Addressing Fashion’s Intellectual Property Conundrum

L: Proenza Schouler PS1. R: Target Mossimo® Messenger | Source: purseblog.com

LONDON, United Kingdom — When reports first surfaced in March about the striking similarities between Proenza Schouler’s PS1 bag and Target’s Mossimo Messenger, the discomfort within the fashion industry was palpable. What was particularly troubling was that Jack McCollough and Lazaro Hernandez, the design duo behind Proenza Schouler, had a longstanding relationship with Target.

Indeed, in 2007 the designers debuted their capsule collection for Target, part of which they agreed to re-issue for the 2011 spring season. So to make matters worse, when the Target story broke, the alleged knock-off was sitting alongside the re-issued Proenza Schouler for Target pieces, lending a quasi-legitimacy to the offending Mossimo Messenger bag.

Speaking with BoF, Proenza Schouler chief executive Shirley Cook said the impact was deeply felt. “Our relationship [with Target] was based on trust, so of course the [revelation] was particularly upsetting,” she said. “We were attracted to working with Target because we really respect it as an upstanding company, so seeing our product knocked-off in store cut close to home.”

Copying is endemic in the fashion industry. But the effects are particularly acute for emerging designers for whom every sale counts. “The damage actioned by knock-offs is twofold,” noted Gary Assim, partner and intellectual property specialist at London law firm Shoosmiths. “Firstly it robs the designer of the proceeds from the sale of his or her product, which will often have been the result of a considerable research and development investment,” he said. “In addition, it denies the designer the rightful recognition as the original creator.”

While Ms. Cook declined to disclose whether the company is taking legal action against Target, she emphasised that Proenza Schouler is serious about protecting its intellectual property: “For sure, this is something which is very important to us. We are fortunate to have had very knowledgeable people around us from the start, so we are very aware of our rights.”

But how can emerging designers protect and better capitalise on their creative IP? “Intellectual property law offers a raft of rights to fashion designers,” continued Mr Assim. “Some of these will arise automatically, such as copyright, while others require registration, such as trademarks.”

Like the rest of Europe, the UK affords protection to three-dimensional fashion creations through a relatively straightforward design rights system. In practice, designers register a design right for particularly iconic, carry-over pieces that meet the dual requirements of novelty and distinctiveness, while relying on an automatic unregistered design right for other pieces that display the statutory level of originality.

But taking legal action on the basis of alleged infringement can be an onerous process. In the case of an unregistered design, the right holder must present a clean chain of evidence which is not always easy to establish. Moreover, the financial burden is considerable. If the cost of applying for an injunction — typically between £30,000 and £50,000 — is not enough to dissuade an emerging designer from taking action, the unpredictability of the damages system might very well seal the deal. For instance, under UK law an unsuccessful claimant can be held liable for two-thirds of the defendant’s legal fees, meaning that an unfavourable ruling could be a crushing financial blow for a fledgling brand.

In the US, the design patent system has high application costs, long procedural timeframes and an unusually high standard of invention, which means that fashion designers are left unprotected and vulnerable against increasingly bold copyists.

In recent years, the Council of Fashion Designers of America (CFDA) has been campaigning to redress this imbalance and has lent its vocal support to the Innovative Design Protection and Piracy Prevention Act (IDPPPA), a bill that seeks to introduce design protections similar to those which exist in the EU.

Susan Scafidi, professor at Fordham Law School and director of the Fashion Law Institute, emphasised that the IDPPPA, in particular, offers “important protection to fashion designers who struggle to realise return on their creative investments, particularly emerging and independent designers.”

Mr. Hernandez and Mr. McCollough of Proenza Schouler were the latest designers to take to Capitol Hill, arguing that designers should not have to compete with copies of their own work. The industry is watching the proposed legislation with bated breath. But for the time being, the situation in the US is fraught with difficulties, particularly for emerging designers.

“The reality is that taking someone to court is not so easy and super expensive for many new designers,” said Ms. Cook. “If players like Louis Vuitton and Gucci have their hands full protecting their IP then what chance does a young designer have?”

