Cost-benefit analysis of Trademark protection
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Outline
Cost-benefit analysis of Trademark protection
Introduction
Thesis statement: Trademark protection provides an effective platform for business activities in the marketplace though creating and developing a strong trademark that enhances production of high-quality products. A. Limitations of trademark protection 1. The use of the actual person’s name in the business can cause confusion in the business. 2. Fair use doctrine is another limitation applicable to trademark protection. 3. Import limitation. B. Advantages of trademark protection 1. Trademark reduces the search cost for the customers in the market. 2. Trademarks provide them with the incentive to produce high-quality products. 3. Trademark helps consumers identify the right product they want in the market. 4. Trademarks help the producers to reduce the cost of advertising their products. C. Analysis of the cost benefit 1. Sellers in the marketplace might have the same product that is produced with different companies; however, the goods might be similar but cannot be identical. 2. Trademark protection ensures that every consumer is protected and not overexploited by the sellers. 3. Trademark protection is based mostly on the economic cost-benefit analysis; it considers the trademark as a tool for controlling and regulating communication in the marketplace. D. Economic-based concept of explaining trademark protection 1. Economic based concepts of explaining trademark regulations considers trademark as an impact of market failure that results from the overexploitation of the few resources available in the market. 2. Trademark regulations control and regulate the relationship between the consumers and sellers in the market. 3. Both buyers and sellers of commodities in the market lack to understand trademark regulations and this does not only result in poor performance of products but also results in legal and financial deterioration. E. Steps to protect the trademarks 1. One must ensure that the trademark is fully registered under the laws of that guarantees protection of trademarks. 2. Maintain the operation and to continue enjoying the free market opportunities is to operate within the stipulated laws to avoid infringement of the trademark. F. Infringement of trademark 1. Trademark can lose its validity and can be abandoned if it was improperly licensed. G. Dilution of trademarks 1. In a case where the trademark has been infringed and cancelled, the trademark owner can seek the trademark dilution that is acquired either through the state or federal government.
Conclusion
1. Summary of the points discussed. References 1. Boardman, A. E. (2010). Cost-benefit analysis. 2. Cohen, D. (1986). Trademark strategy. The Journal of Marketing, 61-74. 3. Demsetz, H. (1982). Barriers to entry. The American Economic Review, 47-57. 4. Kitch, E. W. (2000). Elementary and persistent errors in the economic analysis of intellectual property. Vand. L. Rev., 53, 1727. 5. Klieger, R. N. (1996). Trademark Dilution: The Whitling Away of the Rational Basis for Trademark Protection. U. Pitt. L. Rev., 58, 789. 6. Lemley, M. A., & Dogan, S. L. (2007). Grounding Trademark Law Through Trademark Use. Iowa Law Review, 92. 7. Landes, W. M., & Posner, R. A. (1987). Trademark law: an economic perspective. Journal of Law and Economics, 265-309. 8. Swartz, D. W. (1997). Limitations of Trademark Law in Addressing Domain Name Disputes, The. UCLA L. Rev., 45, 1487.

Trademark protection provides an effective platform for business activities in the marketplace though creating and developing a strong trademark that enhances production of high-quality products. It gives business organizations to produce different and unique products that can satisfy customer’s desires. Consumers can develop different attitudes towards the same product in the market; however, what makes them distinct is the way they see the products that is brought about by the trademarks. This paper will examine the cost-benefit analysis of trademarks.
