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Online marketplaces are digital platforms that facilitate transactions between customers and third parties. A recent case involving media company Pokemon and online artwork marketplace Redbubble showed that Australian marketplaces might face legal ramifications if the parties that use their platform break intellectual property (IP) laws. Therefore, if you run an online marketplace, it is important to understand your legal obligations to prevent illegal activity. This article explains these responsibilities and outlines tips to prevent your online marketplace from getting into legal trouble.

What is an Online Marketplace? 

Several different kinds of online markets facilitate shopping from multiple sources. Some popular global marketplaces where you can buy a variety of different products include:

  • eBay;
  • Alibaba; and
  • Amazon.

However, there are other marketplaces which sell user-submitted artwork and goods online. Some of these include:

  • Redbubble; and
  • Etsy.

Legal Issues for an Online Marketplace

If vendors or third parties conduct illegal activities in your online marketplace, your business may become vulnerable to legal consequences. Therefore, as a marketplace, it is important that you do not engage in business processes that could promote infringement of the intellectual property (IP) rights of third parties.

It is important to lessen these risks by having clear terms and conditions that users must agree to if they wish to sell their products on your website. Furthermore, it is important to have a ‘notice and take down policy’. Under this policy, you can subsequently remove any content that infringes on the rights of others.

For example, someone may try to sell content that features the trade mark of another business on your platform. If so, a notice and take down policy would allow you to take it off your online platform.

Copyright Obligations

Copyright law awards automatic protection to original works from being reproduced by unauthorised parties. However, these original works must be written down or recorded and can be:

  • literary;
  • dramatic;
  • musical; or
  • artistic.

You may come into some issues if you run an online marketplace where users can directly upload content for sale. For instance, one of these problems is that people may try to sell material that infringes on the copyright of others. In the case of Redbubble, their business allowed for and facilitated the communication of infringing works and trade marks via a tagging system.

Measures to Avoid Infringing Copyright

You can minimise the risk of your marketplace infringing on the copyright of others by requiring users to agree to terms of service before uploading their content. Your terms of service agreement should explicitly acknowledge that users cannot upload copyrighted material to the marketplace. Furthermore, the agreement should hold the other party accountable if they breach IP laws or commit any other kind of legal activity. It should also clearly state that your business is not legally responsible for any of these breaches by third parties.

If your marketplace has terms and conditions containing a takedown or penalty system, this may not be enough to show your legal compliance with copyright laws. Instead, you must be actively removing infringing content. You must also block users who consistently infringe upon the IP rights of others. In the case of Redbubble, they were failing to do this.

Consumer Law Obligations

All businesses must not engage in misleading and deceptive conduct by deceiving consumers. In the case at hand, Redbubble was selling Pokemon themed products that users had created. The court found that Redbubble had knowledge of the pricing of authorised Pokemon products and comparably priced their user-created products. In addition, Redbubble did not make any disclaimers showing that they were not affiliated with Pokemon.

Because of Pokemon’s reputation within Australia, an ordinary consumer would likely believe that Redbubble’s products were authorised by Pokemon. The court found that Redbubble had misled and deceived consumers.

Therefore, it is important that none of the content that your online marketplace is selling could create a false impression in the minds of your consumers. Ask yourself, is it clear who has created your products? Have any of the products infringed upon copyrighted material? If you believe that a product may deceive consumers, you should fix the issue or take down the material immediately.

Key Takeaways

If you run an online marketplace, you may be vulnerable to legal risks if your vendors or third parties breach the rights of others. Therefore, it is important that you;

  • have clear terms and conditions for users to agree to;
  • have a notify and take down policy where you can remove content that infringes upon the rights of others; and 
  • do not engage in business processes that could promote the infringement of others’ IP rights.

If you run an online marketplace and would like to discuss how to mitigate the risk of infringing the rights of third parties, contact LegalVison’s IT lawyers on 1300 544 755 or fill out the form on this page.

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