2H 2016 Quick Links, Part 4 (Counterfeits and Olympics)
* Gucci v. Alibaba, Case 1:15-cv-03784-PKC (SDNY Aug. 4, 2016) (cites omitted):
Plaintiffs have failed to plausibly allege that the Merchant Defendants engaged in anything but independent conduct, without coordination and for their own economic self-interest. Indeed, the Merchant Defendants’ relationships with one another are not alleged to be any different from their relationships with the millions of other merchants operating on the Alibaba Marketplaces. True, the SAC alleges that each Merchant Defendant—and not legitimate merchants—engaged in fraudulent conduct with the purpose of profiting from the sale of counterfeit products, but it does not allege that they “‘associated together for a common purpose of engaging in a course of conduct.’” Nor does the SAC plausibly allege that these competing Merchants “work[ed] together to achieve such purposes.” The fraud perpetrated by each Merchant Defendant could be accomplished without any assistance from any other Merchant Defendant. The Merchant Defendants all operate from China and happen to sell counterfeit goods bearing Plaintiffs’ Marks. But there is no indication that the Merchant Defendants, “located in different parts of the country, came to an agreement to act together—or even how they knew each other.” Plausibly read, the SAC alleges only that each Merchant Defendant engaged in a pattern of racketeering activity “independently and without coordination.”
Plaintiffs argue that the existence of a relationship between and among the Merchant Defendants can be inferred from the Merchant Defendants participation in the Alibaba ecosystem. Plaintiffs contend, for instance, that the Merchant Defendants were aware of each other’s existence by virtue of operating within the Alibaba ecosystem. But the Alibaba Marketplaces consist of “millions of merchants.” Moreover, the Merchant Defendants operated on different Alibaba Marketplaces—some operate on Alibaba.com, and others operate on Taobao.com or AliExpress.com. In any event, a generalized awareness of the existence of a competitor does not establish the existence of an “interpersonal relationship.”
Plaintiffs also argue that the Merchant Defendants’ awareness of one another is evident from the fact that some Merchant Defendants sold counterfeit raw materials (i.e., leather emblazoned with Plaintiffs’ Marks), which they contend other Merchant Defendants could purchase to produce counterfeit products. But nowhere in the SAC do Plaintiffs allege that those raw materials were marketed to other Merchant Defendants. Nor do Plaintiffs allege that other Merchant Defendants’ purchased those raw materials. In fact, the SAC asserts that the two Merchant Defendants who sold raw materials indicated that North America was one of their “main markets,” rather than other producers in China. Alleging that the Merchant Defendants were aware of one another based on the fact that Merchant Defendants could have sold or purchased raw materials from another Merchant Defendant, especially where all the Merchant Defendants did not operate in the same Alibaba Marketplace, amounts to little more than a “‘naked assertion’ devoid of ‘further factual enhancement.’”
Nor does the fact that all the Merchant Defendants obtained common benefits from the Alibaba ecosystem demonstrate that a relationship existed between and among the Merchant Defendants. The Merchant Defendants obtained the benefits of the Alibaba ecosystem—such as marketing and shipping services—from the Alibaba Defendants, not from one another. While such allegations may imply a relationship between each Merchant Defendant and the Alibaba Defendants, one cannot infer that the Merchant Defendants acted in a coordinated manner by receiving common benefits. The Merchant Defendants did not “act in certain ways ‘to benefit’ one another,” rely on one another to accomplish their activities, or otherwise “function as a continuing unit.” Nothing about receiving benefits from the same source makes “it plausible that the Court is confronted with something more than parallel conduct of the same nature and in the same time frame by different actors in different locations.”
Plaintiffs also argue that the Merchant Defendants benefited from one another as a result of “self-reinforcing network effects that benefit” all participants in the Alibaba Marketplaces. The Merchant Defendants benefit, Plaintiffs argue, through “online retail clustering because . . . ‘more merchants attract more consumers, and more consumers attract more merchants.’” But the benefit that the Merchant Defendants received from one another as a result of selling counterfeit goods is no greater or different than the benefit that merchants selling genuine goods receive by operating in the Alibaba Marketplaces. Furthermore, these allegations still fail to show that the Merchant Defendants engaged in anything more than parallel conduct. Two stockbrokers, for example, both of whom engage in similar acts of securities fraud, are not bound by an interpersonal relationship just because their conduct targeted the same stock on the New York Stock Exchange. Boyle’s relationship requirement demands more—it demands plausible allegations that individuals operating within the ecosystem coordinated their conduct to accomplish a common purpose. Such allegations are missing in the present case.
* CNBC: Amazon’s plan to fight counterfeiters will cost legit sellers a ton
* Washington Post: This car company ripped off Land Rover. Here’s why it might get away with it.
The cars are basically indistinguishable unless you hone in on the exact stitching of the seats or the fine arrangement of the headlights. Even then, changes are so minuscule, it’s nearly impossible to realize one of these vehicles costs $41,000, and the other just $21,700.
British luxury carmaker Jaguar Land Rover and Chinese carmaker Jiangling will go to court this summer in China to settle their dispute over what exactly is fair game in the auto industry. Can Chinese companies continue to get away with “shanzhai” — a Chinese term for prideful counterfeiting — of car designs?
* AdWeek: Here Are the Many, Many Ways Your Business Can Get in Trouble for Tweeting the Olympics
* NY Times: Olympic Cover-Up: Why You Won’t See Some Shoe Logos
* Adweek: 10 Ways Brands Are Talking About the Olympics Without Saying ‘Olympics’