Protecting brands in cyberspace and e-commerce transactions

Filipinos have largely shifted to e-commerce over the past five years, driven by the widespread adoption of contactless transactions following the pandemic. Philippine e-commerce has grown exponentially into a $25-billion industry, with the average Filipino spending P16,000 a year through e-commerce.¹

While online shopping is now widely preferred due to its convenience and affordability, it also exposes consumers to instances of fraud — ranging from fake listings and counterfeit goods to fake seller accounts. As a result, the brand reputation of goods offered for sale may suffer, regardless of the manufacturer’s involvement in the transaction. In this regard, how can consumers and brands protect themselves against fraudulent internet transactions, and what role does the e-commerce platform play in regulating such fraud?

Under the Intellectual Property Code, the owner of a registered trademark may take action against, and recover damages from, a person who uses any reproduction or imitation of its mark in commerce which is likely to cause confusion or deception. Persons found guilty of such acts are also subject to criminal penalties.² Thus, brands may seek redress against infringing online sellers for the latter’s unauthorized use of their marks in e-commerce transactions. However, since the concept of secondary or contributory infringement does not apply to Philippine trademark law, brands cannot hold e-commerce platforms liable for hosting or facilitating the said transactions.

Meanwhile, consumers who are prejudiced by counterfeit goods or misleading advertisements of unauthorized sellers may seek redress under the Consumer Protection Act. Under the said law, a producer, manufacturer, supplier, or seller in a consumer transaction who commits deceptive sales acts or practices may be held civilly and criminally liable for such conduct.³ However, the Consumer Protection Act makes no mention of the liability of e-commerce platforms in online transactions.

The Internet Transactions Act of 2023 (ITA) addresses this gap in legislation to protect both brands and online consumers from fraudulent e-commerce transactions. The ITA defines the persons engaging in electronic commerce as follows:

1. Digital Platforms – ICT-enabled mechanisms that connect and integrate producers and users in online environments where goods and services are requested, developed, and sold;

2. E-marketplaces – digital platforms whose business is to connect online consumers with online merchants, facilitate the shipment of goods or provide logistics services and post-purchase support within such platforms, and otherwise retain oversight over the consummation of the transaction;

3. E-retailer – a person selling goods or services directly to online consumers through its own website, webpage, or application; and,

4. Online Merchant – a person selling goods or services to online consumers through an e-marketplace or third-party digital platform.⁴

Under the ITA, the e-retailer or online merchant is primarily liable to the online consumer for damages arising from internet transactions.⁵ The digital platform or e-marketplace may be held subsidiarily liable with the e-retailer or online merchant if it fails, after notice, to act expeditiously in removing or disabling access to goods or services that infringe on another’s intellectual property rights, among others.⁶

The subsidiary liability of digital platforms or e-marketplaces, however, is limited only to the extent of damages suffered by the online consumer as a direct result of the transaction.⁷ Hence, it appears that insofar as trademark owners are concerned, the remedies available against digital platforms or e-marketplaces under the ITA are limited to the removal of infringing material on their platforms. On the other hand, e-retailers or online merchants may be held liable by trademark owners under the provisions of the Intellectual Property Code, or by the defrauded consumer under the provisions of the ITA.

These provisions also extend to cross-border transactions. If a person engaging in e-commerce avails of the Philippine market to the extent of establishing “minimum contacts” in the country, then they shall be subject to applicable Philippine laws and regulations.⁸ While the ITA does not define the term “minimum contacts,” the concept has been applied in Philippine jurisprudence through test factors such as the nationality and intended governing law of the parties, the location of the goods, and the place of performance of the transaction.⁹

Ultimately, the ITA seeks to balance consumer protection and brand integrity in laying out the responsibilities of e-commerce platforms in fostering a safer online marketplace. n

¹PaymentsCMI. (November 2024). Asia E-commerce Data Portrait 2024–2027. Americas Market Intelligence. Retrieved from https://americasmi.com/pdfs_landings/PCMI_Asia_Ecommerce_Data_Portrait.pdf

²Section 155 in relation to Section 170, Intellectual Property Code of the Philippines.

³Article 60 in relation to Article 50 of the Consumer Protection Act.

⁴Section 4, Internet Transactions Act of 2023.

⁵Section 25, Internet Transactions Act of 2023.

⁶Section 26, Internet Transactions Act of 2023.

⁷Section 40, Implementing Rules and Regulations (IRR) of Internet Transactions Act of 2023.

⁸Section 5, Internet Transactions Act of 2023.

⁹Esther Victoria Alcala Vda. de Alcañeses v. Jose S. Alcañeses, G.R. No. 187847, June 30, 2021 [Per J. Leonen, Third Division], citing Saudi Arabian Airlines v. Court of Appeals, 358 Phil. 105, 123, Oct. 8, 1998 [Per J. Quisumbing, First Division].

This article is for general informational and educational purposes only and not offered as, and does not constitute, legal advice or legal opinion.

Atty. Ninna Joyce P. Delantar is an associate of the Intellectual Property Department of Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).

npdelantar@accralaw.com

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