The Knockoff Economy (39 page)

13
. Edward J. Epstein,
Hollywood Demystified, The Reel Show,
Winter 2005,
www.scribd.com/doc/5885934/How-film-studios-make-money
(accessed May 24, 2011). The case was
Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417 (1984).

1
. Eric Wilson, “Simply Irresistible,”
New York Times,
May 21 2008.

2
. Serena French, “Knock It Off!! Fashion Fights Back at Year of the Copycat,”
New York Post,
May 1, 2007.

3
. Marie Claire: Splurge vs. Steal,
www.marieclaire.com/fashion/tips/splurge-vs-steal
/ (accessed May 31, 2011).

4
. See, e.g., Dana Thomas,
Deluxe: How Luxury Lost Its Luster
(Penguin, 2007).

5
. Pankaj Ghemawat and Jose Luis Nueno, “Zara: Fast Fashion,”
Harvard Business School Case
#9-703-497 (2003).

6
. See, e.g., Francois Baudot,
Fashion: The Twentieth Century
(Universe, 1999) and Teri Agins,
The End of Fashion: How Marketing Changed the Clothing Business Forever
(Harper, 2000). Of course, apparel dates back millennia, but scholars generally view the Renaissance as the birth of fashion, by which they mean clothing used to distinguish individuals from one another in terms of status. See, e.g., Jean Baudrillard, who wrote that fashion is “born with the Renaissance, with the destruction of the feudal order by the bourgeois order and the emergence of overt competition at the level of signs of distinction.” Quoted in Veronica Manlow,
Designing Clothes: Culture and Organization in the Fashion Industry
(Transaction, 2007), 9.

7
. Manlow,
Designing Clothes,
35. See also Nancy Green,
Ready to Wear and Ready to Work
(Duke University Press, 1997), 45, and Paul Nystrom,
Economics of Fashion
(Ronald Press Company, 1928), chapter 16.

8
. Eric Musgrave,
Sharp Suits
(Pavilion, 2009), 97.

9
. Manlow,
Designing Clothes,
47,

10
. Baudot,
Fashion,
123.

11
. Agins,
The End of Fashion,
34.

12
. Thomas,
Deluxe,
4.

13
. Thomas,
Deluxe,
316. Zara changes three-fourths of its merchandise every month, or less. Ghemawat and Nueno, “Zara,” 13.

14
.
See
“Fashion Scoops: Vigilante Justice,”
Women’s Wear Daily,
September 11, 2007, 13.

15
. Nystrom,
Economics of Fashion,
190. Nystrom’s book is a treasure trove of information about early 20th-century fashion, both in Europe and the United States, and Nystrom thought systematically about several of the issues we discuss here.

16
. Copyright is not entirely consistent in this regard. Despite being highly functional, maps and charts have been copyrightable since the first US copyright statute in 1790.

17
. See, e.g.,
Galiano v. Harrah’s Operating Co., Inc.,
416 F.3d 411, 422 (5th Cir. 2005) (casino uniforms unprotected; expressive element not marketable separately from utilitarian function);
Poe v. Missing Persons,
745 F.2d 1238 (9th Cir. 1984) (copyright found in “three dimensional work of art in primarily flexible clear-vinyl and covered rock media” shaped like a bathing suit; evidence suggested article “was an artwork and not a useful article of clothing”).

18
. 35 U.S.C. 102. See also
In re Application of Bartlett,
300 F.2d 942, 49 C.C.P.A. 969, 133 U.S.P.Q. 204 (C.C.P.A. 1962) (“The degree of difference required to establish novelty occurs when the average observer takes the new design for a different, and not a modified already-existing, design”).

19
. We recognize that this pattern of “remix” innovation may be endogenous; in other words, if not for the practical barriers sharply limiting the availability of design patents, it is at least theoretically possible that the fashion industry would engage less in the endless reworking of existing designs and turn attention toward designs that would meet patent’s novelty requirement.

20
. Not all are cheap; the quality of knockoffs can be extremely good, and distinguishing imitations from originals difficult. “Counterfeit for Christmas: Gift Givers Tap New Source as Travel to China Eases, Knockoff Quality Improves,”
Wall Street Journal,
December 9, 2005, B1. For further discussion of the links between trade, fashion, and IP generally see Jonathan M. Barnett, “Shopping for Gucci on Canal Street: Reflections on Status Consumption, Intellectual Property, and the Incentive Thesis,” 91
Virginia Law Review
1381 (2005).

