The Knockoff Economy

by Kal Raustiala

  Fonts and Copyright

  Fonts, like recipes, and fashion designs, can be freely and legally copied. They are excluded from copyright protection for a lot of the same reasons fashion designs and recipes are. For purposes of copyright law, fonts fall within the category of “pictorial, graphical, or sculptural works.” These are not protected if they are “functional,” and fonts are considered functional in the simple (or perhaps simpleminded) sense that they are used to construct words and sentences. But for fonts, there would be no books.

  Though fonts are clearly functional in this narrow sense, they may still be protectable by copyright if their aesthetic appeal is “separable” in some way from their utilitarian purpose—much like the jewelry designs we discussed in Chapter 1. But given that fonts, to perform their function, must be legible, the utility of fonts is pretty much unavoidable. When Congress passed the current copyright law, the accompanying report from the House of Representatives recognized this basic fact, stating that the relevant committee “does not regard the design of a font… to be a copyrightable ‘pictorial, graphic, or sculptural work’ within the meaning of this bill and the application of the [separability] dividing line.”15 In the years since, the United States Copyright Office has refused to register font designs. The few cases that have considered the issue have followed suit, ruling that fonts are uncopyrightable.16

  So fonts are unprotected by copyright law.* Is there any law that does protect them against copying? In theory, a truly original font could be protected by a design patent, but for practical reasons patent has only marginal relevance. Patent’s novelty requirement would limit protection only to the most unusual fonts. But the most valuable have almost all been attractive but subtle variations on well-known designs. And a very unusual font would most likely be very hard to read.

  Trademark law has even less relevance.17 While the names of fonts can be trademarked, fonts themselves cannot. Few consumers can even identify a single font by name, much less associate one with a particular producer. The absence of any consumer association between a font and its producer—what is known as “secondary meaning” or “acquired distinctiveness”—essentially eliminates the possibility of using trademark to protect fonts from copyists.

  Font Technology and the Ease of Copying

  For hundreds of years the inapplicability of copyright law to fonts didn’t really matter, because the technology of printing made fonts very hard to copy. Originally, type was produced in the form of wood blocks and then metal letter shapes. And from the invention of movable type in the 15th century until the early 19th century, the effort involved in designing a font was only a small fraction of the total effort involved in producing print-ready type. Fashioning the metal letterforms would take a punchcutter—a lost art that combined sculpture, metallurgy, and smithery—nearly 800 hours of full-time work.18 Under these conditions, plagiarizing made little sense, because the work necessary to reproduce the print-ready type meant that copyists and originators faced roughly equivalent costs in producing the finished product.

  This changed only at the end of the 19th century with the introduction of photography and something called the pantograph. These technologies, used in combination, allowed easier reproduction of fonts by relatively unskilled workers. But the potential for really cheap font copying arose only in the early 20th century with the spread of the photogravure method of typesetting—or “phototype.” Using this technique a copyist could photograph a letter form and then chemically etch that image into a metal plate. The process reduced the cost of copying a font by 90% or more.

  So from the early 20th century on, fonts have been relatively easy and cheap to copy. And in the late 20th century, copying became easier and cheaper still. As publishing shifted from mechanical to electronic technologies, fonts also shifted from the physical to the virtual. Fonts exist today not on metal blocks, but as computer code. Once fonts became digital, copying involved a few keystrokes—or, at most, a bit of work with widely available software.

  And yet despite the ease of copying fonts—and many individuals do copy them enthusiastically—creativity in fonts continues to thrive. The number of fonts is difficult to count accurately. But the several attempts that do exist reveal a thriving creative environment. A 1974 estimate pegged the number of fonts at 3,621.19 A 1990 survey identifies 44,000 fonts;20 a 1996 estimate ranges between 50,000 and 60,000;21 and in 2002 that number was revised to 100,000.22 Some current estimates are as high as a quarter million.23 A quick Google search suggests that even only counting fonts that have been digitized, the growth rate has been substantial. As of April 2012, the Web site fonts.com lists 170,232 computer fonts for sale. That number does not necessarily correspond to the number of distinct fonts; as that term is used on fonts.com, it typically refers to a single typesize or weight of a font “family.” Nevertheless, the number of distinct fonts is quite large. The Web site dafont.com lists more than 11,500 free fonts.

  In any event, it is clear that while fonts are easy to copy, and the law does not prevent copying, there is still significant creative effort invested in the design of new fonts. If the 1974 estimate is at all accurate, and if 100,000 serves as a conservative figure for the current number of fonts, then there has been an increase of more than 2,700% in the last 35 years. Moreover, the rate of increase in the production of new fonts seems to be growing, not slowing.

  How can it be that innovation in font design is booming in the face of cheap and virtually uncontrolled copying? The digitization of fonts makes copying far easier. The law does not impose any meaningful deterrent to copying. The monopoly theory of IP says that easy and legal copying destroys the incentive to create. And yet the numbers suggest that more fonts have been designed since the rise of the Internet than in the previous five centuries.

