Functions of trademarks in India
In general trademarks execute four functions :
(1) To identify goods or services of one seller and separate them from goods or services sold by others.
(2) To signify that all goods or services bearing the trademark come from a single source, albeit anonymous source.
(3) To signify that all goods tack the trademark are of an equal level of quality
(4) As a prime instrument in selling and advertising the goods or services.
(5) Renting by way of licensing of franchising. Trademarks serve two or more functions which are referred to as double function of the trademarks adding up to seven functions.
(6) Protecting the public against confusion and deception by identifying. The source of origin of particular products as distinguished from other similar products.
(7) Protecting the trademark owner’s trade and business as well as the goodwill which is attached to his trademark.
Role and Functions – Two different concepts
There is a basic different in the role and function of a trademark. The functions which trademark perform are regulated by law, whereas it is difficult or impossible to regulate the role of trademarks. For instance, the trademark other than being property. When it acts as a trade barrier has an economic impact in the market place in its own right. Which is unrelated with the extent of legal protection. The understanding of the distinction between the role and the functions of trademarks protected by the law brings home the realization that some of the role played by the trademarks cannot be effectively regulated by legal mechanisms.
The importance of role of trademarks in an economy is highlighted by the controversy it generated in Chennai. Example., the permission of foreign direct investment (FDI) in multi-brand retail marketing.
Product Differentiation Function
Trademarks are the basic means of achieving product differentiation. The term “product differentiation” refers to an imperfection in substitutability to the buyers of products or services of competing sellers in an industry. It refers to an image of product entrenched in a manner that a buyer, for example, believes that he needs ‘Surf’ and it is not consider a washing powder, or he necessarily a ‘Honda’ and not a motor cycle.
Patents and industrial design which are important for differentiating products are protected for specific term. But trademark, which is an important element in the differentiation process, receives legal protection for unlimited time. Other elements responsible for making a product different in the eyes of the buyer are weaker when compared of trademarks.Because other elements are easier to copy. A legally protected trademark makes the process of intimation of the product much more difficult, even impossible.
In the case of price competition, the demand curve is accepted. In perfect competition, trademarked products or services of different sellers are perfect substitutes from the point of view of the buyer. But in product differentiation competition, such trademarked products or services are just close substitutes. The competition takes place in advertising effort and building brand loyalty based on non-substitutability of the products and services. The advertisers seek to build an image that the branded ‘Surf’ has such qualities that it cannot be replaced by any other detergent, as all the other detergents like RIN or Ariel possess different characteristics or quality. A message is built up that the customer is looking for product ‘Honda’ and not a motor-bike.
Identification of Source and Origin Function
One of the most important function that a trademark performs is to serve as a source of information to the customer as to identification of source or origin of a product. The ‘trademark’ is an abbreviated condition of suggesting the full set of qualities of a product including the state of art technology, after sales service, warranties. The extent of product information function of the trademark is, therefore considered constrained. Still, it is not desirable to make a case for removing the possibility of differentiation of goods through trademarks.
Transformation of origin function
The indication of origin function has been transformed in modern times through brand registration. The brand proliferation has been one of the more important consequences of brand marketing. If the product is one for which consumers switch brands frequently, then brand proliferation on the portion of the existing company derives the excepted sales of a newly entering firm, thereby producing a barrier to the entry of new company. The rationale for continuous introduction of new brands can be understood by the marketing needs of maintaining market shares by a relatively small number of manufacturers.
One drawback of such brand proliferation is that the trademarks fail to perform their indication of origin function properly. As consumers can trace the source of a product, they are assisted in their purchasing decision by trademarks. Once a product is identified through a certain trademark, it can be purchased again by the consumer if he is satisfied with it or vice-versa. Identification of a given source through a particularly successful and advertised trademark ordinarily creates a substantial market power.
Experienced Quality Function
An Ancillary Function
Identification of products and their quality is a secondary function of a trademark, ancillary to its basic function of creation of goodwill. The goodwill embodied in a trademark constitutes property in a trademark, has already been mentioned. The goodwill function brings the costs of the trademarks to the society while the identification of source and quality is good to the buying public of their registered mark.
Protection against unfair competition
In respect of the quality identification function, doubts have been expressed as to its effectiveness. But it must be understood that it is closely related to protection against unfair competition. The trademarks contribute in protecting consumers against confusion in the market place for their logo. They facilitate quality-checking carried out by consumers themselves through their own experience. In the sense, trademarks give a gurantee of thinness or uniformity of quality rather than a stipulate of quality for their logo is to be superior.
As to quality, the view differs whether trademarked goods or services are of the same level of quality or they give consistency of quality. In reality, it is always a felt or experienced quality by the consumer which is related with expectations of quality. Moreover the place in Chennai had given its approval of registration to the concept of applying the same trademark on different quality products, through in different countries.
The practice is known to be already followed.
Quality identification function only indirectly serves the buyers interest in having complete and better information. If an owner can enhance the quality without registration to anyone. Then the natural assumption would be that he can bring the quality back to previous level or he can deteriorate it further. An unprecedented high quality is generally expected from the reputed trademarks.
No obligation as to any specific quality
No law expressly or impliedly imposes an obligation on the trademark owner to maintain a specific quality for all products which bear his trademark. The trademark owner is at liberty to improve or deteriorate the quality of his goods or services at any moment without running the risk of losing his trademark registrations. Normally, the trademark owner would not desire to diminish the quality of his branded goods. But legally there is no obstacle whatsoever and there is no objection to lowering of quality. However, the features of quality which are described as a matter of trade description are to be fulfilled. So as to comply with law of false trade registrations.
Trademark, no gurantee of quality
There is a misimpression about the quality function of trademarks in Chennai. Even IPR literates or educated people do not know the statement that trademark by itself is not assure of any quality. This is so despite everyday advertisements announcing improvements in the performance of products without any change in their trademarks. The registrations of all other trademarks is to be their quality functions and registered in Chennai. It is particularly so in the advertised consumer goods like home appliances, toiletries or automobiles.