Gucci America Inc v. Alibaba Group Holding Ltd, U.S. District Court, Southern District of New York, No. 15-03784

Kering SA, the owner of luxury brands such as Gucci and Yves Saint Laurent, has filed a lawsuit in New York against Chinese e-commerce giant Alibaba Group for conspiring to manufacture, offer for sale and traffic in counterfeit products bearing their trade marks without their permission.

As reported by Reuters, the lawsuit alleges that Alibaba and its related entities “provide the marketplace advertising and other essential services necessary for counterfeiters to sell their counterfeit products to customers in the United States.”

The lawsuit cites an example of handbags bearing the Gucci trade mark being offered for sale by one vendor at $2 to $5 each to buyers seeking a minimum of 2,000 units, and offering to supply up to 50,000 units per month. The authentic Gucci bag retails for US$795.

Furthermore, the lawsuit alleges that Alibaba has allowed counterfeit sales to continue even when it had been expressly and specifically informed that identified merchants were selling fake products, and where the merchants themselves openly stated that they were selling fakes.

Kering is seeking a court order preventing Alibaba from, among other things, offering or facilitating the sale of counterfeit products, as well as unspecified damages that could include $2 per infringing item under the statutory regime.

Reaction

Alibaba’s founder Jack Ma responded by calling the lawsuit “regrettable”. “It would have been better had they tried to find a solution through cooperation with us,” he told reporters in Seoul. An official statement from the company added “we continue to work in partnership with numerous brands to help them protect their intellectual property, and we have a strong track record of doing so”.The lawsuit comes nine months after Kering withdrew a similar complaint after talks between the parties led to a cooperation agreement to stem the sale of counterfeits. In separate statements, both companies confirmed at the time that they had “agreed to work together in good faith through the normal business process on ways to enhance intellectual property protection.”

Previous concerns over fake products on Alibaba’s platforms have seen Alibaba-owned Taobao, China’s largest consumer e-commerce platform with an estimated market share of more than 70 percent, named at one point on the US Trade Representative’s ‘notorious markets’ list for sales of pirated and counterfeit goods. It was removed in 2012 after working “with rights holders to significantly decrease the listing of infringing products for sale through its website”.

Action in respect of the UK marketplace

It is clear that counterfeiting continues to be a major problem for luxury brands – particularly through online intermediaries, given the market reach, flexibility and anonymity offered to vendors. Kering’s complaint comes on the back of proceedings brought by other luxury brand owners against intermediaries, such as L’Oreal’s claim against eBay for the sale of infringing and counterfeit products on eBay’s online auction site in the High Court (L’Oréal v eBay, C-324/09 (2011)). The European Court of Justice found that eBay could be injuncted as an intermediary in respect of such sales in the past, but also in future, in order to fulfil the requirements of Article 11 of the Enforcement Directive, provided that the injunction is framed such that it is “effective, proportionate and dissuasive”.

This was confirmed more recently in the UK in Cartier & ors v BSkyB & ors [2014] (Olswang’s commentary can be found here), where Richemont (owner of luxury brands such as Cartier, Montblanc and IWC) brought proceedings against internet service providers Sky, BT, EE, TalkTalk and Virgin requiring them to block or impede access by their subscribers to two websites which infringed trade mark rights. The court made a blocking order in respect of the infringing websites, giving brand owners a further alternative means to prevent unlawful sales of counterfeit goods. An appeal is currently outstanding on the case.

By: mang
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