Economics Questions

Re: The economics of counterfeit goods

Albert — Tue, 01 Feb 2011 22:15:39 GMT

Thanks good research Leo

Mickachussets: current law is not approved by libertarian thinkers, but here is some of the crazy consequences.

If the New York Yankees do not vigorously defend their name against all encroachment, then a future person can come and claim that name as his own and force the Yankees to pay him royalties.

The argument in court would be that there really wasn't a trademark and the yankees are just discriminating against me the new claimant because here are 15 examples of where they allowed outsiders to use their name without suing them.

(This is also the reason why the Mises institute tries to copyright protect their writings, even though they choose the most lenient form of copyright)

Re: The economics of counterfeit goods

LeeO — Tue, 01 Feb 2011 21:25:24 GMT

And here are Kinsella's suggestions for improving trademark law:

Raise the bar for proving “consumer confusion”
Abolish “antidilution” protection
In fact, abolish the entire federal trademark law, as it is unconstitutional (the Constitution authorizes Congress to enact copyright and patent laws, but not trademark law)

Re: The economics of counterfeit goods

LeeO — Tue, 01 Feb 2011 21:20:11 GMT

I think Kinsella mentioned that this sort of thing could only count as fraud, since trademarks are positive rights. No fraud, no tort.

I'm confused. Kinsella said that counterfeit goods could count as fraud? Then whay did you say, "No fraud, no tort"? Did you mean that since trademarks are positive rights, this sort of thing could not count as fraud?

I found this quote from Kinsella, which perhaps clarifies things:

"Consider IP. Under a free market there would be no patent law at all. The existence of patent law therefore causes much waste and distortion and redistribution that would not otherwise occur. The same is true of copyright.

However, trademark would exist in some form–there would be at the least a fraud claim on the part of customers that a seller defrauded by selling them bootleg goods. So there would be differences–the cause of action would be that of the customer, not the trademark holder; there would be no ridiculous state extensions of TM law such as antidilution rights–but a seller of fake goods would have legal consequences under a free market, *similar* to those he faces now. So, we can see that state trademark law, while not good, is probably not as harmful and distorting as patent and copyright law are."

Re: The economics of counterfeit goods

BioTube — Tue, 01 Feb 2011 19:55:39 GMT

I think Kinsella mentioned that this sort of thing could only count as fraud, since trademarks are positive rights. No fraud, no tort.

Re: The economics of counterfeit goods

mikachusetts — Tue, 01 Feb 2011 17:08:12 GMT

Albert:
As I understand it, if the owner of the name brand or patent allows little encroachments on their product or name, then later it can be held against them when they have to defend against a big time counterfeiter. That is how current law is applied and precedent plays a big role.

That is why you see big sports organizations like basketball teams or football teams, go after little leagues or school teams using their name without license.

I can't imagine why a sports franchise would act this way. Even if they had to go after small fish to set precedent, is there an actual concern that a counterfeit NY Yankees would decrease the real Yankees' profit?

Re: The economics of counterfeit goods

LeeO — Mon, 31 Jan 2011 21:46:45 GMT

I am not sure what a libertarian solution would be.

I wonder if anyone at the Mises Institute has written specifically on this topic. I know there is plenty of literature on Intellectual Property in general that I have not read...

Re: The economics of counterfeit goods

Albert — Mon, 31 Jan 2011 20:28:32 GMT

The ban on counterfeit does not only apply to things that can be easily distinguishable, (like fake purses) but things that are closer to each other.

As I understand it, if the owner of the name brand or patent allows little encroachments on their product or name, then later it can be held against them when they have to defend against a big time counterfeiter. That is how current law is applied and precedent plays a big role.

That is why you see big sports organizations like basketball teams or football teams, go after little leagues or school teams using their name without license.

I am not sure what a libertarian solution would be. Seems to me if your brand or product is not distinguishable from the counterfeiter, then maybe you don't have a legitimate brand.

Re: The economics of counterfeit goods

LeeO — Mon, 31 Jan 2011 03:37:44 GMT

I know New York City's main complaint is that they "lost sales tax" revenue when people decide to buy counterfeit goods.

And if they legalized the industry, they would get the sales tax on the $20 bag, right?

