I have posted following issue in TestNG JIRA issue tracker:

http://jira.opensymphony.com/browse/TESTNG-439

The response I received was:

This looks like a problem with Gradle, not TestNG.

This error message is printed when you run TestNG on a testng.xml file that uses <suite annotations="">, which is no longer supported, since only the standard JDK annotations are supported now.

I'm guessing Gradle is generating a testng.xml file with this incorrect attribute and the fix should be to simply not generate that attribute in the XML file any more.

I suggest you send a link to this issue on the Gradle list and see what they have to say.