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Introduction
Shein has rapidly emerged as a dominant global force in e-commerce, with an estimated valuation of $45 billion as of January 2024, by capitalising on an ultra fast production cycle. The commercial success is fundamentally predicated on a technological infrastructure that integrates data analysis, proprietary algorithms and artificial intelligence to identify and respond instantly to market trends. The core mechanism involves collecting vast amounts of consumer data and leveraging AI to identify emerging trends or successful designs originating from competitors, luxury brands and independent creators.
However, in July 2023, in Perry, Martinez & Baron v. Shein1, three independent creators - Krista Perry, Larissa Martinez and Jay Baron filed a civil lawsuit against Shein and its associated entities, alleging that Shein produced, distributed and sold exact copies of their creative works without permission'.2 The significance of this litigation is dual in nature - in addition to standard claims of copyright infringement under 17 U.S.C § 101 and associated unfair competition claims, the plaintiffs also seek remedies under the Racketeer Influenced and Corrupt Organisations (RICO) Act, under 18 U.S.C. § 1962(c).3 The complaint accuses Shein of engaging in a pattern of racketeering activity, shifting the charges from torts to organised corporate crime.4
The Perry case distinguishes itself by targeting the corporate mechanism itself. Shein has historically sought to mitigate liability by blaming third-party suppliers, often claiming that suppliers must 'certify their products do not infringe third party IP'.5 The RICO complaint attempts to neutralise this defense by alleging that Shein's internal data surveillance and scraping programs provide the designs to suppliers, meaning that manufacturers do not independently choose the products they create6, shifting liability from contractual failure to intentional, systemic conduct by the Shein corporate apparatus itself. A repeated emphasis on the role of AI and algorithms driving design selection provides crucial evidence for the pattern requirement under RICO. The utilisation of the algorithm ensures that the theft is repetitive, predictable and central to the overall business model, thereby linking the technology directly to the required 'conduct' element of 18 U.S.C, § 1962(c), transforming continuous infringement to organised crime.
A California Federal Court refused to dismiss the RICO claim in November 2024. This importantly signals a willingness to accept a theory that algorithmic, systematic IP theft can constitute a pattern of racketeering, potentially setting a significant precedent for IP laws. However, as of September 9, 2025, the dispute is reported to have been terminated as the parties have reached an undisclosed settlement. Nevertheless, the court's decision not to bar a RICO claim in the face of multiple ongoing instances of copyright infringement, as seen in cases brought by H&M in Hong Kong, Uniqlo over its viral 'Mary Poppins' bag, Brandy Melville over misuse of its imagery, and dozens of artist lawsuits such as that of Alan Giana, makes it vital to analyse the implications thoroughly; the precedent could shape both the strategy and stakes of innumerable future actions and decisions against Shein and fast fashion companies with similar corporate structures.
Protection under U.S. Copyright Law
The underlying tort in Perry7 is the Copyright Act, 1976.8 Copyright protects 'original works of authorship fixed in any tangible medium of expression.'9 In the context of the fashion industry, USA's 'useful articles' doctrine limits copyright protection. The functional or utilitarian features of clothing, such as its shape, cut or basic construction cannot be copyrighted because these aspects are considered practical rather than creative.10 However, this case focuses on the protection of graphic designs and surface ornamentation, which are copyrightable elements. Since graphic designs are 'original, independent artistic' expressions that are separable from the garment's function, the plaintiffs avoid the legal grey area around the clothing design itself. 11
Racketeer Influenced and Corrupt Organisations ( RICO ) Act
RICO was enacted in 1970 to stop organised crime groups like the mafia from using legitimate businesses such as unions, casinos, or construction companies as fronts for their illegal operations.12
The civil provisions under 18 U.S.C § 1964 (c) allow private parties injured by violation of § 1962 to sue for treble damages and attorney's fees. To establish a violation of § 1962 (c), the plaintiffs must demonstrate 4 statutory elements - (i) conduct (ii) of an enterprise, (iii) through a pattern, (iv) of racketeering activity.13 The definition of an 'enterprise' under § 1961(4) is liberally interpreted to include any partnership, corporation or 'group of individuals associated in fact although not a legal entity'. Shein's global network is alleged to constitute such an association-in-fact enterprise under § 1961(4), deliberately structured to obscure liability. Shein Distribution Corporation (Delaware) operates as the U.S. sales and profit hub, Shein Technology, LLC (Delaware) manages data scraping and algorithmic design generation, and Roadget Business Pte. Ltd. (Singapore) serves as the central command overseeing website and app operations, while unidentified suppliers execute production. This decentralised, cross-jurisdictional web is presented as a labyrinthine structure in which liability evasion is not incidental but integral to the alleged RICO scheme.14
The SC in United States v Turkette15 requires that an enterprise be distinct from the racketeering acts themselves, with an ascertainable structure and longevity. Shein's operational model satisfies these requirements - 3 distinct entities operate with the common purpose of generating profit through systemic IP theft while contemporaneously 'obfuscating responsibility'. This provides both separation and continuity necessary to meet the enterprise element.
