Shein, founded originally as ZZKKO in 2008, is a fast-fashion retailer whose low-priced clothing has made them famous among the younger, budget-conscious generation. Their business model relies on two principles: low-cost manufacturing through their network of factories, and not investing in the design process past identifying trendy silhouettes. While the first principle brings into question their relationship with labor laws, the second principle has brought about significant conflict with other brands whose IP has been infringed upon.
As a company, Shein’s modus operandi is centered on surpassing fast-fashion with what they refer to as “real-time” fashion. By “outsourcing” design (scouring the internet to identify the most popular and purchased designs), they cut the production process for clothing nearly in half. Further, with their network of industrial factories throughout China (subject to claims of dubious labor practices), they cut down the reproduction and distribution time that other retailers face. However, apart from labor practice disputes that arise due to their rapid production and distribution method, their actions with respect to other fashion industry players has caused opposition to form. Earlier this year, independent designer Cassey Ho of Blogilates exposed Shein for “duping” (replication with a significant price cut) her “pirouette skort”, which achieved internet fame after her design process video on it went viral. In a post detailing the issues she had with the retailer, she mentioned other designers who faced similar issues at the hands of the site. Shein’s replication process is swift and silent: with around 10,000 styles per day added to the site, Shein far surpasses the number of new styles added by any other fast-fashion sites.
The primary complaint made by designers whose designs are being “duped” by Shein is the severe losses they face due to it: while major designers suffer too, independent designers suffer exponentially more due to the lack of name recognition their designs have,meaning that their unique designs are their primary brand value drivers. With these being ripped off by Shein, sold at a fraction of the price, independent designers face the loss of nearly all their new customers as the SEO power and internet presence of Shein drives these independent designers to the corners of search engine results focused on design instead of name.
Within the fashion industry, clothing design is protected primarily by design patents. Design patents are the default IP tool chosen to protect brand new designs released by a brands. The test for infringement with this type of patent is the “ordinary observer test”, which as articulated in the case Egyptian Goddess, Inc. v. Swisa, Inc. is dependent on whether an “ordinary observer” would mistake an external product or article of clothing for the one that is protected by the design patent. If the ordinary observer can make such a mistake, then the accused design is infringing upon the IP of the holder of the original design patent. Additionally, for brands that have a “signature” element to their products or a signature standalone product, trade dress is available to protect their IP and prevent other brands from using or replicating these “signature” elements. Examples of things protected by trade dress include the signature three stripes of adidas, purse designs closely related to a brand (such as Hermès’ Birkin), or even colors (such as Tiffany’s signature blue). The primary issue with protecting the IP of companies that are independently owned and that do not have trade dress-worthy elements or products is that they simply cannot afford to keep track of infringements. With the rapidity that Shein (among other fast-fashion retailers) can replicate clothing designs, the manpower and investment into legal measures that would be required to effectively combat infringement on design patents is beyond the operating budget of smaller brands. While large design houses under conglomerates have extensive legal protection and dedicated legal teams, smaller brands are often comprised of small teams that have a minimal to nonexistent level of IP spending. As such, AI-powered IP management software solutions that can track design patents and prevent infringement through iterative comparison of a company’s IP with integrated IP databases such as the WIPO and USPTO databases. Patlytics, backed by AI-forward funds such as Google’s Gradient Ventures and 8VC, utilizes an AI model that is synced with these databases and assists users in not only analyzing infringement and invalidity of their IP portfolio, but also assists users in drafting further patents to increase the comprehensiveness of their IP portfolios.
With Shein’s IPO looming pending approval by Beijing, they are poised to continue their exploitative pattern. In fact, with the influx of funding they are poised to receive following their IPO, the shorting of other fashion industry stocks pay prove to be equally as lucrative as purchasing Shein’s stock, according to Fortune magazine. With investors and the public divided on Shein’s prospects, and regulation decisions that could decide whether the fashion industry gets greener or faster than it already is on the line, it is clear that IP protection in the face of such rapid changes is going to be the clear differentiator in terms of what brands survive the Shein shakeup or not.
