Do Trademarks Diminish the Substitutability of Products in Innovative Knowledge-Intensive Services?

Trademarks are treated negligent in the scholarly innovation discourse. In contrast to other intellectual property rights, trademarks are not intended traditionally to protect immediately valuable information. Trademarks protect distinctive commercial signs which stand for something else.

Trademark protection encompasses two dimensions: signifier protection and dilution protection. The protection of distinctive signifiers facilitates customers to identify product source. Identifiable producers may compete on delivering reliably satisfying products. Traditional trademark law protects customer. In contrast, anti-dilution regulation protects the capacity of famous mark to identify and distinguish. Both dimensions of trademark protection might differentiate the signed products; either on quality characteristics or on product meaning.

Diminishing product substitutability should foster product innovation incentives. Trademarks are therefore supposed to supplement the appropriation of innovation rents. This should be particularly the case for knowledge-intensive services in which other intellectual property rights are considered as little effective due to the intangible and interactive service production.

Trademarks are often supposed to reduce substitutability and imitability of product innovations. Using German CIS data for 2010, we provide empirical evidence that trademarking firms assess easy product substitutability as less characteristic for their competitive environment. This correlation between the ease of product substitutability and trademark protection is present for product innovators, for firms in knowledge-intensive services and for firms which consider trademarks as important intellectual property rights. The correlation does not appear to reflect superior functional product characteristics from the application of new technological knowledge. This suggests trademarks as important complementary asset for the commercialization of innovative products in knowledgeintensive services.

Crass, Dirk and Franz Schwiebacher (2013), Do Trademarks Diminish the Substitutability of Products in Innovative Knowledge-Intensive Services?, ZEW Discussion Paper No. 13-061, Mannheim.