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Thursday, 4 November 2010

Trade Marks and Innovation: how strong is the link?

This particular Kat spent a very interesting morning yesterday at the Westminster Legal Policy Forum Keynote Seminar – “Intellectual property, innovation and the UK economy”. The event, held in central London, gathered a number of individuals involved with, and/or interested in, the IP system in the UK to discuss two main issues: Research, knowledge transfer and realising the social value of intellectual property; and Intellectual property rights and the economy.


However, rather than celebrating what an entertaining morning he had, this Kat wishes to raise an issue in the hope that some further debate might be forthcoming. Therefore:

During the course of the event, the Kat provided a very brief (10 minute) overview of the IP system, so as to set the scene for the remainder of the speakers. He set out his stall by detailing the main rights falling under IP’s umbrella (another IP Umbrella (left)), and then quickly discarded those that, in his mind at least, were not directly linked with the subject under discussion: innovation. Patents, designs and copyright therefore received most of his attention, and trade marks were left to one side; explained away rather rapidly on the basis that they did not really concern innovation, being more involved with facilitating consumer choice within a market economy.

His rather blithe dismissal of trade marks was, quite properly, investigated by questions from the floor, forcing the Kat to justify his views (or at least attempt to do so). The point made to him was to the effect that the brand often provides an aspirational statement that may, itself, induce a firm to innovate – the example given was Gillette’s trade mark “Gillette: the best a man can get”. Furthermore, reputation, as bottled in the brand itself was a spur to innovation as goodwill required topping-up from time to time, and you could do this by creating better products - innovating. (I probably do great injustice to the question-setter in this summary, but was not taking detailed notes at the time and so must rely a consumer's imperfect recollection...)

To the Kat, this appeared to be a simple market-induced innovation point, - that there are some innovations that the patent system is not required to incentivise - and so the answer given in return essentially boiled down to the assertion that patents and copyright were just ‘different’ to trade marks with different justifications and a different purpose in life.

Thus, the Kat noted that whereas there are some links between the ideology of patents and copyright, there is no such link between these two and the trade mark/brand. He therefore instinctively saw trade marks/brands as less directly concerned with the innovative process than copyright and patents. Accordingly, while the latter pair provide incentives and/or rewards for innovation by creating artificial scarcity (and thus a market) in information products – the non-rivalrous and non-exhaustible nature of information being constrained by legal intervention thereby creating “property” in the patented invention or copyright work – the trade mark is not directly concerned with this process. It provides a degree of secondary protection that is focused more on the ex-post gathering of profits than any ex-ante incentives.

However, mulling this over when walking back from the event, the Kat began to wonder whether his initial, knee-jerk, dismissal of the trade mark, discarding it as substantially irrelevant to innovation, was in fact correct. Whilst he maintains that trade marks are (obviously) fundamentally different in ideology than patents and copyright (at least to a far greater extent than the latter pair are ideologically different from each other), he is less sure that his initial reaction did not underplay the innovation|trade mark link.

So, what is the brand's place in the innovative process? Does it play a more direct role than this Kat erstwhile appreciated? Was he simply wrong when he sidelined the trade mark in his initial presentation and instead focused on patents, copyright and designs? Or is the brand a secondary citizen in the innovation party? Comments, as ever, are encouraged.

10 comments:

Arthur said...

Trade marks and brands are all about reputation, and in some fields establishing and maintaining a reputation for innovation is all important. Look at Apple: they make sure their brand is closely associated with innovative, beautifully designed products, and as a consequence they create an association between people's minds between their brand and innovation.

That said, a reputation for innovation is not the same thing as actual innovation. But if the industry leaders in a particular field are all competing to be seen as the most dynamic and innovative companies in the field - witness the tussles between Google and Apple over the smartphone market - then that at least means that genuine innovation will be valued and sought after. Even if it means that phony innovation is sometimes over-valued.

Meldrew said...

Of course the property that most spurs innovation is cash..... Discuss.

Arthur said...

True, but cash goes where it expects to find more cash. If innovation isn't profitable (due to rampaging copying) it isn't going to spur innovation, if innovation is a good investment people will invest.

Peter Mason said...

Just a little thought on this. Trade marks are hugely important to commercial innovation rather than perhaps technical or artistic innovation. As an IP lawyer who works for a lot of start-up creative businesses I am regularly faced with clients who have developed an innovative business model for whom patent or copyright protection is of no assistance. What I can offer to help them with, and what frequently they take on board, is the development of a strong brand with which they can educate the public about their new business model and thereby establish a link between their business and the business model they have created. Without a protectable brand name, many of these people would not be able to build up the goodwill necessary to make their innovative business viable.

