SHEIN Doubles Down on Temu, Accuses Rival of Running a “Fraud” Marketplace

A little over a year after Shein’s parent company, Roadget Business Pte. Ltd., targeted Temu in an Illinois federal court for trademark infringement and related claims, the company has its ultra-fast Chinese fashion rival and its corporate affiliates in its crosshairs once again. This time, Shein is taking on Temu in the U.S. District Court for the District of Columbia on similar – but expanded – allegations. In the complaint that it filed on Monday, Shein accuses Temu of counterfeiting, trade secret theft, and trademark and copyright infringement, as well as intentionally confusing customers with a misleading and fraudulent business model.

In the newly-filed suit, Shein claims that while Temu “masquerades as an e-commerce ‘marketplace,’” in reality, “nothing could be further from the truth.” Specifically, Shein maintains that Temu is not actually a marketplace platform at all, and instead, “controls every aspect of its sellers’ activity” and encourages sellers to “infringe the intellectual property rights of others,” including its own. China-founded, Singapore-based Shein alleges that its IP has been “strategically ripped off” by Temu in various ways, including via “imposter” social media accounts intended to confuse consumers and unlawful use of its trademark and advertising material, as well as by providing influencers with guidelines directing them to make disparaging statements about Shein.

Moreover, Shein claims that Temu has “continuously directed and used unfair and unlawful means” to compete, including by stealing valuable trade secrets, “egregiously” infringing on Shein’s copyrights, as well as poaching its resources, employees, and suppliers.

“Temu can no longer hide behind the protection afforded by U.S. law and it should be held liable for its participation in the illegal conduct on its platform,” Shein states in the filing, going on to note that the U.S. government has recognized Temu’s China-based sister website, Pinduoduo, as “one of the most notorious websites for piracy and counterfeiting,” and alleging that “Temu has used the same illegal business model to build a massive counterfeiting and infringement machine in the U.S., which must be stopped.”

The scathing 80-page complaint contains an array of fierce accusations, ranging from trade secret misappropriation involving a crooked Temu employee to the company’s practice of creating “imposter” social media accounts in order to dupe consumers. For example, in regard to the trade secret allegations, Shein asserts that Temu directed one of its employees to steal its “highly sensitive” seller data, and then proceeded to share it with hundreds of people on social media in order to teach suppliers how to copy Shein’s most popular products and incentivize them to do so “by providing rewards” while unjustly enriching itself in the process.

Additionally, Shein claims that Temu’s misleading business model “is not a legitimate marketplace,” and in order to “squeeze prices to rock bottom levels” the company allegedly directs “every phase” of its business and attempts to hide behind the legal protections of a marketplace platform “because otherwise it is directly liable for infringing activity and other product safety” issues. This is in contrast to how “bona fide” online marketplaces operate, Shein states, and the company benefits directly from the infringing activity while “exercising the right to control it.”

On the copyright front, Shein alleges that Temu has “blatantly infringed” its copyright-protected works by copying, displaying, refusing to take down, and encouraging partner sellers to copy photographs and designs without permission in order to sell goods that directly compete with what is available on Shein’s website and app. Temu does not even try to hide the infringement, per Shein, which maintains that the images are only “slightly modified or enlarged” but are still “derivatives” of Shein listings, photos, and advertisements. At the same time, Temu allegedly runs advertising that contains the Shein trademark “or close variations thereof,” and when customers click on the ads containing the trademark in question, they end up at the Temu website “where no genuine Shein-branded products are offered for sale.”

There is also the accusation that Temu “and/or its agents” have “brazenly impersonated” Shein on the social media platform X, Shein alleges, and has used these “imposter accounts” to falsely suggest that they are associated with Shein and “deliberately sown consumer confusion.” Temu has “lured consumers, including customers or potential customers of Shein, into viewing and interacting with the Imposter X Accounts through the unauthorized use of the Shein trademark,” Shein states in the complaint, going on to highlight how social media accounts are also used by influencers – under Temu’s direction – to make false and disparaging statements about Shein.

For instance, Shein points to two popular influencers who allegedly used Instagram to make statements like “Shein is not the only cheap option for clothing! Check Temu.com out, cheaper and way better quality!” – posts that Shein accuses Temu of directing the influencers to publish and cause consumers to believe that Shein branded products “were inferior in quality to products sold by Temu.”

Shein is suing Temu and Whaleco for 16 counts of various infringement-related and trade secret misappropriation claims, including direct, contributory and vicarious copyright infringement; inducement of copyright infringement; federal trademark counterfeiting; federal trademark dilution; unfair competition; false advertising; and misappropriation of trade secrets in violation of the Defend Trade Secrets Act. Shein, which has requested a jury trial, is asking the court award punitive damages, actual damages, for Temu to disgorge its profits, enjoin the company from engaging in future infringement-related activities, and other remedies.

THE BIGGER PICTURE: Shein’s suit is the most recent case to pit it against Temu. As the two companies have faced off to amass greater revenue and market share in the U.S. and beyond, they have similarly upped the ante against one another in court. In March 2023, for example, Shein lodged a headline-making trademark and copyright infringement lawsuit against Temu in the U.S. District Court for the Northern District of Illinois, accusing its closest rival of “willfully and flagrantly infring[ing] its exclusive and valuable trademark and copyright rights” and engaging in a scheme to boost its own growth in the American market by “impersonating [the] SHEIN brand on social media, trading off of the well-known SHEIN trademarks, and using copyrighted images owned by [Shein] as part of [its own] product listings.” That case settled in October 2023 alongside a separate antitrust lawsuit that Temu filed against Shein in a Massachusetts federal court in July. 

The parties hardly made peace, however, as the settlements were swiftly followed by a new (and currently ongoing) lawsuit that Temu waged against Shein. In furtherance of that case, which was filed in December, Temu claims that Shein has engaged in a “mafia-style” scheme to intimidate its suppliers and abuse the U.S. legal system in order to “illegally interfere with Temu’s business.”

These ongoing battles between the Chinese fashion retailers are taking place against a backdrop of rising attention among global regulators and consumers, alike, which are taking increased notice of the workings of these two titans. Temu, for instance, has experienced a fair share of scrutiny recently, grappling with three class actions over its data privacy and consumer trust practices, along with a lawsuit that the state of Arkansas lodged against the  China-founded, Boston-based retailer for allegedly utilizing nefarious means to gain access to the private information of consumers who use its shopping app. 

Meanwhile, Shein and its corporate affiliates saw more than 40 lawsuits lodged against them in 2022, alone, with the bulk of such litigation coming in the form of intellectual property infringement cases, with plaintiffs like Uniqulo and others alleging that Shein engaged in copyright, trademark, and/or patent infringement.

At the same time, Shein has raised eyebrows in connection with its plans to list on a public exchange this year, with Oliver Scutt, a senior associate at Bates Wells, saying that Shein’s impending IPO “raises some significant human rights, supply chain and environmental questions.” He noted that “despite public challenges to its processes and policies, there is still an absence of clear evidence that Shein is cleaning up its supply chains, treating its workers fairly and changing its behavior so as to minimize environmental damage.

The case is Roadget Business PTE. LTD., v. PDD Holdings, et. al., 1:24-cv-02402 (D.C. Cir.)