21
. Lanham Act, Sec. 2(e)(5). The nonfunctionality requirement for trade dress may be somewhat lower than in copyright, because most courts have held that functional design elements may be protected as trade dress if they are part of an assemblage of trade dress elements that contains significant nonfunctional items. See
Fuddruckers, Inc. v. Doc’s B.R. Others, Inc.,
826 F.2d 837, 842 (9th Cir. 1987) (“Our inquiry is not addressed to whether individual elements of the trade dress fall within the definition of functional, but to whether the whole collection of elements taken together are functional”).

22
.
See
, e.g.,
Knitwaves, Inc. v. Lollytogs, Ltd.,
71 F.3d 996 (2d Cir. 1995) (aesthetic features of girls’ sweaters that were not source designating were not part of protectable trade dress). See also
Wal-Mart Stores, Inc. v. Samara Bros., Inc.,
529 U.S. 205, 213 (2000) (product design cannot be “inherently distinctive,” and “almost invariably serves purposes other than source designation”).

23
.
Samara,
529 U.S. at 213.

24
.
Inwood Laboratories, Inc. v. Ives Laboratories, Inc.,
456 U.S. 844, 851 n.11 (1982) (emphasis ours).

25
.
Jack Adelman v. Sonners & Gordon,
112 F. Supp. 187 (S.D.N.Y. 1934).

26
. Arnold Plant, “The Economic Aspects of Copyright in Books,” 1
Economica
167–192 (Blackwell, 1934). See also Nystrom,
Economics of Fashion,
for a similar discussion.

27
. Cathy Horyn, “Is Copying Really a Part of the Creative Process?”
New York Times,
April 9, 2002; Manlow,
Designing Clothes,
95.

28
. Robert Merges, “Contracting into Liability Rules: Intellectual Property Rights and Collective Rights Organizations,” 84
California Law Review
1293, 1363 (1996).

29
.
Fashion Originators’ Guild v. FTC,
312 US 457 (1941).

30
. “Dress War,”
Time,
March 23, 1936.

31
. Ibid.

32
.
Fashion Originators’ Guild v. FTC,
312 US 457 (1941), 467. Simultaneous with its action against the Fashion Originators’ Guild, the Federal Trade Commission also successfully struck down a similar cartel that organized makers of women’s hats. See
Millinery Creators’ Guild, Inc. v. FTC,
109 F.2d 175 (2d Cir. 1940).

33
. The Filene’s case was significant, however, as we discuss below. The Supreme Court noted in its first footnote that it agreed to hear the case because of the difference in opinion on the legality of the Guild between the First Circuit, which heard Filene’s claim, and the Second Circuit, which agreed with the FTC that the Guild was illegal.

34
. “Fashion Designer Asks ‘Piracy’ Ban,”
New York Times
, July 22, 1947.

35
. Thomas,
Deluxe,
269.

36
. Thanks to the latest amendments, named for Sonny Bono, the singer and former Congressman, the standard copyright term is now life plus 70 years for the creations of individuals and 95 years after first publication or 120 years from creation for those of corporations.

37
. On this shift, see Jamie Boyle,
The Public Domain
(Yale University Press, 2008); Adrian Johns,
Piracy: The Intellectual Property Wars from Gutenberg to Gates
(University of Chicago, 2010).

38
. The comparison with France dates back to at least 1928. Nystrom described France’s legal protections for fashion design favorably, noting that “style-creating houses, both in this country and in Paris, would like to see such a law provided, so as to stop American copying of both American and French designs.” Nystrom,
Economics of Fashion,
191.

39
. Press Release, “Delahunt, Goodlatte and Nadler Reintroduce Legislation to Combat Design Privacy,” April 30, 2009,
www.cfda.com/index.php?option=com_cfda_content&;task=news_display_all
.

40
. Biography of Allen B. Schwartz,
www.absstyle.com/allen.asp
. See also Sarah Childress, “Proms Go Hollywood,” MSNBC.com, May 18, 2005,
www.msnbc.msn.com/id/7888491/site/newsweek/?GT1=6542
(discussing Schwartz’s history of design copying).

41
. Eric Wilson, “Before Models Can Turn Around, Knockoffs Fly,”
New York Times,
September 4, 2007.

42
. Vanessa Lau, “Can I Borrow That? When Designer ‘Inspiration’ Jumps the Fence to Full-On Derivation, the Critics’ Claws Pop Out,”
W Magazine,
February 2008.

43
. Cara M. DiMassa, “Designers Pull New Styles Out of the Past,”
L.A. Times,
January 30, 2005; see also Cathy Horyn, “Defying Knockoffs and Inviting Them,”
New York Times,
October 2, 2009. Cathy Horyn, “Is Copying Really Part?”

