More suits over sale of fake goods expected

E-commerce giant Alibaba Group may take more rogue vendors to court after suing two sellers of fake Swarovski watches offered on its shopping sites, the first such lawsuit in China, analysts said.

The case, announced by Alibaba on Wednesday and filed in Shenzhen Longgang District People's Court, is part of Alibaba's larger effort to rein in counterfeit goods. It comes weeks after Alibaba's Taobao online shopping portal was put back on US trade authorities' list of sites known for selling counterfeit goods.

The company said it seeks 1.4 million yuan ($203,300) for "violation of contract and goodwill" and intends to take similar legal action against other merchants.

More such lawsuits are likely to follow, since they make violation of law a lot more costly for counterfeit producers, said Zhou Hui, an assistant researcher of law at the Chinese Academy of Social Sciences.

"Alibaba is trying to shed its fame as a paradise rampant with fake items. It may seek further court action to broaden anti-counterfeit mechanisms and better deter counterfeit producers," Zhou said.

Alibaba said it used big data and monitored suspected fake merchandise to identify counterfeit products worth 200 million yuan and locate the sellers in Shenzhen, Guangdong province.

"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 Alibaba has with our customers," said Jessie Zheng, Alibaba Group's chief platform governance officer.

The move is a clear response of Alibaba to criticism from US trade regulators, who included the company on their Notorious Markets list, citing a high level of alleged piracy and counterfeiting, said Ling Xiao, partner of Hui Ye Law Firm, which specializes in investment and financing.

"Any news shorting Alibaba might be detrimental to its reputation and share price. While trying to shut down shady manufacturers wouldn't be the best tactic, litigation stands as a more effective way for companies who haven't been vocal about their anti-fake efforts," Ling said.

Alibaba has been taking action to bolster its reliability and boost credibility after a number of brands, including Gucci and Tiffany, voiced concern about rampant knockoffs on its website, resulting in Alibaba being suspended from the International AntiCounterfeiting Coalition, a non-profit organization, in May last year.

It cracked down last year on 417 manufacturing and sales sites offering counterfeit products worth 1.43 billion yuan.

In November, US e-retailer Amazon.com filed two lawsuits against vendors allegedly selling counterfeit goods through its internet marketplace, the first of its kind in the company's 20-plus year history. The move accords with China's massive crackdown on counterfeits, which sharpens the focus on the responsibility of trading platforms, Ling said.