South-Western College Publishing - Economics  
An Unofficial Economic Indicator
Subject Measuring Economic Activity
Topic Productivity and Growth
Key Words

Trade Mark Applications, Economic Growth, and Recovery

News Story

More prosperity is just around the corner, according to March, 2004 postings of the index of economic indicators. The index is a tool used by policy makers to forecast the future direction of real GDP. It is made up of ten important variables in the economy, including average workweek, initial claims for unemployment insurance, new orders of consumer goods, stock market prices, and building permits for houses. These and several other variables have been proved effective in providing advanced forecasts of economic activity.

While the index in general has suggested economic growth and a climb out of the recession, another (unofficial) indicator, suggests that the recovery may not be as quick as some expected. Business firms, marketers, and advertisers file trademark applications to tie their products to brand names or images that represent "potential new businesses, product launches, line extensions or ad campaigns," according to intellectual-property law firm Dechert. Dechert has been tracking trends in trademark applications for 12 years, hoping to get another indication of the direction of the economy.

The firm believes the applications can indicate of how businesses feel about economic prospects. "Our reports have shown how the flow of applications to the U.S. Patent and Trademark Office can reflect either economic optimism or pessimism," according to Dechert partner Glenn A. Gundersen, who originated the trademark survey from the firm's Philadelphia office. He continues, saying, "Through good times and bad, trademark filings have echoed the larger economy in uncanny ways."

The current report found that in 2003 some companies were remaining pessimistic. Although the number of applications actually rose by 5 percent, industries like high technology, computer hardware and software, the Internet, telecommunications, pharmaceuticals and financial services were down and these are all industries cited by analysts as the future site of American business and job creation.

Gundersen explained the importance of this trend in an interview. "When companies file applications, about half are filed for products not on the market or businesses or services not yet launched. So we see in the applications filed now what plans people are making for products or services in the coming months or years." Translated to the current situation, the recovery cited by some may not come as quickly as expected. Trademarks represent a firm's capital assets--property that can be owned to enhance a product or service. A fall in such intellectual property filings indicates less investment spending than would have taken place had the trademarks been requested and received.


(Updated May, 2004)

Questions
1.

Expand and discuss the notion of fewer trademark applications indicating less investment spending. See if you can come up with some specific examples.

2. If the report from Dechert is correct, the economy my need a fiscal stimulus to continue the present expansion. What fiscal policy would you recommend? Would it involve tax breaks or investment or both?
3. Read the following statement about the value of a trademark and indicate if you agree or disagree, and why. "An exclusive name or image associated with a product in the mind of consumers often increases its value."
Source Sabra Chartrand, "Patents as an Economic Indicator", New York Times Online, April 5, 2004.

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