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June, 2017

Man sentenced to 18 months in prison for selling fake Ray Bans

A Wenzhou court has fined a man RMB 100,000 and given him an 18-month jail sentence - suspended for two years - for selling counterfeit Ray-Ban sunglasses on the Xianyu, Alibaba's used goods mobile app. The man, who is named Huang Mou, sold phony Ray-Ban shades on Xianyu from January 2015 to July 2016, earning RMB 2.59 million in income. Wenzhou police seized 12,360 pairs of the fake sunglasses valued at about RMB 493,000 when they raided Huang's residence on July 13, 2016.

In its ruling, the court noted that the Ray-Ban trademark is registered by the Luxottica Group SpA. Huang sold phony glasses bearing the Ray-Ban trademark that misled the public, the court said, adding that Ray-Ban representatives inspected the glasses in Huang's possession and confirmed they were counterfeits.

Analysis:

In its ruling, the court did not cite any other defendants in the case, suggesting that Huang may have acted alone. It is also possible he reached an agreement with authorities before his sentencing - perhaps to provide information about the upstream manufacturers of the fake sunglasses in exchange for a lighter sentence. Regardless, for brand owners, the fact that even suspended jail time is part of Huang's punishment is heartening. The threat of stiff punishment is among the only deterrents we have in the battle against counterfeiters.

For Alibaba, owner of Xuanyu, this is old news on a new platform. Brand owners the world over are familiar with the Hangzhou-based internet giant's counterfeit travails - which are also their own. It's a bit of a co-dependent relationship.

Xuan Yu is a handy platform for trading second-hand goods - including counterfeits - because it's designed for the mobile internet era. Users can conveniently list products on Xuanyu anytime and anyplace. They just need an internet connection and a smartphone with a functioning camera. Prices are often competitive as well given the platform's focus on used goods. That means counterfeiters can move large quantities of fake goods quickly on Xuanyu.

Alibaba is privy to this. However, to date, the e-commerce giant has done little to stymie the trade of phony goods on Xuanyu. In contrast, TIPG noted in a previous newsletter that JD.com closed down its then-consumer-to-consumer e-commerce site in 2015 to send a message to brand owners that it is serious about fighting counterfeiters.

Chinese legal experts have suggested Alibaba take a more proactive approach to IP protection on Xuanyu. Chen Yirui, a lawyer in Zhejiang province, told local media that Alibaba would have to share blame for the trade of fake goods on Xuanyu with the counterfeiters themselves if it fails to take effective measures to deter them. A better move would be for Alibaba to introduce a system to verify the authenticity of goods sold on Xuanyu and "take other appropriate measures," Chen says.

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