In China, the largest e-commerce market in the world, the live streaming e-commerce model has strongly boosted sales volumes and has become a prevalent form of shopping. Younger consumers tend to favour this model, through which they can see the product and interact in real time with the selling host on a specific platform.
This method has become popular among merchants and consumers alike. However, problems in e-commerce, such as intellectual property and consumer rights infringements, have been exponentially magnified as a result. Another important question is whether live streaming platforms hold the legal responsibility for intellectual property infringements.
China is the largest e-commerce market globally, generating almost 50 percent of the world’s transactions. According to eMarketer, China’s online retail transactions reached more than 710 million digital buyers, and their value reached U$S 2.29 trillion in 2020, with forecasts to reach U$S 3.56 trillion by 2024. In 2021, China became the largest market for e-commerce with a revenue of U$S 1.5 trillion, placing it ahead of the United States.
Currently, live streaming does not have a strict access mechanism, and among the vast number of participants, only a few have any knowledge of intellectual property laws.
Because of its easy accessibility, live streaming e-commerce has attracted more e-commerce platforms, sellers, suppliers, and consumers, and with a large number of competitive entities in the industry, the risk of intellectual property infringement has also increased.
Chinese consumers are strongly connected to their electronic devises and mobile phones, and using the internet, they can access any online store at anytime from anywhere and freely choose and buy goods. This gives e-commerce platforms a greater advantage over brick-and-mortar stores in terms of sales time, region, quantity, and type of products.
This vast number of items, merchants, buyers, and sellers, increases the risk of intellectual property infringement.
It is almost impossible to detect and stop infringement in time because of the immediacy and randomness of live streaming. It is also challenging to trace and preserve evidence.
Compared to traditional e-commerce (based on a static display of product information through an Internet web page), live streaming hosts release product information in the introduction process and promote the completion of a large number of transactions in a short time under the stimulation of price comparison, live streaming discount, real-time streaming of sales data and other aspects.
The fast pace of live streaming e-commerce creates a significant barrier to IP rights protection. Since e-commerce does not have a physical warehouse or space that limits the number of goods or buyers, the quantity of the items for sale during live streaming is so huge that the scrolling of the goods is accelerated, and the product information disappears right after the quick sales are made.
To spot or collect evidence of infringement is almost impossible given the fast-moving appearance and disappearance of the products.
Additionally, there may be infringement risks of intellectual property rights in the process of publicity and sales due to the process of live streaming marketing to attract more consumers to shop in live streaming studios.
Since e-commerce live streaming breaks the geographical restrictions, users from anywhere may become consumers of a live streaming studio. Thus, the operators' publicity programs, publicity materials, live streaming decorations, background music, etc., are subject to copyright infringement risks, and there is a chance that the host could have false publicity and other unfair competition behaviours in the product introduction process.
Regulating live streaming e-commerce is also extremely complicated because of its fast and widespread transmission. E-commerce platforms manage large teams of sellers and buyers, which represents significant challenges when it comes to seller review, problem identification, and dispute resolution.
Unless the product information released by a host contains obvious infringing details or the right holder has sent a warning notice of rights in advance, it is usually tricky for e-commerce platform operators to screen infringing information. Moreover, e-commerce platform operators have limited ability to monitor massive hosts' live streaming words and actions in real-time, and the supervision cost is also high.
Another issue is the proper identification of the seller. In live streaming e-commerce, it is difficult to directly confirm the identity of a specific seller because consumers are faced with various entities. This can create significant confusion about rights protection because it is hard to know who the actual seller is, making rights protection relatively problematic.
The first step, when an infringement occurs, is determining the responsible party. When a host sets up a studio by registering an account on a live streaming platform and engages in live streaming marketing activities as an individual (individual host), the responsible party shall be the host themselves.
When a merchant or supplier sets up a studio by registering an account on a live streaming platform and engages in live streaming marketing activities through a contracted host who has established a labor or service relationship with the merchant or supplier, the responsible party shall be the merchant or supplier.
When a live streaming platform conducts live streaming marketing activities by setting up a studio on its website (the platform is self-run, and the host establishes a labor or service relationship with the platform), the responsible party is the live streaming platform.
If the platform is aware that it is being used to sell infringing products, it shall take measures such as deletion, blocking, and disconnection. If the platform fails to do this, it can be jointly and severally liable with the infringer for the aggravated damages.
Companies should also take steps to protect their IP rights from potential infringement in the industry of live streaming e-commerce in China. These actions could include clearly marking all IP-related information on their products or services, strengthening rights supervision, and informing live streaming platforms of possible infringements.
When an infringement is discovered, business may fix and preserve evidence in time, submit infringement complaints to the live streaming e-commerce platform, and take further actions if needed.
Protecting intellectual property rights on e-commerce platforms is difficult. In 2018, China issued the e-commerce Law, which, according to the Chinese government, is designed to address rampant online infringement of intellectual property rights.
The law included requirements related to “notice-and-takedown” mechanisms for China’s e-commerce platforms. These mechanisms allow individuals to request that platforms delist or “takedown” links offering products that infringe on established IP rights. Similar to enforcement offline, companies must register their patent and trademark rights in China to be accepted by e-commerce platforms.
As different platforms have varying procedures for accepting takedown notices, companies must familiarize themselves with takedown procedures for various e-commerce platforms in China. Monitoring e-commerce platforms for infringing goods can be time-consuming, so firms often rely on local agents to monitor China’s large platforms.
To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at firstname.lastname@example.org. DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.