Trademark dilution: Comparing the effects of blurring and tarnishment cases over brand equity

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DOI: 10.1515/mmcks-2017-0021
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Abstract
Trademark dilution is, in a general sense, a reduction in brand equity due to the unauthorized use of the trademark by third parties (junior brands). Although there are two types of dilution, blurring and tarnishment, existing academic empirical evidence only relates to blurring cases, showing its damage to some variables related to brand associations in consumers’ minds. Literature also shows the moderating role of the similarity between junior brands, but this evidence is not complete unless presumable tarnishment cases are analyzed. This paper compares the effect of two types of junior brands over strength of associations and brand equity of famous trademarks. An experimental approach was applied with a sample of 372 undergraduate students, users of two famous convenience brands. Junior brands use identical or similar famous brand names in different product categories, offering a continuous of similarity levels, so the moderating effect of this variable is analyzed. Results show that: (i) dependent variables are reinforced when junior brands are perceived as very similar, and diluted above some degree of dissimilarity; (ii) dilution increases the more dissimilar the junior brand. However, although they have a high degree of dissimilarity, cases of presumable tarnishment, might not always produce dilution. Besides, they suggest that the effect induced by similarity is not linear. These findings are discussed through the lenses of marketing and psychology theories. The study represents a contribution to the field, providing evidence not only from blurring cases, but also from supposed tarnishing imitators, comparing their effects and showing the limited moderating effect of similarity. The boundary conditions of similarity effects in trademark dilution literature have not been discussed previously. Finally, main implications for managers are highlighted, given the negative effects that trademark dilution may entail at firm level.
Trademark dilution: comparing the effects of blurring and tarnishment
cases over brand equity
Washington MACÍAS
Escuela Superior Politécnica del Litoral, ESPOL, Facultad de Ciencias Sociales y Humanísticas,
Guayaquil, Ecuador
wamacias@espol.edu.ec
Julio CERVIÑO
Universidad Carlos III de Madrid, Spain, and Universidad ESAN, Lima, Peru
Abstract. Trademark dilution is, in a general sense, a reduction in brand equity due to the
unauthorized use of the trademark by third parties (junior brands). Although there are two types of
dilution, blurring and tarnishment, existing academic empirical evidence only relates to blurring cases,
showing its damage to some variables related to brand associations in consumers’ minds. Literature
also shows the moderating role of the similarity between junior brands, but this evidence is not
complete unless presumable tarnishment cases are analyzed. This paper compares the effect of two
types of junior brands over strength of associations and brand equity of famous trademarks. An
experimental approach was applied with a sample of 372 undergraduate students, users of two famous
convenience brands. Junior brands use identical or similar famous brand names in different product
categories, offering a continuous of similarity levels, so the moderating effect of this variable is
analyzed. Results show that: (i) dependent variables are reinforced when junior brands are perceived
as very similar, and diluted above some degree of dissimilarity; (ii) dilution increases the more
dissimilar the junior brand. However, although they have a high degree of dissimilarity, cases of
presumable tarnishment, might not always produce dilution. Besides, they suggest that the effect
induced by similarity is not linear. These findings are discussed through the lenses of marketing and
psychology theories. The study represents a contribution to the field, providing evidence not only from
blurring cases, but also from supposed tarnishing imitators, comparing their effects and showing the
limited moderating effect of similarity. The boundary conditions of similarity effects in trademark
dilution literature have not been discussed previously. Finally, main implications for managers are
highlighted, given the negative effects that trademark dilution may entail at firm level.
Keywords: trademark dilution, blurring, tarnishment, brand equity, similarity.
Please cite the article as follows: Macías, W. and Cerviño, J. (2017), “Trademark dilution: comparing
the effects of blurring and tarnishment cases over brand equity”, Management & Marketing.
Challenges for the Knowledge Society, Vol. 12, No.3, pp. 346-360. DOI: 10.1515/mmcks-2017-0021.
Introduction
According to Simonson (1993), trademark dilution is, in a general sense, a reduction in
brand equity due to the unauthorized use of the trademark by third parties (junior brands).
