Understanding Intellectual Property Rights in Dropshipping

Imagine selling goods or items you don’t actually produce yourself and stock in your own warehouse. But then, you’re able to make lucrative profits out of them. That’s the beauty of dropshipping! 

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For the uninitiated, dropshipping is an order fulfilment model where you sell products online and process customer orders. However, you aren’t responsible for storing, picking and packing, as well as delivering the goods or items to the customers’ doorsteps. Instead, a third-party service provider does the job for you! 

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As an online seller, think of yourself as a middleman between companies with products and the buying consumers. However, here’s one problem: What if some of these businesses accuse you of owning or copying their goods or items? For all you know, you might be held legally liable!

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In this article, we’ll share with you the importance of intellectual property (IP) rights in dropshipping. As an online seller, learn how to avoid committing copyright and trademark issues with this business model.

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Ready? Read on.

How To Avoid Copyright and Trademark Issues in Dropshipping

First things first, who says dropshipping is dead? The statistics from Grand View Research prove otherwise:

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Its global market is projected to grow from $225.99 billion in 2022 to $1,253.79 billion by 2030. It could achieve a compound annual growth rate (CAGR) of 23.4% during the forecasted period.

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The dropshipping market growth is due to an increasing preference for online shopping and a growing inclination toward e-commerce businesses among the consumers. That is not to mention the proliferation of technology, like the smartphones used by the vast majority of consumers for online purchases.

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However, the dropshipping industry also has its fair share of negative consequences, which include copyright and trademark issues. 

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As a dropshipper, IP rights protection should be a part of your risk management and financial planning to avoid the following:

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• Copyright infringement: A copyright legally protects unique and tangible literary and artistic works like songs, books, and paintings produced by an individual. In the context of dropshipping, a copyright violation happens when you reproduce original products, claim them as your own, and sell them in the market.

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• Trademark infringement: Trademarks legally protect the logos, brand names, slogans, designs, and other visual elements of companies that identify and set them apart from competitors. In dropshipping, a trademark violation happens when you copy such identifiers and sell products with these trademarks to your customers.

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Understand that copyright and trademark infringements in dropshipping have legal consequences, from hefty fines to actual imprisonments, depending on the weight of the offense. That’s why you should never commit these violations at all costs!

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That said, here’s how to avoid committing them:

1. Perform product research at the onset

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While the dropshipping segment has grown and expanded, its market has become somehow saturated. This means various businesses across different industries sell goods or items via e-commerce platforms. Therefore, you must choose the right products to sell online for your dropshipping business.

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Jesse Galanis, Content Marketer at Furm, suggests doing thorough product research for your dropshipping business. “This is to guarantee that the goods or items you plan to sell are legitimate and that you don’t infringe on copyrights and trademarks. That last thing you want is to put products out in the e-commerce marketplace without knowing you’ve violated IP rights.”

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2. Partner with reliable suppliers for your product sourcing

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There’s a line drawn between searching for legitimate products and partnering with trustworthy suppliers. To ensure product quality and avoid legal issues, you better find reliable suppliers. That said, product sourcing is key to achieving a successful dropshipping business!

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Linda Shaffer, Chief People Operations Officer at Checkr, recommends background checking for potential dropshipping suppliers. “You want to ensure the suppliers you’ll be working with are always on top of legal and regulatory compliance. You also want to make sure they don’t violate copyrights and trademarks, lest you face legal implications as well.”

3. Seek permission for the white labeling of your products

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Some dropshippers sell other businesses’ goods or items via e-commerce platforms. Others promote officially licensed products after seeking permission from IP owners to use their branding. So, whether you’re starting a dropshipping business or looking to innovate your products, consider obtaining authorization for white labelling.

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First, you should conduct digital identity verification and perform a trademark search to see if particular goods or items contain copyrights and trademarks. If you believe in these products and want to sell them for profit, seek permission for white labeling. At the end of the day, you don’t want to get caught in a legal circus that can cost you wasted money, time, and energy!

4. Include IP rights in all your contract agreements

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When it comes to business, you should put everything in writing as they say. This critical step applies to dropshipping, especially given that you are partnering with suppliers for products to sell. But while at it, you should add intellectual property rights provisions in all your contracts.

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Start by outlining the terms and conditions concerning IP rights in all your legal paperwork. Likewise, make sure to define copyrights and trademarks in specific terms. If possible, have a smart contract audit in place to ensure you’re on top of legal adherence for your dropshipping business. 

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5. Avoid using copyrighted pieces of content

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It’s imperative to avoid using copyrighted text, images, or clips in your product listings, product descriptions, and even marketing copies. Instead, you should utilize royalty-free and licensed pieces of content for your dropshipping business. Again, heed our advice: Never use copyrighted content and trademarks at all costs unless authorized! 

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Nathan Smith, CCIM of Austin Tenant Advisors, highlights the importance of IP rights. “While the trademarks represent what a business is, the copyrights protect the original products they create. As a dropshipper, you want to respect these rights even if you want to sell their goods or items. Don’t worry, as getting authorization is key to making the selling opportunities plausible!”

6. Review and track your product listings regularly

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It’s easy to see aspiring dropshippers check IP rights before partnering with suppliers and selling products. However, they tend to neglect the importance of checking copyrights and trademarks in the long run. They end up getting caught in alarming legal situations when they unknowingly commit IP rights violations.

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Eric Mills, Owner of Lightning Card Collection, suggests reexamining and monitoring product listings regularly. “As an online seller, you better pay attention to all the products of your dropshipping business. Check to see if they are all legitimate and that you sell them within the bounds of the law. As such, take ample time to review and track your product listings on a regular basis.”

7. Consult legal experts for guaranteed IP rights protection

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There are several reasons dropshipping businesses fail. These include not vetting suppliers, marketing online stores, prioritizing customers, performing due diligence, and more. But one thing that can be a recipe for business disaster in dropshipping is not complying with the laws, such as IP rights protection.

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Andrew Pierce, CEO at LLC Attorney, recommends consulting legal professionals for dropshipping business. “Not only will they assist you in setting up this business model, but they will also help you stay on top of your legal and regulatory compliance. For instance, they can aid in complying with the Digital Millennium Copyright Act (DMCA) by addressing copyright infringement claims and taking down infringing content pieces.”

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Promoting IP Rights for Dropshipping Businesses

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In the world of e-commerce, there’s a need to promote intellectual property rights in dropshipping. However, it all starts with the online sellers themselves, who have ventured into this business model and worked with different suppliers.

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That said, understand the value of IP rights and avoid committing legal infringements. Take the crucial steps outlined above, from staying on top of your product sourcing down to consulting legal experts.

By doing so, you can prevent and avoid copyright and trademark issues. Ultimately, you’ll make lucrative money out of your dropshipping business—in a legally responsible way!