The Knockoff Economy

by Kal Raustiala

  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 ope
rating 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).

  62. In interviews, the designers told us of a woman returning to the store in tears with her dress, after discovering the existence of the Forever 21 version.

  63. We mention this retail outlet and this brand for illustrative purposes only. We do not mean to suggest that data from this outlet and brand are included in the BLS data, which is confidential.

  64. Nystrom, Economics of Fashion, 26.

  65. David Colman, “Choices, Up to Your Knees,” New York Times, August 25, 2005, E1.

  66. Lauryn Howard, “An Uningenious Paradox: Intellectual Property Protections for Fashion Designs,” 32 Columbia Journal of Law & Arts 333 (2009).

  67. Horyn, “Is Copying Really a Part?”

  68. Ibid.

  69. Lau, “Can I Borrow That?”

  70. Lau, “Can I Borrow That?”

  71. A classic treatment of first mover advantages is Marvin B. Lieberman and David B. Montgomery, “First Mover Advantages,” Strategic Management Journal 9, 1 (1988).

  72. “Dress War,” Time.

  73. Kenneth D. Hutchinson, “Design Piracy,” Harvard Business Review 191, 198 (1940).

  74. Nystrom, Economics of Fashion.

  75. Barnett, “Shopping for Gucci,” 30.

  CHAPTER 2

  1. Complaint at 1:3, Powerful Katinka, Inc. v. McFarland, 2007 WL 2064059 (S.D.N.Y. 2007). This was not the first dust-up between Charles and a former co-worker; Mary’s Fish Camp, a little further uptown, engendered a similar dispute a few years earlier.

  2. Pete Wells, “Chef Sues over Intellectual Property (the Menu),” New York Times, June 27, 2007.

  3. Figures drawn from National Restaurant Association, Restaurants by the Numbers (2011), www.restaurant.org/pdfs/research/2011forecast_pfb.pdf.

  4. DAVID Kamp, The United States of Arugula: How We Became a Gourmet Nation (Random House, 2006), 15.

  5. Ibid. After the outbreak of World War II kept many French staff from wanting to return home, The Pavillion at the Fair became Le Pavillion in Manhattan.

  6. Malla Pollack, “Intellectual Property Protection for the Creative Chef, or How to Copyright a Cake: A Modest Proposal,” Cardozo Law Review 12.5 (1991): 1477, 1490.

  7. For the full story see Jennifer 8 Lee, The Fortune Cookie Chronicles: Adventures in the World of Chinese Food (Twelve, 2008).

  8. Kamp, The United States of Arugula, 70-71.

  9. Figures in current dollars from the National Restaurant Association, www.restaurant.org/pdfs/research/2011forecast_pfb.pdf.

  10. Lauren Sherman, “The Most Unusual Restaurants in the World,” Forbes, December 19, 2006.

  11. A quick (if that is possible) look at Modernist Cuisine: The Art and Science of Cooking (Cooking Lab, 2011), a nearly 2,500-page tome by Nathan Myrhvold, Chris Young, and Maxime Bilet, will explain what all the fuss is about.

  12. Adria himself disclaims the phrase, as do others. Along with Thomas Keller, Heston Blumenthal, and writer-scientist Harold McGee, Adria wrote an open letter to the UK newspaper The Guardian stating, “The fashionable term molecular gastronomy was introduced relatively recently, in 1992, to name a particular academic workshop … that workshop did not influence our approach, and the term molecular gastronomy does not describe our cooking, or indeed any style of cooking.” Ferran Adria et al., “Statement on the ‘New Cookery,’” Guardian Observer, December 10, 2006,

  www.guardian.co.uk/uk/2006/dec/10/foodanddrink.obsfoodmonthly.

  13. Katy McLaughlin, “That Melon Tenderloin Looks Awfully Familiar…,” Wall Street Journal, June 24, 2006, http://online.wsj.com/article/SB115109369352989196.html.

  14. Whether Vongerichten or Matsuhisa are really the inventors of these dishes is of course another question, about which there is some controversy. We have already noted that miso cod probably was not really pioneered at Matsuhisa; the same may be true for the molten chocolate cake. For example, Michel Richard, Michel Bras, and Jacques Torres have all been touted at some point as the true originator of the molten chocolate cake.

