In Response: Is Counterfeiting Actually Good for Fashion?

On the heels of releasing its first-ever documentary exploring Korea’s next-level counterfeit culture, HighSnobiety took on the age-old question, “Is Counterfeiting Actually Good for Fashion?” In his op-ed, Aleks Eror makes some undeniably good points. However, he falls short on a few important accounts – the two most important being his failure to distinguish between counterfeits and mere knockoffs, and his overlooking of the theory of trademark dilution (a crucial element) – both of which warrant discussion before any assertions as to the merit counterfeits can even begin to be made. 

As Mr. Eror states early on, “There’s actually substantial evidence that counterfeiting can actually be good for brands, some of which is outlined in ‘The Knockoff Economy: How Imitation Sparks Innovation.’” This is where we encounter our first issue. 

The book that Eror references here, authored by copyright scholars Kal Raustiala and Christopher Sprigman, actually does not speak at any length to counterfeiting, nor does it support Eror’s position. My aim is not to get technical here – but it is unavoidable, unfortunately. Counterfeiting, which Eror is making a case for in his article, is a trademark concept (Note: Trademark is a. completely. different. type. of. law. than. copyright., a Google search reveals this as being true – although, yes, both fall under the umbrella of intellectual property).

Raustiala and Sprigman’s book, as indicated by its title, makes an argument in favor of knockoffs, a copyright-specific term that refers to garments and accessories that are copies but that do not make illegal use of others’ trademarks. Uses of others' trademarks - which is absolutely required in order for something to be called a counterfeit (another fun little Google-able fact) - falls under the umbrella of trademark law. 

In accordance with Sprigman and Raustiala’s theory (in a nutshell), which is also set forth in their article, The Piracy Paradox, copying of overarching runway trends by fast fashion retailers is beneficial for the fashion industry as it forces big name brands to constantly innovate to stay one step ahead of copyists, like Forever 21 and Zara. That, according to Sprigman and Raustiala, fuels creativity, which is good for the industry. 

Nowhere, to my knowledge (and I have read Sprigman and Raustiala’s book and their related articles, and Mr. Sprigman’s testimony in connection with relatively recent copyright law reform legislation – in fact, I was in attendance when Mr. Sprigman testified to his work – and his views in connection with it – in front of the U.S. House of Representatives Judiciary Subcommittee on Intellectual Property, Competition and the Internet) does Mr. Sprigman lobby in favor of counterfeiting.

To summarize: Copyright is different from trademark. Counterfeits are different from knockoffs. Sprigman and Raustiala are not pro-counterfeiting.

Moving along, Eror notes, “What legitimate manufacturers often refuse to acknowledge is that counterfeiting actually provides them with free advertising,” and this begins my other major point of contention (I am limiting my response to two key points in order to keep this short – there are, of course, very strong arguments to be made regarding the direct ties between the manufacturing and sale of counterfeits and organized crime and forced labor to keep in mind).

As indicated by at least some high fashion brands’ willingness to laugh off alleged parodies – for instance – (which may, in fact, be deemed trademark infringements, as opposed to legal parodies, in some cases, likely not in the Second Circuit though) brands are, in fact, aware of the beneficial advertising aspect that comes along with being copied. That is simply not what is going on here.

As such, it seems that unfortunately Mr. Eror is the one who refuses make acknowledgements here by not adequately presenting and balancing the risks – to the value and strength of companies’ branding – that comes with the proliferation of counterfeit goods and stands to make this “free advertising” not only not free but actually very costly to brands.

While Mr. Eror seems to start to touch on this, in writing, “While exclusivity is undeniably a major source of brand prestige, desirability is arguably more important,” he stops short. Nonetheless, this is half right. Desirability is what drives consumers purchasing habits in many cases but exclusivity in intrinsically intertwined in that desirability, at least when it comes to luxury goods and even high fashion ones, and divorced therefrom.

In saying so, Eror is misled, it seems, by the "argument against counterfeiting, [which] lies in the assumption that knockoffs cannibalize a brand’s potential profits.” A quick reminder: That assumption is that consumers are purchasing counterfeits instead of the real thing, thereby taking sales away from the real brand.

That – in my opinion and it seems, the opinion of many brands based on their legal strategies and statements in litigation –  is not the core issue, though. In fact, that is small, tiny, minuscule change in comparison to the real issue, which is the damage to brands' trademark rights that comes about as a result of the flooding of the market with counterfeits. That is most pressing issue; it is not the fear of losing customers because they would rather buy a fake bag.

The reality that most brands fear comes as a result of consumers buying fake bags (not simply in them buying fakes) and the saturation of the streets with these fake bags. Ask Louis Vuitton, which was forced to undergo a complete brand revamp as a result of there simply being too many Toile Monogram-printed bags (mostly fake) in circulation some years ago. Consumers tired of the brand’s logo – remember all of the reports about logo fatigue that coincided with Louis Vuitton’s less than stellar growth reports in and around 2013? – and looked elsewhere, in large part because the market was waterlogged with bags depicting its logo (at one point it seemed as though literally one fourth of the women on the subway at any given time had the same Neverfull bag). Exclusivity was gone and its treasured trademark was – at least for the time being – not signifying esteem or exclusivity; it was completely commonplace, diluted even.

The legal name for such a concept is trademark dilution. This is a cause of action separate from trademark infringement that occurs when an entity (a counterfeiter in our case) uses a trademark that is sufficiently similar to a famous mark such that it harms consumer perception of the famous mark. This is what brands are afraid of!

In an article, entitled, “Responding to the hidden threat: how luxury brands are fighting back against counterfeiting, the World Trademark Review states, “Make no mistake, the threat to luxury brands is real – loss of goodwill, damage to corporate brands, trademark dilution and the costs of enforcing IP rights.”These are the things – damage to brand goodwill, to their image of exclusivity, to the value of their logos – that brands fear and work so hard to protect and protect against.

With that in mind, while the presence of counterfeits may, in fact, serve to indicate and further drive desirability of a product (writes Eror, “We’d all like to think that we’re terribly original, independently-minded tastemakers who are unswayed by peer pressure, but the fact is that we overwhelmingly pick things up by imitation.”), that is not a sustainable benefit for brands. In fact, it quickly becomes a liability, particularly for luxury and high fashion companies, that have spent countless years and dollars building esteem and goodwill around their names (and thus, their trademarks).

In order for such marks to operate as the valuable assets that they are – more often than not, trademarks amount to brands’ most valuable assets (you are buying a bag with the Gucci interlocking “G” print all over it because of the appeal of the trademarks themselves and the social cues they send about the wearer) – they must be policed in order to avoid dilution.

As Louis Vuitton’s legal counsel noted in their ongoing case against My Other Bag, unauthorized uses of its trademarks put its "decades of substantial investment [in its marks] and efforts [to police its marks] at risk.” And any of the short-term benefits that are derived from counterfeits that Mr. Eror cites are pale in comparison to the risk that comes with counterfeiting, and – in staying with Louis Vuitton – the 163 years of luxury branding that it has exercised to order be in a place to sell the goods that it does at the price points it demands.