Barriers to Entry and Status Marks

"The Piracy Paradox" disclaims any attempt to be normative. But of course it's the normative implications that are most intriguing. Let me apply the paper's insights to an issue I've been contemplating, namely, status trademarks.

I'm referring to the marks themselves, not to design elements in a blouse or coat that may achieve distinctiveness as trade dress. As the authors note, rapid turnover in fashion design is probably good for the fashion industry, and like the authors I'm agnostic about whether rapid turnover in fashion design is bad for the populace. (See note 89 of "The Piracy Paradox.") Fashion has an aesthetic element that makes investment in its renewal potentially valuable for society as a whole. What I'm less agnostic about is the lack of societal value in status marks themselves.

To the extent marks that such as Rolex and Rolls-Royce are valued for their own sake, rather than as source indicators, it seems wasteful to spend social dollars on their protection.  For reasons, I refer you to Veblen, to Ralph Brown on "Advertising and the Public Interest", and to Felix Cohen's on "Transcendental Nonsense."

Admittedly it can be hard to separate out status-maintenance from source-protection in the ordinary case, so some legal protection for status is inevitable if we're to have trademark law at all. But with federal anti-dilution law Congress has gone out of its way to safeguard the status element.  It's one thing to accede reluctantly to inevitable human traits like status competition; it's another for the law to take a stance that seems to prize and elevate those traits.

Law does have an expressive function. So it's unfortunate to see judges and legislatures going out of their way to validate behavior that (in my view) is a counter-productive leftover from the prehistoric past. This is an area in which we shouldn't simply accede to the 'consumer sovereignty' notion of 'give the people what they want': no one wants to waste money, and the self-defeating nature of status-competition cycles is well known. People spend a fortune just to stay in the same place in the status hierarchy.

So I've tried to think of a social purpose that anti-dilution law might serve. The best argument I've been able to come up with is this:

First, assume that people will inevitably show the behavior that Veblen ridiculed. That is, let's assume that the amount of status competition is fixed. (Without this assumption, we'd have to account for the possibility that the expressive function of law would encourage even more status competition.)

Second: given some wasteful but inevitable behavior, the law might seek to reduce its cost. One way to reduce the cost of achieving status is to make status production less costly.

Third: Assume that status is merely relative, and that any one mark is equal to any other mark, so long as the marks carry equivalent status. If so, competition among marks will not produce a "better product" (that is, a higher-status mark). Nor, given the nature of luxury goods, will competition among status marks produce lower prices for consumers. Thus, the usual virtues of marketplace competition may be absent.

Fourth: Allowing anti-dilution protection for marks like Rolex and Rolls-Royce helps keep existing status marks powerful. That may mean that newcomer companies and newcomer marks waste less money than they otherwise would in seeking to overturn the market leaders. That is: the very "barrier to entry" characteristic that most worries us in most trademark areas, may be a virtue for status marks.

Note that in the Piracy Paradox paper, the authors note that spread of designs would occur even if designs were highly protected by IP, because the owners of designs could and would -- through bridge brands or licensing--  issue their designs in low-priced versions whose presence would push the fashion cycle into turning over yet again. But the authors do not contend that high protection for trademarks would yield the same behavior. Trademarks are hoarded, not dissipated; stability, not turnover, results from their protection.

So: if status is merely relative, and competition among status marks merely increases advertising budgets without producing any net gain for consumers, then anti-dilution protection may reduce wasteful expenditure.

All that being said, the best defense I can construct for anti-dilution law looks like the defense (articulated best by David Friedman) for trade secret law and (articulated by Richard Epstein) for blackmail law: Given that people will inevitably engage in wasteful behavior-- wasteful arms races in industrial espionage, 'digging up dirt only to bury it again' in the case of Blackmail, Incorporated-- the law might as well step in.

But when the law steps in, it has effects other than reducing wasteful expenditures. For blackmail, the law stepping in causes no problem: blackmail is an undesirable activity on many grounds, so for the law to stamp it as 'evil' merely induces good behavior. For trade secrecy, however, there are some bad side effects: notably, the law seems to increase an individual company's sense of 'entitlement' over things that the law might otherwise and desirably put in the public domain.

Legal protection for status marks functions, I fear, more like trade secrecy law than blackmail law: its side effects are bad. Providing status marks with anti-dilution protection may increase the perceived legitimacy of spending one's life pursuing a competitive ranking. In the real world, the amount of status competition isn't fixed; I fear legally protecting status encourages real people to invest more than they should in its pursuit.

Comments

[Frank]

Terrific point on "entitlement" here. We already have so many areas of life that permit the commodification of advantage. Why add another?

Inspired by Robert Frank & Michael Walzer, I make that point a bit more generally here:
http://madisonian.net/archives/2006/10/07/a-sketch-of-my-paper-on-ppei/