44
. Horyn, “Is Copying Really Part?”

45
.
Societe Yves Saint Laurent Couture S.A. v. Societe Louis Dreyfus Retail Management S.A,
[1994] E.C.C. 512 (Trib. Comm. (Paris)) (“YSL”). Interestingly, Yves Saint Laurent’s position was illustrative of the significant measure of legitimacy copying enjoys in the fashion industry. According to St. Laurent: “It is one thing to ‘take inspiration’ from another designer, but it is quite another to steal a model point by point, as Ralph Lauren has done.” Ibid., 519, 520. See also Agins,
The End of Fashion
(quoting a fashion consultant as saying that “Yves Saint Laurent has blown the whistle on the dirtiest secret in the fashion industry. None of them are above copying each other when they think they can make a fast buck”).

46
. Lau, “Can I Borrow That?”

47
.
International News Service v. Associated Press,
248 U.S. 215, 250 (1918) (Justice Brandeis dissenting) (“The noblest of human productions—knowledge, truths ascertained, conceptions, and ideas—become, after voluntary communication to others, free as the air to common use,” and should have “the attribute of property” only “in certain classes of cases where public policy has seemed to demand it”).

48
. Thorstein Veblen,
The Theory of the Leisure Class
(Macmillan, 1899).

49
. “Economics A-Z,”
The Economist,
at
www.economist.com
. See also Juliet Schor,
The Overspent American: Why We Want What We Don’t Need
(Harper, 1999) and Robert Frank,
Luxury Fever: Why Money Fails to Satisfy in An Era of Excess
(Princeton, 1999) (portraying much consumer purchasing as an arms race, in which each new purchase spurs others to engage in similar purchasing, with no gain in status since status is inherently relational). Barnett, “Shopping for Gucci,” focuses on this literature to create a three-tiered model of utility: snob utility, aspirational utility, and bandwagon utility. An early treatment with regard to fashion is Paul M. Gregory, “An Economic Interpretation of Women’s Fashions,” 14
Southern Economic Journal,
2 (1947).

50
. In this respect, two-sided positional goods are very different from those goods subject to positive externalities and network effects. Goods like fax machines or computer operating systems are continually more valuable as they are more widely used. The rate at which these goods increase in value may slow past a certain threshold of distribution, but there is no inflection point at which the good begins to decline in value as it is more widely spread.

51
.
New York World Telegram & Sun,
August 21, 1960.

52
. Manlow,
Designing Clothes
.

53
. Gregory, “An Economic Interpretation,” 161.

54
. “Symbolic Exchange and Death,” 2000 at 98.

55
. See Lorrie Grant, “UGG Boots a Fashion Kick,”
USA Today,
December 10, 2003,
www.usatoday.com/money/industries/retail/2003-12-10-ugg_x.htm
.

56
. “Ugg Poncho, the New Ugg Evil,”
Defamer,
August 9, 2004,
www.defamer.com/hollywood/culture/ugg-poncho-the-new-ugg-evil-019192.php
.

57
. Tad Friend, “Letter from California: The Pursuit of Happiness,”
New Yorker,
January 23-30, 2006.

58
. Georg Simmel, “Fashion,” 10
International Quarterly
130, 138–39 (1904). See also Nystrom,
Economics of Fashion,
who devotes an entire chapter to the mechanisms of the fashion cycle, replete with detailed graphs of hemline changes and the like.

59
. We borrow the language of differentiation and flocking from Scott Hemphill and Jeannie Suk, “The Law, Culture, and Economics of Fashion,” 61
Stanford Law Review
1147 (2009).

60
. The exceptions, such as inventions of new fabrics that wick moisture or retain heat, are usually limited to outdoor and technical apparel and moreover tend to be patented—not for the design, but for the fabric itself.

61
. We thank James Suroweicki for this analogy. Earlier economic analyses, such as economist Paul Gregory’s in the 1940s, have noted the obsolescing quality of apparel, but have not drawn the link to copyright. Instead, Gregory stressed factors like deliberately poor quality. Paul M. Gregory, “A Theory of Purposeful Obsolescence,”
Southern Economic Journal
(July 1947). See also the discussion in Nystrom,
Economics of Fashion.
Nystrom notes that “imitation is the most essential element in fashion” (26). But he nonetheless opposed the freedom to copy and favored the French model of design protection, as did Maurice Rentner years later. For Nystrom, the “evil of copying” was a central problem for the apparel industry (190).