Draft July 28, 2006 Please do not circulate or cite without permission The Normative Foundations of Trademark Law

127 163 U.S. 169 (1896).

128 Id. at 185.

129 Id.

130 David S. Welkowitz, The Supreme Court and Trademark Law in the New Millennium, 30 Wm. Mitchell L. Rev. 1659, 1664 (2004); Singer, 163 U.S. at 200-04.

131 As discussed below, courts and commentators of the nineteenth century were quite careful to make this distinction between legitimate and illegitimate attempts to steal competitors’ customers. See Section __, below

132 See Welkowitz, supra note __ at 1664.

133 305 U.S. 111 (1938).

134 Id. at 120-22.

135 See Hopkins supra note __ at § 10, at 18 n.35 (citing cases decided prior to 1900 that declared trademark rights property rights).

136 Bone essentially takes this position. Bone, Hunting goodwill at 19-20.

137 See Section II(B)(2) above.

138 See supra notes 63-64 and accompanying text.

139 McLean v. Fleming, 96 U.S. at 254 (right to injunction not based on rights in a specific mark); Thompson v. Winchester; Perry v. Truefitt; Avery v. Meikle; Cook v. Starkweather, CMTM 221 (N.Y. Sup. 1872); Amoskeag v. Spear, 2 Sand. S.C. 599.

140 There are a couple of other intellectual histories of trademark law that attempt to describe the relationship between the evolution of trademark law and contemporaneous thought about property law. See Kenneth Vandevelde, The New Property of the Nineteenth Century: The Development of the Modern Concept of Property, 29 Buff. L. Rev. 325, 341-48 (1980); McClure, supra note __ at 306-10; Bone, Hunting Goodwill at 19-25. All of those works make important contributions to the literature, but I believe that each misunderstand the development of trademark law in a couple of important respects.

141 Some commentators did. See William Henry Browne, A Treatise on the Law of Trademarks and Analogous Subjects § 86 (2d ed. 1885) (describing property rights in trademarks as having their foundation in “immutable law”).

142 There is abundant of evidence that judges in this era were heavily influenced by natural law principles. Legal treatises, including Chancellor Kent’s well-known Commentaries, cited and relied on natural rights philosophers. 1 James Kent, Commentaries on American Law 16-18 (O.W. Holmes, Jr. ed., 12th ed. 1873) (1826) (stating that “Grotius [is] justly considered the father of the law of nations,” and listing Pufendorf, Wolff, Burlamaqui, and Rutherforth, as “the disciples of Grotius.”). Judges also considered the writings of natural rights philosophers legitimate sources of authority. See, e.g., Pierson v. Post, 3 Cai. R. 175 (N.Y. Sup. Ct. 1805). See also Adam Mossoff, What is Property? Putting the Pieces Back Together, 45 Ariz. L. Rev. 371, 406 n.140 (2003) (hereinafter “Mossoff, What is Property?”) (listing nineteenth-century property decisions and noting the common practice of lawyers and judges of citing to and relying on natural rights philosophers and legal scholars).

143 This notion of labor giving rise to property is most often associated with John Locke. John Locke, Two Treatises of Government (Peter Laslett ed., Cambridge Univ. Press 1988) (1690). Locke argued that God gave the world “to the use of the industrious and rational,” and that one acquired property by mixing his labor with the common. Id. at ch. 5, §§ 27, 34. Thus, the proper object of the law is to promote “the honest industry of mankind.” Id. at § 42.

144 Locke’s concern for the rights of others is manifested in the so called Lockean proviso, which allows for property acquisition so long as one leaves “as much and as good” for others. Id. at § .

145 Eric R. Claeys, Takings, Regulations, and Natural Property Rights, 88 Cornell L. Rev. 1549, 1556 (2003) (hereinafter “Claeys, Takings”). Several leading natural law commentators discussed this conception of property. Chancellor James Kent, for example, concluded that “[e]very individual has as much freedom in the acquisition, use, and disposition of his property, as is consistent with good order, and the reciprocal rights of others.” 2 James Kent, Commentaries on American Law 319 (2d ed., Halsted 1832). Similarly, James Madison wrote that “[i]n its larger and juster meaning, [property] embraces every thing to which a man may attach a value and have a right; and which leaves to every one else the like advantage.” James Madison, Property, Nat’l Gazette, Mar. 27, 1792, at 174, reprinted in 14 The Papers of James Madison 266 (Robert A. Rutland et al. eds., 1983). See also, James Wilson, Lectures on Law, in 1 The Works of James Wilson 67 (Robert Green McCloskey ed. 1967); Zephaniah Swift, A System of the Laws of the State of Connecticut (1795).

146

147 Claeys, Takings at 1586-87

148 Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).

