Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 1 of 100
`
`
`
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`
`
`
`WHALECO INC.,
`
`
`31 St. James Avenue, Suite 355
`Boston, MA 02116,
`
`
`
`Plaintiff,
`
`
`v.
`
`SHEIN TECHNOLOGY LLC,
`
`
`250 Massachusetts Avenue NW
`6th Floor, Suite 660
`Washington, DC 20001,
`
`
`ROADGET BUSINESS PTE. LTD.,
`
`
`7 Temasek Boulevard,
`#12-07 Suntec Tower One,
`Singapore 038987,
`
`Defendants.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Case No. 1:23-cv-3706
`
`
`COMPLAINT
`
`JURY TRIAL DEMANDED
`
`i
`
`
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 2 of 100
`
`
`
`TABLE OF CONTENTS
`
`NATURE OF THE ACTION .................................................................................................... 1
`
`JURISDICTION AND VENUE ................................................................................................ 6
`THE PARTIES........................................................................................................................... 8
`FACTUAL ALLEGATIONS .................................................................................................... 8
`I. Shein’s Multifaceted Scheme to Abuse the U.S. Copyright Office’s Intellectual
`Property Protection Regime and Subvert the Purposes of the DMCA to Interfere
`with Temu’s Growth ...................................................................................................... 9
`Shein’s Unlawful, Anticompetitive Exclusive-Dealing Agreements with
`Coercive IP Transfers from Suppliers to Shein ................................................. 9
`Shein Uses Illegal IP Seizures for Pretextual IP Enforcement and a Mass-
`Scale Bad Faith Campaign of Sending Tens of Thousands of Sham
`DMCA Notices to Disrupt Temu’s Operations ............................................... 10
`Shein Has Defrauded the U.S. Copyright Office and Obtained
`Improper Copyright Registrations that It Has Asserted Against Temu ........... 15
`Shein’s Bad-Faith DMCA Campaign to Cripple Temu and Tie Up
`Suppliers .......................................................................................................... 19
`1.
`Shein’s Submission of Thousands of False DMCA Notices
`Where Shein Neither Owns the Asserted Works nor Has the
`Required Authorization from the Copyright Owner ............................ 19
`Shein’s Accusations Against Products Unrelated to Its Asserted
`Copyrighted Images to Interfere with Temu’s Business...................... 21
`Shein’s DMCA Notices Against Non-Infringing Images .................... 24
`Shein Intentionally Has Misused the DMCA Process to Interfere
`with Temu’s Business .......................................................................... 25
`Shein Relied on Its Mass-Scale DMCA Fraud to Launch Bogus
`Legal Actions Against Temu (Directly and by Proxy) ........................ 29
`II. Shein’s Abuse of the Copyright System Is Part of a Pattern of Defrauding and
`Abusing the U.S. Legal System ................................................................................... 30
`The U.S. Copyright Office and Its Fundamental Reliance on the
`Candor of Applicants ....................................................................................... 30
`Shein Is a Potemkin Village ............................................................................. 31
`Shein’s Scheme Relies on Information Asymmetry Between U.S.
`Courts and Other Countries ............................................................................. 33
`Shein’s Corporate Camouflage and Shape-Shifting Corporate Entities .......... 35
`III. Shein’s Scheme to Foreclose Temu from Supply Through False
`Imprisonment, Exclusive-Dealing Agreements, Loyalty Attestations,
`Phone Seizures, and Unauthorized Searches of Merchants’ Phones ........................... 38
`Shein’s Abuse of Its Monopoly Position through Improper Seizures of
`IP Rights and Exclusive-Dealing Agreements ................................................. 39
`
`2.
`
`3.
`4.
`
`5.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`ii
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 3 of 100
`
`
`
`
`
`Shein’s Coercion of Suppliers to Enforce Its Exclusivity Requirements
`and IP Seizures—False Imprisonment of Vendors Who Deal with Temu,
`Loyalty Attestations, Public Shaming, and Mafia-Style Intimidation ............. 44
`
`1.
`
`2.
`
`3.
`
`4.