  A fascinating study by Blake Fry (written when Fry was still a law student) offers several interesting takes on this question, many of which track arguments we make in this book.24 Fry notes that fonts are in some ways like fashion design. Font trends rise and fall. Fonts are also like food: they come bundled with another product that is harder to copy. In the case of food, particular dishes come bundled with the preparation and ambience of a restaurant. With fonts, particular font designs often come bundled with graphic design software. And they’re like jokes, in that their production is governed by a set of norms that exist in a particular creative community and that blunt the harmful consequences of copying. Let’s briefly consider some of these arguments.

  Technology Makes Copying Easier, but It Also Makes Innovation Easier

  Creating fonts before the digital revolution required a lot of investment in time and equipment and probably a team of skilled craftsmen. After digitization, font designers can work solo—all that is needed is some design talent, a computer, and inexpensive software. With low capital costs, and distribution via the Internet, the cost of creativity has fallen markedly. And so too have barriers to entry—would-be font designers no longer need specialized equipment to get into the trade. The digital revolution means that barriers to piracy have fallen too. But since the costs to create new fonts have shrunk so much compared to what they were pre-digitization, the price of fonts can still fall—and they have, significantly. Availability of cheaper (and in many cases free) fonts does not eliminate piracy, but it helps to blunt its appeal, just as the growth of affordable music downloads via Apple’s iTunes has led some former music file-sharers back to the legal market.

  Likewise, we’ve seen significant growth in the number of font designers. Before digitization, Fry claims that there were perhaps 100 font designers, and, importantly, virtually all were professionals. There are more professional font designers today—perhaps five to ten times as many as before digitization—but the most important change is the entry of many thousands of amateur font designers. Thanks to digital technologies, amateurs have become a significant source of new font designs.

  It’s often easy to discount amateur innovation, but
it might be especially important in a creative arena like font design. Like so many areas in this book, font innovation is more about tweaking than pioneering: most new fonts involve incremental developments based on well-known designs. Amateurs are well placed to engage in incremental innovation because the investment required is relatively low, and small creative insights can be significant in an art form that is itself composed of subtle variations on the same set of fixed letters.

  There is another significant shift in the production of fonts, and it too is driven by technological change. Following digitization, font design has increasingly merged into graphic design. During the era of metal type, the punchcutters who produced usable type were very highly skilled. After the digital revolution, all this changed: general graphic design skills and an interest in type are all that is needed to produce attractive fonts. As a result, many graphic designers today undertake font design projects that would not have occurred before digitization. This also means more fonts.

  Changes in the Technology of Printing Induce Innovation in Fonts

  Technological innovation has made font design easier and cheaper. But it also has more subtle effects. Because fonts are designed to work well with particular printing technologies, the technologies in wide use at any particular time shape the fonts that get produced. And as these technologies change, the fonts designed for them change as well.

  For example, during the 19th century the tremendous growth in newspapers spurred a lot of font innovation. Printers needed to produce legible newspapers using mass printing on cheap, coarse paper. The result was fonts that could be easily read under these adverse conditions. Times New Roman is an example of this wave of newspaper-driven font innovation. Later, as offset printing became more refined, more delicate fonts could be legibly reproduced, and this set off another wave of innovation. As phototypesetting grew in the 1970s, still newer designs appeared, some tied to the technology’s ability to render fonts with narrower letter spacing.

  The process repeated itself as readers moved from paper to screen in the 1980s and 1990s. Early computers couldn’t handle richly detailed fonts, so fonts were made from large blocks. Later, processor and memory limitations eased, but screen resolution remained low. The result was more innovation in sans serif fonts, more legible on low-resolution screens. As screens gained resolution, more new serif fonts began to appear. But the technology does not stand still. Smartphones and tablet computers feature smaller screens. And consequently, screen readability has revived as an issue.

  The overall point is that technological change induces innovation in fonts. New technologies have made it easier to create fonts. And other innovations, like the huge success of the iPhone and Android phones, have shaped the kinds of fonts people want. Font innovation is thus driven by innovation in the products that people use to consume text. So long as these technologies continue to evolve, incentives to invest in the production of new fonts arise as a sort of fortunate accident.

  Fonts Are Not the Product—Something Else Is

  The preceding discussion shows that often innovation in fonts is not undertaken for its own sake, but in service of some other aim. This dynamic is not driven only by changes in technology. The ceaseless demands from advertisers for new and interesting ways of selling things has led to many new fonts. And font innovation is also undertaken in order to sell word processing and graphic design software.

  The practice of bundling fonts with software is the primary reason that ordinary consumers do not engage in much piracy of font designs. Most of us think we have plenty of fonts to choose from on whatever word processing software we use. There are font files available on peer-to-peer networks like BitTorrent, but only a tiny group of people care enough to go this route.

  Graphic designers are the real market for fonts. For this audience, bundling also plays a major role in inducing innovation and blunting the impetus toward piracy. For example, Adobe, the largest producer of fonts in the world, is in the font business principally as a way to help sell their market-leading Creative Suite graphic design software. Adobe gives away more than 100 fonts with Creative Suite. They sell many additional fonts, but these are just a small sideline business. Nevertheless, Adobe continues to invest in the design of new fonts. Adobe’s innovation in font design helps to bolster their position in the product that provides virtually all their revenue: their software. Incentives to create new font design are woven into competitive pressures in a related market for software. In the area of fonts, market competition plays a large role in inducing innovation.

