Why the Shein Lawsuit Is Going After Its Algorithms

Shein’s mysterious algorithms have landed at the centre of a headline-grabbing new lawsuit against the fast-fashion juggernaut.

Last week, three artists filed a complaint in a California federal district court accusing Shein of such rampant intellectual-property theft it amounts to racketeering. In their view, Shein is liable under the civil portion of the Racketeer Influenced and Corrupt Organizations Act, or RICO, established to fight organised crime. The lawsuit argues Shein is a loose federation of companies, made up of the main corporate entity and its suppliers, structured to dodge liability while being able to knock off smaller designers.

Though the appeal to RICO is a novel tactic, the copying claims are the sort Shein and other fast-fashion retailers have fended off for years. Where this lawsuit takes a new turn is its assertion that Shein’s infringement starts with its algorithm.

“The brand has made billions by creating a secretive algorithm that astonishingly determines nascent fashion trends — and by coupling it with a corporate structure, including production and fulfilment schemes, that are perfectly executed to grease the wheels of the algorithm, including its unsavoury and illegal aspects,” it states.

The track record for design-theft suits isn’t great for the accusers, and this one will have to overcome significant hurdles to prove a link between Shein’s tech and its alleged copycat tendencies. Still, the case represents a new front in the perpetual battle against copying in fashion. In the past, it was just human infringers that designers were on guard against. Now they’re also worried about AI that can identify a hot product and flag it to be replicated.

“We’ll see more of these issues as the use of AI expands,” Susan Scafidi, academic director of the Fashion Law Institute at Fordham University, wrote in an email.

The lawsuit suggests Shein’s algorithm not only spots trends online but identifies designs “with the greatest commercial potential” and generates its own versions — often exact replicas. It claims Shein passes these to its factories with little additional information and even speculates that the algorithm might attempt to alter the designs but sometimes just reproduces them “as a matter of business necessity.”

The plaintiffs don’t really know if Shein uses AI this way. For one thing, the complaint refers repeatedly to a single algorithm, but Shein might need multiple algorithms performing different tasks. The filing admits Shein has kept these types of details secret, and without more investigation, it’s impossible to know exactly what’s going on. It says it’s inferring how the algorithm works based on the visible results of Shein’s business, which are the numerous allegations other designers and artists have made that Shein copied their work.

In a statement, Shein said it takes all infringement claims seriously and will defend itself against this lawsuit and any other claims. The company declined to comment on how it uses algorithms to select the designs it produces.

What Shein has said publicly is that it gathers data on customer demand from its app and website, as well as through customer feedback, to determine what products to make. Researchers have noted it also has access to third-party data. Peter Pernot-Day, global head of strategy at Shein, said during a February appearance on a podcast hosted by investment bank Cowen that, armed with this information, the company turns to its own internal design teams, the independent designers in its SheinX programme and “other inputs” to produce the thousands of designs that appear on its site each day.

In this case, “other inputs” seems to mean the company’s suppliers. Last year, the global tech outlet Rest of World looked into what Chinese media has revealed about Shein’s supply chain. While some factories just manufacture designs Shein supplies, many create original designs, too. (Wired has reported the same.) They may find pictures online and send them to Shein’s internal buyers, who review them and select styles for the manufacturer to make into physical samples. After Shein’s team approves the samples, the manufacturer produces a small volume that Shein puts up for sale and automatically reorders in larger numbers if it detects strong demand.

It’s hard to say what role Shein’s algorithms play in recommending the specific designs its internal designers and suppliers produce. The suppliers can work somewhat independently, and their products might appear on other sites like AliExpress in addition to Shein. It’s possible Shein’s data provides general guidance and a human designer is ultimately responsible for any alleged copying.

But if the lawsuit’s version of affairs is accurate, it creates a new complication in fending off infringement. Brand protection teams would have to keep pace with algorithms that could begin cloning products with little human interference, Scafidi noted. “The issue is not just speed, however, but the challenge of proving that a secret algorithm’s infringing actions were ‘willful’ and attributable to its proprietor,” she wrote.

It’s unlikely this lawsuit will be the one to settle the issue. Scafidi pointed out that proving a RICO case would require a substantial investment of time and money. It’s much more likely the parties will settle out of court. (The plaintiffs are currently seeking monetary damages and as well as an injunction against Shein engaging in any further “racketeering activity.”)

So why go to the lengths of filing a RICO suit? In part, these cases are a way to make a point. Other lawsuits have accused Allbirds, H&M and Nike of greenwashing, and while the Allbirds and H&M cases have already been dismissed, they put those brands and others on defence. The new case against Shein comes as the brand is believed to be preparing for an IPO and probably not eager to draw more government scrutiny.

It’s also a moment when anxiety about generative AI is running high — not least among the writers and actors striking in Hollywood — as many creatives fear it could displace them. Artists have already sued AI developers claiming their work was used to train AI models without their consent. At the same time, it’s easy to imagine a company like Shein or its suppliers using the technology to churn out new designs. In the US, existing case law holds that the test for IP infringement is the final product, Anthony Lupo, an attorney focused on fashion and technology at law firm ArentFox Schiff, previously told BoF. But generative AI could present new issues for courts to consider.

Either way, as Scafidi said, it’s likely we’ll see more legal clashes as the use of AI grows.