Tim Lince

(This article has been updated – the new information is italicised below)

Alibaba Group this week took a hard line against users that file false or misleading IP infringement complaints, claiming that 24% of all complaints it receives are deemed “malicious” and “a drain on the group’s efforts to stamp out counterfeits”. Highlighting its strong stance on the matter, it confirmed it had barred one company from lodging complaints due to repeated misuses of its complaints platform. However, one commentator claims that the problem is of the ecommerce giant’s own making.

Yesterday, Alibaba took the significant step of announcing it would no longer be processing IP violation complaints filed by a China-based intellectual property agency, Hangzhou Wangwei Technology Ltd. This follows an investigation by Alibaba’s Platform Governance team which concluded that Hangzhou Wangwei had filed thousands of complaints across multiple product segments – including women’s apparel, sporting goods, shoes, cosmetics and household appliances – and that over 60% of them were withdrawn following counter-claims from merchants. While this high figure itself was deemed to suggest suspicious activity (and is confirmed as “well above the norm”), Alibaba also alleges that the company has engaged in price-fixing behaviour, by working with distributors to lodge complaints against the distributors’ competitors. Alibaba further confirms that it may pursue further legal actions if the company continues such “malicious” practices.

It appears that the crackdown against Hangzhou Wangwei is part of a wider war Alibaba is waging against so-called malicious complaints. In its announcement, Alibaba revealed some startling figures. It claims that of all IP violation complaints lodged to Alibaba, malicious complaints accounted for 24% of the total. Of that figure, 5,862 accounts from Alibaba’s IPR system were involved, totalling an approximate 1 million merchants affected and over 6 million products. The estimated financial loss from these malicious complaints, Alibaba claims, is 107 million yuan ($15,545,547) – adding that victims include “major brand owners” such as Nike.

“[These malicious complaints] serve as a drain on the group’s efforts aimed at stamping out counterfeits on its platforms,” the announcement concludes. Chen Wenxuan, an Alibaba Group lawyer, further added: “The purpose of the IPR system is to protect innovation, yet deliberately abusing the system for malicious or false complaints is unlawful behaviour infringing the principles of integrity and justice and will cripple innovation, acting like sand in the gears.”

When considering the statistic that a quarter of complaints are characterised as malicious, it is important to remember that a complaint which fails due to a successful counterclaim does not necessarily mean that the initial action was filed with ill-intent. Indeed, it is understood a specifically “malicious” complaint is defined as an unsubstantiated takedown notice that provides false allegations, often accompanied by forged documentation.

It is also worth noting that these warnings are not necessarily aimed at brand owners, but at the “numerous agencies that have sprung up in China in recent years promising to help companies and brands manage their IP rights”. While acknowledging that most of these agencies operate legitimately, and actually aid international brand owners tackle problems they face on Alibaba, they suggest some are using “grayer measures” – often with the aim of making money ‘on top’ of what clients are charged. This is a risk that all rights holders must consider; when you hand over power-of-attorney rights to a third party brand protection agency, effective due diligence must be carried out to ensure they are wholly legitimate.

However, considering this week’s statement form Alibaba, Geoffrey Potter, head of the anti-counterfeiting practice at Patterson Belknap, told World Trademark Review that he has little sympathy for the company, which “only has itself to blame” for any damage or inconvenience caused by such complaints. In a strongly worded retort, Potter said: “Alibaba is the largest counterfeiting bazaar the world has ever known – brand owners are in the business of making and selling their products, they are not in the business of, and don't want to be in the business of, policing Alibaba. Still, they are forced to undertake this herculean task because Alibaba either won't or can’t police itself. Faced with thousands of counterfeit offerings, there is no doubt that brand owners sometimes make good faith errors. But Alibaba's response should be to clean up its own act rather than blaming the victims.”

All-in-all, the key takeaway for trademark owners from this latest development is that the proper vetting of third party agencies should be front of mind when tasking them with policing marketplaces for misuse. However, unsuccessful complaints are not necessarily malicious and it is important that – in addition to asking brand owners to be more careful – Alibaba also continues to make improvements to both its proactive measures to automatically remove fakes and the effectiveness of its IP complaints platform.

Shortly after the publication of this article, an Alibaba spokesperson got in touch to respond to Geoffrey Potter's claims. The statement, in full, is below:

“It appears Mr. Potter may have misunderstood what we were announcing. Alibaba’s actions were to 1) stop accepting notice and take down requests from an IP enforcement agency with a well-documented track record of fraudulent and malicious behavior and 2) caution rights holders that not all IP enforcement agents are acting in good faith. These actions better equip rights holders and ecommerce platforms like Alibaba to protect themselves against malicious notice and take down requests that distract and drain resources from the real fight against the pirates. These actions are more evidence of Alibaba’s leadership in IP enforcement and they show that Alibaba is squarely on the side of rights holders. Any suggestion otherwise is misguided or flat out wrong.”


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