When a junior brand causes a weakening of famous brand associations, it is called dilution
by blurring (Simonson, 1993; Peterson, Smith and Zerrillo, 1999). On the other hand,
dilution by tarnishment is caused when a junior brand adds negative associations to a
famous brand mental network, or modifies the positive ones, negatively affecting the brand
evaluation (Simonson, 1993), attitudes and desired behavior of consumers (Jacoby, 2001).
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For example, Budweiser Laboratories Insecticide (Brauneis and Heald, 2011), or Victor’s
Little Secret sex-related products store (Nicoletti, 2010), could add negative associations to
the brands’ nodes Budweiser and Victoria’s Secret, respectively, in consumer memory.
The brand is recognized as a set of product or service identifiers i.e. words, phrases,
logos, product configuration (also known as trade dress), colors, sounds and scents, which
identify a person or entity's goods or services (Aaker, 1991; Kotler, 1991; Long, 2006).
From the consumer’s point of view, a brand can be defined as the total accumulation of all
his/her experiences, built at all instances of interaction with (or exposure to) the brand
(Kapferer, 2004). Once an identifier, or a combination of them, is legally registered to
distinguish products or services from a manufacturer, it is known as a trademark that is
protected by intellectual property rights. As such, trademarks can be owned, licensed,
bought, sold, and used as collateral (Baird, 2010). One of the rights the owner of a
trademark has, is to protect it against dilution caused by a third party.
The topic of trademark dilution is focused on famous brands, but there is no
straightforward definition of “famous”. Instead of famous brands, the World Intellectual
Property Organization (2000) defines a well-known brand in terms of several
considerations, such as the degree of recognition in the relevant sector of the public, the
value of the brand, the geographical area of use of the brand, the geographical reach of
advertising and promotions, amongst others. The U.S. Trademark Dilution Revision Act of
2006 states that a brand is famous “if it is widely recognized by the general consuming
public of the United States as a designation of source of the goods or services of the mark’s
owner” (emphasis added), and then also gives a set of considerations a court should
observe for determining the requisite degree of recognition (Civic Impulse, 2017). For the
purpose of this study, famous brands are brands that are among the most used and recalled
by consumers, within a product category.
Reconciling conceptualizations of several authors (Aaker, 1991; Farquhar 1989;
Keller, 1993), this study defines brand equity from a consumer perspective as the perceived
added value that a brand gives to a product, when compared to the same unbranded
product. Consumer perceived added value is characterized by positive reactions towards
the brand, such as buying more branded products, the willingness to pay price premiums
and positive word of mouth. Although Aaker and Keller propose different multidimensional
conceptualizations for brand equity, they concur that associations are pillars for building
brand equity, something also shared by Simonson (1993), when explaining the process by
which trademarks dilute. Associations represent the links between the brand and product
attributes, sensations or experiences (Aaker, 1991), and these associations could vary in
favorability, uniqueness and strength (Keller, 1993). Precisely, when understanding
trademark dilution as the weakening and injury to the beliefs and feelings that consumers
hold regarding a famous brand (i.e. associations). It can be argued that the harm could
extrapolate to how consumers intend to behave toward that brand, e.g. reducing their
purchase intention or increasing the possibility of negative word of mouth (Jacoby, 2008),
which would constitute an important concern for managers of firms.
Trademark dilution has received attention not only from marketing and
management, but also from the legal field. There is a debate among legal scholars on
whether the anti-dilution law is necessary to protect famous trademarks. In a review of
extant literature, Dworkowitz’s (2011) summarizes that those who favor the anti-dilution
law argue that the loss of a brand’s distinctive power would result in a reduction of sales
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and, consequently, brand value, that is, that economic damage would have motivated the
anti-dilution law.
On the other hand, those who are against the law consider that the harm posed by
many of the examples of supposed dilutive products (e.g. Kodak pianos, Buick aspirin) is
non-existent or, even if some negative effect exists over associations, it does not necessarily
imply a reduction of purchase behavior in the marketplace. Therefore, they argue that legal
protection is not justifiable (Moskin, 1993) under a theory of economic harm. The brand
equity literature supports the assumption that an injury to associations translates into
economic harm through a reduction in the branded product’s purchase.