A pattern of racketeering activity requires both relationship and continuity. The 'continuity plus relationship' test was articulated in Sedima, S.P.R.L. v. Imrex Co16. and refined in H.J. Inc. v. Northwestern Bell Tel. Co. - it requires a plaintiff to show that the racketeering predicates are related, meaning they have the same or similar purpose, results, participants, victims or methods of commission, and that they amount to, or threaten the likelihood of continued criminal activity. Continuity, being a temporal concept, may be shown by predicates extending over a substantial period of time, or by demonstrating a threat of long term racketeering activity, such as being part of an ongoing entity's regular way of doing business. The proof of multiple criminal schemes is not required to establish this pattern.17
The foundation of the RICO claim in the present case lies in demonstrating predicate acts under 18 U.S.C § 1961(1)18, with plaintiffs relying primarily on criminal copyright infringement, wire fraud and potentially trafficking in stolen property. Criminal copyright infringement, codified in 18 U.S.C. § 231919, requires willful infringement for commercial advantage or private financial gain. Contrastingly, wire fraud under 18 U.S.C § 134320 only requires a 'scheme or artifice to defraud' using interstate wires, thus offering a more effective vehicle for establishing the necessary pattern and continuity of racketeering activity. The argument follows that AI scraping, transmission of design data, and cross border e-commerce sales all implicate interstate wires. Finally, trafficking in stolen property under §§ 2314-2315 may apply if the digital designs or their outputs are deemed as stolen property and involve their interstate transportation exceeding $5000 in value. The Wire Fraud predicate acts are paramount to the RICO claim's viability. The scheme to defraud is Shein's alleged attempt to deceive the public, consumers and copyright holders by operating its system of algorithmic copying and production, all while using interstate wires to identify, reproduce and sell the stolen designs, and maintaining a fraudulent corporate veil to shield liability. The corporate system's intent to reproduce the IP, driven by AI can be interpreted as the collective mens rea of the enterprise, bypassing the difficulty of proving individual criminal intent for thousands of separate infringement instances. Essentially, the algorithmic intent can be imputed to the Enterprise as a whole, satisfying elements of the intent to defraud. Shein's counterargument that these are 'garden variety copyright infringement claims' that cannot serve as RICO predicates fails to acknowledge the distinction between incidental infringement and systemic, corporate structured, continuous fraud.
Critical Analysis
The first battle against globally fragmented platforms was procedural rather than substantive with Shein's victory in the 2024 class-action suit, Giana v Shein21. Before the court even began to consider a racketeering claim based on AI driven infringement and wire fraud, the plaintiffs had to navigate a labyrinth of corporate veils and separate legal entities22. Judge Jed Rakoff dismissed Giana's case due to lack of personal jurisdiction but, notably, without prejudice, permitting refiling in a proper forum23. Despite valid claims regarding US payments collected by Shein Distribution and US service affiliates like Roadget enabling New York transactions, the court contended that the plaintiffs had not established the required nexus with New York for the Shein companies in question. Since the dismissal, the plaintiffs, in September 2025, refiled claims in California, being the suitable forum, given the numerous Shein entities located there24. The Central District Court of California has allowed RICO allegations regarding apparent copyright infringement and wire fraud as acceptable predicates in stark contrast to the New York holding.
