The Law and Economics of the Fashion Industry

Vipasa Shah, NMIMS School of Law

Fashion is one of the world’s most important creative industries. It has provided economic thought with a canonical example in theorizing about consumption and conformity. India as a nation has an ancient tradition of clothing design and is one of the emerging fashion destination. There has been an accelerated growth in the fashion industry in the last ten years. The Indian fashion scenario reflects its cultural heritage, elegance and colorfulness. It brings out subtlety and beauty which has sustained over decades. Indian fashion is comfortable, sophisticated and aesthetically beautiful but has also evolved with time.

With such a booming industry, comes its own set of legal issues ranging from intellectual properties (IP), contracts, licensing and franchising agreements to labour laws. The legal policy debate within a reflection on the cultural dynamics of innovation as a social practice. Fashion in the realm of dress is a version of a ubiquitous phenomenon, the ebb and flow of trends wherein the new, ineluctably, becomes old and then leads into the new. Fashion is commonly thought to express individuality, and simultaneously to exemplify conformity. Thus, the emerging legal speciality that encompasses the issues surrounding the fashion industry is what we call Fashion Law.

In the legal realm, this social dynamic of innovation and continuity is most directly engaged by the law of IP.  Kate Spade Bag, the Vera Wang dresses, Louis Vuitton handbags are example products of applied IP and skills in the fashion industry. Be it high fashion or ready-to-wear, intellectual capital adds tremendous value to the creation and marketing of products in the industry.

Some readers will no doubt bristle at the implication that Prada, say, ought to enjoy better protection for its wares. That reaction misunderstands the project. Since the current legal regime denies design protection while providing trademark and trade dress protection, the primary threat to innovation currently is not to the significant fashion conglomerates. As we explain, these luxury firms are already well protected by the existing trademark and trade dress legal regime, brand investments, and the relatively small overlap between markets for the original and for the copy. The main threat posed by copyists is to innovation by smaller, less established, independent designers who are less protected along all of these dimensions. Affording design protection would level the playing field with respect to protection from copyists and allow more such designers to enter, create, and be profitable.

As with other creative goods, IP law plays a role in shaping the quantity and the direction of innovation produced by the fashion industry and made available for consumption by people who wear clothing—that is, everyone—a group larger than those who consume art, music, or books.

Further, fashion industry has substantial economic importance. Getting the economics of this industry right is a significant challenge that must inform an inquiry into its regulation by IP law.

Economic Analysis of Fashion Law:

The most influential and widely held theory posits fashion as a site of struggle over social status. This is a view most concretely articulated in terms of social class at the turn of the century by Georg Simmel, the German sociologist, who was in turn influenced by Thorstein Veblen’s classic work, The Theory of the Leisure Class.[1] According to this view, fashion is adopted by social elites for the purpose of demarcating themselves as a group from the lower classes. The lower classes inevitably admire and emulate the upper classes. Thereupon, the upper classes flee in favor of a new fashion in a new attempt to set themselves apart collectively. This trickle-down process, moving from the highest to the lowest class, is characterized by the desire for group distinction on the part of the higher classes, and the attempt to efface external class markers through imitation on the part of the lower classes. Change in fashion is thus endlessly propelled by the drive to social stratification on the one hand, and to social mobility on the other.

When the magazine, Vogue, was founded in 1892, its first published pages presented the editorial goal as the representation of the lifestyle of New York high society, “the establishment of a dignified authentic journal of society, fashion and the ceremonial side of life.”[2]

The other major theory of fashion sometimes goes by the term “collective selection,” associated with the sociologist Herbert Blumer. On this theory, fashion emerges from a collective process, wherein many people, through their individual choices among many competing styles, come to form collective tastes that are expressed in fashion trends. The process of trend formation begins vaguely and then sharpens until a particular fashion is established. The themes of the trend reflect the spirit of the times in which we are living.

Under the umbrella of IP, we have two types of IPs: codified and non-codified IPs. Codified IPs are those IPs for which legal provisions have reduced in the form of acts like trademarks, copyrights, industrial designs and patents, whereas, uncodified IPs are those IPs which have no fixated laws governing them like traditional knowledge, folklore, or trade secrets.

