Gucci, YSL, others suing Alibaba back down on mediation threat

A logo of Alibaba Group is seen on a building under construction, where the company's Beijing headquarters will be, in Beijing
A logo of Alibaba Group is seen on a building under construction, where the company's Beijing headquarters will be, in Beijing, China, October 15, 2015. REUTERS/Kim Kyung-Hoon

November 13, 2015

By Jonathan Stempel

NEW YORK (Reuters) – Gucci, Yves Saint Laurent and other luxury brands suing Alibaba Group Holding Ltd for promoting the sale of counterfeit goods will resort to mediation, backing away from a threat to withdraw from the process after Alibaba founder Jack Ma said that he would rather lose the case than settle.

Brands owned by Paris-based Kering SA accepted U.S. District Judge Kevin Castel’s request that they try to resolve their differences through a mediator, their lawyer Robert Weigel said in a letter filed on late on Wednesday in a Manhattan federal court.

The brands, which also include Balenciaga and Bottega Veneta, had accused the world’s largest online retailer of trademark infringement for letting 31 companies sell knockoff goods, damaging their sales and reputation.

One example cited in the lawsuit was a bogus “high quality leather” tote bag offered for $2 to $5 that resembled a real Gucci bag costing $795. The lawsuit sought a halt to counterfeit sales, plus triple and punitive damages.

Forbes magazine had on Nov. 4 quoted Ma, worth about $23.4 billion, as saying: “I would (rather) lose the case, lose the money” than settle. “But we would gain our dignity and respect.”

That prompted the Kering brands to ask the judge to relieve them from being obliged to mediate, saying Ma’s comment made it a “futile exercise”.

But the judge on Monday urged them to reconsider and urged both sides to tone down their rhetoric. “Needless public comments can undermine talks,” he wrote. “Yet public positions and positions in confidential talks have been known to vary.”

In his letter, Weigel, a partner at Gibson, Dunn & Crutcher, said “we are hopeful that is the case here,” and that the Kering brands will “proceed in good faith” to mediation.

Weigel also called the matter a “test case” that could change the behavior of Hangzhou, China-based Alibaba toward “tens of thousands” of sellers of alleged knockoffs on its platforms.

Alibaba spokesman Bob Christie said the company welcomed the brands’ decision to “pursue good faith mediation as a constructive means of exploring a path of cooperation – rather than litigation – in the fight against counterfeiting”.

Bruce Rich, a partner at Weil, Gotshal & Manges representing Alibaba, declined to comment.

The case is Gucci America Inc et al v. Alibaba Group Holdings Ltd et al, U.S. District Court, Southern District of New York, No. 15-03784.

(Reporting by Jonathan Stempel in New York; Additional reporting by John Ruwitch in Shanghai; Editing by Will Dunham and Miral Fahmy)