Counterfeiting, A False Alarm? The Origins Of Intellectual Property

Counterfeiting has become a widespread phenomenon, and brands accuse it of damaging their image and cannibalising their profit. Estimates of lost sales do vary from one source to another, for the sake of argument let us agree that brands usually come up with a number that compares with the United States national debt.

The anti-counterfeiting propaganda fuelled by brands usually find an echo in the press and government officials, who run rather patronising and moralising campaigns that antagonise consumers by depicting them as unwitting criminals or worse: terrorists.

Anti-counterfeiting campaign

Counterfeit mechanical components and medicine are a serious safety hazard. That being said, Professor David S. Wall drew ire when he dared to contradict the brand’s arguments in a report co-signed by Doctor Joanna Large for the British Home Office. Teir findings are actually very similar to those published by Pamela N. Danziger in 2008: by constantly drawing attention on image, brands have completely forgotten about content and governments are now expected to step in to protect the fat margins of private companies.

Globalisation permanently changed the game of intellectual property but brands continue to play with outdated rules. The solution is no longer to fight counterfeiting downstream by antagonising customers, but to fight it upstream by sorting out priorities. Instead of antagonising consumers, a less cynical and patronising type of marketing could actually generate true consumer love for the genuine article.

Preamble

Twenty years ago, a layman could easily tell a genuine Rolex from a fake one purchased on a street corner. Nowadays, one can easily order in an online store, run a few hundred yards from the factory, a counterfeit that is identical to the original and have it delivered under a few days. Brands talk of losses in seven figures numbers, and their lawyers are lobbying for heavy penalties on any occasional counterfeit importer caught red-handed. Besides the alleged financial loss and damage to reputation, the same brands treat those customers like potential terrorists:

IACC

Today, the market of luxury good represents 170 billion dollars per year, which is the gross domestic product of the 42nd richest country in the world (on a list of 243 countries). After an unbridled globalisation and access to broadband internet, physical goods and information take less than one day to go round the planet. The current size and reach of counterfeiting leaves little doubt as to the success in repressing it.

By hammering consumers with advertising, brands have almost brainwashed consumers in replacing brand loyalty by lust after logos, a Pavlovian reflex that they must channel through counterfeit goods. Professor Wall and Danziger swam upstream when they chose to debunk the brands discourse that typically gets relayed by the press.

According to Pamela Danziger, counterfeit products don’t take away from sales of the brand, since the majority of counterfeit products out there are bought by customers who can’t buy the real thing anyway.

The three experts point to pragmatic solutions that would be worth considering. Before going any further, the author would like to try to separate the wheat from the chaff by looking at the causes of counterfeiting, the current lack of results in cracking it down, and the experts recommendations for a cure.

Dogma of Intellectual Property

In the history of civilisations, intellectual property is a fairly recent concept. From Antiquity to the Modern Era, ideas that were considered of public interest were easily accessible. The only way to protect an idea was to surround it with mystery as was the case with Alchemia, or to reserve it to insiders as was the case with Shamanism. At a time where craftsmanship was predominant, the concept of a model or a design didn’t yet exist. The Decorative Arts of an ethnic area would typically use popular shapes and patterns that resulted from slight improvements brought on generation after generation. The difference between two artefacts mostly lied in the following:

  • Quality of raw materials
  • Skill of the manufacturer

The best craftsmen having made a name for themselves, competitors would be tempted to pass items of lower quality as the real thing. As the reader can guess, the risk of seeing a design used by competitors would increase with the capacity for mass production.

Birth and evolution of the concept of intellectual property

In Europe, the first monopoly on a design dates from the 5th century BC in Greater Greece (Southern Italy), but it is mostly during the Renaissance that rulers started to grant monopolies limited in time in return for full disclosure of the design.

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The first patent ever was granted to inventor Brunelleschi in 1421, and Gutenberg’s assistant negotiated a lifelong monopoly on movable-type printing from the city of Venice in 1469. The first draft of copyright appeared in 1710 with the Statute of Ann, taking from the Licensing Act created to allow the crown to control the printing industry.

Statute of Anne, by British Government. Original source: The History of Copyright: A Critical Overview With Source Texts in Five Languages. Licensed under Public Domain via Wikimedia Commons
Statute of Anne, by British Government. Original source: The History of Copyright: A Critical Overview With Source Texts in Five Languages. Licensed under Public Domain via Wikimedia Commons

The Statute of Ann laid the ground for protectionism in favour of English printers who were at a disadvantage with lower Scottish wages. Intellectual property was borne from a sovereign and unilateral decision to grand a protectionist monopoly to the holder of an idea. In our Modern Era, there is a distinction between copyright, trade mark, registered design and patent. Copyright extends for several decades after the death of a person, to allow heirs to reap the benefits:

  • Trade marks can be protected forever.
  • Registered designs only last for 25 years.
  • Patents only last for 20 years.

The protectionist monopoly has been designed to reward, and thus foster creativity. In the case of registered designs and patents, rulers wanted to discourage inventors to rest on their laurels: once expired, those two categories of intellectual property allow for the rest of the industry to capitalise on the invention. The programmed obsolescence of this protectionist monopoly leads to a broader use of an invention by the rest of the industry and indirectly benefits to the state’s treasury.

In France and countries of similar law, intellectual property can combine registered design and copyright. The United states refuse to combine protections. Registered designs that have expired can be legally copied in the USA, but they will still be considered as counterfeits in France. The Reverso watch, registered in Paris in 1931 by engineer René-Alfred Chauvot, saw its patent fall into public domain in 1951, which led to the design registration in 1956. It remains under copyright protection in France.

Registered design

Artifacts were the result of an empirical and spontaneous design process, but the Industrial Revolution introduced new job titles such as the industrial designer. Frenchman Raymond Loewy, one of the most prominent spokesperson for this new discipline, use to say that “ugliness doesn’t sell”. Between the two world wars, designers are called upon to bring added value to mass-produced products.

In watchmaking, brands were used to buy stock cases, dials and hands from the same suppliers. As an example, the Compressor, Compressor 2 and Super Compressor watch cases from E. Piquerez SA found their way through a handful of brands. This practice led to very similar looks amongst numerous brands, and makes it difficult to determine who was the first to come up with the look. The Rolex Submariner, considered by experts as the template of the modern diving watch, was only released one year after the Blancpain Fifty Fathoms, another nautical watch.

After the first Oil Crisis, watch brands started to use design to differentiate their products from the competition. Audemars Piguet pioneered watchmaking design by releasing the first stainless steel luxury watch at the price of gold, at the 1972 Basel fair. The timepiece had been designed by a young Gérald Genta during his first year as a freelance designer.

The Royal Oak by Gérald Genta
The Royal Oak by Gérald Genta

The industry crisis of the 1980’s called for a change of priorities, and brands focused on surviving or regrouping. It took fifteen years before they started to innovate again. The 2000 collapse of the dotcom bubble discouraged investors to speculate on the virtual, and many brands outside of the watchmaking industry started to look at the fat margins made possible by brand extension towards timepieces. Between 2000 and 2007 there was an average of 40 new brands per year, novel or resuscitated. With this revival of interest, watchmakers ventured off the beaten path of classical and sports watches: Classicism, Neo-retro, New Horology, and so on…

In the second part of this essay, we will look at the behavioural explanation of counterfeit consumption, the way in which brands have made themselves vulnerable, the various degrees of counterfeiting and the consumer’s attitude towards each of them.