Current problems in the field of IP: e-commerce using live broadcasts in China
The article discusses the main issues of intellectual property rights protection, in particular trademarks in the field of e-commerce in the context of live broadcasts (livestreaming). The article analyzes such a concept as livestreaming e-commerce, which has become quite common in recent years due to the progressive development of social media platforms and the emergence of new players in this niche. The article pays attention to the distribution of responsibility within the framework of violation of IP rights in live broadcasts, examines the case and explores the issue of attributing platforms for broadcasting TV shows to e-commerce platforms. In conclusion, recommendations are given to the relevant enterprises that operate in the field of using live broadcasts.
Keywords: e-commerce, operators of e-commerce platforms, violation of intellectual property rights, live broadcasts (livestreaming).
Online shopping is not a novelty for a modern person, just like social networks, but what about their combination? Since 2016, a unique shopping format has been flourishing in China, combining social networks and e-commerce, which has already become a prominent sector of the Chinese retail market. According to a report by the Beijing consulting company iResearch, by 2020, the volume of the e-commerce market using live broadcasts in China has already exceeded 1.2 trillion rubles (175 billion US dollars), and by the end of 2023 it was expected to exceed 4.9 trillion rubles. By 2030, the number of e-commerce users watching live broadcasts will reach 388 million people, with 66.2% of them placing an order after watching videos.
Simply put, livestreaming e-commerce is a new generation of shopping channels, but transformed from TV channels to social media platforms. On platforms such as Taobao, Douyin (the Chinese version of TikTok) and Kuaishou, viewers can respond and interact with the hosts of live broadcasts, which makes the online shopping process more fun than just watching photos and videos on e-commerce platforms. Although such a shopping regime may open up new promising business opportunities, sellers should keep in mind the related issues of intellectual property rights protection (hereinafter referred to as IP).
Firstly, when creating videos broadcast in real time, it is possible to use images or illustrations of third parties, as well as background music, which may have consequences from the standpoint of copyright law. In addition, from the point of view of trademark protection, electronic commerce through live broadcasts poses new challenges in combating counterfeiting and trademark infringement. This relatively new online shopping model provides sellers with a convenient way to reach the masses, not only through traditional marketplaces such as Taobao, but also through social media platforms such as Douyin. If these sellers sell counterfeit products on live streaming platforms, they will certainly be liable under the law. However, the scope of responsibilities and potential responsibilities of broadcasting platforms is not so obvious, and this is the issue that has been the subject of consideration in some regulations and court decisions.
Since different parties may participate in e-commerce related to live broadcasts under different circumstances, it is necessary to determine the responsible party depending on the specific situation before concluding what legal obligations may arise. So, these circumstances can be divided into three scenarios. According to the first one, the presenter creates a studio by registering an account on the live broadcast platform, and engages in marketing activities in the field of live broadcasts as a subject of individual entrepreneurial activity. In this case, the responsible party is the presenter, who simultaneously acts as the seller.
The second scenario refers to a situation where a live broadcast account is registered by a merchant or supplier to create a studio, and live marketing activities are carried out through a presenter hired by the host, who has established an employment or service relationship with the merchant or supplier. In this case, the responsible party is the trading company or supplier.
In the last example, marketing activities are carried out by the live broadcast platform by creating a studio on its own website or in an application, and the receiving party is only in an employment or official relationship with the platform. The responsible party is the live broadcast platform.
After determining the responsible party, it is necessary to check whether she knows that she is selling counterfeit products or not. If the responsible party is the manufacturer, then, of course, he is aware of the fact of the violation and bears all legal responsibility. In the future, the question arises about what consequences await such a manufacturer. It can be said that, if a violation of trademark rights is established, the manufacturer must bear civil liability for termination of the violation (to stop the production and sale of alleged counterfeit products, destroy inventories, etc.), as well as reimburse economic losses and reasonable expenses. It should be added that if the responsible party does not produce products, but knows about the violation, then, as a rule, it is jointly and severally liable with the manufacturer of counterfeit products.
But what if the responsible party is just a seller who accidentally, without knowing about it, purchased counterfeit products for sale? In this case, if a party can prove the legitimate source of the products, then it is usually enough for them to stop selling counterfeit products and they will not be responsible for compensation. However, if the copyright holder can provide evidence that the notification of the violation was sent in full, but the above-mentioned responsible party continues to sell the alleged counterfeit product via live broadcast, then protection of the legitimate source of the responsible party after receiving notification of the violation is impossible and the responsible party must also pay compensation. Some examples of such sources may include:
1. Registered patents, copyrights or trademarks. If the copyright holder has registered intellectual property rights to his product, then he can use them as a legitimate source to protect his interests. He may demand the termination of the sale of counterfeit goods, as well as compensation for the losses caused.
2. Contracts and agreements. If there is a contract or agreement between the parties that regulates the use of intellectual property, then the copyright holder can refer to such documents to confirm his rights and demand compliance with the terms of the contract. Violation of the terms of the contract may serve as a basis for stopping the sale of counterfeit goods and demanding compensation.