The U.S. Trademark Law prohibits registration of identical or similar (to already
registered trademarks) brands when used in, or in connection with the goods of registered
mark’s owner. One may infer that - unless consumer confusion or mistake, or trademark
dilution is likely to occur - registration of identical or similar brands in different product
categories is possible (article 1, #3D). As is explained by the U.S. Patent and Trademark
Office, USPTO (2016), two identical or similar trademarks could coexist if “products and
services are not related”.
In Ecuador, the Intellectual Property Law allows the registration of new distinctive
trademarks, establishing as exceptions (article 196) imitations, or those which are identical
or similar to previously registered trademarks which identify the same products or
services, or “products or services in respect of whose use may cause confusion or
association with such mark; or may cause damage to its owner by diluting its distinctive
strength or commercial value”. In other words, the registration of the same or similar
trademarks in different product categories is feasible, unless likely confusion or dilution is
presumed.
In addition to cases of identical or similar brands in other categories of products,
which may eventually be registered in some countries (such as the U.S. and Ecuador), there
may also be cases of unauthorized use of famous trademarks in similar or different
products. In summary, cases such as those illustrated in this study are likely to be seen in
the market. Dilution could occur not only due to new registered trademarks, but also with
unauthorized users of a well-established trademark.
Empirically, blurring has received the greater attention from scholars who have
shown that junior brands weaken associations (Morrin and Jacoby, 2000; Morrin, Lee and
Allenby, 2006; Pullig, Simmons and Netemeyer, 2006), dilute brand personality (Choy and
Kim, 2013) and brand equity (Macías and Cerviño, 2017), and reduce purchase intention
(Choy and Kim, 2013; Pullig et al., 2006) and purchase behavior (Macías and Cerviño,
2017). Several studies focused on blurring cases have also shown that dilution is alleviated
the more similar that the famous trademark and the junior brand are (Macías and Cerviño,
2017; Morrin and Jacoby, 2000; Pullig et al., 2006). Apart from Macías and Balcázar (2016),
there is a general lack of research about presumable tarnishment cases. Tarnishment cases
typically relate to unsavory or unwholesome products or services, parodies or criticism
(Bradford, 2008; Long, 2006), which may imply a high degree of dissimilarity with famous
trademarks’ product category or image, despite the use of some of its brand identifiers,
such as its brand name, logo or lemma.
This indicates that an evident gap in the literature is the comparative analysis of the
dilutive effects of presumable blurring and tarnishment cases. Following Simonson’s
definition of dilution, these effects should be evaluated not only over brand associations’
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metrics, but also over a brand equity construct. Therefore, this study aims to analyze how
junior brands (blurring and tarnishment cases) affect famous trademarks’ brand equity and
strength of associations, considering the variable level of similarity that these junior brands
may have. The hypotheses are that junior brands, either blurring or tarnishment cases,
weaken famous brands’ associations and dilute brand equity; that these negative effects
increase the more dissimilar the junior brands are; and, presumed tarnishment by junior
brands, when surpassing a threshold of dissimilarity, reduce or annul their dilutive effect.
To delimit the scope of this article, the cases presented for the study of dilution
relate to the use of identical or similar brand names in different product categories. Highly
familiar brands are used as famous trademarks. This study enriches the trademark dilution
literature and bring more elements to the current debate regarding the level of harm that
junior brands represent for holders of famous trademark.
Literature review
Associative Network Model and trademark dilution
According to the Associative Network Model (ANM) (Anderson, 1983; Teichert and
Schöntag, 2010), information in the consumer’s memory is stored in networks consisting of
nodes (e.g. a famous brand and its distinctive aspects, such as product category and
attributes, beliefs, sensations, etc.) connected by links (associations). When a junior brand
emerges in another product category with some attributes (similar or not to those of the
famous brand), new associations are added to the existing network or actual associations
could be modified. When the consumer thinks about the brand, all associations compete for
activation in the memory, thereby weakening the famous brand’s associations by a
reduction in the likelihood or speed of retrieval (Burke and Srull, 1988). This theory about
the effect of junior brands on strength of associations has been supported by previous
research, using blurring cases (Morrin and Jacoby, 2000; Morrin et al., 2006; Pullig et al.,
2006). One of our arguments is that presumable tarnishment cases could also weaken
actual associations, since new associations (regardless of their content) are attached to the
brand node. In the process of evaluating dilution, or tarnishment, as explained by Simonson
(1993), one can understand that tarnishment is a special case of blurring. Thus, it is
hypothesized that:
H1: the emergence of junior brands, in cases of either blurring or tarnishment,
weakens a famous brand’s associations.
