Just days after Kering owned luxury brand Gucci filed suit against Alibaba, its security chief has asked the brand not to spend its money on lawsuits but instead to use it to assist Alibaba in fighting fakes.
“I strongly believe that spending money on lawsuits could result in a completely different outcome than cooperating with us,” the head of security and anti-counterfeiting said in an interview with Reuters. The company already employs over 2000 staff and spent over 100 million Yuan fighting fake goods in the last year but it’s an uphill struggle for Alibaba. It’s co-founder Jack Ma has referred to the counterfeit goods industry infiltrating his company as a ‘cancer’.
The lawsuit, filed in New York on Friday, claims that Alibaba “provides the marketplace advertising and other essential services necessary for counterfeiters to sell their counterfeit products to customers in the United States,” This is the second time Kering has sued Alibaba. A similar suit was filed last year only for it to be withdrawn weeks later following what Kering called a ‘constructive dialogue’ with Alibaba chiefs. So, is Alibaba really doing enough to prevent the sale of counterfeit goods on its platform? The Chinese government certainly don’t think so. In a report released earlier this year by the State Administration of Industry and Commerce (SAIC), Alibaba was accused of being ‘far too lax’ and failing to adequately police its market place.
So what can we expect from the lawsuit? Should internet service providers be liable for the violations of intellectual property rights committed by its customers? In recent years a number of high profile fashion companies have launched legal battles against these intermediaries in an attempt to hold them liable.
Six brands under the LVMH umbrella including Christian Dior, filed complaints against eBay in 2006 accusing the company of allowing people to trade fake goods causing damage to the brands involved. In 2008, a French court ruled in favour of LVMH and fined eBay 38.5 million euro. The plot thickened when in 2012, French courts overturned the previous decision, stating that they could rule on eBay’s U.K. and French sites, but not on its U.S. website.
Following rulings in the UK and Belgium, in 2011, the European Court of Justice considered a lawsuit filed by L’Oreal’ against eBay and handed down a judgement which provided clarification to national courts on the liability of companies operating internet marketplaces for trade mark infringements committed by users. They ruled that operators could be liable for infringement where they fail to promptly remove listings when they are aware of circumstances which suggest that those listings are unlawful. Where the operator of an online marketplace provides assistance intended to optimise or promote offers for sale by users, it will be playing an active role. The ECJ indicated that not only should national courts be able to take measures against ISPs to end existing infringements, but also to prevent further infringements. This could include suspending accounts and identifying the infringing users.
The ECJ decision was in contrast to that of the US courts in a similar case. In 2008 eBay were sued by jewellery brand Tiffany & Co. eBay successfully argued that it was a platform for buyers and sellers to interact and, therefore, not liable for counterfeit items posted by sellers. Brand manufacturers, eBay maintained, were responsible for finding the items they believed to be fakes and requesting their removal. eBay immediately takes down items in response to complaints, leaving sellers to take up their case with the rights holder. The Court held that Tiffany failed to establish that eBay intentionally set out to deceive the public; much less that eBay’s conduct was sufficient to create a presumption that consumers were being deceived.
Following this, Gucci will need to establish that Alibaba are intentionally deceiving the public, a tough burden to prove given the fact Alibaba employees 2000 staff to specifically fight the sale of counterfeit goods on its platform. Will the two come to an agreement before it reaches the courts?
For more information on why you should NEVER buy fakes, read our post here. Fakes are never in fashion!