Intellectual Property Rights (IPRs) despite manifesting a homogeneity prima facie, a deeper analysis indicates far from the same. There exists a uniform IP law. However, industry wide differentials cause varied heterogeneity in appropriation and enforcement. The pharmaceutical and seed industry were in the forefront of the demand for uniform global enforcement of patent laws. While the knockoffs seemingly produced in India and the subsequent loss of profits this entailed was the apparent reasons, the real reason was an extension of US dominance in the sector to multiple markets. IPRs globally enforced and not subject of national sovereignty was to be a barrier of entry for the firms that were making headway from the emerging world. Indian pharmaceutical firms which were biggest beneficiaries of national IP regime stood to lose in the new regime.
The next stage was the US entertainment industry seeking to negotiate and enforce a global copyright law so as to ensure their creativity is not allegedly stolen by the so-called lesser mortals. The emergence of the digital media thanks to YouTube, Facebook among others threatened their monopoly on the creative industries and opened up a long tail for creative products. The cost of production of a documentary would come to be in the range of $100 or so making it affordable for amateur entrants into the industry. While these amateurs might have very small and niche audience, the bigger players somehow felt threatened. As the adage goes, kill the jinn when it is the smallest; the same principle was to be adopted there.
However, when one looks at the industries across board, the motivations and practices of IP vary across industries. A glance at these would be in order. In the fashion industry, firms nurture their trademarks yet demonstrate remarkable diffidence towards imitation or derivative reworking of designs. Derivate reworking is not uncommon and impact on revenues seems insignificant. It is perhaps attributed to the nature of costs in the industries. Fashion is among those industries that are dominated by high variable costs, thus a probable indifference to IP violations. The fashion industry thrives on novelty. Copying or derivative reworking of fashion designs is not uncommon, the industry itself being quiescent on knock-offs. There is very little or near zero technological improvements in the product itself. Any technological intervention is through the means of production and not product. To an individual, there is always an inherent tendency to look different. Differentiation is the unique proposition each firm and individual adopt as seek to navigate the rough waters of Darwinian competition.
There is inherent desire to look different, to adopt a sense of fashion that is unique and stands apart from the rest. Once a role model is established, the diffusion is swift with many seeking to replicate the same. Within no time, the fashion becomes obsolete. In fact, using the metaphor from economics, fashion industry economics thrives on the ‘diminishing marginal utility’ with consumers seeking something novel every season. As the principle of equi-marginal utility indicates, the spending on new clothes or wearable etc. would be linked to marginal utility generated on the last rupee spent on the good relative to their spending on other goods. If spending an extra unit of money on the new fashion trend generates a positive marginal utility, there would be shift in spending from other goods to the new one. Yet with passage of time, as diffusion of fashion gathers pace, this marginal utility tends to decline till a new fashion gets introduced. Imitations thus help in ‘Induced obsolescence’ compelling new designs every season. This also explains the investment fashion industry undertakes every year on new designs and innovations A faster diminishing marginal utility and short product life cycle makes the industry ignore design knock-offs while retaining the focus on trademarks as key identity differentiators. The industry diffidence towards derivative reworking of designs presents something of ‘Piracy paradox’.
The paradox of knockoffs encouraging innovation in contrast to the argument of industries like pharmaceutical, entertainment etc. is not unique to fashion industry alone. Investment banking will not be able to use patents or copyrights given the very nature of their work. It is a different matter, financial industry patents are increasing. Yet the industry protects its competitive advantages through trade secrets. These are executed through a series of non-disclosure agreements between employees and employers, employers and clients among others. Their portfolio strategies and investment mix remains a trade secret. Further, many innovations are constantly imitated and replicated. The shelf life of innovation is short. Hence the industry is under severe pressure to constantly innovate and outperform the peers. In absence of continued innovation, the firms will land up in a sort of Prisoner’s Dilemma (a post on this here). Patents will not be able to help sustain the advantage for long. The monetizing value has not been empirically significant in these industries.
Sports despite numerous innovations thrives on difficulty in execution. A coaching strategy, a new manoeuvre, a new shot in the repertoire, a new style in execution, all cannot be imitated in the short run and even in the long run, very few can master the art. The short run difficulties in imitation give the teams a major advantage.
Similarly, in the cuisine industry, proving no prior art is difficult if not impossible. Secondly, to customers, there is a constant desire to try something new. The dish gets obsolete over a period of time. The desire to experiment makes the chefs design something new each season. Secondly, the taste is the outcome of culinary skills of the chef and thus not very easily replicable. There is a definite competitive advantage to the culinary skills demonstrated by the chef. Thus a combination of fashion industry idiosyncrasies and the difficulties in execution a la sports industry seem to drive the endeavours of the cuisine industry as it seeks to constantly and continuously innovate.
Similar instances abound from various industries like magicians and stand-up comedians (norms based appropriation, short shelf life), and dance (execution than theoretical appropriation). Despite advocating stringent IP laws, film industry itself thrived on derivative reworking of the original plots. Formula films and music have long been the staple diet not only in the Indian film and film music industry but across their international counterparts also. As a matter of fact, Walt Disney’s Snow White (he tapped Brothers Grimm’s version which was in public domain) was a derivative reworking that led to emergence of Disney. In the absence of an environment conducive to adaptations from the public domain, the world might never have known about Mickey Mouse. Ironically, Disney alleged lobbying to retain the copyright over Mickey Mouse, Goofy etc. caused further shrinking of public domain.
The analysis of the IP environment across the globe thus is not contingent on the demands of certain industries as representative of all industries but linked to physiognomies inherent in the cost, utility and execution structures of different and diverse industries.
Thoughts on Theory and Practice 