American Public University
Inventing a new thing which has the potential of being widely used by the people might create essential opportunities for the invention owners. The companies or people working on new inventions and innovations have the chance to be the leader in their industries or societies. In simple words, inventing or innovating brings an essential power to its owners. However, there is a high risk of losing these opportunities because the other people or companies might steal the idea of invention or innovation. In this case, inventing or innovating does not provide any power because all the people or the companies might benefit from the invention or the innovation freely by producing and using it without bearing any cost relevant to it.
Inventing a new thing or innovating requires investing in the research infrastructure and human resources. It is a highly costly and highly risky process. Doing research and development activities do not guarantee success in the market. There exist the following risks for developing a new marketable product as a result of the research and development process: 1)The research may not reach the desired results, 2)The research and development process might be unaffordable for the research owners, 3)The product might not convince the customers because of various reasons, 4)The product which is the result of the research and development process might not be marketable effectively for the company, 5)Someone or another company might steal the idea, or they start to apply for the legal rights before. All these risks make the research and development very costly (Netterville, 1956).
The patent and other legal regulations for new ideas and new products aim at promoting research and development activities by giving some monopoly rights to the new design and new product owners. The monopoly rights over the new idea or the new product guarantees some marketing rights and some other rights for the company over a limited number of years (Netterville, 1956).
The companies and the individuals do not want only to protect the new products but the new ideas as well. In the science of economics, an important strategy of product differentiation is discussed in the uncompetitive markets subject. The companies try to create a belief among their potential customers that their products are relatively better than the other similar products in the market. If they can manage to do this, they receive a temporary monopoly power in the market.
The brands, the product packages, and the marketing activities try to create this belief. This application might legal or illegal. The Trademark law regulates the rights and the illegality in building brands and some other relevant marketing activities. The Trademark Law in the States is mainly led by the Lanham Act. When a business starts using symbols, some other figures, and names, those are legally protected. The registered patent rights to the U.S. Patent and Trademark Office is on the list of the highly protected rights (Handler, 1996).
Genericide is the loss of the legal protection of the brands, the inventions, and the innovations due to the legal regulations. When the companies to lose the protection rights on a service, brand, or product, the rivals can produce the same product or the same service, or use the same name as a brand. The products manufactured by the other companies without bearing any cost of the research and development costs and patent protection related expenses are called generic products (Walsh, 2013). These companies might use different recipes or the original recipe to produce the generic product. Subsequently, the high competition causes a dramatic decrease in the market price of the product. In simple words, the generic products create a significant threat to the original products in the market (Ramakrishnan, Chen, & Balakrishnan, 2005).
The high competition in the markets after the appearance of the generic products, the market dynamics change to a new direction. The competition is accepted as a positive in the markets; however, taking the profit-maximizing behavior of the companies in the market into consideration, the companies' primary goal of maximizing the profits might contradict with the innovative approaches and the research and development works because implementing research and development activities might require high costs, and many companies are not willing to deal with these costs. The enterprises that make enormous contributions to building knowledge and develop new ideas for producing relatively products are concentrated in the developed countries, and they are a few leading companies. The rest of the companies in the international markets from the developing countries are the followers of these pioneering companies in the developed countries. The followers have the goal of maximizing their profits by using marketing strategies, and they are not willing to contribute to the research and development in their industries. Consequently, when the generic products increase the competition, the resources are relatively more allocated to the marketing and advertising activities which are comparative less efficient regarding developing relatively better products which might satisfy the people's needs relatively more. In another word, the competition might slow the developments in the markets, and the markets cannot supply high-quality products. The loss of development in the markets of the products might cause inefficiency for every stakeholder (Silverman, 2004).
Though the decreased efficiency due to the high competition in the markets after the generic products are introduced might occur, the generic products might contribute to disseminate the utilities of the original products to the people who cannot afford the original products. The Chinese producers have realized the missing point in the developing countries' markets, and they could manage to reach many customers in the developing countries. For instance, the poor people cannot afford to purchase the sports shoes sold at high prices. The Chinese products imported to the developing countries allow the poor people to buy sports shoes for their kids. The generic products might decrease the inequality to access some exclusive products. However, the generic product traders might get the consumer surplus occurring thanks to the generic products, and again the poor people might face high prices (Silverman, 2004).