There are many examples of innovative businesses, especially in the digital age, such as Ebay, Facebook and Twitter, for whom the brand is very closely linked in the mind of the customer with their innovative business model.

Anonymous said...

This and related themes have perplexed and also greatly frustrated me in the past.

There follows a bit of a rant (apologies) on a related theme...

I have not infrequently heard, in international corporate contexts, 'IP lawyers' (i.e. generally straight-legal-(&-not-technologically)-qualified colleagues, at least outside of the
US - as opposed to patent attorneys around the world) explain earnestly to clients/colleagues that all IP is essentially the same - i.e. anyone who can cope with trademarks can easily cope with all technology/patent matters - and therefore that 'IP' must all fall under the corporate legal department's control/budget and/or, for outside counsel, must be billed at essentially the same $-rates regardless of relative case-complexity and/or - as in your example at the talk - that all IP serves to achieve the same benefit (e.g. innovation).

Personally, I do not see a benefit to a company's business in trying to pretend 'all IP is the same' when it is palpably not in practice (as opposed to seeing a benefit to the personal Macchiavelian or economic interests of such 'IP-lawyers').

This theme appears, amongst other things, to be one of the things that contributes to holding up setting up a single-jurisdiction European Patent Court with the related €billions/year savings to European industry - i.e. the theme that people with no experience or training in the area of patent litigation feel that they should be 'accessing the honeypot' as they see it (and even trying to exclude more experienced/qualified colleagues from supporting companies facing disputes more cost-effectively) on the basis that 'trademarks and patents are essentially the same & (apparently 'irrelevant') technological details may be dealt with via listening to 'experts' and judging their credibility, rather than through any need to understand what you're talking about'. Ho-hum.

TM's are definitely valuable, maybe even aspirational in their effect, but they also seem to attract alot more empty, useless (over-priced) bulls**t than their technologically-directed counterparts. Some of this is there in the question at the conference.

I, for one, would (anonymously :o) ) tend to agree with your originally stated view. TM's might help businesses (and speculators) to generate more cash for themselves, but I remain unconvinced that, overall, they encourage people to aim to improve the human lot (public good) through the development of physical things.

Finally, there is a not-dissimilar distinction that arises with the use of the term 'technology company' to describe either
i) a company that (tries to) design, make and sell things (or services) of use to people or
ii) a company (e.g. a dot-com) that uses technology (e.g. internet technology) to essentially sell things (or services) more efficiently.

In our last two-to-three-decades of finance-driven capitalism, those who have won through have been the speculators (& bulls**t-merchants in the pejoritive), alongside the prevailing view that macroeconomic power lies most naturally in the hands of financiers and their lawyers and therefore everything must be phrased in terms that these two sub-groups of our population uderstand to be worthy of investment (= Peter Mason's 'viable' above?).
Following on from the global financial crash, is there any chance that those who notice the bulls**t might get up the collective nerve to name the bulls**t as such and that we might move forwards to a more pluralistic capitalism in which it really does matter whether you can do and deliver what you say you can?

If anybody ever got this far, congratulations/apologies for the unfortunate stream-of-consciousness style.

Anonymous said...

This and related themes have perplexed and also greatly frustrated me in the past.

There follows a bit of a rant (apologies) on a related theme...

I have not infrequently heard, in international corporate contexts, 'IP lawyers' (i.e. generally straight-legal-(&-not-technologically)-qualified colleagues, at least outside of the
US - as opposed to patent attorneys around the world) explain earnestly to clients/colleagues that all IP is essentially the same - i.e. anyone who can cope with trademarks can easily cope with all technology/patent matters - and therefore that 'IP' must all fall under the corporate legal department's control/budget and/or, for outside counsel, must be billed at essentially the same $-rates regardless of relative case-complexity and/or - as in your example at the talk - that all IP serves to achieve the same benefit (e.g. innovation).

Personally, I do not see a benefit to a company's business in trying to pretend 'all IP is the same' when it is palpably not in practice (as opposed to seeing a benefit to the personal Macchiavelian or economic dominions of such 'IP-lawyers').

This theme appears, amongst other things, to be one of the things that contributes to holding up setting up a single-jurisdiction European Patent Court with the related €billions/year savings to European industry - i.e. the theme that people with no experience or training in the area of patent litigation feel that they should be 'accessing the honeypot' as they see it (and even trying to exclude more experienced/qualified colleagues from supporting their clients more cost-effectively) on the basis that 'trademarks and patents are essentially the same & (apparently 'irrelevant') technological details may be dealt with via listening to 'experts' and judging their credibility, rather than through any need to understand what you're talking about'. Ho-hum.

