The WSJ reports,"the Taobao online marketplace, run by Chinese e-commerce giant Alibaba Group Holding Ltd., is one of the world's largest shopping sites, with 7 million sellers offering 800 million items—ranging from Columbia Sportswear fleece jackets to Dahon folding bicycles.
But there are some hitches: Of the roughly 58,000 folding bikes for sale on Taobao, for instance, up to half are knockoffs or infringe on Dahon's intellectual property, says David Hon, chief executive of the Duarte, Calif., company.
The number of fake Dahons on Taobao has increased 10- to 20-fold in the past two years, Mr. Hon estimates, costing the company a few million dollars in sales each year and forcing it to ramp up its fraud-fighting resources. Dahon now has four full-time staffers and spends about $200,000 a year to monitor and fight counterfeits globally.
"We keep complaining" to Taobao, said Mr. Hon. "The [counterfeiters] stop doing this for a while, and then a few months later, they resurface and open up another store."
Alibaba says it spends more than 100 million yuan ($16.1 million) yearly fighting counterfeit goods—particularly on Taobao, its biggest shopping site, according to a February report filed with the World Intellectual Property Organization.
In the past year alone, Alibaba removed more than 100 million listings suspected of intellectual-property infringement and partnered with Chinese law enforcement on 77 counterfeit cases, leading to the arrests of 51 criminal groups.
In 2012, such efforts helped get Taobao removed from the U.S. Trade Representative's list of "notorious markets" for counterfeit goods.
Yet some foreign brands and analysts say that fakes remain a serious—and in some cases a growing—problem on Taobao, a virtual bazaar where anyone with an ID can set up shop. The issue could raise awkward questions ahead ofAlibaba's $15 billion stock listing in the U.S.
"They will have shareholders who will not want to be associated with a company making its money on counterfeit goods," said Damian Croker, the chief executive of BrandStrike, which monitors fakes for foreign brands on e-commerce sites. Mr. Croker says his clients aren't seeing an improvement in the situation on Taobao.
Alibaba declined to comment for this article, citing its pending IPO. The company's public filings to the USTR and the World Intellectual Property Organization detail the steps it has taken to cut down on counterfeit goods on Taobao.
"Sales of allegedly IPR-infringing goods over the Taobao platform are minimal, and Taobao neither invites nor condones such activity," the company said in a filing to the USTR in September 2012".
Analysts and brands say it is nearly impossible to pin down the scale of the problem on Taobao, due to the massive number of goods for sale and the difficulties of detection and authentication.
