Shein’s trying to avert double trouble when it comes to its pending lawsuit against rival Temu.
Shein has filed two motions against Temu’s operator and parent company—Whaleco and PDD Holdings, respectively—stating that the two separate motions to dismiss filed by each company should be denied.
The company asks the case’s judge to continue hearing its argument, originally put forth in August, in which it has alleged a slew of wrongdoings on Temu’s part, including trade libel, trademark dilution, false advertising and more.
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In the lawsuit, Shein’s parent company Roadget goes after both PDD and Whaleco, alleging that PDD is ultimately responsible for Whaleco’s actions, despite PDD not having an immediate headquarters in the U.S. That, Shein’s counsel argues, is because “Whaleco operates as an alter ego, agent or mere division of the larger PDD business.”
Nonetheless, PDD fought back against that allegation, filing a motion to dismiss on the grounds that Shein doesn’t go far enough to prove that the Washington, D.C.-based court has personal jurisdiction over PDD. It doesn’t say the same about U.S.-headquartered Whaleco. In the motion to dismiss, PDD references several other lawsuits that Shein has brought against Temu in Illinois,
“In all five of these Shein-funded cases, the court dismissed PDDH because PDDH is not subject to personal jurisdiction in that state or the United States,” the dismissal motion reads.
Shein clapped back at PDD by filing an opposition to PDD’s motion, in which it states that the court does, indeed, have jurisdiction over both PDD and Whaleco because the two companies’ operations are not separate enough to warrant a dismissal for PDD. It also calls out documents PDD reportedly filed with the U.S. Securities and Exchange Commission (SEC), which it claims “make clear that PDD has a significant role in directing Whaleco’s operations and that Whaleco operates as an alter ego, agent or mere division of the larger PDD business.”
“Unsurprisingly, PDD seeks to hide behind the corporate form, claiming it is merely a holding company that ‘does not operate any substantive business’ and has nothing to do with Temu’s operation. But PDD ignores the detailed and specific factual allegations underpinning Shein’s allegations that PDD effectively controls and operates the Temu e-commerce platform and is ultimately responsible for the tortious and fraudulent conduct described in the complaint,” the Singapore-based fast-fashion company wrote in its oppositional motion.
In addition to the dispute over jurisdiction for PDD, Whaleco has filed a separate motion to dismiss against Shein, stating that it doesn’t go far enough in trying to prove the claims it made in the initial complaint, and that it is using the lawsuit as a tactic to delay other pending legal action between the two companies, in this case onslaught by Temu.
“This lawsuit is just the latest step in Shein’s numerous efforts to disrupt Whaleco’s operation of Temu in the United States and to stifle competition by a rival. Shein has been attacking Whaleco’s business by sending sham takedown notices under the Digital Millennium Copyright Act (DMCA), threatening Whaleco’s merchant relationships, infringing on Whaleco’s intellectual property and stealing Whaleco’s proprietary information, forcing Whaleco to file a complaint to stop Shein’s illegal efforts,” it wrote.
And though Whaleco’s motion is separate from parent company PDD’s motion, it uses some similar logic throughout. For instance, in the same way that PDD attacked Shein’s attempt to use a different venue to its advantage when including PDD as a plaintiff, Whaleco calls out Shein, saying it “recycles stale, outdated assertions from a two-year old action that Shein filed against Whaleco in another court and ultimately voluntarily dismissed.”
But Shein won’t go down without a fight. Last week, it filed, in tandem with its oppositional motion against PDD, a motion in opposition of the dismissal Whaleco seeks.
Shein states that Whaleco’s motion to dismiss “targets only a limited number of Shein’s claims, [and] should be denied.”
More specifically, it says, it has gone far enough to prove that the issues at hand—false advertising and trade libel; trade secret misappropriation and trademark dilution—are relevant and that Temu has committed some wrongdoing in these areas.
In Whaleco’s motion to dismiss, it alleges that Shein hasn’t adequately shown that Temu has gone out of its way to advertise its products as better through commercial statements. Shein argues that, because Temu allegedly pays influencers to peddle its products online, statements made by those individuals in accordance with Temu’s guidelines should be taken as a statement from Temu.
When it comes to trade secret misappropriation, Shein has alleged that Whaleco “stole [its] confidential Best Seller Data, which contains highly confidential and proprietary information on Shein’s top-selling and most popular styles on Shein’s website and app, distributed it to hundreds of Whaleco’s sellers and suppliers and instructed them to copy those best-selling Shein goods on [Temu].”
Whaleco said that, because data about which products sell best can be accessed by the public, the characterization of that data as a “trade secret” is not correct. Shein notes that, per court precedent and law, it does not have to reveal the depths of the secret in the lawsuit, since doing so could be taken as a public statement that would allow competitors to use proprietary information to further compete with the company.
On trademark dilution, Shein had alleged that Temu’s alleged infringing actions have caused the value of the Shein name and reputation to be tarnished in consumers’ minds. Whaleco said in its motion to dismiss that the trademark was not famous enough to be considered for a dilution claim. In its opposition, Shein notes that, because of its public notoriety among consumers, as well as the rest of the information it has disclosed about the uses for the word mark, it is sufficiently famous. Regardless of that, the company argues that the trademark dilution claim should not be dismissed based on Temu’s perception of the trademark’s fame level.
“The fame of the [Shein] marks is precisely the reason [Temu] went to such great lengths to imitate Shein, using these famous Marks unlawfully in advertising and fake social media accounts,” counsel for Shein wrote.
The validity of PDD, Whaleco and Roadget’s opposing claims have yet to be adjudicated; the case’s judge has not issued a decision on either motion to dismiss.
