Friday, February 22, 2013

Notre Dame 3

Irina Manta (Hofstra), Hedonic Trademarks

Bill McGeveran: disconnect between aspect of meaning of mark that lawyers care about and aspects that marketers care about. Manta is trying to focus our attention on the tertiary aspects of meaning: not just producers/mark owners but how consumers think about the mark.

Concerns: slippage between the is and the ought in the paper/critiques of other aspects.  Search costs theories and responses to them: McKenna/Sheff—those are ought rather than is projects.  Search costs is attempting to be somewhat more descriptive, at least insofar as it accurately captures courts’ rhetoric.

When we talk about preserving the hedonic signal sent by a mark, he thought about the Academie Francaise trying to continue to control the French language and prevent its bastardization by other languages. And about how which nightclub is the coolest in NYC is always shifting, and how the bridge & tunnel people always find it and ruin it for the hipsters and then the hipsters move on.  Wondered about advisability or even possibility of having a static, permanent hold on “hip.”  Protecting the coolness of the mark from encroachment seemed like an unwinnable task, if this is a normative project.

Relatedly, if you talk about a presumption of justified intervention, you have to think about what costs exist related to compliance and enforcement.  Would like to see more discussion of that.  If you can’t demonstrate a market failure, why not let fluid markets distribute hedonic benefits rather than having legal static monopolization? People might enjoy eating a Gucci burger, as the paper acknowledges.

Eric Goldman (Santa Clara)

Big paper, big claims.  Means lots of avenues of attack.

Maximizing social utility: are you counting everything that should count?  You acknowledge that the utils of the consumers of the defendants’ products count, but then seem to discount them. It’s also not just the utils of the consumers, but the innovation that might follow. We don’t know what we don’t have yet, and that’s hard to figure out.

Common objection: there are too many rights; costs of dealing with them create problems of deadweight loss as well as overall decreased utility. 

Say more also about self-dilution.  Bad brand extensions, reformulations: reduce consumer hedonics, but self-inflicted. If goal is to maximize hedonics, then we need to follow Dillbary’s lead and say that might be actionable.

Don’t know how to distinguish hedonic loss from new market entrants and hedonic loss from criticism: the playground criticism of “you’re a loser because you’re wearing that brand.”  Brand criticism probably does more to interfere with hedonic benefit from brands.

Normative v. descriptive: what’s the principled way to set the boundaries?  Maybe we are going too far in protection even if we don’t account for hedonic benefits formally.  Example: LV v. Hyundai.  Hard to reverse engineer what makes brands more or less likely to create the benefits you want.

Would focus more on descriptive, with only normative point being that a cost benefit analysis has to account for consumer hedonics, which might be undercounted today.  

Side note: Gucci burgers do exist on the market—if you make a claim about a specific product, it’s worth noting that such exist.

Manta: doesn’t disagree with very much here. The normative/descriptive slippage here is a fair point.  Establishing a framework here.  Not a pure free riding argument.  There is an underlying understanding: why should some people be able to gain benefits as others when they didn’t invest the same? (Producers or consumers?)  Also agrees that First Amendment values are important; her First Amendment argument is just meant to be descriptive: TM isn’t going anywhere. For most of these things, we don’t know what the hedonic loss is.

Goldman: the LV basketball isn’t a real product: how do you calculate that?

Sheff: a few women may benefit from the Gucci purse, but the thousands of women who want the counterfeit may gain utility from having them—this is a distributive question separate from optimization.

Manta: if hedonic theory bears out, some level of straight-up counterfeiting might be beneficial compared to other things.  What happens when people assume that you’re carrying around a counterfeit even if you have the real thing because of the high level of counterfeiting.  Can’t ignore that there is a harm. The Guccis of the world we may never see because of counterfeiting, investment in building up a prestige brand.  (See again Yi Qian from last time at Notre Dame.)  This might be a harm because we don’t have the data.

Goldman: if that’s your route, make that the only point in your paper.

RT: I think one reason people are having the normative/descriptive conflict here is that the current version has insufficient attention to hedonic gains.  The empirical project Manta suggest isn’t the full empirical account.  Manta says that we might be able to justify dilution by adding up total net utility, and suggests proving that by experimenting to see if a small group who likes the famous brand is negatively affected by a small use. That would, the paper suggests, be evidence that something worth stopping has happened.  At the very least you then would have to examine a different small group who might like the “diluting” product/use and see if they gain utility, and then estimate how many in the former group will see the diluting product/use per individual in the latter group.

One reason I am skeptical when Manta says “we have to admit that there is a harm” is the problem of the utility monster.  Why favor the wealthy consumer protective of the exclusivity of his Porsche over the poorer consumer whose marginal utility of wealth, not incidentally, is likely to be higher?  (Barton Beebe has of course covered this in some detail.)  It’s good to favor consumer utility, but which consumers?

