Copy or Compete? Unpacking the Shein vs. Temu legal showdown

In the rapidly evolving world of e-commerce and fast fashion, intellectual property (“IP”) rights have become a battleground where industry giants fight for dominance. The ongoing legal dispute between Shein and Temu epitomises this struggle, with far-reaching implications for fashion brands worldwide.

The Players

*Picture credit

On one side, we have Shein, a global online fashion powerhouse founded in China but now based in Singapore. On the other side is Temu, a relative newcomer in the U.S. market, launched in 2022, as the American subsidiary of PDD Holdings. Despite its recent entry, Temu has experienced explosive growth, challenging established players like Shein.

The Allegations

Shein's lawsuit, filed in Washington D.C., is comprehensive, encompassing claims of copyright infringement, trade secret misappropriation, trade mark infringement, false advertising, and unfair competition. Here are some key allegations:

Coordinated Scheme

Shein has accused Temu of orchestrating a “coordinated scheme” to steal its designs and posing as Shein on social media platform X (formerly Twitter) as seen in the below exhibits attached to Shein’s complaint, and embed Shein’s trademarks in counterfeit products.

*Extracted from formal Shein complaint

Trade Secret Misappropriation

Shein claims that one of its former employees, now allegedly employed by Temu, stole valuable trade secrets, including sales data and internal pricing information, to give Temu a competitive edge.

Counterfeiting and Fraud

Shein further alleges that Temu has built an empire on counterfeiting and fraud, encouraging its sellers to infringe on other brands’ designs and discouraging them from removing infringing products even after acknowledging the infringement.

False Advertising

Temu is also accused of using copyrighted images of Shein’s products (as seen below) and instructing influencers to falsely claim that Temu’s alleged counterfeit products, are cheaper and of higher quality than genuine Shein goods.

*Extracted from formal Shein complaint

Interestingly, Shein is no stranger to accusations of copying designs itself. Well-known brands like Zara and H&M, as well as independent designers, have accused Shein of replicating their products and designs. In some instances, Shein has been accused of using artificial intelligence to scan and replicate designs almost instantly, offering cheaper versions on its platform. Hashtags like #sheinstolemydesign and #zaradupe have trended on social media, pointing to the similarities between Shein’s products and those of other brands.

Understanding Copyright Infringement in Fashion

Copyright infringement in the fashion industry often involves unauthorised copying of original designs, patterns, and even branding elements. While inspiration is a common and accepted part of the fashion industry, the line is crossed when a design is replicated to the point where it can be easily mistaken for the original. This not only dilutes the original designer’s brand but also results in lost sales and revenue.

Business owners can mitigate the risk of such copyright infringement occurrences by implementing robust IP management strategies. This includes monitoring the market for copies of designs and taking prompt legal action when infringement is identified. Additionally, it is advisable to ensure your designs are registered where they meet the threshold for registrability and that legal counsel is sought to understand the scope of IP rights, including copyright in the underlying sketches and patterns.

In addition, documenting the creative process will also be useful in proving your rights.

What’s at stake?

The outcome of this case could reshape the fashion industry's IP landscape. A victory for Shein could strengthen the IP rights of fashion brands, setting a powerful precedent against illicit copying and counterfeit goods. Conversely, a win for Temu might encourage new market entrants to employ more aggressive tactics, potentially lowering the bar for acceptable business practices in the industry.

This case is not just about two companies fighting for market share; it’s about setting standards for how fashion IP is protected and enforced globally. A high-profile victory for either side could fuel initiatives to tighten oversight of e-commerce platforms and regulate the import of counterfeit goods, affecting not just fashion but all consumer goods industries.

The Shein vs. Temu saga is a microcosm of a larger struggle playing out across global markets in how to balance innovation, competition, and IP protection in a digital-first world. This matter is more than just a legal battle between two fashion giants - it's a wake-up call for all business owners, designers, and entrepreneurs in the fashion industry. Protecting your intellectual property is essential to maintaining your brand's integrity and value. If you are facing similar challenges or want to safeguard your designs, now is the time to take proactive steps to secure your assets.

*Reviewed by Janine Thomas, Executive in ENS’ Intellectual Property practice

Gomolemo Tau

Associate | Intellectual Property

gtau@ENSafrica.com