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November, 2017

Alibaba steps up civil action against counterfeiters

Original article: Sina

Alibaba is pursuing counterfeit shoe sellers with unusual zeal, initiating civil litigation against the offenders even after a Zhejiang court sentenced them to prison time. There is reportedly a contract dispute between Alibaba and the defendants, who previously used Taobao stores to sell fake Vans shoes. 


The Hangzhou-based internet giant is suing the defendants for RMB 530,000 in damages and has asked them to make a public apology. 


For the defendants, the civil litigation adds insult to injury: They already have to serve 3-5 years in prison and pay an RMB 300,000 fine. 

Analysis:

It's been a banner year for Alibaba's anti-counterfeiting efforts, but this move may just out-trump the rest. Why initiate civil action against small-time shoe counterfeiters who already have to serve prison time? 


Indeed, it was a pretty mundane operation. When investigators raided the counterfeiters' storage facilities, they found 203 pairs of Vans shoes valued at RMB 50,000. Police later said that the infringement value of the operation was RMB 530,000. That adds up to quite a few pairs of shoes, but by the standards of counterfeiting in China, it's not a big business.  


During the civil trial, Taobao's attorney Shen Yongqiang argued that there is no conflict between civil and criminal penalties in this case. In other words, if Taobao wants to sue shoe counterfeiters for damages, Chinese law does not prohibit it - regardless if the defendants already have been found guilty of criminal charges. 


Shen further argued that the defendants' trademark infringement not only seriously damaged the interests of consumers, but also harmed Taobao's reputation.  


"Currently, criminal penalties are not severe enough to deter the [China's] lucrative counterfeit business," Zhen Junfang, Alibaba's chief platform governance officer, told Sina in an interview, adding that Alibaba "has zero tolerance for fake goods." 


It's clear Alibaba wants to signal its seriousness about fighting counterfeiters. There is no doubt some sincerity to the company's efforts, which are in line with President Xi Jinping's recent call for stronger protection of intellectual property in China. Of course, as TIPG has noted in many a previous newsletter, Alibaba is also eyeing Taobao's potential removal from the U.S. Trade Representative's Notorious Markets blacklist. The U.S. Trade Representative will make that decision next month.


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