Intellectual property and e-commerce: Alibaba’s perspective

By Jungong Sun, Director of the Alibaba Intellectual Property Research Institute and Vice-President of the Alibaba Group

E-commerce emerged in China just 25 years ago, in 1993. Two years later, the country’s first e-commerce company was established, and three years after that, in 1998, the first e-commerce transaction took place. From these modest beginnings, China’s e-commerce landscape has evolved beyond recognition. And in that process, it has moved away from mirroring the practices of Western economies to developing its own model which embraces globalization.

Since the 1990s, several pioneering global internet companies have emerged. These include giants like the Alibaba Group (Alibaba), JD.com, and Suning.com. Since 2013, China has led global rankings for the volume of online retail transactions. In 2016, four Chinese online retailers – Alibaba, JD.com, Xiaomi, and Suning.com – ranked among the top ten global e-commerce companies. With a market share of 26.6 percent, Alibaba topped global rankings for that year.

Founded in 1999 by Jack Ma, China’s online business pioneer, and his associates, the Alibaba Group now employs more than 70,000 people around the world and has more than 70 offices in Greater China, India, Singapore, the United Kingdom and the USA. The Alibaba Group has since developed leading businesses in consumer e-commerce, online payment, business-to-business (B2B) marketplaces and cloud computing. More recently it has expanded into a range of new areas, including mobile apps, mobile operating systems and Internet TV. Alibaba’s mission is to make it easy to do business anywhere.

Alibaba spearheads a new model for intellectual property protection

The protection of intellectual property (IP) rights in today’s innovation-driven and increasingly knowledge-based global economy is an important consideration for policymakers and businesses around the world. IP protection has also become a central concern for online retailers, including the Alibaba Group which has had IP protection in its sights since it began operating.

The Alibaba model for IP governance in e-commerce seeks to protect IP rights by integrating technology, business models and the law.

Jungong Sun, Vice-President of the Alibaba Group

In an attempt to tackle the proliferation of counterfeit products more effectively, and the growing number of related complaints, many on-line retailers have set about building user-friendly, internal governance systems that support the protection of IP and their reputation as socially responsible corporate citizens. The Alibaba Group, for example, has, through experimentation, pioneered the development of an ever-more sophisticated and effective IP protection system. Using advanced computing technologies and big data, Alibaba’s Platform Governance Department has crafted and rolled out an effective system for spotting and disciplining offers involving counterfeit goods on its platforms. Alibaba’s governance model is built around proactive monitoring and an effective IP rights infringement notification system. The so-called Alibaba Model for IPR protection in e-commerce is governed by technology, innovative business practice and the law.

Using technology to improve online governance

Alibaba is harnessing various advanced technologies to tackle online counterfeiting and piracy. To identify counterfeit goods it uses fake product identification modelling, image recognition techniques, semantic recognition algorithms, product information databases, real-time interception systems and data collaboration platforms. Thanks to its algorithms, every day Alibaba identifies up to 600 million product images with an accuracy rate of 97.6 percent. Using these sophisticated technologies, over 97 percent of suspected infringing goods are removed from Alibaba platforms as soon as they are posted online. In 2017, twenty-seven times more goods were removed from Alibaba platforms using these technologies than were removed with takedown notices issued by IP rights holders.

Strengthening governance through innovative business practice

As a leading e-commerce player, Alibaba is at the forefront of efforts to shape China’s e-commerce landscape. Since it opened its doors for business, the Alibaba Group has been working to build an open, collaborative and thriving e-commerce ecosystem that benefits consumers, merchants and the economy as a whole by making it easy to do business anywhere. With this in mind, Alibaba is leading the development of the private sector-led Electronic World Trade Platform (eWTP), a multi-stakeholder initiative which seeks “to incubate e-trade rules and foster a more effective and efficient policy and business environment for cross-border electronic trade development.”

By April 2018, seventeen countries and regions had set up pavilions on the Alibaba’s Tmall platform, the preferred channel for large overseas brands and small and medium-sized enterprises seeking to enter China’s sizeable and expanding online consumer market. To date, over 100,000 brands – representing 75 percent of the world’s most valuable consumer brands – have a presence on Alibaba’s e-commerce platforms. The commercial power of e-commerce in China has made it a magnet for global brands, and has allowed it to become the touchstone for best practice with respect to IP protection.

Alibaba is constantly exploring new ways to tackle the illegal online trade in counterfeit goods. In July 2016, the company launched its IP Joint-Force System, a world first, which combines the strengths of e-commerce operators and right holders. The system uses big data modelling identification to provide IP rights holders with links to suspected IP infringements, giving them “one-click rights protection”. So far, over 250 rights holders have joined the initiative.  

