New Restrictions From China Could Threaten Sites Violating IP Laws

As counterfeit products continue to plague digital retail, new regulations from China could threaten some of its largest platforms including Alibaba and JD.com.


The State Administration of Market Regulation (SAMR), which oversees both digital and physical retail markets in China, proposed amendments to the nation’s eCommerce law earlier this month, indicating that licenses can be revoked for online platforms failing to take action against vendors infringing upon intellectual property rights.


According to the Draft Guiding Opinion on the Adjudication of Intellectual Property Disputes Involving E-commerce Platforms released before the Supreme People’s Court of China last year, online retail sites hold the primary responsibility for implementing their own measures regarding IP rights. Article 45 of the law specifically indicates that platforms shall assume an additional case of joint liability with offenders when they “know or should have known” of any IP infringements yet failed to take appropriate measures, including the removal, blocking and deletion of links.


The law reflects, in part, commitments made on behalf of China during the first phase of 2020’s US-China Economic Trade Agreement. Several Chinese platforms, including Alibaba’s Taobao.com, had previously been included on the US Trade Representative’s 2020 Review of Notorious Markets for Counterfeiting and Piracy.


“The problem is that the fake products today, they make better quality, better prices than the real products, the real names,” stated Alibaba co-founder Jack Ma in 2016.


While a penalty of 2 million yuan ($309,521 USD) is already in place for platforms knowingly enabling counterfeiters and IP violations, the SAMR’s proposed revocation of licenses is a new amendment reflecting the growing international concern from both regulatory agencies and retailers towards online piracy.


A recent review from the International Trademark Association estimates that the value of trade in counterfeit goods could reach as high as $2.8 Trillion by 2022. Pirated goods from China reportedly accounted for over 70 percent of all global counterfeit trade in 2016 alone, a value assessed at over $285 Billion. Digital commerce in China saw a growth rate of 20 percent in 2020, a revenue totalling $2.16 Trillion.


The SAMR is inviting opinions on the draft revision until October 14th, 2021.



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