`
`Shein Demands that Manufacturers Execute False and
`Misleading Loyalty Attestations Against Temu .................................. 45
`Shein Has Threatened Suppliers that It Would “Go After”
`Anyone That Supplied Temu or Any Other Third Party ..................... 46
`Shein Has Used Public Penalty Notices to Publicly Shame
`Suppliers Who Did Business with Temu and to Intimidate
`Other Suppliers .................................................................................... 46
`Shein Has Falsely Imprisoned Suppliers’ Representatives,
`Searched Their Phones for Temu’s Proprietary Information
`Without Permission, and Made Additional Threats ............................. 48
`
`
`
`
`
`Shein’s Anticompetitive Pricing Floor Requirements ..................................... 50
`IV. Shein Has Copied Temu’s Copyrighted Games and Arcade-Style Trade Dress
`to Steal Temu’s Customers .......................................................................................... 51
`Shein Has Copied Temu’s Copyrighted Games to Increase Customer
`Acquisition ....................................................................................................... 52
`1.
`Shein’s Infringement of Temu’s Registered Copyrights ..................... 52
`2.
`Temu’s Copyrighted Games Are Particularly Valuable as
`They Are Designed to Acquire New Customers and Deepen
`Engagement with Current Users .......................................................... 56
`
`
`
`3.
`
`Shein Has Hired Temu’s Key Marketing and Advertising
`Personnel Who Had Access to Highly-Confidential Information
`and Know-How Including for Temu’s Trade Dress that Shein
`Copied .................................................................................................. 59
`Shein Has Copied Temu’s Arcade-Style Trade Dress ..................................... 60
`1.
`Temu’s Arcade Trade Dress Is Distinctive and Valuable .................... 62
`2.
`Shein’s Improper Acts ......................................................................... 65
`V. Shein’s Misappropriation of Temu’s Trade Secrets .................................................... 67
`VI. Injury to Temu, Consumers, and Competition............................................................. 69
`
`CLAIMS .................................................................................................................................. 73
`Count I
`False DMCA Takedown Notice (17 U.S.C. § 512(f)) ......................................................... 73
`Count II
`Copyright Infringement (17 U.S.C. § 101, et seq.) ............................................................. 74
`Count III
`Inaccurate Copyright Registrations (17 U.S.C. § 411) ........................................................ 74
`Count IV
`Trade Dress Infringement (15 U.S.C. § 1125(a)) ................................................................ 75
`
`
`
`
`
`
`
`iii
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 4 of 100
`
`
`
`Count V
`Misappropriation of Trade Secrets (18 U.S.C. § 1831, et seq.) .......................................... 76
`Count VI
`Misappropriation of Trade Secrets (D.C. Code § 36-401, et seq.) ...................................... 78
`Count VII
`Violation of Section 1 of the Sherman Act (15 U.S.C. § 1) ................................................ 80
`Count VIII
`Monopolization in Violation of Section 2 of the Sherman Act (15 U.S.C. § 2) ................ 81
`Count IX
`Attempted Monopolization in Violation of Section 2 of the Sherman Act
`(15 U.S.C. § 2) ..................................................................................................................... 82
`
`Count X
`Violation of Section 3 of the Clayton Act (15 U.S.C. § 14) ............................................... 83
`Count XI
`Restraints of Trade (D.C. Code § 28-4502) ........................................................................ 83
`Count XII
`Monopolization (D.C. Code § 28-4503) ............................................................................. 84
`Count XIII
`Attempted Monopolization (D.C. Code § 28-4503) ............................................................ 85
`Count XIV
`Unfair Competition (D.C. Common Law) .......................................................................... 86
`
`Count XV
`Tortious Interference with Contract (D.C. Common Law) ................................................. 87
`Count XVI
`Tortious Interference with Business Relations (D.C. Common Law) ................................ 88
`Count XVII
`Tortious Interference with Prospective Business (D.C. Common Law) ............................. 89
`Count XVIII
`Abuse of Process (D.C. Common Law) .............................................................................. 89
`PRAYER FOR RELIEF .......................................................................................................... 90
`JURY TRIAL DEMANDED ................................................................................................... 95
`
`
`
`
`
`
`
`iv
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 5 of 100
`
`
`
`
`Plaintiff WhaleCo Inc. (“Temu” or “Plaintiff”), by its attorneys White & Case LLP, brings
`
`this Complaint and requests a Jury Trial against Defendants Shein Technology LLC and Roadget
`
`Business Pte. Ltd. (together, “Shein” or “Defendants”). Temu alleges, upon personal knowledge
`
`as to events or actions taking place in its presence, and upon information and belief as to all other
`
`events or actions, as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`Temu is a growing e-commerce marketplace offering U.S. consumers an extensive
`
`range of products supported by an innovative, enhanced user experience. Though Temu’s business
`
`model is very different from the fashion-focused, resale approach relied on by Shein (an incumbent
`
`online retailer that has been straining to reinvent itself as an online marketplace), ever since Temu’s
`
`U.S. launch in September 2022, the company has been seen by Shein as its greatest threat—and
`
`therefore the target of malicious and unlawful conduct intended to thwart Temu’s success.
