Picture this: your product goes viral, orders triple overnight, and then you get a cease and desist. Or worse, your AI generated logo looks a lot like someone else’s trademark. Welcome to the new IP Wild West. E-commerce sellers, creators using AI, and anyone working with overseas suppliers are on the front lines. Intellectual property is now both your greatest asset and your biggest legal exposure.
This post breaks down the principal IP risks you will see today. Each section is practical and packed with examples, small case studies, and clear next steps that small and mid-size businesses can take right away. We also explain how having experienced counsel at your side can turn an existential threat into a manageable commercial outcome.
Read this if you sell online, use AI tools for content or imagery, import products, or license creative work. If you already received a cease and desist, do not ignore it. Get help immediately.
1. AI generated content and new copyright landmines
AI tools can produce remarkable content quickly. That speed is also the source of the risk. Most widely used AI models are trained on huge datasets pulled from the web. Those datasets often contain copyrighted writing, images, music, and code. When the model generates content, the result can be substantially similar to copyrighted works the model saw during training. The law on exactly how training and output interact is still developing, but courts and claimants are already active.
Real world example. A client of ours used an AI tool to draft blog posts. A competitor sent a nasty cease and desist alleging substantial similarity to material on its site. Our investigation showed the AI output included turns of phrase and structuring that mirrored the competitor’s articles. The competitor argued the AI effectively regurgitated its content. We negotiated and reworked the posts, but it was a costly distraction that could have been avoided with safer practices.
Practical risks you face with AI output
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Copyright claims for text, images, audio, and code. Even if you did not copy directly, similarity can be actionable.
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Trademark risk when logos, names, or taglines are generated that resemble existing marks.
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Trade secret risk where internal confidential inputs are exposed in a way that undermines exclusivity.
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Reputation and takedown risk if platforms receive DMCA notices or brand owner complaints.
What you can do right now
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Use licensed tools. Prefer AI providers that explicitly state they trained on licensed or proprietary data and that grant clear usage rights. Adobe, for example, advertises different rights for content created in its ecosystem. Read the terms.
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Human review and clearance. Treat AI output as a first draft. Run similarity checks and edit for uniqueness. Use plagiarism and image-similarity scanning tools before publishing.
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Register important works. For content and creative works that matter to your business, register copyrights and trademarks early. Registration creates statutory remedies and strengthens your position.
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Build contract clauses with vendors and freelancers that require warranties of originality and indemnities for IP infringement. Get those promises in writing.
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Keep records. Document what prompts you used, what editing you performed, and which AI tool produced the output. That information may matter in a dispute.
Bottom line. AI is a productivity multiplier, but you must adopt workflows that minimize legal exposure. Don’t assume “generated by AI” means risk-free. Be deliberate about provider choice, human oversight, and clearance.
2. You can be both the victim and the violator: supply chain IP risk
Small companies often source products from overseas manufacturers or resellers. That convenience hides a powerful risk: you may unknowingly distribute infringing goods. Many sellers assume the supplier vetted the designs and licenses. That assumption is dangerous.
Case study. A small hardware brand bought a line of trendy phone accessories from a Chinese supplier. The supplier marketed the items as free to resell. Months later the buyer received demands from a major international brand claiming patents and design rights. The small buyer discovered it had sold products that infringed U.S. patents. The supplier denied liability and refused meaningful indemnification. The buyer faced potential recall, lost sales, and legal exposure.
Why this happens
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Suppliers may rebrand or resell third party designs without disclosing third party rights.
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Some suppliers manufacture near-copies of patented or trademarked items and market them to resellers as safe.
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Contractual protections are weak or absent. Many transactions begin as emails or sample approvals, not fully negotiated agreements.
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Cross-border enforcement is difficult. Even if you have contractual remedies, collecting on them abroad is costly.
How to protect your business
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Require IP warranties and indemnities. Make suppliers warrant that products do not infringe third party rights and that they will indemnify you for IP claims. Insist on a clear scope and financial cap.
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Oblige suppliers to provide provenance documentation: copies of design registrations, licenses, or assignments related to the items you buy.
