French luxury brand Kering has dropped its US lawsuit against Chinese e-commerce giant Alibaba in favour of a partnership with the online marketplace to co-operate over protecting intellectual property and fighting fakes.
The owner of Gucci and Saint Laurent was in the middle of court proceedings after filing a lawsuit against Alibaba in 2015 over claims the online marketplace wasn't sufficiently tackling fake goods on its platform. But dismissal of the lawsuit and this new agreement between the two firms is something of an about-turn and reflects the effort Alibaba is putting in to fight counterfeits and woo big brands.
Described as a "landmark" and "ground-breaking" agreement, the partnership will see the two companies – and Alibaba's affiliate Ant Financial Services – "co-operate in their efforts to protect intellectual property and take joint enforcement actions online and offline against infringers in order to provide the best consumer experience and a trusted environment", a statement from the companies said.
As part of the agreement, Kering has agreed to dismiss the lawsuit and instead the companies have established a joint task force with the purpose of collaborating and exchanging information, as well as working closely with law enforcement bodies to take appropriate action against infringers of Kering's brands.
Financial terms associated with the deal were not disclosed.
The relationship is grounded in Alibaba's advanced technology and big data capabilities – including complex algorithms, machine learning, optical character recognition and mapping technologies – which it says was responsible for generating 1,184 information leads to law enforcement agencies last year, resulting in the arrests of 880 suspects, the seizure of more than RMB 3bn ($440m) worth of merchandise and the shutdown of 1,419 manufacturing locations.
"The new partnership represents a milestone in both parties' investment and efforts to protect brands' intellectual property rights," the statement said. "This agreement reflects the parties' firm belief that taking proactive measures and using advanced technology will help law enforcement bodies and other relevant authorities address the challenges of intellectual property infringement."
Kering first sued Alibaba in 2014 claiming Alibaba's complicit knowledge of the sale of fake goods was tantamount to racketeering. This case was settled out of court before trial with Alibaba promising a "zero tolerance policy" against counterfeits and a commitment to keeping fake Kering brands off its platforms.
But in 2015, Kering went back to court, suing Alibaba on behalf of its brands Balenciaga, Bottega Veneta and Gucci, among others, alleging that the e-commerce site was infringing trademarks, facilitating the sales of counterfeit goods and colluding with vendors selling fakes.
Then last year, a US judge dismissed part of the lawsuit, ruling that Kering had "failed to allege the existence of a conspiracy" under federal racketeering law.
According to The Fashion Law, the co-operation deal leaves open the option for Kering to sue Alibaba again if the agreement terms are not met.
The online marketplace has had criticism heaped at it over the past few years with accusations it has allowed fake goods to persist on its platforms. At the end of last year, the firm's Taobao platform was relisted as a notorious market by the US Trade Representative, something Kering had been pushing for.
As the e-commerce site realised it was taking a reputational hit it began to publicly make efforts to address the issue, introducing a number of new initiatives including a Platform Governance Department and more stringent monitoring and takedown systems.
The firm has also introduced programmes that encourage closer IP enforcement collaboration with rights holders, such as the IP Joint Force System and the Alibaba Group Big Data Anti-Counterfeiting Alliance, which includes Samsung, Louis Vuitton and Mars as partners.
Just this week, the firm announced its anti-counterfeiting initiative, the Cloud Sword Alliance, has recruited more governments from various Chinese provinces boosting the membership to 13. The Alliance will work with the Big Data Anti-counterfeiting Alliance to combat counterfeit rings.
That news and the Kering deal comes as Alibaba also announces a new, exclusive, invite-only Luxury Pavilion on its Tmall platform. Brands currently signed up include Burberry, Hugo Boss, La Mer, Maserati, Guerlain and Zenith.