By Madison Boudreau
Madison Boudreau, CDC Fellow Spring 2023, pictured in the UMass Law Library
The rise of and development of e-commerce over the last nearly thirty years has completely revolutionized consumerism and shifted the retail industry from what it once was. The inception of the “digital marketplace” in the United States can be dated back as far as 1982 upon the launch of the Boston Computer Exchange, an online platform for the purchase and sale of used computers. However, it was not until the development and growth of sites like Amazon and eBay in the nineties that the online retail industry would truly begin to take shape. Despite the initial “burst” of the dot-com bubble in the early 2000s, the last two decades have shaped digital dominance worldwide—and retail is no exception. Between 2015 and 2019, the e-commerce share of total global retail sales experienced steady annual growth over the four-year period, rising from 7.4% to 13.6% during this time.
The COVID-19 pandemic sparked an increase in online retail engagement by necessity, which led the e-commerce share of total global retail sales to jump from 13.6% in 2019 to 18% in 2020. Between 2020 and 2022, Americans spent $1.7 trillion online, representing a 55% increase in digital spending compared to the two years preceding the pandemic. Further, in response to the personal and financial hardships that resulted during this period, there seemed to be a boom in e-commerce innovation. According to the U.S. Census Bureau’s Business Formation Statistics, there were more applications filed to form new businesses in 2021 (5.4 million) and 2022 (5.1 million) than any other year on record. The culmination of these circumstances has led to a fundamental shift in the consumerism paradigm as a whole.
In many respects, the e-commerce boom over the last three years in particular has streamlined small business ownership—particularly for retail businesses. In 2023, it is not uncommon for small retail businesses to operate exclusively online; many of whom operate exclusively as third-party sellers for websites like Amazon, Shopify, and Etsy. Further, the increased role of curated social media in consumer advertising provides an opportunity for these small retailers to build brand identity for little to no cost and with potential for exponential growth and limitless market reach. As a result, this new age of e-commerce has created the image that small business ownership has never been easier. While there may be some truth to this façade, it is equally true with the rise of modern digital retail comes its own unique set of risks and challenges—namely in the wheelhouse of intellectual property.
Trademark registration has long been recognized as an invaluable tool for distinguishing brands from one another. The protection offered to trademarked symbols or words is intended to provide notice of claim to other businesses, a legal presumption of ownership, and the exclusive right to use the trademark. However, characteristics of the modern global online marketplace have revealed deficiencies in trademark law as it stands today. In short, the oversaturation of the market has made it difficult for small business owners to navigate the possible risks, rights, and remedies under the current trademark framework.
First, the determination of eligibility of a certain mark for trademark protectio
n is a lengthy process that can take an average of 12-18 months for finalization and legal recognition. Further, the sheer size of the online marketplace has made it more difficult than ever for small business owners to stay afoot of marks in use by other brands. As a result, e-commerce retailers may unknowingly lack proper protection of their brand before the trademark registration process has been completed or may expose themselves to liability by using symbols or words already registered and protected.
Additionally, the third-party sale of retail through websites like Amazon, eBay, and Etsy raises new questions surrounding the contributory liability of these online marketplaces for trademark infringement. This concept of “secondary liability” has been judicially created and has continued to evolve alongside this new age of e-commerce. In Tiffany Inc. v. eBay, Inc., the Second Circuit established that trademark owners have the burden of policing their trademarks in online marketplace websites, where online marketplace website owners provide an adequate process to remove potentially infringing listings once reported. More than a decade later, courts remain undecided on the proper framework for these cases.
While the impact of the post-pandemic digital age on business ownership and structure has provided increased accessibility for people to start and run their own enterprises, the new legal risks related to brand identity this landscape has fostered should not be understated. As the consumerism paradigm continues to shift throughout this time, it is of utmost importance to remain mindful of these new considerations to adequately advise small business owners for success in the new age of e-commerce.