Trademark protection has a number of limitations such as; the use of a person’s own name in the business (Swartz, 1997). The use of the actual person’s name in the business can cause confusion in the business. Apart from the confusion in the business, the use of real name can also cause confusion from the previously used trademarks. The use of actual name is not restricted by the law except in a situation where the name might cause confusion in identity (Swartz, 1997). It is better to choose a symbol or a name that is unique and distinct from other trademarks. The trademark is also limited to the area of operation. The trademark of a given product is only allowed to operate within the geographical area of where it is registered, although, transnational trademarks are also available that can help the business operate outside the environment of one country (Swartz, 1997). However, business that has no trademarks finds it very difficult to operate within the country that can lead to termination of the business. Such penalties can only apply to businesses within a country; it does not extend outside the country. For example, a product with no trademark in the US may face rough time with the law enforcement agencies that are applicable within the states. Additionally, the business can only operate at the national levels when it is registered with the USPTO that is the only organization responsible for granting trademark rights at the national level (Boardman, 2010). Fair use doctrine is another limitation applicable to trademark protection. Anything can be used as a trademark as long as it carries a meaning that can be well interpreted by the consumer or any other user in the market. Most of the trademarks are based on the commonly used language and as a result, the trademark owner may find it difficult to sue someone using the same trademark language elsewhere because of its commonality. For example, someone can decide to come up with a product in a different country bearing the same trademark and the actual owner of the trademark might not be able to sue the one who has copied his/her trademark.
Another limitation on trademark protection is the import limitation. Import limitation is where a trademark owner is restricted by the law not to fight anyone who imports the same product from the same place and creates competition in the market; the actual trademark owner is not allowed to fight such person because he/she is also acting based on the law (Lemley & Dogans, 2007). For example, someone might import the same product you have or may be import the product from a different country and sell them at a cheaper price; the product owner is not allowed to act against such a person because he/she is protected by the law. However, the trademark owner might only act against that person only when the products are imported from a country where the products are not trademarked.
Trademarks also have advantages both to the owners and the product buyers (Cohen, 1986). Trademark reduces the search cost for the customers in the market. Reducing search cost means that it attempts to provide a concise identifier for a given product, thus, enhancing the exchange between consumers and sellers in the market. To the owners of the business, trademarks provide them with the incentive to produce high-quality products. Most people fail to recognize the significance of producing high-quality goods because they are only aimed at making profit out of the business (Landes & Posner, 1987). The quality of a product matters a lot when it comes to market competition. Trademark does not only help in reducing the search cost in the market but also dictates the existence of the market. The dynamism nature of the market regulates the market operations.
Trademarks help the producers to reduce the cost of advertising their products (Swartz, 1997). Consumers will always prefer a product that they have had experience with and if the experience was good; if the product is of high-quality, they will always prefer their fellow consumers to buy that product (Landes & Posner, 1987). As a result, the cost that the producer could have incurred while trying to sell out their ideas to other consumers is reduced. It also creates purchasing motivation to consumers because they will be purchasing what they have idea about. To some extent, trademark is not only a market regulator but also the trademark owner’s property. Products with trademark are trusted by consumers and normally they perform very well in the marketplace than the private products that are labeled with the private names. Consumers prefer to purchase a product with trademark than the privately labeled products.
Trademark helps consumers identify the right product they want in the market (Boardman, 2010). Additionally, it also provides the distinctions between different products in the market. Trademark focuses on the consumers’ perspective and they view it as a significant symbol (Kitch, 2000). Consumers normally depend on the trademarks on the products to identify quality product from the counterfeit ones; it is also applied in identifying different products in the same marketplace. Trademarks enable consumers to identify products with the previous experience. Consumers like to associate with what they have seen somewhere.

Sellers in the marketplace might have the same product that is produced with different companies; however, the goods might be similar but cannot be identical (Kitch, 2000). What make the products different are the trademarks that are never identical. The trademarks might be also similar but can never be identical. Consumers have different shopping skills that help them in choosing their favorite products in the marketplace. There are those consumers who are careful with their choice and cannot be fooled to pick a product they have no taste for. Careful consumers use the trademarks on the products as a purpose for choosing a certain product. Sellers finds it very difficult to convince such consumers who are very careful on their choices of products and some even try to confuse them with the trademark that has less acute context (Kitch, 2000). On the other hand, marketplace also consists of the confused consumers who have no idea of what type of product they need in the market. Such confused consumers are even confused more when it comes to choosing products in the market; sellers happen to remove all the ambiguity from the advertising section. Although, sellers think that removing all the ambiguity from the advertisement section helps the confused consumers to make the right decision in choosing the products of their choice; most of them have no idea that they are confusing their clients even more (Swartz, 1997). In a situation where there have similar products, there should be a trademark that gives the distinction between the products. Trademark gives a product its unique identity that cannot be found on any other product in the marketplace. Sellers should reduce the confusion in the marketplace between consumers and their choice for the products, although, there has to be some costs incurred in the process to prevent such confusion. Distinctive trademarks give the seller the best opportunity to exploit the marketplace because it will be the only product with its unique features (Cohen, 1986).
