Alibaba sues counterfeiter
An IP first for China
14 December 2018
Alibaba has lodged a case in the Shenzhen Longgang People's District Court against the defendants Liui Huajun and Wang Shenyi, seeking RMB1.4 million (US$203,000) for what it claims are contract and goodwill violations. The court has accepted the complaint made by Alibaba and the case is presently pending a court hearing.
Alibaba claims that the vendors (i) have violated the service contract between Taobao and the vendors, and (ii) have also infringed Taobao's goodwill and reputation. According to the terms of an unverified standard Taobao service agreement (uploaded by a third party online), any vendor using the site is obliged to ensure that any information it publishes on the site does not infringe any third party's IP rights, trade secrets or other proprietary rights.
The action comes amidst persistent complaints that fake goods are being sold widely on its websites. Just two weeks before the case was lodged, the US put Taobao back on its list of so-called "notorious marketplaces" known for the sale of counterfeit goods after four years of being in the clear. Alibaba executives reportedly claimed this was a political move in what was a US-election year.
Taobao reportedly conducted a data analysis which indicated that the store, which first registered on Taobao in November 2015, was likely selling counterfeit products. It used a combination of (i) "mystery shopping", where purchasers working for the company make what appear to be normal purchases, and (ii) big data to identify the counterfeit products and locate the sellers. Alibaba then arranged for Swarovski to examine the quality, workmanship and packaging of the purchased samples to confirm the products were fake.
Swarovski said that it was committed to protecting its brand from counterfeits and praised Alibaba's efforts to protect the integrity of its brand and the platform as a whole. A statement released by Swarovski stated, "Swarovski has cooperated with Alibaba on cases against sellers who are offering Swarovski counterfeits on Alibaba platforms and applauds any steps Alibaba takes to discourage counterfeiters from selling on Alibaba platforms."
Last year, police in the Luohu district of Shenzhen (just across the border with Hong Kong), seized 125 fake Swarovski watches and two company official seals, with a total value of RMB200 million (US$29 million). Alibaba also collaborated with authorities in an anti-counterfeit crackdown in the Zhejiang Province called "Cloud Sword". The operation which took place between April and July 2016, led to the closure of more than 400 production lines, the arrest of 332 suspects and the seizure of fake goods valued at RMB1.43 billion (US$208,000).
Alibaba says that its anti-counterfeiting drive is ongoing and that it has more than 2,000 full time employees and 5,000 "volunteers" who identify and root out fakes. Jessie Zheng, Alibaba Group's chief governance officer has said that more actions can be expected in the future. "Selling counterfeits not only violates our service agreement, it also infringes on the intellectual property rights of the brand owner, puts inferior products in the hands of consumers and ruins the hard-earned trust and reputation Alibaba has with our customers."
Alibaba has also issued proceedings against the intellectual property agency Hangzhou Wangwei Technology Co which is accused of having made malicious or false IPR complaints against Alibaba vendors. It has been reported that Hangzhou Wangwei has made thousands of complaints to Alibaba covering hundreds of brands related to clothing, shoes, cosmetics and household appliances. Alibaba is asking for RMB1.1 million (US$160,000) in compensation and an apology. The case has been accepted for hearing by the Beijing Dongcheng District People's Court.
Alibaba hopes that by defending its intellectual property and pursuing infringers more vigorously in court, the threat of prison sentences and large fines will remove the incentive for counterfeit sellers to continue to abuse the platform. Whether Alibaba's actions help convince the new Trump administration to remove Taobao from the "notorious marketplaces" list remains to be seen.