AJPark

Traditional retailers are quickly becoming the dominant retailers online.  They are the best positioned to master the economics of online selling and capture growing consumer demand.  Yet to become a successful online retailer, you need to recognise the positive impact a sophisticated online strategy can deliver.

It is not yet time to shut the bricks-and-mortar shop.  The online retail industry still only accounts for about 7% of total retail sales, excluding travel.  But certain categories represent a much higher percentage, like computers, where online sales make up 44% of the total.  By contrast, food and drinks only account for 1%.

The long-term prospects for online selling are strong.  Demand for goods and services online will continue to grow as consumers become more familiar with multichannel shopping.  Growth is further fuelled by more customers using fast broadband connections and the profusion of easier, more navigable websites that encourage browsing and buying online.

A net presence

Getting started is fairly easy once you decide to sell online.  First up, you need a domain name.  The ideal would be to register a domain name that mirrors your retail shop name. But as many different businesses share common elements in their names, you need to act quickly.  Registration is granted on a ‘first-to-file’ basis. 

You may find that your shop name has already been taken as a domain name by another retailer or business.  If this happens, you may be able to buy the domain name from the existing owner.  If they do not want to sell, you may have to think of a close derivative and then educate customers on how to find you on the net.  You can work around existing domain names easily to find one you can register – add an ‘s’ or ‘nz’ and you have a new domain name. 

Trade mark rights

But you need to go further and make sure you can trade using the domain name you have registered.  If you have already registered your shop name as a trade mark for ‘retail services’ you can use your domain name.  If you do not hold a registration for your shop name, then it would pay to get some advice.  If another retailer or business has registered a similar name as a trade mark for the same or similar goods or services to those you sell, you will not be able to use your domain name.  To do so would infringe the rights of the trade mark owner.  It is therefore important to have the trade mark records checked before you set up your website and start trading.   You don’t want to face legal action when you should be celebrating your e-launch.

Beyond New Zealand?

Trade mark rights are territorial whereas the net has no boundaries. This means there is a potential for difficulties to arise.  You may have registered your brand in New Zealand but what about overseas?  Having a net presence means you are trading globally.  You therefore need to consider carefully the implications of your activities. 

If you are intending to actively solicit custom from other countries via your website, then it would be prudent to make checks to clear your trade mark for use in those countries where you will direct your e-retailing activities.  There is debate as to whether the presence of a trade mark on a website is ‘use’ for trade mark infringement.  A key consideration is whether the use on the net has produced a commercial effect in any particular country.  Such an effect can of course be obtained without any real effort on your part and this is why care needs to be taken.

At this stage consider whether you also wish to register your brand for retail services, if you have not done so already.  It is not uncommon for retailers to also sell goods marked with the same name you retail under.  If this is your situation, then register your trade mark for both goods and services. 

You should also consider registering your brand overseas in the important potential markets you have identified.

Having registered your brand, any reference in your website to your own trade mark should be clearly identified by using the ™ or ® symbols.

Avoiding a dispute

The most effective way to avoid a domain name dispute is to register your brand as a trade mark before securing the matching domain name.  You can rely on your trade mark rights to assert ownership in your domain name.  You will have an even better claim if you have been using your brand for a long time and have built up a reputation and goodwill in that name.  

Copyright

Setting up a website also creates other intellectual property rights.  Before work begins on your website, it is important to clarify with your website developer who will own any intellectual property rights created.  The agreement you reach should be documented.  It should also confirm that you are the owner of any copyright in the website content developed on your behalf.

Copyright exists automatically in the text, graphics, music, animation, film or video clips often featured on websites. So long as the content placed on the pages of your website is original, there is no problem. Alert others to your copyright claim in your website content by using the copyright notice ©.

If you use another person’s copyright material or trade mark in your website, you must have their permission to do so or risk infringing their rights.  Copyright licensing schemes exist in New Zealand and elsewhere which make it easy to get the necessary permissions.

Sponsored links

A growing trend on the net involves the use of sponsored links.  ‘Sponsored links’ is a practice by which businesses pay search engines to display links to their website, with the businesses choosing the key words they want to trigger their advertisement.  From a user’s perspective, sponsored links make easy viewing advertisements for products or services relating to the user’s search terms.  For the business, the aim is to direct more traffic to their websites.

However, the key words selected by businesses as part of keyword triggered advertising can, and has been, the trade marks of other businesses.  This has prompted those businesses to file complaints against the search engine operators that their practices amounted to trade mark infringement and false representation and several misappropriation and unfair competition claims.

Be careful which keywords you choose if you use sponsored links.

Other considerations
There are a host of other considerations that a retailer needs to be mindful of if selling on the net.

Some of these are briefly outlined below:

Be careful with comparative advertising

• The law surrounding your ability to compare your goods or services with those of your competitor by referring to their brand differs from country to country. 
• In New Zealand, the law states that comparative advertising does not infringe a registered trade mark unless the use is without ‘due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark’.  
• Even if there is no trade mark infringement, use of a competitors’ trade mark may be copyright infringement if the comparison relates to a trade mark which contains a graphic element.

Avoid claims of unfair or deceptive trade practices

• All claims made on your website about prices, stock availability, and incentives to buy must be accurate.

Advertising claims

• Be mindful of claims you make about your products or services and their benefits.  Not only must your claims be true, if you are making statements about performance or quality they should be able to be independently verified (if possible).
• Avoid using advertising that will create an image for your goods or services or business that cannot be backed up by facts.

The use of the net for selling is becoming a business imperative for many businesses. Think critically about what it is you need to do to ensure that your launch onto this fast paced and dynamic selling channel is smooth and hassle free.

An edited version of this article was published in NZRetail magazine December 2007

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  Corinne Blumsky

  Partner