1. Knock-Off Products on Alibaba Websites
I got an email yesterday from a company called Vintage Industrial, out of Phoenix, Arizona. Vintage Industrial makes gorgeous retro furniture pretty much entirely by hand, using old-school techniques. I am not sure why I got this email at my law firm email address. I say this because the email (as I read it) had two purposes. One, to get me to buy furniture from Vintage Industrial. And two, to tell me about how knock-offs of its furniture are being sold on Alibaba. It accomplished the second of the two purposes by prominently including a New York Times article on its China counterfeiting problems, entitled, A Small Table Maker Takes On Alibaba’s Flood of Fakes.
Not being in the market for furniture (we just last month ordered new conference room tables for two of our U.S. offices!), I went straight to reading the article. The article essentially says the following:
1. Many companies have knock offs of their products sold on Alibaba.
2. These knock offs negatively impact sales of the real thing.
3. It is difficult to get Alibaba to remove the knock offs and pretty much as soon as they do, a fresh round of knock offs show up and keeping knock offs off Alibaba is like whack-a-mole
2. Removing Knock-Off Products from Alibaba Websites
Our China IP lawyers are constantly contacted by American and European companies regarding counterfeits of their products being sold on Chinese e-commerce sites, mostly Alibaba (Taobao, Tmall, Alibaba, AliExpress, 1688.com, etc.). These sites have formal internal procedures for removing product listings that infringe a third party’s IP rights. The procedures are actually relatively easy to follow if you are fluent in either Chinese or Chinglish. But because you must follow these procedures to the letter, removing counterfeits is usually neither fast nor easy for most companies. The New York Times article talks about the owner of Vintage Industrial sometimes spending 12 hours a day on counterfeit removal. Among other things, you usually must provide documentation proving (1) you and your company exist and you are the IP owner and you as the IP owner still have the rights to the IP in question. Only after you have submitted these documents and had them verified by the e-commerce site can you even submit a takedown request.
If you do all this and the removal happens, great, but oftentimes things do not go so well with the Chinese e-commerce site and then it is essential to have someone who speaks Chinese, understands Chinese intellectual property law, and is experienced in dealing with the particular Chinese website with which you are having the problem. This person’s job becomes getting to the high-level employees at the Chinese e-commerce site to explain to them why the listing does in fact violate your IP. The NYT Times spoke with an “Alibaba spokesman [who] said that suggestions that small businesses do not get its attention are “false” and that they can qualify for the streamlined process if their submissions prove reliable. If your company has not built up its own reliability with Alibaba, using a law firm whose Alibaba submissions have been proven reliable will usually be the fastest and best way to get counterfeits of your products taken down.
Our China IP lawyers have succeeded with nearly every takedown request seeking removal of products that infringe our client’s trademarks or copyrights. But we often tell potential clients they should not bother retaining our law firm for their product removal because there is such a small likelihood of success or because the gain from removal will not be worth the cost — more on that later. The below summary of an email from one of our China IP lawyers who regularly works on takedown matters across multiple websites (both in China and elsewhere) explains:
Every Chinese website has its own takedown protocols and following that protocol to the letter is the key to getting products removed. You mention wanting to sue these websites. We emphatically do not advise that unless and until we have tried and failed to get your products taken down. Lawsuits are expensive and based on our track record in securing takedowns, the odds are overwhelming that we will never need to file one on your behalf.
Note that only the copyright or trademark owner or its authorized representative can make takedown requests and sites vary as to the sort of authentication they require. Virtually all sites ordinarily require Powers of Attorney, but all of the big Chinese sites know our lawyers well enough that they almost never require we provide them with a formal Powers of Attorney to achieve a takedown.
It is critical we can prove you have registered your IP (your trademark or your copyright) somewhere. Some Chinese sites will take down products with foreign IP (i.e., non-China) registrations, but China registrations are always much better. Technically, China is obligated to recognize copyrights registered in any Berne Convention signatory nation, but explaining China’s WTO obligations to a 21-year-old customer service representative seldom works. And as you can probably imagine, securing the removal of copyrighted IP for which a copyright has never been registered anywhere is even more difficult.
The more sophisticated/well-heeled the website, the more likely they have a formal takedown procedure. For the smaller websites, we generally have to contact someone directly (usually by telephone) because there are no instructions on the website or the instructions make no sense or simply do not work. But unless the website is a pirate site (which is rarely the case), it does not want to be sued for hosting counterfeit or pirated items and so long as we do all the work for them, they almost always will take down rogue products and content.
Once the whole takedown process begins, it pretty much continues forever. because the pirates and counterfeiters don’t just give up after their first upload is taken down. Even after we stop one or two of the counterfeiters, we should expect more to pop up. This is why companies hire us to monitor and report and after we remove the existing counterfeits, we should discuss what sort of future programs make sense for your company and your situation. You also should have us try to figure out who is doing the counterfeiting, how they are doing it, and what we can do — if anything — to try to stop it or slow it down. Oftentimes it will be your own factory or distributor.
