June 27, 2022

Volume XII, Number 178

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June 24, 2022

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U.S. Trade Representative Names 6 Chinese Online Markets in 2021 Review of Notorious Markets for Counterfeiting and Piracy Up 1 From 2020

On February 17, 2022 the  Office of the United States Trade Representative (USTR) released the findings of its 2021 Review of Notorious Markets for Counterfeiting and Piracy (the Notorious Markets List).  The Notorious Markets List highlights online and physical markets that reportedly engage in or facilitate substantial trademark counterfeiting or copyright piracy.  There is no penalty for being listed but the list has been used to encourage foreign companies and countries to crack down on piracy and counterfeiting. Of the 42 online markets listed, 6 are Chinese including Aliexpress, Baidu Wangpan, DHGate, PinDuoDuo, Taobao, and WeChat (Weixin), up from 5 in 2020.   

Relevant text from the report is reproduced below. The full report is available here.

ALIEXPRESS

Nominated as aliexpress.com. Headquartered in China. AliExpress is a business-to-consumer e-commerce platform that connects China-based sellers with buyers around the world. Sellers on AliExpress provide wholesale offerings and order fulfillment services for drop shipping retailers that do not maintain their own inventory. AliExpress is owned by Alibaba and shares certain anti-counterfeiting tools and systems with other Alibaba platforms. As a whole, Alibaba is known for having some of the best anticounterfeiting processes and systems in the e-commerce industry, having much-improved communication with right holders, including micro-, small-, and medium-sized enterprises (MSMEs), on their IP protection and enforcement issues, and for providing significant support for offline investigations and enforcement actions against the companies that manufacture and distribute counterfeit goods. Although these efforts are laudable, this year, right holders have noted a significant increase in counterfeit goods being offered for sale on AliExpress, including goods that are blatantly advertised as counterfeit and goods that are falsely advertised as genuine. Right holders also report a vast increase in the number of sellers offering counterfeit goods. Alibaba notes that AliExpress sellers must provide a business license in order to sell on the platform, but these sellers apparently are not sufficiently vetted to ensure that they will not be selling counterfeit goods. Another key concern of right holders is that known sellers of counterfeit goods on AliExpress remain prevalent, purportedly due in part to the lenient seller penalty system and a removal process that does not deter sellers from continuing to offer counterfeit goods.

BAIDU WANGPAN

Nominated as pan.baidu.com. Headquartered in China. This cloud storage service is operated by Baidu, the largest search-engine provider in China. Users of this service are able to share links to files stored on their accounts with other users. According to right holders, infringers widely share links to pirated movies, TV shows, and books stored on Baidu Wangpan. While right holders report some cooperation from Baidu in recent years and Baidu provides some tools for taking down unauthorized motion picture and television content, takedown times are reportedly lengthy, and right holders often have to follow-up with Baidu to ensure that pirated content does not reappear on the platform. Right holders also raise concerns that they are required to submit thousands of infringement notices to remove multiple instances of a single piece of pirated content, as the platform has no proactive procedures in place to detect pirated content.

DHGATE

Nominated as dhgate.com. Also available as a mobile app. Headquartered in China. DHgate is the largest business-to-business cross-border e-commerce platform in China, although it primarily serves purchasers outside of China. DHgate is reported to be the most popular online market for purchasing bulk counterfeit goods that are then resold on other markets, including the online and physical markets listed in this year’s NML. This year, right holders again identified DHgate’s inadequate seller vetting, ineffective proactive anti-counterfeit processes, and lack of transparency as likely reasons why the volume of counterfeit goods on the platform remains unacceptably high. DHgate reported continued improvements to its seller vetting system over in 2021 that incorporates a third-party database to further verify sellers. DHgate should continue to explore whether the information it requires of sellers and the vetting performed on that information is commensurate with the number of sellers that offer wholesale counterfeit goods on its platform. Regarding proactive anti-counterfeiting processes, DHgate revealed that it recently added approximately 3,399 keywords to its database that scans new products listings, and that it hired five new inspectors to manually review listings. As sellers of counterfeit goods grow increasingly adept at evading detection by altering product images, blurring logos, and using code words to conceal the illicit nature of the goods they offer, the processes used to proactively keep those listings off the DHgate platform will likely have to grow and evolve. Finally, transparent communication with right holders and other stakeholders regarding the steps taken to remove listings and ban sellers after a notice has been submitted, and proactive engagement with right holders and law enforcement to track down the source of counterfeit goods on the platform will instill confidence that DHgate recognizes and embraces its role in combating the global trade in counterfeit goods.

PINDUODUO

Nominated as pinduoduo.com. Also available as a mobile app. Headquartered in China. Pinduoduo, a “social commerce” app, is China’s second largest e-commerce platform as measured by the number of users. Despite significant improvements to its anti-counterfeiting tools, processes, and procedures in the past few years, the large volumes of counterfeit goods
that stubbornly remain on the platform evinces the need to improve the effectiveness of the tools or close the gaps in their implementation. This year, right holders conveyed that Pinduoduo appears to be moving in the wrong direction, with delays in takedowns, lack of transparency with takedown procedures, more burdensome and expensive processes, less effective seller vetting, and reduced cooperation with brands participating in the Brand Care program, as well as those unable to join the Brand Care program. Right holders also report difficulties in receiving information and support from Pinduoduo in pursuing offline follow-on investigations to uncover the manufacturing and distribution channels of the counterfeit goods.

