In January, Microsoft and Alibaba Group teamed up to tackle counterfeits on the Chinese company’s various platforms. TBO assesses the agreement and asks whether it will result in a significant reduction in fakes.
The term memorandum of understanding (MOU) doesn’t exactly evoke excitement.
When considering what it might entail, the mind could wander to images of pages and pages of legal jargon with very little substance.
But an MOU signed by Microsoft and Alibaba Group in January this year could change that perception. The players are among the biggest in their respective industries.
Alibaba is China’s biggest online e-commerce company, providing consumer-to-consumer (C2C), business-to-consumer (B2C) and business-to-business (B2B) services. Its platforms include Taobao and Tmall.
Microsoft is one of the world’s biggest computer software companies, known for products including the Windows operating systems, Microsoft Office, and the Internet Explorer web browser. Its Xbox game console is one of its flagship products.
When TBO first reported on Alibaba and Microsoft putting pen to paper, the companies claimed the agreement would help consumers to avoid goods ripping off Microsoft products, and that both companies would coordinate on action against counterfeiters and collaborate on raising awareness.
The finer details of the deal mean Alibaba will remove suspicious listings from its Taobao and Tmall platforms, provided it has received a notification from Microsoft first.
The two companies also hope to expand their programme to educate Chinese consumers about the risk of pirated software.
Working together
Neither Alibaba nor Microsoft responded to a request for comment on the MOU, but on the Alizila website, which features news and commentary on Alibaba, Ni Liang, senior director of security operations at Alibaba, was quoted as saying that it is “constantly working with partners and stakeholders” to enhance intellectual property protection and tackle counterfeiting.
“Microsoft has been a great partner on this front, and we believe that this agreement will go toward building an orderly e-commerce environment where consumers’ interests are best protected,” Liang added.
Tim Cranton, Microsoft’s associate general counsel, said in a statement after the announcement of the MOU that Microsoft was “committed to protecting customers from downloading or purchasing non-genuine software”.
Wider details of the MOU, such as a proposed timescale for achieving results or specific projects the pair will carry out, are not known at this stage, but there is a feeling among IP practitioners that the deal could have a positive effect.
Gareth Dickson, an associate at law firm Cooley in London, says agreements such as this “help focus parties’ minds” on the issues facing them.
“They reveal a lot about what each party is thinking on the issues, and they send a message to the public at large about how seriously they take them.”
He adds: “When parties have a meeting of minds on matters of importance to them, good things can happen.”
“Tmall shops that are operated by brand owners and reliably sell legitimate goods have done a lot to increase Chinese consumers’ confidence in buying goods online"
Joshua Mandell, a senior associate at law firm Rouse in Beijing, is also hopeful.
“Anything that makes it easier for a right owner to remove offers for counterfeits from B2C/C2C sites is bound to be helpful,” he tells TBO.
But, referring to Alibaba and Microsoft’s pledge to remove counterfeit products from the sites, Mandell adds that in the past right owners have sometimes had difficulty in efficiently establishing that goods on offer on online platforms were definitely counterfeit.
“An unreasonably low price was considered insufficient,” Mandell explains. “In some cases, samples had to be purchased from counterfeit sellers, or other preliminary evidence had to be gathered. This can be quite labour-intensive and that undermines the effectiveness of a take-down programme when hundreds or thousands of offers are involved.”
Legal moves
Dickson says the MOU should not be considered as a way of both companies “giving up on the law” to develop their own remedies, but rather a way of emphasising the existing attitudes toward IP and a need to tackle counterfeits.
“Legal redress against sellers of unauthorised software is clearly an important part of the MOU,” Dickson says.
“The fact that Alipay (Alibaba Group’s online payment service) will offer guidance to consumers about obtaining compensation emphasises again the importance of, and need for, education in the battle against counterfeiting,” he adds.
Alibaba and Microsoft are no strangers to working together on these types of initiatives. In 2013 Microsoft launched a flagship virtual store on Tmall in order to promote genuine Microsoft products.
But this time, Mandell says, there are new benefits.
“First, Microsoft will be better able to have offers for counterfeit goods removed once sellers post them. Second, consumers will be better able to get their money back and address the security concerns that pirate software carries.”
Mandell adds that practices that are already on the rise, for example the sharing of information on sellers of counterfeit goods with right owners and authorities, and refunding money to consumers who have been duped, will also help to decrease the profits of people selling counterfeits on mainstream sites.
Discount days
In recent times, Alibaba has been implicated in the sale of counterfeit goods in China.
In December 2014, TBO reported that China’s State Administration for Industry and Commerce (SAIC) said that more than 10% of products available on e-commerce websites, including Alibaba.com and its subsidiaries, on a renowned online shopping day were found to be counterfeit.
The SAIC said that 10.6% of products it sampled on November 11, known in China as Single’s Day—a day which has seen sharp increases in online shopping due to the amount of discount deals being marketed—were counterfeit or sub-standard.
In November, TBO also reported that a Chinese government department, the Office of the National Leading Group for Combating IPR Infringement and Counterfeits, was set to tighten up its anti-counterfeiting efforts following a boom in online shopping.
Chai Haitao, deputy director at the office, which is part of the Ministry of Commerce (MOC), said that increasing cross-border online trade meant “new approaches were needed” to stop the flow of counterfeit goods.
Even further back, in 2013, Alibaba entered into an agreement similar to the Microsoft MOU with French fashion brand Louis Vuitton.
Mandell is quick to praise the efforts that Alibaba and its various platforms have made in recent times.
“Alibaba recently reported some figures on their consumer protection and anti-counterfeiting efforts,” Mandell says, referring to Alibaba’s announcement in December 2014 that it had spent RMB 1 billion ($160.7 million, based on exchange rates at the time) fighting counterfeits from January 2013 to November 2014.
Mandell adds: “Tmall shops that are operated by brand owners and reliably sell legitimate goods have done a lot to increase Chinese consumers’ confidence in buying goods online, especially higher value goods. This creates a very lucrative, growing market, and one that benefits everyone involved.”
It is not known whether the MOU with Microsoft is a direct result of the MOC’s earlier pledge to tackle counterfeits, but Dickson says the deal could be seen as a stepping stone for industry-wide cooperation on fakes.
“If two major players in the digital economy can demonstrate that this type of cooperation can be mutually beneficial, then there is every reason to believe others will see the incentive to cooperate in a similar manner,” he says.
Long-term effects
Could an agreement like this really lead to a significant reduction in counterfeit Microsoft products?
While it may have an immediate impact and kick others into action, Dickson is not optimistic about the MOU’s ability to permanently banish counterfeits.
“As long as it remains profitable for counterfeiters to sell unauthorised goods online, they will devise new ways, or use new locations, to get around whatever measures right owners adopt to protect their IP,” he says.
Mandell adds that counterfeits “exist on online shopping sites because they exist in the real world marketplace”, not the other way around. “For right owners, this can turn into an endless game of ‘whack-a-mole’,” he says.
As with the early days of any agreement in which the parties pledge to make a big difference, excitement and speculation on what may happen are building.
There could be two possible outcomes to the MOU.
It could be hailed as another step towards China’s efforts to cast aside its somewhat fading image as a Mecca for counterfeits and to establish itself as a safe environment for right owners.
Alternatively, it could simply fall by the wayside as counterfeiters wise up to the methods employed and seek other means of getting their fake products online.
How the companies react to and deal with forthcoming challenges will be a key indicator of whether the agreement can work in the long term. The challenge then will be to encourage other major players to follow suit.
Microsoft, Alibaba, Tmall, online counterfeiting
