Theft or flattery?

Article  \  17 Oct 2014

Coco Chanel is famously quoted as saying 'imitation is the sincerest form of flattery'.  But with an increase in the supply of counterfeit goods, particularly in the fashion and apparel sectors, there are mixed views on whether copying someone else's idea or design is theft or flattery. In the end, it probably depends on your perspective.

For Patrizio Bertelli, chief executive of Prada 'fake goods aren't totally bad ... we don't want to be a brand nobody wants to copy.' But what if you were the originator of the idea or design that is being copied? Would you be flattered if the market was suddenly flooded with fake versions of your creation? Perhaps not.

The good news is that from an intellectual property (IP) law perspective, you do have recourse. Copying is a crime. When a fake good is produced, a copier is effectively stealing the greatest asset a business has - its creativity. But you need to ensure you take steps to ensure that what you create and sell is protected. So what can you do to shore up your brand or business against copyists?

Strategies for retailers

You can register your trade marks and designs, but you probably don't want to stop there. There are other measures you can take as well. One such measure is to try and remove the incentive for consumers to consider purchasing fake alternatives in the first place. For most, that incentive is heavily discounted pricing. Some retailers and designers are now collaborating to combat this by developing licensing agreements to offer consumers co-branded 'designer' lines at more affordable prices.

In 2011, fashion label Missoni established a commercial partnership with Target to sell a line of clothing at an affordable price. UK retailers Topshop and H&M have also engaged in similar campaigns by introducing limited lines by well-known designers. Closer to home, Farmers Trading Company has also picked up on this trend.

Another approach that some brands are taking is to launch 'flash sale' websites in partnership with established retailers. Toronto-based online retailer, 'The Peacock Parade', is a good example. They have entered partnerships with several designers, and offer 'flash sales' of between three and five days where designer-label items are sold at a discounted price of up to 80% of their recommended retail price (RRP).

From an IP perspective, consumers can trust the authenticity of sites such as The Peacock Parade, because they are authorised by the designers whose products they sell. However, questions have arisen over who is responsible for enforcing trade mark rights when there are multiple parties involved. Is it the duty of the designer to ensure that unauthorised copies of its products are not sold, or should retailers ensure that what is traded on their sites do not infringe existing IP rights?

Enforcing trade mark rights

In 2010, Tiffany sued eBay for trade mark infringement and false advertising. Tiffany claimed that fakes of its products were being sold on the website and that it was the responsibility of eBay to prevent this from happening. The judge ruled for eBay, signalling that responsibility for enforcement rested with the trade mark owner. In other words, if you are the registered owner of a brand or design, it's up to you to ensure it is enforced, regardless of the channels through which it is marketed and sold.

Not all online commerce sites are legitimate though. There have been plenty of examples of cyber-squatted sites 'tricking' consumers by using domain names that infringe existing trade marks. In one particularly high profile case in 2011, US fashion designer Tory Burch was successful in a $164 million cyber-squatting dispute. Domain names such as '' were among 232 sites found to be selling fake items. The judge ruled that control over the domain names be handed back to the fashion designer - a happy ending for one designer but unlikely to be the last such case.

If, like Tory Burch, you don't subscribe to the idea that imitation is the highest form of flattery, we recommend you seek expert advice, and take proactive action to ensure you're doing all you can to combat the imitators.

An edited version of this article first appeared in the October 2014 issue of NZ Retail.