Fashion's Piracy Paradox

Hello, readers of the Chicago Faculty Blog.  It's a great honor to have our paper, The Piracy Paradox: Innovation and Intellectual Property in Fashion Design, which will appear in the December Virginia Law Review, serve as the topic of discussion on the mobblog and we thank Randy Picker for suggesting the idea. We also want to thank the commentators he has rounded up; it’s always great to get feedback from colleagues whose work we admire.

The Piracy Paradox is about the challenge that the fashion industry presents to the orthodox theories of IP. Advocates for strong IP rights argue that absent such rights copyists will free-ride on the efforts of creators and stifle innovation. Yet fashion presents a significant empirical anomaly: the industry produces a huge variety of creative goods without strong IP protection in one of its biggest markets (the United States), and without apparent utilization of nominally strong IP rights in another large market (the countries of the European Union). Copying and derivative re-working are rampant in both the U.S. and E.U., as the orthodox account would predict. Yet innovation and investment remain vibrant.

Why, when other major content industries have obtained increasingly powerful IP protections for their products, does fashion design remain mostly unprotected --and economically successful? The fashion industry is a puzzle for orthodox IP theory.

Our paper explores this puzzle.

We argue that within the fashion industry copying does not deter innovation--and it may actually promote it. This makes the existing low-IP regime stable, even though in nearly every other major creative industry IP rights are strong and (often) expanding. In explaining the piracy paradox, we aim to shed light on the creative dynamics of the relatively-unexplored apparel industry. But we also hope to spark further exploration of a fundamental question of IP policy: to what degree are IP rights necessary *in particular industries* to induce innovation? Is the kind of stable low-IP equilibrium we see in the fashion industry imaginable in other industries as well?

(A brief doctrinal note: Why is fashion design mostly unprotected by IP law in the U.S.? Take a look at the paper for a full explanation, but in brief, although trademarks protect famous fashion industry marks (Gucci, Prada, etc.), copyright protection has been withheld in the U.S. from virtually all fashion designs due to the “useful articles” rule. The rule declares that copyright does not protect the aesthetic components of useful articles like apparel unless a particular garment’s aesthetic appeal is somehow “separable” from its usefulness in covering the human form. On this basis, courts have generally rebuffed plaintiffs’ claims of copyright infringement arising from fashion knockoffs.)

Many of the details of our paper will emerge in the commentary to follow, but we’ll provide a quick summary here. We advance an explanation for the piracy paradox that relies on two interrelated elements: induced obsolescence and anchoring. Both phenomena reflect the status-conferring power of fashion, and both suggest that copying, rather than impeding innovation and investment, actually promotes them.

First, what do we mean by induced obsolescence? Fashion is a status-conferring, or “positional”, good. As an attractive design begins to spread, its status-conferring value grows as fashion-forward consumers consume it. But as the design diffuses to the general public, its positional value declines, and fashion-conscious early adopters begin to seek the next new thing. Obligingly, the fashion industry has a new round of design innovations ready for them to consume. The cycle of innovation and diffusion starts again.

This is the fashion cycle, and it’s familiar to anyone who’s thought about the industry or even paged through an issue of Vogue. Less well-appreciated is the connection to the otherwise-puzzling low-IP regime. The industry’s practice of copying and re-working attractive new designs very quickly is made possible by the current legal regime. The legal regime speeds up the fashion cycle by diffusing designs more rapidly, which then drives them toward exhaustion.

We also describe a second dynamic, anchoring, that works along with induced obsolescence in stabilizing fashion’s low-IP equilibrium. The basic thrust is simple and reflects another well-known attribute of fashion: trends. By turning out a large number of copies and derivations each season, the industry “anchors” its seasonal output to a discrete set of designs that characterize what is, at least for the moment, in fashion. The low-IP regime in fashion permits trends to occur, and trends in turn drive the fashion cycle. We discuss some of these trends in the paper and provide pictures to illustrate. The process of trend-making is so familiar that it’s almost invisible. But it’s a vital element of the industry’s innovation process, and it is able to happen in part because IP doesn’t stand in the way.       

