Alibaba Faces Lawsuit Over Counterfeit Squishmallows Sales on Online Platforms

In a recent development, a U.S. judge has rejected Alibaba’s attempt to dismiss a lawsuit accusing the company of allowing the sale of counterfeit versions of the popular children’s toy, Squishmallows, on its online platforms. The lawsuit, filed by Kelly Toys, a subsidiary of billionaire Warren Buffett’s Berkshire Hathaway, alleges that Alibaba knew about and contributed to the merchants’ infringement of its copyrights and trademarks.

Kelly Toys claims that despite six previous lawsuits, the sale of counterfeit Squishmallows on Alibaba’s platforms has persisted. The company alleges that Alibaba has ignored its own “three-strike” policies and even awarded some infringing merchants with “Gold Supplier” and “Verified” status. Alibaba has not yet responded to requests for comment on the matter.

The lawsuit was initially filed in November 2022 against around 90 merchants accused of selling counterfeit Squishmallows. Kelly Toys obtained an injunction against these merchants in January 2023. Alibaba was later added as a defendant in March.

In its defense, Alibaba argued that Kelly Toys failed to allege any involvement in the infringements and was attempting to improperly shift the burden of policing its intellectual property by requiring “draconian” measures against sellers.

Jazwares, the parent company of Kelly Toys, was acquired by Berkshire Hathaway in October 2022. The company reported revenue of $847 million in the first nine months of 2023.

The case, Kelly Toys Holdings LLC v 19885566 Store et al, is currently being heard in the U.S. District Court, Southern District of New York. The outcome of this lawsuit could have significant implications for Alibaba and its online marketplace operations.