TM's are definitely valuable, maybe even aspirational in their effect, but they also seem to attract alot more empty, useless (over-priced) bulls**t than their technologically-directed counterparts. Some of this is there in the question you got at the conference.

I, for one, would (anonymously :o) ) tend to agree with your originally stated view. TM's might help businesses (and speculators) to generate more cash for themselves, but I remain unconvinced that, overall, they encourage people to aim to improve the human lot (public good) through the development of physical things.

Finally, there is a not-dissimilar distinction that arises with the use of the term 'technology company' to describe either
i) a company that (tries to) design, make and sell things (or services) of use to people or
ii) a company (e.g. a dot-com) that uses technology (e.g. internet technology) to essentially sell things (or services) more efficiently.

In our last two-to-three-decades of finance-driven capitalism, those who have won through have been the speculators (& bulls**t-merchants in the pejoritive), alongside the prevailing view that the power lies naturally in the hands of financiers and their lawyers and therefore everything must be phrased in terms that these two sub-groups of our population uderstand to be worthy of investment (= Peter Mason's 'viable' above?).
Following on from the global financial crash, is there any chance that those who notice the bulls**t might get up the collective nerve to name the bulls**t as such and that we might move forwards to a more pluralistic capitalism in which it really does matter whether you can do and deliver what you say you can?

If anybody ever got this far, congratulations/apologies for the unfortunate stream-of-consciousness style.

ME said...

Due to the length, this is a two parter..

In the context of trademarks as legal rights, the link to “innovation” (whatever that is exactly) may be intuitively seen as a tenuous one, and certainly when compared to their more innovatively-oriented siblings (patent, copyright). Much though will depend on the scope of the individual right in law that is in question – because as a negative right, an IP right can be extremely anti-competitive (depending on use) and that cannot be pro-innovative. But this scope issue skates over the more fundamental issue of whether IP is, at all, linked with innovation. Economists continue to debate that question, and no clear cut evidence exists – partly because counterfactual observations are not very plausible anymore. Geography is also important here, i.e. compare the US and China. The prevailing law for IP assets usually reflects powerful lobbying by the IP powers that be to ensure IP is seen and packaged as innovative; and thus well-protected accordingly. But we simply do not know. Sadly, I see the presumption more as a matter of who has had the loudest voice. The Agreement on TRIPS is, to a fair extent, a case in point.

But putting all that age-old and overly-politicised discussion to one side, on the question of whether trademarks encourage and facilitate innovative market behaviour, some general points arise. Firstly, the sector and company size can be influential factors. SMEs, often thought of as innovation-hubs, are predisposed more to trademarks than other IP rights, partly due to cost and time factors. Many smaller companies do not have patents but still have technology, and still exhibit innovative behaviour by bringing variations of products and services to the market. Some “innovations” may rely on first-to-market, especially in fast-moving sectors with short-life cycles and/or fluid consumers. Almost all companies must advertise and trademarks are more essential for that process than any other IP right; period. Yet almost all companies have a brand or trademark of some kind. This says something too. “Innovations” must be sold of course. A “package view” of IP might therefore be more accurate than artificially separating each of the rights. Trademarks are possibly more essential to the market operating than patents; patents are certainly more important as to at what level (of innovation and speed) the market operates. Patents are not as intensive in the service sector for instance – where many SMEs live. And certain industries attract certain kinds of IP rights. Citing the examples of Apple and Google is relevant as they are important high profile businesses, but these kinds of operators are in the end a mere percentile of all that goes on. I do accept though that they have a disproportionate influence of us (for better or for worse), and many things that ebb and flow, including the law’s path.

A second point is that for smaller businesses or products with short life cycles, trademarks can be rightly seen as important. And to the extent such business are innovative, trademarks are part of the product mix. It is also worthwhile to split the conversation into pre-grant and post-grant. Many trademarks have existed without registration – in effect, without “propertization” by the law. Yet products and services still prevailed. There is also the discussion of post-right behaviour, and about the proper long-term innovative capability of IP rights, as negative rights – and whether they achieve real dynamic efficiency. That is very difficult to measure or even estimate, particularly over long protection spans. A good way of dealing with this whole question is to come up with accepted ways of defining and measuring “innovation” and specifically, in the “IP context”. Simple headline statistics are very unlikely to add much value. Quality and quantity considerations must be somehow mixed.

ME said...

Part 2.

Thirdly, trademarks do not mean that products are “good”, or necessarily innovative. Likewise with patents and less so copyright, an attached marker just means something has been created and is protected and is available for repeat purchase. The market decides what is innovative more than the law can. Laws tend to play catch up to technology shifts. What the law does do is facilitate a return on investment – upon for instance the breaking of a new market or the continuation of old market models (compare electronics and medicine, for example).

