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Tuesday, 22 January 2013

Trade Mark Search Results and Client Behaviour: "Predictably Irrational"?

No matter how many times this Kat goes through the ritual, the mystery remains. The client comes to you for a trade mark search. "No" he says, "we are not using the mark yet. We are waiting for your advice." He specifies the goods and you then set about to check the proposed mark on the relevant trade mark database. You find that while there is no identical mark, there is one registered mark that is similar. In your professional judgment, there is 90/10 likelihood that the registered mark will be cited in examination (you are practising in a jurisdiction that still examines applications for relative grounds). If cited, you believe that there is no better than a 50/50 likelihood that you can successfully overcome the citation.

Given this estimated likelihood of success and the fact that the client has not begun to use the mark, you advice the client to select another mark. You are convinced that you have given sound, practical counsel. And then the push-back begins from the client. "The marks aren't really alike"; or "I know this field, no one will be confused"; or "what about three other similar marks that are registered"? If none of these manoeuvres works, there is a threat to take the matter up with the head of your department, or the firm's executive committee, or both. You reply, "But you have nothing at stake in the proposed mark; there is no use of it. Come back tomorrow with three alternatives. I am sure that we will be able to find a mark that can be reasonably cleared." Sometimes this advice is accepted, but sometimes it is rejected: "Just go ahead and file the mark."

I have long sought cogent explanations why clients resist what appears to be advice that is in the client's best trade mark interests. After all, there is an unlimited number of potential alternatives and the client has not generated any goodwill in the proposed mark. Despite this, there may be roughly objective reasons for the client's behaviour. Perhaps coming up with another name that is acceptable within the organization is not as straightforward as it might seem. Perhaps there is simply too little time to come up with an alternative name (selection of a trade mark not being the kind of decision that is usually made well before the results of the decision are to become operative). Perhaps rejection of the proposed name has internal political ramifications for the parties within the company who have proposed the mark.

But, for this Kat, the reason(s) why clients tend to push back on an unfavourable search report, even though there is little or no objective downside to the client's accepting your advice, seem to more psychological in nature. One way to view it is to say that the client has irrationally "fallen in love with its trade mark." While there is a metaphorical attraction to this characterization, it still seems analytically unsatisfying. Perhaps a more compelling way to view the matter is by reference to the concept of the "endowment effect" as developed within the field of behavioural economics by such scholars as the Nobel Laureate Professor Daniel Kahneman of Princeton University here (and his frequent collaborator, the late Professor Amos Tversky here), Professor Richard Thaler of the University of Chicago here, and Professor Dan Ariely of Duke University here.

A pithy description of the "endowment effect" (I believe that Professor Thaler coined the term) states as follows: "Simply put, the endowment effect says that once you own something you start to place a higher value on it than others would" (Montier 2010, p. 194).

While studies on the endowment effect have focused on the behaviour of persons in connection with their ownership of property, as the quote above suggests, the notion would seem to be of broader applicability. As applied to a client's behaviour with respect to a proposed trade mark, the argument runs that some form of personal affinity has developed between the client and the proposed name, a quasi-proprietary relationship with the name, if you wish. As such, the client, faced with a legal opinion to jettison the proposed mark, is more likely to value the proposed mark more highly than do his legal counselors--hence the push-back. Such behaviour is therefore predictable under the circumstances, even if it does not appear to be wholly "rational" (in the words of the title of Ariely's 2008 best seller, such behaviour is "predictably irrational").

Seen in this light, there is a bit of solace for this Kat as he once again gnashes his teeth in discussing his search results with the client. While this process is unpleasant, at least this Kat has the feeling that he is not alone.

More on the endowment effect here, here and here.

12 comments:

miw said...

The search for a new product name can be extremely complex and the number of reasonable names often are in the single digit numbers. The trademark search is done on the top candidate. The mere process of picking a top candidate creates a certain level of buy-in from senior management. By the time the search results arrive, it is hard for the decision makers to go back and redo the product name decision process. Perhaps you should consider advising your clients to conduct trademark searches on a number of alternatives prior to the decision making process by the client.

Mark said...

Some clients want a specific legal opinion, and if they don't get it they try to negotiate with their lawyer for a better one. Firm handling with clear explanations (eg as to why the legal system doesn't work the way they expect it to) are often required, in my experience.

Anonymous said...

