Chinese fast fashion “etailer” Shein has officially surpassed Zara and H&M as the world’s largest fashion retailer after only 15 years in existence. The online retailer jumped in sales from $10 billion in 2020 to $100 billion in 2022, surpassing the sales of both Zara and H&M combined. On the surface, it seems like Shein cracked the code for commercial success, harnessing the power of an online-only model to rope in consumers. However, independent designers are accusing Shein of something much more sinister: systematic and rampant intellectual property theft amounting to racketeering.
In July of 2023, designers Krista Perry, Larissa Martinez and Jay Baron filed a complaint in California federal court, alleging that Shein’s “egregious intellectual property infringement” is “baked into its business model.” The plaintiffs are seeking relief for four claims of copyright infringement, one claim of trademark infringement, and one claim for violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Here’s everything you need to know about the pending lawsuit:
Shein’s ‘egregious intellectual property infringement’ is ‘baked into its business model’
The Plaintiffs’ Claims
Designer Krista Perry is accusing Shein of selling wall art and phone cases emblazoned with “mechanical cop[ies]” of her original artwork. After Perry complained through contact forms on Shein’s website, “an agent at the email address email@example.com offered to pay her $500, without release or settlement language.” Perry called Shein’s behavior “downright evil.” This was not the only design she alleged was stolen. In 2020, Perry created and copyrighted a design called “Floral Bloom” for throw blankets. Despite having already refused to grant Shein a license to use any of her work on its clothing, Shein used “a mechanical copy of Perry’s pattern on an identical throw blanket as the one Perry sells…” Other plaintiffs allege that this approach was used to steal their designs. Jay Baron, who created and copyrighted an original artwork entitled “Trying My Best” in 2016, and Larissa “Blintz” Martinez, who designed “Orange Daisies” in 2018, argue that Shein knowingly sold mechanical copies of their works. Additionally, Baron asserts that the mark “Trying my Best” is a source-identifier for him and his products. He believes that Shein’s use of an identical mark will cause confusion and suggest Baron’s sponsorship, endorsement, or approval of Shein.
The RICO Claim
The plaintiffs consider these copyright and trademark violations as more than isolated incidents. According to the complaint, the Racketeer Influenced and Corrupt Organizations Act “was designed to address the misconduct of culpable individual cogs in a larger enterprise.” This definition encapsulates Shein’s business model, the plaintiffs argue, because the retailer operates by decentralizing activity through a “de-facto association of entities.” Therefore, the plaintiffs accuse Shein of deliberately avoiding liability for systematic copyright infringement by operating a network of separate companies that work together to create clothing that infringes on the artists’ copyrights in violation of RICO.
In a statement made shortly after the lawsuit was filed, Shein said:
“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.”
In October, Shein filed a motion to dismiss the RICO claim, stating that “garden variety copyright infringement claims, like those alleged by Plaintiffs here, cannot serve as predicate acts to establish a RICO violation, regardless of whether the predicate act is styled as criminal copyright infringement or wire fraud.” The motion also urges the court to dismiss Baron’s copyright infringement claim because “his alleged artwork is not protectable under copyright law.”
Shein is no stranger to lawsuits. The company’s IP infringement has given rise to over 50 federal lawsuits in the United States, and they’re also under investigation for human rights violations involving forced labor. However, this is the first group of plaintiffs to bring a RICO claim against the fast-fashion giant, meaning that a win for these designers could set legal precedent. It’s difficult to gauge how much it will take for Shein to significantly alter their business tactics, but a complaint they’ve never heard before could be a fruitful place to start.
Caroline Kloster is a 2L at UNC School of Law. She graduated from UNC-Chapel Hill in 2022 and is interested in intellectual property matters as they relate to creative industries.