Chinese Shopping App Pinduoduo Sued in U.S. Before IPO

BEIJING — China’s hottest new online bazaar has had a whirlwind year. The number of people shopping on the app, Pinduoduo, has grown more than fivefold since the beginning of 2017, and its parent company is preparing to list shares on the Nasdaq, one of a wave of Chinese tech companies tapping international capital markets this year.

But by taking its business global, Pinduoduo has exposed itself to a new kind of stumbling block: a trademark infringement lawsuit in the United States.

The complaint, filed Thursday in a federal court in New York by a diaper maker called Daddy’s Choice, says that Pinduoduo knowingly allowed the sale of knockoff products bearing the Daddy’s Choice name. According to the suit, the e-commerce platform removed some of the unauthorized goods when Daddy’s Choice, which is based in Beijing, first reported them last year. But the items quickly reappeared, and Pinduoduo took no action when notified of them again this year, the complaint says.

Lawyers for Daddy’s Choice say in the complaint that they filed the suit in New York because U.S. consumers are able to buy from Pinduoduo, and because Daddy’s Choice has spent considerably to build its brand in the United States. Pinduoduo declined to comment.

China is the world’s largest market for online retail, and giant companies and startups alike are competing to modernize the shopping experience. There are platforms catering to shoppers of every taste and persuasion, whether they want high-end imported wares or the latest in fast fashion. Heavyweights such as Alibaba and JD.com are experimenting with technologies such as facial recognition and drones to get people to buy more, and more often.

Even by the standards of China’s buzzy tech scene, Pinduoduo’s rise (its name is pronounced “PING-daw-daw”) has been extraordinarily rapid.

The 3-year-old company says that nearly 350 million people shopped on its platform in the past year, which would most likely make it China’s No. 2 e-commerce provider by that metric, behind only Alibaba. With its deep discounts on groceries, clothes, gadgets and knickknacks, the company has won over a vast, underserved population of online shoppers in China: older, less internet-savvy people living in smaller cities and the countryside.

But Pinduoduo has been dogged by accusations that its platform hosts sales of counterfeits, illegal goods or products that simply do not match their descriptions online.

In its filings with the U.S. Securities and Exchange Commission, Pinduoduo has said that it immediately removes unauthorized products or misleading information found on its platform, and that it freezes the accounts of merchants who violate its policies. Still, the company said in its regulatory filings that in January, Chinese authorities required it to strengthen supervision and respond more effectively to claims of copyright infringement.

Such allegations are hardly new in the world of Chinese e-commerce.

Alibaba’s Taobao marketplace has long been accused of being a haven for fakes, and the company fought a lawsuit brought by Kering, the French luxury goods group, about the prevalence of unauthorized sales. (Kering eventually withdrew the suit and teamed up with Alibaba to fight copyright violators.)

In January, the Office of the U.S. Trade Representative classified Taobao as a “notorious market” for piracy and counterfeiting. Alibaba has said that the complaints against it are unfair, and that it has taken many measures to detect and remove fakes.