`
`2.
`
`Shein’s efforts to illegally interfere with Temu’s business, abuse the U.S. legal
`
`process, and infringe Temu’s intellectual property (“IP”) rights have escalated recently and warrant
`
`immediate action by this Court. Shein recently has gone so far as to falsely imprison merchants
`
`doing business with Temu, including detaining merchant representatives in Shein’s offices for
`
`many hours while Shein confiscates the merchants’ electronic devices, obtains access to
`
`proprietary Temu information through the merchants’ seller accounts, and threatens the merchants
`
`with penalties for doing business with Temu.
`
`3.
`
`Following its pandemic-related boost, Shein reportedly was valued at over $100
`
`billion as of early 2022 and announced its intention to become a public company traded on a United
`
`States exchange. Following the U.S. entry of Temu, however, Shein’s valuation reportedly fell by
`
`over $30 billion, so Shein hatched a desperate plan to eliminate the competitive threat posed by
`
`Temu. Shein’s plan entailed the manipulation of the U.S. Copyright Office, misuse of the Digital
`
`
`
`
`
`1
`
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 6 of 100
`
`
`
`Millennium Copyright Act (“DMCA”) procedures designed to protect legitimate rights holders
`
`(which Shein is not), the subversion of the U.S. legal process to disrupt Temu’s operations and
`
`damage Temu’s valuable brand, and the unlawful copying of Temu’s IP. At the same time, Shein
`
`carried out a campaign to shore up its public image and deceive U.S. regulators and intellectual
`
`property agencies located here in the Nation’s Capital.
`
`4.
`
`Temu brings this action to respectfully ask this Court to put a stop to Shein’s
`
`deceptive misuse of the U.S. legal system and anticompetitive conduct.
`
`5.
`
`Shein has carried out a multi-faceted scheme to slow Temu’s growth in the United
`
`States, including through at least the following actions (the “Scheme”):
`
`(a)
`
`Coercing thousands of suppliers to sign adhesion contracts allowing Shein
`
`to seize the suppliers’ worldwide IP rights, through invalid assignments
`
`and often without the suppliers’ knowledge;
`
`(b)
`
`Relying on the illegally seized IP rights and/or relying on knowingly false
`
`information to obtain improper copyright registrations in the United States
`
`Copyright Office, located in this District;
`
`(c)
`
`Issuing voluminous, bad-faith DMCA takedown notices to Temu, often
`
`alleging that a product sold on Temu’s marketplace has infringed the very
`
`rights obtained as a result of Shein’s supplier IP seizures—even where
`
`Shein has no basis to establish that it owns the IP it is purporting to enforce;
`
`(d)
`
`Further abusing the U.S. legal system by instigating and supporting
`
`dubious copyright infringement lawsuits against Temu, even though the
`
`named plaintiffs suffered no commercial injury, and even though Shein’s
`
`entire business model is based on stealing others’ IP (with approximately
`
`
`
`
`
`
`
`2
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 7 of 100
`
`
`
`100 IP infringement lawsuits filed against Shein and its affiliates in the U.S.
`
`alone); and
`
`(e)
`
`Leveraging its dominance in ultra-fast fashion (the product market on which
`
`Shein built its earlier success in the United States) to foreclose Temu from
`
`access to suppliers, through Exclusive-Dealing Agreements, mafia-style
`
`intimidation of suppliers, and anticompetitive pricing floor requirements.
`
`6.
`
`In the months leading up to Temu’s major upcoming advertising campaign for
`
`Super Bowl LVIII in February 2024 (bound to increase traffic to Temu’s app and website, just as
`
`a similar Temu campaign did in 2023), Shein has resorted to even more desperate and coercive
`
`measures, including physical detention of merchants who dare to work with Temu, personal
`
`threats, and illegal seizures of merchants’ personal devices to obtain access to the merchants’ Temu
`
`accounts and Temu’s confidential information and trade secrets.