3. Legislation and regulations. The copyright holder may refer to applicable laws and regulations that prohibit the sale of counterfeit goods or protect intellectual property rights. As in the previous paragraph, violation of these norms may become the basis for stopping the sale of counterfeit goods and demanding compensation.
In each specific case, the specific legal source and its protection may vary depending on the actual circumstances and applicable legal norms. It is important to obtain qualified legal advice and adequate support for the effective protection of intellectual property rights.
If an operator is hired within the framework of an official or employment relationship to carry out marketing activities, it is usually assumed that his behavior relates to the performance of duties, and the corresponding responsibility should be borne by the employer. If the violation is committed within the framework of a service provision relationship or during the outsourcing period, then the appropriate responsibility should be borne by the party accepting human resources or the party outsourcing human resources. However, if the operator advertises products under his name or image, he must carry out the necessary checks on the legality of the source and quality of the products. Otherwise, they may face the risk of assuming the corresponding responsibility, which is borne by advertising representatives in accordance with the Law "On Advertising".
When it comes to regulating e-commerce activities, in addition to the general provisions of the Law on Advertising, the Law on Combating Unfair Competition, the Law on Trademarks and the Law on Copyright, the Chinese authorities have also adopted a number of laws and administrative regulations to address relevant legal issues.
In January 2019, the Law "On Electronic Commerce" <1> came into force, which contains specific provisions on the protection of IP rights on e-commerce sites. The law provides for a notification and deletion mechanism that obliges trading platforms to remove infringing content after receiving notification from IP copyright holders. They, on behalf of the owners, are obliged to take the necessary measures to prevent violations of IP rights committed on their platform, if they are aware or should be aware of such violations, otherwise they will be jointly and severally liable.
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<1> E-Commerce Law of the People's Republic of China, 2019.
However, there was previously a grey area on whether TV broadcast platforms would be considered e-commerce platforms and therefore subject to the relevant e-commerce laws. As an example, it is worth citing the landmark decision issued in May 2021 by the Beijing Haidian District Court in the case of Saishi Trading (Shanghai) v. Laizhou Hongyu Art Crafts <2>, in which platforms for selling goods via live broadcasts were recognized as e-commerce platforms for the first time. In this particular case, a claim for trademark infringement was considered, which arose in connection with the sale of goods via live broadcasts on Douyin. The trademark owner has filed a case not only against the direct infringer, but also against the platform. Douyin has tried to distinguish between a broadcast platform and an e-commerce platform, citing that it only provides a communication channel between consumers and other e-commerce platforms, without making any direct sales. Nevertheless, the court considered the essence of the sales services provided by Douyin and concluded that, in accordance with the law on electronic commerce, it falls under the definition of an "electronic commerce platform" regardless of its main function - providing content for live broadcasts.
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<2> Saishi Trading (Shanghai) Co., Ltd. v. Laizhou Hongyu Art Crafts Co., Ltd. et al., 2021.
Despite the fact that Douyin is subject to the legislation on electronic commerce, it was found that it fulfilled its duty of care and, therefore, does not bear joint and several liability. The court took into account the following factors: firstly, whether the platform had rules and policies for the protection of IP rights, and whether it notified its users about this; secondly, whether a mechanism for preliminary verification of the seller's qualifications was created on the platform; thirdly, whether the platform was notified in advance of the violation of trademark rights by the seller; Fourth, whether timely and necessary actions have been taken to provide information about the seller and remove relevant content after notification of a violation. In particular, the court took into account that it was difficult for the platform to carefully track all information about the product and users before it received an active notification from the victim of the violation.
As for actions after the violation of rights, in accordance with the Law on Electronic Commerce <3>, e-commerce platforms that carry out live broadcasts are required to develop a mechanism to eliminate violations of intellectual property rights. Failure to comply with this obligation may result in joint liability with the violator.
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<3> E-Commerce Law of the People's Republic of China, 2019.
Is it easier to violate IP rights in electronic commerce through live broadcasts compared to conventional retail? We can assume that yes, due to the features inherent in live electronic commerce. Firstly, at present, trade through live broadcasts does not have a strict access mechanism and among the huge number of participants, some have relatively low awareness of IP laws.
Due to its advantages and political support, e-commerce through live broadcasts attracts more and more platforms, sellers, suppliers and consumers, and with the emergence of a large number of competing entities in the industry, the risk of intellectual property infringement also increases. In addition, e-commerce platforms to a certain extent overcome the limitations of physical stores in terms of sales time, region, quantity and type of goods sold. Thanks to the Internet, the consumer can enter any online store at any time from anywhere, freely choose and buy goods. In this sense, e-commerce causes an almost unlimited increase in the number of buyers and sellers, the number of goods and merchants. From the point of view of probability, a large number of participants may indicate, accordingly, an increased risk of violation of intellectual property rights.