  15. www.recipesecrets.net/forums/recipe-exchange/23906-chilis-molten-chocolate-cake.html.

  16. Under US law the medium in which a work is fixed need not be especially durable. Any fixation of the work that is perceptible for more than a “transitory duration” is sufficient. We recognize that molten chocolate cake is usually consumed pretty quickly, but since the cake nearly always lasts for more than a transitory duration it would seem qualified to receive a copyright. As we explain, however, this is not the case.

  17. Architectural Works Copyright Protection Act (AWCPA), Pub.L. 101-650, Title VII, 104 Stat. 5133, December 1, 1990.

  18. Publications Int’l, Ltd. v. Meredith Corp., 88 F.3d 473 (7th Cir. 1996) at 476.

  19. Ibid., 480. Very similar reasoning, based on Meredith, appeared a few years later in Lambing v. Godiva Chocolatier, 142 F.3d 434 (6th Cir. 1998).

  20. U.S. Copyright Office, Recipes, www.copyright.gov/fls/fl122.html (accessed September 14, 2006).

  21. Nigella Lawson, Nigella Bites—Comfort Food, http://www.channel4.com/life/microsites/N/nigella/bites2.shtml (accessed June 2, 2011).

  22. See U.S. Copyright Office, Recipes, 101. See also Pollack, “Intellectual Property Protection,”. As David Nimmer pointed out to us, instructions merged with explanation in a cookbook are typically copyrightable. Thus when Lawson writes, apropos the Halloumi bake, “Season with black pepper, but no salt as the cheese will make it salty” that passage would probably qualify for copyright. Interview with David Nimmer, author of Nimmer on Copyright (Matthew Bender, 1978).

  23. “To say that a recipe is an uncopyrightable procedure or process is the same as saying that a schematic rendering of dance steps is a procedure or, more clearly, that the required instruments and notes for a symphony constitute [an uncopyrightable
] process. In truth, the recipe, the drawing, and the musical notation are simply means for fixing a work (the dish, the dance, or the symphony) in a tangible medium of expression.” Christopher J. Buccafusco, “On the Legal Consequences of Sauces: Should Thomas Keller’s Recipes Be per se Copyrightable?” Cardozo Arts & Entertainment Law Journal 24.3 (2007): 1121, 1131.

  24. Nimmer, Nimmer on Copyright, § 2.18[I].

  25. Unless somehow the aesthetic appeal of the dress or the dish is “separable” from its function. For both dresses and food, the aesthetic appeal—the lovely appearance, the delicious taste—is infused into the article itself, and thus is not separable, and that fact defeats copyright protection. For this reason, food simply falls outside the scope of contemporary copyright law.

  26. Complaint, Powerful Katinka, Inc. v. McFarland. In addition, Charles claimed that McFarland had violated his fiduciary duties as a sous-chef at Pearl Oyster Bar.

  27. Trade dress is generally divided into packaging and product design. Trade dress that is only packaging does not always require secondary meaning to be protected, whereas trade dress that is part of product design must have it. See Walmart Stores v. Samara Bros. 529 U.S. 205 (2000).

  28. Two Pesos v. Taco Cabana, 505 U.S. 763 (1992).

  29. Ron Ruggless, “Taco Cabana Buys Rival Two Pesos,” Restaurant News, January 25, 1993.

  30. On February 23, 2012, a jury handed down a mixed verdict but nonetheless found that Phillipe Chau had engaged in unfair competition and false advertising. Details of the feud can be found in Aaron Gell, How Now Mr. Chow? The Sweet and Sour Saga behind the City’s Epic Food Fight, New York Observer, February 28, 2012, www.observer.com/2012/02/mr-chow-02-28-2012/5/.

  31. Sara S. Munoz, Patent No. 6, 004, 596; “Peanut Butter and Jelly Sandwich,” Wall Street Journal, April 5, 2005.

  32. Pete Wells, “New Era of the Recipe Burglar,” Food & Wine, November 2006.

  33. Ibid. The review in The Age appeared in March 2004; John Lethlean, “Interlude,” The Age, March 16, 2004, www.theage.com.au/articles/2004/03/15/1079199150268.html.