Alibaba sues counterfeiters and warns more lawsuits to come

Chinese e-commerce giant Alibaba appears to be determined to prove critics wrong over counterfeit accusations as it takes two vendors to court for selling fake Swarovski watches on its Taobao platform.

The online marketplace is suing sellers Liu Huajun and Wang Shenyi following an investigation and is seeking 1.4m yuan ($201,320) for "violation of contract and goodwill".

The company also warned that it has plans to take more counterfeiters to court, with litigation added to its IPR enforcement toolbox and a list of counterfeiters already compiled, Jessie (Junfang) Zheng, Alibaba Group's chief platform governance officer, said in a statement. The online retailer hopes that jail sentences and large fines will remove the incentives for counterfeiters, she added.

This is the second lawsuit lodged by Alibaba in as many months after it sued a firm in December, alleging it was involved in generating fake reviews for products posted on Alibaba platforms.

"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 and reputation Alibaba has with our customers," Zheng said.

"We want to mete out to counterfeiters the punishment they deserve in order to protect brand owners. 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 current lawsuit came about following an investigation by Alibaba. Using big data and analysis, the online retailer discovered it was highly probable that the e-store in question, which was registered on Taobao in November 2015, was selling fake Swarovski watches.

Alibaba then used "mystery shopping" to make surreptitious purchases of the suspected fake watches, which were then examined by the brand owner for quality, workmanship and packaging to confirm the watches were indeed bogus.

This information was shared with authorities and on 10 August last year, police in Shenzhen's Luohu District seized 125 fake Swarovski watches and two counterfeit Swarovski official seals, with an estimated value of 200m yuan ($28.7m).

The news of the lawsuit comes less than two weeks after the office of the US Trade Representative relisted Taobao as a notorious market. The move followed months of pressure from several vocal industry groups, which sought for Alibaba to be re-listed after it was removed four years ago, citing "the enormous number of counterfeits that persist on Alibaba platforms".

Alibaba expressed disappointment at the re-listing, claiming the decision "ignored" the real work the company had done to fight fakes. "We are far more effective and advanced in IPR protection than when the USTR took us off the list four years ago," the company's president Michael Evans said at the time.

Indeed, from a PR perspective the world's largest e-commerce platform appears to be clamping down on counterfeiters. In December, it announced it had conducted a large anti-counterfeit crackdown where big data intelligence provided by Alibaba to authorities – as part of Operation Cloud Sword – led to the disruption of more than 400 counterfeit rackets and 332 arrests. The firm now seeks to expand the operation.

Meanwhile, other anti-counterfeit efforts noted by the company included 150m yuan ($21.6m) spent in 2015 to test-buy suspected fake goods from sellers operating on Alibaba platforms, and the employment of more than 2,000 full-time staff responsible for combating counterfeits.