Counterfeit Goods or Counterfeit Bads: The Copyright Anomaly

Counterfeit Goods or Counterfeit Bads: The Copyright Anomaly

By Amanda B. Agati

There is something palpably wrong about the current state of copyright protection for fashion design, or lack thereof.  To illustrate, Steve Madden, a brand notorious for copycatting, sunk to a new low in the Fall of 2007, when its graphic designers stole not only the design, but the actual photograph of Christian Louboutin’s Miss Fred Tacco patent leather shoe bootie from Saks Fifth Avenue’s website, by photoshopping out the red sole.ⁱ

Christian Louboutin’s Miss Fred Tacco is on the left, and the astonishingly similar Steve Madden Beck Shoe is on the right.  (Notice the glare on the patent leather.)

What makes this so outrageous is that Steve Madden is blameworthy for unlawfully using the copyrighted photograph, but has done nothing wrong by copying the actual subject of the photograph, the shoe itself.  It is completely nonsensical that a fashion sketch is deserving of copyright protection, but the original garment that is subsequently produced can be copied freely.

There have been recent efforts to modify copyright law to rectify this inconsistency.  The Design Piracy Prohibition Actⁱⁱ (DPPA) proposes to amend Section 1301 of title 17 of the United States Code, the “Vessel Hull Design Protection Act,”ⁱⁱⁱ which currently protects the original designs of boat hulls, to include a three year period of copyright protection for fashion designs.  The bill was introduced to the Senate on August 2, 2007, but before the bill went to a vote, the Congressional session ended, marking the 89th failed attempt since 1914 at adopting copyright protection for fashion design. Unfortunately, the bill’s passage in the near future seems unlikely. For some reason, the protection of a boat hull as an “original design of a useful article which makes the article attractive or distinctive in appearance,” is of much more importance than the protection of the $350 billion dollar fashion industry. Apparently, boat hulls have made a far greater impact on American society than Levi Strauss or Ralph Lauren.

Many opponents of the DPPA argue that there is no need for an expansion of copyright to include fashion design because there has not been sufficient evidence of the harm that fashion designers have suffered as a result of copying of their designs, inasmuch as that the fashion industry operates in such short cycles and continues to grow prosperously.

Challengers to the protection of fashion design point to the fact that the fashion industry creates new designs so efficiently and rapidly, despite the lack of protection, as evidence that fashion industry defies the incentive/dissemination IP policy.  They argue that because the fashion design industry continues to thrive without protection, it runs afoul to traditional IP ideals, and therefore there is no real need for protection in the industry.

A more appropriate and compelling policy to analyze the need for copyright protection of fashion design is commercial morality.  Courts have repeatedly and consistently found infringement where one “reaps where he has not sown.”  Time after time, the court system rules in favor of the creator, rather than the free rider who simply steals the creator’s work.  Courts will often go to great lengths to ensure this result, even if current doctrine does not support it.  In the landmark case of International News Service v. Associated Press,^iv the court found against INS because   the company was stealing AP’s news information.  Although copyright only provides protection for the expression of facts or ideas, not for the facts themselves, the court ruled against INS simply because the company was free riding.  Surely, under the same line of reasoning, fashion design should be protected under copyright law against the vast misappropriation of designers’ creations.

While it is true that resourceful designers have found protection for their designs under design patents, such as Burberry’s trench coat, Gucci’s signature GG fabric, and Dior’s saddle bag, the process of obtaining a patent is both lengthy and costly. Well-known luxury brands also turn to trademark protection for images that are widely recognized and clearly identifiable with the brand, like Lacoste’s crocodile and Louis Vuitton’s LV monogram.

Even if these protection measures help to secure the brand image, it is clear that trademark and patent are not suitable protections for fashion designs, and that designers are resorting to these avenues of intellectual property law for lack of a better alternative.  There is an undeniable hole in existing copyright law.  Designers Viktor & Rolf stated that, “In our information society, mystery is very hard to maintain, and what is avant-garde today is mainstream tomorrow.  It can be copied and marginalized very easily.” The reality is that in today’s global marketplace, $600 billion dollars, or between seven and ten percent of all annual world trade is counterfeit, $30 billion of which affects the retail industry alone.^v These are facts that current copyright law is completely unprepared to confront.

As Professor Susan Scafidi of Fordham Law School explains, most industries in emerging economies experience an initial boom due to piracy, which results in increased proficiency in the production of the pirated goods.^vi This allows for the proprietary development of a creative sector within the country and leads to the expansion of intellectual property laws to protect these new ideas and support the continued growth of the industry.  “This was the pattern followed in the music and publishing industries, in which the U.S. was once a notorious pirate nation but is now a promoter of IP enforcement.”  The fashion industry in the U.S. has not followed this cycle; it continues to develop, while our intellectual property laws remain at a standstill.

Years ago, designers didn’t feel threatened by cheap, poorly made imitations, and viewed them as mere nuisances.  Now, as the quality of fakes gets increasingly better, even fashionistas have difficulty distinguishing real from fake.  Criminals are getting smarter, more innovative, and are able to produce copies as fast, if not faster than the originals.

