Fakes, fashion and innovation: gulf between US and Europe

It is one of the world's most important industries with revenues of over $330bn in the US alone in 2012. Compare this with, say, the semiconductor industry, at the heart of products from iPhones to advanced weaponry, which boasted global revenues of $300bn in the same year.

With stakes this high, it ought to be troubling indeed that an entire school of thought holds that copying and counterfeiting in that industry can "drive innovation" and in several ways can play a positive role. Counterfeiting, we hardly need to remind ourselves, is a form of theft.

The industry is fashion, and, troubling or not, this is exactly the controversy when the subject turns to fashion design in North America. In Europe, where IP protection against copying and counterfeiting is strong, fashionistas may be forgiven for asking: "What in the world is going on here?"

Last week SecuringIndustry.com described the latest entry in this controversy, a new study which set out to show that the entrance of counterfeits into the footwear industry during a 12-year period caused authentic brands to "up their design game." Counterfeit entry, in some parts of the market, caused authentic brands to improve quality, according to the study by Assistant Professor Yi Qian, of the University of British Columbia, Sauder School of Business.

But wait, there's more. The market dynamic works so well, we learn, that parts of the studied markets became "self-regulating" without need for legal protection. (This referred, to be precise, to the market for high-end products. Sales in the low-end sector, the study admitted, were mercilessly hammered).

[Ed: Our exclusive interview with Prof Qian can be viewed here.]

In the US, the study will not be seen as unusual. That is because it overlaps with quite a sharp controversy over copying of fashion designs, which has remained legal here, to the chagrin of many in the industry. Near replicas of original designs are widely available on the Internet and in certain chains. Forging of trademarks, of course, is a crime. But copying of a design? Perfectly legal.

In fact, especially in academic circles, copying of fashion designs is sometimes seen here as progressive, part of the sharing economy.

Perhaps the most visible expression of the latter point of view is found in a 2012 book The Knockoff Economy: How Imitation Sparks Innovation by Kal Raustiala, a professor of law at University of California, Los Angeles and Christopher Sprigman, a professor at New York University.

The authors summed up the book's central message this way in a New York Times op-ed column last year, in which the wrote: "...the New York fashion industry has not only survived piracy, it has thrived specifically because of piracy. Every time a new design is widely copied, fashion’s most powerful marketing force kicks in: the trend. Copying makes trends, and trends sell fashion. "

The Knockoff Economy compares the role of copying in fashion to the cultural cross pollination seen in areas like music, cuisine, sports, where copying and "remix" of designs and strategies has always been normal and intrinsic. It received prominent play in publications like the Wall Street Journal, some fashion blogs, and even some intellectual property monitoring websites.

Other influential voices hold that counterfeits function as an entry point for consumers into luxury goods, or at the very least generate the brand prestige and buzz that such goods depend on.

By contrast, the fashion industry, including both established and emerging designers, and legal advocates have been united in pressing for greater copyright protection for fashion designs. A showdown came in the form of a proposed bill in the US Congress, the Innovative Design Protection Act of 2012 (S.3523), which would impose some relatively mild protections for fashion designs.

Before Congress, protection advocates pointed out that copyright defences existed for designs in jewelry, sculpture, art, and even some textile design patterns. Susan Scafidi, Professor at Fordham University, made this point during Congressional hearings:

"The problem today is that, as in other industries like music and film, the digital era has made pursuing a creative business without copyright protection even more difficult. ...It used to take months to copy a new style. Now it takes mere hours. That ecosystem has been upset."

Christopher Sprigman argued forcefully against the bill, saying: "Unlike in many other creative industries, copying does not appear to cause harm to the fashion industry as a whole."

The would-be law went down to defeat in January 2013.

What accounts for the difference in fashion IP policy between the US and, for example, the UK, where full copyright protection is afforded to fashion design automatically from the moment of creation?

Some drivers may have more to do with ideology than specifics of the fashion industry. Government intervention in anything has little sympathy right now in much of the US. And copying in fashion, rehabilitated as "sharing," or remix may seem to meld happily with the digital economy.

Scafidi, on the other hand, told this writer: "I believe that most designers would insist that they are not remixing, but creating new original designs."

She continued: "The economic reality of fashion is that - at least in the case of clothing rather than accessories - most designers need lower-priced diffusion lines and mass market collaborations to pay the bills. If their most successful designs are cherry-picked by copyists, the original designers lose that opportunity."

"Today, the speed of the internet and other technologies allows copies to make it to the stores before the originals. When Narciso Rodriguez designed Carolyn Bessette Kennedy's wedding gown, one copyist alone sold approximately 80,000 copies; by the time Narciso was able to produce the dress, he sold about 45. The 'fashion cycle' has been short-circuited."

The most compelling point in favour of greater IP protection might be the simplest. France, which has arguably the strongest fashion design protection laws in the world, also remains a legendary centre of fashion design and innovation.

Scafidi suggests, "If would-be copyists were instead forced to innovate, hiring designers and creating designs that are inspired by the runway and the red carpet rather than slavish copies, customers would have more, not less innovative styles from which to choose."