Economics of trademarks, a new discussion
on how trademarks is also one of the important
intellectual property rights today and that
is important for consumer as well as producer.
So, we are basically going to, we are going
to learn today that how trademarks 
which is presented as as TM for many products
in the circle or R in a circle is important
for a consumer and also for, also for a producer.
But before that, let me give you the introduction
that, what is basically the meaning of trademarks.
Trademarks as well as the service marks are
used to recognize the goods and services to
consumers and to distinguish between the brands.
Large number of products are available today
and if you have to really find out that which
product is the genuine product which product
is really the real product, this trademark
gets you the idea that, which one is the right
and which one is the wrong and company and
the form is keep informing the consumer that,
please try to see this trademark before using
the product.
So, I can give you some examples from, from
the, from the things available here.
So, if you will see the the glassware package,
you will find this particular product is having
this, this name with the, the TM.
And this trademark TREO is the trademark of
this, this glassware set and for a consumer
it is very easy to find out whether this is
a real product or not.
Like that if we can see some of the electronic
products today, this my book complete backup
and security product, which is used for, for
data backup, we find out that my book is again
the trademark of this particular, this particular
company.
So, for example, I can give you some of the
product based example here.
So, if you can just see this product glassware,
where you are finding the name of the, there
is a name written here and then you have this,
you have this trademark on the top, this shows
that, this is the trademark of this particular
glassware.
So, this is easy for a consumer to identify
the product, whether a product is really genuine
or not; if it is really a popular product,
if it is really really very demanding product,
then other, other forms may try to copy the
product; which already in grade the mark.
So, generally trademarks and other products
are facing this problem, trademark is facing
the challenge when the products are really
having a great demand.
One can also see here the another product,
which is the, which is the complete pack up
product for the data and used for the computer.
So, in this product also this My book is the
product which is a trademark of this particular
company; and again we are finding that there
is a TM on the top of the My Book; it means
that this is the trademark of this particular
company and this shows that how trademark
matters for a producer because this is the
single identification and this is the single,
single name, which is giving the information
to the consumer and this is the main, main
motivation for the producer to reach the consumer
and also the consumer is getting the idea
that this product is really the authentic
product.
The trademark may be, may be presented in
different way, the same My book here we are
finding that TM is not written here, but it
is R in the circle.
This also means that it is the trademark whether
it is R in the circle or TM, this also the
trademark for the My book.
So, I can give you one more example of another
small product.
This fevi stik where we are finding that there
are 2 elephants, there are two elephants and
its shows that this two elephants are basically
the trademark, very small circled R is also
here, which you can identify from, from buying
this product from any shop, or if you have
this product at your home, you can also find
out that how these the symbol.
So, trademark can be, can be a word, it can
be a symbol, it can be a device, it can be
a name and combination used in the business
to recognize and differentiate the goods.
So, in brief we can say that; trademark may
be a word, may be a symbol, maybe a device,
and maybe a name or any combination.
Basically to recognize and to differentiate
the goods because whenever a product is launched
universal services of provided to the consumer
subscriber, it is very important to have the
identification of those products, through
certain symbols and through certain names
or some slogans or some combination of words
or whatever.
So, some examples may be again taken from
the day to day consumer items like Nike or
coca cola or Haldiram or any other products
which is very popular in nature.
So, when it comes for the trademark protection,
the protection of trademarks ensures the protection
from others dishonesty because many firms
are trying to confuse consumers with providing
the misleading similar names.
So, there are certain, certain similarities
in the names in the product which is in the
market and if, if a consumer is not really
aware if consumer is really confused,
they are basically cheated by different firms.
So, trademark is basically safeguarding the
rights of the trademark holders, at the same
time we cannot really, we cannot disagree
with this point that trademark is also safeguarding
the consumers, if consumer is really aware
with those trademarks and identification.
So, if the trademarks are registered, registered
it grants a level of protection as known as
your mark is not registered you cannot say
that this is my trademarks.
So the moment your trademarks are registered,
then only you can say that it is our registered
trademarks.
So, it is the responsibility of the registration
holder to make all the efforts to protect
it.
