Shein used algorithms in ‘systematic’ IP theft, artists claim

The online retailer is under fire for IP ‘crimes’ against potentially thousands of designers | Artists allege that Shein uses an algorithm to generate ‘exact’ copies of works and avoids litigation with a ‘baked in’ strategy.

A group of graphic designers has sued online fashion giant  Shein for an allegedly rampant pattern of copyright and trademark infringement of not only their designs, but potentially tens of thousands more.

This number, according to the plaintiffs, looks set to increase as the retailer applies its high-tech, “byzantine” business model to conduct a “systematic and continuous pattern of criminal copyright infringement”.

This renders it "impossible for intellectual property plaintiffs to figure out who to sue”, according to the complaint filed on Tuesday, July 11 at a California court.

The US-based artists— Krista Perry, Larissa Martinez, and Jay Baron—submitted their lawsuit after seeing what they say were exact copies of their individual works, used on newly created products for sale by Shein.

These were, specifically, a framed picture using Perry’s ‘Make it Fun’ graphic artwork; a throw blanket appearing identical in pattern to one designed and sold by Martinez, ‘Floral Bloom’; and Baron’s ‘Trying My Best’ typographical piece.

All three artists claim copyright infringement, but Baron also claims that Shein infringed his trademark rights, since ‘Trying My Best’ was registered in the US in 2018.

Smart AI

The artists claim that Shein’s design algorithm “could not work without generating the kinds of exact copies that can greatly damage an independent designer’s career—especially because Shein’s artificial intelligence is smart enough to misappropriate the pieces with the greatest commercial potential.”

The complaint goes on to say: “The deeper one digs into Shein’s business model, the more it becomes clear that a pattern of systematic criminal intellectual property infringement is baked in from the very beginning.”

Shein, according to the plaintiffs, is run by "a mysterious tech genius, Chris Xu, about whom almost nothing is known." The company’s labyrinthine corporate structure operates as a "dizzying and ever-changing decentralised amalgamation of companies."

Avoidance of IP blame

This decentralised structure and business model, it seems, enables Shein to avoid direct blame by “plausibly redirect[ing] blame to third parties as if they were independent, when in fact they are closely controlled by Shein”.

Avoidance of litigation is enabled by using a ‘large-scale automated test and reorder’ (LATR) model, claim plaintiffs, which essentially means that Shein produces small quantities of each new item for sale, with initial production runs as low as 100-200 units per SKU.

“The brand has made billions [of dollars] by creating a secretive algorithm that astonishingly determines nascent fashion trends,” according to the complaint, which are then allegedly used to create new products in sweatshops.

Shein then sells the goods via its online channels, whose target audience are “millions” of Gen Z consumers—and waits to see if anybody complains that the design was stolen.

But the brand—which deploys social media influencers via platforms such as Instagram and TikTok as part of its marketing machine—“gets away with little more than comically token explanations and apologies” when challenged about infringing activities, plaintiffs argue.

And small, independent artists and businesses are likely to be the worst hit, rather than the mightier brands such as Nike, which have larger resources with which to tackle infringement by Shein as seen previously.

For example, Dr Martens AirWair International sued Shein over trademark infringement in 2021; while in 2018, Levi Strauss accused Shein of copying a stitch pattern found in the back pockets of trademarked Levi’s jeans, in a suit that was later settled.

‘Societal threat’

This latest complaint against the Chinese firm cites a Congressional Issue Brief from earlier this year, which refers to a 2022 Wall Street Journal report that Shein had more than 50 outstanding federal cases over three years levied against it alleging trademark or copyright infringement.

Shein’s apparent “empire”, which was valued in April 2022 at $100 billion, sells more clothing than any other in the world, according to the complaint.

And last month, it began to roll out its online “integrated” marketplace model, which it says will empower independent sellers.

However, the company’s notoriety is well documented, with reports of using toxic chemicals in its fabrics and cheap labour to add to the allegations of design theft.

The company is branded by the artists’ lawsuit as a “greater societal threat than TikTok—because it contributes mightily to serious problems beyond data security and privacy, such as environmental damage, sweatshop (or worse) labour conditions, tax avoidance, child safety, as well as the subject of this lawsuit, large-scale and systematic intellectual property theft from US designers large and small.”

Each artist claims diversion of trade, loss of profits, and a diminishment in the value of their art, rights, and reputation; and demand damages, injunctive relief and a jury trial.

Shein’s activities, plaintiffs allege, also amounts to large-scale infringement of US federal racketeering law under the Racketeer Influenced and Corrupt Organizations ( RICO) Act, as well as tax avoidance.

Designer or tech firm?

Elliott Alderman, founder and principal of Alderman IP, thinks that the court’s conclusion of this case “will be interesting”.

“Is Shein a clothing designer or an artificial intelligence-aided technology company structured to infringe the copyrights and trademarks of other designers?

“The infringement questions are more likely straightforward, although who to sue, the RICO issues, are anything but,” he says.

“And Shein’s alleged use of an algorithmically aided platform to gauge customer interest and avoid the consumer purchasing risks that other designers need to navigate (eg manufacturing small quantities)—as well as its byzantine, decentralised corporate structure, making it difficult for intellectual property owners to sue a defined entity—don’t appear to be benign.

“The European Union is taking a broader, more hands-on approach to regulating AI than the United States. Perhaps in edge cases like this, the EU would intercede.”

'Not an AI case'

Mark Lemley, professor of law at Stanford Law School, and of counsel at Lex Lumina, agrees that the infringement issues vary depending on the goods at issue.

“Some of these (like the ‘Fun’ poster) seem pretty clearly problematic.

“Others, like a sticker saying ‘trying my best’, seem like simple ideas [that] no one can copyright. Others are somewhere in between.”

But, he adds, he doesn’t see this as an AI case.

“This is fundamentally different from the wave of generative AI cases we have seen,” he explains.

“The claim is that copying is [Shein’s] business model, which may be true. Algorithms help decide what to sell (and what to copy), but that doesn't seem different from Amazon or any other modern retailer.”

WIPR approached Shein for comment, which responded simply with: “SHEIN does not comment on pending litigation.”

The lawsuit was filed at the US District Court, Central District of California, Western Division.

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