The fact is that IP and Fashion are intertwined for life. The work of designers, commonly known as style statements, are creations of their minds and the law of our land seeks to protect them by granting an exclusive right to use such innovations and use them to reap commercial benefits.[3]

If the said laws are not able to guard creativity in an effective manner, the same will have profound consequences to the nation, since no one will come forward to innovate, and no new creations will be created. Thus, one may understand the deep connection between fashion and IPR. The Trademark Act, Copyright Act, Designs Act and Geographical Indication of Products Act, collectively aim to protect the property rights corresponding to the designs of the style industry.[4]

Let’s take a look at how IPs play a role in the fashion industry, while taking a walk through a store, starting with the IP we see, while standing right outside the store:

Trademarks: All the brand names, logos and taglines, you know about or see, are nothing but trademarks. Trademarks are marks used to distinguish the goods/services of one enterprise from the goods/services of another enterprise[5].

In the fashion world, companies/brands are always finding ways to distinguish themselves from their competitors and draw the attention of the public towards pertaining to their style and brands to public. The use of distinguished name such as Yves Saint Laurent, the iconic interlocked double G logo of Gucci or the distinguished  blue color (light medium robin egg blue) used by Tiffany & Co., are proof that trademarks are extensively used IPs by companies and individuals to identify themselves with their product or image. Marks can also consist of single word or phrase, shape, sound, a signature, a combination of color or a combination of the former[6]. There could be traditional Trademarks such as name ‘Nike’ or non-traditional trademarks such as Burberry ‘check print’. In India, in order for your mark to be protected, it is necessary to obtain registration under the Trademarks Act[7].  Out of all the IPs it is trademarks that on face of the world helps differentiate brand from another brand.

Now that we have seen the name and logo of the store, let’s enter the store. Next we see the products in the store, leading us to our next IPs,

Copyrights and Industrial Designs: Copyright protects the original literary, artistic, musical, dramatic work, cinematographic film and sound recording[8]. Copyright basically protects original creations of the author from the time they have been created.

The varied components of fashion like accessories, drawings, textile pattern, and computer program related to designs, photos of fashion models, editorial content are protected under copyright act. In India, the Copyright Act does not specifically protect fashion designs as a separate category but it is protected under the category of artistic work[9].

Industrial Designs aims to protect the aesthetic appeal or ornamental aspect of product. The Indian Industrial Design Act defines Design[10] as “only the features of shape, configuration, pattern, ornament or composition of lines or colors applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye”.

The Design Act in case of the fashion world protects a particular aspect of the apparel like the shape or pattern; rather than protecting the apparel as a whole[11].

When it comes to the fashion industry, there is fine line of difference and overlap between Copyright and Designs Act. Copyright aims at protecting the original expression while design aims at protecting the appearance of a product. In case of designs, it is not always not necessary that the design in question should be original. The Designs Act even protects new applications of known design[12]. However, to be eligible for copyright protection, the work has to be original.

In India, in order to be protected under The Designs Act, registration is compulsory while in case of copyright it is not. Having entered the store, you go about feeling the fabric of the products. Now, you are interacting with another IP, which is not known to play a role in the fashion industry,

Patents: Patents are granted for inventions which are new, have an inventive step and can be industrially applied[13]. They are granted for a new product, new process or a new way of doing something known. There is a misconception that patents do not apply to the fashion industry. However, that is not true.

The fashion industry has, for long, been banking on patents to protect innovative fabrics or the process to create a particular material. A pair of stone washed denim jeans, which is a staple in everybody’s closet, or a zipper or Velcro are examples of patents in the fashion industry. The treatment of ‘novoenzymes’ on the fabric by the Danish Biotech Company led to Stone washed jeans.  The company holds the patent for technology for treatment of stone washed jeans[14].

Another great example would be the fabric made out of Cork, Suberis. This particular fabric was invented by Mrs. Grindi and is known to be indestructible, waterproof and fire-resistant. Indian companies are catching up to this new method of creating exclusivity of its own. Reliance Industries Limited was granted a patent for a fabric processing technology called DEO2 that provides anti-microbial finish on fabric that arrests the growth of fungi and bacteria, keeping the fabric clean and fresh[15]. In India patents are granted for period of 20 years from the date of filing of the application[16]. Patents can prove to be beneficial IP for a company as it leads to creating uniqueness for the brand.

