Big Fashion Fights Beijing's Big Markets

This entry discusses the battle between major fashion designers and Beijing markets over the protection of trademarks.

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Round One: The Big 5 vs. Xiu Shui Market.

Seems to me that there are two different kinds of people that criticize China. One criticizes its human rights violations (i.e. death penalty, lack of free media, etc.) The second type of person attacks how the Chinese run their economy (currency exchange, trade deficits, piracy, etc.) Working at a law fim and reporting on changes in Chinese law, these are the two types of topics that encounter. Within those two categories, I find the death penalty and intellectual property the most interesting (I know, call me morbid smile.gif.) And, as a result, they are the topics that consistently end up here. Specifically, intellectual property and the death penalty interest me. So here’s some news about the war the major fashion industries are waging on Chinese. (Let’s hope I don’t end up as an Intellectual Property lawyer. J)

In the first round, five big fashion names, Chanel, Prada, Burburry, Luis Vuitton, and Gucci sued one of Beijing’s largest tourist markets, the Silk Street Market (Xiu Shui) and won. The complaint was that Xiu Shui was allowing their vendors to sell black-market copies of their trademarked products. If you have never been to one of these markets, they consist of well over a hundred individual stalls selling everything from souvenirs and shoes to iPods and pearls. In my opinion, if anything in that store has a brand name on it, it is a fake. Anyone with a pair of eyes can tell you that Xiu Shui if full of black market products.

http://i51.photobucket.com/albums/f363/xukaiwen/xiushui.jpg

Images from www.beijingtraveltips.com.

So the big 5, as I like to call them, won the case against the management ofXiu Shui, who claimed that they had done what they could and the individualstall owners were the ones at fault. But the point of the case against Xiu Shui was to make managers of these large stores responsible for what is sold in their market, as it is much easier to target the one building than the hundreds of individual sellers. Though the fashion companies won the case, they only ended up receiving only 20,000 yuan in damages (roughly $2,500 US). I doubt that covered court costs.

But the point was made, Xiu Shui market is responsible for what is sold within their walls. How far has this case gone to actually protecting the trademarks of these big companies? Not that far. Sure, some stalls will display only Chinese brand names now, but if you ask for it, they will produce Gucci for you faster than a magician pulls a rabbit out of a hat. Fashion designers and other companies around the world keep trying to figure out how to enter and make profit in a country that does not protect their trademarks and other intellectual property with anything near Western standards.

I think bringing the owners of tourist malls in line is a very good first step. The majority of shopping is done in these markets. I mean, how likely is the average tourist to follow the allure of black market goods into a dark alley? People want to shop in a clean, safe environment and that is why markets like Xiu Shui are so popular. Taking on the owners of the big tourist stores will slow a lot of black-market sales. And even many of the unruly outdoor markets have landlords who can be sued.

But a $2,500 fine is not a big deal to Xiu Shui’s managers. I can’t see it being a punishment that causes enforcement of policy. My question is, if it is obvious that Xiu Shui’s sellers are marketing illegal goods, then why dont the Chinese courts inflict a fine that will actually change things? (The Big 5 originally asked for $310,000.) The only answer I can see is that Chinese policy makers don’t want to get rid of black-market goods that quickly. They are willing to make a statement—it is wrong to allow individual operators to sell illegal products in your store—but they aren’t willing to clamp down and effectively stop it. Personally, I don’t see the benefit that black-market goods bring to China. I really can’t tell you why they want to protect the market. It is just a bad idea. The WTO is breathing down their necks and creating Chinese brands would help them much more in the long run. Also, as I have stated elsewhere, failing to protect intellectual property hurts Chinese innovation.


On to the second round: Luis Vuitton vs. ChaoWai Men’s Dept. Store

This time Luis goes solo against another big Beijing bad boy. And the result: another win for the protection of trademarks. Again, the Chinese courts penalized the management of a Chinese market for allowing the individual operators within their store to sell illegal goods. This time the fine reached 150,000 Yuan or roughly $18,500. That’s over a 700% improvement. It’s still not the $135,000 that Vuitton claimed, but it is a bigger fine—one that is more likely to take effect.

I have no doubt that there will be a round three, four, five, and more. Trademark holders will continue to fight to protect themselves. Happily, it seems that China is more and more willing to support the cause. Eventually the Chinese government will start to make it too painful to sell fake goods in those nice, clean and safe markets, pushing illegal goods further and further underground. That’s not bad, considering that’s about all you can expect in America or Europe these days, anyway.

Tomorrow I will post on updates in franchising in China.

News sources:

People’s Daily: http://english.people.com.cn/200604/18/eng20060418_259237.html

Fibre2Fabric: http://www.fibre2fashion.com/news/fashion-news/newsdetails.aspx?news_id=15806



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