The Knockoff Economy (5 page)

Today, the fashion industry is a riotous blend of high and low: the extremely cheap (and largely disposable) clothing offered by firms like H&M standing side by side with stratospherically priced brands like Tom
Ford. Occasionally odd hybrids occur, such as
Vogue
-darling Rodarte designing a collection for mass retailer Target. Hunting and gathering at all these price levels are ever-more sophisticated fashion consumers, often armed with the latest magazine spreads and photos from their favorite street fashion blogs. Perhaps the signal feature of American fashion today is its dizzying diversity of design and style—and the frequency and speed with which appealing designs are knocked off.

Striking or popular fashion designs have long been reinvented, reinterpreted, and sometimes simply ripped off. Complaints about copying date back at least to the beginning of the 20th century, and probably further. Writing in the 1920s, Columbia business school professor Paul Nystrom declared that “the extent of the evil of copying is almost unbelievable. Every known device is used by the style creators to prevent their designs from going into the hands of imitators and copyists, particularly before the products of the design are offered for sale.”
¹⁵
Yet in the United States, the copying of fashion designs has never been against the law and has remained legal even as a world-class fashion industry grew up in New York.

Why have fashion designs never been protected against copying? To explain this requires digging into some detail about the structure of our laws against copying. The lack of protection in American law does not arise from any conscious decision. Rather, it flows from a more general feature of the American approach to copyright law: so-called useful articles usually can be copied freely. Useful articles are goods, like apparel, furniture, or lighting fixtures, in which creativity is closely compounded with practicality. A painting has no functional use, whereas a dress is functional, even if it is also a work of art. Copyright law is generally aimed at art forms that either have no function (such as music) or have only the most minimal functional attributes.
¹⁶

The useful articles concept leads to some curious results. Jewelry can be copyrighted, because it is considered ornamental, not useful. But an ornate dress that barely covers the body is considered functional, and consequently is not protected. A two-dimensional sketch of a fashion design is protected as a drawing. But the three-dimensional garment produced from that sketch is not protected. The same basic principle—two dimensions are protected,
but three are not—applies to prints that appear on fabric. A printed fabric is protected, just as an ink print or drawing would be. But the cut and shape of the garment that employs the fabric can be copied at will.

Rules against copying are not totally inapplicable to apparel, however. Following the same basic principles, copyright law can sometimes apply when the garment’s expressive component can be separated from its useful function.
¹⁷
For example, a jeweled appliqué stitched onto a sweater may be protected because it can be
physically
separated from the garment. It can also be
conceptually
separated in the sense that the appliqué does not contribute to the garment’s utility. (The sweater is just as warm with or without it.) Very few fashion designs are separable in this way, however. The expressive elements in most garments are not “bolted on” in the manner of an appliqué but are instilled into the form of the garment itself—for example, in the cut of a sleeve or the shape of a pants leg. The bottom line is that most of the fashion industry’s products, aside from fabric prints and some accessories, can be freely and legally copied.

While copyright is generally concerned with art forms that lack an obvious function, patent law is focused on functional inventions and new designs. At least in theory, novel fashion designs could be protected against copying via a “design patent.” Design patents offer 14 years of protection for “new, original, and ornamental” designs. As a practical matter, however, design patents are rarely useful for clothing. Unlike copyright, which extends to all “original” expression (that is, to all expression not copied in its entirety from others and that contains at least a bit of creativity), design patents are available only for designs that are truly “new.” As a result, design patents do not extend to designs that are merely reworkings of older designs.
¹⁸
Because so many fashion designs fail this test, they do not qualify for protection.
¹⁹

Patents are also hard to obtain. The application is expensive, the waiting period lengthy, and the prospects of ultimately gaining protection uncertain. (The United States Patent and Trademark Office rejects roughly half of all applications for design patents.) Given the one or two season life of many fashion designs, design patents are simply too slow and unpredictable to be practical. The fashion industry’s primary use of design patents has been in the world of handbags and shoes, which tend to have slower turnover in style and, as already noted, cost more, and are quite a bit more profitable, than the average garment.

What about other forms of intellectual property (IP)? Trademark is by far the most significant. Trademark law stops others from a using a mark—that is, a brand name or a logo—when that use would likely confuse consumers about the source of a product, or would dilute the value of the mark. For example, Adidas’ famous three-stripe mark cannot be used by another firm in a way likely to confuse consumers about who made the shoe—as discount shoe purveyor Payless discovered to the tune of more than $50 million (reduced from an initial jury award of over $300
million
) when Adidas sued it for selling look-alike sneakers with two rather than three stripes. Compared with confusion, dilution is a bit more difficult to imagine. Say that a manufacturer of kitchen appliances uses a three-stripe mark to identify its toasters. This might be considered dilution if a court finds that the use of the mark on toasters will weaken the mark’s ability to help consumers identify Adidas’ athletic shoes, even if the consumers don’t actually believe that Adidas is the source of the three-stripe toaster.

Trademarks are critical in the fashion industry because they help to maintain a prestige premium for particular brands. As a result, many apparel firms invest heavily in policing their marks. (That said, many fashion goods sold by street vendors are counterfeits that plainly infringe trademarks, such as the cheap handbags and watches often found in areas such as Canal Street in New York and Santee Alley in Los Angeles.)
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Trademark law does little to protect fashion
designs,
however. Occasionally a fashion design will visibly integrate a mark so that it becomes an element of the design. Burberry’s distinctive plaid is trademarked, for example, and many Burberry products incorporate it into the design.