Our law firm has an Alibaba account that makes us eligible to seek removal of links that infringe our clients’ IP. We do this by submitting proof of identification and authorization, as well as information regarding the IP being infringed upon. We do this by providing Alibaba: (i) our client’s “business license,” (ii) any formal IP registration documents and (iii) (sometimes) a power of attorney signed by the client, authorizing us to file the complaint on its behalf. We also submit the following information: the IP registration number(s), the title of the IP, the name of the IP owner, the type of IP, the country of registration, the time period during which the IP registration is effective, and the period during which the IP owner wishes to protect its IP rights. We translate these documents into Chinese to make things easier on the Chinese website company and to speed things up.
Once Alibaba verifies the above information, we provide the infringing links and removal nearly always occurs quite quickly after that. For complaints concerning patent rights, we also need to provide proof of the connection between the infringing material and the IP being infringed. Alibaba normally then sends our complaint to the infringing party. If the infringing party does not respond to our complaint within three working days — either by deleting the infringing link or by filing a cross-complaint — Alibaba will delete the infringing link. Absent prior written permission from Alibaba, the infringing party would then be prohibited from posting the same information on Alibaba again. If the infringing party files a cross-complaint, we would then need to deny the cross-complaint, and then Alibaba would handle the “dispute.” Alibaba normally resolves such disputes within a few days. Counterfeiters almost never file cross-complaints; they typically just slink away.
We have achieved similar results with China’s other leading and legitimate online marketplaces. But as you would expect, China’s smaller and sketchier marketplaces are more difficult when it comes to IP protection.
If your IP (especially your trademark or your copyright) is registered in China, securing removal of counterfeit products from Chinese websites is usually relatively fast and easy. If your IP is registered in a country other than China, securing the removal of counterfeit products from Chinese websites is definitely possible, but less certain. If your IP (your unregistered U.S. trademark, for instance, or your unregistered copyright) is not registered anywhere, your best strategy for securing removal of infringing products is usually (but not always) to register it first (typically wherever it can be done fastest and cheapest) and then seek removal, rather than to seek removal first. The same generally holds true for US websites, but US websites are much less likely to remove products that infringe on your patent rights than are Chinese websites. US websites typically take the position that you need a US court order stating that the product or products infringe on your patent for a removal based on patent infringement.
Early in this post, I said we sometimes “tell the potential client they should not bother retaining our law firm for their product removal because the gain from removal will not be worth the cost” and promised more on this later, which is now. So I read the New York Times article from beginning to end and I looked at a ton of the Vintage Industrial products on its website and, like I said above, they make great stuff by hand. Great furniture plus hand-made in the United States using old-school methods is not cheap.
Please allow me to digress a bit. Actually, please allow me to digress a lot.
Many years ago I went to an art gallery in Hanoi and saw a painting I loved, going for around USD$4500. I loved it because its colors pop, its brush strokes are emphatic and incredible, and the eyes of the woman in the painting are mesmerizing. It was a work of art. Later that day I saw copies/counterfeits of that painting all around Hanoi going for around $50. I ended up buying the original and it now hangs on a wall in my office — it’s the painting above!
Here’s the thing: I never once considered buying the copy because the copy lacked everything the original had. The brush strokes were nothing special. The colors looked tired. And the eyes of the woman were off-kilter. I wanted a beautiful and well-done piece of art, not the equivalent of what hangs in the rooms at a Holiday Inn Express. They are not at all the same product and they don’t appeal to the same customer. The person who buys the $50 knock-off is not the person who might buy the $4500 original. Two different markets. Two different consumers.
Those who buy a $15 knock-off Gucci purse would not pay $4650 for the real thing if there were no knock-offs; they would buy a $14 no-name purse somewhere else.
Way back in 2012, I wrote an article [link no longer exists] on how to protect your IP from China and how important it is to keep your eye on the prize when dealing with your IP in China:
But there are of course circumstances where not going into China greatly increases your chances of avoiding China IP theft. In those situations, should you avoid China? Not necessarily. In those situations you should do a cost-benefit analysis, or as I am always telling my clients, you should “keep your eyes on the prize.” Your company is in business to make money, and as important as IP is to your company – and no doubt for many companies, especially biotech companies, IP can be everything — your end goal is to maximize profits. There will be plenty of times where you can make more than enough money in China to justify putting your IP at risk.
The point of all this is that companies that see knock-offs of their products immediately get all up in arms — and rightly so –and too often want to do “anything and everything’ to stop it. But that is not always going to be the best use of their time or their money. It generally (but not always) will not be worth it for a company to spend money trying to stop knock-offs in a country in which they are making no sales and in which they have no future plans to sell products. It also is often not worth it for a company to spend a lot of time or money trying to stop knock-offs with which it is not competing.
So read the New York Times article and then ask yourself what it’s really about. Is it about Chinese counterfeiting? Is it about how American companies are impacted by Chinese counterfeiting? Is it about how American companies are economically harmed by Chinese counterfeiting? Is it about how American companies need to find a balance between advancing their company’s profits and fighting off Chinese counterfeiting? I think it is about all these things.
What do you think?