Dilution of Brand Equity
As explained in the introduction, this construct reflects the added value of the brand,
perceived by the consumer, when compared to the same unbranded product (Aaker, 1991;
Farquhar, 1989; Keller, 1993). Although Aaker (1991) and Keller (1993) have discussed
that brand equity is supported by several dimensions, the conceptualization chosen for this
study’s purpose emphasizes the overall evaluation of the brand and not its sources (except
strength of associations). We suggest it is an evaluative construct that could reflect the
impact of a tarnishing brand, as it is defined as one that affects brand evaluation.
Aaker (1991), Keller (1993) and Macías and Cerviño (2017) explain that one of the
pillars of brand equity is strong associations. When associations are weakened, they could
be less salient in consumer memory during an evaluative task. Empirical evidence for
blurring cases shows that brand equity could be diluted and purchase decisions could be
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affected due to consumers being exposed to junior brands (Macías and Cerviño, 2017).
Moreover, when referring to tarnishment cases, it should be noticed that these types of
brands would not only weaken the original associations by adding new associations to the
brand node, but also the nature of the new aspects (negative or unpleasant) would affect
the current perceptions towards the famous brand, reducing its global evaluation.
Therefore, the second hypothesis is:
H2: the emergence of junior brands, either in blurring or tarnishment cases, dilutes a
famous brand’s equity.
Similarity, trademark dilution and the subtyping model
Brand image is based on specific associations related to product category, attributes or
benefits (Keller, 1993), many of them being brand-specific associations that distinguish the
brand from other brands. Image similarity refers to consumers' perceptions of the
similarity between brands images, for example, a parent brand and an extension (Bhat and
Reddy, 2001), or as in the case of this study, a famous brand and its imitator.
Based on the ANM, when the perceived similarity between a JB and a famous brand
increases, there are more interconnected nodes (nodes relating to all similar aspects) in the
brand network (Jacoby, 2001), so the likelihood of retrieving original brand associations
when the brand is triggered may not be reduced (Humphreys et al., 2000; Pullig et al.,
2006). This means that lower dilution is expected, the less dissimilar that the JB and the
famous brand are. Empirical studies on trademark dilution with blurring cases show
evidence in this line (Morrin and Jacoby, 2000; Pullig et al., 2006; Macías and Cerviño,
2017). Considering the positive relation described between strength of associations and
brand equity, the moderating effect of similarity is also predicted for the later construct.
The following hypotheses summarize these arguments:
H3: When perceived similarity between a JB and a famous brand increases, either in
blurring or tarnishment cases, weakening of associations reduces.
H4: When perceived similarity between a JB and a famous brand increases, either in
blurring or tarnishment cases, dilution of brand equity reduces.
On the other hand, presumable tarnishing JBs use certain elements of the famous
brand - as in this study the brand name - but the type of product and attributes may likely
be significantly distant from the famous brand. This high dissimilarity would suggest that
the weakening of the associations should be high. Academic evidence of tarnishment
studies is scarce. A study of a parody of a famous Mexican series showed that the evaluation
of the original series and its characters was statistically equal among the viewers who saw
the parody in comparison to those who did not see it (Macías and Balcázar, 2016). The
subtyping model for mental schemas can be used to explain this result. This model assumes
that schemas are hierarchical structures that evolve through experience or new information
(Weber and Crocker, 1983). When discrepant or incongruent information is acquired, and
cannot be assimilated to be part of the established schema, a subcategory is created in
order to differentiate (or discriminate) it from the upper category. In the context of this
study, the junior brand could be interpreted as an exception and unrepresentative of a well-
established famous brand. In this sense, the new information would be stored in a
subcategory without the dilutive effect over famous brand’s schema. Following this theory,
we hypothesized that brand equity would be affected to some extent, depending on the
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