Chinese E-Commerce Platforms Strengthen Efforts on IP Protection, Paper Finds

China’s major e-commerce platforms have taken a range of measures aimed at minimizing intellectual property (IP) infringements, helping the nation improve its overall IP protection practices, a white paper by Pinduoduo, the country’s fastest-growing marketplace, finds.

The problems with counterfeit goods go further than harming brands’ revenues and reputations. Typically, they are of poor quality and can pose safety risks. And the enormous profits involved in selling counterfeit goods have made such trade a huge global problem, particularly for e-commerce platforms, according to the white paper.

The three key firms in China’s e-commerce space, namely Alibaba, Pinduoduo and JD.com, have taken the initiative to implement a series of proactive steps to screen and identify counterfeits.

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These measures include strict vendor registration, using technology such as data analytics, artificial intelligence, machine learning and image recognition in product-screening, introducing user-friendly portals for takedown requests and complaints about fraudulent products, implementing penalty policies and enforcement measures, and working with stakeholders and law enforcement.

These measures conform to the best practice guidelines the International Trademark Association (INTA) released in 2017.

For example, Pinduoduo, which has put the issue of combating IP infringement at the center of its operations since 2015, demanded that corporate merchants looking to sell on Pinduoduo must submit their business license and the ID cards of their legal representatives and store managers, which are also checked against national databases.

Holding such information helps prevent the sale of counterfeits, makes investigations of alleged breaches and penalizing actual breaches easier, and precludes those on Pinduoduo’s blacklist, for example, from getting another account, the whitepaper said.

The platform also works with leading brands and develops customized and AI-driven blocking rules and screening models for each, and fines any merchant who sells counterfeit goods 10 times the value of the goods sold historically.

Pinduoduo said its future efforts would fall into three areas: operate with more precision, and use data to better inform decisions; use networking technology to map merchants, eliminating those selling counterfeits and involve more stakeholders, because collaboration and communication are vital.

China’s is by far has the world’s largest e-commerce market. In 2019, online retail sales reached 10.63 trillion yuan (about $1.5 trillion), nearly three times the $566 billion attained in the US. This makes for a hugely competitive Chinese e-commerce environment: Alibaba, which established Taobao in 2003, has 742 million annual shoppers; Pinduoduo, which was founded in 2015, has 683 million; while JD.com, whose retail platform opened in 2004, has 417.4 million. The three capture the lion’s share of e-commerce sales in China.

Although China is a major source of counterfeit goods, it has taken significant efforts to combat the trade, said Mark Cohen, Senior Fellow and Director of the Berkeley Center for Law & Technology’s Asia IP Project at the University of California Berkeley’s School of Law, who is viewed as the leading US expert on IP law in China. He was also the senior IP attaché at the US embassy in Beijing from 2004-2008.

“This is a pretty tough area. It demands in many cases great technological resources and commitments, and I think China is generally showing a lot of those commitments,” Cohen said. “I hear people increasingly praising some of the Chinese e-tailers for the steps they’re taking.”

IP lawyer Bo Yu, a partner at LexField Law who concurrently chairs INTA’s China sub-committee within its Anticounterfeiting Committee, said brand owners operating in China know matters have improved – though those with no experience in China will likely be negatively influenced by news stories that talk about a lack of IP protection.

“But if you talk to the big companies who have been operating and developing for the past years in China, they will probably have a different perspective – because they know that everyone’s working hard to address these issues, to improve on that,” he said.

When it comes to the e-commerce law, previously, platforms would delist counterfeit listings, pass the information to brand owners and leave them to get on with the offline pursuit of criminals. Now, some platforms work directly with the authorities to target counterfeiters.

“They are doing some work traditionally done by the brand owners themselves and enforcement authorities. That’s a very strong message to whoever wants to sell products that are infringing or counterfeit,” Bo said.

This view was echoed by a China-based brand manager of a major western luxury brand who said that in recent years the major platforms have worked with the authorities and brands using big data to locate and tackle the sources of counterfeit goods.

Bo urged Chinese e-commerce platforms to improve how they communicate with brand-owners and trade associations, and tell them what they are doing.

“Do a better PR job, if I can put it that way,” he said.