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Luxury Brands Sue Alibaba for Carrying Counterfeits

Finally fed up with Alibaba, a group of luxury brands sued the Chinese e-commerce giant for its alleged knowledge and allowance of counterfeit goods being sold on its site.

Gucci, Yves Saint Laurent and other brands owned by Paris-based Kering filed suit in Manhattan federal court Friday and are seeking damages and an injunction for violations of trademark and racketeering laws, according to Reuters.

The suit alleges that Alibaba conspired to manufacture, sell and bring in counterfeit products bearing the brands’ trademarks without permission.

Alibaba spokesperson Bob Christie said in a statement, “We continue to work in partnership with numerous brands to help them protect their intellectual property, and we have a strong track record of doing so. Unfortunately, Kering Group has chosen the path of wasteful litigation instead of the path of constructive cooperation. We believe this complaint has no basis and we will fight it vigorously.”

Being cited for counterfeit goods isn’t new for Alibaba—the office of the U.S. Trade Representative (USTR) had placed its Taobao online marketplace platform on the Special 301 Notorious Market list, which publicly blasts companies for intellectual property infringements, piracy and counterfeits, though it removed the company in 2012, rewarding it for good behavior in terms of progress made to rectify the problem. The counterfeiting, however, continued but Taobao wasn’t added to the list again despite a continuing presence of fakes on the site.

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Just last month, the American Apparel and Footwear Association (AAFA) sent letters to U.S. trade representative Michael Froman and U.S. Securities and Exchange Commission chairwoman Mary Jo White, imploring both to fight what it referred to as “rampant proliferation of counterfeit apparel and footwear,” on Alibaba’s Taobao platform.

In its initial public offering last September, the company addressed the counterfeit concerns, saying, “Although we have adopted measures to verify the authenticity of products sold on our marketplaces and minimize potential infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-down procedures, these measures may not always be successful.”

The recent lawsuit is Kering’s second in less than a year against Alibaba for peddling knockoffs. The previous one, filed in July, was withdrawn when the companies agreed to work toward a resolution, Reuters reported.

Friday’s suit alleged that Alibaba provided marketplace advertising and other necessary services for counterfeiters to sell their imitation goods to U.S. consumers. It said, offering an example, that one Chinese merchant was selling alleged fake Gucci bags for $2-$5 each to buyers who would take at least 2,000 units, and an authentic Gucci bag retails for $795.

The brands are seeking a court order that would prevent Alibaba from offering or facilitating the sale of counterfeit goods, and damages that have yet to be specified but could include $2 per counterfeit item.