Friday, September 18, 2015

You're Only Hurting Yourself: How Trademark Holders Can't Fight The Secondary Market They Created

Once upon a time there was a well respected and venerable jurist named Richard Posner. He held tremendous respect from his peers on the bench and the legal profession at large, and held the distinction of being the most cite judge of the 20th century. He merged the fields of law and economics together in his academic writings, and while not all lawyers agreed with his views on that front, he remained a steadfast and solid asset to the legal profession.

And one time he had to talk about Beanie Babies and it was sort of hilarious because of how serious he was about the whole thing.

My personal amusement aside, the case of Ty, Inc. v. Perryman had plenty of meat on its bones to make it worthy of Posner's analysis since it presented an important question of marketing on the Internet and the validity of online re-sellers being able to accurately tell potential customers what they had for sale. The defendant in the case was Ruth Perryman, a seemingly nice lady who had a website where she re-sold bean-bag stuffed animals. Some of them were Ty Beanie Babies, and some weren't. Now this case was decided in 2002, and considering the parties are a corporation that was had struck gold with a fad toy and a Midwestern housewife, I figure the original suit was filed at the tail end of the "Beanie Mania" that gripped the United States between 1995 and 1999. Ty found out that this little lady was operating a site called "" and very quickly freaked out at the prospect that their trademark was being diluted by her site.

Courtesy of the Wayback Machine, we can have a little taste of the site they were so scared of that they made Richard "I have published 40 books" Posner write the sentence "Now suppose that the restaurant that adopts the name 'Tiffany' is actually a striptease joint." You ready for a pure shot of 90s web-design straight to your eyeballs?

Sometimes there's so the world.
.....I feel like I can't take it
Obviously, a screenshot cannot capture all the majesty this site has to offer, and we are sadly too far into the cold, joyless future to be able to see all of the animated gifs and clip art it surely once had. Another thing not in that screenshot (but which you can find at the link!) is a little disclaimer at the bottom of the page saying that Bargain Beanies was not affiliated with Ty, Inc. I hope I'm not shocking anyone when I say that a disclaimer like that isn't going to be enough to keep the lawyers away.

Ty came at this site with a charge that Ms. Perryman was diluting their trademark on the term "Beanies" by calling other non-Ty beanbag stuffed toys "Beanies." Perryman argued it was a generic term for toys filled with beans instead of stuffing, and that was basically all she had as a response. What else was she really going to say? Ty kept on the dilution point by specifically accusing the defendant of "blurring" the meaning of the term "Beanies" and thus watering down Ty's trademark on the term along with consumer confidence in the origin of products calling themselves "Beanies." The last thing any company wants is for their precious trademark to become so blurred and widely used that it becomes generic. "Genericide" is a term we in the legal profession actually use without even having the decency to be embarrassed. It comes from the idea that a brand is basically dead once its key terms have become synonymous with similar products or services rather than being strictly proprietary.

On top of blurring based dilution, you also have "tarnishment" dilution, which is when those products using the term trademarked by another company produce a product that harms the good name or image of the trademark holder's product. That's where Posner gets into his Tiffany-strip-club example, basically saying that the fancy jewelry place "Tiffany" might have a claim for tarnishment of their trademark if a strip club opened up under the same name. Now instead of boring, jewelry, people might think of boring, overpriced jewelry AND really depressing lap dances! Unacceptable!

Thing is, Ty didn't want Perryman to be using the term "Beanies" at all. There's a real tension between secondary market folks like Perryman who have the potential to make a serious profit off the resale of an item and the original producers like Ty who made money at one point of sale and would obviously love to make money every time that little beanbag bear changes hands. On the surface, counsel of Ty made it look like a trademark issue, but this was really a matter of economics and attempted control over the secondary market.

And it's exactly at a time like this that you want Richard "I am the mind behind the Law and Economics movement" Posner to be writing the opinion.

Only the legendary wit and analytical prowess of the 7th Circuit's Chief Justice can
accurately decide who gets to make money by selling.....this. (source
I've said before that trademark law is supposed to act like a shield protecting consumers against counterfeit goods, but it seems to often get used like a sword against competitors. Companies like Ty know that they look bad when they try to go the sword approach, so they really push the shield aspects of their arguments. You can see on the screenshot above that Perryman was selling non-Ty products on her website, so Ty's best argument was that she was eroding consumer confidence in these beanbag toys by calling these surely inferior quality toys "beanies." Posner's not buying it and even gets a little salty in his explanation of why Ty cannot suddenly object to the creation of a secondary market considering its business strategy:

"The main goal is to stampede children into nagging their parents to buy the new Baby lest they be the only kid on the block who doesn't have it. A byproduct (or perhaps additional goal) is the creation of a secondary market, like the secondary market in works of art, in which prices on scarce Beanie Babies are bid up to a market-clearing level."

The only argument I have with that statement is that I know for a fact that my mother was way more into Beanie Babies than I was, and plenty of other kids were in the same position.

Back on relevant stuff, Posner ultimately concludes, through a pretty solid understanding of search engine mechanics for the time, that a re-seller can't be barred from accurately marketing their goods on the basis that their store name or url includes a trademarked term. If someone is reselling Beanie Banies, they need to be able to let their potential customers know that their online store sells "Beanies," regardless of the rights Ty might have on the initial marketing using that term.

"Whatever, law nerd, I thought this was a blog about video game stuff!"

I'm getting there, voice in my head. There are plenty of ways Ty v. Perryman is relevant to the current video game environment. Let's say you're a collector of games for the Atari 2600. You're online looking for new additions to the collection when you find a site with the domain name On the site, the title says "Atari Games Preserve: Classic Games for Atari, Commodore 64, and More." Atari shouldn't be able to shut that site down for saying what he sells. If we're going to treat video games the way we treat other forms of media, there needs to be a healthy, viable secondary market for people to trade in obsolete formats and help them find places they will be cared for. You can't get a new "Joust" cartridge any more than you can get a new Hoot the Owl Beanie Baby. Producers can't get sour about secondary markets when there is no primary market for consumers to turn to.

Moreover, it's not as though the video games industry has nothing in common with a time when extremely popular toys were being underproduced, creating an unnecessary scarcity that encouraged the supply to be snapped up by re-sellers who the jack up the prices as high as the market can tolerate. It's not like we don't have a present situation where people are calling on a major video game studio to do something about scalpers and the company's response shows a misunderstanding of what tools are actually available to it so it instead shrugs its shoulders and asks us to please understand.

What I'm really trying to say with all this is where is my goddamned VILLAGER AMIIBO!?

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