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Abuse of IP: The Effects of Counterfeiting on the Fashion Industry

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louis-vuitton-2628969_640The phenomenon of counterfeiting has been around as long as couture itself. The rise of the internet and e-commerce has created an ideal breeding ground for counterfeiting due to the anonymity it provides and the proliferation of distribution channels. Protection against counterfeiting is difficult because it requires continuous monitoring of a brand and how its trade marks are used.

The establishment of trends is at the heart of fashion but this sampling of others’ designs inherently creates a culture of copying. Unless the industry model changes, the war against counterfeiting will remain unwinnable. The main complexity is deciding where inspiration ends and infringement (i.e. copying) begins.

“Counterfeit” and “knock-off” are often used interchangeably but their legal meanings are very different. Knock-off is a copyright-specific term that refers to products that are copies but that do not make illegal use of someone’s trade mark. A counterfeit is a copy bearing the trade mark of the copied designer without authorisation to do so. Counterfeit products are illegal because they fraudulently use a trade mark that is highly similar to a famous mark such that it causes consumer confusion and trade mark dilution.

Some believe that counterfeiting acts as free advertising through peer endorsement, which is far more effective than an advert or a pop-up ad because it slips by our resistance to marketing. However, this advertising is not free; the proliferation of counterfeit goods is actually very costly to brands as it can damage their reputation, harm the image of their trademarked brand and at worst result in trade mark dilution.

However, while exclusivity is undeniably a major source of brand prestige, it could be argued that desirability is more important. Although desire for a product is an important driver of consumer purchasing, with luxury goods and high fashion brands, exclusivity is intrinsically intertwined with desirability. While the presence of counterfeits may serve to indicate and further increase the desirability of a product, it is not sustainable for brands. Any short term benefits are outweighed by the long term risks that derive from counterfeits.

Raustiala and Springman support the theory of a ‘piracy paradox’ in the fashion industry whereby copying results in greater industry-wide sales but also causes design trends to have a shorter lifespan which in turn spurs innovation. However, although a culture of copying produces an open and creative environment, it is not always the driving force behind innovation. Alternatively, close copying may incentivise the creation of designs that are difficult to copy, as opposed to those that are truly innovative. Whichever argument holds true, it is undeniable that every level of the fashion industry is to some extent reliant on designers taking inspiration from the work of others to reinterpret styles and re-visit old ideas.

Copying manifested in the form of a knock-off is not as detrimental to a brand and in some cases can encourage creative innovation. The real issue is counterfeiting due to the damage it causes to a brands’ trade mark rights as a result of the market being flooded with counterfeit products. Although the loss of revenue and potential customers is a concern, the most pressing fear for brands is trade mark dilution.

Once a trade mark no longer signifies extravagance or exclusivity and becomes commonplace, its value as a brand indicator is severely weakened. For example, in 2013, Louis Vuitton was forced to undergo a complete brand revamp due to logo fatigue reaching tipping point in its ubiquitous toile and LV monogram. Customers tiring of the brand’s logo coincided with low growth reports demonstrating the destructive power of a market saturated with counterfeits and knock-offs.

Louis Vuitton is in an on-going case against My Other Bag (MOB) to protect its universally recognised mark against dilution. Louis Vuitton has alleged that MOB is not only infringing its registered trade mark, they are also diluting the ‘distinctive quality’ of its world-famous trade marks. When a decision is reached, the outcome of this case could have a significant impact on owners of famous and distinctive marks.

Counterfeiting is a liability to a brand, particularly luxury and high fashion companies; because it can destroy the time and money spent building up reputation and goodwill in a trade mark. The most valuable asset to a brand is their trade mark because people are attracted to one product over another due to the appeal of that specific trade mark and the social cues associated with it; this precious asset must be policed in order to avoid dilution.

Oscar Wilde famously said that imitation is the sincerest form of flattery – but is it really? Exploiting a fashion brand’s most valuable form of intellectual property is essentially damaging to the company itself and the industry as a whole. The abstract notion of luxury and high fashion that is attached to a trade mark is what makes a brand successful.

Ultimately, the aim of trade mark law is not to incentivise original design or encourage creativity. Trade mark law exists to protect consumers and improve the quality of information in the marketplace. Although counterfeiting can be seen as a measure of success, any short term benefits are vastly outweighed by the risk of trade mark dilution. The challenge is in striking the right balance between exclusivity and popularity, whilst remaining profitable.

Amelia Skelding 16 February 2018


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