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Toh Han Shih

Luxury goods makers plan legal action against mainland sites for selling fakes

Leading luxury brands are poised to take legal action against  Chinese web portals for allowing fake products to be sold online, according to a partner at international law firm Baker & McKenzie.

The law firm, which represents more than 20 brands in Hong Kong and China  fighting the problem of online fakes,  could launch legal actions  in major cities across the country.

'The brands are extremely alarmed. For instance, a major French luxury brand told us that it launched an action against a US website, but the quantity of fake goods on that website is much less than one of the bigger Chinese websites,' Tan Loke Khoon, a partner at Baker & McKenzie, said.

'Many brands identify online fakes as one of their biggest challenges now. For the last three to four years, I have noticed an increasing amount of fake luxury goods sold online.'

A source said brands hurt by online sales of fake luxury goods included L'Oreal and Louis Vuitton.

The threat of legal action follows a similar case in the United States last year in which jeweller Tiffany  sued eBay to halt the sale of fake merchandise. If the luxury brand  wins the case, eBay will be forced to account for profits made on the sale of counterfeits or else pay up to US$1 million for each type of fake Tiffany merchandise sold on the website.

Tiffany said it randomly bought 'Tiffany' jewellery through eBay and found 73 per cent of them  were  fakes.

Some brands had sent 'cease and desist' letters to offending websites, telling them to stop selling  and remove the fake products from their websites, said Mr Tan. 'Most brands hope these websites will police themselves effectively, but it's very difficult.'

A spokeswoman for one European luxury brand said counterfeits injured the brand's image. She said several cases in China had already been referred  to the police and the Administration for Industry and Commerce, but the authorities often could not physically find any  goods being sold by the offending websites.

'If you check their premises, they often have no products. If you seize nothing, it's difficult to launch a criminal prosecution against the culprits,' she said. 'The websites' business model enables them not to stock goods. On the internet, we are really at a disadvantage.'

She said colleagues in the US had ordered fake goods from various websites and shipments had come mostly from China.

'Many major brands tell me that 90 per cent of the goods sold under their brand names on unofficial and unauthorised websites are false,' Mr Tan said.

'This is possibly linked to the growth of the internet in China. The problem has become noticeably severe with the rise of Chinese search engines, portals and auction websites.'

While China passed laws  last year requiring internet service and content providers to remove products that infringe a brand's copyright, enforcing the legislation has been another matter.

'The reality is that this problem can't be solved today, because the laws in China and other countries, even the US, have no real teeth,' Mr Tan said. Laws in most countries including China and the US state no clear liability for internet service and content providers if they host online vendors of fake products.

Under  Chinese laws, mainland internet service and content providers are not legally obliged to monitor or police themselves against the sale of counterfeit products on their websites, according to Mr Tan.

Legal experts are awaiting the verdict on the dispute between Tiffany and eBay, which would set a legal precedent in the US.

'Even the US has not sorted out the problem of online fakes legally, so it's not surprising China is lagging behind,'  Mr Tan said.



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