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 COLM -0.69% 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."
Dahon's struggle highlights a big unsolved problem for Taobao operator Alibaba, which is preparing to list in the U.S., in what's expected to be one of the world's largest public offerings ever.
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.