The Knockoff Economy Is Out! Bring Your Questions for Kal Raustiala and Chris Sprigman

The Knockoff Economy is out! The book explores the relationship between copying and creativity. Copying has a well-known destructive side—which is why we have intellectual property rights—but it also has a much less appreciated productive side. We explain how some creative industries not only survive in the face of copying, but thrive due to copying.  These industries offer an important set of lessons about intellectual property law and highlight the often complex balance between innovation and imitation. While many of the cases we explore are unusual—such as fashion and fonts—we close the book with a broader examination of the main themes and lessons and a brief look at the music business, which is perhaps the poster child for the (often exaggerated) perils of copying.

The Knockoff Economy grew out of an earlier paper of ours on innovation in the fashion industry. We realized there were many creative fields that fell outside the scope of intellectual property law in one way or another, and just as importantly, these fields turned out to be really fun to explore. Writing the book allowed us to dig into things like football and fonts, and to do so in a way that, we hope, opens up a broader debate on the law and economics of innovation.

To celebrate the release of The Knockoff Economy, let’s have a contest.  Send your photos of crazy knockoff items to photo@freakonomics.com  Here’s an example we saw a while ago — a Louis Vuitton waffle maker

Can you find a knockoff that’s nuttier than that?  Send us a pic. The winner will receive a signed copy of The Knockoff Economy, and this great new CD of Fleetwood Mac covers. “Cover songs” is just a technical term for knockoffs in music. The law makes these knockoffs legal, so don’t worry!

We’re also happy to answer any questions that Freakonomics readers might have, so please ask away in the comments section below!

Here is the table of contents:

The Knockoff Economy:  How Imitation Sparks Innovation

Introduction

Knockoffs and Fashion Victims

Cuisine, Copying, and Creativity

Comedy Vigilantes 

Football, Fonts, Finance, and Feist

Conclusion: Copies and Creativity

Epilogue: The Future of Music

 This post is no longer accepting comments. The answers to the Q&A can be found here.


Jeff

Without ruining the conclusion of your book, my question has to do with the music industry. In an earlier post on this topic, your finding that a person who buys knockoffs often becomes a customer of the knocked off brand got me thinking. One common defense of stealing music is that, if I get it for free and tell people about it, that will lead to more sales. Is this consistent with your findings, or do the people I "tell about" the music go on to steal it themselves?

On the flip side, many indie bands are doing this themselves, either going the Bandcamp route of donation-based pricing; Amazon MP3 heavily discounting music, sometimes very new music; or services like SoundSupply, which offers a bundle of 10 albums for $15 every few months.

Another argument that leads to both of these models is that bands make most of their money from tours and licensing, and albums are really just "ads" for all the downstream uses of the music. Is this consistent with your findings?

To inject my own opinion in the matter, I purchase music when I can. A lot of the bands I like are self-managed (ie not on a label, on a tiny label, or on their own label). Anything I can do to keep them from having to get day jobs means they have more time to keep touring and creating music for me!

Read more...

Chris Sprigman

Hi Jeff. So in the book's epilogue we apply a lot of the lessons we learn by looking at industries like fashion, food, and comedy, in which there is very little IP, to the music industry, in which there's a lot of IP on paper, but increasingly little chance of actually enforcing it out in the real world. What we see in music is that although the record labels have suffered and are suffering badly, music as an art form -- especially the pop music that is most likely to be pirated -- is thriving. So how is this possible? Well, it's early days yet, so it's not yet possible to say definitively what's working and what's not. But we mention some of the new ways that you've mentioned that musicians are trying to break through in a fast-changing industry. One is attempting to harness piracy to build a fan base. Another is giving away some music to do the same thing. Another is relying more heavily on the live show -- a strategy which works in concert with the first two I just mentioned. Another is using kickstarter-type funding to make recordings. Another is simply taking advantage of low-cost/high-quality digital recording and distribution tools, and direct connection to fans via social networks, to dramatically reduce the cost of producing and distributing new music -- a strategy which permits less reliance on intermediaries (record companies) with deep pockets. None of this is a panacea. The music industry is going through a period of wrenching change, a lot of it driven by piracy. But our point is that piracy is very unlikely to go away. And yet there's no reason to think that music is going to go away. It's just a fact -- music is thriving, even as the music industry is not.

Read more...

Jeff

Thanks for the insight! And I forgot about the "Kickstarter" model; I think it's a great idea for relatively established bands.

I think your point about piracy is spot-on. Litigating against it won't stop it. Nothing will. So it's a matter of how do you align your fans' incentives with your own? How do you entice them to give you money for your art. For my money, what the Internet has cost labels has been more than offset by the terrific music cheap recording and distribution has given us. We were in an era where only pretty faces with mediocre talent were getting major contracts and the Internet blew that all up. We live in an interesting time for music!

