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Alibaba to Pay $250 Million to Settle Pre-IPO Counterfeiting Lawsuit

Alibaba may be accepting accolades for its efforts to protect IP rights, but the surfacing of years-old transgressions are proving troublesome for the e-commerce giant.

On Monday, the Chinese firm said it would pay $250 million to settle a U.S. lawsuit alleging that it concealed a regulatory warning about its ability to control counterfeiting before it went public in 2014, according to Reuters.

Alibaba is accused of securities fraud stemming from reports that the company met with China’s State Administration of Industry and Commerce (SAIC) on July 16, 2014, two months before the launch of the its public offering at $25 billion. The SAIC held off until after the IPO to release a white paper detailing concerns that were raised at that meeting—namely, the fact that many items sold on Alibaba at that time were fake or infringed upon trademarks.

Alibaba’s American Depositary Shares fell 12.8 percent on January 28 and 29, 2015, after the white paper was released, according to Reuters.

The class-action settlement proposed on Monday will impact investors in Alibaba ADS and ADS options in the four and a half months that preceded the white paper’s release. It will also resolve claims against Jack Ma, Alibaba’s executive chairman, and other company officials.

Alibaba maintains its innocence, saying the settlement ends all pending securities litigation against the company and its investors.

Earlier this month, Alibaba’s vice president and head of global IP enforcement, Matthew Bassuir, was given the Luxury Law Summit’s “Luxury Law Innovator in IP Rights and Technology” award in London. The company was recognized for the work of the Alibaba Anti-Counterfeiting Alliance, which counts 132 luxury and consumer goods brands as members, and works to combat counterfeit sales on the platform.

According to the firm’s website, the alliance was created as “a way for Alibaba to work with brands, using the latest anti-counterfeiting technology to protect IP across its platforms.”

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