The Knockoff Economy

by Kal Raustiala

  As this book goes to press in 2012, the IDPPPA has failed to come to a vote in Congress, and its future is uncertain. But if it passes, it will mark a sea change in American law. For over 200 years the United States has treated fashion design as an unprotected form of creativity, there for the taking by any entrepreneurial passerby.

  THE WORLD OF KNOCKOFFS

  As our brief history of American apparel suggests, knockoffs have long been ubiquitous in the fashion world, and whether you’re paging through Marie Claire’s Splurge vs. Steal, perusing the newest Zara “lookbook,” browsing the Web site of knockoff specialist Allen B. Schwartz (whose own biography states that he is “revered and applauded for the extraordinary job he does of bringing runway trends to the sales racks in record time”),40 or just wandering around the mall, the point is clear: knockoffs are everywhere. Some are more fairly called derivative works—that is, designs that are inspired by the original, but which add some new creative elements. Others are really “point by point” (that is, exact) copies. All are easy to find.

  If the ordinary rules of copyright law were applied to fashion, nearly all knockoffs would be illegal, and the guilty copyist would face substantial fines and penalties—including, in some cases, the possibility of jail time. Indeed, the practice of copying within the garment industry is so widespread that “normalizing” fashion within the regular copyright system (combined with America’s lawsuit-friendly system and plentiful and entrepreneurial lawyers) would probably result in a staggering array of lawsuits, fines, and injunctions—which is why even strong proponents of amending American law acknowledge that fashion needs its own special and much more permissive rules.

  Two other points are worth noting about knockoffs. First, not all copying involves an entire garment. In many cases only a feature of a design is copied, and that feature may become part of that season’s set of trends. Often these features are familiar, recycled elements that under no imaginable legal system would be protected: cap sleeves, kitten heels, peaked lapels, or an empire waist. But sometimes the feature is new—or newer—like the many mink, fox, rabbit, and raccoon stoles dyed in psychedelic colors that designers were showing for Fall 2011. Either way, it is the widespread copying of such features that often gives rise to (or evidences) a trend. Even the clichéd rise and fall of hemlines can be thought of this way.

  This distinction between design feature and overall design is important, since many of the examples used in the debate over copying are really examples of overall designs copied more or less accurately. The Foley & Corinna/Forever 21 spat is a good example of this. But point-by-point copies like these, although they grab a lot of attention, are only a small part of the copying that goes on in the fashion industry. The relative amounts are hard to measure. But it is unquestionable that a large share of copying in the fashion industry involves design features, not the total design. The result is a range of garments that copy that feature in order to follow a trend, but which, unlike point-by-point copies, are easily recognized as different items.

  Copying varies in scope but also in time. Some copying occurs in the same year or season that the original garment appears.41 At times copying may even occur before the original arrives in stores*. Other copying occurs with a pronounced lag, and indeed this kind of copying is so common it is hardly noticed. Think of how often a style from a decade or two ago reemerges, usually slightly tweaked, on the runways in Paris or New York.

  Viewed from the perspective of creative industries such as the music or motion picture industries, the ubiquity of copying in fashion is more than surprising. In these industries, every type of copying that is widespread in the fashion world is condemned as illegal piracy, and combating piracy is a principal concern. This is clear to anyone who has followed the music industry’s battle against online filesharing.

  By contrast, the freedom to copy apparel designs—sometimes euphemistically referred to as “referencing” or “homage”—has long been taken for granted. Indeed, it is often accepted, and sometimes even celebrated, by a surprisingly large swath of the fashion world. Some designers are fatalistic: Alber Elbaz of Lanvin recently declared that “I don’t care if people copy me,” though he quickly added, alluding perhaps to the power of copying to inspire new creativity “well, I do care. For me, I create prototypes. They can copy yesterday but they can’t copy tomorrow.” Others view copying as a badge of honor. Tom Ford has said that “Nothing made me happier than to see something that I had done copied.”42 Prada CEO Patricio Bertelli was even blunter: “I would be more worried if my product wasn’t copied.”43