`
`7.
`
`Shein’s illegal Scheme to disrupt Temu’s business cannot be separated from its
`
`public campaign to manufacture the false image of itself as a law-abiding corporate citizen. In
`
`numerous public statements, Shein has gone to great lengths to convince the public that Shein
`
`respects intellectual property rights and champions the rights of the merchants who supply
`
`products for resale on Shein’s websites. For example, in a 2022 “Sustainability and Social Impact
`
`Report,” Shein represented to the public that:
`
`“Protecting intellectual property is one of SHEIN’s key priorities and
`a critical part of empowering independent designer talent,” and
`
`“A core pillar of our business model is empowering entrepreneurs.”
`(emphasis added)
`
`8.
`
`But Shein’s behind-the-scenes campaign to prevent competition and thwart Temu’s
`
`success exposes its public campaign as a fraud and a farce. The truth is that Shein’s interpretation
`
`of “protecting intellectual property” is illegally seizing, fabricating, and weaponizing intellectual
`
`
`
`
`
`
`
`3
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 8 of 100
`
`
`
`property rights to block competition. And if Shein claims to “empower entrepreneurs,” then
`
`someone should ask the “entrepreneurs” that Shein has bullied, intimidated, and even detained in
`
`its offices until they swore allegiance to Shein—and Shein alone.
`
`9.
`
`Shein’s conduct targeted at Temu is part of a larger pattern of behavior by Shein to
`
`subvert and abuse the U.S. legal system. Shein’s recent and ongoing manipulation of DMCA
`
`notice procedures to disrupt Temu’s marketplace is founded on Shein’s improper seizures of the
`
`suppliers’ IP and Shein’s false submissions to the U.S. Copyright Office. Shein has asserted and
`
`continues to assert against Temu copyrights Shein unlawfully seized from suppliers or fraudulently
`
`registered with the U.S. Copyright Office, not for the purpose of protecting legitimate IP rights but
`
`instead to shut down listings of competing fashion products on Temu’s marketplace. But most of
`
`Shein’s asserted copyrights are invalid, and any corresponding copyright registrations should be
`
`cancelled, because they are based on (1) coercive, unlawful IP transfers; (2) works where Shein
`
`otherwise lacks IP ownership; and (3) a massive pattern of misrepresentations to the U.S.
`
`Copyright Office (including knowingly false claims regarding ownership, publication, and
`
`backdated transfers).
`
`10.
`
`Had the U.S. Copyright Office known that its registration process—which depends
`
`on honesty and respect for the law by applicants—had been abused to obtain registrations based
`
`on knowing misrepresentations in order to perpetrate widespread DMCA fraud, it would have
`
`refused registrations to Shein. Although the scale of Shein’s unlawful copyright scheme is
`
`currently unknown, it likely implicates numerous copyright registrations and likely thousands of
`
`DMCA notices against Temu and the innocent suppliers who dared to offer U.S. consumers
`
`competing products.
`
`11.
`
`Not stopping there, Shein manipulates the U.S. judicial system by making self-
`
`
`
`
`
`
`
`4
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 9 of 100
`
`
`
`serving and inconsistent representations depending on which side of the “v.” Shein is on: when it
`
`gets sued for IP infringement (which is often), Shein claims that its suppliers are responsible for
`
`the infringements. But when IP enforcement suits Shein, it uses the rights it seized from suppliers
`
`to attack Temu and block sales of competing products through a sham DMCA campaign, often
`
`relying on fraudulently-obtained copyright registrations.
`
`12.
`
`If Shein believes that its public statements, IP enforcement conduct, and litigation
`
`positions are not inconsistent—and if Shein indeed stands by its past statements—then Shein’s
`
`senior executives should be willing to appear in this Court to testify under oath that they intend to
`
`comply with U.S. law and that they can attest to the truth and accuracy of their statements.
`
`13.
`
`Finally, and true to form, to boost its attempted pivot to a marketplace model, Shein
`
`has been infringing Temu’s valuable copyrights in its popular customer acquisition mobile games
`
`and has been copying Temu’s unique and distinctive trade dress, causing confusion in the
`
`marketplace and loss of goodwill for Temu.
`
`14.
`
`Shein’s pattern of deceitful, intentional disregard for U.S. law and the laws of this
`
`District has spread and will continue to spread without intervention by this Court.
