In recent years we have seen more businesses finding innovative solutions to offer their customers exactly what they are looking for, whether that’s through a product customisation service or the use of artificial intelligence searches. Nike and Adidas are known for offering customers seemingly endless customisation options when it comes to their trainers. Levi's will be launching a customisation service in the US later this year that will allow customers to decide how distressed and what colour they would like their jeans to be. Amazon has also announced the launch of 'StyleSnap' which is a new AI-powered tool that helps users find clothes to buy. It works by allowing users to upload an image and StyleSnap will use machine learning to “match the look in the photo” and find similar items for sale on Amazon.com.
In providing such options, retail brands are clearly looking to increase sales but also create a closer bond between the brand and the customer. Customer demands are changing and new generations are likely to super-charge this particular change as the traditional retail model moves from 'supply' to 'demand-chain'. It is important however to consider the intellectual property and consumer rights implications when businesses try to give the customer 'exactly' what they want.
The standard position of intellectual property rights ownership is reversed when customers create their own design. If the customer's design resulted in the creation of any new intellectual property rights then (subject to any agreement to the contrary) the default position in English law would be that the customer would have some ownership in those new intellectual property rights. This applies to digital as well as physical products. For example if a business provides a platform that allows its customers to build a fully custom mobile app then any intellectual property rights in that app could be automatically owned by the customer to some extent. The main issue with customer owned or jointly owned intellectual property rights is that it restricts a business from openly exploiting that particular (customer designed) product. Brands need to think carefully about this and ensure that they build protections into the process.
It is important to also consider the risk that a customer designed product could infringe third party intellectual property rights. The level of risk would depend on the level of customisation options provided. In general, the greater the level of customisation then the greater the risk of third party intellectual property infringement. Similarly with AI-powered search technology there is an inherent risk of third party intellectual property infringement as the technology is ultimately trying to find clothing similar to that in the picture uploaded by the customer. If the technology can recognise and search for clothing with similar patters/intricate designs then naturally the risk of infringement is higher as compared to technology that only searches on basic design characteristics such as colour. Businesses can reduce this risk by having a screening process in place whereby orders are reviewed prior to being accepted. Again, adequate process design will be essential.
It is also worth noting that there is a new Directive on Contracts for the Sale of Goods which is likely to come into effect by the end of 2021 and will apply to sales made to consumers both online and in store. The new Directive will expand the customer's remedies/rights in relation to goods that fail to conform with the contract of sale, including a 2 year minimum guarantee period (from the time the consumer receives the product). Businesses should be aware therefore that when trying to offer the customer 'exactly' what they're looking for, the product has to be just that. Although difficult to predict, Brexit is unlikely to effect the coming into force of these stricter consumer rights. Despite the current uncertainty around Brexit, it is likely that the UK will adopt closely similar provisions to the Directive as it is difficult to envisage the UK having the political will (and time) to substantially derogate from the Directive.
Fieldfisher's Retail Team has a wealth of knowledge and experience of advising and supporting clients in the retail sector design and develop digital strategies and the application of consumer rights rules. If you would like to know more about this topic, please contact James Corlett, Bilal Ahmad or your usual contact in Fieldfisher's Brand Development Team.