Richemont wins victory in TradeKey counterfeit fake fashion law suit

Chloe counterfeit bag, evidence in TradeKey case. Source VentureBeat

RICHEMONT luxury fashion brand owner have won a significant victory in the war against counterfeit fake fashion and defeated Trade Key e-commerce with the help of one man.  Rob Holmes is a private investigator and owner of IPCybercrime from Plano, Texas, and he blew the lid on one of the world’s biggest counterfeit goods sales sites with a year-long undercover operation. In doing so, he may have helped give brands a new legal tool in their attempt to stamp out billions of dollars in sales lost to counterfeiting each year.

In an interview with VentureBeat, Holmes said his work helped unearth evidence that the Pakistani e-commerce vendor TradeKey helped enable wholesale trading of thousands of counterfeit goods over the Internet by setting up a “virtual swap meet” where vendors could sell fake goods with impunity. A federal judge ruled on Oct. 8 that TradeKey had violated copyright law and contributed to the counterfeiting of goods made by companies, including Holmes’ client, Richemont, the owner of six luxury fashion brands including Mont Blanc-Simplo, Cartier, Chloe, Alfred Dunhill, Officine Panerai, and Lange Uhren. Holmes said he found thousands of cases of large-scale counterfeit listings during his undercover work.

Holmes told Venture Beat how, at the request of Richemont’s lawyers, he organised the undercover investigation with luxury brand company’s legal team as it pursued TradeKey, a site that had more than 5 million members at the time of the investigation. The tale is a case study in how big brands are going after shadowy counterfeiters and how tricky it can be to collect evidence that will bring those counterfeiters down.

The case could set a new legal precedent, since an earlier ruling in 2010 put the burden of stamping out counterfeiting on e-commerce sites on the brand claiming to be a victim. In the case of Tiffany v. eBay, the U.S. courts ruled that eBay was not responsible for policing its market for counterfeits sold by third parties. That decision put the burden on brands to provide proof to eBay if they wanted it to take down a counterfeit sale.

But in the TradeKey case, the evidence of counterfeiting was so widespread throughout the site that a federal judge ruled that TradeKey was in fact responsible for curbing counterfeit sales. That ruling by U.S. District Court judge Gary Allen Feess in Los Angeles is the latest result of a one-year investigation and three-year legal case against TradeKey. The judge found that TradeKey had “actively promoted and facilitated the sale” of counterfeits. He ordered it to monitor its sales.

TradeKey counterfeit listings. Source VentureBeat

“This is the first case that holds an online marketplace liable for contributing to counterfeiting,” Holmes said in an interview with VentureBeat. “And they were the No. 1 counterfeiting site in the world. This was the big, bad one.”

It’s hard to verify if TradeKey was the biggest counterfeiting site, but Holmes does work for about 50 brands, and the lawyer for Richemont agrees it was a big one.

“We believe the case is groundbreaking in the magnitude of the counterfeiting on TradeKey.com,” said Susan Kayser, legal counsel for Richemont at the law firm Jones Day, in an interview. “Rob Holmes’ investigation was essential to the case. The court relied heavily on the investigation’s findings in its ruling.”

TradeKey’s attorney, Erik Syverson of Miller Barondess, said in an e-mail, “We completely disagree with the court’s ruling, factual findings and application of the law, particularly with respect to contributory liability principles. Followed to its logical conclusion, this ruling requires web sites that permit user-generated advertising to proactively screen for infringing or counterfeit items listed for sale. That is not the law.”

He added, “The law has always required that trademark owners perform such a function. Furthermore, the ruling impermissibly restricts the legal use of trademarks in meta data and Adwords, even by third parties not connected to this lawsuit. For example, under this ruling, I cannot list for sale on my client’s website my own collection of authentic Mont Blanc pens, or even mention Mont Blanc for comparative advertising purposes.”

He said TradeKey is considering its options.

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Content thanks:VentureBeat

Taobao Teams Up With Apple, Gucci To Remove Counterfeit Products

First reported March 20 2011

China’s leading retail website – Taobao has joined hands with some of the world’s best known brands on a sting operation to remove the sales of counterfeit products from the e-commerce website.  A total of 89 brands including Apple, Louis Vuitton, Gucci, Chanel, Estee Lauder, Samsung, Panasonic and Swarovski are participating in the “Special Covert Anti-Counterfeit Operation” announced by Taobao on March 14.

With more than 10 million daily new product listings on Taobao, the sheer number made it very difficult to track counterfeit products. The introduction of a sting operation was inevitable to eradicate fake goods.

The method is simple and effective. Everyday a list of suspected products will be purchased by Taobao itself. These goods will be screened for authenticity and merchants with counterfeit products will punished according to Taobao’s guidelines. Taobao has already purchased 608 items and 586 sellers were found guilty. Taobao disciplines merchants by assessing points against them for violations of its trading policies. The seller will be shut off from Taobao when he or she reaches 48 points within a calendar year.

“This collaboration with brand owners is a further step by Taobao to fortify and escalate its commitment to eliminate counterfeit products from the site, which will advance Taobao’s goal of being a retail destination where consumers can shop with confidence,” said Justine Chao, a Taobao spokeswoman.

In addition to the sting operation, Taobao has implemented a series of safeguards designed to keep counterfeit products off the site, as reported on Alibaba Group’s news site. The safeguards include:

Automated filtering: Product listings that do not match manufacturer SKUs (indicating they are authentic) or are priced abnormally are removed by an automated filtering system. Taobao maintains databases of SKUs and standard product prices.

Manual filtering: A dedicated team monitors the site around the clock and can remove problematic goods from circulation at any time.

Reporting by users: Every product-listing page contains a button so shoppers can easily report suspicious items.

Coordination with brand owners: Taobao received complaints from more than 6,000 brand owners in 2010 and as a result removed approximately 14 million product listings. Taobao is currently in discussion with 214 brand owners on further cooperation.

Taobao officials said that all these programs result in an average of 20,000 product listings being removed from the site each day.  I particularly like how Taobao has leveraged users as gatekeepers. In its efforts to make the site increasingly authentic, Taobao is seriously doing a great job.

Content thanks: TechInAsia

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