As seen by the 2024 dismissal in Giana v. Shein, and the numerous petitions filed by Shein for dismissal or going into mediation, Shein heavily relies on jurisdictional defences such as the lack of particular contracts, entity separateness and forum non conveniens25 to avoid courts delving into the merit behind these technical considerations26. Regarding cross border issues, forum non conveniens serves as a lightning rod in the courts' hands, to reject valid claims due to weaker local ties27. These dismissals can put an end to the litigation altogether, a predictable tactic used by multinational retailers to challenge service, discovery access and enforcement internationally. Giana v. Shein brings to light a double edged sword - RICO may theoretically fit the algorithmic infringement schemes when combined with fraud predicates, but Shein ultimately wins or delays justice if the plaintiffs cannot align forum, entity and conduct.
The absence of a customised, expeditious and expandable right for fashion designers in the USA forces plaintiffs to stretch copyright and patent laws to prevent widespread infringement by transnational entities who take advantage of decentralised supply chains28. Due to the patchwork's inability to withstand platform-scale appropriation and AI generated lookalikes, plaintiffs often turn to RICO as leverage for joinders and remedies within the otherwise insufficient intellectual property jurisprudence. As per US laws, the main "look" of the garment is typically unprotected and unsuited to meet the reality of seasonal speed-to-market since copyright laws only cover separable, two dimensional elements (printing images) and not the overall cut or silhouette of a garment, leaving them vulnerable to large scale unchecked infringements29. Trade dress requires a secondary meaning which is uncommon for most designers. Design patents can cover non functional ornamental characteristics but such measures are sluggish, expensive and out of touch with the quick cycles of contemporary and fast fashion30.
On interviewing Advocate Diya Mehta Kumar, the core tension of this case was brought to light- RICO is not a policy solution but rather a tactical stopgap. According to her, using racketeering legislation to combat design theft takes focus away from the true solution, which is updating and evolving existing IP legislation to safeguard the overall aesthetic of clothing and allowing it to keep up with the rapidity and volume of platform driven mass copying. Advocate Kumar also highlighted the structural importance of the settlement. The law still remains uncertain, and the settlement exposes a certain risk that Shein was not willing to take. Proceeding with the litigation could potentially lead to an adverse judgement for Shein, further opening the flood gates for numerous other claims against the entity.
Conclusion
For geographically dispersed retailers with substantial online presence and operations , whose operations readily map onto enterprise and continuity theories, such claims would be far more prevalent if the court had expressly held that wilfully copying with wire fraud is sufficient to prove a pattern related to an association- in- fact organisation. However this was not done, leaving this question for future interpretation and review. Advocate Kumar further expresses caution regarding evidentiary difficulties; RICO raises the burden of proof compared to mundane IP laws, thus requiring detailed logs, genealogy and internal coordination records which are expensive and easy to obscure across borders. This could swallow the small plaintiffs and make RICO an ill fitting mechanism to cut down claims even if the factual story is compelling. Though the case did not set any binding legal precedent due to the out-of -court settlement, Advocate Kumar does not completely discount the use of RICO. The court's decision to uphold the racketeering claims at the threshold indicates that there is at least some plausibility to this legal process. The use of RICO, which primarily relates to the realm of organised crime, for matters like fashion disputes is an indictment of the existing statutory vacuum.
Footnotes
1 Krista Perry v. Shein Distribution Corporation, 2:23-cv-05551, (C.D. Cal.).
2 Michelson IP Institute, https://michelsonip.com/news/unusual-suspect-a-rico-claim-against-fast-fashion-company-shein/ (last visited Sept 25, 2025).