Fourthly, innovative companies – if we think of Samsung or Toyota or Vestas, tend to have wide IP portfolios across the globe, and this suggests all kinds of IP rights are important in different ways to different sectors and geographical markets. Trademarks may enable smaller companies to exist before large investments are needed, and so enable other more innovative behaviour to flourish at some future point. Also using the trademark of another – say a reputable advisor, might attract the finance or backing needed for higher risk innovative investments. Connected to this is that strong, well-placed trademarks (backed up by attractive packages) are much more likely to attract the smartest, most ambitious new graduates to the business, which over time may mean a more dynamic and innovative culture breeds.

A fifth point is that trademarks attract entrants to the market by advertising success. That may encourage innovative behaviour to get to the market and end up attaching to or distinguishing entrants from main successful players; provided new players feel that (abnormal) profits are available. Trademarks allow shorter investment cycles – i.e. a quicker return (than say patents); though of course technology will be needed in many sectors, but might be available for license, or more susceptible to reverse engineering.

A final point is that designs and utility models may be equally seen as innovative inducing – even though the latter is seen as a poor man’s patent. We must always recall that private actors basically decide what is going to be the latest innovation. These other, more accessible rights might provide crucial ways in. In the end, the other comment suggested, it comes down to reputation when we talk about trademarks. Whether a business or person is innovative in fact may have nothing to do with the perception of that same business or person among a hungry public. To the outsider, trademarks can signal a given level of performance – some companies invest a lot in selling that perception (even if they are not “innovative” in the classical sense). But that investment in itself may be seen by some as an innovation; and for many consumers who cannot afford the latest “innovations” of truly innovative companies.

I realize this comment has not, despite its length, addressed copyright... And that reflects that copyright, in my view, is the most tenuous of all the IP species in terms of “innovation” – reflecting a greater subjectivity of the creator in many cases, a greater flexibility in the law, and a lower return on investment threshold (perhaps?). Technology is more objective, as is product marking. One should also ask to what extent more than 70 years protection, or around 15 years for that matter (for patents post-grant), can possibly be an innovation stimulant; or rather a simple race to get the right to X, Y, Z. This argument does not work well for copyright. Still, even though trademarks can last forever they can fall more quickly than almost anything else (reputation is fickle). Trademarks can signal good stuff just as well as not-so-good stuff. That may be just the spur an operator needs to be “innovative”: fear of failure and people knowing who you are (or were)... "

Anonymous said...

Yep, I believe that's a good example of what I was referring to.

So, in summary, ME, your points appear to be:

1a. TM's are intuitively NOT linked to innovation, but maybe intuition is wrong
[& "counterfactual observations are not very plausible anymore"!?!].
1b. TM's are paramount in advertising and innovations must be sold, therefore seeing all IP as the same makes sense (?!)

2. 'Innovation' should be defined and measured quantitatively and qualitatively in 'the IP context'
[ed - not sure what this means - other than 'maybe we need to redefine the meaning of 'innovation' so that TM's are relevant to it'?]

3. IP rights exist to facilitate ROI, market decides what is innovative, not law.

4. Innovative companies often have TM's. TM's can be useful for creating 'credibility' to allow investment and/or attracting ambitious employees

5. Advertising creates dynamic market, therefore TM's allow investments with quicker returns

6. Designs and utility models also relevant. TM's are to do with reputation and perception.

7. Copyright is different.

and you conclude that therefore... TM's may be the spur that is needed to cause someone to be innovative
[ed - though I note, as Meldrew above, that in this sense TM's are no more related to innovation that Cash is].


NONETHELESS, THE OBSERVATION REMAINS ('COUNTERFACTUALLY'?) THAT PATENTS, UTILITY MODELS, DESIGN RIGHTS AND THE SOFTWARE/TECH-SIDE-OF-COPYRIGHT ARE CLOSELY-RELATED TO THE TECHNOLOGICAL WORKINGS OF PROGRESS & INNOVATION
AND TM'S ARE NOT,
DESPITE THEIR BEING LINKED TO THE REPUTATION OF SOME RELEVANT PEOPLE AND PRODUCTS.

Ah, if only you were not right that it may well be more "a matter of who has had the loudest voice", the world might be a better place!...

The Bright Spark said...

You can get trade mark protection just as easily whether your business is highly innovative or not, and being innovative does not (or at least should not) give your trade mark any greater level of protection. A trade mark is all about the source of the goods or services, and not about any particular quality of the goods or services, or the person providing them. The law of trade marks is therefore neutral as to the innovativeness of the proprietor - it gives no more rewards to innovative businesses than it gives to other businesses.

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