Trademark protection ensures that every consumer is protected and not overexploited by the sellers. It gives every consumer a chance to choose a product of their choice and not be deceived by sellers. Trademark protection protects consumers in the marketplace from wrong representation of products. Frequent check on trademarks is advantageous to the business firm because; first, it enables the business firm to review, manage and possibly exploit the value of existing trademarks maximally (Cohen, 1986). The review can be carried out either annually, or even after a period of two years. It offers the business a good platform to identify new brands of products. At the same time, it gives the business a good opportunity to exploit the market with the existing brands.
Trademark protection is based mostly on the economic cost-benefit analysis; it considers the trademark as a tool for controlling and regulating communication in the marketplace (Landes & Posner, 1987). Many people have good business ideas; however, it becomes difficult to implement the ideas because sometimes he/she might lack the resources. However, some other people are driven by their self-interest desires to utilize the resources they have to start a business without considering the consumers’ interest (Landes & Posner, 1987). It is important to consider the interest of the consumers when establishing a business or coming up with a new product because they are the ones to buy the product. Therefore, if the product does not attract their attention then it becomes almost impossible to that particular product bought. One should come up with a product that consumers need and protected by the trademark laws that ensure that the product has its unique features different from other products with similar characteristics (Landes & Posner, 1987).
Trademarks are one of the major factors that regulate the competition in the marketplace (Boardman, 2010). Places where there is high competition there is always the fluctuation between the supply and demand levels. Trademark regulate such competitions though the trademark laws. Competition also controls the market because when the same product is produced by two or more firms, it creates the competition for such products and as a result, the prices of products are regulated. Unlike the case with the monopoly production where only one business firm produces the product, therefore, the firm can decide to control prices of goods in the market; thus overexploiting consumers (Boardman, 2010). Although we have highlighted that competition in the market is significant especially when it comes to regulating similar products, there are still some shortcomings it brings in the market. For example, the prices might be regulated but this does not mean that they will be lowered down. In such a case, the consumers are not considered because the business owners will continue making the highest possible profit and the consumers continuing to suffer (Boardman, 2010).
Economic based concepts of explaining trademark regulations considers trademark as an impact of market failure that results from the overexploitation of the few resources available in the market (Demsetz, 1982). A free competitive situation can only be achieved in the marketplace through effective decision-making that is entirely based on the right and proper information. The information must be sufficient and reliable so as to help in the decision-making. Cost theory can be used to explain the significance of trademark in the marketplace. Cost theory examines the importance of trademark regulations in controlling and regulating the market activities. Reliable trademark can help in improving information situation to customers. Lack of reliable trademarks in the market would result in overexploitation of the consumers by the producers and suppliers (Demsetz, 1982). Without reliable and sufficient information in the market, consumers would be misguided when it comes to making decision on the products they wish to buy. Producers have the responsibility of informing the consumer and providing them with the right and reliable information that can help them make the right decisions on products of their desire. Producers should provide information such as; product quality that can only be obtained with the help of trademark. Consumers like to purchase what they are familiar with; therefore, producers need to familiarize themselves with the consumers’ desire. Trademark is very significant in the market because it helps in reducing the search costs (Cohen, 1986). Search costs are incurred by the consumers while still searching for their desired products in the market; therefore, trademark can help reduce this extra cost through provision of readily available information to consumers. Trademark enables consumers to differentiate similar products in the market. It enables consumers to familiarize themselves with the products because trademarked products provide experience characteristics to such products (Boardman, 2010).
