Alibaba wins landmark counterfeit cat food case

Chinese e-commerce giant Alibaba has won a landmark court case over the selling of counterfeit cat food on its Taobao platform.

In March this year, the online marketplace sought to stamp down on fake goods being sold on its platforms and set an example for the lengths it would go to by suing a pet food vendor for almost 2.67m yuan ($400,000), alleging the vendor was selling counterfeit cat food through its Taobao store.

Five months on, a Shanghai court found the vendor, surnamed Yao, guilty and ordered the defendant to pay Taobao 120,000 yuan ($17,700) in damages.

The case is believed to be the first of its kind in China where an e-commerce platform has successfully sought compensation from one of its online retailers.

Alibaba's news service Alizila said the court decision marked a legal victory for the e-commerce firm as part of its continued brand-protection efforts to ensure products on its sites are genuine, safe and compliant with intellectual property laws.

"Winning the first lawsuit [against Yao] has made Alibaba more confident in our crackdown on counterfeit merchants," said the group's chief platform governance officer Jessie Junfang Zheng. "We plan to put all the proceeds we receive [from lawsuits] to a special fund dedicated to protecting and compensating our consumers."

The lawsuit against Yao came about after a joint investigation between Alibaba and Mars Inc, which owns the "Royal Canin" cat food brand. Taobao claimed Yao, who had started selling the fake pet food on the platform in January 2015, had broken several of the trading platform's regulations prohibiting the sale of counterfeit and trademark-infringing merchandise.

The first indications that something was amiss came after Taobao bought a suspected fake 99 yuan ($14) bag of Royal Canin kitten food in May 2016 as part of Alibaba's 'mystery shopping' brand-protection programme, and sent the pet food to the brand rights holder Mars Petcare and its China representative.

While the bag's packaging and verification codes were legit, Mars Petcare found the packaging had been tampered with and the contents turned out to be fake.

A joint investigation between Alibaba and Mars led to Yao's arrest on 12 October on suspicion of selling counterfeit goods.

In court documents, Taobao claimed Yao's illegal activities had caused reputational damage to the platform.

Taobao sought compensation for direct and indirect economic losses, loss of goodwill and legal fees.

The platform had also asked the court to compel the defendant to publish a written apology in several prominent print and web publications for a week.

The lawsuit is the second civil action lodged by Alibaba this year in a bid to publicly show it was actively taking measures to crackdown on counterfeits on its platforms following continual criticism the e-commerce site was allowing fakes to persist on the online marketplace.

In January, Alibaba sued two vendors for allegedly selling fake Swarovski watches, seeking 1.4m yuan ($207,000) in damages for "violation of contract and goodwill". The firm has also sued a merchant for selling fake Wuliangye spirits, a popular Chinese liquor brand. These cases are ongoing.

Last month, Alibaba released its platform governance report for 2016, highlighting the "significant strides" the e-commerce firm has made in protecting IP rights and clamping down on fakes.

Its move to seek legal action against counterfeiters has the goal of improving the legal and judiciary environment in China to better protect brands and consumers, the company said in the report, and it warned earlier this year that more lawsuits against counterfeiters would be forthcoming. The online retailer hopes that jail sentences and large fines will remove the incentives for counterfeiters.

"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 company said at the time.

In March, Alibaba's chairman Jack Ma called for China to tighten its counterfeit laws, enforcement and penalties, saying the lack of deterrents hurts China's ability to innovate while damaging its reputation and threatens the country's future.