Re: The economics of counterfeit goods

LeeO — Mon, 31 Jan 2011 03:34:36 GMT

Thanks for the response, Albert.

You're argument for legalization makes plenty of sense. I wonder what the official rationale is for the laws against counterfeit goods, and who pushes for the ban? It seems that the makers of designer goods wouldn't care, because as you said they serve a completely different market. It's probably the makers of $15 handbags and other cheap merchandise who support the reduction in competition.

Re: The economics of counterfeit goods

Albert — Sun, 30 Jan 2011 21:53:18 GMT

Yeah right?

Who's the bigger fraud, the guy from Chinatown or the city of NY?

Re: The economics of counterfeit goods

auctionguy10 — Sat, 29 Jan 2011 23:24:53 GMT

I know New York City's main complaint is that they "lost sales tax" revenue when people decide to buy counterfeit goods. As if someone who bought a $20 Louis Vuitton bag was EVER going to spend $500+ on a real one. Its a shame they closed down so many stores on canal street in Chinatown here- what the hell is the point of even going there now? Ruin people's livelihoods and make everyone worse off- thanks NYC.

Re: The economics of counterfeit goods

Albert — Sat, 29 Jan 2011 23:06:51 GMT

OK so here is what I think about the legality question:

One would hope that there is more difference between the Designer product and the version produced by 8 year olds, than just somebody stamping on a logo.

Clearly the person getting in their car and driving to Chinatown to buy a handbag for $15 (when the legitimate version sells on Rodeo drive for $400) is under no false impression that this is the real thing.

They are doing it for a lark and to temporarily trick their friends at a party or have some fantasy role-play in their heads.This product is intended strictly for wannabe girls or suburb ladies who were never fooled by the merchant. If Paris Hilton bumped into them she would be able to tell from a mile that the material is fake leather, not expensive leather, the stitching is poorly done and the paint on the logo is chipped. If this purse was bought by some rich socialite, the shame of being caught with a fake would be far more horrible than the extra $385 to get the REAL status symbol.

In that sense I don't think its illegal and I don't even see why the designer should lose any sleep over it. It is in fact a subtle compliment to his name.It does not take legitimate sales from him and it does not target his market.

If on the other hand the designer product is just as poorly made, he might have a case for fraud, but rather that calling in Big Brother to bully the competition, he can take some time to upgrade his product and make it harder to counterfeit. (Like the credit card companies now putting hologram logos on their cards.)

If the counterfeiter can still make and sell the product for cheaper than him, it would help little to throw the counterfeiter in jail. His neighbor or his brother will start a new counterfeit factory.

Rather the designer should buy him a drink and ask him how he did it for less, or buy his factory or hire him as production manager... tada the market has spoken.

Re: The economics of counterfeit goods

LeeO — Sat, 29 Jan 2011 22:05:18 GMT

Lets just assume that legalizing drugs wold be legalizing "fraud"... in a free market, would the fraud go away in the long run due to market forces?

Yes, because people would stop buying from those who cheated them. But there is obviously no fraud inherent in the sale of drugs. I'm trying to figure out whether there is fraud inherent in the counterfeit goods market. Just because the market punishes cheaters doesn't mean they shouldn't also be punished as criminals.

Re: The economics of counterfeit goods

LeeO — Sat, 29 Jan 2011 22:01:10 GMT

Actually the author said nothing of poor children being FORCED. It is left up to the imagination of gullible readers to just assume that.

Exactly. It's strongly implied, but not actually stated. Because if the kids aren't forced, the argument falls apart as you point out.

Re: The economics of counterfeit goods

LeeO — Sat, 29 Jan 2011 21:59:07 GMT

Well, in some cases people KNOW it's a fake, they don't mind. It doesn't look exactly the same but it looks close enough to the real thing at much lower the cost. It's like buying a "nice" shirt at Ross or TJ Max, it looks expensive and nice but it's much cheaper than getting a similar shirt from the mall. Great deals at Ross :)

Good point. But I think there is a difference between the "fake" shirts at TJ Max and actual counterfeit goods. It's like the difference between someone who makes "fake" money to sell to people because it looks cool, and someone who actually counterfeits dollar bills to spend. I'm only arguing that the second type of good is an example of fraud.