Trademark regulations control and regulate the relationship between the consumers and sellers in the market (Lamley & Dogan, 2007). It protects the link the sellers and the producers of the goods they sell; as a result of protecting the relationship between the buyers, sellers and producers in the market, trademark regulations provide the producers with motivation to produce high-quality products that can meet consumers’ needs (Lamley & Dogan, 2007). Both buyers and sellers of commodities in the market lack to understand trademark regulations and this does not only result in poor performance of products but also results in legal and financial deterioration (Demsetz, 1982). Trademark in the market act as the indicator of quality and reliable communication to consumers; which is the most valuable asset to a company.
There are two major steps that business owners can take to ensure that their trademarks are fully protected under the trademark regulations; first, one must ensure that the trademark is fully registered under the laws of that guarantees protection of trademarks. In the US, protection and registration of the trademarks are normally carried out in the first day they are implemented to be used in the business (Lamley & Dogan, 2007). The common laws that regulate the use of trademarks are established immediately when the business starts to operate. In most cases, the trademarks regulations can only protect the business in the internal market and not international context. Most of the common laws that protect the trademarks in the US are limited to be applied within the country. Apart from registering the trademark internally for international business firms, the trademarks can also be registered at the international level. In such a case, the business is allowed to register the trademark in the respective country of operation that can protect that trademark in the specific country. Trademark of a particular business is only protected by a country where the business operates (Lamley & Dogan, 2007). The US federal government is only responsible for the national business operations and not international. International registration of trademarks is expensive and can only be obtained by the big business firms. The US federal government only recognizes common law of trademark based on the federal registration of a start of the business. However, for small business that are only starting up can only obtain this registration through skillful planning without incurring some extra costs that can result to the business making huge loss.
Another step that can be taken by a business firm or business person to maintain the operation and to continue enjoying the free market opportunities is to operate within the stipulated laws to avoid infringement of the trademark (Lamley & Dogan, 2007). Numerous businesses have emerged over the past years and as a result, competition emerged that has been accompanied with the deceptive business practices. These deceptive practices may result to trademark of the business infringed (Swartz, 1997). When the trademark of a business is infringed, it loses its validity to allow operation leaving the business unprotected. Most of businesses have become deceptive and consumers are more confused in the market. There are cases where different businesses produce the similar products and this results in competition in the market that in most cases may lead to deceptive of consumers (Boardman, 2010). This deception usually arises from the business using another business’s trademark to sell their products that may be fake product. As a result, consumers get confused in the market to make decision on the right choice of product they should choose. Different business organizations that produce the same product and sell it using the same trademark may result to infringement of the trademark (Lamley & Dogan, 2007). This kind of deception is not only found in big business organizations alone but also in the retail business; where the retailers use other producer’s trademark to pack their counterfeit products and sell it to the consumers. Trademark regulations are placed in the market to ensure that market operations are fair and to reduce consumer’s confusion in the decision making (Kitch, 2000). Business owners have the responsibility to the law enforcement agencies to ensure that the trademark is protected to avoid infringement. If the trademark is found on another business not registered on, the trademark is infringed. Apart from infringement of the trademark, the business may be dissolved and the business operation terminated. It is the owner of the business who is going to suffer the infringement of the trademark and dissolution of the business, therefore, every business owner must ensure that the trademark is protected by preventing others from using their trademarks to carry out business operations (Kitch, 2000). The business owner must act as the law enforcement department and, therefore, they should protect their trademarks. Protecting the trademark is entirely the responsibility of the business owners and if it is found being used by another business other than the actual registered business, no one is answerable to the judicial system other than the business owners. The sellers are the ones who know the actual qualities of a product in the market and as such, they take advantage of the confused consumers who have not hint on the product by selling to them a product that is fake bearing other producer’s trademark (Demsetz, 1982). Lack of consumers to verify the products when it comes to quality is an advantage to the sellers and at the same time to the producers of such counterfeit products that does not meet the market standards. Trademark protection regulates the market operations and reduces the dishonesty cases in the market that have been rampant with the emergence of many businesses. Trademark regulations protect the business in the market through checking and regulating the quality of a product (Cohen, 1986). For example, in a situation where a product that creates competition in the market and yet it does not meet the quality standards of the market or other producers, trademark law becomes the solution to such a problem by preventing such competitor from using other producers’ profile to outdo them in the market. As a result, trademark laws allow consumers to trust the sellers through provision of reliable and sufficient information on the products.