Copying the exact design is fair game, but putting a fake logo on the goods is where counterfeiters get into trouble with trademark laws.  Goods that infringe on a registered trademark or falsely purport to be authentic are illegal, but counterfeiters find ways to evade the law.  To avoid having their goods seized at customs, countless goods are now being shipped “blank,” and the logos are attached once they are in the country or on demand at the time of sale.

Major fashion houses with recognizable logos can fall back on the protection of trademark laws once knockoffs are discovered, but it is up and coming designers who really suffer from this loophole.  New designers have not yet built a reputation or logo that is widely identifiable to qualify for trademark protection, so their designs can be replicated openly.  The illicit trade of counterfeit goods is a global epidemic, and providing copyright protection for fashion design through the DPPA would be a major step in facilitating the fight against counterfeits.

Lately, there have been promising victories in the fight against illicit trade.  Last February, Mayor Bloomberg, the Office of Special Enforcement, and the NYPD, won a court action allowing them to shut down thirty-two storefronts in Chinatown, seize over a million dollars in counterfeit goods and impose substantial fines on merchants. “Counterfeit goods cheat the City, consumers, legitimate business owners, and trademark holders and their proliferation is standing in the way of the revitalization of Chinatown,” said Mayor Bloomberg. “Not only are counterfeit goods usually inferior in quality, they are sold by unscrupulous merchants that have been linked to money laundering operations.” Commissioner Kelly of the NYPD added, “We need consumers to help us instead of burying their heads in the sand.  No matter how ‘victimless’ a crime may appear, when you scratch the surface you are bound to find some unpleasant realities. That’s true in the knock-off trade. The NYPD will continue to do its part to stop the counterfeiters. But we need educated consumers to do their part too.”  Earlier this month, on March 5th, Immigration and Customs Enforcement agents arrested five people linked to a conspiracy to import over $40 million in counterfeit merchandise into New York City from China.xviii  The alleged co-conspirators face up to 20 years in prison, if convicted.

Of course, while these recent busts are encouraging, they are only a drop in the bucket.  The real problem is that consumer demand for counterfeit goods is growing, and consumers are uninformed about the dangers of buying a fake designer bag.

Buying knockoffs is not, as most people believe, a victimless crime.  Fake handbags are made by young children in illegal factories, and are often used to smuggle drugs into the country.  New York City’s advertising campaign, “The Real Price of Counterfeit Goods,” cautions that “when you buy counterfeit goods, you support child labor, drug trafficking, [and] organized crime.” Dana Thomas, in the Harper’s Bazaar’s Luxury Report on The Fight Against Fakes, tells a story about children in Thailand sitting on a factory floor assembling counterfeit handbags, because the “owners had broken the children’s legs and tied the lower leg to the thigh so the bones wouldn’t mend.  [They] did it because the children said they wanted to go outside and play.”^vii

Additionally, counterfeiters make significant profit margins and don’t pay taxes, while other Americans are struggling to get by.  It is estimated that New York City loses one billion dollars annually in tax revenue to counterfeit goods.

In his book Illicit,^viii Moises Naim explains that there is a huge demand for illicit trade consisting of drugs, both pharmaceutical and recreational, human trafficking and illegal workers, weapons, rip-offs of intellectual property, and money laundering.  These illegal networks are growing seven times faster than legal trade, and they do not operate distinctly, but are more like an interconnected web of black market trade.  When you buy a fake Gucci bag for $25 on Canal Street, you are contributing to the demand and supporting a supply chain.  Counterfeit pharmaceuticals, airline parts, auto parts, children’s toys and knockoff designer goods, all enter the country the same way.

A great deal of evidence suggests a link between this illicit economy and organized crime and terrorism.  The bombing of the World Trade Center in 1993 is believed to have been funded by the sale of counterfeit apparel.  Smugglers, drug dealers and terrorists all operate in the shadow of the law, and terrorists use illicit trade to launder money that funds their operations.  Naim warns that governments are losing the battle against illicit trade because they are confined to playing by the rules and are inhibited by their bureaucratic nature.  Illicit trade is threatening the health of the global economy.  The United States loses between $200 to $250 billion annually and 750,000 American jobs to counterfeiting.  Given the current state of the economy, and the surmounting statistics indicating the harmful effects that illicit trade has on our economy, isn’t it time that our government work with the fashion industry to protect our innovations from thievery?

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ⁱ http://www.almostheeled.com/2604528

ⁱⁱ The Library of Congress, The Design Piracy Prohibition Act, S. 1957, http://thomas.loc.gov/cgi-bin/query/z?c110:S.1957:

ⁱⁱⁱ 17 U.S.C. § 1301 (2008).

^iv 248 U.S. 215 (1918).

^v LiliAna Andreano, IACC, Homeland Security Meet to Fight Fakes, Sept. 30, 2008, http://www.fakesareneverinfashion.com/bazaar-blog/

^vi Susan Scafidi, Written Statement on H.R. 5055, “The Design Piracy Prohibition Act” presented to the Subcommittee on Courts, the Internet, and Intellectual Property, U.S. House of Representatives (July 27, 2006).

^vii Dana Thomas, Luxury Report: The Fight Against Fakes, HARPER’S BAZAAR, Jan. 2009, at 69.

^viii Moises Naim, Illicit: How Smugglers, Traffickers, and Copycats are Hijacking the Global Economy (2006).