Intellectual Property Rights And The Fashion Industry Cultural Studies Essay

With a gross annual turnover of $750 billion per year the fashion industry is at the forefront of the world’s economy. Unlike most other goods, people demand fashion not for the added value or feature that a new item brings but for its own sake. People (mostly females) of all ages pour over magazines showing the latest celebrity fashions and then go out to retail fashion shows or browse online in search of something similar. This demand for the ‘latest style of the rich and famous’ has transpired into a business network with an influence across the globe. This global business has brought with it many legal issues. Particularly important is the ‘copying’ of the celebrity fashion that the masses seem to want. This essay will be broken into three parts. The first part will examine the current state of the law both in Australia and other jurisdictions. The second part will ask how the law can be changed in Australia to give greater protection to the fashion industry and the third part will look at whether or not this change is necessary for the industry to grow. I will argue that the law needs to be reformed in such a way that copying is prohibited but flocking (following celebrity styles) isn’t.

IP law – the reasons for its existence.

The standard argument for the existence of intellectual property rights is that without them copyists will free ride on the creative efforts of others. Since most creative efforts are sold for economic gain absent any intellectual property rights the creators will see no incentive in creating when others can copy their designs and profit from it. The market for books, movies and music is protected from industrial copying in Australia by the Copyright Act. This act prevents the mass scale production of these creative works without licence or prior approval (with certain exceptions). This protection, gives the industry the comfort of knowing that it’s protected from the free-riding act of copyists. Albeit a creative work, the fashion industry remains vastly unprotected in many parts of the world. In Australia the Designs act of 2003 (which replaced the designs act of 1906) is the primary form of protection of designs for the industry. It is helpful to note at this point that the sketches of designs are protected by the Copyright Act. Similarly, a new invention in clothing for example a new material that can keep one warm in winter and cold in summer would be protected by the Patents Act. This essay however is not concerned with those acts and their advantages or limitations. This essay is concerned with the protection of designs – designs, researched and manufactured by the big designer houses and then copied by the high street for the masses.

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In a bid to regulate themselves from copying because of the absence of any laws to protect them the Fashion Originators Guild of America started self regulating the industry as early as the 1930’s. Their method of regulation was to have designs registered with the Guild and any other firm copying these designs d be boycotted by members of the guild. The guild’s activities were ruled as a violation of U.S. antitrust laws by virtue of a decision of the U.S. Supreme court in 1941. What concern us though are not the contents of that case, but rather whether the Guild’s efforts in protecting intellectual property caused an increase in innovation and more frequent designs. Randal Picker suggests that the guilds efforts go to show that there was a need by the high end designers for this type of protection. He goes on to argue that the very theory of fashion means that the high end designers would only thrive in a market which was heavily regulated. This is because they market goods to a niche of customers who want to have what no one else has. These designers offer their customers unique one of a kind products and their customers purchase these because of the snob appeal – these customers want only what others don’t have. If there is no protection for their designs these designs would be copied by the high street stores and then the snob appeal of these goods will be lost. This means that these customers will not be willing to pay such high prices for these goods as they do not see a differential value in them. Although this copying has been around for almost a century and a half the problem is worsening due to improvements in information technology. The internet provides simultaneous access to fashions worldwide especially the European fashion weeks where big designers usually display their stuff and these are copied almost immediately. The poor quality of these copies means that some of these producers can get the products out to the market faster than the original designers. This means that once the designers products hit the market they have already lost their unique appeal. Further, since this fast fashion run-offs have become more highly sophisticated; the copyists can wait to even see which of the products seem to sell the most before they decide what to produce and they can then produce these ‘trend setting items without having to take on the risk that their ‘investment’ might not pay off. The basic theory of intellectual property would find this appalling. The big design houses spend millions of dollars on salaries for designers, researching market trends and organising expensive processes and fashion shows. Copyists however free ride on this work and produce cheaper substitutes. According to the traditional theory of IP this should lead to an economic disincentive on the part of the big fashion houses causing them to research and produce less. However the converse is true. We see that the bigger fashion houses continue to produce new creations every single year and the glamour of their products only increase. In order to understand why the standard disincentive is not in place we will need to look at the theory of fashion.

