Lecture 25: The Economic and Legal Values of Trademarks

[Music] What is a trademark? A trademark is an intellectual property right
granted by a government to an individual, business, or legal entity that creates and
uses a distinctive word, name, symbol, or device to distinguish its products or services
from those of any other entity in the marketplace. The original purpose of a trademark was to
indicate the origin of goods and services. Trademarks protected the public by preventing
mistakes, confusion, or deception by those who would “palm off” their goods as those
of another. But it also served to protect the market and
reputation of the producers of goods. As modern markets evolved, trademarks also
developed into guarantees of quality as well as potent marketing and advertising devices. Trademarks as Branding Consider, for example, the role that Nike’s
“Swoosh” logo plays in its $106 billion shoe, equipment, and apparel business. In 1971, Nike founder Phil Knight paid graphic
design student Carolyn Davidson a mere $35 to design the “Swoosh” logo for the fledgling
new company. According to the Portland Oregonian newspaper,
when Knight saw her design, he reportedly told her, “I don’t love it, but maybe
it will grow on me.” Nike attorneys nonetheless registered the
logo with the U.S. Patent and Trademark Office on June 18, 1971. Today, this one logo is estimated to be worth
as much as $20 billion, and is recognized around the world as a symbol of Nike’s quality
workmanship and design. Indeed, its vital role in protecting Nike’s
market share and reputation explains why the company so strenuously protects its trademark
rights from being infringed by counterfeiters. As for Carolyn Davidson, Phil Knight gave
her Nike stock in 1983 that is today worth more than $850,000. How are trademarks different from patents
and copyrights? Trademarks vs. Other Intellectual Property
Rights Trademarks share with other intellectual property
rights the power to encourage and reward creative enterprise. Trademarks also share with patent rights and
copyrights the public policy goal of marshaling the benefits of creative endeavor—in this
case, the distinctive branding of one’s products and services from those of others—to
the public good. They do this by protecting consumers from
deception and encouraging sellers to provide quality products. But trademarks are different from other intellectual
property rights in three key respects. Congress and Trademarks First, although the Constitution grants Congress
the right to legislate on patent and copyright, it does not expressly grant Congress the right
to make trademark law. The legal foundation for trademark law lies
in the Commerce Clause of the Constitution, which gives Congress the authority to regulate
interstate commerce and enact whatever “necessary and proper” legislation is required to do
that. Second, trademarks are different from other
intellectual property rights in that they are not limited in duration. Patents and copyright are granted only for
limited periods of time because society benefits by putting an invention or literary work into
the public domain once the inventor or artistic creator has recouped his or her costs of innovation
and been rewarded for his or her pioneering endeavor. Trademarks, however, never hinder the sales
of other products or services, so they are granted in perpetuity so long as they are
not abandoned by the trademark owner. Trademarks Mean Business And finally, trademarks exist only in conjunction
with commercial activity. An inventor may receive a patent for a new
invention and never employ or “practice” that invention in a business or research endeavor. Similarly, an author can receive a copyright
for an original literary or artistic work and yet never publish, display, or sell it. A trademark, however, cannot exist by itself,
separate from commercial activity. Thus, a trademark cannot be obtained by mere
adoption. It can only be acquired through commercial
use, or in anticipation thereof—for example, through the sale of goods and services.

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