Western brands have long complained about China-made knock-offs of their goods being sold online, including on China’s biggest web marketplace, Taobao.com. That led last year to Taobao being added to a U.S. government list of “notorious markets” where pirated and counterfeit goods are freely sold. This week the U.S. government took Taobao off the list, acknowledging its efforts to police its marketplace.

“Chinese site Taobao has worked with rights holders to significantly decrease the listing of infringing products for sale through its website, and has committed to continue working to streamline its complaint procedures to further reduce listings of counterfeit products,” the Office of the U.S. Trade Representative, or USTR, said in removing Taobao from its list of web site that facilitate sales of counterfeit goods and items that infringe on the trademarks of U.S. brands.

Taobao parent company Alibaba Group, which had petitioned the USTR in February to be removed from the list, welcomed the move. “We would like to thank the USTR for the acknowledgement of our efforts,” a company spokesman says. “The IPR [intellectual property rights] issue is a long march in China; this is a milestone and it is only the beginning.”

In making its request to be removed from the list earlier this year, Alibaba noted that it had removed 63 million product listings from its web sites in 2011 for infringement of intellectual property rights and that it employs 200 people to handle infringement complaints, work with brand owners and monitor the quality of products sold on its marketplaces. Alibaba’s two major online marketplaces, Taobao.com and Tmall.com, account for roughly 75% of online retail sales in China.

Frank Lavin, a former undersecretary of the U.S. Commerce Department for international trade who now works closely with Alibaba as CEO of Export Now Inc., which helps Western brands sell on Tmall, says the USTR decision “accurately reflects the strides Taobao has made over the past year.”

“In particular,” Lavin says, “Taobao has shown a high degree of responsiveness to `take-down` requests.  These are the requests and communications from the legitimate manufacturers who have encountered a fake product on Taobao.  By improving the speed and effectiveness of take-down requests, Taobao is helping U.S. businesses and also helping Chinese consumers—by ensuring that only legitimate products are sold through their system.”

The U.S. government’s decision removes a black mark against the name of Alibaba, which is widely expected to offer its stock publicly in the next couple of years, in what would likely be a multibillion share offering. Alibaba this year bought back about half of Yahoo’s stake in the Chinese company, in a deal that valued Alibaba at around $40 billion.