Growth of the virtual high street and its effects on brands

Much has been written about the decline of ‘the high street’ in the first two decades of this century and the phenomenon is well recognised. According to the ONS, retail numbers have consistently fallen as a proportion of all high street business from 29% to 25% between 2012 and 2017 and a leisurely walk in many towns and cities in the UK amongst the empty and boarded-up shop spaces indicates that this pattern is continuing. The major cause of this decline? Without doubt, the rapid growth of online shopping and commerce.

Indulging a younger generation’s desire for convenience and instant gratification, internet sales as a percentage of total retail sales have increased steadily since the start of this century, as indicated by the graph below produced by the ONS:

Source: https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi

With the onset of the COVID-19 crisis, this pattern is likely to be accelerated. Notwithstanding the much anticipated great escape and relaxation of social distancing rules which will lessen our absolute reliance on online retail, the crisis is almost certain to have set in motion trends and behaviours from which there will be no return. Octogenarian online grocery shoppers – who’d have thought!

Impact on brand owners

A worrying development is the impact this has on brand owners. The growth of online shopping certainly provides an opportunity for them to reach new consumers through different channels of trade. However, it will also pose great challenges in the protection of their brands. The growing shift to online commerce provides bad actors, scammers and brand infringers with new avenues of activity and the situation is ripe for fraud. A brief outline of a couple of these challenges are examined below.

Counterfeiting

A unique aspect of online shopping is that it is impossible to ‘inspect’ the goods one is buying and to be satisfied of their provenance. This has always been a problem for e-commerce but the current health crisis, which has promoted a dangerous mix of panicked buyers, diminishing stocks of products and opportunistic sellers, has markedly increased the risk of counterfeiting. INTA recently published a bulletin related to counterfeiting during the crisis.

Domain name profiteering and phishing

The rapid rise in the online population has seen a commensurate rise in bad-faith domain name registrations and phishing websites, with the aim of hijacking internet traffic through causing confusion with brand names. With particular reference to the current crisis, there has been a spike in opportunistic domain name registrations including terms such as ‘coronavirus’, ‘covid’, ‘vaccine’, etc. However, it is frequently the case that third parties register domain names similar to those of well-known brands to divert traffic and to profiteer from the registrations, either through making money via the website they are operating or seeking to sell the domain back to the brand owner (effectively, a form of ‘blackmail’).

What action can brand owners take in the face of these challenges?

The ultimate tool for a brand owner is to have their brands (and sub-brands) registered as a trade mark for the relevant territory. This forms the basis of and legal grounds for taking action against errant third parties, whether that be by filing domain name complaints against third parties who have registered domain names similar to their protected trade mark with the aim of using the domain in bad-faith, or recording a registered trade mark with customs authorities so that they can confiscate suspected counterfeit goods in advance of them entering the market. Of course, having a registered trade mark ultimately facilitates a brand owner to take the Rolls-Royce option, namely bringing trade mark infringement proceedings.

But having the tools in place to take action against third-parties is only part of the story. It is also important to monitor the avenues through which bad actors operate. As indicated above, bad faith domain name registrations is just one of those avenues. Third parties may also attempt to register similar social media accounts / handles to those of brand owners or make use of online marketplaces to sell counterfeit products. It is therefore imperative that the relevant ‘watch service’ is put in place for each of these aspects (to monitor any unauthorised use or application of the trade mark), to go hand in hand with having comprehensive registered trade mark rights.

The importance of online brand protection has been brought into sharp focus by the COVID-19 pandemic, which has forced us all online to meet both our social and retail therapy needs, exacerbating a pattern which has been developing since the turn of the century. For further advice regarding online brand enforcement, contact Dennis Lee, Tom Robson or Sajjad Khan of BDB Pitmans’ intellectual property and brand protection team for more assistance.