Why knockoffs are good for fashion

James Surowiecki (author of the great book The Wisdom of Crowds) has a fantastic, tight little article about copyright and fashion in this week's New Yorker. Fashion designs aren't covered by copyright, and this means that couture designs are knocked off and sold at huge discounts in department stores and shops like H&M within seconds of appearing on the runway. This upsets many designers, but there's plenty of evidence that it's good for the industry as a whole — the knockoffs sell to people who'd never buy the couture originals, so they don't really cannibalize sales; what's more, by making a hot new look ubiquitous, the knockoffs contribute to making it look tired and boring, which creates the market for next season's clothes.

This reminds me of the story of database copyrights, which exist in Europe and not the in the USA. Advocates for these monopolies argue that a copyright spurs investment and makes the industry bigger. But the fact is that the European database industry has stagnated over the past 25 years, while the US industry has grown 25-fold, and the biggest difference between the two is that European firms can prevent competition by using the database right.

Even though the evidence is that a database right has retarded the industry and limited growth, European database firms still profess a great love for their regulatory monopoly, and American firms still bemoan its absence.

The recipients of regulatory monopolies are like kids getting candy: they all believe that they need more, and nothing will convince them otherwise. But monopolies end up costing the public and the next generation of creators: by limiting competition in databases, Europe has created a smaller and less useful database industry. By encouraging competition in fashion, the world has created an easy means for all of us to get cheap clothes, while creating a huge amount of investment in the "next thing," making it easier for new designers to break into the field.

Designers' frustration at seeing their ideas mimicked is understandable. But this is a classic case where the cure may be worse than the disease. There's little evidence that knockoffs are damaging the business. Fashion sales have remained more than healthy–estimates value the global luxury-fashion sector at a hundred and thirty billion dollars– and the high-end firms that so often see their designs copied have become stronger. More striking, a recent paper by the law professors Kal Raustiala and Christopher Sprigman suggests that weak intellectual-property rules, far from hurting the fashion industry, have instead been integral to its success. The professors call this effect "the piracy paradox."

The paradox stems from the basic dilemma that underpins the economics of fashion: for the industry to keep growing, customers must like this year's designs, but they must also become dissatisfied with them, so that they'll buy next year's. Many other consumer businesses face a similar problem, but fashion–unlike, say, the technology industry–can't rely on improvements in power and performance to make old products obsolete. Raustiala and Sprigman argue persuasively that, in fashion, it's copying that serves this function, bringing about what they call "induced obsolescence." Copying enables designs and styles to move quickly from early adopters to the masses. And since no one cool wants to keep wearing something after everybody else is wearing it, the copying of designs helps fuel the incessant demand for something new.


(Thanks, Scott!)