Alibaba Says it’s Blacklisting Trademark ‘Squatters’

(Beijing) — Alibaba has begun a crusade against firms abusing its intellectual property rights (IPR) complaint system, which was created to protect legitimate brands against counterfeits and knockoff products sold on the site but often used by unscrupulous entities to harass and even blackmail other sellers.

However, some legal experts question whether blacklisting individual companies is an effective way to deal with the widespread problem.

Alibaba said that one out of every four trademark or copyright complaint they receive is submitted by “unscrupulous” companies that specialize in trademark squatting, often though forging credentials.

Their acts cost 1 million merchants over 107 million yuan ($15.6 million) last year.

In one such case, an agent who had raced ahead of Nike Inc. to register one of the sportswear brand’s backpack logos in China submitted complaints against 2,000 merchandise listings with such a logo. The agent even challenged the authorized Nike shop on Tmall.

These claims are often enough to force legitimate shops out of business, and shady agents profit by using the threat of claims as leverage to blackmail their victims.

The Hangzhou-based e-commerce giant announced it will blacklist one such company, Wangwei, saying Alibaba will refuse to deal with any further “malicious” complaints filed.

Though lawyers agree that exploitation of trademark protection mechanisms should be deterred, they believe Alibaba’s boycott of individual firms seem arbitrary and superficial.

“In the age of intense competition in online retail, it’s difficult for the platform to separate ill-intended claims from legitimate ones,” said Wu Xuhua, a Beijing-based partner at Yingke Law Firm.

“Whether or not a firm is one of these ‘unscrupulous’ squatters should be up to a third party to decide, not Alibaba,” he said, explaining that its arbitrary conclusion could be used as an excuse to turn down fair trademark claims.

Others point out that Alibaba is treating the symptom but not the disease by singling out individual companies.

Agents are taking advantage of imperfect IPR protection systems on Alibaba’s site, said lawyer Dong Yizhi of the Yatai Law Firm. “Presently, the platform mitigates its risk by saying it’s only responsible for notifying the accused party and removing the product,” he said. This is a system that gives the complainant the upper hand.

“It’s the asymmetrical treatment that has spawned this gray industry (of trademark squatters), and it can’t be weeded out until the platform has systems equally fair for both parties,” Dong said.

Contact reporter April Ma (fangjingma@caixin.com)