/Wordpress store has made it easier than ever to enter the world of e-commerce. However, while it may be easy to get started, it’s also easy to get into legal troubles if the proper precautions aren’t taken. In this article, we cover some of the most common legal issues businesses come across when beginning an e-commerce business.
The transition to moving a business online brings companies many new opportunities for scaling their business quickly and providing simplified transactions to their customers. However, these opportunities also come with new legal challenges related to various legal areas such as intellectual property (IP)protection, privacy and data protection, electronic contracting, and jurisdictional issues. We’ll be discussing each of these issues in greater depth in subsequent publications, in this article we’ll be focusing on IP protection.
One of the major benefits of an online e-commerce business is the scalability e-commerce platforms provide. Depending on the type of business and services, e-commerce provides companies with the opportunity to reach customers and clients in areas far outside their local or region. However, quickly scaling a business may bring with it challenges of potentially encroaching on a competitor’s IP rights. In order to navigate this, businesses need to be aware of the relevant IP owned by their direct competitors, as well as the larger landscape in their industry. In doing this, companies will then be able to use the knowledge to best determine where the “gaps” are in the IP landscape, where they may be able to fit in their operations. In most industries, ownership of IP is an arms race, so a good defense so developing a defensible portfolio is necessary while scaling a business.
The five most common forms of intellectual property (IP) protections which are relevant for e-commerce businesses include:(1) copyright; (2) trademarks (3) trade secrets; (4) design protection; and (5)patents. Each form of IP provides different protections with varying levels of costs. In order to best protect their business, companies should look to develop an IP strategy which incorporates several “layers” of IP protection in order to provide various avenues they can follow for protecting their business.
Each form of IP provides different types of protection and different levels of costs associated with obtaining protection. Copyright and trade secret protection often are some of the cheaper forms of protection to obtain because there’s no requirement to register in Canada. Trade secrets may however become more expensive to maintain as a business grows and it becomes more difficult to maintain secrets in the business. Trademarks and design protection carry modest costs in the range of hundreds of dollars to low thousands. Patent protection is often the most fundamental form of protection for businesses, but generally the most expensive with the costs often being in the tens of thousands or more over the life time of the patent.
A well-executed IP strategy incorporates various types of protection to best protect ideas and decides on the types of protection while considering the costs. Companies should also decide on the IP protection to pursue based on where the value of their business likes. For example, if value lies in the specific look, brand, style, or aesthetic of a product, there may be opportunities to use copyright, trademark, or design protection to protect against competitors. If value lies in specific functionality, it may be necessary to protect the business using patents and trade secrets.
The challenges brought by navigating IP issues may be a lot for early stage businesses or businesses new to scaling online. The most important thing businesses can do is simply be informed of the potential risks. For navigating IP issues, businesses should seek assistance and legal advice from an experienced IP lawyer to determine how best to utilize IP to protect their business.