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Alibaba Lawsuit Drama Unfolds Over Alleged Counterfeit Toy Incident Alibaba Lawsuit Drama Unfolds Over Alleged Counterfeit Toy Incident

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Alibaba Lawsuit Drama Unfolds Over Alleged Counterfeit Toy Incident
Alibaba company logo on office building

Robert Way

Alibaba, listed as NYSE:BABA, battled it out in a U.S. court on Wednesday in a legal tug-of-war over the alleged sale of knock-off Squishmallows, a beloved children’s toy, by various merchants on its digital emporiums, as per a report from Reuters.

Unfortunately for the e-commerce giant, Judge Jesse Furman from the U.S. District Court, Southern District of New York, waved away Alibaba’s attempts to quash the lawsuit. He highlighted that Kelly Toys, a unit of Jazwares under the ownership of Warren Buffett’s Berkshire Hathaway, has plausibly accused Alibaba of being aware of and contributing to the merchants’ encroachment on its copyrights and trademarks, the report detailed.

Kelly Toys claimed that despite filing six prior lawsuits and securing an injunction, Alibaba turned a blind eye to the sale of fake products, even allowing some infringing merchants to attain “Gold Supplier” and “Verified” status, in direct violation of their own “three-strike” policies, the report added.

To add a cherry on top, Judge Furman refrained from passing judgment on the lawsuit’s merits, keeping the suspense alive.

In November 2022, Kelly Toys finger-pointed about 90 merchants, accusing them of vending counterfeit Squishmallows, before obtaining an injunction two months down the line. Fast forward to March, and the company dragged Alibaba into the legal maze as a defendant.

In its plea for dismissal, Alibaba argued that Kelly Toys failed to assert any involvement on its part in the alleged infringements. The report disclosed that Alibaba also labeled Kelly Toys’ attempt to shift the responsibility of safeguarding its intellectual property onto them as “draconian,” treating sellers unfairly.

Adding fuel to the fire, Jazwares secured a majority stake in Kelly Toys back in April 2020. The plot thickened when Berkshire Hathaway acquired Jazwares’ parent company, Alleghany, an insurance holding firm, in October 2022.

BABA surged by +1.73% to reach $77.43 in premarket trading on December 28th, fueling the uncertainty surrounding the lawsuit.