  Fonts and Fashion Cycles

  Incentives to create new fonts also reflect broader cultural changes. Fonts, like fashion, are subject to trends. To be sure, trends in font design last far longer than in the fashion industry, and also are not as overwhelming a factor in the marketplace. But as in fashion, there are classic styles and bold new designs.

  Consider Helvetica, the archetypal clean-lined font we described a few pages back. Helvetica and its many imitators are associated strongly with mid-20th century modernism. These designs still have substantial currency, as Apple’s adaptation of Helvetica illustrates. But for all its continuing influence, Helvetica is not really the font of the moment. Other styles have risen to prominence that are the antithesis of the modernist Helvetica style. An example can be found, of all places, on the placemats used in Mario Batali and Nancy Silverton’s famed Pizzeria Mozza in Los Angeles.

  This Pizzeria Mozza placemat, from 2011, uses fonts that look like recreated letterpress type from the mid-19th century. These sorts of fonts are currently in wide use, in part because they are linked to the contemporary design aesthetic of the “steampunk” movement and to a general love of antiquarian styles—think of the rash of old-timey cocktail bars in major American cities, manned by bartenders in sleeve garters and waistcoats chipping blocks of ice. Steampunk originated in a Jules Verne-esque genre of science fiction, first appearing in the late-1980s, that was set in a world in which things like computers and space travel are reimagined in a Victorian-era context.

  FIGURE 4.2 Pizzeria Mozza placemat

  In the 2000s, steampunk emerged as a significant trend in art and design. Designers following the steampunk aesthetic reject the sleek and often cold modernism of objects like the iPhone as inauthentic and alienating, and reach back to older technologies for inspiration. Importantly, steam-punk pushes back against the “cleanliness” that has long been dominant in industrial design—including, of course, in modern fonts such as Helvetica. Steampunk-inspired designers find typographic models in the fonts common during the Victorian and Edwardian eras, examples of which we see on the Pizzeria Mozza placemat.

  In short, font designs respond to broad cultural and artistic trends. Fonts do not change all that swiftly. But aside from the speed of the cycle, the trend cycle in fonts is similar to that in fashion. If a font is popular enough it will be copied. Sometimes this copying will be exact. Often, however, the copyist will add some variations of her own—and what will emerge is a nonidentical font that is nonetheless recognizably of the same style. Because of digitization, designs in the new style can be made and distributed quickly. As copying and close variation spreads, the style becomes ubiquitous. Like fashion trends that are overdone, once-ubiquitous fonts lose their power, either because they have lost their novelty or the ability to convey what they were originally designed to connote. And as in fashion, font designers innovate in response.

  FINANCIAL INNOVATIONS

  Over the past several decades the financial services industry has become one of America’s biggest economic sectors. Measured in terms of financial flows and trading volumes, the industry is enormous. The capitalization of US stock markets grew from $136.0 billion, or 13.1% of US GDP in 1970, to approximately $19 trillion, or 180% percent of GDP in 2000. Even after the 2008 financial crisis, stock market capitalization is still roughly equivalent to GDP.25 And as the value and amount of trading in financial markets have grown, so have profits.
Profits in the financial industry have more than tripled in size relative to the overall economy since the end of the Second World War.

  The financial sector has not just become very large and hugely profitable, however; over this same period it became increasingly filled with America’s best and brightest. In 2007, just before the financial crisis began, nearly half of Harvard College’s graduating class went into the financial industry or management consulting. And these smart people, unsurprisingly, are also pretty innovative.*

  In the wake of the financial crisis, of course, it is very difficult to tell whether many of the recent financial innovations—new kinds of securities, derivatives, pricing models, methods of investing, and so on—are a blessing or a curse. Some commentators, including luminaries like Nobel prize-winning economist Robert Merton, maintain that the financial services industry has benefited society immeasurably through major innovations such as affordable household financing, countless types of derivatives, and low-cost mutual funds. Others argue that most financial innovations serve only to benefit bankers. Famed investor Warren Buffett called derivatives “financial weapons of mass destruction.” Former Fed Chairman Paul Volker opined in 2009 that the only socially beneficial financial innovation of the past 25 years has been the ATM.

  Whatever the answer, there is no question that the financial services industry has been innovative—and with surprisingly little reliance on IP. Its creative output has included, among other things, thousands of varieties of derivatives, bonds, currency warrants, credit and currency swaps, collateralized debt obligations, exchange traded funds, investment indexes, and the pricing models and trading strategies associated with these instruments. For a long time, as the story of John Bogle and his Vanguard index funds illustrated, the industry produced these innovations with few protections against copying other than, in some cases, secrecy. Considering that the cost of innovation can be substantial—estimates of the investment required to produce most forms of financial innovation range between $500,000 and $5 million26—this seems surprising. How can the financial services industry’s record of innovation be explained?