  Not everyone agrees, of course. The fashion copying debate is often depicted as one that pits great artists (read: fashion press favorites) against sneaky pirates (read: Forever 21 and fly-by-night knockoff artists). But that’s not a fully accurate picture. Famed designers don’t just acquiesce in copying; they sometimes engage in it. In 2002, for example, Nicholas Ghesquiere, a heralded young designer for Balenciaga, admitted to copying point-by-point a vest originated some three decades earlier by a largely forgotten American designer named Kaisik Wong. As Cathy Horyn, the New York Times fashion critic, opined, this kind of incident was more commonplace than many realized:

  Were it not for Mr. Ghesquiere’s fame and Mr. Wong’s obscurity—were it not, indeed, for the recent examples of plagiarism in publishing and the continuing debate in the music and art worlds about sampling and ownership—this latest instance of copying might not merit special attention. After all, copying is part of the history of fashion…. Today, under the postmodern rubric of “referencing,” copying flourishes so openly that nobody bothers to question it. And the practice isn’t confined to the low end of the business, to knockoff kings like Allen B. Schwartz of ABS and Victor Costa. Tom Ford, Marc Jacobs and Miuccia Prada have all dipped into other designers’ wells.44

  None of this gainsays the fact that designers sometimes bridle when they believe they have been knocked off a bit too blatantly. Certainly Dana Foley and Anna Corinna did. On rare occasions, designers even sue one another. In 1994 Yves Saint Laurent sued Ralph Lauren in a French commercial court for copying a YSL design.45 Saint Laurent’s successful lawsuit took place in Europe, where copyright laws are, as Maurice Rentner long ago pointed out, far more protective of fashion designs. (And of course, the revered French designer prevailed and the parvenu American lost—a result Ralph Lauren later called “totally ludicrous”).46

  Whatever the rules in France, however, in the United States the law is different. Fashion designs are, for better or for worse, “free as the air to common use.”47

  THE PIRACY PARADOX

  To appreciate how striking the phenomenon of fashion copying is, think back again to the monopoly theory of innovation. The monopoly theory holds that copying is a grave threat to creativity. If a creator knows her creation will be freely copied by others, she will not invest in creation in the first place. Legal rights that give the creator a monopoly over who can make a copy are, consequently, essential. How then does the fashion industry remain so creative despite such extensive copying?

  The answer turns on the unusual economics of fashion, and draws on a tradition of thinking about fashion that goes back at least to Thorstein Veblen’s landmark work of social criticism, Theory of the Leisure Class.48 For Veblen, much of social life turned on status, and the ways that many of us try to achieve and signal status to one other.

  Status is certainly central to fashion. And in fashion, status can be signaled by expensive labels and materials. But it is also signaled by trends—specifically, by being on the leading edge of, rather than a late-comer to, a hot trend. Thinking about fashion as an industry driven by trends, and by people trying to acquire or keep status by discovering the new trends and discarding the old, can help explain why imitation in fashion is not especially harmful to innovation. Indeed, as we will explain, free and easy copying benefits the fashion industry more than it harms it.

  The Fashion Cycle

&nbs
p; People buy clothing for many reasons. The most basic is entirely practical—to cover our bodies and to stay warm. But of course even the simplest clothing can do that. So why will a woman spend thousands of dollars on a Balenciaga cocktail dress? Why will a man shell out thousands of dollars for a Thorn Browne suit? These sorts of purchases are driven by the desire for expression and status.* Clothing is very personal, and it sends signals about the wearer, whether intended or not. Those signals are socially complex and context-dependent—in Los Angeles, the guy at the valet stand parking the Aston Martin is often wearing a tie, and the studio mogul who owns it a baseball cap. But the signaling features of clothing are omnipresent.

