Alibaba Sues Vendors Over Counterfeit Swarovski Watches

Hangzhou, China–Alibaba Group has filed a lawsuit against two watch vendors that sell on Taobao, its consumer-to-consumer e-commerce marketplace that’s comparable to Ebay.

The mega e-tailer is alleging that the vendors are selling counterfeit Swarovski watches on the site.

Alibaba is suing the vendors in Shenzhen Longgang District People’s Court, and asking for RMB 1.4 million, or approximately $202,230 per current exchange rates, in damages.

Alibaba said its lawsuit marks the first time that a Chinese e-commerce platform has taken legal action against sellers of allegedly fake goods.

“We want to mete out to counterfeiters the punishment they deserve in order to protect brand owners,” said Chief Platform Governance Officer of Alibaba Group Zheng Junfang. “We will bring the full force of the law to bear on these counterfeiters so as to deter others from engaging in this crime wherever they are.”

The company also said that it plans to take action against several additional sellers of counterfeit goods.

In 2015, Alibaba launched its platform governance department, which uses data to detect counterfeiters then confirms goods are real or fake via a “test-buy purchase program.”

Alibaba utilized this process to examine the watches of one seller in question last summer, confirming with Swarovski that they were indeed counterfeit timepieces.

The Shenzen Luohu District police then raided the seller last summer, confiscating 125 watches. The investigation led to the discovery of the second seller in the suit.

The governance department program now has approximately 7,000 employees, Alibaba said.

Matthew Bassiur, the head of Alibaba’s global intellectual property enforcement, said, “We take a holistic and technology-driven approach to IPR (intellectual property right) 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.”

“Big data” entails utilizing complex algorithms via a “machine learning engine” that examines characteristics of online sale listings to predict the probability of fakes, rating them between zero and 100. Anything above a score of 80 merits further investigation from Alibaba.

Another system runs data through a 600-point detection system that analyzes seller behavior, product info and consumer reviews.

Technological systems are a must if Alibaba is to keep track of its roughly 10 million new listings posted daily on its various marketplaces.

Between April and July of last year, Alibaba turned over information stemming from its platform governance department to the police, leading to raids across 12 provinces and 13 various factories and stores, which Alibaba said were manufacturing knock-off random access memory chips.

A total of 332 suspects were arrested during that time.

In December, the U.S. Office of Trade Representatives (USTR) included Taobao in its “Notorious Markets Report.”

Regarding the listing, Alibaba said in a statement, “We are very disappointed by the USTR’s decision to include Taobao on its ‘notorious markets’ list, which ignores the real work Alibaba has done against counterfeiters. In 2016 alone, we proactively removed more than double the number of infringing product listings than in 2015. It is therefore unreasonable for the USTR to have concluded that Alibaba is less effective in anti-counterfeiting than when it reviewed our efforts in 2015 and when it removed us from its list four years ago.

“Our results speak for themselves. Unfortunately, the USTR’s decision leads us to question whether the USTR acted based on the actual facts or was influenced by the current political climate.”

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