Knock-offs

[issackd]

I decided to post this here to get the greatest number of political responses - rather than pure economic responses.

I recently received a letter inviting me to attend a conference in Toronto on why knock-offs are the devil and how they need to be deleted from the pages of history, yada yada...

I'm new to Objectivism and wonder if the following line of thinking is correct:

Some general principles first:

1. Knock-offs are produced more efficiently than the "real" product.

2. Knock-offs rely not on their quality, but on their low price and relatively similar name to major brands.

3. Because of knock-offs, major brands are losing money.

4. Instead of producing more efficiently, major brands complain to the government to deal with such knock-offs - essentially shifting the burden onto the general population (whose taxes go to subsidize the fat, lethargic major brands which successfully complain).

My thought process is this: knock-off brands such as Rodex, Bolex, etc... are bought because they look the same as the major brands and cost less. Customers usually know when a brand being peddled is a knock off: whether it's sold on 5th Avenue or on the park bench in the Bronx should be a hint. There is nothing inherently wrong with knock-offs unless they violate the actual NAME of the major competitors, such as a cheap version of Nike, when that name is legally protected. Noke, Nikee, Nuke - are all fine by my standard: caveat emptor, after all. Therefore, such products do not present a threat to anyone except the major brand being imitated. Such brands, like Nike for example, should strive to compete against such knock-offs. They can advertise anti-knock-off media campaigns which stress the higher quality of the major brand. They can also attempt to produce their product more efficiently.

It is up to a business to ensure that it remains a viable competitor. After all, if the only difference between Nike and Nikee is that Nike shoes last 1 year longer, a non-brand-sensitive individual would hesitate to buy Nike if the price were too high. Understanding that brand-loyalty is anti-capitalist, there is nothing wrong with introducing Nikee into the market and letting it compete with Nike. When Nike goes crying to the government that its livelihood is being threatened, thus prompting a big response which is paid for by the citizens of the country, Nike only further hurts itself in the long-run by dampening its competitive abilities.

Any of that make sense?

Issack D.

[EC]

Sounds good to me, although, I think it would be funny watching government running to help Nike. What would be next government subsidies for Wal-mart? Man, that would tick-off the anti-Capitalists of the world.

[Groovenstein]

There is nothing inherently wrong with knock-offs unless they violate the actual NAME of the major competitors, such as a cheap version of Nike, when that name is legally protected. Noke, Nikee, Nuke - are all fine by my standard: caveat emptor, after all.

Under U.S. trademark law, the key inquiry in a trademark dispute is whether there exists a "likelihood of confusion" between two marks. Right now I see three possible objections to this approach:

1. A general objection, namely, that trademark should not exist at all. Your word choice suggests that you would not agree with this.

2. An objection to the standard used, namely, that "likelihood of confusion" is not the proper principle for judging trademark claims. I can not tell whether you would agree with this, because I am not sure from what principle you derive the idea that only infringement of actual names should be grounds for suit. Can you elaborate on this?

3. An objection to application, namely, that courts interpret "likelihood of confusion" incorrectly. You have said nothing to suggest this. It would require some thorough analysis.

[Edit: For your reference, here is a particular statute allowing a trademark owner to sue an infringer. Note that (1)(a) makes liable any person who uses a mark in such a way as is "likely to cause confusion."]

Edited January 5, 2006 by Groovenstein

[issackd]

1. A general objection, namely, that trademark should not exist at all. Your word choice suggests that you would not agree with this.

I did not mean to imply that I support or do not support one system over the other. I merely wanted to deal with the current reality that trademarks do exist... you've brought up an interesting point and I'll have to consider whether I actually do support them... (I'll do that now... as I write...)

If businesses are legally people, then trademarks would be akin to protecting your full name from being copied by someone who wants the same job, same wife/husband and same position you have in life. Such a person would seek this goal NOT by producing more efficiently, working harder, etc, but by seeking to trick people into thinking that your achievements were his own (just like Nuke or Nikee rely on people mistaking them for Nike).

In a world where all individuals are rational, such a person would not exist: an individual who seeks to place theft of ideas and reputation above effective production. Trademarks would be unnecessary.

Unfortunately, the world is not perfect. One's name connotes one's abilities, experiences and past successes/failures to other people. For example, when I hear about W. Buffet, I have an impression of a stock guru. If I hear about F. Castro, I imagine a despot. In our world of scammers, where some individuals prefer to deal with others not through reason but through lies and coercion, I would have to support trademarks to protect, NOT the customers, but rather the business whose name is being stolen.

Without such protection, I imagine a situation where crazy, fundie, new-age-hippy groups copy the names of businesses and make "press releases" that they eat babies, in order to scare customers away. Also, I would imagine people here would not take it kindly if in 1970, someone by the name of Ayn Rand (not the original, but a copy-cat) began writing articles about how truth is subjective and life is about mysticism and worshipping mushrooms.

I guess my conclusion is that I support trademarks if only because I believe the alternative (no trademarks) would leave businesses legally unable to respond to trickery, deceipt, and coercion. It's 3AM right now... I may have logical leaks - feel free to critique away!

Issack D.

[JMeganSnow]

I think that trademarks are necessary because your business reputation is one of your assets. As far as knock-offs go, I am against them, because it is my understanding that a knock-off is supposed to be so poor in quality that it could not be a profitable product unless it was mooching off the similarity to another high-quality product.

