IP Law Daily, COPYRIGHT NEWS: ‘Far worse than imitation’: Chinese e-commerce company allegedly copied market leader’s software, (May 15, 2024)

By Matthew Hersh, J.D.

The company allegedly purloined its competitor’s code, made only modest changes, and distributed it as its own.

A Chinese e-commerce company purloined the source code from a North American e-commerce market leader and used it unlawfully to develop a competing platform, a new federal complaint asserts. The lawsuit, filed in the Manhattan federal court, asserts that the Chinese company replicated the e-commerce company’s software “[f]rom the highest level of overarching organization to the smallest level of individual lines of code”—and then induced its clients to reproduce the same software on their own e-commerce sites (Shopify Inc. v. Shopline Technology Holdings Pte. Ltd., No. 1:24-cv-03691-ALC (S.D.N.Y. May 14, 2024)).

The lawsuit was brought by Shopify, a Canada-based e-commerce service provider that, according to its complaint, “enable[s] businesses around the globe to design and operate online stores and receive backend support for everything from inventory management to payments to shipping.” Central to Shopify’s success, the complaint alleges, is Dawn, a computer program that powers a customizable storefront template. “Shopify merchants can use Dawn to quickly launch a compelling online presence or to design their own unique store,” the complaint asserts. “Dawn receives rave reviews for its striking, clean appearance, its ease of customization and its operational efficiency.

But Shopify’s success allegedly brought flattery in the form of imitation (and indeed, “far worse than imitation,” the complaint asserts) in the form of competing e-commerce platform Shopline. That company, a subsidiary of a Singapore-based Chinese company name Joyy, offers software—named Seed—that also allows users to create customizable website templates. The Chinese company not only distributes Seed directly to merchants, the complaint alleged, but also encourages web developers to build upon Seed to design stores for clients, and to develop enhanced themes that the developers can sell.

But the software powering the Chinese company is “not the product of Shopline’s ingenuity and hard work,” Shopify contends. Instead, the complaint alleges, Shopline copied the Dawn program, translated it into another programming language and made cosmetic changes, and distributed it as its own. “From the highest level of overarching organization to the smallest level of individual lines of code,” the complaint alleges, “the evidence of Shopline’s copying is overwhelming.” For example, the complaint alleges, the organization of Seed’s directory layout is the same, the Seed code reproduces thousands of lines of Dawn’s code, and the user interface of the two platforms are largely identical. What’s more, the complaint asserts, developers of the Seed code at one point even labelled their own work as “Dawn test”—further evidence, the complaint asserts, of deliberate copying.

The lawsuit contends that Shopline infringed Shopify’s code and seeks damages, attorney fees, and injunctive relief. The lawsuit also accuses the Chinese company of contributing to the infringement of its merchant clients “because it knowingly and materially contributed to the direct infringement, and because it induced the direct infringement.” No doubt to shore up the secondary infringement claim, the complaint also names as a defendant a New York shoe retailer, Fosterry, that uses the allegedly purloined Seed program in its own website.

The Case is No. 1:24-cv-03691-ALC.

Judge: Carter, Jr., A.

Attorneys: Jeremy Paul Auster (Wilson Sonsini Goodrich & Rosati, PC) for Shopify Inc.

Companies: Shopify Inc.; Shopline Technology Holdings Pte. Ltd.; Shopline US, Inc.; Sinoxpress Inc.

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