Counterfeit goods

Looking at the debate on my earlier thread on ‘moral rights’ I reached for a column I wrote early last year on counterfeit goods. I thought it was posted here previously, but couldn’t find it. So here it is. I think it’s relevance to Ken’s comment on my post is clear.

I can’t for the life of me see why, if IP rights have been given their due and copyright royalties are duly paid and there is no misleading going on – consumers know what they’re getting – there is some moral right to stop someone scrubbing out bits of a film for their own and others’ consumption.

Anyway, the column is over the fold. Counterfeit Goods

First they’re flying suicide bombers into buildings killing thousands of innocent people. I guess somehow we all knew that Louis Vuitton would be next. Will these terrorists stop at nothing? An international industry lobby group campaigning for stronger measures to protect international brands like Dior, Cartier and Hugo Boss from imitation in the market, alleges that Al-Qaeda is active in the ‘counterfeit goods’ market.

Didn’t the word ‘counterfeit’ once refer to making and passing off fake money? In the immortal words of Kath Day-Knight, I’ve got one word to say about ‘counterfeit goods’ “Karl Marx’s theory of ‘commodity fetishism'”. I’m no fan of Karl Marx (I always preferred Groucho), but ‘commodity fetishism’ does seem to hit the nail on the head here. Marx argued that the more our lives became dominated by markets, the more obsessive we’d become about commodities including the super commodity of money. You’re not wrong there Karl! (That’s Karl Marx, not Karl Lagerfeld)

You’re average designer brand wallet is $500 fetish and $99 commodity (and that’s being generous). Should we be paying quite this much for our foibles and our fetishes? The association with Al-Qaeda helps the lobbyists demonise ‘counterfeit goods’. But it’s a double edged sword. As the Americans discovered during prohibition, outlawing everyday activities expands the natural market for organised crime. As we escalate enforcement against imitation goods, its no surprise that Al-Qaeda hops for its chop.

Prohibition taught us that we should outlaw only what we need to. That doesn’t mean we should legalise heroin, but it might give us pause in the fight against imitation goods. This is particularly the case where, as with prohibition, we seek to criminalise behavior that is widespread.

Most of us appreciate the abstract argument that copying others’ products isn’t fair and is even analogous to theft. But hands up if you think wearing an imitation designer watch to a party is wrong? (If you’re reading this on public transport and someone just put their hand up, go and tell them kindly not to take things so literally. It was only a rhetorical question. They need to lighten up a little.).

The economics of innovation points in the same direction. We should give all the protection necessary to encourage our firms to fund the production of new intellectual property designs, ideas, inventions but no more. Exceeding that minimum not only drives up consumer prices, it often obstructs other innovators who have to negotiate a legal minefield. Why don’t we criminalise one restaurant’s ‘counterfeiting’ another’s recipes? Because we don’t need to. Those recipes just keep coming even though they produce a crop of imitations.

And for the same reason, we don’t need to criminalise imitation goods. The pitch of the intellectual property lobby is that selling items at three, ten twenty times the cost of manufacture is all about financing innovation and design. If their clients were five star restaurants we’d be hearing about pirated profiteroles.

If design really was a heavy cost in producing branded goods like clinical trials really are a major cost in pharmaceuticals for instance there should be some protection, because otherwise the economics of intellectual property production would be undercut. But for most branded goods design costs are like ‘recipe costs’ in restaurants a tiny fraction of total costs. Against this tiny impost, firms gain kudos from being the first and the best. When choosing between the restaurant that invented a new dish or set some trend or an imitator who saved you only two percent on your bill, which would you choose?

And, as you’d expect, firms eat most of the margins offered by big brands away not in funding design, but in advertising and promotion to associate their products with our deepest fears and fantasies. They should be free to do it but we shouldn’t use criminal law to help them. What I’m suggesting would probably lead to more designer goods being sold, not less. They’d be cheaper, because they’d have to compete against still cheaper imitations. There’d be a smaller, but still hefty premium for originals. And there’d be a reallocation of marketing jobs, from expensive brands to cheaper ones and their imitations.

That still leaves one issue unresolved. We have every right to wear gold plated jewelry to a party and let people think it’s 24 carat. But no-one should have the right to sell gold plate on false pretences. See where I’m headed? We should keep those basic trade practices laws that require customers to know exactly what they’re buying. But having bought the goods, we should all retain the right to use what commodities we like, and keep others guessing.

It won’t happen anytime soon, but it wouldn’t do any harm for the law to acknowledge the public’s already widespread complicity in frugally funding their fetishes.

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2 Responses to Counterfeit goods

  1. Ken Parish says:

    Nicholas

    I partly accept the logic of your argument in relation to industrial/consumer products. However, it only protects the buyer from being misled, not others who may see the fake product being used and draw erroneous conclusions about it. Ensuring that the purchaser knows they’re buying a fake might be enough in many cases, however if the product is shoddily made and others notice that fact when the purchaser is wearing/using it and conclude erroneously that Rolex watches or Dior clothes are a heap of rubbish then unfair damage is done to the original brand by allowing the purchaser to collude with the counterfeit manufacturer in creating a misleading impression of the identity/provenance of the product. Although I agree with you about the overpricing of many “name” products (except that it isn’t overpricing in a market sense if people are prepared to pay that price), but nevertheless most counterfeit products are dramatically inferior in quality, as anyone knows who has bought rip-off clothes in Bali and discovered that they fall apart as soon as you wash them a couple of times.

    But artistic works also involve rights of the creator in a deeper (although ultimately similar) sense, namely that of the artistic integrity of the work. Editing/censoring the work may potentially ruin the plot or radically alter the characterisation or the intended theme or message of a movie. Indeed that will almost always be the case unless the sex, violence, nudity, swearing etc was purely gratuitous/extraneous to the story and artistic purpose. In that situation, merely requiring “scrubbers” (private enterprise censors usually associated with fundamentalist churches) to make it clear that viewers are watching a version of the movie that has been censored without the permission of the creator would not be enough. As with the tangible consumer products, viewers are still likely to believe that they’re watching (say) a Stephen Spielberg movie when in fact they’re watching something that has been radically altered even to a point of conveying an entirely different message from that intended by the creator. It seems to me that creative artists are entitled to protection from damage to their artistic reputation that may be engendered by passing off unauthorised heavily censored versions of their works as edited/sanitised versions of the original.

  2. Chris Lloyd says:

    Most counterfeit products are dramatically inferior in quality, as anyone knows who has bought rip-off clothes in Bali and discovered that they fall apart as soon as you wash them a couple of times.

    Which should help the reputation of the brand I would have thought, at least for those comsumers who have bough the counterfeit and been unsatisfied.

    Bu I think the issue is not quality – though you are correct that counterfeits are poorer quality. It is all to do with snob-value. Branded goods cost more because people want to advertise that they can afford the brand. Do you really buy a Rolex watch because it works at 300m and loses 1.5 seconds every century? No. You wear it to let everyone know that you have a Rolex. The existence of counterfeits undermines this silly pretense..is that bloke really waering Armani or is it a copy?? Which just warms the cockles of my heart. It is hard to see the public interest in assisting companies to position their products as elite per se, separate from their quality.

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