IP PROTECTION IN CHINA ’ S E-COMMERCE INDUSTRY
In September 2019 , Pinduoduo improved its online IP protection portal by launching an English-language version to help international rights holders , and using enhanced algorithms to improve the speed of takedown requests . 24 Its portal also contains educational material on takedown procedures . In addition , Pinduoduo established a dedicated team to resolve rights holders ’ inquiries regarding its IP protection portal .
Alibaba ’ s portal covers its key e-commerce platforms 25 and comprises one way that rights holders can file takedown requests ; other channels include phone , email and online . 26 It expedites takedown requests from proven rights holders , removes products until the request is resolved , 27 and alerts proven rights holders to listings Alibaba believes are suspicious but cannot verify . 28
This proactive approach is used by JD . com , too , which has “ zero tolerance ” of fake and shoddy products , and who ’ s “ one strike and you ’ re out ” rule for merchants guilty of such practices sees them removed and blacklisted . 29
PENALTIES AND ENFORCEMENT The fourth element in INTA ’ s best practice guidelines is to implement penalty policies and enforcement measures . All three of China ’ s leading e-commerce platforms do this , with Pinduoduo ’ s approach to penalties the most stringent ( see box ).
Along with its 10-times compensation procedure for counterfeit products , Pinduoduo provides consumers three-times compensation for sub-standard products , as well as compensation for delayed shipments . 31 Additionally , merchants guilty of sales of counterfeit goods will see their store shuttered .
Proactive measures : 10x Compensation Policy
Pinduoduo has the toughest compensation policy of any of the major e-commerce platforms . Its policy , which it instituted from the start , fines any merchant who sells counterfeit goods 10x the value of the goods sold historically .
This compensation far exceeds that required by law , and was upheld by China ’ s highest IP court after aggrieved merchants claimed it was too onerous . Additionally , all customers who have bought a counterfeit product ( not just those who complain ) get this 10x compensation .
Compensation is deducted from the deposit and the account of the store concerned and from others owned by the same person . Pinduoduo has also set aside a RMB250m ( US $ 35m ) consumer protection reserve fund to ensure consumers are compensated even if merchants cannot pay in full . 30
The firm ’ s tough compensation policy is backed by anonymous secret buyers and – if a counterfeit is confirmed – a range of serious consequences follow . Merchants know that they can , and probably will , get caught .
Alibaba ’ s policy is to escalate penalties to deter repeat infringement . 32 Taobao removes infringing products and the information on them , and has a three-strikes policy under which a merchant account is closed if it has listed infringing products on three occasions . ( Alibaba ’ s Tmall has a stricter one-strike policy .) In addition , Taobao can remove a product listing , restrict new listings , retain a merchant ’ s deposit , order that compensation be paid , or ban the merchant .
JD . com monitors merchants and goods by actively inspecting products and publicity on its platform using a quality management system , and hiring global inspection companies to conduct mystery shopping , 24
See : https :// www . pinduoduo . com / home / tousu 25
Those platforms are : Taobao , Tmall , Tmall Global ( tmall . hk ), 1688 . com , Aliexpress . com , Alibaba . com and Lazada . As per Alibaba ’ s public filing on its Comments for 2019 Special 301 Out-of-Cycle Review of Notorious Markets ( see subsequent reference ). 26
Comments for 2019 Special 301 Out-of-Cycle Review of Notorious Markets : Docket No . USTR-2019-0013 – PUBLIC VERSION , Alibaba ( September 30 , 2019 ). 27
See : https :// ipp . alibabagroup . com 28 Comments for 2019 Special 301 Out-of-Cycle Review of Notorious Markets : Docket No . USTR-2019-0013 – PUBLIC VERSION , Alibaba , op cit . 29 In-Depth Report : How JD Tackles Counterfeits Part Two : The Quality Guarantee , JD . com , op cit . 30 Consumer Protection Annual Report , Pinduoduo ( October 2019 ). 31 Ibid . 32 Comments for 2019 Special 301 Out-of-Cycle Review of Notorious Markets : Docket No . USTR-2019-0013 – PUBLIC VERSION , Alibaba , op cit .
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