Luxury Counterfeit Law: Kering v. Alibaba
Alibaba.com and a behemoth fashion company are entangled in a luxury counterfeit lawsuit. Let’s take a look.
The Cast: A Luxury Brand to Rule Them All v. Online Retail Giant
Before we get to the lawsuit, let’s establish the players.
Kering is a huge fashion holding company for sport and luxury brands like Yves Saint Lauren, Gucci, McQueen, Brioni, and Puma. (Fun Fact: Kering’s CEO, François-Henri Pinault, is married to actress Salma Hayek.)
Alibaba.com (at the time of writing) is the #2 tech company in China and a major online retail hub. Almost everybody in the product marketing industry interacts with Alibaba.com in some capacity. Like Amazon.com, Alibaba.com is an expanding Borg-like force.
Kering v. Alibaba.com: The Clash of The Retailers
Product Marketing Legal Overview
Let’s be blunt: More often than not, especially lately, items bearing luxury tags are made in China. Why? You know the answer: cheaper labor. “Then how come luxury items cost so much?” Again, you know the answer: brand status is commerce’s co-pilot. “So, then, where does all that luxury money go if not to the people making the products?” Bingo! Back to the luxury companies who are trading mostly in marketing, not manufacturing.
A retail revolution Is afoot: Asian factories are growing frustrated with the disparity. After all, who appreciates doing most of the work and reaping the least amount of profits? Nobody. So, Chinese manufacturers began a “Quality Made in China” initiative in an attempt to bypass luxury marketing middlemen, like Kering. Let’s put it this way: if “Made in the USA” is about patriotism, the Chinese effort is about globalism.
Luxury Counterfeit Law Claim
So, back to the lawsuit.
In an attempt to knockout knockoffs, Kering sued Alibaba, claiming various intellectual property infringements and — rather dramatically — racketeering.
Racketeering, you ask? Here’s the argument: Alibaba allegedly collaborated with fourteen counterfeiters, by allowing vendors to sell phony products on its site, over an extended period, to deliberately cheat Kering of profits.
Alibaba insists the claims are baseless. So much so that Jack Ma, the online retailer’s founder, vowed to lose in court rather than settle. Why isn’t Ma compromising? Only he knows; but to wager a guess, it’s probably because a settlement would thrust Alibaba into an extremely vulnerable cash flow position — which could also effect U.S. online retail companies. Moreover, a racketeering conviction, in a case like this, has the power to hamstring the global market — top to bottom.
Judge Shuts Down Luxury Goods Racketeering Claim
Theoretically, the racketeering assertion is plausible; but is it practical? No way. Why? It could crush the multi-billion online retail industry — and jump-start another global recession.
The presiding judge did side-eye the racketeering claim, and ultimately dismissed the charge, explaining: “[M]erchants weren’t aware of each other or were in intentional cahoots w/ Alibaba, required by U.S. racketeering laws. […] The fraud perpetrated by each merchant defendant could be accomplished without any assistance from any other merchant defendant.”
The Case Is Not Over: Yes, in this luxury counterfeit law case, the judged axed a racketeering charge — but the intellectual property claims persist; Jack Ma and co. aren’t out of the woods just yet.
An Attorney Who Understands Luxury Counterfeit Law
Need help sorting an Internet business issue? If so, get in touch.