In a forthcoming Virginia Law Review paper, entitled "The Piracy Paradox: Innovation and Intellectual Property in Fashion Design," two law professors investigate how the fashion industry manages to thrive despite rampant copying of clothing designs.

The paper's authors, Kal Raustiala of the University of California, and Chris Sprigman, start by observing that the fashion industry has what they term a "low-IP equilibrium," in which clothing designs enjoy almost no copy protection and designers frequently turn large profits by copying each others' work. In spite of the lack of IP protection for clothing designs—or rather, because of this lack, the authors argue—the fashion industry remains vibrant and profitable, exhibiting none of the negative effects on creativity that advocates of strong intellectual property (IP) rights would predict in the absence of government-enforced monopolies on creative "content."

Part of the overall reason for undertaking this investigation of the fashion industry is to question the standard assumptions about the relationship between intellectual property laws and incentives to create that underly all of modern intellectual property law. The standard theory goes that if a creator's exclusive right to profit from the distribution of her work is not protected by law, then creators will lose the incentive to create, as "free riders" drive down the price of the work by filling the market with copies.

This theory may hold true for books (the original "intellectual property" of Renaissance IP debates), inventions, and music, but it's apparently a poor fit for the fashion industry. If it weren't for widespread copying of clothing and accessory designs, there would be no such thing as a "fashion trend." The fashion industry, it seems, has settled into a relatively stable state (an equilibrium) in which a large amount of intellectual property "piracy" effectively drives the market.

Note: I'm going to keep putting the word "piracy" in those annoying scare-quotes because it's a terrible term for IP infringement. If pirates hijack a shipload of cannonballs in the Mediterranean, then the owners of that shipment are now short a few tons of cannonballs. If I download a copy of a song from a P2P service, then the owner of that IP may be out some money (assuming I would otherwise have bought that track elsewhere), but they're still in possession of the IP for the song; I haven't taken anyone's property from them, and it's not even clear that I've cost them any money if I wouldn't otherwise have purchased the track. Infringement, though illegal and possibly costly to an IP owner, does not equal piracy or theft, and the misuse of the term in this paper is unfortunate.

Anyway, Raustiala and Sprigman locate the roots of the fashion industry's successful low-IP equilibrium in two factors: induced obsolescence and anchoring.

Induced obsolescence

Because clothing is closely tied to status, especially in the realm of fashion, every design eventually becomes obsolete (i.e. it goes out of style) when it loses its ability to confer status on the wearer. When is something well and truly out of style? When everybody is wearing it, and that's where the open nature of fashion copying helps drive the fashion market. The authors write:

As Miucci Prada put it recently, "We let others copy us. And when they do, we drop it." The fashion cycle is driven faster, in other words, by widespread design copying, because copying erodes the positional [ed: or "status-conferring"] qualities of fashion goods. Designers in turn respond to this obsolescence with new designs. In short, piracy paradoxically benefits designers by inducing more rapid turnover and additional sales... What was elite quickly becomes mass.

So rampant, unauthorized copying drives the fashion cycle, and in doing so it spurs designer creativity; this is the opposite of what the standard assumptions about the relationship between unauthorized copying and incentives to create would predict.

It's important to include the authors' caveat about the importance of trademark law in this scheme. A genuine Prada purse confers more status than a Prada knock-off, so designers must protect their trademarks aggressively, even if they don't protect the designs to which those marks are attached.

Anchoring

The second phenomenon that Raustiala and Sprigman identify at the root of the fashion industry's low-IP success is what they call anchoring. Anchoring describes the process by which the industry converges on a few major design themes, or trends, during a fashion season—whether skirts are fitted or flowing, or cuffs are wide or slim, and so on. Anchoring is also the mechanism by which the fashion industry signals to consumers that trends have changed, and it's time to update the wardrobe.

While the industry produces a wide variety of designs at any one time, readily discernible trends nonetheless emerge and come to define a particular season's style. These trends evolve through an undirected process of copying, referencing, receiving input from consultants, testing design themes via observation of rivals' designs at runway shows, communication with buyers for key retailers, and coverage and commentary in the press. Copying helps to anchor the new season to a limited number of design themes, which are freely workable by all firms in the industry within the low-IP equilibrium. A regime of free appropriation helps emergent themes become full-blown trends; trendy consumers follow suit. Anchoring thus encourages consumption by conveying to consumers important information about the season's dominant styles: suits are slim, or roomy; skirts are tweedy, or bohemian; the hot handbag is small, rectangular, and made of white-stitched black leather, and so forth. Thus anchoring helps fashion-conscious consumers understand (1) when the mode has shifted, (2) what defines the new mode, and (3) what to buy to remain within it.

So unrestrained copying not only drives the production of new designs by making older designs obsolete, but it also helps shape the new designs around themes so that consumers can easily identify what looks are "in" or "out" at the moment.

What does this mean for Big Content's crusade against peer-to-peer copying?

Probably not much, at least in the near term. The two phenomena identified above are at the very least peculiar to markets involving "positional goods," and may well be peculiar to the fashion industry in particular. The models developed in the paper aren't really that generalizable to other IP regimes, and the authors acknowledge as much.

Nonetheless, the paper may be a good first step in moving beyond traditional, blanket assumptions about the relationship between copying and innovation, and it may spur legal scholars to develop more detailed models of intellectual property that fit specific industries. The paper also suggests that when technological and market conditions change dramatically, as they have in the wake of the P2P revolution, the relationship between unauthorized copying and incentives to create may change dramatically as well.

Further reading