From Fashion to Pharmaceuticals

Intellectual property Professor C. Scott Hemphill’s most recent scholarship has taken him to ateliers of fashion designers around New York, where he’s sought evidence to help answer a question that has agitated the industry for decades: Does clothing design warrant copyright protection? Hemphill’s research is timely, considering the issue is up for debate before Congress.

With coauthor Professor Jeannie Suk of Harvard Law School, Hemphill posits that fashion, like music, film, and other creative realms, ought to have some protection—the question remains: How much?

In “The Law, Culture, and Economics of Fashion,” forthcoming this spring in the Stanford Law Review, Hemphill and Suk say that fashion involves two warring impulses: first, a natural tendency to flock toward a trend; and, second, the equally strong desire to stand out. These contending forces for conforming and being different shape the formation and lifespan of trends. Consumers experience, and designers work to satisfy, these tastes for both flocking and differentiation, write the authors.

Hemphill and Suk believe that fashion deserves limited protection. So, for instance, “close copying,” when a coat matches the original down to the color of its buttons and stitching, should be considered infringing. “Proliferation of close copies of a design is not innovation—it serves flocking, but not differentiation,” write the authors.  By contrast, a coat that is based on another creator’s original design but features its own unique elements or touches, ought to be permitted.

Hemphill’s focus on intellectual property and issues related to competition also extends to his work on “pay-for-delay” deals in the pharmaceutical industry. The practice works as follows: A large pharmaceutical company, faced with possible loss of patent protection on a blockbuster, brand-name drug and with some risk of losing its case in court, pays a generic company not to bring a cheaper version of the drug on the market for an agreed-upon period of time. This lack of competition keeps drug prices higher, says Hemphill.

In recent testimony before the House Subcommittee on Commerce, Trade, and Consumer Protection, Hemphill told lawmakers that pay-for-delay settlements are becoming more common and getting harder to prosecute because of their growing complexity. For example, the brand-name firm might disguise its payment to the generic firm by asserting that its payment is not for delayed entry, but rather for some unrelated service provided by the generic firm, such as product development or manufacturing.

The problem is compounded by the fact that federal courts, which are charged with setting substantive antitrust policy, lack the access to information about current settlement practices that is needed to create optimal rules. At stake are billions of dollars consumers and insurance companies might be overpaying in drug purchases.

The solution, argues Hemphill in his forthcoming Columbia Law Review article, “An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition,” is to put regulation in the hands of the Federal Trade Commission, which is better equipped than courts for collecting and synthesizing information that can bolster antitrust suits. Armed with the requisite information about new settlement strategies, the FTC can more successfully prosecute sophisticated pay-for-delay deals. Hemphill told congressmen that he had collected data on 143 brand-name/generic settlements in the past 24 years and nearly half of them raise pay-for-delay issues.