Social media fertile ground for IP abuse

The proliferation in China of social media has meant a surge in the availability of counterfeit items, with hugely popular apps like WeChat offering a growing platform for the sale of fake goods.

Joe Simone, director of Simone IP Services, an intellectual property agency serving multinationals in China, says the emerging social media trend represents a huge new challenge for established brands.

"There's an ad (on social media), and when you want to pay, you pay directly," he says.

"It's something we'll be talking about in three years' time, but at the moment it's not on people's radars, yet it should be."

With 40 percent of the world's population connected to the internet, online counterfeits in China are one of the biggest challenges facing global brands, which often remain tight-lipped about the issue.

Anti-counterfeit work in China is also costly for brands, according to Simone.

"I hardly know any company who really knows their stuff and that can say, 'I'm on top of my online problem'. Often, that's because of pricing," he says.

IP infringements are as a result not usually reported, making it difficult to find data and quantify the sheer scale of the problem.

A spokesman from Tech21, a British company that makes high-end smartphone cases, says online counterfeits are one of the most challenging aspects of entering the Chinese market.

"We work extremely hard to create unique products that satisfy our customers and it is frustrating when those customers unwittingly receive counterfeit and vastly inferior products," the spokesman, who requested anonymity, says.

"We do a number of things to counteract this problem, including increasing our own brand presence in China, creating genuine opportunities for shoppers to buy directly from us ... as well as taking legal action against those who steal our IP, including logos, product designs and images."

Individual British brands have told the China-Britain Business Council that they lose millions of pounds' worth of sales each year because of online counterfeiting in China, though the body doesn't have any accurate statistics on the issue.

While the internet is a major facilitator of counterfeit products, the borderless nature of social media for vendors and consumers to exchange fake goods is now serving up an even bigger challenge for brands.

The CBBC says it receives a number of complaints from British brands about WeChat and the increasing use of Moments - a feature that allows you to post updates to other users - on both personal and official accounts.

"We're trying to work together with WeChat to help them improve their IP protection mechanism," says Michael Ryan, the council's head of IP issues.

"At this stage, sales on WeChat don't make up a big part of the market, and WeChat will be the first to point out they're not an e-commerce platform but an information sharing platform and they're not actually selling things themselves."

According to Ryan, WeChat, which says it has almost 700 million monthly active users, has a brand protection platform, as well as a system of WeChat users reporting online postings that may be a scam or IP infringing.

"That report then goes directly to the brand owner and then they have the opportunity to say, 'Yes, this is an infringing item' or, 'No, this product is genuine,'" he says.

"The same system can also be used by brand owners to submit complaints to take down goods, particularly from official accounts."

Beside social media, Simone says the sale of fake goods at higher prices is another sign the issue of online counterfeit has infiltrated a lot deeper into the economy.

"The movement from the obvious seller of fakes to a higher price is the biggest development in the past few years and is much more cancerous," he says.

"A smart counterfeiter is not going to use photographs that are stolen; they're going to take their own pictures of a legitimate product, and then set it at a price so that it's really hard for a brand owner to say it's fake."

Simone refers to this subset, which attracts consumers who can afford to buy the real thing, as the cloud.

He warns it gives rise to problems for online platforms, like Alibaba, the Chinese e-commerce giant, which have notice and takedown procedures in place - whereby IP rights holders can file requests to have links to counterfeit products removed.

"The last thing Alibaba wants is to be doing takedowns and getting into arguments with vendors over the fact that the product was actually real, and the brand owners being too aggressive," he says.

AliProtect and TaoProtect are two of Alibaba Group's IP protection strategies used to submit complaints about suspected infringing goods across its various platforms.

The e-commerce company, which has a whopping 80 percent share of China's online shopping market, has been criticized by Chinese regulators over the sale of fake goods on its platforms.

Last year, the country's top watchdog found that only 37.25 percent of examined goods on Taobao, an online market place operated by Alibaba, were genuine. The findings were disputed by the company.

In the same year, the CBBC, under a strategic agreement with Alibaba, launched an investigation into some of the larger sellers of counterfeit engine oils on behalf of British producers.

"Through that investigation, 120 million yuan ($18.4 million; 16.3 million euros) worth of counterfeit oils were confiscated that were in the public domain in December 2015," Ryan says.

"There are criminal cases going through the Chinese courts at the moment."

A British spirits producer says: "Alibaba's ambition to protect the IP environment is getting stronger, and the memorandum of understanding between CBBC and Alibaba definitely plays an important role in it."

According to Simone, despite strategic partnerships, like those between Alibaba and international governments, there's a significant lack of anti-counterfeit lobbying by industry globally.

In 2014, China established three courts that specialize in dealing with intellectual property case in Beijing, Shanghai and Guangdong province.

China's Supreme People's Court is considering establishing additional courts to deal with such disputes.

For China Daily

(China Daily Africa Weekly 05/20/2016 page28)