`
`15. While each component of Shein’s conduct is unlawful in its own right, taken
`
`together they form an anticompetitive Scheme and abuse of power in violation of District of
`
`Columbia Code Sections § 28-4502 and § 28-4503, §§ 36-401 to 36-408 and District of Columbia
`
`common law relating to unfair competition, tortious interference with contract, tortious
`
`interference with business, tortious interference with prospective business, and abuse of process.
`
`Shein’s conduct has also violated and continues to violate several federal statutes: 15 U.S.C. § 1,
`
`15 U.S.C. § 2, 15 U.S.C. § 14, 15 U.S.C. § 1125(a), 17 U.S.C. § 101, et seq., 17 U.S.C. § 411, 17
`
`U.S.C. § 512(f), and 18 U.S.C. § 1831 et seq., as set forth below.
`
`
`
`
`
`
`
`5
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 10 of 100
`
`
`
`16.
`
`Shein’s conduct has harmed and continues to irreparably harm Temu, U.S.
`
`consumers, hard-working ultra-fast fashion suppliers, and the U.S. intellectual property and
`
`judicial systems as a whole.
`
`JURISDICTION AND VENUE
`
`17.
`
`The Court has subject matter jurisdiction under 28 U.S.C. §§ 1331 (federal
`
`question), 1337(a), and 1338(a) and (b) because the claims herein arise out of federal questions
`
`concerning the copyright laws under 17 U.S.C. § 101, et seq., antitrust laws under 15 U.S.C. § 15,
`
`trade secret laws under 18 U.S.C. § 1836, and trade dress infringement under 15 U.S.C. § 1125(a).
`
`The Court also has supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a).
`
`18.
`
`The Court has personal jurisdiction over Defendants under D.C. Code § 13-423
`
`because Shein transacts business in this District, Shein contracts to supply services or things in
`
`this District, and Defendant Shein Technology LLC has an office and employees located at 250
`
`Massachusetts Avenue, NW, Washington, D.C., 20001. Defendants have transacted business,
`
`maintained substantial contacts, and/or committed overt acts in furtherance of the illegal Scheme
`
`throughout the United States and in this District specifically. The fraudulent DMCA campaign
`
`and the scheme to defraud the U.S. Copyright Office have been directed at, and have had the
`
`intended effect of, causing injury to persons residing in, located in, or doing business in this District
`
`and throughout the United States. Moreover, Shein’s anticompetitive Scheme directly affects
`
`interstate commerce and has been directed at this District.
`
`19.
`
`Shein also offers, markets, promotes, and sells products in this District in
`
`connection with its infringing trade dress and infringing interactive games, which are the subject
`
`of this lawsuit, and Temu is being harmed in this District by Shein’s infringing activities. Shein
`
`also purposely directs its business activities and sells its products to District of Columbia residents,
`
`and the exercise of jurisdiction in this District is consistent with the United States Constitution and
`
`
`
`
`
`
`
`6
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 11 of 100
`
`
`
`laws.
`
`20.
`
`This Court also has personal jurisdiction over Defendants under Federal Rule of
`
`Civil Procedure 4(k)(2) because Shein purposely directs its business activities and sells its products
`
`to District of Columbia residents and United States residents, and the exercise of jurisdiction in
`
`this District is consistent with the United States Constitution and laws.
`
`21.
`
`Venue is proper in this District under 28 U.S.C. § 1391(b) because a substantial
`
`part of the events or omissions giving rise to the claims occurred in this District and Defendants
`
`are subject to personal jurisdiction in this District. The acts complained of have and will continue
`
`to have substantial effects in this District. Moreover, Defendants reside, transact business, are
`
`found, and have agents in this District. Defendants have submitted hundreds of copyright
`
`registrations, which are implicated in this litigation, to the U.S. Copyright Office, located in this
`
`District. The critical records related to Defendants’ copyright applications and registrations, as
`
`well as Defendants’ scheme to defraud the U.S. Copyright Office, are located in this District and
`
`may be obtained only from the U.S. Copyright Office’s records and/or witnesses. Further,
`
`Defendants use social media to target consumers in the District of Columbia to join its purported
`
`platform and purchase its products, and it ships consumer goods to and imports into this District.
`
`Customers from this District access Shein’s website or mobile application.
`
`22.
