Taobao is a Chinese language website that provides a platform for businesses and individuals to sell products online in a similar way to Amazon. It also offers an Ebay-like auction function. It is the most successful website of its kind in China and frequently used by those who wish to sell IPR infringing products.
In a recent case in the Shanghai First Intermediate People's Court Taobao unsuccessfully appealed against a decision that held it jointly and severally liable for trademark infringement. The Judge ruled that Taobao had failed to take sufficient action to prevent an individual from selling goods on its website that infringed the Claimant's trademarks. He decided that Taobao should therefore share responsibility for compensating the Claimant.
Taobao publicises its anti-infringement policy on its website. In basic terms, when an infringement complaint is made to Taobao (and substantiated by evidence) a warning is issued to the seller who is required to remove the item in question. Such warnings incur penalty points. There are a number of thresholds of accrued points which, when met, result in further sanctions. These range from the temporary suspension of the seller's account (which coincides with a 'period of IPR infringement education') to a permanent ban for persistent infringement.
The Claimant used several registered trademarks under licence and made thousands of complaints to Taobao everyday relating to their infringement. Seven complaints were made by the Claimant against an individual who offered for sale counterfeit clothing bearing two of the Claimant's 14 trademarks. The Taobao seller page in question even contained the following statement: "Some of the goods sold by this store are genuine, some are imitations, but you can be completely assured of the quality".
Following the complaints made by the Claimant, Taobao failed to follow its own procedure and simply deleted the infringing products from its website without issuing any penalty to the individual. The infringer's account remained operational and he was not prevented from carrying out subsequent infringing activity, which he should have been according to official Taobao policy.
The Judge decided that Taobao, in failing to follow its penalty points procedure and suspend the account of the infringer, had passively facilitated the continued infringements and was therefore held jointly and severally liable with the infringer.
This decision is a departure from previous judicial approaches and should go some way to encouraging Taobao and its competitors to monitor and punish infringers proactively; action which would severely restrict a principal route to market in China.