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Summary:

People love to hate clone artists like Berlin’s endlessly cash-hungry Rocket Internet, but is this really a clear-cut debate? And where should we draw the line?

attackoftheclones

Another day, another massive wad of cash flying Rocket Internet’s way. This time it’s JP Morgan again, putting somewhere between $40m-$80m into the Samwer Brothers’ Lamoda fashion site.

Lamoda is of course a Russian version of Rocket’s Zalando, which is in turn a clone of Zappos. JP Morgan has already invested in Zalando (figure unknown) and the Brazilian version, Dafiti ($45m), and is fast becoming a serial Rocket backer. It will have a way to go before it matches Kinnevik though – they’ve put in over half a billion so far this year.

With the JP Morgan news, and with super-new Square clone Payleven having rolled out to Brazil, the Netherlands, Poland and the UK late last week, I think it’s time to address a rather important question.

Is cloning really so bad?

It’s not hard to find those who maintain it is. Witness Jason Calacanis’s rant in February, which justifiably championed originality and decried the Samwers for giving Germany a bad rep.

But it’s a subject I find more complex the more I think about it. Here are what I consider to be the main issues at play:

Territoriality

Let’s take Square as an example. Currently only available in the U.S., it has been cloned by Payleven, iZettle and others, all of which are targeting other markets.

Is this wrong? Should those other countries all have to wait for Square to get its act together and expand overseas?

Much as I love originality, I find it hard to see this as a clear-cut issue. A good idea is a good idea, and I personally don’t think ideas should be protected as intellectual property. That’s never how innovation has worked. Even Saint Steve sang the praises of “stealing great ideas”.

And it’s not as if every innovation coming out of the U.S. is guaranteed to make it overseas at all. After all, the U.S. is a huge market in itself.

Another thing to consider here: if you’re going to clone, it really matters where you do so. Rocket has largely (though not entirely) stayed clear of the U.S. up until now. It’s hard not to wonder how much of that is to do with the potential legal troubles they could face in the country where so many of their cloning ‘victims’ are based.

Speed of execution

It took Rocket a couple of years to clone Square. It took them less than a year to do the same to Stripe, which now has a copy in the form of Paymill.

It’s easier to come down on the cloner’s side when you’re looking at something like Lazada, Rocket’s Indonesian answer to Amazon. Amazon is hardly a fledgling, and it’s not available in Indonesia, so… duh. Someone did a clone there. Wouldn’t you?

But when the original company is barely teething, it all starts to look quite unfair. The Samwers’ MO is to roll out new business models at the speed of light, and there’s no way on this earth that a fresh startup can hope to compete on an international scale, no matter how bright their idea is.

That’s a real problem. The answer, if there is one, is for every startup that thinks it might get cloned to go international from the start. Easier said than done, I know, and it depends very much on the nature of the business. That said, Ifeelgoods chief Michael Amar wrote up some interesting suggestions on this topic for VentureBeat yesterday – it’s definitely worth a read.

Look and feel

Lazada may have some legitimacy in terms of timing, but boy does it look like Amazon. Again, that’s a problem.

There is no justification for making a clone look like the product it’s copying, unless that design is obvious and essential to functionality. Copying colour schemes and layout is not cool. And copying actual code from a rival is just plain stupid.

There are many reasons why that kind of copying is ill-advised. It betrays laziness, for one thing. It also sails close to actual ‘passing off’: trying to create the impression that you are, or are affiliated with, something you’re not. Also, copying code usually involves copyright infringement.

Everyone copies

How many startups copy? Almost all of them. Rare is the new company that’s built its idea from scratch, and there’s nothing wrong with that. We all stand on the shoulders of our forebears.

Google wasn’t the first search engine: it was just much better than its predecessors. Same goes for Facebook and social networks, and Apple and smartphones. What those companies did, though, was to take a concept and innovate on top of it.

There is nothing stopping clones from being creative after their birth, if they want to be. Whether they do or not is another question, and one that ultimately comes down to the character of the cloners.

In short, cloning is a big gray area. If you believe ethics are fundamental to business, it’s clearly going to be off-limits, but if you are more flexible on such things, it’s difficult to deny the attraction.