There is much more to say. But we hope that the discussion over the next few days will touch on a subject we begin to explore in The Piracy Paradox; namely, whether the story of the fashion industry extends to other creative fields.  We are particularly interested in exploring what we term the “negative space” of IP law. By that we mean creative activities to which IP rules could apply, but do not. We offer a clutch of examples: food; football plays; perfume scents; haircuts; and many more. Why do these plainly creative endeavors fall in the negative, rather than the positive, space of copyright? This question goes well beyond our forthcoming article, but we think it is fascinating and surprisingly unstudied. 

Comments

[priscieve]

IPRs are happening in food (at least at the seed level) and I'd argue they would happen for any field where uniqueness/novelty/stability/distinctness can be defended. Within the fashion industry, I'm trying to think of how in the world anyone can scientifically prove all these. There would need to be an objective, systematic assessment of the clothing in order to prevent another fashion company from unwittingly 'copying' the fashion.

If I owned a fashion line, in order to be sure I wasn't copying, I'd come up with the craziest designs possible and then no one would wear it...or would they? Because everything else would be so crazy we would really have the catwalk fashion finally in the streets!

[Frank]

As for "Why do these plainly creative endeavors fall in the negative, rather than the positive, space of copyright?"

It would be interesting to compare the legal costs of different creative industries. We know that in the classic music business model, about 5 to 13 cents of every dollar in CD sales went to the artist as royalty. (I hope I'm remembering This Business of Music right!) But how much of the cost of the CD went to lawyers--specifically, IP lawyers?

Perhaps its very difficult to parse out IP law costs from general legal costs. But it strikes me that one plausible explanation of the fashion situation is that there is not sufficient consensus among industry players that the gains from IP protection would outweigh the costs of enforcement.

[Tony Sarabia]

There is at least one other important concept with significant impact upon the protection and creation of apparel. I would refer to it as “historical cycling” to distinguish it from the fashion trends and cycles you describe. By “historical cycling” (for ease I shorten to “cycling”), I refer to the recurrence of trends over many years. For example, single breasted and double-breasted suits which swing in and out of fashion. The impact of cycling is extremely significant because it means that what is often claimed to be original by haute couture designers - and you correctly recognize as trend setting - is not original. Thus even under a more protective IP regime, cycling would, certainly under a copyright approach, bar protection to the creations of trend setters to the extent that the trend setters themselves dipped in the well of prior fashion - which is very common. To put it another way, cycling would eviscerate quite a bit of a more protective IP regime.

Because of cycling, the impact of stronger IP protection under a copyright regime would be substantially reduced. The failure to consider cycling causes both the proponents of stronger IP legislation and the opponents (perhaps your paper) to overestimate the impact of a stronger IP regime on creativity in the apparel industry.

Another important concern is the impact of existing IP protection. While there is no copyright protection for the functional aspects of clothing, there is copyright protection for nonfunctional aspects, such as fabric patterns and decorative elements. There is also protection for trademarks. These types of protection loom very large in the fashion world. I would be concerned that describing apparel as a low IP regime industry understates the significance of the existing protection. Consider a comparison with computer chips. One may get a patent for a chip with a certain function - very important protection because chip consumers buy mainly based on functionality. But if the chip were a suit, protection for the pattern on the silicone would be more important because apparel consumers buy mainly based on appearance. Apparel companies can get protection for the appearance of their fabric. This suggests that nonfunctional protection plays a relatively larger role in industries in which appearance is a central consumer criterion.

It may also be the case that trademarks play a larger role in impulse purchases such as clothing, than in larger consumer goods. Consumers spend less time anaylyzing and comparing characteristics and are more likely to use trademarks as a guide to relative quality. Clothing’s place as an impulse purchase gives greater weight to the importance of trademarks. A greater percent of purchases are probably based on Polo than on Intel.

Existing IP protection in the apparel business may be stronger then it appears.

I think the points you make, as well as the points above, apply to a variety of other industries in different combinations.