Guatemala | Intellectual Property Strategies to Boost E-commerce Success in the Fashion Industry

Ivón Hernández, partner at ARIAS Guatemala and an expert in intellectual property matters, shares the following article on how, in a world where fashion moves at the speed of a click, the industry faces significant challenges, including the rise of counterfeit products and the ongoing infringement of intellectual property rights.

One of the characteristics of the fashion industry is that it has all kinds of people and companies, from artisans, micro, small and medium-sized enterprises (MSMEs), to multinationals. Each one is a piece of the machinery that moves the global fashion market daily, which is currently dominated by social networks such as Instagram, Tik Tok and Facebook, among others, in addition to more traditional media.

Previously, it was much more difficult for MSMEs to compete with large companies, but it was also difficult for large companies to have a presence in several countries, due to the investment involved. However, some of these difficulties have been overcome thanks to E-commerce or electronic commerce.

E-commerce, in its simplest definition, is the purchase and sale of products or services through the Internet, social networks and mobile applications. Among the products that are most sold through this medium are a variety of fashion items, including clothing, shoes, accessories, for women, men, children and pets, among other products.

The fashion industry is also characterized by the creativity put into the products that are sold, which causes an attachment in consumers to certain designers, brands or companies. Therefore, as happens in other industries, in fashion, well-managed Intellectual Property (IP) assets can also be monetized for the benefit of their owners. The first step is to determine what type of assets the company can have, such as brands, industrial designs, copyright, software, etc., and the second step is to take the necessary measures to protect each asset according to its nature, for example, if it is a brand or industrial design, that they are registered or if it is a copyright, that there is the corresponding support to prove the right.

After intellectual property assets have been identified and legally protected, right holders can plan strategies to monetize those assets, such as through franchising and licensing.

Franchising is a type of contract in which, according to the Guatemalan Franchise Association, "a business owner or manager (the franchisor) allows someone to market products or services using his name, trademark, and most importantly, his prescribed business format. In exchange for the use of the name and system, the franchisee – as that person or organization is called – pays an entry or franchise fee and, usually, an ongoing royalty. The franchisee also assumes the costs of starting up the franchised business.”1

On the other hand, the license of use is also a contract in which the use of one or more brands is authorized by its owner, so that a third party can use and market the brands in a territory, in exchange for a financial benefit, but unlike the franchise contract, in the license of use contract the beneficiary of the license does not necessarily must have the same format and business system as the owner of the brands.

In E-commerce, franchises and licenses play a very important role, since they give fashion brand owners the opportunity to do business internationally through digital platforms, but at the same time they can establish alliances with local companies through this type of contract to have a local presence without having to open their own stores. These contracts also benefit local designers and companies because they can have the opportunity to offer their customers fashion products from international brands, which are already positioned in the market, but they can also create alliances to sell their products abroad without having to invest in having physical points of sale abroad.

In both franchise and license business models, in addition to IP aspects, other factors must also be considered, such as taxes, human capital and even in some cases environmental issues, among others. All these elements are part of the multi-channel marketing strategies that are currently necessary in the market, where consumers of different generations coexist with diverse consumption habits, promoting brand loyalty.

Additionally, it is also important to mention that the fashion industry is being affected by emerging technologies such as the metaverse that are giving rise to new businesses. The metaverse, understood in simple words as a virtual space shared by multiple users known as avatars, in which digital objects can be created, marketed, and exchanged, has revolutionized the fashion industry because it has almost forced fashion brands to get involved in these technologies to prevent unauthorized third parties from appropriating distinctive signs without authorization from their owners.

However, in the world of E-commerce, not all is good news, the technological facilities that it offers have also made it more accessible for both infringers and consumers of infringing products to buy and sell products that infringe IP rights. We can often see on the Internet and social networks the marketing of products that at first glance or because of their price make us doubt that they are legitimate in origin, and the fashion industry is precisely one of the most affected. But, in response to the increase in the marketing of counterfeit products on the Internet and social networks, IP rights holders must have surveillance systems on the Internet and social networks, ranging from constantly checking the different platforms personally, to hiring computer systems to do so in a more systematic way, all depending on the needs of the person or company. It is important to consider that most platforms have procedures to report publications of counterfeit products, which are known as "notice and take down”, which have had favorable results, but it is important to clarify that the use of these procedures does not replace taking legal measures through the current legislation of each country since they are only alternatives that E-commerce itself provides to its users.

Regarding the issue of IP rights violations in E-commerce, it is also extremely important to mention that with the rise of Artificial Intelligence (AI) systems, there are now surveillance tools that allow action against offenders in a much more expeditious manner. So, AI has other functions besides helping to segment and personalize consumer preferences, in addition to other functions for which AI is being developed.

According to Sellers Commerce website, there are currently 26,6 million E-commerce sites worldwide, which represents an increase of 3.83% compared to 2023. This means that between 2023 and 2024, 2,685 E-commerce websites were created every day, and the statistics for 2024 and 2025 will surely be on the rise. These figures help us to demonstrate the importance of E-commerce worldwide, with the fashion industry being one of the most involved, so it is advisable for companies to maintain solid commercial and legal strategies.2 

At ARIAS we have a team of highly trained professionals to advise you on issues related to Intellectual Property and E-commerce. Do not hesitate to contact us for more information.