Shein loses UK copyright lawsuit against rival Temu in key e-commerce ruling

LONDON, Aug 13 (Reuters) - Online fast-fashion platform Shein on Thursday lost its London lawsuit against rival Temu over alleged copyright infringement, in a ruling that could be beneficial for online marketplaces hosting third-party sellers.

The ruling, which comes as Shein aims for a more than $30 billion valuation in a Hong Kong initial public offering, concerns the first round of the companies' London legal battle. Temu's counterclaim that Shein broke competition law by tying suppliers to exclusive agreements is due to go to trial next year.

Shein had accused Temu of breaching its copyright "on an industrial scale", arguing at a trial in May that Temu – owned by PDD Holdings – used photos of Shein's own-brand clothing to "piggy-back" on a more established competitor.

Judge Kelyn Bacon rejected Shein's arguments that Temu infringed Shein's copyright and said that, even if it had infringed, Temu would not be liable.

Shein had initially argued that Temu reproduced Shein's photos, but did not pursue that at the trial as Temu's servers are outside the United Kingdom and any reproduction was outside the UK, Bacon said in her ruling.

A Shein spokesperson said there was no dispute that Shein owned the thousands of photos it had sued over and that they had appeared on Temu's website.

"Yet despite copying on an industrial scale, it has avoided liability in the UK simply because the servers supporting its UK website happen to sit in Ireland," the spokesperson said. Temu did not immediately comment.

FAST-FASHION RIVALS FACE OFF

The case is part of a global legal battle between Shein and Temu, which have expanded rapidly in international markets with low-cost clothing, accessories and gadgets.

In her written ruling, Bacon rejected the argument that Temu authorised the infringement of Shein's copyright by merchants who uploaded photos to its website, saying Temu "prohibits merchants from uploading infringing content".

The judge also significantly ruled that, if there had been copyright infringement, Temu could have relied on the so-called hosting defence, because it was only an "intermediary" and did not have the requisite knowledge of any infringement.

"In so far as any infringements could be established in this case, Temu did not have either actual knowledge of the infringements or awareness of facts or circumstances from which the infringements would have been apparent," Bacon said.

She also upheld Temu's counterclaim, which sought damages for having to remove listings when Shein obtained an injunction in relation to images for which Shein did not own the copyright.

(Reporting by Sam Tobin; additional reporting by Helen Reid; editing by William James and Susan Fenton)