Perhaps the answer is to be found in how emerging designers leverage their intellectual property rights. Entering into brand category extensions and licensing deals provides an ideal long-term platform for additional revenue streams, often at advantageous margins. But these activities typically require high levels of capital expenditure and management oversight.

By contrast, collaborations with mass retailers like Target and H&M give younger brands a unique model with which to easily reap the benefits of their IP, while establishing a contractual relationship with the retailers, which gives designers an easier recourse against retailers in the event of design infringement. Of course, the potential financial upside of these collaborations is also a big draw. To wit, the original Proenza Schouler for Target collaboration reportedly generated $20 million in retail sales within a two-month window, according to Ms. Cook.

But this only shows the importance of recognising creative IP rights as financial assets. “The problem is that generally, there is not enough awareness about intellectual property in the fashion industry and designers will typically become interested in their IP rights only once things go wrong, or perhaps when an investor comes in,” said Tahir Basheer, whose legal practice at London law firm Sheridans focuses on the management, exploitation and protection of intellectual properties across media, entertainment and fashion.

“IP rights are not just about protection against copying,” continued Mr Basheer. “Instead they may be viewed as performing a more subtle function, identifying the creator of content. By adopting an approach more akin to that taken within the media and entertainment industries, fashion brands can reach that next level of sophistication whereby they are strategically managing their IP rights distinctly from their commercial operations.”

“This type of set-up is completely commonplace among [more established] fashion brands,” said Hugh Devlin, a consultant at London solicitors Withers and an advisor to the luxury sector. “Nowadays, it would be foolish for anyone to still have their IP and trading company in the same vehicle, because of course things can go wrong with a trading company.”

Essentially, this mechanism allows the owners of a fashion company to hedge themselves against commercial risk while protecting their firms’ creative IP, ensuring the future strength of their brand identity. In this respect, by appreciating intellectual property rights as stand alone financial assets, the company can better safeguard its primary source of competitive advantage.

Often details of this type of arrangement are disclosed once a company decides to seek external sources of financing — whether through an IPO, a strategic partner or an institutional investor. “Increasingly, investors will insist that the separation be in place,” said Mr Devlin, noting that “of course, investors are hoping they will end up with a stake in the IP vehicle, while designers will be wanting to hold on to that and license it in perpetuity to the trading company.”

It’s time that emerging brands recognise the economic benefits provided by intellectual property law. Indeed, correctly administering intellectual property rights from the very early stages of structuring a business is one of the most effective ways to ensure they are adequately protected and financially exploited down the road.

Ceci Guicciardi is a consultant and writer focused on the interplay between brand, commerce and IP protection in the luxury fashion industry.

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10 comments

  1. This article read like a press release, not like a seasoned review of the idea.

    Most conspicuously absent were the three basic arguments against this type of law:

    1. It’s nearly impossible to enforce. Fashion constantly recycles and borrows ideas. Louis XVIII wore shoes with red soles; can France sue Louboutin? Does Chanel have a patent on the little black dress?

    2. Copying is a cornerstone of the fashion industry. Remember everyone’s favorite fashion speech from “The Devil Meets Prada”? Where Miranda explains that Andie is wearing a cerulean sweater because some designer had a cerulean in one collection and then the next season three more designers had it, and the season after that it was mass market? Mass market designers have always been “inspired” by high fashion designers and adapt that inspiration. This is how the entire ecosystem operates.

    3. Perhaps most importantly, no one who was going to actually buy a designer good would buy a knockoff, and no one who could recognize a designer bag would be fooled by one.

    Clearly, there are problems with the patent system, and it should be easier for emerging designers to navigate. I also agree that there’s a big difference between knockoffs (e.g. Target vs. Proenza) and out and out pirated fakes (e.g. Canal Street Louis Vutton),and the latter group of copiers should be prosecuted.

    jd from Seattle, WA, United States
  2. I agree with JD, mainly on the point that consumers are discerning and work within their own price points. If you can’t produce the PS1 in the price bracket of your customers, then they’ll buy something similar from someone else who can, whether it be Target or the guys on the corner of Broadway and 29th Street. It’s implicit that a brand’s value is more than just the design of a purse and you know you don’t get that when your walking down the street with a rip off.