3 Dynamis LLP, https://www.dynamisllp.com/knowledge/ai-and-design-litigation-j-crew-backlash-shein-lawsuits-getty-and-anthropic-cases (last visited Sept 26, 2025).
4 Krista Perry v. Shein Distribution Corporation, 2:23-cv-05551, (C.D. Cal.).
5 Dan Strumpf, 'China's Fast-Fashion Giant Shein Faces Dozens of Lawsuits Alleging Design Theft', The Wall Street Journal, July 3rd 2022, 5:30 am ET, https://www.wsj.com/business/retail/chinas-fast-fashion-giant-shein-faces-dozens-of-lawsuits-alleging-design-theft-11656840601.
6 Chloe Gocher, Shein Lawsuit Alleges E-Commerce Giant Uses AI to Steal, Sell Copyrighted Designs, ClassAction.org , September 22nd 2025, https://www.classaction.org/blog/shein-lawsuit-alleges-e-commerce-giant-uses-ai-to-steal-sell-copyrighted-designs.
7 Krista Perry, Lariss Martinez, Jay Baron v. Shein Distribution Corporation, 2:23-cv-05551, (C.D. Cal.).
8 Copyright Act, 1976, 17 USC §101 et seq.
9 Copyright Act, 1976, 17 USC §102.
10 Kosi Moneke, Copy, Cut, Steal: The Legal Struggle Ov , Cut, Steal: The Legal Struggle Over Fashion's Creative Ownership, Bates College Undergraduate Law Review, Volume 1, April 19th 2025
11 Star Athletica, LLC v. Varsity Brands, 580 US 405 (2017).
12 Britannica, https://www.britannica.com/topic/racketeering (last visited Sept 25, 2025).
13 18 U.S.C § 1962 (c).
14 Krista Perry, Lariss Martinez, Jay Baron v. Shein Distribution Corporation, 2:23-cv-05551, (C.D. Cal.).
15 United States v. Turkette, 452 U.S. 576 (1981).
16 Sedima, S.P.R.L v. Imrex Co., Inc, 473 U.S.479 (1985).
17 H.J. Inc v. Northwestern Bell Telephone Company, 492 U.S. 229 (1989).
18 18 U.S.C § 1961(1).
19 18 U.S.C. § 2319.
20 18 U.S.C § 1343.
21 Giana v. Shein Distribution Corp., 1:24-cv-02599, (S.D.N.Y.).
22 Justia, https://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2024cv02599/619010/38 (last visited Sept 26, 2025).
23 Giana v. Shein Distribution Corp., 1:24-cv-02599, (S.D.N.Y.).
24 Giana v. Shein Distribution Corp., 1:24-cv-02599, (S.D.N.Y.).
25 Hogan Lovells, 'Forum non-conveniens and access to remedy in transnational business and human rights litigation: an update from Brexit Britain and a glance across the pond', JDSUPRA, December 27th 2017, https://www.jdsupra.com/legalnews/forum-non-conveniens-and-access-to-67214/.
26 Simona Grossi, 'Forum Non Conveniens as a Jurisdictional Doctrine', SSRN, oCTOBER 1st 2012, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2155214.
27 Jon Styf, 'Shein Seeks Dismissal of Copyright Infringement Lawsuit', Top Class Actions, October 24th 2023, https://topclassactions.com/lawsuit-settlements/consumer-products/apparel/shein-lawsuit-accuses-fast-fashion-retailer-of-egregious-copyright-infringement/.
28 Riccardo Ciullo and Miriam Santin, 'Fashion Design Protection: US vs. EU', IP Wisely, https://ipwisely.com/fashion-design-protection-us-vs-eu/.
29 Megan Bannigan, 10th Annual Law Firm Marketting Summit, The Global Legal Post, March 2024, https://www.globallegalpost.com/lawoverborders/fashion-law-guide-1929833902/united-states-941717902.
30 Fashion Law in 2025: Navigating IP, Sustainability & Emerging Business Models, TFL, July 15 2025 https://www.thefashionlaw.com/fashion-law-in-2025-course-navigating-ip-sustainability-emerging-business-models/.
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