Shein sues Temu over copyright infringement, alleges rival loses money on every sale

Chinese-linked fast-fashion giant Shein is suing rival Temu, alleging the retailer stole its designs and built an empire using counterfeiting, intellectual property infringement and fraud.

The suit, filed Monday in Washington, DC, federal court, comes as Shein itself fends off similar allegations from a wide variety of brands and independent artists, including Levi Strauss and H&M.

In its complaint, Shein alleges that Temu, owned by PDD Holdings, is “masquerading” as a legitimate online marketplace because it encourages its sellers to steal other brands’ designs and then prevents them from removing products from the platform, even after they have admitted to infringement.

“Temu draws US consumers into downloading and using its mobile application with promises of extremely low pricing. But Temu is not profiting from the sale of these products, which are priced so low that Temu must subsidise each sale, losing money on every transaction,” the complaint said.

“Only by encouraging its sellers to infringe the intellectual property rights of others and sell counterfeit or sub-standard goods can Temu hope to minimize the massive losses it is subsidising,” the lawsuit added.

The dueling e-tailers have taken the retail industry by storm with their ultra-low-priced products and their ability to respond to trends far faster than their legacy competitors. Along the way, the two have racked up a mountain of criticism related to their labor practices, their connections to the Chinese government and their alleged use of other brands’ designs.

As the two jockey for market share, they have taken to the courts to accuse each other of a series of scandalous allegations. Last year, Temu sued Shein over copyright concerns and allegations that it uses “mafia-style intimidation of suppliers” to bully them into exclusivity agreements.

In Shein’s complaint, the company accused Temu of “brazen” illicit behavior. It said at least one of Temu’s employees stole “valuable trade secrets” that identified best-selling Shein products, along with internal pricing information, to help it in its efforts to compete.

“Armed with this stolen information, Temu then directed its sellers to copy those and other best-selling Shein products and sell knock-off versions on Temu’s website and mobile application,” the complaint said.

“Temu is no garden-variety infringer,” the suit said. “In order to advertise the counterfeit versions of Shein products, Temu has reproduced virtually identical copyrighted images of Shein products and used them, or instructed sellers to use them, as promotional images on the Temu website and mobile application.”

The company goes as far as to say that Temu has falsely pretended to be Shein on social media site X in an effort to “misdirect customers away from the Shein platform to the Temu platform.”

The complaint includes a screenshot of a Temu-sponsored Google ad that shows Shein in the headline, but Temu as the web address.

“To further deceive consumers, Temu has instructed its paid social media influencers to falsely claim that Temu products which are often counterfeits of Shein products are cheaper and of higher quality than genuine Shein goods,” the complaint said. “Temu has gone to great lengths to imitate Shein, including by poaching resources, employees, and suppliers from Shein.”

Shein’s 80-page complaint includes more than a dozen examples of clothes and designs that Temu allegedly ripped off.

It has asked the court to rule in its favor and enter an order that would prohibit Temu from using Shein’s confidential information, among other requests.

Temu did not immediately respond to CNBC’s request for comment.