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

NEW YORK (Reuters) - Gucci, Yves Saint Laurent and other luxury brands suing Alibaba Group Holding Ltd for promoting the sale of counterfeit goods have backed away from their threat to withdraw from mediation, despite Alibaba founder Jack Ma’s statement that he would rather lose the case than settle.

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

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 Wednesday night in Manhattan federal court.

The brands, also including Balenciaga and Bottega Veneta, had accused the world’s largest online retailer of trademark infringement for letting 31 companies sell knockoff goods, damaging the brands’ 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 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 withdraw from mediation, believing 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.

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; Editing by Will Dunham