Kelly Toys Holdings LLC. v. 19885566 Store
- Jesse Furman
- 1:22-cv-09384
- U.S. District Court · Southern District of New York
- 4
In Kelly Toys v. 19885566 Store, Judge Furman denied Alibaba Defendants’ motion to dismiss claims alleging platforms facilitated counterfeit Squishmallows sales.
Kelly Toys’s three claims against the Alibaba Defendants remain in the case. The Alibaba Defendants were required to file an answer within two weeks unless the court ordered otherwise.
What happened
Kelly Toys Holdings, LLC sued about ninety online merchants over alleged counterfeit Squishmallows products and later added claims against Alibaba Defendants, the online-platform defendants. The new claims alleged that Alibaba Defendants helped merchants infringe Kelly Toys’s trademarks and copyrights.
Alibaba Defendants asked the court to dismiss the claims for failure to state a legally sufficient claim. The court found the claims plausible because Kelly Toys alleged that Alibaba Defendants knew about specific infringement, allowed infringing listings to continue, promoted those listings, and financially benefited from them. The court also found that the Digital Millennium Copyright Act’s safe-harbor defense could not support dismissal at this stage because the defense did not appear on the face of the complaint.
The court denied Alibaba Defendants’ motion to dismiss, and ordered them to file an answer within two weeks unless the court ordered otherwise. Judge Jesse M. Furman did not address a separate motion asking the court to reconsider an earlier contempt ruling.
The detailed version
- Kelly Toys Holdings LLC. v. 19885566 Store · No. 1:22-cv-09384
- Jesse Furman
- Dec. 27, 2023
Background
Kelly Toys Holdings, LLC sued approximately ninety e-commerce merchants for allegedly selling counterfeit Squishmallows products. The merchants sold products through online platforms including Alibaba and AliExpress. After obtaining a temporary restraining order and preliminary injunction, Kelly Toys filed a Second Amended Complaint adding three claims against the Alibaba Defendants: contributory trademark infringement and counterfeiting under the Lanham Act, contributory copyright infringement, and vicarious copyright infringement.
The Alibaba Defendants moved under Rule 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally plausible claim.
Court’s Analysis
The court accepted the complaint’s factual allegations as true for purposes of the motion and drew reasonable inferences in Kelly Toys’s favor. The court concluded that Kelly Toys plausibly alleged that the Alibaba Defendants knew about specific infringement through orders in six separate lawsuits involving sellers on Alibaba and AliExpress. Kelly Toys also alleged that infringing listings continued to appear on the platforms, including listings by some Merchant Defendants, despite that knowledge.
The court further relied on allegations that Alibaba Defendants promoted or assisted in promoting infringing listings. Those allegations included granting certain merchants “Gold Supplier” and “Verified” status, selling Squishmallows-related keywords, purchasing Google keywords to promote infringing listings, and sending promotional emails advertising infringing listings. Kelly Toys also alleged that Alibaba Defendants financially benefited by attracting customers, encouraging merchants to pay for additional services, and earning transaction commissions.
The Alibaba Defendants relied on a Second Circuit decision involving YouTube, but the court found that case different because the complaint there did not allege prior knowledge or specific additional infringement after removal of the videos. The court also rejected dismissal based on the Digital Millennium Copyright Act’s safe-harbor provisions. The court explained that safe harbor is an affirmative defense, meaning a defense to liability, and generally can support dismissal at the pleading stage only when the defense appears on the face of the complaint. The court found that the defense did not appear on the face of this complaint.
Ruling
The court denied the Alibaba Defendants’ motion to dismiss. Unless the court ordered otherwise, the Alibaba Defendants had to file their answer within two weeks of the order. The court directed the clerk to terminate the motion from the docket. The opinion did not address the Alibaba Defendants’ separate motion for reconsideration of the court’s earlier contempt ruling; that motion was addressed separately.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.