The Theory of fashion

Fashion theory dates back several hundred years. The Haute Couture stores of France were the powerhouses of fashion. No sooner was an item launched was it copied in America and sold to a larger market for much cheaper. It is important to make the distinction between close copying on the one hand (making replicas) and participating in trends on the other. Fashion changes often with some styles emerging as trends only to be soon replaced by other styles rising quickly to take its place. The demand for fashion is not merely a physical need although some people will wish to buy a new coast when their old one tears or a new cardigan because their old one looks worn. Fashion is more accurately a cultural expression. According to the fashion theory – “the theory of the leisure class” – fashion is usually adopted by elites with the purpose of being different from the masses. The masses then admire and demands goods that will emulate the elites. Consequently the elites abandon the older fashion, which has now been copied by the masses in favour of newer items that will distinguish them from the masses. This first theory of fashion suggests that fashion is driven by a an aspiration of social mobility on one hand (the masses trying to emulate the elite) and social stratification on the other (the elite trying to distinguish themselves from the masses)

The other major theory is that of “collective selection” whereby fashion evolves through the collective process where many people, through their individual choices come to form the collective trend in society. The process of trend formation begins vaguely with a few people buying something of a unique design in the emulation of a celebrity and others copying it until a trend is formed. This theory is not purely about copying the elite, rather it is people following fashion because they desire to be in fashion and associate themselves with the latest styles and trends. This theory also called the Zeitgeist theory works through a matter of individual choice and collective social tastes.

Whatever the theory prevalent in society – one thing is certain and that is that the masses cannot afford the styles of the elite. Very few people in our society can afford t – shirts from Armani and jackets from Polo Ralph Lauren. These large fashion house brands retail items at several hundred dollars apiece making it unaffordable to the masses. Fast fashion copying is the solution. The fast fashion outlets like Zara and Forever 21 provide these trend setting items at a fraction of the cost of the designer houses. One must not be mistaken here that they make exact copies of these items, because they don’t. Rather their in house designers make inspirational pieces – following the same trend but different. The items are visually similar to the ones of the high fashion houses and this is what many times has come before the courts under the Designs Act 2003 (Australia). Many of these fast fashion firms have shops on large high streets and have built themselves into a business empire.

State of the law in Australia

In Australia until the 17th June 2004 designs were protected by the Designs Act of 1906. According to the older legislation in order to register the design the design had to be:

‘Features of shape, configuration, pattern or ornamentation applicable to an article, being features that, in the finished article, can be judged by the eye, but does not include a method or principle of construction’

This legislation did not strike a balance between what are considered ideal objectives of design legislation; to protect designs form free riding competitors but yet at the same time not stifle competition too much because innovation is usually a development on a previous design. The older legislation was also impractical for the fashion industry because of the nature of the law itself. According to the old law the applicant had to file a separate design registration for each variation to the similar product. This is impractical as many items of fashion come in different colours and sizes.

Further the design application needed to be examined by the designs office before registration was granted. This meant that designs had to be submitted before they could be registered. This too was impractical to the fashion industry for a number of reasons. Firstly, by the time the process of submitting the design and registration was complete the item would already have gone out of fashion – given the relatively fast lifecycle of fast fashion. Further submitting the designs would mean the designs would have to be completed earlier. Usually designers work on their designs until the last minute before the official launch – working on extras until hours before the design goes public.

The old designs regulation was clearly impractical for fashion and the replacement legislation in the form of the Designs Act of 2003 hoped to iron out some of the problems. Under this act the fashion industry benefitted heavily as protection was obtainable for more than one design (colour or size) of the same product. . However the official government fees for this is a drawback to the registration of more than one design of the same product. Under the new act the fees for the first design is $200 and for every variation of that design a further $200. This heavy cost especially for the mid budget fashion houses is disadvantageous.

Further the new legislation permits the design to be registered even before a full examination of the product is undertaken. This gives time for the producers to tweak the designs even until the last minute before they are released. However, the examination whilst not compulsory needs to take place before the owner can take action against anyone who infringes on this design. Getting this inspection carried out is costly, costing $360 per variation of a design, and requires a lot of paper work; in the form of photographs and a Statement of Newness and Distinctiveness explaining how this design is new and distinctive from any others on the market (without which the registrar might not be satisfied that the product is new and distinctive).

