The general consensus is that on balance, strong protections create innovation and high quality products.

Economists generally agree on the fact that trademark protection creates an incentive for the production of quality goods.46 However, this function is presented by economists in two different versions. Some authors claim that trademark protection induces firms to offer goods with a precisely defined and constant quality.47 For others, trademark protection makes firms produce high quality goods, and the aggregate effect is to increase the average quality of goods throughout the whole market.48 The adoption of the latter approach may be crucial to providing a rationale for the extended protection of “strong” and famous trademarks. Take, for instance, the primary finding of Landes and Posner: the higher the quality of products, the greater the incentive to invest in order to create a “strong” trademark.49 Although Landes and Posner put forth a seminal contribution in the economic literature on trademarks, their findings are affected by several limitations as related to the aims of our research. First, Landes and Posner tacitly assume that the activities that create a “strong” trademark, such as the production of high quality products and advertising, are perfect signals to consumers regarding the characteristics of products.50 Second, their model mainly concerns firms that are attempting to build a “strong” trademark;51 what really is at stake in real markets, though, is the extended protection of brands that are already “strong.” And third, their model deals with the use of trademarks within a product class; the possibility of non-homogeneous goods is included, but the phenomenon of brand extension is not considered.52 This same limitation characterizes the work of others as well.53