In what some legal experts are calling a landmark ruling, online retailer and e-commerce platform giant Alibaba prevailed in a lawsuit filed in China against a manufacturer accused of selling fake cat food through Alibaba’s Taobao website. The lawsuit resulted in a judgment of approximately $400,000 in favor of Alibaba, which is believed to be the first ruling of its kind in China. What makes this situation unique is that it is believed to be the first time in China that an online e-commerce marketplace such as Alibaba has been able to recover compensation for damages it has suffered itself as a result of counterfeit goods.
How this counterfeit goods lawsuit came about – Yao and the pussycat
Alibaba’s successful lawsuit began with an effort by the e-commerce platform to address counterfeit goods being sold on Taobao. Alibaba, through Taobao, conducted a test purchase of a bag of cat food sold under the brand of Royal Canin and offered for sale by a vendor named Yao. Royal Canin-brand cat food is owned exclusively by Mars, Inc. After the cat food test purchase, the product was turned over to Mars, Inc. for analysis. The analysis revealed that though the cat food’s packaging bore the Royal Canin brand, the cat food contained within the packaging was not from Mars. Alibaba thereafter filed suit against Yao.
In its lawsuit, Taobao/Alibaba sought $400,000 in damages from Yao, claiming that Yao’s alleged counterfeiting activities had harmed the online retailer’s reputation and goodwill amongst its customers. As a result, Alibaba sought compensation for economic and noneconomic damages as well as its legal fees.
The hidden purpose of Alibaba’s actions
One might legitimately wonder whether Alibaba’s investigation in this case was linked to an ulterior motive, beyond merely recovering compensation for losses as damages to reputation and good will. In fact, such suspicions would be true: Alibaba pursued this “mystery-shopping” investigation and the subsequent lawsuit as a means of getting beyond a well-publicized struggle for legitimacy and demonstrating its commitment to uncovering and punishing sellers who offer counterfeit goods for sale on Alibaba’s websites. It may also have had something to do with the fact that Mars partnered with Alibaba in 2016 – demonstrating that brands may need to align with Alibaba (and other marketplaces) to ensure that IP enforcement in China a top-of-mind issue when it comes to e-commerce.
This lawsuit comes at a time that Alibaba has unveiled a new, expedited Intellectual Property Protection (IPP) Program designed to make it easier for brand owners and intellectual property (IP) rights holders to file a claim when they detect a listing on any of Alibaba’s websites containing goods that are counterfeit or that otherwise infringe on the owner’s/holder’s rights. The IPP Program is an improvement over Alibaba’s previous reporting system that required a holder or owner to submit a claim through each of Alibaba’s several retail websites (Alibaba, Aliexpress, Taobao, Tmall, among others) on which the counterfeit or infringing product appeared – even if the listings were for the same product and offered for sale by the same seller. With the new IPP Program, the submission of one claim is effective for all of Alibaba’s websites. What is more, Alibaba touts its goal of responding to these claims within 24 hours of submission. At a recent event, Alibaba claimed that with the new IPP Program over 80 percent of claims submitted through the Program were resolved by the removal of the offending listing within 24 hours of the claim’s initial submission.
Do these counterfeiting lawsuits have any influence in the United States?
Because this particular lawsuit was filed and decided in China, it is of very little persuasive value (and of no precedential value) for any United States court – state or federal. Nonetheless, the fact that Alibaba undertook this investigation, filed a lawsuit, and saw the lawsuit through to judgment should provide brand owners and IP rights holders with some confidence that Alibaba’s commitment to reducing the incidence of counterfeit goods being sold across its platforms is more than mere words.
Despite its stated commitment to brand owners and rights holders as well as its demonstrated actions in not only pursuing legal compensation against the alleged counterfeiter/purveyor of infringing goods, Alibaba and other online e-commerce platforms cannot effectively stop all counterfeit goods from being sold (Alibaba has more than 368 million listings on just on Alibaba.com on any given day!). Moreover, brand owners and IP rights holders are still largely responsible (read: on their own) for finding fakes on marketplaces, social media, search engines and websites, and reporting those infringing listings to proper authorities and law enforcement.
No need police counterfeit goods or do test purchasing on your own, or with expensive lawyers
You do not need to spend countless hours searching through marketplace websites and e-commerce platforms looking to stop counterfeits of your product or hire expensive attorneys to catch criminals that willingly infringe upon your IP rights. Perception Partners can assist you in not only identifying problematic listings, but in conducting test purchases that timestamp, photograph and validate evidence to get fake listings removed, factories raided and fraudsters arrested. This can save you and your business considerable time and resources, while preserving your brand’s reputation. Learn more about Replicatch anti-counterfeiting software and test purchasing solutions from Perception Partners.