The courts have taken an interesting approach to the question of designs in the fashion industry. The first decision to be handed down after the enactment of the Designs Act 2003 was the Federal Court of Australia’s decision in Review v Innovative Lifestyle Investments Pty Ltd and concerned a dress produced by Review and registered of which Innovative Lifestyle Investments produced an identical design. Justice Jessup found that the “striking visual similarity” between the designs and the time period in which they were produced (the ILI dress coming out only a few months after Review’s) was an indication that the registered design was breached. However, calculating damages was difficult because Review did not wish to submit its sales figures to the court. Thus Justice Jessup awarded Review $7500 in damages due to minor loss of reputation as not being a brand of originality and another $10,000 for ILI continuing the sale of the dresses after finding out about Review’s registration. ILI plans on appealing the decision so it will be interesting to see what decision the appellate court hands down. This case shows that whilst there is sufficient legal protection in Australia for the protection of designs there are several limits to the protection. One such limitation is time. It took about seven months for the Review design to be registered. Items which are not ‘timeless’ items like Reviews dress would have the long passed their ‘fashion expiry’ before the registration of these items were completed. Since action cannot be taken until registration is completed this would mean that many designers would potentially not be willing to take action as the product would no longer be an item in stock. Further the need by the judges to assess the loss in sales would require firms to furnish in court their sales and projected sales figures. This might be highly sensitive information that they would not want competitors, in the highly competitive market, to know. Finally the value of damages awarded in this case was not high against ILI. If this case is anything to go by the exemplary damages are arguably not sufficient to deter copying. Rather many copyists would see this as merely the cost of doing business.

Copying of items in the fashion industry can also be protected by copyright law. The copyright law provisions are used when there is an artistic or craftsmanship appeal to the garment. Protection under this provision was brought before the courts in 2008 by Elwood a manufacturer of trendy youth clothes. Elwood alleged that Cotton On had violated its copyright for two computer generated drawings; the “New Deal” tshirt and the swing tags attached to these garments. They alleged that Cotton On had sold several hundred tshirts which were visually similar to the “New Deal” tshirts. Cotton On conceded that the only difference was the wording but otherwise they had copied the design drawings. The first question the court had to answer was whether the designs drawings were drawings and thus entitled to protection under the act (as artistic works). The key to answering this question was whether the wording was to be read as text or whether they were for pictorial purposes. The court found that they were a pictorial which was designed to bring recognition to the Elwood brand. Accordingly the design drawings were the subject of the Copyrights Act.

After determining that the designs were copyright works, the judge had to determine whether they were original Elwood drawings. The judge found on the evidence that this was an original drawing as Elwood had spent several weeks and a lot of effort creating them and thus they satisfied the originality criteria. That being assessed the judge had to then work out whether what Cotton on had copied amounted to a substantial part. In his honour’s opinion Cotton On had copied only the shape and the form of the item and not the wording or symbols of the design and thus did not create a visual similarity with Elwood’s design. His honour said that the degree of copying was in keeping with Cotton On’s theme, “same but different”.

We see here that even through copyright law it is hard for the copyright holders to have protection for their designs. The problem of free riding occurs when larger companies like Elwood carry out research and spend both time and money creating the brand and ‘fashion statement’. The copyists then free ride on this and tweak the designs slightly so that they can get around the law and as such they benefit from the hard work and risk taking of other firms.

The Design/Copyright Overlap

Whereas copyright law must encompass an element of artistic craftsmanship (such as the digital designs of both the tshirt and the tag in the Elwood case) or used to protect one off designs such as individual garments or pieces of jewellery; garments which are commercially marketed need to be protected by the Designs Act. For many years governments have been trying hard to emphasise this distinction. Their rationale suggests that when it comes to the shape and appearance of designs the Designs Act is more appropriate and people wanting their items to be mass produced for commercial sales should register their designs. To give effect to this policy the government has included provisions in the copyright act to close the loopholes that existed in previous legislation. Some of the provisions intend that purely two dimensional designs will have dual protection under the copyright and designs act. The other main change is that people creating works of artistic craftsmanship can choose whether or not to register the design (but registering will generally result in a loss of copyright). It follows that the design copyright overlap has been made clearer as a result of the amended designs act and changes to the Copyrights Act. This has been the government’s attempt to make the laws clearer and friendlier to give designers a more protected environment in which to carry out their work.

