An Illinois federal court has sided with Shein in an initial round of its headline-making lawsuit against Temu, granting the Chinese ultra-fast fashion company’s bid for a temporary restraining order (“TRO”) on Monday. In a July 31 memorandum opinion and order, Judge Franklin Valderrama of the U.S. District Court for the Northern District of Illinois held that in addition to showing a likelihood of success on its trademark infringement and false designation of origin, and copyright infringement claims against PDD Holdings Inc. and Whaleco, Inc. (collectively, “Temu”), Roadget Business Pte. Ltd. (“Shein”) has also established that it has no adequate remedy at law and will suffer irreparable harm if the court does not temporarily block Temu’s allegedly infringing activity. The TRO will remain in effect until August 17 at 6 p.m.
The Background: The TRO, which was first reported by TFL, comes in the latest round of the lawsuit that Shein filed against Temu in December, in which it accuses its rival of “willfully and flagrantly infringing [its] exclusive and valuable trademark and copyright rights,” and engaging in a scheme to boost its own growth in the American market by “impersonating [the] SHEIN brand on social media, trading off of the well-known SHEIN trademarks, and using copyrighted images owned by [Shein] as part of [its own] product listings.” Temu has pushed back against the lawsuit, arguing that Shein falls short on its copyright claims (on the basis that some of the allegedly infringed images are not registered), as well as its false advertising and trade libel claims. Temu asserted, among other things, that it “never impersonated SHEIN and played no part in the creation of said Twitter accounts,” and instead, believes the accounts were created by “third-parties gaming Temu’s affiliate program, an initiative rewarding users who refer at least five new customers to download Temu.”
Shein’s Trademark Claims
Delving into Shein’s bid for temporary injunctive relief, Judge Valderrama began his analysis with whether Shein established a likelihood of success on the merits for its: (1) trademark infringement and false designation of origin and (2) copyright infringement claims. On the trademark front, this saw the court run through the Holbrook likelihood of confusion factors, finding on a high level …
Similarity of the Marks – The allegedly infringing SHEIN mark (as used by Temu on its platforms and in Google advertisements) and the authentic SHEIN mark “are similar enough that a customer could believe that the infringing mark is associated with the authentic mark. As a result, this factor weighs in favor of Shein.”
Similarity of the Products – “Because Shein and Temu are competitors and the identical infringing SHEIN marks appear on Temu Platforms, this factor weighs in favor of Shein.”
The Area & Manner of Concurrent Use of the Products – “Temu and Shein are online platforms targeting the U.S. fashion and lifestyle market. Both platforms sell inexpensive clothing and home goods. Thus, this factor also favors Shein.”
Degree of Care Likely to be Exercised by Consumers – “Because both Shein and Temu offer inexpensive clothing and products, customers are more likely to exercise less care and discrimination in their purchases. Therefore, the likelihood of confusion is greater. This factor also weighs in favor of Shein.”
Strength of the Plaintiff’s Marks – “Temu does not challenge the strength of the SHEIN Mark. No matter as this factor favors Shein” in light of things like its social media following (26 million-plus followers on Instagram, 5.5 million on TikTok, and over 500,000 on Twitter), and app-specific stats (Shein was the most downloaded shopping mobile application in the U.S. in 2021 and the most downloaded mobile application across any category in 2022).
Evidence of Actual Confusion – “Shein concedes that there is no actual evidence of confusion, but insists that because discovery is ongoing, this could change, and the balance of factors still weighs in [its] favor.” The court stated that this factor favors Temu.
Intent to Palm Off Its Goods as Those of the Plaintiff’s – The court spent most of its time here, stating that “Shein argues that infringing SHEIN marks appear on counterfeit Shein products, particularly an image of a shirt with an infringing SHEIN mark on the tag (but is delivered to the customer without said infringing SHEIN mark) and a ROMWE jacket with an infringing SHEIN mark listed in the description as a ROMWE product.” Temu unsuccessfully counters that the first sale doctrine shields it from liability here, with the court noting that “contrary to Temu’s assertion, the first sale doctrine is not a defense to the presence of infringing SHEIN Marks on Temu platforms.” The major caveat to its protection is that “the resold goods must be authentic, trademarked goods,” which does not appear to be the case here.
Beyond those products, Shein argued that the “SHINE” storefront on Temu platforms “deliberately capitalizes off of a common mispronunciation of Shein by U.S. customers and uses a font stylized like the SHEIN mark to attract Shein customers.” The “SHINE” storefront also “contains identical images found on the Shein website,” per Shein. (The court noted that Temu has denied any involvement in “the naming of this seller, what the storefront sells, or what listings to include.”)
Still yet, as additional evidence of trademark infringement, “Shein contends that the display of SHEIN marks in the Temu search bar is confusing to customers because it recommends clothing with infringing SHEIN marks and “counterfeit marks with terms for the types of products sold by SHEIN.”
TM TLDR: Temu is “capitalizing off of the goodwill of Shein’s customers,” according to the court, and Shein is “likely to succeed in its trademark infringement claims.”
Copyright Infringement
The court similarly sided with Shein in regards to the likelihood of success on its copyright infringement claims. The discussion turned exclusively on the second element of the copyright infringement test – unauthorized copying by the defendant of the constituent elements of the work that are original – since Shein already showed that it owns valid copyright registrations for the works at issue. “At this juncture and based on the evidence before the court,” including “evidence from both Temu’s own website and communications, as well as articles detailing Temu’s distinctive full-service model to defeat Temu’s DCMA safe harbor arguments,” the court held that Shein has shown that Temu is “actively involved” in copyright infringement. “Based on the low bar, Shein is likely to succeed on its copyright infringement claims,” Judge Valderrama held.
THE BOTTOM LINE: In lieu of remedies at law and in light of the risk of irreparable harm caused by Temu’s alleged infringement (“the fact that Temu platforms continue to have images of infringing SHEIN Marks satisfies Shein’s burden of showing a risk of irreparable harm,” according to the court), the court granted Shein’s request for an emergency temporary restraining order as to its trademark and copyright infringement claims. The court also called on the parties to submit briefings as to Shein’s bid for a preliminary injunction.
The case is Roadget Business PTE. Ltd. v. Whaleco, Inc., 1:22-cv-07119 (N.D. Ill.)
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