China's largest e-commerce company, Alibaba Group Holding, has been sued by the owner of several of the world's best-known luxury brands for facilitating the sale of counterfeit goods on its various platforms like alibaba.com, taobao.com and tmall.com. Alibaba believes the lawsuit is wasteful, and that the case has no merit considering it has implemented a number of initiatives to help brand owners protect their intellectual property.

This case raises the question of whether online marketplaces are doing enough to protect brand owners and stop the sale of counterfeit goods.

The lawsuit

On 15 May 2015, Paris-based Kering Group, owner of luxury brands like GUCCI, YVES SAINT LAURENT, BALENCIAGA and others, filed a lawsuit in the United States against Alibaba. The lawsuit claims that Alibaba and its related companies knowingly encourage and profit from the manufacture, sale and traffic in counterfeit goods on its websites. It also claims that Alibaba provide marketing and other services enabling counterfeiters to sell their products on its sites. For example, when 'Gucci' is typed into its search bars, terms like 'cucchi' and 'guchi' are suggested, directing customers to fake goods.

Kering is seeking a court order that would prevent Alibaba from offering or facilitating the sale of counterfeit goods. The lawsuit is also seeking unspecified damages that could include US$2 per counterfeit item.

It's not the first time Kering has taken Alibaba to task. Kering filed a similar lawsuit against Alibaba in July last year, although it was withdrawn with the ability to be re-filed while the parties worked toward a resolution. 

Alibaba's response to Kering's latest action raises the question of what Alibaba is doing to help brand owners protect their intellectual property. In a statement issued shortly after the suit was filed, Robert Christie, VP of International Media at Alibaba, said, 'We continue to work in partnership with numerous brands to help them to protect their intellectual property, and we have a strong track record of doing so. Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation. We believe this complaint has no basis and we will fight it vigorously.'

So what action is Alibaba taking?

Faced with increasing scrutiny and criticism for its role in the sale of fake goods, Alibaba continues to boost its efforts to combat the problem. Alibaba is reported to have spent US$160 million in the two years to December 2014 in an effort to block the sale of counterfeit products on its online marketplaces. It removed an estimated 90 million listings that may have breached intellectual property rights in the lead up to its IPO in 2014.

Group-wide, a number of initiatives are being undertaken. It has signed an agreement with the International AntiCounterfeiting Coalition (a group which works to protect IP) to remove counterfeit items from its largest shopping site Taobao within two days rather than the coalition's standard two weeks. It is also cooperating with a number of Chinese law enforcement agencies, including China's State Intellectual Property Office, and the Office of the National Leading Group on the Fight Against IPR Infringement and Counterfeiting, to help safeguard the interests of consumers.

Taobao provides an online system enabling brand owners to file complaints against merchants and request removal of offending listings, and to list on Tmall.com, Alibaba's B2C marketplace, sellers must put up a sizeable deposit. Those caught selling fake goods can lose their deposits and have their stores closed. Deposits are also used to provide refunds to buyers of fake goods, at five times the purchase price.

In its 2014 Counterfeit Report, Alibaba said it had a task force of over 2000 spearheading the group's counterfeit effort, and that its cooperation with Chinese law enforcement agencies had lead to 400 suspects from 18 counterfeiting rings being arrested. The report also referenced Alibaba working with over 1100 brand owners to identify and remove IP-infringing goods from its sites.  But is this enough?

No quick fix

All these initiatives show that Alibaba appear to be taking the issue of counterfeits seriously, but many brand owners still think that Alibaba is not doing enough. Some claim that take-down measures are slow and cumbersome. Others complain that listings that have been taken down often reappear.

Clearly there is no quick or easy fix and more needs to be done to block the sale of counterfeit products at source. As the world's largest online and mobile commerce company, Alibaba Group will no doubt continue to come under considerable pressure to play its part in the fight against fakes. Watch this space.