US Court “strongly recommends” mediation despite reluctance to settle in luxury goods makers’ claims against Alibaba

US Court “strongly recommends” mediation despite reluctance to settle in luxury goods makers’ claims against Alibaba

A US judge has “strongly recommended” that a group of luxury goods makers, including Yves Saint Laurent and Gucci continue with attempts to mediate the group claim against China’s largest e-commerce entity, Alibaba Group Holding (“Alibaba”). The claim relates to the sale of counterfeit goods by Alibaba worldwide.

The claim was filed at Manhattan Federal Court in May and alleges that Alibaba was aware of counterfeit goods being offered for sale on its websites and had conspired to manufacture, offer for sale and traffic such goods, under the claimant’s trade marked names, without the permission of the claimants.

Alibaba has been the subject of numerous complaints from business worldwide in relation to counterfeit goods. Prior to entering the US online market in September 2014, Alibaba removed 90 million listings which it was alleged had infringed intellectual property rights.

The claimants are seeking damages and an injunction in relation to Alibaba’s alleged illegal business activities and trade mark infringement.

Despite initially offering to mediate, comments by Alibaba’s executive Chairman were published in Forbes magazine two weeks ago which suggested there would be no settlement of the claim. An Alibaba spokesman later explained that this comment was made before the offer of mediation was accepted. However, the claimants wrote to the Court last week and explained they now considered mediation to be a ‘futile exercise’ designed only to ‘force [the] Plaintiffs to expend resources’.  The claimants requested that the obligation upon them to mediate their claim be removed.

The Court recognised that “needless public comments can undermine talks” but despite this “the Court strongly recommends that the parties proceed to mediation”.

The Court’s response appears to follow the position of the English Courts in placing a strong emphasis on the importance of mediation in all cases and setting a high threshold for parties to overcome in order to show that mediation is not worthwhile. It will be interesting to see whether settlement can be reached or if the claim will proceed to Court.

We will keep you updated on the progress of this case.