So, if my trademark is registered, I am running
a firm and my trademark registered, but in
if I not really concerned about protecting
my trademarks, if I am not informing to the
consumer, not informing the market that, what
has to be seen on the product have it has
to be, it has to be received by the consumer
and what slogan and what words, that is why
we find today that many firms are trying to
come out with different advertising at the
distant with different names and difference
slogans of the product and that mixing lies
in the market because the movement if you
are not really able to protect your trademark
and if you are not able to advertised your
trademark, then it is not really possible
to basically stop the infringement of the
trademark products.
So, appropriate use of trade mark and legitimate
enforcement are really in the hand of trademark
holder and that prevents the infringement
of, infringement of, infringement for those
marks by others and if it is not really well
taken then entire effort of registering those
trademarks is over.
So, when we are discussing this economics
beyond this trademark we cannot really ignore
the discussion on asymmetric information and
adverse selection.
So, this can be explained with this particular
chart that asymmetric information is leading
us to the lemons problem, means the adverse
selection, lemons problem is, is pointed out
by one of the economics; where he has argued
that due to the symmetry in the information
some time bad products are driving out good
quality products from the market.
And therefore, average qualities of used cars
for used cars and itself are declining and
its price as well.
So, this was, this was presented in figure
1A and also in figure 1B while in figure 1A
we are finding that, there is an, there is
an average quality curve in the market fact.
In figure 2 we find that, the markets is facing
the Lemon market, lemon, lemon problem and
now the market is not really supporting the,
the price of used cars and the quality of
used cars are, are, are not in more demand
after, after, after this, this price of used
cars even if it is going high.
The quality of used cars supplied by the,
by the suppliers are not really very high
because the bad car due to their asymmetry
in the informations are driving out the good
quality cars from the market.
So, what is basically the economic, economic
justification for trademark because like other
intellectually property rights, trademarks
is again restrict in the free riders from
destroying the information, capital, embodied
in the trademark because trademark is the
key for protecting the forms from other, other
free riders, from other tapers and if it is
not registered; if trademark is not registered
there are many free riders available in the
market.
And they basically enjoy the benefit of infringing
the rights of the people who are already registered
with their mark and it is true that only those
companies those firms are facing the attacks,,
the companies which are really having very
good name and very good fame in the market.
So, a consumer pays cost for searching goods,
there is a search cost involved with trademark
is not available people are finding very difficult
that which one will be the good quality product
for them and there is a huge transaction cost
involved searching and bargaining and consumer
is paying huge, huge cost and they are not
having any, any benefits.
But information about the brand trademark
helps to reduce search costs, search costs
of searching the product search transaction
in terms of bargaining because if we have
a very clear cut indication that which brand
and which mark then you are basically king
in the market otherwise you are helpless.
So, in figure 2 we have seen that, where due
to the trademark the expected cost of search
for consumer falls; which leads to the fall
in time spent in searching.
If we can go back, we can see here, see here
that the time spent on searching if, if it
is reduced it really happens when you have
expected marginal costs and benefits of searching.
So in case if you have, if you have reduced
to your marginal cost on searching and the
benefits of searching, then you have, you
have certainly having more time spent, but
it is true that if you have reduced the time
you are in the position to really, really
due to the trademark the expected cost of
search for consumer falls which lead to the
fall in time has spent on searching.
One of the important example related to the
trademarks is the domain name newton.com was
registered by Mark Newton in 1994 for his
bulletin board to offer computer assistance.
Subsequently Mark Newton was asked by the
apple computer to discard the domain name.
Since the later has a trademark for ‘Newton’
Apple computer accused mister Newton to the
InterNIC because he was reluctant to withdraw
the domain name this has raised concerns whether
trademarks actually confer ownership over
a domain name to the companies; the matter
is on hold.
So, this shows that how even the domain name
which was registered by Mark Newton in 1994,
is, is really one of the challenge for apple
computer.
So, the trademark is linked with the language
and economics of language and communication
because it is economizing the language in
three ways.
First it increases the collection of names
of things consuming, thus economizing on communication
and information costs in the ways just recommended
and it also creates new generic words that
denotes entire products; not just individual
brands.
