Home / Insights / Another Bad Headline for Shein: Copyright Infringement on the Order of Racketeering

Another Bad Headline for Shein: Copyright Infringement on the Order of Racketeering

by | Aug 29, 2023 | Copyrights, Intellectual Property

The fashion retailer Shein is known for its constant waterfall of online clothing listings. Shein enthusiasts are known to scroll the app like they would social media, gazing upon absurdly cheap outfits, shoes, and home decor. But if you are at all familiar with Shein, you have also likely heard of exposés in recent years uncovering their ethically questionable labor, environmental, financial, and data privacy practices. And now you can add another question to the list: intellectual property theft!

Three independent designers have banded together to sue the fashion giant, claiming copyright infringement to a severe degree. As their complaint states in its incendiary opening: “At issue here, inexplicably, are truly exact copies of copyrightable graphic design appearing on Shein products.”

With its ample corporate resources to conduct searches and clearances, how could Shein let such copycatting occur? According to the case brought against them, the answer appears to lie in their business plan, which builds infringement into its workings.

To Be Blunt: An Independent Designer Vampire

The three designers in this case – Krista Perry, Larissa Martinez (known professionally as Larissa Blintz), and Jay Baron – lay out how Shein seems to systematically steal designs from small designers with negligible or no retribution. 

The company touts its use of technology to stay on the cutting-edge of fashion. While the exact algorithm is not known, the designers postulate that it must be more AI than human. Most people would know better than to sell an exact copy of a design – instead, they would create a “knock-off” that toes the line but does not quite infringe. 

Because the designers were finding their unmistakable work on Shein, they reasoned that a machine is simply hoovering designs from the internet and outputting them as quickly as possible to factory floors. 

Sustainable Values or Sustainable Scheme?

Shein’s alleged work-around for this copying is its “small test batch” system, in which they start by making only a few hundred pieces. If consumers bite, Shein may then decide to make more. By contrast, most fashion retailers would normally manufacture thousands of pieces per design – leading to those clearance bins of excess, unwanted clothing at the end of the season. 

Shein claims this test batch process is a sustainability practice. But the designers have called them out: they say it is a way to evade larger infringement claims. If Shein only produces small runs of copied designs from independent designers, they may never even find it amid the barrage of products on the app. And if the designer does locate it in the early stages, Shein can pay a minimal fine, as the infringement damages remain small at that point. 

Basically, Shein is starting small, manageable fires that it knows it can put out, rather than a huge wildfire engaging a larger company like The Gap, who surely has the corporate legal and financial resources to fight infringement.

A Shell Within a Shell

Another way that Shein evades infringement claims: the sheer complexity of their company. The designers in this case assert that Shein makes their structure purposefully confusing, so that copyright owners cannot readily determine who they need to sue. 

This defense difficulty is once again exacerbated for smaller designers. And without the resources to pursue a long-range case, many designers likely settle out of court, meaning the cases stay out of the public eye.

Counts Against the Shein Enterprise

The current plaintiff designers put together the big picture of the scheme to sue Shein for an egregious level of copyright and trademark infringement (Counts 1-5) – and included  a sixth claim for Violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). They have alleged that members of the Shein Enterprise agreed to and did conduct and participate in enterprise affairs through a pattern of racketeering activity – for the unlawful purpose of intentionally and criminally infringing the plaintiffs and other copyrights for massive financial gain.  

Under the Anticounterfeiting Consumer Protection Act of 1996, Congress added criminal copyright infringement to the statutory list of RICO predicate acts listed in 18 U.S.C. s. 1961(1)(B). Following that statute, Perry, Martinez, and Baron consider Shein’s infringement on their designs as part of a pattern that has occurred systematically and continuously over a period of years without cessation. In other words, the designer plaintiffs are pursuing Shein Enterprises like they are an organized crime racket. The Complaint that was filed July 11,2023, references fifty current cases filed against the Shein Enterprise – which is accused of a typical algorithm-based business model and blame avoidance and liability techniques.  

They very well may have a case. Shein appears to have been blatantly infringing and banking on its convoluted system to avoid responsibility. I recommend you take the time to read the Complaint that they filed. It is an interesting read and may be the beginning of the unraveling of a possible criminal enterprise. 


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