Alibaba releases third annual IP protection report 1 day before listed as “notorious market” by USTR

Updated: The original article said this was the first annual report when, in fact, it is the third.

The Office of the US Trade Representative (USTR) name-checked Taobao for the second year in a row in its 2017 USTR Notorious Markets report, criticizing the platform and its parent company Alibaba for the “high volume of infringing products reportedly continue to be offered for sale and sold on Taobao.com.” The Chinese e-commerce giant responded by releasing a statement, accusing USTR of being politically biased:

[I]t’s clear that no matter how much action we take and progress we make, the USTR is not actually interested in seeing tangible results. Therefore, our inclusion on its list is not an accurate representation of Alibaba’s results in protecting brands and IP, and we have no other choice but to conclude that this is a deeply flawed, biased and politicized process.

– Alibaba Group President Michael Evans

However, Alibaba cannot deny it has a counterfeit problem. China manufactures an estimated 86% of the world’s counterfeits and e-commerce platforms have become a vital distribution channel for knock-offs. Alibaba founder and chairman Jack Ma made a very public pledge last year to “fight counterfeit in the same way we fight drunk driving.”

Preempting the 2017 USTR report’s publication by one day, the company has released the 2017 Alibaba Intellectual Property Protection Annual Report (in Chinese). This is the third report outlining the work that Alibaba has done to fight counterfeits. So, how did they do this year?

Adding up the numbers

In the report, Alibaba revealed how 2017 has been a milestone year in the management of counterfeit goods on their platforms. Over 240,000 Taobao stores suspected to be infringing on intellectual property (IP) rights were closed, compared to 180,000 in 2016. The number of IP complaints have fallen by 42%. For every 10,000 orders, just 1.5 are thought to be a counterfeit.

“95% of IP complaints were processed 24 hours,” Alibaba Chief Platform Governance Officer Zheng Junfang said the press conference for the annual report. Compared to 2016, the processing time has decreased by 68%. “More and more, before a sale is even made, the counterfeit has already been removed.”

Specifically, 97% of listings for knock-offs were deleted before transactions have ever taken place. The number of counterfeit goods listing removed this way was 27 times higher than IP complaints filed by individuals or companies.

Alibaba is also working with authorities. In 2017, they sent 1,910 tips to police departments in 23 provinces concerning fake goods with the value of over RMB 50,000. Alibaba helped the police to apprehend 1,606 suspects and raided 1,328 counterfeit operation locations. The value of knock-offs involved in these cases was estimated to be approximately RMB 4.3 billion.

Behind the numbers

A big anti-counterfeiting initiative Alibaba launched in 2017 was the one stop Intellectual Protection Platform or IPP (formed from merging Taoprotect and Aliprotect in 2016) that made it easier for vendors to register IP complaints. The IPP’s good-faith takedown program promises to process complaints within 1 – 3 working days and an over 90% takedown rate of offending listings or stores.

We talked to Chen Jing, who runs a store selling plush toys on Taobao, about his experience using the IPP good-faith takedown program. He has submitted complaints in the past against others for infringing on the designs of his products. To file a complaint, Chen needed to fill out a form and submit relevant documents such as trademark registration and industrial design registration.

“The usual result is the takedown of the infringing listing and termination of sales. If we want further compensation, we need to take legal action ourselves,” Chen Jing told TechNode. “I’m not sure how much effect this has on the stores who infringe. The stores that we previously complained against don’t seem to be affected too much.”

Chen also thought vendors who don’t have the complete documentation or understanding of IP rights would be less likely to be successful in their complaints. The whole process felt very inflexible to him.

“Overall, it [Alibaba Intellectual Protection Platform] has made it more convenient but has limited effects,” said Chen.

 The way forward

Alibaba’s anti-counterfeit efforts are aimed at international brands more so than local Chinese vendors, as they look to expand overseas and build relationships with brands that command a higher price premium. In May 2016, Alibaba joined the International AntiCounterfeiting Coalition (IACC). However, the membership was rescinded after only one month when brands such as Michael Kors, Gucci, and Tiffany quit their IACC membership in protest. At the time of writing, Alibaba is still not a member of IACC.

The brands who are willing to work with Alibaba have joined an initiative launched by the e-commerce giant called “Alibaba AntiCounterfeiting Alliance”, which aims to use big data to combat fake goods. The 30 or so companies who have taken part include Dulux, Louis Vuitton, Swarovski, Sony, and Samsung.

As a show of the working relationship, the annual report highlighted a case where Alibaba, the police and Louis Vuitton worked together to thwart a multi-province counterfeit ring that had factories in Hunan and Guangdong. The operation seized 3 industrial processing machines and apprehended over 10 suspects. The fake goods involved in the case were estimated to be worth about RMB 216 million, the largest ever case concerning the so-called “fake Louis Vuitton industry” in China.

The final scorecard

The results from Alibaba’s third Intellectual Property Protection Annual Report may look impressive, but as we have seen some of their anti-counterfeit efforts have limited effects. While certainly a step up from previous IP protection mechanisms, knock-offs have proliferated on Taobao for years and the platform was not able to prevent another listing this year.

The 2017 USTR Notorious Markets points out that the data provided by Alibaba were merely suggestive of progress made and did not directly reflect the scope or status of the counterfeiting on Taobao.

“Alibaba has not identified metrics to assess objectively the scale of infringing products sold on Taobao.com nor objectively demonstrated that the volume or prevalence of counterfeit goods has decreased over the last year,” the report said.

What’s more, while Alibaba is making progress for international brands, small and medium enterprises continue to experience IP issues as they often don’t have the resources nor the times to spend on fighting counterfeits.

Alibaba, for their part, has issued a point-by-point rebuttal, claiming in the first section that the report unfairly compares them to other platforms: “This proves nothing. Alibaba is the biggest e-commerce platform in the world. It is not appropriate to compare platforms by simply counting complaints with no context.”