If Nike and Converse happen to make two near-identical tennis shoes, the Converse shoe isn't going to do better (except by coincidence) because it appears similar to the Nike shoe. Both brands stand on their own name. But if you go out of your way to imitate everything about Nike's product, including their name (apart from one letter), then you are counting on their reputation to increase the value of your product. You're mooching.

However, it is probably not necessary for prestige brands to take legal action against knock-off-ers. You may temporarily lose market share, but the cheapos will be defeated by their own inferiority on a free market. If you think long-term, you realize it's not necessary to fight these people with guns: you fight them better with your own products.

[softwareNerd]

It's mooching, and it could be infringement of intellectual property. A Nike supplier somewhere in the far-east might resist the temptation to dump a few extra batches on the gray-market, but he's kept in check from doing so not just by his long-term self-interest but also by legal agreement. With simpler products, another factory might easily be able to ramp-up, source raw-materials from the same places, and be churning out pretty good imitations shortly after the "real" product hits the market. It's not as easy as copying music or books, but there are many products where it is not that difficult. Using the law to stop this is sometimes a big part of the defense.

[DavidV]

In the course of innovation, all products and technologies are eventually copied. The question politically, is how broad any monopoly privileges should be, and ethically, how soon and how closely competitors should copy desirable innovations.

I am not sure about the political perspective, but ethically, I think it’s acceptable to imitate other products as long as you are honest about it. For example, I buy imitation Raisin Bran cereal and imitation Gillete shaving cream. Both companies make it clear what product they are imitate, yet are easy distinguish from the original.

By the way, reputation is not an asset in the legal sense – or at least, should not be. One does not have the right to be free from criticism, or from lies. It is only when the consumer is harmed by lies that a competitor can (or should) be liable.

[JMeganSnow]

By the way, reputation is not an asset in the legal sense – or at least, should not be. One does not have the right to be free from criticism, or from lies. It is only when the consumer is harmed by lies that a competitor can (or should) be liable.

Criticism no, lies yes; after all, that's what fraud is. Look at what happened to Wendy's when that woman cut the finger off a corpse and dunked it in her chili. I don' t know that they sued her (even though they lost money), but she was arrested.

[softwareNerd]

... but ethically, I think it's acceptable to imitate other products as long as you are honest about it. For example, I buy imitation Raisin Bran cereal ...

You mean, as long as there is no rightful patent on the IP?

[DavidOdden]

Criticism no, lies yes; after all, that's what fraud is. Look at what happened to Wendy's when that woman cut the finger off a corpse and dunked it in her chili. I don' t know that they sued her (even though they lost money), but she was arrested.

Lies are different from fraud. Just telling a lie is not fraud -- fraud is when you trick someone into giving you something material in exchange for something else, and you are dishonest about that thing in exchange. House brand Raisin Bran is not fraud, unless it is actually represented as being real Raisin Bran. The only legitimate claim I see in product-counterfeiting involves defrauding of the consumer, and has nothing to do with the brand-name manufacturer. (A note on finger food women: she didn't just lie about finding a finger, she filed a legal claim against the store in an attempt to extort money from Wendy's).

[shane]

I think you would be hard pressed to find a person who is likely confused by Nike and Nikee, and if someone does unknowingly buy a knock-off without any provocation from a seller they deserve to be ripped off.

If the seller does proceed to say "this is genuine Nike product" then that would be fraud: an intentional and premeditated lie intended to make money off somebody else's hard work.

The knock-off isn't fraudulent, doesn't impinge on trademarks, and is a sign of a healthy and productive economy. But I do not see them as an important value because they cannot exist without something to knock off. Still, they are producing, have jobs, and are creating markets. Ultimately if they didn't have any brands to "knock-off" they would be peddling cheaper shoes or bananas or whatever. Don't see any evil in that.

[Lemuel]

What about the second-hander argument?

Sure, eventually variations will come out after an innovative poduct hits the market. I don't think anyone can accuse the multitude of MP3-player manufacturers of "second-handing" Apple, just because the iPod went big quick.

But if I had made an almost identical product to the iPod, which looks the same but lacks the Apple logo, is made of cheaper components, and called an "aPod", am I not guilty of being a second-hander?

Is there not a moral argument to be made against this kind of practice?

[DavidOdden]

But if I had made an almost identical product to the iPod, which looks the same but lacks the Apple logo, is made of cheaper components, and called an "aPod", am I not guilty of being a second-hander?

Is there not a moral argument to be made against this kind of practice?

I think you should leave the question of cheaper components out of it, because the point would be the same even if the product were made of more costly components. I agree with that judgment, assuming that the similarity is not "metaphysically required". That is, if you're going to make a box of wheat-flake type cereal with rasins, then the content will look very much like Raisin Bran. The box design is another matter. To the extent that it strongly resembles Raisin Bran ® for the sake of invoking thoughts of the virtues of Raisin Bran ®, it is an attempt to gain the unearned -- a particular kind of respect. OTOH a brand name "Reason Brain" that claims to be the breakfast food that increases mental accuity is being funny, which is quite moral.

[erik]

There are actually companies out there, mostly in Asia, that copy the name and all. Companies like Bolex at least are not copying the name exactly. I think there is still case for the name or item being too close a copy though. Where that line is should be left to the court system.