  Put in economic terms, most kinds of clothing function as “positional goods.” The Economist magazine helpfully defines positional goods as

  things that the Joneses buy. Some things are bought for their intrinsic usefulness, for instance, a hammer or a washing machine. Positional goods are bought because of what they say about the person who buys them. They are a way for a person to establish or signal their status relative to people who do not own them: fast cars, holidays in the most fashionable resorts, clothes from trendy designers.49

  Positional goods purchases, in other words, are made based largely on the status the good is expected to convey. As a result, these purchases are interdependent. What we buy is partially a function of what others buy. Like parimutuel betting at the racetrack, the status payoff depends on the actions of others, actions that are not entirely predictable at the time of purchase. Fashion’s positional nature is very powerful, and a consumer’s attraction to a new design is often triggered not just by beauty or fit, but also by the status associations created by the producer’s trademark, by stylish advertising, by seeing the garment worn by a famous actress or model, by a clotheshorse acquaintance, or even by a stylish stranger on the street.

  The positionality of a fashion good is often two-sided, however. A trendy new design is most coveted when enough people possess it to signal that it is desired, but its value diminishes if every person on the street owns it. Nothing about the design itself has changed, except for its ability to distinguish its owner from the crowd. For fashion goods, in short, exclusivity is a large part of the appeal.50

  Perceptions of beauty matter, of course. But these perceptions are not wholly divorced from perceptions of exclusivity. As Jean Cocteau astutely noted some 50 years ago, “Art produces ugly things which frequently become more beautiful with time. Fashion, on the other hand, produces beautiful things which always become ugly with time.”51 In short, consumers are drawn to a particular dress from Lanvin or a men’s jacket from John Varvatos in part because stylish people have it and unstylish ones do not. The dress or the jacket will be coveted so long as it enables its wearer to stand out from the masses but fit in with his or her particular crowd. Many historical and sociological studies of fashion argue that this distinguishing quality is central. Fashion is “a vehicle which marks distinctions and displays group membership or individuality.”52 Consequently, as fashionable styles diffuse to a broader clientele their prestige diminishes. The style in question becomes unstylish, and eventually fades away.

  This is the fashion cycle. New designs catch on, become trends, spread, become overexposed, and die. And then a new design appears, a new trend ignites, and the process repeats.

  Fashion never stops, but it never goes anywhere either. Whether the fashion cycle is a good thing or a bad thing in its own right is an interesting question, but not the focus of our story here. It is fair to say, however, that fashion is routinely pilloried by intellectuals who view it as capricious, exclusionary, and socially wasteful. The rapid rise and fall of trends has been called “a symptom of intellectual, emotional, and cultural immaturity.”53 French cultural critic Jean Baudrillard went so far as to declare fashion “immoral.”54 Other commentators, however, have celebrated fashion designers as artists on par with any painter or composer. Indeed, this is one of the arguments used by advocates of copyright protection—that fashion ought to be treated like other great art forms.

  For most of us, though, the fashion cycle is not a subject of great debate. It is just a fact of life; perhaps even an entertaining one that allows us to enjoy new clothes and occasionally scratch our heads at old photographs. Whatever its social meaning or ethical value, the fashion cycle is clearly a central feature of the apparel industry. Styles come and then they go. Soon after, many of us wonder what we were thinking.

  An example of this ascent and descent is the Ugg, a sheepskin boot originating in Australia. Uggs, which date back to the 1930s, had sold steadily for years but became a must-have fashion item for many young women in 2003 and 2004. The style was then widely copied and gained broad distribution.55 But soon a backlash began, with writers calling the shapeless and fuzzy Ugg a “human rights violation” and urging the fashion-conscious to give them up.56 By 2005, the Ugg trend was, at least in some quarters, declared to be over.

