Shein loses UK copyright battle against Temu as court backs marketplace ‘hosting defense’

Fast-fashion retailer Shein has lost a High Court copyright lawsuit against rival online marketplace Temu over the alleged use of photographs of Shein products, in a ruling that could have significant implications for the liability of online marketplaces hosting content uploaded by third-party sellers.

Mrs. Justice Kelyn Bacon dismissed Shein’s copyright infringement claims, finding that Temu had not authorized copyright infringement by merchants using the disputed images and, significantly, that Temu would in any event have been able to rely on the so-called “hosting defense” if infringement had been established.

The judgment concerns the first stage of a wider legal battle between the two e-commerce rivals. Shein, operated by Roadget Business Pte Ltd and related entities, brought proceedings against Whaleco UK Ltd, the UK Temu business, in 2023.

At trial in May, Shein alleged that Temu had infringed its copyright “on an industrial scale,” accusing the marketplace of using photographs of Shein’s own-brand clothing to promote products sold by third-party merchants and thereby “piggy-back” on Shein’s established market position.

Temu denied the allegations and argued that Shein was attempting to use litigation to restrict competition.

Court rejects authorization claim

A central issue was whether Temu could be held responsible for copyright infringement resulting from material uploaded by independent merchants using its platform.

The court rejected Shein’s argument that Temu had authorized infringement. According to the judgment, Temu prohibited merchants from uploading infringing content and its role in relation to the disputed photographs was that of an intermediary.

The court found that Temu’s role was of a “mere technical, automatic and passive nature.” It also concluded that Temu did not have actual knowledge of the alleged infringements, nor awareness of facts or circumstances from which infringement would have been apparent.

The distinction is important for online marketplaces because the court’s analysis was not simply that Shein had failed to establish infringement. It also considered whether Temu could have been liable even if infringement had been established.

‘Hosting defense’ offers protection to marketplace

Mrs. Justice Bacon concluded that Temu would have been entitled to rely on the hosting defense in those circumstances.

The defense provides protection for certain intermediary service providers where they host information supplied by users and do not have the requisite knowledge of unlawful activity. The ruling therefore provides an important indication of how the protection may operate in the context of large online marketplaces where product listings and associated imagery are supplied by third-party sellers.

Elise Cant, associate and trademark attorney at intellectual property firm Marks & Clerk, said the judgment could provide greater legal certainty for marketplace operators: “Significantly, the court indicated that even if infringement had been established, Temu would have been entitled to rely on the ‘hosting defense,’ which protects online platforms acting as intermediaries where they lack actual knowledge of the infringing content,” Cant said. She added that Temu’s role in relation to the photographs had been found to be of a “mere technical, automatic and passive nature.”

Server location also proved significant

The judgment also addressed Shein’s original allegation that Temu had reproduced its photographs.

Shein ultimately did not pursue that particular reproduction claim at trial because Temu’s relevant servers were located outside the UK, in Ireland. The court found that any such reproduction on those servers occurred outside the UK, limiting the basis for a UK copyright claim.

Shein nevertheless maintained that it owned the thousands of photographs at issue and that the images had appeared on Temu’s website.

A Shein spokesperson said the company was disappointed with the outcome, arguing that the decision effectively allowed Temu to avoid liability because servers supporting its UK website were located in Ireland.

Implications for online marketplaces

The decision is likely to be closely watched by online marketplaces and rights holders alike.

For marketplace operators, the ruling reinforces the importance of maintaining a genuinely intermediary role and having systems and policies aimed at preventing the upload of infringing material. It also illustrates the potential significance of the hosting defense where platforms lack the knowledge required to trigger liability.

For traditional retailers and IP owners, however, the judgment could make it more difficult to pursue infringement claims against marketplace operators where allegedly infringing material has been uploaded independently by third-party sellers.

That could place greater emphasis on enforcement against individual sellers rather than the platforms through which their products are marketed.

The judgment does not, however, bring the wider Shein-Temu litigation to an end. Temu has brought a counterclaim alleging that Shein breached UK competition law by requiring suppliers to enter into exclusive arrangements. That aspect of the dispute is expected to proceed to trial next year.

The wider proceedings have already generated significant litigation over disclosure and confidentiality. In March, the Court of Appeal refused Shein permission to appeal an order requiring disclosure of a list of approximately 450 suppliers into an “outer” confidentiality ring in connection with Temu’s competition counterclaim.

The latest copyright judgment therefore represents an important development in a much broader dispute between two of the world’s fastest-growing low-cost e-commerce platforms — and one that could have consequences beyond the immediate parties for the future enforcement of copyright against online marketplaces.

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