It can be seen however, that the cost of registering the designs as well as the cost of enforcement of the registered design (litigation and related costs) are high in comparison to the damages receivable especially if the original designer is hesitant to make too many ‘figures’ known to the court. Further, especially for claims under the Copyrights Act, the burden of proof is very high. The courts have been very careful to interpret the word ‘substantial’ and as was seen in the Elwood case, although the copyright was found in favour of Elwood the court held the outcome in favour of Cotton On because they said that the visual appearance was not substantially similar to the Elwood design. This decision begs the question as to whether items can be copied so long as the colour and wording has changed. Whilst this might be perfectly acceptable in other industries, judges fail to understand the uniqueness of fashion, where it is not the item itself that matters but the advertising, marketing and style promotion than creates the trend for the item. It is arguable then that when considering designs and copyright protection the court should look deeply into merely just the design or drawing and focus on the value of the design or drawing in creating the trend fashion. That said, it is difficult to assess where exactly the trend originated. Some argue that the trend originates with the celebrities in Hollywood and others argue that the trends originate from the catwalks of Europe. These claims are however disputable as there are new and emerging fashion design centres around the world especially in Australia where the seasons are opposite to those of the countries in the Northern hemisphere – making it impractical to follow their trends. Thus the onus of proving who started a trend might eventually mean that there is no protection for any designer since all fast fashion designs are usually a variation of some trend or item.

Reforms:

The US lacks fashion copyright protection completely and this has given rise to an entire industry that copies and tweaks. Fashion industry specialists call this blatant piracy – looking great for cheap. One fashion expert reports that a high street fashion brand like Forecer 21 copies and retails a $2000 dress for $80 and even shoes by the renowned designer Balenciaga worth over $600 dollars is copied and sold by Steve Madden for $60. The lack of adequate safeguards in the US as opposed to Australia is the cause of this. Experts say that the up and coming designers are those at the biggest risk because they can ill afford the legislation needed to fight back. The Australian law can perhaps take some ideas for reform from the amendments suggested by the US Copyright’s office.

The first as a part of several suggestions is that the protection time frame be reduced from 10 years to 3 years. This is because the haute couture fashion where items retail for several hundred dollars a piece will usually have lost their exclusivity or reached the end of their fashion peak well within the three years. Although designs change fast a reason for the longer period of three years is to also include classic fashion items like the Guy suit by Hugo Boss.

Another reform that has been suggested that we might adopt in Australia is that registration must be completed and take place within three months from the date that it goes public. This means that once a design is registered the designer has upto three months to organise for the inspection to be carried out for the item. This gives the designer more flexibility to decide which designs are profitable and then decide which ones he wants to register thus saving on the costs of statutory fees and paperwork.

Finally they suggest that there be a special fashion board set up to deal with the fashion industry where a group of experts independently asses the item such that they can better understand the subtleties of a new design as opposed to an old one and thus the granting of registration will be fairer. Along with this Ralph Brown suggests that in order to make the enforcing more affordable this board be also given the power to handle conflicts. He argues that this be the ‘first instance’ board that reviews the complaints that designers have if they feel that their designs have been breached. This board should be entrusted with the power to make a non binding directive (after analysing the evidence) in favour of or against the claimant. He argues that because this board will be made up of fashion experts they will be in a better position to analyse the breaches. If Australia had a system like this, then the Elwood decision might not have been decided the way it was. This board would have been able to realise the subtleties of the trend style which His Honour in that case failed to see. In other words they will interpret the law in the context of the industry and not on the black letter analysis of the law. He concedes that the court is the ultimate arbitrator and he argues that if one or both parties are not willing to settle based on the boards directive then they could appeal the decision to court. The rationale for this approach is that to save costs and reputation most firms will settle out of court. What is important in any reform is having a balance between protecting the designs of those whose spend time, skill and money developing the latest fashions against the interests of the masses who want to be in fashion and who are willing to buy the cheaper counterfeits. The recommendations mentioned above would definitely allow designers to make the most of protecting their designs and their investments. In keeping with the standard theory of intellectual property it is likely to increase investment in the industry. The large fashion houses might be willing to come up with more designs, and varieties of designs because they feel that there is an inexpensive way of enforcing their intellectual property rights. At the same time younger designers will be willing to release more designs into the market because they feel that they are better protected and can enforce their intellectual property system in a way that is understandable and cost effective to them.

On the other hand the method proposed above would benefit the high street fast fashion firms as a trained eye in the board is likely to be able to spot the difference between blatant copying and trends. Zara for example will be able to produce in the confidence that when they produce dresses a trained eye in the design board will be able to easily tell that theirs is not an imitation of an original dress but rather a variation in style but within the scope of trends. This is something that the judges find hard to understand because as Susan Scaffidi (one of the most prolific fashion law writers) put it “it is hard to have a sixty – seventy year old white man look at an item of chic ladies fashion and decide whether or not copyright has been breached”.

