Temu is being sued by Shein for copyright infringement, with the allegation that the rival company loses money on every sale.

• Temu has been sued by Shein for copyright infringement, as it faces similar accusations from numerous brands and independent artists.
• The Chinese-linked fast-fashion company accused Temu of regularly stealing its designs and claimed that one of its employees stole confidential trade secrets in a civil complaint.
• Allegedly, Shein claims that Temu incurs a loss on every sale it makes and compensates for these losses through trademark infringement.

Shein, a Chinese-linked fast-fashion giant, is suing Temu, accusing the retailer of stealing its designs and building an empire through counterfeiting, intellectual property infringement, and fraud.

A suit filed in Washington, D.C., federal court on Monday accuses Shein of copyright infringement, as the company also faces similar allegations from numerous brands and independent artists, including Adidas and H&M.

Shein claims that Temu, owned by , is pretending to be a legitimate online marketplace by allowing its sellers to steal other brands' designs and then preventing them from removing products from the platform, even after they have admitted to infringement.

The complaint stated that Temu entices U.S. consumers to download and use its mobile application by promising extremely low pricing. However, Temu does not profit from the sale of these products, which are priced so low that the company must subsidize each sale, resulting in a loss on every transaction.

The lawsuit stated that Temu can only reduce its significant financial losses by motivating its sellers to violate the intellectual property rights of others and sell fake or inferior products.

The two e-tailers have revolutionized the retail industry with their low-cost products and quick response to market trends, but have also faced criticism over their labor practices, ties to the Chinese government, and alleged use of other brands' designs.

The two companies are currently engaged in a legal battle over accusations of scandalous behavior, with Temu accusing Shein of copyright infringement and using "mafia-style intimidation" to force suppliers into exclusivity agreements.

In its complaint, Shein accused Temu of "bold" illegal actions. The company claimed that at least one of Temu's employees stole "valuable trade secrets" that identified best-selling Shein products, as well as internal pricing information, to help it compete.

The complaint stated that Temu, armed with stolen information, instructed its sellers to replicate popular Shein products and sell counterfeit versions on its website and app.

"The suit stated that Temu is not a typical infringer. Instead of using copyrighted images of Shein products, Temu reproduced virtually identical images and used them as promotional images on their website and mobile application."

The company claims that Temu has dishonestly presented itself as Shein on social media platform X in an attempt to lead customers away from the Shein platform to the Temu platform.

The ad in question features Shein in the headline, but incorrectly lists Temu as the web address.

"Temu has instructed its paid social media influencers to falsely claim that Temu products, which are often counterfeits of Shein products, are cheaper and of higher quality than genuine Shein goods," the complaint stated. "Temu has imitated Shein by poaching resources, employees, and suppliers from Shein."

Temu is accused of copying numerous clothes and designs from Shein in a 80-page complaint.

The court has been asked to rule in favor of the plaintiff and issue an order preventing Temu from utilizing Shein's confidential information, in addition to other demands.

Temu did not immediately respond to CNBC's request for comment.