Shein, the fast-fashion retailer, has reached a settlement with a group of independent designers who accused the company of copyright infringement and violations under the Racketeer Influenced and Corrupt Organizations (RICO) Act. The settlement was disclosed in a notice filed on Monday in a California federal court.
The designers alleged that Shein systematically copied their original works, including graphic designs and fabric patterns, without authorization. They contended that the company’s business model relied on sophisticated algorithms to identify and replicate popular designs, leading to widespread intellectual property infringement. This approach, they argued, constituted a coordinated scheme that violated RICO statutes.
In November 2024, U.S. District Judge Mark C. Scarsi denied Shein’s motion to dismiss the RICO claims, allowing the case to proceed. The judge found that the plaintiffs had plausibly alleged that Shein engaged in willful copyright infringement as a predicate act for their RICO claim. The court noted that the designers sufficiently alleged that Shein’s algorithm purposefully created and employed exact or close copies of works it did not own, and that the company concealed its infringement through a complex corporate structure.
Shein has faced numerous allegations of intellectual property theft in recent years. In April 2024, a class-action lawsuit accused the company of operating an “industrial-scale scheme of systematic, digital copyright infringement” against small designers and artists. The complaint claimed that Shein used advanced electronic systems to algorithmically scour the internet for popular works and misappropriated them without attribution.
In response to these allegations, Shein has stated that it takes all claims of infringement seriously and takes swift action when complaints are raised by valid intellectual property rights holders. The company has also implemented measures to prevent infringement, including expanding its U.S. product review team and investing in image recognition technology, which it claims led to a decline in infringement claims from 2021 to 2022.
The terms of the recent settlement have not been publicly disclosed. However, the resolution of this case may have significant implications for Shein’s business practices and its relationships with independent designers. The fashion industry will be closely watching how Shein addresses intellectual property concerns moving forward.