Conclusion:

So, when you leave a store, you have had experienced all the four IPs. In a nutshell the four conventional IPs discussed above are what help us distinguish a brand from another at various touch points. The fashion industry is just not limited to IPs. However, these properties pave the way for other laws like breaching a licensing agreement will lead to contract law or counterfeiting of goods can lead to civil procedure code being invoked. With the booming fashion industry in our country, there arises a necessity to understand the wedding between law and fashion. This understanding will play a much more vital role, given the present climate in the country, where the Prime Minister has given a clarion call to become aatma-nirbhar (self-reliant). The blood and sweat put in by fashion designers to create a brand, from the scratch has to be respected. With stringent IP laws in place and the increasing awareness about their relation to the fashion industry, we must protect the ones who put clothes on our backs. All in all, with the increasing awareness of how IPs could help the fashion industry, there is need to understand its relation to the industry and how it can be worked out.  This analysis puts into relief the contours of an essential fight in innovation policy. New copying technology alters the dynamics of innovation. In recent years, we have seen how digital file-sharing of copyrighted music has changed the economics of that industry. The same is increasingly true of movies and other video content. In fashion, as in other industries, we see rapid copying becoming cheaper and more effective, and tools that enable remixing and reuse are becoming more widespread.

There is a need for a conceptual distinction between the two phenomena in the debate about how much Ip protection we want to have. There is no necessary confluence or equation between a full freedom to engage in reinterpretation and remixing, and free rein to make close copies. It is emphasized that such remixing is vital to innovation and that innovation is enhanced—not stymied—by protection against close copies. The line between close copying and remixing, supported by the theory of their differential effects on creators’ incentives, represents an often underappreciated but most promising and urgent direction for IP today. The dynamics of innovation in fashion design is a window to this critical aspect of innovation generally.


Vipasa Shah is a student at NMIMS School of Law. She can be reached here.


Photo Credits: Arthur Elgort/Conde Nast

Notes:

[1] THORSTEIN VEBLEN, THE THEORY OF THE LEISURE CLASS (Dover Publication 1994) (1899).

[2] Arthur B. Turnure, Statement, reprinted in VOGUE VOLUME I NOS. 1-28, at 16, 16 (N.Y., The Fashion Co. 1893).

[3] Filma v, IPR in fashion industry, Altacit Global, <https://www.altacit.com/publication/ipr-in-fashion-industry/ >, accessed on 4th December 2019.

[4] Ibid.

[5] Section 2 (Zb) of the Trademark Act 1999.

[6] Sheila nfono, The use of Trademarks in the Fashion Industry, the fashion law chronicles, <https://www.thefashionlawchronicles.com/blog/the-use-of-trademarks-in-the-fashion-industry&gt;,accessed on 15th December 2019.

[7] Section 27 & 28 of the Trademark Act 1999.

[8] Section 13 of Copyright Act 1957.

[9] Sec 2(c) of the Copyright Act 1957 defines Artistic Work as:

“(i) a painting, a sculpture, a drawing (including a diagram, map, chart or plan), an engraving or a Photograph, whether or not any such work possesses artistic quality;

(ii) A work of architecture; and

(iii) Any other work of artistic craftsmanship;”

[10] Sec 2(d) of the Industrial design Act 2000.

[11] Sapna Malik, Fashion Law (1st edition, Bloomsbury) Pg.18

[12] V K Ahuja, Law Relating to Intellectual Property Rights (third edition, Lexis Nexis), Pg.218-220.

[13] section 2(1)(m) & 2(1)(j) of the Patent Act 1970.

[14] ‘IP and Business: Intellectual Property in the Fashion Industry’ (WIPO, May 2005) ,<https://www.wipo.int/wipo_magazine/en/2005/03/article_0009.html&gt; accessed on 25th May 2020

[15] RIL’s Vimal gets US patent for technology to fight sweat odour, The Economics Times, accessed on 28th May 2020.

[16] Section 53 of the Patent Act 1970.

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