It further develop the language by inventing
new words or perhaps that people value of
their natural attractiveness as well as their
information value.
So, there are few, few words which is, which
is very popular this days, surf is coming
out with the words [FL] or even, even [FL]
for the soft drinks or, or when, when India
is started telecommunication liberal very
private, private oriented telecommunication
business, then reliance came with the, with
the slogan called [FL].
So, all these, all these words are basically
the words which basically lead the market,
lead the market for many years and all these
words are the, the new words invented by the
firms and popularized by the firms to established
their identity and to motivate the consumers
to consume more and more and to, to grab the
market because these are the trademarks for
the purpose of grabbing the market.
You know that market is imperfect large number
of producers are available in the market and
you have the cut-throat competition available
in the market.
So, you are trying, your base to convince
the consumer, the particular product is the
product which you can consume and that is
the product which is very good for you.
So, through this words, through this generic
words, through this invented words, you are
trying to explore the market, you are trying
to capture the market.
So, the trademark helps in, in capturing the
market through the language and communication
and in different country they are trying to,
to find out different people and they are
trying to, they are trying to identify the
people who can really lead those slogans those
words into the market through different electronic
and print media, print advertisement and electronic
advertisement channels and the boost which
came with the word called, slogan called “boost
is the secrete of my energy” from Kapil
Dev to Sachin Tendulkar.
we are finding that this particular slogan
is coming again and again and, and we find
that such advertisement and such, such trademarks
which is, which is connected with the advertisement
is trying to really create a new, new word,
a new world in the market and that you world
is basically motivated to the language and
communication.
So, the that one major question like like
the patent or like the copyright, the duration
of trademark is also one of the important
point to understand.
But the duration of trademark protection is
unlimited, in patent we have seen that it
is limited, in copyright we have seen that
life plus 60 years, in case of, in case of
India.
But the duration of trademark as I gave you
the example of boost which gives this advertisement
that boost is the secrete of my energy and
that slogan that slogan, that slogan is continuing
in the market in India for for many years
from when the Kapil Dev was the Indian cricket
team caption, from that time to Sachin Thendulkar
and may be from the next generation of the
cricketers also.
So, it is not, it is not the, it is not like
the patent that within few years you have
to have the way to exploit the market, but
you have unlimited time to exploit the market
as known as your product is really have in
the value and it is associated with the value
of the product the quality of the product.
So, the trademark is not only the mark, it
is not only the word, it is not only the symbol;
which itself is enough to exploit the market,
but you have to be very much competitive and
very much active, efficient in terms of, in
terms of maintaining the quality of the product
and that trademark is identified by the consumer
that trademark is your identity in the market
associated with the identity and the quality
of the product.
But it suddenly creates encourage the competition
and prevents the occurrence of tracing cost
because ultimately through those slogans,
through those words, through those marks,
you are giving an identity to the consumers
that see this is the product which you have
to consume.
So, as long as your product is life your product
is available your trademark is available.
Some of the other examples what is basically
the breadth of the trademark, so, the generic
product cannot be the trademark and trademark
cannot be generic products sometimes a competitive
product succeeds so for that its trademark
become a generic name some examples are the
Xeroxing for photocopying, surf for detergent
powder, Hoover for vacuum cleaner.
Today we say that, we do say some of the information
to our friends that we are going for Xeroxing,
but the Xerox was the first for the copying
machine in the world and now that Xerox is
so popular that, Xerox itself is identifying
the entire industry of, of the photocopying
sector, surf itself is leading the entire
detergent powder market today.
So but, but generic products cannot be the
trademark and trademark cannot be generic
products.
For example, if somebody wants to keep the
name of medicine for a medicine product you
cannot.
Because medicine is a very generic, generic
name and that is, that is identifying the
entire medicine entire products in the medicine
sector, so, so like that you cannot keep the
generic products as the trademark.
But the trademark is a so soft monopoly rents
because owners may enjoy monopoly rents by
spending money on creating fake image of high
quality and thus avert consumers form lower
price substitutes of equal quality or even
higher quality.