    When it comes to design and litigation, innovation in fashion, beyond fabric design, is really limited and hard to define. Jack and Lazaro—don’t waste your time getting upset, design a better Ps1…

  3. While JD is right on certain points… Copying is NOT a cornerstone, inspiration IS. Thequote itself pertains towhat inspiration is : One trend setting designer making a bold color choice, leading others to choose the same color for their own work. Yes there is a very very fine line between “being inspired” and straight out knocking-off (copying), because if you consider them as the same, then ultimately there would be no new young designers….there’s nothing new under the sun, merely variations and shades of.
    And as far as the whole those who buy the knockoff would never buy the real thing….where does the blurring of lines end? Ie- my mom has declared that she will NEVER buy LV becuase of the fact too many asians in our area carry good/bad knockoffs…What’s the point of saving and buying LV when most people who see it assume that she’s carrying a fake?

    et from Paris, Île-de-France, France
  4. To be honest the Proenza Schouler bag is a bad example – there’s nothing original about it. Although it looks like nice quality, good leather, craftmanship etc., it just seems like a fancy label and some good p.r. and marketing. I can remember that style of bags being in fashion in the 80s. Essentially Proenza Schouler was the first to reintroduce the style but haven’t created anything original to protect.

    It’s rare to see an original ideas in fashion – even the big designers are doing it.

    tracey from Saint Kilda, Victoria, Australia
  5. If you look at the customer for a brand like Marc Jacobs where a purse may cost $4100 that is not the same customer that goes to Canal Street in New York or goes to Santy Alley in Los Angeles to buy a knockoff of a Marc Jacobs bag in vinyl. Those people would never pay $4100 for a bag. For some that’s rent, a used car, or food money, and making knockoffs illegal won’t change that.

    katie from Addison, IL, United States
  6. i’d like to see the original bag that proenza schouler used for THEIR inspiration.

    duckie from New York, NY, United States
  7. I agree, I’d like to see the vintage bag (or collection of bags) that Proenza Schouler knocked off, because that looks a whole lot like something I’ve seen in miltary surplus. And how could anyone mistake the Target version for the high end one? There are enough details changed to make this two different interpretations of a generic design that’s been in the public domain for decades. Was Target riffing on the fact that this particular style is hip and did all the “It Bag” celebrity hysteria in fashion and gossip magazines – arguably featuring the PS bag at some point – feed into their decision to mass produce? Of course. If they were smart, Target would have approached PS and licensed said knock off. They could have charged way more for it, and their relationship with PS would have been strengthened. But the corporate behemoths know all too well that when this designer star fades another one will be right behind it, ready to step up and license the latest.

    claire from Austin, TX, United States
  8. After reading the comments I need to add that there is a big difference between drawing inspiration from other artists’ work and copying. This is something that many people do not understand. Artists take inspiration from everything: other cultures, politics, history, emotions – and other people’s works. But they take little ideas from other’s entire works and RE-INTERPRET. They make it their own. Someone gave an example of the Chanel’s little black dress. Chanel’s idea will always be remembered and respected but it is not so distinctive that it can be considered Intellectual Property. McQueen’s (hoof) shoes from one of his most recent collections, on the other hand, could be. The reason we have IP laws is to protect those who put considerable amounts of time, energy, and money into original ideas. It is for those people that IP laws should continue to exist. As we can see in this article, and even by skimming through Etsy or E-bay, it is all too easy for someone to copy someone else’s good idea. Lazy, uncreative people should not be rewarded. The courts need to be more accessible by being more affordable. Suing someone should not give rise to fears of bankruptcy.

    katie everett from Ottawa, ON, Canada
  9. This article misses a very important point for many fashion houses. Speed.

    It’s all very well to quote from lawyers that “IP creators have X rights and Y rights” but in reality the legal process is very slow compared to the seasonal schedules that designers work to. By the time an injunction arrives both the IP infringer and fashion consumers have moved on to the next trend, while the IP creator is left with a hefty legal bill.

    GC the GC from Macclesfield, Cheshire, United Kingdom