The rest of the stop-and-start fakes case — which was brought in 2014, then set aside while the two sides worked to settle the issue, then flared back up in May 2015 — is pressing on. The legal clash is being closely watched as it could help set a tone for how brand owners that have spent millions building the reputation of their products can defend themselves in the world of far-flung Internet marketplaces.
The Racketeer Influenced and Corrupt Organizations, or RICO, Act was created in an effort to fight Mafia groups, but has since been used to take on other groups that are working together toward criminal ends.
Kering alleged that the defendants, including Alibaba, merchants who use the company’s services and unidentified co-conspirators “joined together to form an enterprise in fact whose purpose is to sell and profit from the sale of counterfeit goods.”
However, Manhattan federal judge Kevin Castel dismissed Kering’s RICO claim and a RICO conspiracy allegation.
Kering declined to comment on the ruling on Friday and a spokeswoman for Alibaba said, “We are pleased with the court’s decision.”
Castel ruled: “Plaintiffs have failed to plausibly allege that the merchant defendants engaged in anything but independent conduct, without coordination and for their own economic self-interest. Indeed, the merchant defendants’ relationships with one another are not alleged to be any different from their relationships with the millions of other merchants operating on the Alibaba marketplaces.”
The judge said that, “Two stockbrokers, for example, both of whom engage in similar acts of securities fraud, are not bound by an interpersonal relationship just because their conduct targeted the same stock on the New York Stock Exchange.”
Attorney Douglas Hand, who specializes in fashion law at Hand Baldachin Amburgey, said, “If RICO charges could have been levied in this case against Alibaba and its affiliates, it would have likely had an impact across the e-commerce continuum and enabled designers to more easily go after and enforce damage claims against copiers who sell online.”
The ruling marks the end of one element of the long-running fight. Kering has also alleged trademark infringement, counterfeiting, false representation, trademark dilution, unfair competition and deceptive acts.
Kerring said last year it “maintains the highest standards of sustainability and quality and takes the protection of its world-famous brands very seriously. It takes equally seriously its obligation to protect its customers from being defrauded by counterfeiters selling goods of inferior quality. This lawsuit is part of Kering’s ongoing global effort to maintain its customers’ trust in its genuine products and to continue to develop the creative works and talents in its brands.”
The counterfeits issue has been a thorn in the side of Jack Ma, executive chairman and the driving force behind Alibaba, which entered the global state with a record-setting $25 billion initial public offering in 2014.
Ma told investors in June: “We are world-leading fighters against counterfeits. We can solve this problem better than any government or organization.…This is not a war for Alibaba, it is a war for our industry, for e-commerce. Let’s do it together….We’ve got 500 million people on our platform. If 10 percent of them are bad guys, we’ve got 50 million bad guys, if 10 percent of them are really bad guys, we’ve got five million. Where there is money, there are bad guys. We don’t have police or a court, we just have a group of young people using technology to fight against them. This is a war against human instinct. Every time we sell a fake product, we are losing five customers. We are a victim of this, but we never stop fighting.”