Design law in the European fashion sector

• Author: Dr. Fridolin Fischer

The European Union trade deficit for clothing in 2006 was a whopping euros 33.7 billion. From 1994 to 2006, the total production volume for clothing within the 27 countries which now make up the EU decreased by some five percent each year. Still, the EU counts some 1.5 million people working in this sector, generating a value added of euros 22 billion (about 1.2% of the total value added of EU-27's industry)¹. Over the coming years, European manufacturers will probably be forced to further downsize their production volume in favor of niche products with a high value added.

Some representatives of the European clothing industry are calling for a stronger worldwide intellectual property (IP) protection for fashion designs because they fear major losses from counterfeiting². Yet some modern economic theories consider competition to include a dynamic interaction between innovation and imitation: innovation generates superior products; imitation makes them available to a greater number of consumers, so a lively imitation process is crucial for dynamic competition. Is this reasonable?

To answer, we must look at the time taken by the imitator to catch up with the innovator. Does the innovator, after launching the innovation, have sufficient time to amortize development costs and generate profit? If the time is too short, then innovators may lose their motivation to generate further innovations, and prolongation through legal measures makes economic sense. However, the fashion industry is a particular case.

Many fashion aficionados cannot afford the original items created by Chanel, Dior, Versace, etc. Instead, they buy cheaper copies, fully aware that these are not originals. The sale of these counterfeit products cannot be equated to loss of sales of the originals as they primarily target consumer groups that are not in the market for the originals. Certainly, plagiarism can confuse consumers and, in case of inferior product quality, damage the designer's good reputation. Nevertheless, it could be argued that counterfeit products bring fashion labels more publicity, stimulating nascent fashion trends and increasing demand for the originals. Gabrielle "Coco" Chanel was not alone in her assertion that imitation reflects the highest form of flattery³. In this context, what is...