Trademark can only qualify to be protected under the trademark protection if it fulfills the trademark laws (Landes & Posner, 1987). For example, it must be the first business that uses the mark in the business and secondly it must be first registered by the patent and trademark office (PTO). However, the descriptive marks can only be registered when it has acquired the secondary meaning that is normally granted after the initial use of the mark. During the initial use of the mark, the trademark is not granted the trademark protection because it has not acquired it meaning. The use of trademark means that the product is ready to be sold to the public.
Trademark can lose its validity and can be abandoned if it was improperly licensed (Klieger, 1996). The trademark laws are limited to the operating trademarks. The trademark registered without proper checking by the owner may result to cancelling of that trademark (Klieger, 1996). Therefore, it is important to double check the trademarks before they are submitted for registration. Apart from the improper licensing, the trademark can be regenerated by another business organizations and this also might result to cancelling of the trademark because it will lost its validity and uniqueness. Since most of the words used to establish a trademark are the commonly used words, it is very easy for the same word to be applied by some other organizations in business (Cohen, 1986). As a result, it might bring confusion in the market for the consumers. Additionally, the trademark will lose its protection from the trademark laws. When the trademark sign or symbol becomes more common to be used by most people, it no longer becomes valid to be protected by the trademark laws.
In a case where the trademark has been infringed and cancelled, the trademark owner can seek the trademark dilution that is acquired either through the state or federal government (Klieger, 1996). Getting dilution claim from the federal government is only possible when the trademark is proven to be famous; this depends on the duration the trademark has been in use and the degree of recognition. The trademark owner must provide proof that the trademark is his/hers by giving evidence that shows that he/she has been using the trademark for business operations. Additionally, he/she must provide evidence that shows that the trademark is being used by someone else who does not qualify to use it (Klieger, 1996).
In conclusion, as the government continue to control and regulate the market prices of products; at the same time trademark’s regulations also increases. Although the government is the controlling factor in the market, trademark owners also has huge role to play by the law and ensure that their trademarks are within the required context of regulations. Trademark will still continue to be the major controlling and regulating factor in the market because all market activities revolves around it. Trademark creates the market stability through establishing the distinctions between various products. It provides the sufficient and reliable information about the product and reduces confusion of buyers when it comes to making decisions. Consumers are able to make right decisions in the market on products that bear the trademarks and not any trademark but the right one.

References
Boardman, A. E. (2010). Cost-benefit analysis.
Cohen, D. (1986). Trademark strategy. The Journal of Marketing, 61-74.
Demsetz, H. (1982). Barriers to entry. The American Economic Review, 47-57.
Kitch, E. W. (2000). Elementary and persistent errors in the economic analysis of intellectual property. Vand. L. Rev., 53, 1727.
Klieger, R. N. (1996). Trademark Dilution: The Whitling Away of the Rational Basis for Trademark Protection. U. Pitt. L. Rev., 58, 789.
Lemley, M. A., & Dogan, S. L. (2007). Grounding Trademark Law Through Trademark Use. Iowa Law Review, 92.
Landes, W. M., & Posner, R. A. (1987). Trademark law: an economic perspective. Journal of Law and Economics, 265-309.
Swartz, D. W. (1997). Limitations of Trademark Law in Addressing Domain Name Disputes, The. UCLA L. Rev., 45, 1487.