As far as I can tell Manta’s response is that defending the utility monster/status goods isn’t Manta’s project, because we already have trademark law.  But what that law is and ought to be is precisely the question for discussion.  If you argue “dilution law is good because it protects hedonic value” and I say “but that protection redounds to the benefit of utility monsters, and that’s bad,” it’s not a persuasive response to say “well, we have dilution law and need to rationalize it somehow.”  Maybe I’m unlikely to win my First Amendment argument today, but I want to keep it alive for tomorrow (remember, First Amendment protection for defamatory speech was initially shocking, and the Commerce Clause argument against health care reform wasn’t colorable), and also even courts unwilling to strike down trademark law are often willing to listen to arguments about the role free speech principles should play in defining its limits.

Why is market preclusion a harm?  Producers can still enter those toilet paper markets if they want to—but they might have to do so under a different brand name.

McKenna: if hedonic value gives form to TM law, you’re coming from a position of rights in gross, and now you need to tell me what the limits are, which you can only do by talking about countervailing interests.  If you are instead trying to give a description of something that should count as harm, then it’s not as incumbent on you to identify the limits. Now, paper reads like unifying theory, which provokes the “tell me the limits!” reaction. 

Manta situates TM with patent and copyright, with the goal to incentivize. He just rejects that as an account of what TM does and should do. That is beyond a descriptive account; that is normative. You can describe certain changes over time as influenced by that idea, but you can’t justify the history and scope that way.

Manta says people who buy Gucci burgers aren’t getting much benefit from them. If courts etc. call it free riding, they must be getting a benefit.  If they aren’t getting a benefit, it wouldn’t be a free ride.

Hedonic value is not found value. It frequently comes from excluding other people from the value. If you do it as an empirical matter, are you assuming hedonic value is finite.  If it goes away from Gucci, it just disappears.  But that’s not how consumers behave.  Consumers fill their hedonic needs some other way. Unless you think consumers can’t do that, it’s hard to understand what happens/just becomes a distributional question. Understands why the brand thinks of it as lost utility, but from overall standpoint it’s not clear why it matters if utility doesn’t dissipate.

Empirical assumption that hedonic value disappears by Gucci burgers is belied by the existence of thousands of Tiffany’s restaurants. There are a zillion such restaurants.  It suggests that for marks that are likely to have great hedonic value, it’s very unlikely that third party use will detract from that, and the most likely source of harm is speech/tarnishment/criticism that’s outside this model.

Manta: Among other things, she thinks trademark and copyright may give rise to the same kind of consumer experience; is willing to think of them as the same from this perspective. 

Free riding: could be taking away more than it is producing: if the benefit is small.

McKenna: but the benefit to the producer depends on the benefits to the consumers on that side.

Manta: but it could be utility of 10 while costing the producer 50.

Finity of hedonic value: might be finite in some individualized contexts.  Especially luxury goods. Somebody will win and somebody will lose.

McKenna: people have developed brands for a while without dilution protection.

Manta: internet changes things.  If we allow free riding, eventually there will be nothing left of any brand, at least that’s the story.  (But that’s a ridiculous story.  Especially since there’s no dilution protection for nonfamous marks in many states, and those states have brands.)

Sheff: what’s the net effect on societal value of not having brands?  Could be negative, but it could be positive—if you had to get your kicks elsewhere than brand consumption.

Manta: might be harmful to have a chain of Tiffany restaurants with bad food.

McKenna: we undoubtedly do have such a chain!  (He made no comment about quality, but Goldman noted that the reviews on Yelp did not average 5 stars.)

Montgomery: difficult for consumers to make connection between Tiffany jewelry and Tiffany restaurants without further connection (as in color). Goes back to how many source identifiers the brand is using.

Sheff: Does agree that it’s a fool’s game to distinguish hedonic from other qualities; that said, there are testable qualities.  There is nonfat yogurt, and if high-fat yogurt is advertised as such, there will be deception. Now, people may get hedonic value from eating the yogurt and thinking that it’s nonfat—there’s a Seinfeld episode about this, where Newman ends up mad that he found out the truth—but that’s not the end of the matter.

Yen: Ask how much hedonic loss is already captured in existing misappropriation theories of TM; producer may capture it in the price of Gucci bags.  Loss valuation for counterfeiting may also count that.

Some people get hedonic value from rulebreaking: hard to shake that out.

First Amendment: Hurley—it’s possible to make an argument that control over admission to the Boy Scouts or the St. Patrick’s Day Parade is protected by the First Amendment—why not allow TM owners to control admission to the Gucci club?

Heymann: takeaway was that our notion of harm wasn’t capacious enough.  What is the pleasure here?  Is it related to exclusivity?  Identity formation?  Confirmation of wealth or status?  It would help the discussion of why TM law should take more account of it.  (Interesting observation, especially since law is usually quite terrible at valuing pleasure. Compare this paper. I might suggest that it is precisely ambiguity about what kind of “value” we’re protecting that has allowed courts reflexively to protect it with respect to status/luxury goods, or at least an idea that status is a different and better form of pleasure than other forms of pleasure.)

Rao: We sometimes forget that hedonic goods can have explicit functional value.   Fancy car eases my search for a certain kind of person to date.

Montgomery: we talk much more about individual value in marketing than social value; everyone has unique hedonic/functional needs.  The individual sees the product as a whole, and if the marketing improves the overall value then the individual experiences that increase.

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