It may create social waste and make consumer
cheated sometime and all depends on how what
is the objective, what type of market conditions
are available and in that condition; if a
firm is really uncontrolled and if a firm
is really not having any competition, a firm
can really come out with that trademark, but
may not be matching the quality of the product
high quality of the product which they, they
used to offer in past.
So, this trademark an incentive to the free
riders, the strong trademark, the stronger
the trademark the grater the incentive to
go for free ride in the absence of legal regulation.
So, if you do not have a, if we don’t have
a very strong legal revolution as we have
seen in case of patent, also in case of future
intellectual property rights also, if you
do not have a strong set of rules and implementation
of those rules, then in that case, free riders
is really having incentive to to copy or to
use or to to really have a very dishonest
effort to exploit the consumers.
Generally the trademark of popular big and
famous brands are pirated or try to be imitated.
The incentive to the free rider depends on
two different conditions; the first if cost
of imitation is higher than the revenue from
the trademark and the second, if it is, if
the cost of imitation is higher than the revenue
for the trademark there will be less incentive
to the free riders because you have huge cost
involved in imitation of a trademark compared
to the revenue which, which, you may, you
may you may get it.
For example suppose a firm, suppose the firm
Avers, a software firm, suppose the firm named
Avers, a software firm, wants to imitate the
trademark of a very established firm.
So, the cost of imitation, suppose if the
cost of imitation as we know that cost of,
cost of imitation is not only the cost of
copying the mark, copying the image, but also
the cost in case of, in case of caught, in
case of jailed, in case of punished.
So, if we calculate that cost may be the lock
out, locking out the company, or the firms,
blacklisting the name of the firms.
So, if a firm is expecting100 million dollar
revenue from the trademark and if the set
of rules are very high and the punishment
is very high, and if the punishment one is
expecting around 200 million dollar and in
that case, due to the strong set of rules
and the huge cost involved in imitation, the
firm will not go for, for imitating the trademark.
But see this is the condition of a country
A, but in country B you have 20 million dollar,
20 million cost cost involve that includes,
all type of cost, but you have 200 million
dollar revenue waiting, you have 200 million
$ revenue waiting, so, in this case revenue,
your revenue is higher than your cost, expecting
cost.
So, the firm will try to imitate the trademark
because higher revenue is there and cost of
imitation is less.
So, trademark is also based on the indication
of origin and indication of quality.
So, for example, the Darjeeling tea one of
the example of trademark from India, is essentially
differentiating from other tea available in
the world because the Darjeeling tea is the
indication of origin and that is that origin
is origin is not in other part of to world
except India.
But it is also the indication of quality some
time we, we, we promise that this particular
quality is not available in other products.
So, we provide the information, sensitive
information to the consumer through our trademark
indicating the quality available in the product.
So the discussion on trademark after analyzing
trademark protection from economic perspective,
we can see that the motive of trademark protection
is to promote economic efficiency and the
trademark protection is really stopping all
those non-serious firms and may be over serious
form, who wish to enjoy the benefits, who
wish to enjoy the benefits of, benefits of
all type of all type of, all type of revenue;
from the existing, from the, from a existing
name, from established forms, from a very
popular forms.
So, it is not so easy to get the benefit without
doing anything if a firm has really established
its identity in the, in the market it means
that it has really worked hard or and they
have really, really well informed, really
well informed the consumer, but if a trademark
for it wants to really become rich, they will
try to imitate the trademark in try to capture
the market.
So, the economics underlying the protection
of trademark is based on the economics of
asymmetric information and adverse selection.
So, if the information is not really reaching
to the consumer, not authentic information
is really reaching to the consumer; if the,
if the parallel forms are good enough to make
them fool, in that case the consumer will
not be able to select the good quality item,
but they will go for the adverse quality or
the bad quality item and the economy will
face this lemon crisis, lemon problem.
So, trademark is really helping producers
as well as consumer.
These are the further readings hope you can
have a look on these readings I think this,
this particular lecture will help you to understand
the economic behind the trademark and how
trademarks is connected with both the demand
side supply side consumer as well as producer.
Thank you.
