Alibaba files first lawsuit over counterfeit goods sold on e-commerce site

Alibaba says it has sued two vendors for selling fake Swarovski watches on its online platform Taobao, marking the first time the Chinese e-commerce giant has taken legal action over counterfeit goods.

A lawsuit was filed in the Shenzend Longgang People's district court against sellers Liu Huajun and Wang Shenyi, asking for 1.4 million yuan (US$201,613) for "violation of contract and goodwill", Alibaba said.

In building its case, the company said it tapped big data and "surreptitious purchases" of suspected counterfeit goods to identify such sale and the location of the sellers in Shenzhen. Its data analysis pointed to the e-store, which was registered on Taobao in November 2015, and Alibaba arranged for samples of the product to be examined by the brand owner for its authenticity. It added that Luohu District police in August 2016 confiscated 125 fake Swarovski watches and two Swarovski official seals, worth an estimated 200 million yuan (US$28.8 million).

Alibaba Group's chief platform government officer Jessie Zheng said: "Selling counterfeits not only violates our service agreement, it also infringes on the intellectual property rights of the brand owner, puts inferior products in the hands of consumers, and ruins the hard-earned trust and reputation Alibaba has with our customers."

Zheng added that the company planned to take further legal action against e-tailers peddling counterfeit goods on its e-commerce platform. She said Alibaba would apply litigation in the hope that jail sentences and financial penalties would be a deterrence against the sale of fake goods.

According to Alibaba, more than 2,000 of its employees were dedicated to fighting counterfeit sale and another 5,000 volunteers worked with the company to identify fake goods on its online platforms.

Its head of global intellectual property enforcement, Matthew Bassiur, said: "We take a holistic and technology-driven approach to IPR-enforcement. Big data analytics enhance our ability to identify and pursue counterfeiters and make it increasingly difficult for these illicit sellers to hide in the shadows."

The latest move had come amid mounting criticism the e-commerce operator was not doing enough to combat the sale of fake goods on its online platforms. Kering Group in 2015 sued Alibaba for allowing US shoppers to purchase counterfeits of its brands, which included Gucci and Yves Saint Laurent, from the Chinese e-commerce sites.

The US Trade Representative last month reinstated Taobao Marketplace to its blacklist of "notorious markets" known for hawking counterfeits, four years after it had removed the e-commerce site from the list. Describing the move as "disappointing" and politically motivated in a US election year, Alibaba said it had committed various efforts, including a 150 million yuan (US$21.6 million) investment in 2015, to stem out counterfeit sale on its shopping sites.

The company added that it helped authorities in Zhejiang Province shutter 417 production lines and arrest 332 suspects last year, seizing counterfeit goods worth 1.43 billion yuan (US$205.93 million).