Do IP Rights Owners Have a Stranglehold on Online Markets? 

June, 2007 -

The development of online markets continues to pose challenges for legislators, who must balance the protection of IP rights owners with protecting traders against anti-competitive behaviour.

Trademarks and copyright are particularly vulnerable to infringement on the Internet. It is not only the individual posting content online who can be found to infringe IP rights, but also any third party (subject to certain exceptions for internet service providers) who facilitates the unauthorised use.

Automatic Enforcement Procedures
To combat the threat of infringement action, online marketplaces often provide automatic enforcement procedures that allow rights owners to assert their IP rights and request the removal of infringing content.

The eBay Verified Rights Owner (VeRO) programme is an example of such a mechanism. Under VeRO, an IP owner who believes their rights are being infringed by a product on the online auction website can send eBay a standard form notification with details of their rights and the product they allege is infringing them. This results in the listings for that product being taken down from eBay and possibly the suspension of the trader’s account. The system also allows rights owners to set up an automated search for infringing acts, and this can issue takedown applications automatically.

The Trader Perspective
Automatic enforcement mechanisms have been widely criticised as content can be removed without first establishing that the infringement allegations are well founded. It is common for traders to accept the takedown notice at face value and cease trading in the goods in question. Therefore, there is a danger that rights owners can use automated systems to take down competitors’ products or content where the IP right is being used legitimately.

On 8 May 2007 the Electronic Frontier Foundation made a complaint in the United States against celebrity ‘psychic’ Uri Geller in relation to Geller’s takedown of a 13-minute (and rather unflattering) video from YouTube. The website removed the video after Geller’s company Explorologist Limited made copyright claims, but the foundation has stated that Geller owned the copyright of only three seconds of the footage used. Under UK copyright law it is unlikely that three seconds would be held to be copying a significant part of Geller’s work and, in any event, a fair use defence for criticism and critique is available. This means that the video was removed when in reality there was no copyright infringement.

In the High Court case concerning Quads4Kids, Judge Pumfrey stated: “It is entirely wrong for owners of intellectual property rights to attempt to assert them without litigation, or without the threat of litigation in reply.” This ruling came in response to a claim by Quads4Kids after its auction items were removed from eBay following a VeRO complaint that the goods allegedly infringed a Community (EU) design right. With no investigation of the strength – or even validity – of the infringement case, systems such as VeRO provide opportunities for competitors, disgruntled customers and malicious third parties to take down items for sale, resulting in a loss of revenue and restricting online competition.

The Rights Owner Perspective
It is not only traders that have criticised automatic enforcement mechanisms – they are also unpopular with rights owners themselves. To benefit from these systems, rights owners must expend significant effort in monitoring sites for infringing material and then taking appropriate enforcement action.

In other areas of internet trading, rights owners receive less brand protection. For instance, rights owners are finding it increasingly difficult to bring successful actions against cyber squatters. In these cases owners must show the likelihood of confusion between the alleged infringing site and their own domain name – so Asda failed to close down the ‘’ website as it was held that consumers would not be confused.

Trademark infringement by use of meta tags and sales of key-word advertising present further difficulties for rights owners. Purchasing a search term that is also someone else’s trademark will link that particular search with the purchaser’s website, even though the trademark itself does not appear on that website.

Future Imperfect
It seems clear that further legislative intervention is required to clarify the legal position. However, problems look set to continue following an independent review of UK IP protection, commissioned by the government and published in December 2006. The review, led by former Financial Times editor Andrew Gowers concluded that the current system is “fit for purpose”.

With a system which fails to adequately protect either traders or rights owners, a review of online IP protection is badly needed. However, it appears that wide ranging changes are unlikely with protection continuing to be effected by piecemeal legislation which fails to consider the global picture.

This article first appeared as the "Burning Question" on



WSG Member: Please login to add your comment.