Dr. Constantinos Charalambous

The knockoff economy owes its existence in the need of people to fool social perceptions. However, such a behavior is self defeating if society knows the financial situation of the person in question. Knockoff economies are mostly developed in relatively larger communities where people do not exactly know each other. My opinion on the knockoff economy is summarized in the following article I wrote a while back.

http://www.everyday-economist.com/2012/06/so-you-want-to-buy-fake-louis-vuitton.html

Chris Sprigman

Hi. So I read your article. I don't think I agree with your suggestion that low-status people who buy fakes lower their social status further. If that were so, very few reasonable people would buy fakes -- and that doesn't fit with the facts, unless the zillions of people who buy fakes are suffering from some sort of mass delusion. And what is the evidence for that?

Eric M. Jones

It turns out that "Enemy" forces, who have access to the internet can easily look up designs for munitions and instruments of war in the patent record.

Example: Explosively Formed Penetrating Munitions. Or those nasty armor-penetrating copper shaped-charge projectiles. These patent records all have complete details of how to make these weapons.

I have to wonder about the sanity of this. Are we going to bring al qaeda to patent court and sue them for stealing the designs?

Cheeeeez..........

Chris Sprigman

Hi Eric. You've put your finger on a real problem. There is a federal law called the Invention Secrecy Act which attempts to deal with it. The ISA prevents the grant of patents on certain inventions and technologies that, if made public, could pose a threat to our national security. And it further prevents disclosure by other means. When the ISA is applied to a particular invention, the gov't issues a secrecy order, and there are thousands of these -- somewhere north of 5000 are effective now. http://en.wikipedia.org/wiki/Invention_Secrecy_Act

frankenduf

wondering if uve done any political analysis of intellectual property v. 'free' market as contradictory political beliefs- that is, do conservatives typically believe in a free market, yet also believe in IP protection; or conversely, do liberals typically scoff at IP protection, yet also believe in market regulation?- how are these contradictions handled?

Moggio

This new book sounds exciting! My question is: why is this research interesting for the creative industries traditionally protected by copyright like the book industry, the music industry, the film industry, etc.? Please could you expand a bit your answer? Thank you.

caleb b

I have a knockoff golf driver. It was a gift. The person thought they were buying a real one, but when they went to exchange it from a store that sells the real ones, they learned that the serial number didn't match a real club.

The clerk said that it is either a chinese knockoff, or a real club and the manufacturer made too many and shipped the extras to china to BE knockoffs. The guy said that the company will do this rather than lower their price in the US.

Did you see any other instances of this? Where the maker actually helps the knockoff get produced?

Eric M. Jones

Knockoffs usually don't include counterfeiting, but probably should if only collectible coins are considered.

Recently the Chinese have "filled the need" for many collectible coins. Even early collectible Lincoln copper pennies are being faked.

Recently, I evaluated an 1883 Morgan silver dollar, that was slightly too heavy, slightly too thick and slightly too small in diameter, slightly magnetic, slightly too shiny, and slightly too good to be true, but was utterly beautiful in its details--actually better than the real thing. It even came with a good story having to do with great a Grandfather. But is was just a great Chinese copy...and sold by the score as real ones on Ebay.

Here's a photo. See for yourself. www.periheliondesign.com/downloads/FAKE_REAL_1883.jpg

nobody.really

As a guy in community theater, I often ponder the curious nature of intellectual property.

Want to sing a song from a show? Pay.
Want to perform lines from a show? Mostly, pay.
Want to perform the choreography? Free
Want to use a show’s costume design? Free.
Want to use a show’s name to advertise that you’re performing a show? Free.
Want to use a show’s logo? Pay.

But what is the legal status of performing a musical review? Say we perform four songs from a musical, with people costumed as performers from the musical, performing choreography from the musical, but with only as much dialogue as required to transition from one song to the next. Is it sufficient to license the four songs, or do you need to license the whole show?

cosmetic dermatologist

Looking forward to reading your book!

The issue that concerns my industry most is internet sales of prescription skin products such as retin-A and hydroquinone. Some might be counterfeit, but many are probably diverted products. The manufacturer sells them to a physician, the unscrupulous physician sells them on the internet at a deep discount, the patient may be hurt by expired or dangerous medications or may not use them correctly even if they are real. This hurts legitimate physicians by drawing business away from them, but also hurts a manufacturer's reputation. (Apparently, people who have qualms about buying viagra online don't think twice before buying skin medications from those same sources.)

Do you plan to do any research in this area? Will you be looking at diversion in addition to counterfeits? Thank you.

John OHara

You missed knockoffs that are centers of influence. The whole media, cable news, political message and talk tracks. Knockoff's disguised as political pundits but are actually the machine for profit.