When piracy is legal

Clothing designers are frequently frustrated to see their creations mimicked by low-end knock-off shops. It's perfectly legal - for now.

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(FORTUNE Small Business) -- A few weeks after clothing label Foley + Corinna debuted its spring 2007 collection, co-founder Anna Corinna received a phone call from one of her store employees.

A good customer had recently visited the designer's New York City store and dropped more than $1,200 on four silk dresses for her bridesmaids to wear in her upcoming wedding. Distraught, the bride-to-be said that she had just seen "the same dress" in the window of a discount fashion clothing chain. There, the dress - a polyester replica with identical coloring, cut, and flower design - was selling for $40.

"She returned the dresses," says Corinna, 35. "When one of our designs gets knocked off, the dress is cheapened - customers won't touch it."

Knockoffs that sell at a lower price, says Corinna, generate substantial losses for her 25-person company. And at the moment there's not much she can do about it.

The Council of Fashion Designers of America (CFDA), a nonprofit trade group, estimates that knockoffs represent at least 5% of the nation's $196 billion apparel market. Copying has been common in the industry for decades. Unlike in India, Japan, and parts of Europe, it is legal in the U.S. to copy someone else's clothing designs. Steven Kolb, the CFDA's executive director, says that much of today's replication comes from mass retailers whose employees troll boutiques and the Internet, pilfering designs from entrepreneurs.

"When you're a small, young clothing company, each design is a building block to a bigger brand," says Kolb. "To have your designs stolen could make the whole thing crumble."

To help protect independent designers against copycats, several members of Congress have proposed legislation - the Design Piracy Prohibition Act - that would extend copyright laws to clothing. Nine Senators have introduced a sister bill, which insiders on the Hill say should pass by late this year. If so, fashion firms would be able to register their designs with the U.S. Copyright Office for about $100 each. The law would protect the patterns for three years.

"No basic design - an A-line skirt, for example - would be protected," says Susan Scafidi, a visiting law professor at Fordham University. "The idea is to allow piracy victims to collect damages from copyists who skip all the expensive parts of creating a design."

The proposed bill could hurt some small firms, such as Faviana, a New York City dress company that bases a number of its designs on what celebrities wear to major events. While Faviana's clothing sometimes looks remarkably similar to the original designs of others, it serves a market of women - prom dress buyers, for example - who can't afford high-end couture. Although these so-called red-carpet replicas represent less than 10% of Faviana's annual revenues, president Omid Moradi is a voice of support for a small faction of apparel entrepreneurs and marketers.

"Fashion will become very boring if this legislation passes," says Moradi, 39. "All this will do is create a backlog of lawsuits - the only ones who will win are the lawyers."

Until the government passes some version of the design-piracy bill, designers can sue only if they can prove someone else has replicated their logo or an original print, which must be registered with the U.S. Copyright Office.

That's what Eleanor Grosch, a Philadelphia artist, should have done. Grosch, 28, creates animals that she prints on T-shirts, which she sells online. In September 2006 she began licensing her images of giraffes, llamas, penguins, bluebirds, owls, and elephants to Keds, which prints them on women's sneakers.

Last summer a fan e-mailed to let her know that Zellers, a chain department store headquartered in Toronto, was selling sneakers adorned with stylized owls that looked exactly like hers.

"I couldn't tell the difference between mine and theirs," says Grosch. She immediately called a lawyer, who persuaded the retailer to stop selling the shoes. (Calls to Zellers haven't been returned.) At presstime, Grosch said she was in negotiations with the chain and its shoe manufacturer to sell her designs.

If Zellers had kept on selling the shoes, would it have been in violation of the law? Scafidi says that if Grosch and her lawyers had been able to prove the originality of her unregistered designs, then, yes, she would have had a copyright-infringement case. To top of page

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