Alibaba's Attempt to Dismiss Counterfeit Toy Suit Denied by U.S. Judge

Disregarded Request for Case Dismissal

A bid by Chinese e-commerce giant Alibaba (NYSE:BABA) to dismiss a lawsuit regarding the supposed sale of fake versions of the popular Squishmallows toy on its platforms by various sellers was declined by a U.S. judge on Wednesday.

Copyright and Trademark Infringement Claims

Judge Jesse Furman of the U.S. District Court in Manhattan stated that Kelly Toys, a subsidiary of Jazwares, a firm owned by billionaire Warren Buffett's Berkshire Hathaway (NYSE:BRKa), had reasonably alleged that Alibaba was aware of and facilitated the sellers' violation of its copyrights and trademarks.

Allegations of Ignored Policies

Despite six prior lawsuits aimed at halting the sale of the counterfeits, Kelly Toys claims that their continued availability on Alibaba platforms indicates that the company disregards its own "three-strike" rules. Further, the e-commerce giant has even awarded some of the offending sellers with its "Gold Supplier" and "Verified" badges.

Response from Alibaba

There was no immediate comment from Alibaba and its attorneys regarding the matter. It should be noted that Judge Furman did not pass judgement on the merits of the case.

Earlier Injunction Against Merchants

Approximately 90 merchants were sued by Kelly Toys in November 2022 for allegedly peddling counterfeit Squishmallows, and an injunction was obtained two months hence. In March, Alibaba was added as a defendant to the suit.

Alibaba's Argument for Dismissal

Alibaba sought to have the suit dismissed, arguing that they were no part of any copyright violation, saying Kelly Toys was trying to shift its intellectual property policing burden on the company by demanding harsh action against the sellers.

Ownership and Revenue of Kelly Toys

Berkshire Hathaway took possession of Jazwares’s parent company, the insurance holding company Alleghany (NYSE:Y), in October 2022, after Jazwares had obtained the majority stake in Kelly Toys in April 2020. Jazwares grossed $847 million in the first three quarters of 2023 alone.