Kelly Toys Holdings, LLC. v. Alialialill Store

Background

Kelly Toys Holdings, LLC, a toy manufacturer that creates Squishmallow collectible stuffed animals, originally sued 61 merchants operating storefronts on Alibaba platforms. Kelly Toys alleged that the merchants sold unlicensed toys infringing its Squishmallow trademarks and copyright. Kelly Toys also sought to hold Alibaba and AliExpress responsible for their alleged role in allowing the storefronts to continue operating.

After Kelly Toys identified additional allegedly infringing listings, it sought an order finding that the Alibaba defendants were aiding and abetting the merchants’ counterfeiting activities. The court previously determined that Kelly Toys had not shown the necessary active participation or coordinated activity by the Alibaba defendants, while noting that Kelly Toys could file a direct complaint against them. Kelly Toys then filed an amended pleading asserting direct claims against Alibaba and AliExpress for contributory trademark infringement, contributory copyright infringement, and vicarious copyright infringement.

Motion to dismiss

Alibaba and AliExpress moved under Rule 12(b)(6) to dismiss the claims. Under that rule, the court accepts the complaint’s factual allegations as true and asks whether they contain enough factual matter to make liability plausible, rather than merely possible.

Court’s analysis and ruling

The court found that Kelly Toys plausibly alleged contributory and vicarious infringement. Kelly Toys alleged that the Alibaba defendants knew certain merchants had previously infringed its trademark and copyright, that the merchants continued selling counterfeit products, and that Kelly Toys’s counsel notified the defendants about the listings. Kelly Toys further alleged that the defendants did not remove the listings or sellers, including storefronts allegedly violating Alibaba’s three-strike policy.

The court also noted allegations that the Alibaba defendants promoted products from some allegedly infringing merchants through the Gold Supplier program’s outreach and marketing. Although the extent of the defendants’ active involvement in those services was unclear, the court concluded that whether their conduct amounted to inducement, support, or material contribution could be determined through further discovery. The Alibaba defendants’ motion to dismiss was therefore denied. They were ordered to file an answer by May 17, 2024, and the parties were directed to submit a joint case-management plan and attend an initial case-management conference on May 31, 2024. The clerk was directed to terminate the motion docket entry.