Trademark Law – Fall 2010: Consumers and Knockoffs

The Daily Telegraph (UK) reports on a provocative new study:

They are an impulse holiday purchase that many buyers later have second thoughts about – the fake Louis Vuitton bags and Rolex watches picked up for a song abroad.

While shoppers are happy with the price, there are often nagging doubts about the items’ quality, their legality and who ends up profiting.

However, such worries are, it seems, over. A new EU-funded report has declared that it is OK to buy fake designer goods.

The study, co-written by a Home Office adviser, says consumers benefit from the market for knock-off designer clothes at knock-down prices.

It also rejects the complaints of designer companies, claiming that losses to the industry as a result of counterfeiting are vastly exaggerated – because most of those who buy fakes would never pay for the real thing – and finding that the rip-off goods can actually promote their brands.

The report adds that the police should not waste their time trying to stop the bootleggers.

It disputes claims that the counterfeiting of luxury brands is funding terrorism and organised crime, and argues there is little public appetite for tough law enforcement measures as consumers enjoy the bargains offered by the illegal trade, which has been estimated to be worth £1.3 billion in the UK.

The full story is here.

Trademark Law – Fall 2010: The Allure of Advertising

Modern trademark law owes a lot to cultural attitudes about advertising. 

There was a time, say 50 or 60 years ago, when advertising was viewed with a great deal of cynicism.  “Madison Avenue” was out to manipulate and trick consumers; consumers were generally foolish and clueless and at risk of being manipulated and tricked.  Vance Packard’s classic book “The Hidden Persuaders,” first published in 1957, both captured this sensibility and helped launch a consumer protection movement to expose it.

“Madison Avenue,” however, had plenty of resources at its disposal, and during the 1960s Madison Avenue fought back.  The glamour of the television program “Mad Men” realizes this idea:  Advertising agencies weren’t evil; they were great!  Advertising was a wondrous thing; the fully realized consumer was exposed to all kinds of wondrous new things, and new information about them, and could use an empowered sensibility to make good choices.

These two perspectives are still with us, and they lead to different treatments of trademarks.  The first tends to suggest that trademarks should be viewed narrowly and skeptically in the first place, because they (and the advertising and marketing of which they are a part) are inherently misleading.   If a protected mark is used in an arguably confusing way, however, one might suppose that infringement liability should be as broad as initial protection is narrow.  Consumers, being foolish and ignorant, need to be protected from themselves.

The second perspective tends to swap these two arguments:  Initial protection for trademarks should be broad and generous, because marks are informative (in the language of modern law and economics scholarship, trademarks help to reduce consumers’ “search costs”).  But liability for alleged confusing use of marks should be correspondingly narrow, because the informed, enabled consumer is pretty good at discriminating between marks and between their related goods and services.

In practice, modern trademark law tends to give us the worst of both worlds:  broad initial protection for trademarks (many things and kinds of things can be “distinctive” symbols) and broad liability for allegedly confusing use of those marks.  Trademark law treats consumers as simultaneously smart and stupid.

For an illuminating discussion of the history of modern advertising, read this post.