The Knockoff Economy (48 page)

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Ultimately, a revised federal trademark law was upheld on other grounds.

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More than 70 years ago, the Supreme Court in
Kellogg Co. v. National Biscuit Co.,
305 U.S. 111 (1938), held that the shape of Nabisco’s shredded wheat biscuit was functional and therefore could not be protected by trademark law. The shape of the Nabisco wheat biscuit was originally patented, as were other famous cereals such as Kellogg’s Corn Flakes, but those patent rights have long since expired. And yet these classic branded cereals continue to enjoy a significant pricing premium over unbranded rivals.

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No buyer believes that a Canal Street watch is the real thing, but some copies mimic originals in ways that are very hard to detect—and sometimes are not detected until the owner tries to get the item repaired. Elizabeth Holmes, “The Finer Art of Faking It: Counterfeits Are Better Crafted, Duping Even Sophisticated Shoppers,”
Wall Street Journal,
June 30, 2011.

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In fact, Lefebvre’s brand is strong enough that he has dispensed with standard features of restaurants altogether (such as fixed addresses), operating only his roving “LudoBites” pop-up operation, whose seats sell out over the Internet almost instantly, and his even-more roving “LudoTruck.”

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Not to mention the Mermaid Oyster Bar, which opened maybe 100 yards away from Pearl Oyster Bar. Or Jack’s Luxury Oyster Bar, a few blocks farther east.

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Great Britain created a prize in the 18th century for the first person to develop a reliable way to measure longitude; more recently, Netflix created a $1 million prize to improve its online recommendation feature. The X Prize Foundation has offered several prominent prizes, such as the Google Lunar X Prize for the first privately funded mission to send a robot to the moon.

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We discuss Radiohead’s famous “pick your price” download experiment in the Epilogue to this book.

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Again Louis C.K.: “I really hope people keep buying it a lot, so I can have shitloads of money, but at this point I think we can safely say that the experiment really worked. If anybody stole it, it wasn’t many of you. Pretty much everybody bought it.” Of course this needs to be taken with a grain of salt. Lots of research on taxation shows that people are much more likely to comply if they believe others are complying. So Louis C.K. is smart to say that almost no one stole it, whether that is in fact true or not.

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This is the fundamental insight of Chris Anderson’s book
The Long Tail
(Hyperion, 2006): online, even items that sell in very low numbers can be profitable, because the costs of inventory and distribution are extremely small.

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Some have suggested that the labels failed to make a deal with Napster because the labels didn’t have the legal right to license online distribution of their artists’ recordings. Major label contracts are not public, but the evidence we’ve seen suggests that most contracts included “all media” clauses, which appear to have given labels the right to contract for online delivery. The fight over online delivery at the time between artists and labels was less about whether the labels had the right to license for online distribution, and more about whether artists would be compensated at the royalty rate applied to distribution via CD, or via a lower royalty rate applied to new media.

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In the fall of 2011, Microsoft threw in the towel and canceled Zune.

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According to the Motion Picture Association (the international counterpart of the MPAA), in 2005 losses due to piracy were 80% overseas and only 20% domestic. It will surprise no one that China was identified as public enemy #1;
http://mpa-i.org/pdf/leksummaryMPA%20revised1.2008.pdf
.

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There is undoubtedly an element of trend and fashion attached to the resurgence in vinyl—young people in particular, who never experienced the heyday of the LP, may be attracted to the older technology simply because it’s novel to them and looks cool. And for older listeners, the act of slipping the record out of the sleeve and dropping the needle is special in a way that clicking a mouse will never be.

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We are both bloggers for Freakonomics but were not involved in the film.