In August 2017, Alibaba launched the Alibaba Express IPP, which offers global IP rights holders a range of benefits free of charge. Beyond managing a world-leading online IP protection system for all brand owners, the program provides right holders with an upgraded IP enforcement service, in particular, by eliminating frivolous, bad faith complaints. Under the program, 95 percent of IP notifications (excluding bad faith notifications) can be processed within 24 hours. This is yet another global first for the Group.

Governance underpinned by the law

The rules governing the use of Alibaba’s platforms are rooted in law and are made publicly available to all parties via those platforms. Under development since 2010, the rules cover all types of IP infringement and govern the full range of activities undertaken by all parties using Alibaba platforms. To date, there have been more than 60 iterations of the rules for Taobao.com, Alibaba’s biggest website, and over 70 iterations of the rules for Tmall.com. These rules cover penalties, access permission, transactions, and marketing. The group has also developed a variety of mechanisms to protect IP right holders. For example, in 2017, Tabao introduced its “three strikes and you are out” policy to clamp down on repeat offenders.

Since 2016, Alibaba has also actively initiated civil actions against vendors of counterfeit products on its platforms. In 2017, the Group won a landmark case when a Shanghai court ordered a vendor of pet foods to pay RMB 120,000 (approximately USD 17,700) in damages. The case attracted widespread attention in judicial and media circles as it was the first time an e-commerce platform had successfully sued a purveyor of counterfeit goods online. The case was selected as a top ten case for “Promoting the Process of the Rule of Law in China” by the Supreme People’s Court and China’s state broadcaster, CCTV.

Innovative dispute resolution mechanisms

To resolve disputes arising from online transactions, Alibaba has developed its highly innovative Public Review Mechanism which canvasses public views on whether or not proposed rules to discourage certain online behavior are considered reasonable. Following its launch in December 2012, users of the Taobao platform were asked to vote on whether the platform’s rules regarding fictitious trading were reasonable. They concurred. The mechanism was subsequently rolled out to support the resolution of transaction-related disputes. The mechanism is proving highly successful and has been further enhanced. It now uses consumer inputs to support the identification of copycat brands. So far, nearly five million people have taken part in the Public Review Mechanism and over 100 million dispute judgments have been completed.

With Alibaba leading the charge, Chinese e-commerce enterprises have developed an innovative framework of e-commerce governance which combines proactive prevention and control measures with effective complaint handling and dispute resolution. The Alibaba model for IP governance in e-commerce seeks to protect IP rights by integrating technology, business models, and the law. 

Alibaba’s model is now widely referenced and is being implemented by other e-commerce platforms. Its strength lies in the fact that the technology it uses can be easily adapted to areas beyond e-commerce to support the protection of IP rights across a broad range of sectors. In this way it supports efforts to build greater respect for IP rights across the economic and social spectrum.

The future

Looking to the future, scientific and technological developments promise to boost creativity, innovation, and business growth in coming years. However, if we are to achieve inclusive trade – where many more small companies and individuals are able to participate in and enjoy the benefits of global trade – it is important that trade barriers are minimized and new global trade rules are adopted.

Legal systems are struggling to keep pace with the needs of the new information age. The traditional means of protecting IP rights are no longer fit for purpose in today’s seamless, high-tech-driven world. Those rights which are territorial in nature, meaning they only have a legal effect in the jurisdiction in which they are granted, are being challenged by the borderless nature of e-commerce. The legal penalties and enforcement mechanisms of the 20^th century are toothless in tackling e-crimes such as online fraud, ID theft, spamming, and so on. We need to find new, more effective solutions to create robust systems for tackling these challenges. New technologies can help us better regulate the online ecosystem to ensure that it continues to expand.

In 2016, Alibaba introduced five-new strategies for retail, manufacturing, finance, technology, and energy. As reflected in the company’s “Made in Internet” theme, the internet, and use of big data to identify consumer preferences, will become an important driver for incubating and cultivating improved IP rights.

Only by respecting IP and fostering the development of IP rights that are effective in fostering online trade can we achieve high-performing, competitive markets. The issue of IP protection in e-commerce is a complex challenge, especially when tackling the online sale of counterfeit products. It involves more and better cooperation and joint governance among relevant stakeholders, and the sharing of data and technologies among government authorities, IP rights holders and e-commerce platforms. Such an approach is essential if we are to make a real difference, achieve mutual benefit and ensure that e-commerce continues to thrive.