`
`Further, Defendants knowingly have targeted Temu with their fraudulent DMCA
`
`and copyright scheme. Shein has sent knowingly false notices of copyright infringement to Temu
`
`that are based on Shein’s alleged copyrights, which were registered in this District and the records
`
`for which reside with the U.S. Copyright Office in this District. As a result, a substantial part of
`
`the interstate trade and commerce involved in and affected by Shein’s violations of the intellectual
`
`property laws, the U.S. copyright registration regime within the U.S. Library of Congress, the
`
`
`
`
`
`
`
`7
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 12 of 100
`
`
`
`copyright protection regime, and antitrust laws was and is carried out in part within this District.
`
`The acts complained of have and will continue to have substantial effects in this District.
`
`23.
`
`Venue is proper in this District pursuant to 28 U.S.C. § 1400(a) (venue for copyright
`
`lawsuits), 15 U.S.C. § 15(a) (Clayton Act), 15 U.S.C. § 22 (nationwide venue for antitrust matters),
`
`and 28 U.S.C. § 1391(b) (general venue provision), because Defendants reside, transact business,
`
`are found, or have agents in this District.
`
`THE PARTIES
`
`24.
`
`Plaintiff WhaleCo Inc. (d/b/a Temu) is a Delaware corporation with its principal
`
`place of business in Boston, Massachusetts. Temu has customers throughout the United States
`
`and the District of Columbia.
`
`25.
`
`Defendant Shein Technology LLC is an indirect, wholly-owned subsidiary of
`
`Roadget Business Pte. Ltd and is located at 250 Massachusetts Avenue, NW, in Washington, D.C.
`
`26.
`
`Defendant Roadget Business Pte. Ltd. (“Roadget”) is a private limited company
`
`organized under the laws of Singapore. Roadget owns the website https://us.shein.com and the
`
`corresponding mobile application. The history of Roadget acting as Shein is detailed below.
`
`FACTUAL ALLEGATIONS
`
`27.
`
`In response to the competitive threat posed by Temu, Shein created and
`
`implemented a Scheme to interfere with Temu’s U.S. growth. While Shein’s Scheme was
`
`motivated by a desire to prevent competition from Temu’s superior offering, Shein’s conduct
`
`struck at the very systems and institutions in place to protect intellectual property and adjudicate
`
`legal disputes in the United States.
`
`
`
`
`
`
`
`8
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 13 of 100
`
`
`
`I.
`
`Shein’s Multifaceted Scheme to Abuse the U.S. Copyright Office’s Intellectual
`Property Protection Regime and Subvert the Purposes of the DMCA to Interfere with
`Temu’s Growth
`
`
`
`Shein’s Unlawful, Anticompetitive Exclusive-Dealing Agreements with
`Coercive IP Transfers from Suppliers to Shein
`
`28.
`
`As described in Section III.A. below, Shein has monopoly power in the U.S. ultra-
`
`fast fashion market. The ultra-fast fashion model relies on a highly tech-enabled supply chain that
`
`includes a limited pool of independent clothing makers that can create and deliver products on
`
`demand. Today, approximately 10,000 of these manufacturers have the capability for small-batch,
`
`flexible production at a low cost.
`
`29.
`
`Temu’s entry and meteoric rise to prominence have given these suppliers—who for
`
`years had no alternatives to Shein—a better channel to sell their products to U.S. consumers. But
`
`it has also posed an existential threat to Shein. Desperate to hold on to its grip on the ultra-fast-
`
`fashion market, Shein has devised an anticompetitive scheme that misuses and abuses the DMCA
`
`procedures and the U.S. Copyright Office registration regime to prevent ultra-fast-fashion
`
`suppliers from listing their products for sale on Temu.
`
`30.
`
`Shein enters into Exclusive-Dealing Agreements with ultra-fast-fashion suppliers,
`
`and through those agreements Shein improperly seizes suppliers’ IP rights—without due
`
`consideration and, oftentimes, without suppliers’ knowledge—to prevent suppliers from listing
`
`and selling similar products on Temu or other retail platforms.
`
`31.
`
`Specifically, at around the time of Temu’s launch in the United States, Shein began
`
`to amend the Exclusive-Dealing Agreements to seize suppliers’ IP. An example of the Exclusive-
`
`Dealing Agreements is attached to this Complaint as Exhibit A. The critical amendments made
`
`to the Exclusive-Dealing Agreements (i) force suppliers to grant a worldwide, irrevocable, and
`
`exclusive license allowing Shein to “publish, display, reproduce, improve, or otherwise use” the
`
`
`
`
`
`
`
`9
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 14 of 100
`
`
`
`suppliers’ products and related styles (Ex. A, Part I, Art. II.11(1)); (ii) force suppliers to initiate a
`
`mandatory transfer to Shein of the IP rights in the images, photos, or videos of such products (id.
