IP Law Daily, COPYRIGHT—D.D.C.: Court denies preliminary injunction in a copyright case involving online fashion marketplaces, (Jan 30, 2024)

By Saurabh Kashyap, B.A., LL.B.

The plaintiff, Temu, failed to demonstrate substantial and serious harm to third-party suppliers.

The federal district court for the District of Columbia denied, without prejudice, Whaleco Inc.'s (doing business as Temu) motion for a preliminary injunction against Shein Technology LLC (Shein). The court found that the proposed injunction, which sought to impose stringent requirements on Shein's DMCA takedown notices, was unjustified and ruled that Temu failed to provide evidence of “substantial and serious” harm to its third-party suppliers (WhaleCo Inc. v. Shein Technology LLC , January 29, 2024, Kelly, T.).

Background. Temu, an emerging player in the ultra-fast fashion online marketplace, accused established rival Shein of using a multifaceted campaign to stifle its growth. In its lawsuit, Temu alleged that Shein unlawfully interfered with its business operations by cutting off third-party suppliers and attempting to poach customers by abusing the American intellectual property protection regime.

Temu also alleged misuse of the Digital Millennium Copyright Act (DMCA) by Shein, stating that Shein bombarded Temu with baseless DMCA takedown notices. These notices alleged copyright infringement and required Temu to remove product photographs from its website, which significantly impacted its business.

Temu moved for a preliminary injunction based on these DMCA abuse claims and a motion to protect sensitive information related to the case by sealing certain materials and restricting access. This includes declarations from Temu's Chinese suppliers, who claim Shein violated their copyright and who fear retaliation. These suppliers have provided evidence of Shein's alleged practices, with some remaining anonymous for fear of repercussions.

DMCA abuse claims. In deciding on the motion, the court considered Temu's claim that Shein violated the Digital Millennium Copyright Act (DMCA). The crux of the argument revolved around Shein's alleged submission of baseless DMCA takedown notices, which harmed Temu's business operations and third-party suppliers. The court considered whether these actions violated intellectual property rights and abused the legal protections provided by the DMCA.

Protective order criteria. The court also considered the application of the Federal Rule of Civil Procedure 26, which permits the sealing of documents to protect parties from undue harm. The D.C. Circuit's guidance requires a three-part test for such protective orders: substantial and serious harm, narrowness and precision of the order, and lack of less intrusive alternatives. The court determined that Temu did not meet these criteria, particularly in terms of demonstrating significant harm to its suppliers if Shein gained access to the disputed materials.

Supplier concerns. The court acknowledged Temu's third-party suppliers in China, who feared Shein would retaliate if their identities and claims were revealed. However, the evidence presented was insufficient to justify the extraordinary sealing measures and attorney-only access. The court emphasized the importance of providing concrete evidence to support claims of potential retaliation.

Rebuttal restrictions. Significantly, the court highlighted the effect of the proposed restrictions on Shein's ability to refute the allegations effectively. Restricting Shein's access to the materials would limit its ability to contest Temu's claims, particularly those involving ownership and infringement of copyrighted material. The court emphasized the fundamental legal principle of allowing a party to confront and challenge evidence presented against it.

Public access. Finally, the ruling addressed the presumption of public access to court documents. The court struck a balance between the public interest and the parties' privacy and property rights. While acknowledging the need to protect third-party interests, the court found no compelling reason to keep the documents secret after Shein received them.

The Case is No. 1:23-cv-03706-TJK.

Attorneys: Anna Naydonov (White & Case LLP) for Whaleco Inc. Michael Domenic Bonanno (Quinn Emanuel Urquhart & Sullivan, LLP) for Shein Technology LLC.

Companies: Whaleco Inc.; Shein Technology LLC

Cases: Copyright DistrictofColumbiaNews