Secondly, the promptness and randomness of live broadcasts make it almost impossible to detect and stop violations in a timely manner, and also make it relatively difficult to preserve and track actual evidence. Compared to traditional e-commerce (it is based mainly on a static description of the product on a web page on the Internet), live broadcasts fully disclose information about the product during the presentation process and facilitate the completion of a large number of transactions in a short time under the influence of price comparison, live discounts, streaming of real-time sales data and other aspects. The pace of e-commerce, when the entire sales process is extremely fast, creates significant obstacles to the protection of IP rights. Since e-commerce does not have a physical warehouse or room that limits the number of goods or buyers, the number of goods for sale during the live broadcast is so large that the scrolling of goods accelerates, and information about the product disappears immediately after making a quick sale. The rapid appearance and disappearance of goods makes it much more difficult to detect or collect evidence of copyright infringement.
The third aspect is that the rapid and ubiquitous transmission of e-commerce data in real time complicates the regulation of the latter. E-commerce platforms are faced with the need to manage a colossal sales team and a huge group of buyers, which creates significant difficulties for their technical and managerial means of checking sellers, identifying problems and resolving disputes.
Except in cases where the product information published by the site contains obvious details that violate copyrights, or the copyright holder has sent a warning about the rights in advance, it is usually difficult for operators of e-commerce platforms to filter out information that violates copyrights. In addition, they have limited capabilities to monitor the words and actions of their active users in real time, and the cost of monitoring is also high.
Finally, the attribution of accounts used for live broadcasts may be unclear, which makes the protection of IP rights relatively difficult. E-commerce with live broadcasts has a complicated legal relationship, since it involves several entities such as sellers, hosts and online platforms. It is difficult to directly confirm the identity of a particular seller, as consumers face different actors. This can lead to considerable confusion in matters of rights protection, as it is difficult to determine who the real seller is. In addition, the responsibilities between the companies and the owners are not clearly defined, which makes it difficult to resolve disputes.
If the copyright holder discovers that his IP rights are being violated by an e-commerce channel carrying out live broadcasts, how should he act to protect his rights? In this case, the copyright holder may first file a complaint against the platform demanding that the relevant content or user be banned, as well as require the platform to provide information about the identity of the violator. Most of the developed online platforms have already created an identity identification system in accordance with regulatory requirements. According to the Law "On Electronic Commerce" and the Civil Code, the platform is obliged to take the necessary steps to fulfill its obligation after receiving notification of a violation. Thus, by contacting the platform with a complaint, the copyright holder can achieve the removal of the counterfeit and obtain the identification data of the account operator for further action.
At the same time, the copyright holder must properly preserve evidence of the violation. The copyright holder can take and save screenshots of counterfeit products during a live broadcast, record sales volumes and/or save information from any advertising pages. If possible, the copyright holder also has the right to purchase counterfeit products in order to confirm the details of the violation and identify the relevant manufacturer. Given the possibility of legal proceedings, in China it is recommended to preserve evidence of violation of rights by notarizing them or putting a time stamp.
Conclusion
As e-commerce using live broadcasts is rapidly developing in China, companies have the opportunity not only to learn about the actions they can take after a violation, but also to take steps in advance to be more prepared to protect their IP rights.
As part of the analysis, we consider it necessary to make the following recommendations:
Enterprises should pay attention to IP rights, form a portfolio of IP rights in accordance with their needs and actively acquire rights to patents, trademarks, copyrights and other IP rights.
Also, enterprises should pay attention to the behavior of competitors in the field of acquisition and protection of rights, conduct the necessary investigations of the distribution of products on the market, in respect of which there are suspicions of violation of rights, through regular monitoring of the market, etc.
Despite the risk of intellectual property infringement on e-commerce platforms using live broadcasts, there are also many business opportunities in this promising market. Before considering the possibility of entering this industry as an operator or seller, it is necessary to pay attention to several points. From the point of view of broadcast operators, before taking part in the broadcast, measures must be taken to avoid becoming complicit in the violation of IP rights, for example, by advertising counterfeit products. In this regard, operators should check the history of the brand for whether it is a legitimate enterprise or a copycat, and make sure that the products being promoted are not counterfeit.
As for brands, it is in their interests to maintain close contact with the organizers-operators and agencies that carry out live broadcasts, and carefully monitor the work of operators. For example, brands should discuss the content and format of the broadcast with the presenters in advance, and regularly remind them of the inadmissibility of using music, photos, images and illustrations of third parties in the broadcast without obtaining the appropriate permission. With regard to ensuring the accuracy of product information provided by presenters during live broadcasts, brands should provide the necessary training for presenters on products, as well as offer presenters the opportunity to submit a list of topics approved for speeches in advance.
And in addition to the above, brands should be aware of legal issues related to advertising and consumer protection if they plan to use e-commerce through live broadcasts. The very nature of the latter means that everything said by the operator will be immediately transmitted to the audience. The presenter can easily step away from the script and make spontaneous remarks that may be beyond the brand's control. This may lead to an increased risk that operators will inadvertently make false advertising statements or use overly exaggerated or inappropriate language, which may be unacceptable from the point of view of legislation.
