A new lawsuit filed by three artists and designers claims that Chinese fast-fashion giant Shein is infringing on their intellectual property by making and selling copycat items. The designers’ complaint additionally alleges that the company, “has grown rich by committing individual infringements over and over again” and has deliberately made the unlawful copying of designs a part of its business model.
People holding Shein shopping bags stand outside the first permanent showroom of Chinese online fast fashion giant Shein on the opening day of the shop in Tokyo on November 13, 2022.
AFP via Getty Images
The firm, which has an estimated valuation of $66 billion, has faced numerous lawsuits for copyright infringement from other creative professionals in recent years. The results have been mixed: some have settled, while others remain pending. None have been decided on the merits. However, this new case, filed Tuesday in federal court in Los Angeles goes beyond claims of individual design theft and alleges “that a pattern of systematic criminal intellectual property infringement is baked in from the very beginning.”
In an emailed statement sent by an unnamed spokesperson, the company wrote: “Shein takes all claims of infringement seriously, and we take swift action when complaints are raised by valid IP rights holders. We will vigorously defend ourselves against this lawsuit and any claims that are without merit.”
The case was first reported by Sourcing Journal.
Shein has faced numerous other controversies ranging from environmental damage to poor labor practices as it continues to make inroads in the United States. Additionally, last year, the company also struck a financial deal with the Indiana University Kelley School of Business, which was short-lived and quietly ended.
The crux of the complaint is a claim that, unlike other companies which may employ human designers to avoid copying the designs of rival firms, Shein automates its design process using software. However, when Forbes conducted a brief search on the career-oriented social network LinkedIn, over 200 results of someone claiming to work at Shein with a “designer” title were found.
The complaint alleges that Shein has an algorithmically-fueled operation that is designed to “knowingly accept, tolerate and even encourage and facilitate such misappropriation.” It goes further and asserts that when the company’s automated processes hit on a copy of a large manufacturer, like Nike, it is more likely to be sued and then reach a larger financial settlement. However, when Shein copies a small-time designer, the plaintiffs say, Shein apologizes with a paltry settlement offer.
For example, the lead plaintiff, Krista Perry, says she designed a piece of art with the phrase “Make it Fun.” Not long after she created the art in 2016, she alleges her design was quickly copied, with prints offered for sale on Shein for $3. She complained about this to the company and was offered $500, which she declined. Later, Shein even offered an unsolicited deal to license her art, which she also declined. (Shein appears to no longer offer the “Make It Fun” artwork.)
Krista Perry created the “Make It Fun” art (left) in 2016 before she alleges that Shein stole her design and sold it on its website and app for $3 (right).
Perry et al v. Shein et al (Central District of California)
Perry’s lawyers say that this business model is further enabled by a “byzantine shell game of a corporate structure,” which is why imposing the landmark federal law, the Racketeer Influenced and Corrupt Organizations (RICO) Act, is necessary, because that law will make it possible to sue the many different corporations and entities that Shein is comprised of.
The civil complaint further alleges that there is a “pattern” of corporate behavior that “systematically infringes” on the plaintiffs’ works. “There is no way that the Shein overall business model can function other than described, which necessarily includes criminal copyright infringement,” the complaint argues.
Should the RICO lawsuit be successful, the artists would receive so-called “treble damages,” or an automatic tripling of the actual damages.
David Erikson, one of the attorneys representing the plaintiffs, told Forbes that he believes Shein has committed crimes with its business model.
“This is the result of our research and we would hope that Congress and the [Department of Justice] would take notice of it,” he told Forbes. “I do plan to contact the DOJ about it to encourage them to pursue it.”
This article was first published on forbes.com and all figures are in USD.