TAOBAO

Nominated as taobao.com. Headquartered in China. Owned by Alibaba Group, Taobao is one of China’s largest e-commerce platforms. Taobao has been identified as a notorious market since 2016 in response to significant right holder concerns about large numbers of counterfeit goods being openly sold on the platform. Alibaba has made strides to improve the anti-counterfeiting processes and tools across its platforms, including Taobao, and has proactively engaged with right holders and the U.S. government on issues of counterfeits on Taobao, which have resulted in a reduced number of NML nominations this year. However, right holders report that the improvements have not led to a decrease in the high volume of counterfeit products on Taobao. This year, right holders expressed concerns that the requirements for takedown notices have become more stringent in recent months, particularly when compared to what other e-commerce platforms require. For example, right holders are evidently being required to submit heightened proof that an item is counterfeit, which in some instances can only be done by disclosing the anti-counterfeiting aspects of the products or testing systems that the right holders claim may be their trade secrets.

WECHAT (WEIXIN) E-COMMERCE ECOSYSTEM

Nominated as WeChat and Weixin mobile apps. Headquartered in China. WeChat, along with Weixin, which is the China-facing version of WeChat, is reportedly viewed as one of the largest platforms for counterfeit goods in China. WeChat reported over 1.2 billion active users around the world in 2021, and describes itself as a “social communication tool and information publishing platform.” Of particular concern, however, is the e-commerce ecosystem that seamlessly functions within the overall WeChat platform and facilitates the distribution and sale of counterfeit products. For example, sellers of counterfeit goods are allegedly directing potential buyers to their counterfeit product offerings by advertising on WeChat through livestreams, the Moments feature, the Channels feature, and other communication portals that are available to all users such as scanning of QR codes at physical stores. The counterfeit goods can then be seamlessly purchased on the profile page of an Official Account or through a Mini Program. Official Account pages and Mini Programs can provide the integrated product catalog, shopping cart, and payment processing features of traditional ecommerce platforms. Additionally, potential buyers can search for products across Official Accounts or Mini Programs, and counterfeit goods are reportedly prevalent within search results. Right holders identify weaknesses in WeChat’s seller vetting as a significant reason for the high volume of counterfeit goods on the platform. According to WeChat, applicants for an Official Account should submit their trademark registration and business certificate information, and Mini Program applicants must submit similar authentication documentation. Right holders, however, assert that the required information, and WeChat’s verification of this information, is lacking such that counterfeiters are able to easily set up their own Official Accounts and Mini Programs. Right holders also identify instances where WeChat reinstated sellers who provided clearly fraudulent documentation to demonstrate the “authenticity” of the goods offered for sale. Once sellers of counterfeit goods are allowed onto the WeChat platform, the ability for brands to find and take down listings of counterfeit goods has been described as ineffective. According to WeChat, anyone can report content on Official Accounts and Mini Programs as infringing an intellectual property right. However, WeChat does not appear to allow registered brands to holistically search or monitor information available to all users for counterfeit goods, making it “extremely challenging” to find bad actors, and right holders describe WeChat’s brand protection portal as “overly bureaucratic and ineffectual.” Right holders also note that the reporting tool is often misused by others who submit non-IP-related complaints, which requires them to sift through completely unrelated or useless content resulting in an unrealistic and unsustainable amount of time to research and follow up on all complaints.
Right holders also complain about WeChat’s three-tiered penalty system for accounts caught selling counterfeit goods. Although there is a lack of transparency regarding the system, from what these right holders can tell, the punishments often involve little more than a brief suspension. Account terminations are reportedly rare and difficult to obtain, and sellers appear
to re-register for new accounts with ease. Finally, right holders contend that WeChat should do much more to investigate and facilitate brand-led inspections into the manufacturers and distributors of the counterfeit goods caught on WeChat’s system. Although WeChat reports that it has worked with law enforcement, administrative, or judicial authorities on many occasions, right holders state that such authorities are frequently unable to obtain cooperation. WeChat points to privacy and data security laws that prevent it from disclosing some information in certain circumstances, but right holders state that they are only looking for the same type of cooperation and information sharing provided by other e-commerce companies operating under the same laws.

© 2022 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.National Law Review, Volume XII, Number 49
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About this Author

Aaron Wininger IP Attorney China Portfolio Development
Director of China Intellectual Property Law Practice Schwegman Lundberg & Woessner

Aaron Wininger is a Senior Attorney and Schwegman’s Director of China Intellectual Property. Aaron counsels both U.S. and Chinese companies on portfolio development and preparation of their patent applications and office action responses. He has worked with clients in the areas of software, networks (wired and wireless), lasers, medical devices, semiconductors and physics.

Aaron prosecutes both Chinese and U.S. trademarks. He has also drafted and prosecuted hundreds of U.S. and international patent applications in a broad spectrum of areas, including computer hardware and software,...

408-278-4059
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