Shein Faces Lawsuit Alleging Intellectual Property Theft and Racketeering Activities

SHEIN

Shein, the Chinese retail giant, is confronted with a new lawsuit that accuses the company of engaging in large-scale intellectual property theft and infringement-related racketeering activities. Independent designers Krista Perry, Larissa Martinez, and Jay Baron have filed a complaint in a California federal court, alleging that Shein and its related entities are responsible for copyright and trademark infringement by producing and selling exact copies of their creative works.

Shein’s Alleged Infringement and Racketeering Activities

The lawsuit claims that Shein, led by Xu Yangtian, also known as Chris Xu, has utilized a secretive algorithm to identify nascent fashion trends and generate billions of dollars through the production and sale of exact copies of independent designers’ works. The algorithm reportedly misappropriates designs with high commercial potential, causing significant harm to independent designers’ careers.

Algorithmic Infringement and Distribution Model

The plaintiffs assert that Shein’s algorithm is responsible for a pattern of copyright and trademark infringements on a daily basis. The company’s distribution model involves producing very small quantities of each item for sale, typically ranging from 100 to 200 units per SKU. This allows Shein to gauge if any design is flagged as stolen. In the event of a complaint, Shein swiftly settles with the affected company. The plaintiffs cite Nike as an example of a big company that would quickly respond to an infringement by Shein.

Copyright Infringements and Damage to Designers

Shein is accused of offering mechanical, infringing copies of the plaintiffs’ copyrightable graphic designs without their permission or consent. The alleged infringements include Perry’s “Make It Fun” artwork and “Floral Bloom” design, Barron’s “Trying My Best” artwork, and Blintz’s “Orange Daisies” design. The plaintiffs claim that such infringement has resulted in diversion of trade, loss of profits, and a diminishment in the value of their designs, rights, and reputations. They argue that their works have been irreparably tarnished, leading to decreased revenue.

 

Allegations of Racketeering

The plaintiffs’ complaint includes claims under the Racketeer Influenced and Corrupt Organizations (RICO) Act. They argue that Shein’s infringement scheme constitutes racketeering, and the company’s decentralized structure enables individual components, such as the defendants, to be held liable under civil RICO. Shein’s complex corporate structure is alleged to aid in avoiding liability for intellectual property infringement. The plaintiffs contend that Shein entities are all connected and knowingly commit criminal copyright infringement as part of a larger enterprise.

Legal Claims and Relief Sought

The lawsuit asserts claims of copyright infringement, trademark infringement, and violations of the RICO Act. The plaintiffs seek monetary damages to be determined at trial and injunctive relief to prevent further misconduct by the Shein defendants.

The lawsuit against Shein highlights the allegations of large-scale intellectual property theft and infringement-related racketeering activities. The plaintiffs claim that Shein’s secretive algorithm and distribution model have enabled the production and sale of exact copies of independent designers’ works, causing significant harm to their businesses and reputations. The allegations of racketeering under the RICO Act further emphasize the alleged systemic nature of Shein’s infringement scheme. The legal proceedings will determine the outcome of the lawsuit and the potential consequences for Shein’s business practices.

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