What Every High Risk Merchant Should Know About Intellectual Property Rights

Intellectual Property Rights: An Age-Old Trouble

Legal battles are not uncommon. Throughout the history of mankind, people have fought for their intellectual property rights and won and lost and paid for damages. In fact, its history dates back to the medieval ages when Gutenberg has invented the printing press. During this time, social information is distributed exclusively by the scribes. Gutenberg has opened a world of possibility when it comes to public distribution of text.

As mass reproduction of books could not be curtailed, the British government during that time (circa 1500s) sought solace with regulating it through license. Eventually the writing and printing of books became a liability for the authors whose names were bound on books as copyright. The true reason is to control the content of material being published, not to give credit to the author. The Licensing Act became obsolete and it was replaced by the Statute of Anne, which turned the tables for the authors. Authors were then given the exclusive right to publish under their own copyrights for up to 14 years and renew it. It has become the precursor of modern intellectual property ownership that we know today.

What You Can and Cannot Do

Now, in the world of online merchants, owning intellectual property rights is considered one of the most troublesome issues. Most local merchant account providers would not admit violators of intellectual copyright to own even a low risk merchant account. The reason is obvious enough. Selling digital items may cause infringement on merchants' intellectual property. Digital items fall into high risk merchant account category as the products are intangible and are likely targets of fraud. This is the reason why intellectual property right ownership is something online merchants should never take for granted.

The good news is that as long as your products and services are registered as copyright, trademark, or patent, you can legally sue anyone who infringes on your intellectual property rights. This can be done under certain provisions, of course. However, it may not be 100% successful. As infringement of digital property cannot be avoided, many so-called "violators" may still get away with it. Consider the following:

1. You cannot sue if the other party used it for non-profit or educational purposes.

2. You cannot sue if the copyrighted item you sell doesn't fall on the level of worthiness. Some items are more "copyrightable" than the others.

3. You cannot sue if the other party merely used an excerpt to illuminate a matter (if it was text, e.g. e-book), or simply did not use the entire item for their commercial purpose.

4. You cannot sue if the copyrighted item posed a neutral effect on the market in general.

What do these all mean for the high risk merchant? Simple. You can still sell digital items, have them copyrighted, and sue if certain provisions have been violated in your intellectual property rights contract. But the key is to prevent rather than find a cure. It would be distressing to pay for lawyers if you soon find out that the website who copied your Biological Warfare e-book only took an excerpt and used it to teach junior high school students. Preventing the infringement in the end is more cost-effective than going through court sessions and paying exacting attorney fees.

Fixing Before It Breaks

Prevention will require you to go through several avenues, depending on the product or services you sell. High risk merchants should be aware that digital items have special ways to be protected. E-books have to be registered for a copyright. Instead of pushing for sales on downloadable material, it would always be better to ship them via CDs. It then becomes less likely for fraud to happen.

Brand names have to be registered for trademark rights. If you own an imaging company that sells stock photos, it would be wise to put watermark seals when you publish them on the web. When other websites use your photos by the bulk and post them without your permission, you can legally sue (as long as you have registered for the trademark rights).

Music and videos have to be registered for copyrights as well. Tangible products such as a new adult toy with unique features must be registered under a patent right. Adult products and pharmaceuticals always fall under the high risk category. Fanatic high risk merchants may even employ a commercial anti-copycatting and security software.

The High Risk Merchant's Hottest Guide on Selling Digital Items

Digital Item: What is it?

They say experience is priceless but in the age of the Internet, even experience can be sold online. In fact, if you can sell digital text in the form of theses, e-books, and articles, digital images in the form of digital photos, movies, and videos, digital sounds in the form of downloadable mp3 and other digital content such as blueprints for building designs and presentations, you are essentially selling a digital item. Which is to say the least, a big market demand these days. A lot of digital sellers may start small with a few items on the catalog and grow into a huge company selling hundreds of items. They evolve to finally adopt a processing system with the help of a high risk merchant account provider.

High Rewards, High Risks?

A high risk merchant account provider? You ask. You heard it right. Selling digital items is not exactly the type of online business that regular merchant account providers approve of. There is no catch to it. Digital items are considered high risk items since there is a high incidence of hacking and fraud involved. Also, the biggest problem of most digital sellers is that they are unable to protect their intellectual property rights and thus lose their sales by copycatting.

I'm hitting the nail straight on the head. Selling digital items has such a high incidence of fraud and chargebacks that digital sellers have come up with various ways to protect themselves from these. For example, content would encoded in .pdf format as well as watermarks in order to protect themselves from copyright infringement. More advanced methods include using secure encryption systems.

Dealing with chargebacks is harder. Unless digital sellers have a way of tracing and verifying the transaction, customers will see loopholes for incurring chargebacks against them. They can merely download the product and call for chargebacks saying they did not download it. The best defense for this is to have the product shipped in tangible version such as CDs. Otherwise, create a contract that binds the customer into non-refundable, non-returnable product agreement.

Luckily, the rewards of selling items online is enormous. Not only because you have the whole internet-using world as your client base, but because you are freed from extra costs of shipping and setup that brick-and-mortar and brick-and-click stores have to pay for. Now, I don't have to convince high risk merchants of this idea, they already know and are quite aware of the benefits. This includes the fact that if you own an offshore merchant account, you enjoy such a high tax reduction that international banks bestow.

Also, if you have a good reputation for coming up with original content and have good marketing skills involving social media, there is even a greater potential to earn money. Most digital content sellers begin with free samples of their product and eventually grow into a profitable digital company. The trick is to sell consumer-oriented items that are of practical use to customers. When the latter can get access to your digital products (unlike in bookstores or record bars), there is more potential for increased sales.

Where and How to Sell your Digital Items?

There are several avenues to selling digital items. You can put up your products on eBay, register in a community mall where you own your customized storefront, or even build your own online store with the help of some programming and credit card processor (may or may not be affiliated with high risk merchant account provider).

Each avenue has its advantages and pitfalls. For example, eBay charges a high commission for certain products posted on certain period of time in the auction site. However, there is a high percentage of items getting sold since eBay is the world's biggest marketplace. The same happens with community malls but you have more freedom to customize your storefront and take advantage of more features that these online public markets provide.

For merchants selling digital items in bulk, it's best to create your own website where you can put up a limitless number of products and services. You will need an efficient shopping cart and a user-friendly online catalog displaying products, product descriptions, prices, and even customer reviews. You will also need a reliable credit card processor that can verify transactions in real time, fast. Above all, if you are a startup, applying for a high risk merchant account that will handle your transactions depending on their terms of processing is an excellent way to get your business running in no time. Only when you have established yourself as a digital seller of good profit and credit rating will you be able to own your independent merchant account. By then you can own your own credit card processing system and handle all your business processes from sales tracking to building your own affiliate program at your own pace.