Shein Fails to Shed RICO Claims in Copyrighted Designs Suit (1)

Fast fashion brand Shein Distribution Corp. will face claims that it violated the Racketeer Influenced and Corrupt Organizations Act by systematically engaging in intellectual property infringement.

Judge Mark C. Scarsi denied Shein’s motion to dismiss the civil RICO claims from a group of designers and artists who allege the online fashion retailer ripped off their copyrighted floral fabric patterns and other designs used in Shein clothing.

The designers have viably alleged copyright infringement as a predicate act for their RICO claim, Scarsi ruled for the US District Court for the Central District of California.

The plaintiffs met the threshold of “generally pleading” that Shein had engaged in willful copyright infringement because it allegedly “purposefully created and employed an algorithm that generates exact or close copies of works it does not own,” the judge said.

The designers also sufficiently alleged mail and wire fraud as a RICO predicate, because the complaint appropriately alleged Shein’s scheme to conceal copyright infringement, Scarsi said.

The lawsuit included evidence of Shein representatives presenting themselves under a unified Shein brand that instead had a “‘byzantine’ institutional structure that allows the participants to avoid or minimize liability for intellectual property infringement.”

A Shein spokesperson said in a statement that “the RICO claims are without merit and SHEIN will continue to vigorously defend against such claims.”

The designers first sued in July 2023, alleging Shein rose to the top of the fashion industry around 2016 when it created a secretive algorithm that identifies and forecasts fashion trends.

The fashion retailed has been at the center of numerous controversies over IP theft, human rights and labor practices, and environmental issues. The company has already faced a number of copyright and trademark lawsuits from competing fashion companies and other artists.

Gluck Law Firm and Woolls Peer Dollinger & Scher represent the designers. Paul Hastings LLP represents Shein.

The case is Perry v. Shein Distrib. Corp., C.D. Cal., No. 2:23-cv-05551, 11/8/24.