Another proposed reform is that the costs of applying for design can be reduced by the government. The UWA faculty of law expert has written that making the registration process cheaper might be possible by maintaining an online database of all the designs. He argues that if design registration is cheaper more designers are going to seek it and this will be better for the intellectual property regime.

The bigger fashion houses also argue that their “selling point” is that their styles are unique and those who purchase from them pay so much because of the snob appeal of the item. They argue that with so much copying their unique designs become less unique and as such they have to keep designing more items to keep up the unique appeal. Alain Wertheimer , Chairman of Chanel when asked about this in an interview to the Newsweek said that because of the vast amount of copying going on in the industry people are willing to pay less and less for designer clothes as they see no snob appeal in them. She says that as a result the bigger fashion houses are finding it hard to survive and that her brand too has had to undergo diversification to survive. Donatella Versace arguing on the same point says that Versace has had to diversify into manufacturing lifestyle items and dinner sets too because of insufficient protection by the government.

Raustiala and Sprigman, in their article the Piracy Paradox argue very strongly that a strong intellectual property regime will not change anything. They argue that people keep demanding the latest trends and as long as the demand is there the suppliers will continue to provide for it. They also argue that the market will not change by much because the masses will not be able to afford the original designs anyway. They rationalise this theory to a fixed amount that people are willing to pay for items even if they were Zeitegists. This is because after a point fashion becomes a luxury good and the demand is therefore inelastic. People, they argue, after a point are not willing to sacrifice necessities for luxury goods and will do one of two things, either do without it or be content with older collections.

They further argue in direct rebuttal to the claims of Alain Wertheimer and Donatella Versace that as a result of the big fashion house designs being copied and reproduced people who demand the unique style that comes with these designer products will keep purchasing more and it is good for their business. Their rebuttal to this is found in their theory of induced obsolescence. They argue that because clothing is about perception the demand for the goods is because the highly fashionable people have them and to not have them means that one is unfashionable. They also argue that in line with the “theory of the leisure class” that once more people have it those who demand unique products will want something else for the snob appeal. They argue that this causes the cycle all over again. Thus we can see that as more items are copied this puts pressure on the fashion houses to produce newer and more distinctive items. As such they can produce more often and their profits increase. Logically, it then flows that copying – whilst being a part of the business of the copyist firms is also beneficial to the large fashion houses because the elite will keep demanding newer styles and this increases their business. This is called induced obsolescence by copying.

They further argue that by the masses flocking to buy the latest styles there is an automatic trend created and as such the large fashion houses benefit because those on the marginal income lines will tend to purchase the fashion house brands so that they can be a part of the trend. It is also arguable that because the trends are so short lived for most of the casual wear collections (an average style time for the Armani Tees is seven months) even if there are tougher intellectual property law few firms would go through the trouble of registering all but their most classic designs.

Conclusion

In this essay we have looked at the reasons for the existence of intellectual property generally. We have then identified the theories of fashion and seen how people demand in style products so the copyists employ designers not to make an exact replica of the item but to make an item similar such that the item is a part of the trend. We have then considered the law in Australia. We have looked at how the Designs Act and the Copyright Act play an important role in protecting the designs and drawings of the designers. We have identified that the courts have had a mixed approach to enforcing right under the act. We saw in the Review decision the impracticality of taking an action to Court under the Designs Act. We saw that this impracticality was because the claimant needs to submit highly sensitive figures for the courts to make a decision. Further, we saw that the Elwood decision in which it is probable that the judge misunderstood that what Elwood was doing was setting a trend for printed tees. We then argued that it is impossible for courts to find the difference between trends and styles and argued that perhaps we do not want them to rule against style. This paper also suggested possible reforms to the law and to the method in which the law should be administered. These reforms flow from our previous analysis of the method of administration of the law being impractical. It was proposed that the proposed methods would help the administration of the system as well as make a more streamlined an easier system for designers to enforce their rights.

However, when we consider the theories of fashion as a whole and when we consider the article by Raustiala and Sprigman, we see that reform really isn’t necessary. Reform will not dynamically change the face of the industry because most designers will not go through the trouble of registering their designs as the design life cycles are very short and the trouble taken to register designs is not worth their while.

We also see that reform is not necessary because copying (otherwise referred to as trend setting) is helpful to the big fashion houses. It stimulates designs for their products and increases their sales. We started off by saying that the industry is worth $750 billion a year. There seems to be enough money to go around. Any changes which impose tighter control will only reduce the value of the industry and push many out of business.