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Add audits and quality controls. Include the right to audit supplier design sources and manufacturing records.
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Limit exclusivity and distribution until you complete rights clearance. Avoid heavy commitments until you confirm IP cleanliness.
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Purchase insurance. Look for product liability and intellectual property insurance policies that can help cover defense costs and limited settlements.
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Vet your suppliers. If possible, work with suppliers recommended by trustworthy industry partners or with verifiable reputations.
Contract clauses that matter
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Representations that the supplier owns or is licensed to grant IP rights.
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Indemnity for claims, and payment of defense costs.
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Choice of law and dispute resolution provisions specifying accessible forums and mechanisms.
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Termination rights if an IP claim arises.
The takeaway. When you outsource production, ownership of the final product does not equal freedom to sell it. Taking basic legal steps before scaling can prevent catastrophic exposure after you go viral.
3. Fan merch, counterfeits, and statutory exposure
Selling fan merch can feel like low-risk commerce. Fans love T-shirts, mugs, and posters with artist names and images. But using famous names, logos, or likenesses without permission can be treated as counterfeit sales. Statutory damages in trademark laws and counterfeit statutes can be severe.
Concrete example. One of our clients sold T-shirts featuring the names of popular musicians. They believed using a name was harmless and that the marketplace tolerance was high. A rights holder sued, initially seeking millions in damages. After negotiation the case settled for a fraction of the initial demand, but the settlement included a six-figure payout and a long-term compliance program. The seller lost substantial profit and had to overhaul supply and IP processes.
What to watch for
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Names, stage names, and likenesses can be protected as trademarks or as rights of publicity. Unauthorized commercial use invites claims.
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Merchandise described as “inspired by” often does not avoid liability if the use confuses consumers or appears to be authorized.
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Online marketplaces are aggressive in policing infringing listings. A takedown can shut your revenue stream in hours.
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Customs enforcement is active. Brand owners record their marks with customs agencies. Shipments of counterfeit goods can be detained and destroyed.
Risk-mitigation checklist
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License first. Get written permission or licenses from rights holders before using their names or images.
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Use disclaimers with caution. Disclaimers do not negate confusion or offset unlawful use.
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Implement pre-sale clearance workflows. Vet designs and confirm permissions before uploading listings.
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Track supply chain compliance. Ensure manufacturers and suppliers have licenses and do not source artwork from third parties without rights.
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Prepare a DMCA and takedown response plan. Know the marketplace policies and how to respond to notices.
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Consider settlements strategically. If you receive a demand, gather facts, check seller history of the claimant, and seek counsel before responding to aggressive demands. Many claims can be resolved for lower sums rather than risking an expensive judgment.
Regulatory reality. Statutory remedies vary by jurisdiction. In the United States, some trademark or counterfeit statutes can expose infringers to millions in statutory damages plus attorney’s fees, particularly for willful infractions.
The practical lesson. Assume fan-related merchandise requires permission. The economics of a sale and an initial profit are not worth the risk of a crippling claim. When in doubt, obtain a license or avoid the design.
4. Famous marks, dilution, NFTs, and the fashion knockoff economy
When a mark is “famous,” it gets special protection. Famous brands can claim dilution, even where there is no confusion about source. That legal doctrine played a central role in the Metabirkins case. The creator sold NFTs that evoked Hermes Birkin bags. Courts found the use diluted Hermes’ famous mark, and damages followed.
Why famous marks matter
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Famous marks get wider protection against uses that blur distinctiveness or tarnish reputation.
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Artistic expression defenses are harder to win against a truly famous mark when the commercial element is strong.
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The NFT context raised novel issues: is a digital collectible commerce or art? Courts have increasingly treated high-volume, marketed NFTs as commercial uses that require permission.
Fashion and the knockoff economy
Fashion presents a paradox. In many jurisdictions the actual garment shape or silhouette is difficult to protect under copyright. However, logos, distinctive patterns, and certain prints are protectable. Fast fashion retailers often iterate on runway looks, sometimes inviting claims. Yet, the industry still thrives on rapid iteration.
