USTR Redesignates Taobao a 'Notorious' IP Market in 2016 List

Listed online markets were reported to “engage in or facilitate substantial piracy and counterfeiting to the detriment of U.S. creators and brand owners, as well as legitimate sellers and distributors,” USTR. The online markets also “may lack safeguards for consumer privacy, security, and safety," it said. "Some sites reportedly actively and surreptitiously install malware on users’ computers, commit advertisement fraud, and enable phishing scams that steal personal information, all to increase their unlawful profits.” The listed physical markets “remain a primary distribution channel for counterfeits in much of the world,” USTR said. Copyright-intensive industries “focused exclusively on notorious online markets due to the rise of digital distribution and online infringement,” USTR said. “In contrast, trademark-based industries continued to nominate both online and physical marketplaces.”

Inclusion of Taobao on the notorious IP markets list is a reversal for Alibaba, which was last included on the list in 2012. Alibaba has continued to act to “address right holders’ concerns on Taobao by, for example, establishing internal offices focused on IPR [IP rights] and appointing experienced officers to guide these efforts, addressing the misuse of brand keywords and blurred trademarks in product images, and developing technology to prevent counterfeit sellers from re-opening,” USTR said. Alibaba reported removing more than 380 million product listings from Taobao deemed to infringe IP rights in the year ending in August. But “current levels of reported counterfeiting and piracy are unacceptably high,” USTR said. “Not only do counterfeit and pirated goods pose a grave economic threat to U.S. creative and innovative industries,” they also undermine the “Chinese and global market for legitimate U.S. products.”

“We are very disappointed by the USTR’s decision ... which ignores the real work Alibaba has done against counterfeiters,” said Alibaba Group President Michael Evans in a statement. This “leads us to question whether the USTR acted based on the actual facts or was influenced by the current political climate” created by the incoming administration of President-elect Donald Trump. USTR said in its 2015 report it was “increasingly concerned” by reports that Alibaba’s enforcement program is “too slow, difficult to use, and lacks transparency” (see 1512170048). The American Apparel and Footwear Association (AAFA) praised again designating Taobao as a notorious market, citing the report's mention that Taobao hosts an "unacceptably high" number of counterfeits. This "shines a renewed spotlight on the considerable concerns we and others continue to see on Alibaba platforms," AAFA CEO Rick Helfenbein said in a statement. "In the coming year, we will work with our members, USTR and other government agencies, outside stakeholders, and Alibaba itself to seek sustained improvements that lead to the permanent removal of counterfeits from these online platforms."

USTR noted the increasing importance of stream ripping as an IP infringement issue, saying this year's notorious markets list was the first to include stream ripping websites. The only such site included on the list was Youtube-MP3.org. Stream ripping, which “often involves violations of terms of use and the circumvention of technological protection measures,” is “on the rise in the world's leading music markets,” USTR said. The International Federation of the Phonographic Industry found that nearly 30 percent of surveyed internet users used stream ripping services. “Stream ripping is a direct threat to this digital growth as it eliminates the need for users to return to licensed services, thereby depriving artists and record companies of this important revenue source,” USTR said.

The document “underscores the need for accountable governments everywhere to take on these forms of piracy and counterfeiting at every stage of the global supply chain to prevent final products that put health and safety of end-consumers at risk,” said USTR Michael Froman in a news release. The report highlighted the disappearance of several websites from the online markets list, including Kickass Torrents, Torrentz.eu, Cuevana.tv and EX.ua that have ceased operations over the past year. The shutdowns “demonstrated a willingness to cooperate in addressing infringement, such as: accelerating responses to infringement complaints; entering into licensing arrangements with right holders; developing technology to identify or prevent infringing uses of platforms; and engaging with right holders to develop cooperative procedures,” USTR said.