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Fast Fashion: Shein Copyright and Racketeering Lawsuits

Credit: Dick Thomas Johnson | Flickr

Shein, a ninety billion dollar fast fashion brand, has quickly become one of the most notorious names in fashion today. What started as a wedding dress company in 2008 and became massively popular during the COVID-19 quarantine represents the market trend known as “fast fashion.” “Fast fashion” is a phrase coined for cheap, rapidly made clothing, often sold for less than $10, but it also represents emerging concerns over sweatshop labor, over-consumption, pollution, and now copyright infringement. The current legal landscape of fast fashion highlights serious problems that small businesses and activists struggle to face on their own. The ongoing transition toward larger lawsuits, such as the Shein RICO suit, presents a unique opportunity to send a strong message against large fashion brands.

Current Legal Landscape:

In a recently filed lawsuit, Shein allegedly stole designs from several small retailers and designers. The complaint that a large fashion brand is stealing ideas from small artists is not new—hundreds of lawsuits are filed yearly over disputed designs, and the battlefield is only growing. In 2008, the 2nd Circuit Court in Tiffany & Co. v. eBay established that online retailers cannot be held liable for third parties selling plagiarized designs—but companies that directly copy others’ works can be held liable for copyright and trademark infringement.

Fashion designers generally have two routes for protecting their designs: copyright and trademark protection. Section 102(5) of the Copyright Act protects “pictorial, graphic, and sculptural works.” However, this is limited as the Supreme Court concluded that clothing is non-copyrightable because it serves a utilitarian purpose. Alternatively, designers may use trademarks to protect themselves from knockoffs or other infringing products. For example, one of the most famous trademark lawsuits enabled Christian Louboutin to protect his red-soled shoe design. Under both copyright and trademark protection laws, designers can sue those who have directly taken and copied their designs.

Unfortunately, this process is both time-consuming and expensive. Often, small businesses do not have the resources to file a lawsuit, and those that do frequently end in settlements. This means that large fashion companies are rarely penalized for infringement and that the punishments are seen as no more than a “slap on the wrist.” This trend culminates in the Shein brand, as it faces almost ten times as many federal copyright or trademark infringement cases as other brands. Furthermore, Shein, like many other fast fashion brands, uses a decentralized structure and blames other entities for infringement to evade copyright claims altogether. As a result, small designers and artists have to use more creative methods, such as RICO lawsuits, to battle the growing landscape of infringement activity. 

What is RICO?:

Congress passed the Racketeer Influenced and Corrupt Organization Act (RICO) to deter organized crime and provide remedies for those affected by unlawful activities of organized crime in the United States, as discussed in Russello v. United States. The Act's goal is to prevent organizations from engaging in repeated racketeering activities, such as repeated criminal infringement on copyrights. A plaintiff attempting to recover damages under a civil RICO claim must prove that an enterprise engaged in a pattern of racketeering activity that caused injury to their person or business. Legal scholars have criticized RICO actions for decades as being vague and prone to abuse, resulting in their use in cases that Congress did not originally intend. 

The complaint filed against SHEIN alleges several instances of copyright infringement that are unlawful under RICO. Krista Perry, an illustrator and designer, claims that the fast fashion company stole her artwork and used the designs on phone cases and wall art. Ms. Perry attempted to reconcile the issue by requesting the brand attain a license to use her work. Shein made a feeble attempt to settle the dispute by offering just $500 to continue to use Ms. Perry's designs. The infringement of small artists’ copyrights continued to Larissa Martines and Jay Baron, who complained similarly about Shein using “mechanical copies” of their artworks. 

Further, the Plaintiffs allege that Shein violated the Racketeer Influenced and Corrupt Organizations Act due to the infringement of their artwork. They first note that Shein is an enterprise made up of persons and entities “whose activities affect interstate commerce.” Shein also allegedly engaged in a pattern of racketeering activity since it has sold a large volume of products that sometimes infringe on the designs of artists, and such predicate acts are part of a systematic and continuous pattern. Because of such infringement, the artists who filed the claim argue that they have lost profits and sales that were instead realized by Shein, as well as injury to their business and reputation. 

In their complaint, the Plaintiffs describe the exact unlawful activity RICO was devised to prevent. Shein's repeated use of the exact mechanical copies of smaller artists’ designs that injure their business, a systematic misconduct of a corporation that rarely faces enough discipline to prevent injury to smaller designers, fits the pattern of racketeering activity under RICO. If the court finds that Shein’s usage of the artwork constitutes copyright infringement, it will likely be found liable under RICO. Large companies that repeatedly infringe on smaller artists should face repercussions under acts like RICO since smaller artists like Ms. Perry will continue to be affected by unethical business practices, and the pattern will only continue unless something is done about it. 

There is criticism of the recent expansion of RICO lawsuit applications. While a RICO lawsuit is a powerful tool that may be used in this case, many people argue that “RICO has metastasized from its original intent, which was to deal more effectively with the perceived problem of organized crime.” This concern stems from a broader concern about enabling prosecutors with unfair discretionary power. While the use of a RICO lawsuit to combat fast fashion is not the most traditional application—it provides the opportunity to send a strong message against powerful fast fashion companies. Striking a balance between protecting the independent small business owner and containing the criminal justice system will be essential moving forward. 

Shein is a powerful player in the fast fashion industry, appealing to many consumers because of the low cost and trendiness of its clothing. Part of Shein's explosive growth is its alleged large-scale copyright infringement, hurting small businesses that lack the resources to litigate against sizable fast fashion companies. Therefore, lawsuits with multiple plaintiffs are likely the only action these smaller designers can bring against Shein. While this litigation is still playing out, the results will set a precedent for how individuals and small businesses can navigate copyright and RICO cases against larger companies such as Shein. The outcomes of these lawsuits will indicate the judicial attitude towards Shein’s actions and will likely influence if other potential plaintiffs move forward with further litigation. 

*The views expressed in this article do not represent the views of Santa Clara University.


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