There is an ongoing debate: does weak protection spur innovation? Some argue that easier copying democratizes style and accelerates trends; others say it discourages original design investment. The law’s mixed approach means fashion companies need smart, pragmatic IP strategies.
Practical advice for fashion and creative brands
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Register what you can. Patterns, prints, logos, and unique graphic designs should be copyrighted and trademarked when possible.
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Enforce selectively. For small brands with limited legal budgets, prioritize enforcement against high-impact infringers or bad faith operators.
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Consider customs recordation and marketplace brand programs. These mechanisms help block counterfeit imports and remove infringing listings quickly.
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When using parody, commentary, or art to engage with a famous mark, consult counsel first. The line between legitimate expression and infringement or dilution is narrow and fact specific.
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Use technology. Image monitoring, trademark watch services, and marketplace scanning can find infringing listings fast.
NFTs and digital goods
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Treat NFTs like any other commercial product. If an NFT evokes a famous brand or uses trademarked elements, the safest path is to clear rights.
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If you intend to create commentary or art, document the expressive purpose and keep commercialization modest, but do not rely on that alone.
The takeaway. Famous marks command serious legal protection. In fashion and creative markets, adapt a layered strategy: register core assets, monitor the market, and decide where enforcement creates the most business value.
5. Practical steps every e-commerce or AI business should take now
You now understand the landscape. Here is an actionable roadmap that small and mid-size businesses can implement quickly to reduce IP risk and strengthen commercial resiliency.
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Conduct an IP audit annually
List your trademarks, registered copyrights, patents, and trade secrets. Identify work created by contractors and confirm ownership assignments are in place. An IP audit reveals vulnerabilities and licensing opportunities. -
Implement clearance workflows
Before launching new products, run trademark searches and image similarity checks. For AI output, run plagiarism scans and verify licensing terms with the provider. Log results and keep decision records. -
Contract with care
Require IP warranties and indemnities from vendors and suppliers. Get written IP assignment clauses for work made for hire. Ensure contracts state governing law and dispute resolution forums you can access and enforce. -
File early and globally where necessary
File trademark applications early in key markets. Many jurisdictions operate on first-to-file rules. Consider strategic filings in countries where you plan to sell or that are critical manufacturing hubs. -
Monitor the market
Use a trademark watch service to catch confusingly similar marks and counterfeit listings. Monitor social media for unauthorized use of your brand elements. -
Respond to notices professionally
If you receive a cease and desist, do not ignore it. Gather facts, preserve records, and consult counsel. A measured legal response can often avoid expensive litigation. -
Insurance and contingency planning
Look into IP liability insurance and product recall insurance. These products can defray litigation costs and settlements in many cases. -
Educate your team
Train marketing, product, and procurement staff about IP red flags. A few smart checks by non-lawyers can prevent huge downstream costs. -
Build relationships with reputable suppliers
Vetting and maintaining long-term supplier relationships reduces the odds of receiving infringing goods. When possible, prefer suppliers that provide provenance documents or licenses. -
Strategize enforcement
Decide what kinds of infringers you will pursue aggressively and which you will let slide. For many startups, selective enforcement is the most cost effective route.
How Carbon Law Group can help
We perform IP audits, negotiate supplier agreements and license deals, defend and respond to takedown notices, and represent clients in settlements and litigation. When a letter lands in your inbox, our team can assess exposure, pressure test the claimant’s demands, and negotiate practical outcomes that keep your business running.
Conclusion and next steps
The intersection of AI, e-commerce, and global manufacturing has created an IP landscape that is both opportunity rich and risk heavy. Viral success is intoxicating. It is also when you are most visible and most exposed. The best risk management blends practical legal measures, strong contracts, proactive IP clearance, and sensible insurance. If you sell products, work with designers or developers, or use AI in your content pipeline, take immediate steps to audit and shore up your IP position.
If you received a cease and desist or want an IP audit, reach out. A short, targeted consultation can prevent a crisis and help you scale with confidence.