And if you, like me, get queasy at the thought of ripping anyone off, then consider this: effectively stopping this sort of behaviour would require a globally enforceable intellectual property regime that protects ideas. That’s not going to happen. But, even if it were practical, would you really want it?

  1. I’d never seen that rant from Jason before. It’s interesting that he complains about the Samwers copying other people’s ideas and businesses when, if you ask me, This Week In looks (and sounds) a lot like Leo Laporte’s TWiT network. And they’ve both had their own arguments in the past about the subject.

    Trying to determine the legality/morality of copying/cloning other businesses is tricky. I’ve been thinking about it a lot lately and it’s not easy to come to a conclusion. Many of the clones we have seen from Rocket Internet in the past 2-3 years saw an opportunity in a certain market and executed, in cases, brilliantly. That is why they are so powerful in some Asian countries, Germany or Russia. And let’s see what happens in Brazil.

    I honestly think it’s just part of the complex startup and technology ecosystem. You’re always going to have early creators that execute brilliantly and create a market/industry, and then you’ll have others who, based on such ideas, will try to apply them elsewhere. And that’s not easy. Amazon could have opened shop in Indonesia but perhaps they didn’t have the expertise in the area that Rocket Internet has.

    And you could argue that, even if considered to be experts in cloning, they might be helping the startup ecosystem providing capital via investments in other startups or straight acquisitions.

    It’s all part of the game and you’re always going to find leaders and followers. But glory can’t be exclusive to Amazons, Zappos, Squares of the world. At least it should not be. The world is too big.

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  2. There are all sorts of behaviors that society is perfectly fine with tolerating, and even encouraging, between businesses when if it were between individual people we would draw a line. Walk into a grocery store and notice the copycat brand of soda, cereal, tylenol that is practically a clone of a branded product. Nobody seems to think that’s unethical, although if it were one artist ‘cloning’ another person’s work and selling it for cheaper, we might think differently. Even IP law, at least in the U.S. and in certain industries, isn’t driven by a sense of moral obligation to a creator – it’s about incentivizing products that make society better… most of the time.

    So we need to be careful about moralizing too much when it comes to business v. business interactions. Calacanis and other founders probably do so because they see (not entirely without reason) founders as artists – and they see clone’s as someone ripping off another person’s masterpiece. But Calacanis also likes to refer to entrepreneurs as “Samurai,” which signifies something. When you step into business, you step into an arena with rules that no decent society today would tolerate between people – like competing until your opponent is literally dead, and then writing an article about how awesome it was to put them to sleep. It’s utilitarian ethics to the max, which is fine because we’re talking about profit-seeking entities, not artists.

    A cloned entrepreneur will hate their cloner just like a CEO at a big corporation will hate the entrepreneur that kills his Company, but that doesn’t mean we need to do anything about it. We should worry about how cloning impacts incentives for entrepreneurship, but that’s not ethics – it’s economics.

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  3. Christoph Raethke Sunday, September 9, 2012

    It may not be clear-cut – what in life is? -, but there actually IS a line, and no sophisticated, educated “well, let’s look at this from another angle” will change that. As Jason C rightly maintains, there IS a difference between innovating in an existing market or versus existing competitors and outright theft of source code, business model, design and everything else that makes a company. Let’s not blur this by being oh-so-understanding for “the complexities of the digital industry”. The way the Samwers are doing it is like buying a book at a Barnes&Noble the U.S., putting it into a giant Xerox machine, and re-selling it in Germany – with the only words changed being the name of the author. And, if we’re lucky, a babelfishy translation thrown in. Would you like that to happen to the articles you write, David? And then have a commentator defend the copycat by saying, “well, David didn’t manage to dish out a German version of his writings fast enough, so it’s basically his fault that someone else did”?

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    1. I know there’s a line. I’m just trying to stimulate a discussion to define where that line is. I’m certainly not trying to come across like a Samwer apologist; I just think the situation is complex, and there’s no point trying to think about it in black and white terms.

      I don’t think the photocopying analogy is useful, because this isn’t about cloning a finished product; it’s about cloning a business that may then succeed or fail, that requires management and growth, and that will face different challenges to those faced by the business it cloned.

      And as regards having my journalism ripped off? I’ve been there many times. Do I like it? Would I do it to others? Can I do anything to really stop it? To all questions, the answer is no.

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