People have lots of ways of avoiding what they don't want to hear. Your article gives a very rational explanation of what might be happening when clients don't accept advice. However a lot of human behaviour is not that rational, and it's difficult to understand that fully if you look for rational explanations for what's happening. We have a lot of assumptions of how things should be, and we often want them to be a certain way. When that is challenged we find ways of clinging on to our version of reality.

MaxDrei said...

I think the Endowment Effect is at least as all-pervading and strong as that so-called Confirmation Bias which skews the assessment of evidence.

So, will our negligence law in time come to expect the averagely competent trademark adviser to append to her clearance opinions a standard sentence along the lines of "I suggest your company makes allowance for the Endowment Effect, when deciding which mark to adopt."

We live in interesting times. Good piece Mr Wilkof. Thanks.

Anonymous said...

Neil, the fact that you are asking this question nicely illustrates why as clients we prefer lawyers with in-house experience or secondments.

In any organisation you have to get consensus of many other people. By the time the attorney is instructed to register the mark, it will have been created by a marketing team. They are convinced that the brand that they have come up with is a work of genius. They will have hard fought agreement from people all the way up to the CEO and board, and this is probably the only one of many many suggestions that has survived that process. You won't change their minds now by telling them there may be problems with registering the mark in one country out of 100.

Anonymous said...

Also happens in the field of patents, Neil. Clients have often invested so much of themselves in "their" idea that they cannot bring themselves to see that it is simply not patently distinguishable from someone else's idea. This happens even in cases where the client's idea is clearly not novel - "Aha, but theirs doesn't do this...". For which I say, thank goodness for the UKIPO and its cheap search - for £150 you can file (and make the client happy) and 4 months later have something to wave under his/her nose.

Eva said...

This post describes EXACTLY what happens in an IP lawyer's everyday work. Even when one puts all reasoning and background and the "psychological analysis" you have explained in your post to the client, also in writing, it is sometimes to no avail. Not even firm handling helps with clients who are terribly in love with their new trademark. Anyway, it is better when a client can make an informed decision and is braced for the potential onslaught. If clients are set to go against all recommendations and warnings there is nothing you can do - only stand by for the opposition procedure.

Anonymous said...

The "in-house" comment above reminds me of a case in a Big Pharma company, where the marketing people demanded that a certain mark be reistered for a new drug. When it failed to get registration, the Big Cheese demanded that the trade mark attorney responsible be fired immediately. An investigation revealed that the attorney in question had advised all along against the chosen mark and had proceeded only when his arm was twisted off. So the Big Cheese mellowed and satisfied himself with merely having the attorney demoted!

Roufousse T. Fairfly said...

While studies on the endowment effect have focused on the behaviour of persons in connection with their ownership of property, as the quote above suggests, the notion would seem to be of broader applicability

Staying in the IP field, one can make similar observations in the patent field. The private inventors are the, er, most entertaining ("it is NOT a perpetuo mobile", "the Patent Office SOBs are out to get me", "the examiner is illiterate/drunk/incompetent", "we would like to arrange for a demonstration of our invention"), but you will also see similar denial of reality or stubbornness on the part of megacorporations. Factors such as fear of losing face, deliberate corporate strategy, general cluelessness, internal feuding, play a role.

Benoit Fallenius said...

The client has two "good" reasons to not accept the attorney advice:

1. The client does not understand the implications of a confusingly similar mark.

This I believe is a communication challenge for the attorney.

2. The naming process the client has been through may have taken months. Due to: A) Creative reasons. B) Internal process. C) Finding a domain name you can afford.

To address this the attorney has to come in early in the naming process or the client needs to use a good free trademark search tool, like Markify, that will help him/her point out confusingly similar trademarks.

Anonymous said...

I greatly enjoyed reading your post today. How true your observations are Neil!

I completely understand and share your sense of puzzlement as to why client’s pay for sound legal advice but fail to follow it.

From my own experience I’m aware that clients do, very often, appear to become more attached to the new name they have chosen after you counsel them against the choice! The adviser then has to consider how best to reconcile the client’s objective to keep the name they have selected with the adviser’s personal sense that it will either be difficult to register or likely to be challenged by another user (whichever is the case) both of which are likely to result in greater costs for the client and which the client very often either resists or resents!

Does Dan Ariely offer any suggestions in his book as how one might set about reversing the endowment effect?

Anonymous said...

In terms of clients not following one's advice, I've found the most difficult situations to be where the patent case is then transferred to another organisation, and then as the patent attorney one has to explain to one's new client why the case was filed (which is normally shortly after the new client has discovered it is worthless)

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