The internet may not be completely lawless, but it does facilitate infringement of intellectual property laws on an unprecedented scale — and it’s not just teenagers downloading songs in their bedrooms who pose a problem. Businesses seeking to protect trademarks and patents are also facing huge challenges.

How do you stop infringement when it is occurring on such a huge scale? Some companies have gone after the intermediaries such as eBay, Facebook and internet service providers (ISPs), which provide the platform on which users can exchange goods and content so freely. In 2001, for instance, Rolex sued eBay’s German subsidiary for trademark infringement after it claimed the site was facilitating a trade in counterfeit watches. It lost. In 2004, Tiffany had more success, forcing eBay to remove counterfeit jewellery after it demonstrated that 73 per cent of the items sold on the site under the Tiffany mark were fake.

As the law stands, however, the middle men are generally immune from prosecution provided they remove infringing material from their sites as soon as they are notified of any potential infringement. This means the onus is on businesses to police their own intellectual property rights.

This sound like a sensible approach. It gives IP owners a quick and efficient mechanism for protecting their rights without placing burdensome restrictions on popular sites such as eBay. But there is a catch. IP owners keen to shut down and prevent copycatting of their products, brands and ideas are often unaware that asserting what they consider to be genuine rights may give rise to liability.

Skype hindered by lack of consistent regulation

There needs to be a clear legal framework in place if internet telephone operators are to flourish, says Richard Eccles

What Google can learn from history

Technology moves at a dizzying pace but the law catches up in the end, says Richard Kemp

Let your employees use Facebook — it's less risky than you think

Businesses should not allow legal risks to detract from the opportunities of web 2.0, says Mark Watts

It may seem surprising, but IP owners who request intermediaries remove "infringing" products or material from their sites can themselves be sued for an injunction and damages by the person or company they have accused. This is what is known as the “groundless threats” provisions.

The rationale is this: an accusation that a business has infringed IP rights may result in that business ceasing to stock and sell the allegedly infringing item without fully investigating the legal position and any defences it may have. The business as a result may lose revenue, while public allegations may damage its reputation in the market. The allegations may be made by a competitor or in bad faith; and even if they are made honestly they may have no legal basis. In the UK, the law on patents, trade marks and designs makes such allegations actionable.

Take eBay's Verified Rights Owner (VeRO) programme. Under VeRO, you can notify eBay, via an online form, that there is material on the auction site infringing your intellectual property rights, such as a design right or a patent. The auction site’s standard response is to remove the highlighted material without (understandably, for reasons of expediency) any investigation of the merits of the claim. This immediately deprives the seller of his point of sale. eBay is contractually entitled to do this, but what if the VeRO notification is unfounded and there is no infringement?

The alleged registered design right or patent may not have been granted. You may not actually own the right in question. Or there may just be no infringement.

The provisions apply even where the so-called threat is made to the intermediary and not to the actual seller of the items concerned, or if you have no intention of bringing legal action. Recently, an injunction was awarded in one case against a person who alleged through the VeRO programme infringement of a community design right. This person had candidly conceded that he had no intention of bringing proceedings; nonetheless the court decided there was a clear arguable threat.

Notification programmes such as VeRO and those operated by ISPs are therefore a double-edged sword: at first sight, they are useful tools for IP owners to have infringing material removed quickly and inexpensively from the internet. And certainly the groundless threats provisions help the system from being abused to the detriment of legitimate traders. But unsuspecting IP owners can find themselves on the receiving end of an injunction or damages claim.

This puts the UK out of line with other countries in Europe and elsewhere, where no such provisions apply, and reform is necessary. A robust and reliable regime for protection of intellectual property should allow all parties to be able to discuss their rights fully and frankly in order to avoid escalation to litigation. For the time being, IP owners should be cautious about notifying eBay or an ISP of alleged infringement.

Gill Grassie is a partner at Maclay, Murray and Spens in Edinburgh specialising in intellectual property and information technology

Explore Law

• Corporate Law

• Public Law

• Columnists

• Law Panel

• Student Law

• Law Reports

Times Recommends

• Iranian bank challenges EU sanctions
• Lord Falconer to join Gibson Dunn
• A Judge by name is new Lord Chief Justice