For this rare category of goods, the logo is part of the design, and as a result trademark law provides significant protection against design copying. But for the vast majority of apparel goods, the trademarks are either inside the garment or subtly displayed on small portions such as buttons. For these garments, trademark law is not a useful weapon against design copying.

Trademark law also protects “trade dress,” a concept designed originally to protect distinctive packaging, but which has also been applied to product design. Like copyright, trade dress is limited to nonfunctional design elements.
²¹
Additionally, the design must signify the garment’s
source or producer
to the consumer.
²²
In other words, the trade dress must essentially function as a label. When a consumer sees the design, she must recognize it as the work of a particular producer.

As the Supreme Court has acknowledged, this rarely happens. In a case involving knockoffs of children’s clothing, the Court said that product design “almost invariably serves purposes other than source identification.”
²³
As a result, a designer seeking trade dress protection must show that, “in the minds of the public, the
primary significance
of a product feature… is to identify the source of the product rather than the product itself.”
²⁴
Implicit in this approach is the idea that customers may admire a design, but they rarely link designs with particular brands. It is certainly possible that consumers may link some truly iconic designs with brands. For example, savvy consumers might associate with Chanel a group of trade dress elements consisting of contrasting-color braided piping along the lapels of a collarless, four-pocket woman’s jacket. But few apparel design elements are likely to meet such an exacting standard.

The bottom line is that American intellectual property law presents a mixed bag for the fashion industry. Trademark is very significant, and many apparel makers work mightly to capitalize on their brands and cultivate an image of desirability. Patent counts for little outside of the important, but limited, world of accessories (and even there is used infrequently). Trade dress is mostly irrelevant. Copyright
could
be very relevant, but under existing law it simply does not apply to clothing, absent a few minor exceptions such as fabric design and appliqués. The result is a world of powerful and valuable fashion brands, but very extensive—and perfectly legal—copying of fashion designs.

Proposals to amend American law to protect garment designs against copying are nearly as old as the American fashion industry. Writing in 1934, a federal judge in New York noted the prevalence of copying but stated that he could do nothing about it, because although “in recent years bills have been introduced in the Congress to amend the copyright statutes” to include apparel, none of the bills had yet passed.
²⁵

That same year, British economist Arnold Plant described in detail how copying worked in Europe—and what its effects were:

The leading twenty firms in the
haute couture
of Paris take elaborate precautions twice each year to prevent piracy; but most respectable
“houses” throughout the world are quick in the market with their copies (not all made from a purchased original), and “Berwick Street” follows hot on their heels with copies a stage farther removed. And yet the Paris creators can and do secure special prices for their authentic reproductions of the original—for their “signed artist’s copies,” as it were.
²⁶

The British certainly had no monopoly on copying. During the 1930s and 1940s, American firms also copied designs widely, and some of the more upstanding ones paid a fee to Paris houses like Balenciaga and Dior that entitled them to send their best sketchers to France to copy original looks for manufacture back at home.
²⁷

It was against this backdrop that, in the 1930s, the burgeoning American apparel industry established an unusual cartel to limit copying, at least among their compatriots. The “Fashion Originators’ Guild of America” registered American designers and their sketches and urged major retailers to boycott anyone known to have copied a registered design. Participants signed a “declaration of cooperation” in which they pledged not to deal in garments copied from American designers.
²⁸
Guild members were left free, however, to knock off foreign designs.

To police this system, the Guild employed some 40 investigators to discreetly browse in member stores and ensure that the clothing for sale complied with the rules. Any store that defied the cartel was subject to “red-carding”: its name was distributed to all the participating manufacturers, who in turn would refuse to fill its orders. Those who violated the boycott faced Guild-imposed fines.

The Fashion Originators’ Guild was fairly effective at limiting copying among its members. And its membership was substantial. By 1936, over 60% of women’s garments sold in the United States for more than $10.75 (approximately $177 in 2012 dollars) were sold by Guild-affiliated firms.
²⁹
In all, nearly 12,000 retailers across the nation signed the Guild’s cooperation agreements. The Guild, in short, made a difference in the market.

As with most cartels, however, the Guild faced internal conflict. Much of it turned on the differing interests of retailers and designers. The retailers wanted to sell as much clothing as possible, and, but for the threat of a boycott, would prefer to carry knockoffs in addition to original designs. So the retailers chafed against the cartel’s rules. A signature example of this conflict—and one that ultimately led to the downfall of the Guild—is the
lawsuit brought against the Guild by Wm. Filene’s Sons Co., progenitor of the famous (and recently bankrupted) Filene’s Basement chain of stores.

At the root of Filene’s lawsuit was a disagreement over the scope of the cartel’s rules. The conflict was sparked by what some retailers saw as “high-handed abuse of the Guild’s position.” As a contemporaneous story in
Time Magazine
colorfully recounted the events, the dispute began with a single incident in 1936: “one day last month at Strawbridge & Clothier, a swank Philadelphia department store, a Guild investigator became quietly uppish.” The investigator demanded that “a certain dress, in her opinion a copy, be removed from the floor and that she be told the name of the manufacturer.”
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Strawbridge & Clothier’s management refused, believing that they maintained the right to determine what was and what was not a copy.

Two days later, the store was served with notice that it had violated Guild rules and that it was now subject to a boycott. Within a few days the same had happened at Bloomingdale’s in Manhattan and at R. H. White in Boston, a Filene’s-owned department store. All three red-carded emporiums were members of the Associated Merchandising Corp., a buying cooperative. Soon, 16 out of 20 Associated Merchandising Corp. members had been red-carded. The Filene’s suit against the Guild, charging a conspiracy in restraint of trade that violated American antitrust law, was a counterpunch.