`
`at Part I, Art. II.11(2)); and (iii) prohibit suppliers from using or displaying the aforementioned
`
`styles (id. at Part I, Art. II.11(1)), to the effect that such suppliers would not be able to list any of
`
`the same styles on any third-party platform.
`
`32.
`
`As detailed below, Shein then relies on these unlawful IP seizures for thousands of
`
`DMCA notices seeking to shut down competing product listings by merchants who dare to list
`
`their products on Temu.
`
`33. What’s more, as described below, Shein has also made scores of knowingly false
`
`claims to the U.S. Copyright Office in this District to procure copyright registrations for various
`
`ultra-fast-fashion product photographs on which it later relies to issue a barrage of bad-faith
`
`DMCA notices to Temu.
`
`
`
`Shein Uses Illegal IP Seizures for Pretextual IP Enforcement and a Mass-Scale
`Bad Faith Campaign of Sending Tens of Thousands of Sham DMCA Notices
`to Disrupt Temu’s Operations
`
`34.
`
`Shein has engaged in a pretextual IP enforcement campaign to inundate Temu with
`
`tens of thousands of baseless and fraudulent DMCA claims to hinder Temu’s progress and
`
`interfere with its business relationships with merchants.
`
`35.
`
`The United States copyright laws are clear: DMCA takedown notices cannot be
`
`made frivolously or without investigation by the copyright complainants. The DMCA provides
`
`safe harbor for service providers but allows copyright owners or those authorized to act on their
`
`behalf to request takedown of infringing material posted by third parties. But takedown notices
`
`pursuant to the DMCA must be based on a “good faith belief” that the use of the material is
`
`infringing, accompanied by a statement made under the penalty of perjury that the information
`
`within the notice is accurate. 17 U.S.C. § 512(c)(3)(A)(v) and (vi).
`
`
`
`
`
`
`
`10
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 15 of 100
`
`
`
`36.
`
`Bad faith notices. If someone asserts a DMCA takedown notice in “bad faith”—
`
`for example, by materially misrepresenting its IP rights or making a false claim of infringement—
`
`then Section 512(f) provides for liability for submitting a notice with a material misrepresentation.
`
`17 U.S.C. § 512(f). Moreover, the DMCA requires that notices of claimed infringement must
`
`include information sufficient to evaluate the claim asserted in the notice. 17 U.S.C.
`
`§ 512(c)(3)(A)(iii). A party asserting a DMCA takedown notice must consider—in good faith and
`
`before a takedown notice is sent—whether the accused material infringes its asserted rights. As
`
`described below, Shein not only has failed to comply with these requirements, but it also has
`
`designed and perpetrated a fraudulent DMCA scheme (knowing that it lacked the required bases
`
`for the notices) with the goal of harming Temu and shutting down tens of thousands of competing
`
`listings on Temu.
`
`37.
`
`Temu is an online marketplace that serves approximately thirty million daily users
`
`in the United States, with over three million product listings. As of the date of this filing, the U.S.
`
`site of the Temu platform displays more than eighty million product images, and over 100,000
`
`new images are uploaded onto the U.S. site of the Temu platform every day. Between January
`
`and October 2023, Temu has received on average 170 copyright takedown requests a day across
`
`all rights holders—which is a very small percentage of the 100,000 new product images uploaded
`
`onto the platform on a daily basis. Moreover, out of the roughly 170 copyright takedown notices
`
`Temu receives each day, the majority (on average 63%) come from Shein. This shows that,
`
`notwithstanding Shein’s abusive practices, Temu is a responsible and trusted marketplace, and it
`
`is committed to following the law, connecting legitimate sellers with U.S. consumers, and
`
`protecting intellectual property rights.
`
`38.
`
`Temu is continuously hard at work to ensure that its platform adheres to industry
`
`
`
`
`
`
`
`11
`
`
`
`

`

`Case 1:23-cv-03706-TJK Document 1 Filed 12/13/23 Page 16 of 100
`
`
`
`standards in working with rights holders to address the