Where IP Isn't

Abstract:     
The orthodox argument for IP proceeds in three steps. First, creative works are often difficult and expensive to create - think of the poet in pursuit of the right verse, or pizza-fueled late nights spent programming a new video game. Second, once the author or inventor produces the first version of a work, others will find it quick and cheap to copy the work. Third, unless the law equips the creator with enforceable exclusive rights, the copyist, having invested nothing in the creation of the work, will outcompete the originator and deny her a return on her investment. The practices of the fashion industry are hard to square with the traditional justification. The global fashion industry produces a huge variety of creative goods without strong IP protection in one of its biggest markets (the United States), and without apparent utilization of nominally strong IP rights in another large market (the countries of the European Union). Copying and derivative re-working of fashion designs are rampant in both the U.S. and E.U., as the traditional account would predict. Yet innovation and investment remain vibrant.

Why, when other major content industries have obtained increasingly powerful IP protections for their products, does fashion design remain mostly unprotected - and economically successful? We argue that the fashion industry counter-intuitively operates within a low-IP equilibrium in which copying does not deter innovation and may actually promote it. We call this the piracy paradox. Our article offers a model explaining how the fashion industry's piracy paradox works, and how copying functions as an important element of, and perhaps even a necessary predicate to, the industry's swift cycle of innovation. In so doing, we aim to shed light on the creative dynamics of the apparel industry. But we also hope to spark further exploration of a fundamental question of IP policy: to what degree are IP rights necessary to induce innovation in particular industries? Are stable low-IP equilibria imaginable outside of the fashion industry?

Keywords: global fashion industry, intellectual property protection, copyright on creative goods

Accepted Paper Series