Trademarks: Supressing innovation, increasing costs, and creating crime since 1875

We are made to believe that trademarks are necessary to protect consumers from fraud and allow producers to differentiate their products as coming from an authenticated source. But are trademarks really all they’re cut out to be? What if I told you that there’s a hidden cost to trademarks, and that society is paying it in the form of a little bit of absurdity?

Case in point: Coach bags are over valued.

You can purchase some of the Madison Collection bags for just under $1000, while some of the more popular bags sell for between $200 and $300. This is rather astonishing for me, but people gladly buy these bags and accessorize themselves with these prominent status symbols in troves. And frankly, it makes sense. Although the material utility of the bag had long plateaued at the value of, say, $100, the bag plays a much more important signalling role in conveying the status of the wearer.

What are your status signals signalling about you?

People are always seeking out signals to market themselves. In particular, there is a lot of active discourse commentating on what your handbag says about you as a person; your style, your personality, you values, and, yes, your wallet.

There is unquestionable utility that is drawn by individuals from this, however, I contend that it is terribly over-valued. I submit to you, that without trademarks, you would have more utility for your handbag dollar.

Here is where the absurdity comes in. If you take a walk down Canal Street in Manhattan, you will be surrounded by a vibrant black market ecosystem of competing knock-offs of Coach bags for a fraction of the price. What you are really witnessing is the front line of a war of the prohibition of competition. Shop keepers and street vendors with smuggled wares constantly on the look out for cops.

Coach should not be competing to keep its brand from being mimicked, but instead competing to add-value to hand-bag buying crowd. But the current legal climate promotes the former. It is easier and more profitable to protect your brand at the expense of innovation, than to innovate.

This is not Coach’s fault. These are all the unintended consequences of trademark laws. Less innovation, higher costs, and more crime.

Knock offs provide downward pressure on price, and upward pressure on innovation.

If cheap knocks-offs were able to compete legally and not have to evade the law in order to come to market, then you can expect knock-offs to greatly increase in quality. Without trademark laws to quiet the competition, the big bag designers would be forced to compete by adding value and utility that competitor mimics cannot, or else “fade away into the dustbins of history”, as Trotsky might say.

The pace of hangbag innovation would surely accelerate, and would soon come souped up with features and designs not-yet-imagined. In this way, the knock-offs, free from trademark restriction, would create downward pressure on price, and upward pressure on value.

Status symbols for consumers would evolve to signalling true innovation and utility, rather than over-valued signals coming as a result of trademark monopoly.

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