  In a 2006 New Yorker article about Los Angeles, writer Tad Friend described a telling story of the rise and fall of the Ugg. A local news helicopter was searching for actress Lindsay Lohan following a minor car crash on Robertson Boulevard, in which she was involved. The news dispatcher, Beth Shilliday, radios the chopper pilot:

  “I know it’s a long shot, but check the street for a skinny, movie-star looking woman. Channel 2 says she and her assistant ran into an antiques store across the way.” [The pilot] panned down Robertson toward the Ivy [a West Hollywood bistro frequented by the L.A. celebrities]. “Problem is, every girl on the street kind of fits the profile. How’s this?” He zoomed in on a Lohanish figure in dark glasses. “She’s wearing Uggs,” Shilliday pointed out. “Those are so last year, couldn’t be her.”57

  One might quibble with the details of when (and, for diehard Uggs fans, even if) Uggs lost their cool.* Nonetheless, Uggs illustrate a basic point about fashion: the ruthless nature of the fashion cycle. In the fashion world, success can lead to the rapid diffusion of a design. But rapid diffusion typically dooms a design to decline and ultimately to death. Debut, diffusion, decline, death: that is the fashion cycle in a nutshell.

  Induced Obsolescence

  That styles rise and fall is of course not a new observation. Before Cocteau wrote his wonderful apercu about fashion and beauty, sociologist Georg Simmel noted the same process: “As fashion spreads, it gradually goes to its doom. The distinctiveness which in the early stages of a set fashion assures for it a certain distribution is destroyed as the fashion spreads, and as this element wanes, the fashion also is bound to die.”58 Even earlier than this, Shakespeare declared in Much Ado About Nothing that “the fashion wears out more apparel than the man.”

  What Cocteau, Simmel, and Shakespeare noticed was not merely the rise and fall of apparel designs. Instead, they highlighted the fact that the rise actually led to the fall. The fall was not merely inevitable, in the sense of a ball thrown into the air that gradually succumbs to gravity. They drew a causal connection: as fashion spreads, its distinctiveness is destroyed. That in turn destroys much of its value.

  Of course, not everyone seeks distinctiveness in fashion. Just look at America’s political class: for the men, an orange or purple tie is a mark of outright zaniness, and the women largely hew to pantsuits that look more like armor than fashion. But for the class of fashion early adopters, things are different. These early adopters seek to stand out, whereas the next tier of buyers seeks to “flock” to the trend.59 As the flockers flock, the early adopters flee.

  Again, the basics of the fashion cycle are well known. What has not been appreciated, however, is the crucial way that the fashion cycle interacts with the freedom to copy. Legal rules that permit copying accelerate the diffusion of styles. More rapid diffusion, in turn, leads to more rapid decline. And the more rapid the decline, the faster and more intense is the appetite for new designs. As they are copied, these new designs in turn spark the creation of new trends—and, as a conse
quence, new sales.

  Copying, in short, is the fuel that drives the fashion cycle faster. It is essential to both the trend-making and trend-destruction processes. Copying speeds up the creative process, spurring designers to create anew in an effort to stay ahead of the fashion curve. This makes copying paradoxically valuable.

  Copying also functions, in the fashion context, as a stand-in for something that many other creative industries depend on—improvements to their products. Cell phones clearly get more powerful and useful over time, leading us to discard our perfectly good old phones for the amazing new ones. Clothes, by contrast, do not improve in any clearly defined way. Garment makers rarely can tout the great new features of their products as improvements—and indeed in practice, unlike cell phone makers, they do not claim this season’s offerings are qualitatively better than last season’s.60 For the most part, clothes just change, and that change is what drives buyers to the stores. In this environment, the rise of a new trend is the functional equivalent of a great new feature on a cell phone: the thing that makes a consumer discard a perfectly useful item and go out and buy something new.61

  We call this process induced obsolescence—that is, obsolescence induced by copying. A design is launched and, for some reason that few can predict (or even explain), it becomes desirable. Early adopters begin to wear it and fashion magazines and blogs write of it glowingly. Other firms observe its growing success and seek to ape it, often at lower price points. As the now-hot design is copied and tweaked, it becomes far more widely purchased and hence even more visible. For a time, the trend grows. Past a certain point, however, the process reverses course. The once-coveted item becomes anathema to the fashion-conscious, and, eventually, to those who are somewhat less style-focused. The early adopters move on, and the process begins again.