Barnett, Jonathan, Grolleau, Gilles and Harbi, Sana El. "The Fashion Lottery: Cooperative Innovation in Stochastic Markets." USC CLEO Research Paper No. C08-17; USC Law Legal Studies Paper No. 08-21. http://ssrn.com/abstract=1241005

This article puts an economic spin or an economist's viewpoint on the fashion copyright debate. In other words, it applies economic principles to the fashion industry to show why an incomplete property regime, not complete copyright protection, is the most sensible situation for the fashion industry. To build this argument, the author first explains the concept of "fashion risk," the main economic problem in fashion. Due to demand uncertainty in the fashion industry, it is difficult to forsee if a new design will be successful. So, designers need a system of collective insurance to balance the losses from seasonal product failure and the risk of firm bankruptcy. This collective insurance comes from designers allowing limited imitation which maximizes earnings in the long run. Basically, how this economic idea works is that the designer that produces the "winning" design for that season earns a larger prize, keeping the incentive for innovation alive. However, the incomplete property regime also gives smaller profits to the "losing" designers as a kind of insurance against the "fashion risk." This method is termed the "winner take most" approach. The article then transitions into three different types of imitation: mark perfection, design perfection, and quality perfection. These are then related to three different methods of imitation: horizontal imitation, legitimate vertical imitation (knockoffs), and illegitimate vertical imitation (counterfeits). Basically, horizontal imitation is copying among high end designers while vertical imitation is copying of elite designs by lower end fashion designers in a trickle down effect. As stated previously, the fundamental economic problem for designers is demand uncertainty and the associated risk of bankruptcy. By allowing horizontal imitation and legitimate vertical imitation, this risk is greatly reduced. An obvious way to success for the majority of the market is to wait until the winning design is determined for the season by the consumers and then release imitation products as this eliminates risk and increases success. However, this would kill innovation. So, the best solution is incomplete protection-positive yet constrained imitation. The economics equations show that to maximize final wealth and minimize the variance of final wealth incomplete, not complete, property regimes are required. This can be explained by the idea that at one extreme the winner does not make enough and so incentive is low. At the other extreme, insurance is too low and risk is too high. Both of these cases lead to underinnovation. In short, some imitation supports design innovation while too much or too little undermines it. Therefore, only the very few elite firms can afford the complete copyright protection suggested by bills such as the Design Piracy Prohibition Act.

This article is a very unique way to approach this fashion copyright war. It is an invaluable asset to my argument against enacting fashion design protection laws. This article basically utilizes economical principles to build mathematical equations proving that incomplete copyright protection or rejection of recently proposed copyright laws is more beneficial to society than enacting complete protection for fashion designs. The organization of this paper with alternating pieces of mathematical equations and textual analysis creates an extremely convincing and almost indisputable argument due to the logical thought process this method of presentation creates. This article greatly enhances my argument in that it provides an alternative viewpoint, particularly an economist's angle, which still points towards the same conclusion: fashion copyright laws should not be enacted.

Due to the volatile nature of the fashion industry’s market, lack of copyright protection through support for a “cooperative innovation” model allows figures in the industry to compete with one another while maximizing profit. A “fundamental timing problem” is at the heart of the fashion market, which dictates that the next major trend is more often than not incredibly profitable, but this trend is only ready for purchase by the time it has already become irrelevant. Cooperative innovation helps solve this fundamental timing problem. With cooperative innovation, producers enjoy incomplete control of their creative property, allowing some imitation and maximum growth and profitability at all levels of the fashion industry and fashion apparel segments. The method therefore supports positive but limited levels of imitation, lending insurance to the designers who constantly face risky investments in the unpredictable fashion industry. Therefore risk for both original and imitating designers is minimized, while opportunity for profit and expansion is maximized.

This article, which introduces the idea of cooperative innovation, supports my thesis that a lenient or nonexistent copyright law is necessary for fashion to continue to expand and develop as an industry. By analyzing the market characteristics unique to the fashion industry – including the different fashion apparel segments, lead times, demand uncertainty, and so on – the article poses a well-documented argument in support of the continued limited protection for original design producers. The meticulous diagrams provide a decidedly more business-oriented analysis of the fashion market and the fashion copyright debate, which will help me analyze the globalization and economic themes in my thesis.