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Here’s What Happened:
Shein Distribution Corp. holds the distinction of being one of the most famous fast fashion brands. Fast fashion is the refuge of those who want to be on the cutting edge of fashion trends but are budget conscious. Fast fashion is cheap and trendy. Fast fashion brands manufacture clothing quickly to take advantage of the current market trends.
A group of fabric designers brought suit against Shein for “purposefully created and employed an algorithm that generates exact or close copies of works it does not own.” The plaintiffs included a cause of action under the Racketeer Influenced and Corrupt Organizations Act (RICO). A cause of action under RICO requires proof of a pattern of racketeering that consists of at least two predicate acts.
Shein brought a motion to dismiss the RICO claim. The court denied the motion. The court held that organized and systematic instances of copyright infringement could be used as predicate acts to move the RICO claim forward. Plaintiffs sufficiently alleged that Shein representatives presented themselves under a unified Shein brand but instead had a ‘byzantine’ institutional structure that allowed the participants to avoid or minimize liability for intellectual property infringement. Further, the plaintiffs sufficiently alleged that Shein used wire and mail fraud to conceal its infringing activities.
WHY YOU SHOULD KNOW THIS: This matter is still at the pleading stage. But the message is clear. If your business model is based on infringing upon the copyrights of others, you could find yourself liable under RICO.
Cited Authority: Perry v. Shein Distrib. Corp., C.D. Cal., No. 2:23-cv-05551 (December 8, 2024)