Another important aspect of the generic products is the brand and generic product wars between the developed countries and the developing countries such as China, Indonesia, Taiwan, etc. Some developing countries have developed a new understanding for stimulating their national productions: copying the patented products from the developed countries, and producing generic products. Although nowadays, many of countries banned the imports of the generic products with the patent rights in the developed countries from China and other developing countries, these products are still sold in many developing countries. The international companies are using the ability to produce at relatively lower cost due to the low labor costs in the developing countries. These companies outsource some of their productions to the developing countries. While evaluating the generic products coming from the developing countries, all these facts have to be taken into consideration.
The companies use the analysis of lifecycle to make their decision about the future. A product starts its life in the markets as a baby, and it dies like all the other creatures. Being aware of the position and the stage which the product is in is essential information for making production and marketing strategies. All the inventions, product differentiations, and different marketing strategies influence the lifecycle of goods. Providing full life protection for a product or a service might be very costly, and not having any protection is also expensive (Sumei, 2011).
The companies develop strategies to make the decision of protecting some rights relevant to patents and trademarks, and they need to reach an optimal point between protecting these rights until they maximize their benefits from it. While trying to come the optimum, the companies have some limits. The trademark law and the patent protection rights regulate some of the limits. Therefore, formulizing the question for the companies with the items to be protected, they need to maximize their utilities from using the trademark and the patents under the limitations coming from the legal framework (Walsh, 2013).
Consequently, the trademark law, the patent law and the other similar rights those aim at providing protection for the intellectual rights play an important role in stimulating and promoting new developments and research development activities. However, giving lifetime protection to companies might cause the problems of the uncompetitive markets. While regulating the rights and the markets, the law-makers have to try to maximize the total social utility. From the perspective of the companies, they can solve their profit maximization problems under the limits regulated by the trademark law and other similar rights.
An important example in this subject would be the case of the Google search engine. Google has been the major search engine in the last decade even though the number of the search engines increased in time. Google could protect its rights, and in many countries, the Google Company sued the other search engines similar to the Google search engine. Being able to protect the brand, the Google has eliminated the other search engines in the market. Also, the Google Company could develop its technology in time. As a result of this, the Google Company could prove the belief of high-quality to its potential customers. Considering that the Google search engine name has been used as a verb describing searching on the internet, “googling”, we can definitely claim that even though the different search engines can do the same services, the Google search engine is completely differentiated from the others. This situation provides an essential power of monopoly to the Google Company. This high-power even allows the Google Company to purchase some new and successful internet start-up business which provides services from mapping to online library. Depending on the information about the Google search engine, the Google Company is one of the most eminent examples of resisting against the negative influences of genericization for the Google Company. On the contrary, the Google search engine has developed a strong monopoly in the search engine market (Goldman, 2016).
References
Goldman, E. (2016). Google Successfully Defends Its Most Valuable Asset In Court. Forbes.com. Retrieved 6 June 2016, from http://www.forbes.com/sites/ericgoldman/2014/09/15/google-successfully-defends-its-most-valuable-asset-in-court/#608740b93f05
Handler, M. (1996). A Personal Note on Trademark and Unfair Competition Law before the Lanham Act. Law And Contemporary Problems, 59(2), 5. http://dx.doi.org/10.2307/1192068
Netterville, V. (1956). Trademark Management, A Guide for Businessmen. California Law Review, 44(1), 184. http://dx.doi.org/10.2307/3478328
Ramakrishnan, V., Chen, J., & Balakrishnan, K. (2005). Effective strategies for marketing biomedical inventions: Lessons learned from NIH license leads. Journal Of Medical Marketing, 5(4), 342-352. http://dx.doi.org/10.1057/palgrave.jmm.5040253
Silverman, A. (2004). Is a patent a monopoly?—Antitrust considerations. JOM, 56(4), 80-80. http://dx.doi.org/10.1007/s11837-004-0079-5
Sumei, Z. (2011). Total object unified model-is driven architecture of product lifecycle management. International Journal Of Product Lifecycle Management, 5(2/3/4), 242. http://dx.doi.org/10.1504/ijplm.2011.043190
Walsh, M. (2013). Protecting your brand against the heartbreak of genericide. Business Horizons, 56(2), 159-166. http://dx.doi.org/10.1016/j.bushor.2012.11.002
