The 1924 Plaid That Became a Two-Billion-Dollar Tax

In 1924, a clerk at Burberry's London headquarters chose a quiet, modest, mostly forgettable plaid as a lining for the inside of a tan gabardine trench coat. The plaid was beige, with intersecting lines of red, black, and white. No one paid attention. The lining was inside the coat, where customers would only see it when they took the coat off, briefly, and folded it on a chair. For sixty years, this is roughly all the plaid was: a pleasant interior detail of an item of British outerwear used heavily by soldiers, journalists, and the kind of person who had to stand in the rain for a living.

The plaid is now worth, by various estimates, billions of dollars.

The transformation began in the 1990s, when the plaid — by then formally registered as a trademark — escaped from inside the coat to outside the coat. Burberry under chief executive Rose Marie Bravo and creative director Christopher Bailey put the check on bags, on scarves, on swimsuits, on umbrellas, on bottles of perfume, on car interiors, and eventually on a pair of canvas trainers worn so widely by British working-class youth that the brand spent years in the early 2000s in horror at the wrong kind of customer wearing too much of it. The check became, briefly, a cultural problem the company had to solve. It then became, more permanently, the most valuable trademark in British luxury history.

The Legal Logic. Patents expire. Copyrights expire. Trademarks, properly defended, do not. The Burberry check, registered under multiple jurisdictions in the early twentieth century and continuously defended through litigation against counterfeiters in every market the company entered, will likely be protected for as long as the company exists. The legal cost of defending it runs into the tens of millions annually — Burberry has a dedicated trademark enforcement team, files thousands of takedown notices, and pursues counterfeiters through courts in Italy, China, Brazil, India, and the United States. But the cost of defending is a fraction of the cost of replacing, because the check is, in luxury terms, a near-permanent asset: every time a customer sees the plaid on something not made by Burberry, the company has lost a small unit of brand authority and gained nothing.

The Margin Math. A Burberry scarf in the check pattern retails for £490. The raw cashmere costs perhaps £40, the dye and finishing perhaps another £20, the labor perhaps £40 — a unit cost in the ninety-pound range against a retail price an order of magnitude higher. The trademark sits between cost and price like a tax that only Burberry can collect. Across the company, the check pattern reportedly contributes to roughly forty percent of revenue, which means that the trademark — a piece of intellectual property essentially given to the company by an anonymous clerk in 1924 — generates something on the order of two billion dollars in annual revenue, almost a century later, with almost no marginal cost of reproduction.

The Maintenance Problem. The risk with a trademark this central to the business is that it can be cheapened by overexposure or by association with the wrong customer cohort. The early 2000s scare — the British tabloids called it the "chavification" of Burberry — forced the company to pull the check from many low-margin product categories, raise prices, and reposition the brand upmarket. Two decades of careful reduction of the check's surface area on the product line have restored its scarcity. The check is now found on roughly fifteen percent of Burberry's product range, mostly in the premium tier, mostly at higher price points. The remaining eighty-five percent of the line carries the brand more subtly. The check is, in effect, rationed.

This is the strange economic shape of a trademark moat. It is not like a patent, which protects a thing the company invented. It is not like a brand, which is the sum of customer impressions and goodwill. A trademark is a legal right to exclude others from using a specific visual pattern in commerce — a right that requires no innovation to maintain, only defense — and the entire question of its long-term value reduces to whether the company can keep the pattern desirable while the lawyers keep it scarce. A clerk in 1924 chose a plaid. The plaid is now a tax. The tax has been collected, annually, for one hundred years.