149 See Claeys, Takings at 1587-89, 1599-1604.

150 See, e.g., Wolfe v. Barnett, 24 La. An. 97 (1872) (describing as the “leading principle of the law” to secure to the “honest, skillful and industrious manufacturer or enterprising merchant … the first reward of his honesty, skill, industry or enterprise” and protect him from deprivation at the ands of another who “appropriates and applies to his productions the same, or a colorable imitation of the same name, mark, device or symbol, so that the public are, or may be deceived or misled into purchase of the productions of the one, supposing them to be of the other”); Lawrence Mfg. Co. v. Tennessee Mfg. Co., 138 U.S. 537, 546 (1891) (describing the a mark owner’s interests as “the custom and advantages to which the enterprise and skill of the first appropriator had given him a just right” and describing infringement as that custom being “abstracted for another's use … by deceiving the public, by inducing the public to purchase the goods and manufactures of one person supposing them to be those of another”).

151 See Avery & Co. v. Meikle & Co., 4 Ky.L.Rptr. 759, __ (1883) (referring to “that great generic rule which lies at the foundation of all law, that a man must so use his own property as not to injury the property of another).

152 11 East 574, 103 Eng. Rep. 1127 (Q.B. 1707).

153 A duck decoy “provided an efficient system for capturing wild ducks on a commercial scale. A typical decoy consisted of a large pool of water from which radiated creeks, called pipes, that were roofed with netting. Ducks were attracted to the pool by the use of decoys; then a specially trained dog, a piper, would appear at the front of a pipe and lure them closer (ducks, like humans, are curious and aggressive animals). When the ducks were well into a pipe a decoy man, previously hidden by a screen, would appear behind them (but out of sight of the pool) and frighten them farther into the pipe, where they were trapped. This technique enabled the capture of very large numbers of ducks, but didn’t work well if there were disturbances – such as guns going off.” Jesse Dukeminier & James E. Krier, Property 34 ( ).

154 Keeble, 11 East at 575, 103 Eng. Rep. at 1128.

155 Id.

156 Keeble, 11 East at 576, 103 Eng. Rep. at 1128. Note that, just as in the case of common law actions trademark infringement, these types of interferences with property rights were remedied through actions on the case.

157 11 H. 4, 47 (Y.B. 11 H.IV, 47).

158 Keeble, 11 East at 576, 103 Eng. Rep. at 1128.

159 Id.

160 Id.

161 Id.

162 Id. at. __.

163 Croft v. Day, 7 Beav. 84 (1843)

164 Id. at 89-90.

165 2 Sand. Ch. 603 (C.C.N.Y. 1846)

166 Id. at __.

167 L.R. 23 Q.B. 598-625 (1889).

168 Id.

169 Id.

170 149 U.S. 562 (1892)

171 Id. at 566. See also, Hilton v. Hilton, 104 A. 375, __ (N.J. Err. & App. 1918) (quoting Vice Chancellor Wood’s definition of goodwill in Churton v. Douglas, 28 L.J. Ch. 841 (1859) as including every affirmative advantage acquired by a firm in carrying on its business, but not the negative advantage of competitors refraining from carrying on their business).

172 Canal Co. v. Clark, 80 U.S. 311, 327 (1871). See also Avery & Sons. v. Meikle & Co., 4 Ky.L.Rptr. 759, __ (1883) (“This limit must be observed, that if the means used are such as are common to all, or not exclusively appropriated by another, and injury follows which is not the result of design and improper use of those means, no remedy exists. There may be a design in adopting lawful means to absorb another’s trade reputation; yet, if those means are the common property of all, and are used in a lawful manner, and damage ensue, it would be damnum absque injuria.”) (emphasis in original).

173 See Mitchell, supra note __ at 286-87 (citing cases). See also, Marsh v. Billings, 61 Mass. 322, 331 (1851) (noting that the defendants had a perfect right to carry passengers from the station to the Revere House and to use the words “Revere House,” provided they did not do so in circumstances likely to deceive).

174 Proponents of the information transmission model seem to assume that the title “unfair competition” was arbitrarily chosen to denominate claims that really seek to promote information flow. These proponents have never explained why confusion is so central to trademark law if the goal is merely better information. Consumer confusion obviously can interfere with transmission of information, but so can too much information. I am unaware of any claim for information overload.

175 Restatement (Third) of Unfair Competition, Chap. 1 § 1 comment a (1995). What normative guide one uses to determine what is unfair is at this point a mystery.

176 See Vandevelde, supra note __ at 331-32 (claiming that Blackstone’s conception of property was “physicalist”):

177 See Vandevelde, supra note __ at 334-38. I discuss treatment of licensing in Section ___ below.

178 See, e.g., Taylor v. Carpenter, 2 Sand. Ch. 603, 7 N.Y. Ch. Ann. 720 (1846).

179 See Hopkins, supra note __ at § 5, at 15, quoting Kerly on Trademarks 475 (2d. London 1901) (“The qualified right in the tradename [or a trademark], a right to prevent a defendant from passing off his goods as those of the plaintiff by the use of it – exists only with regard to goods of the kind for which the plaintiff uses it, and to which the connection with his business suggested by the use of the name extends.”).

180 See Bone, Hunting Goodwill, supra note __ at 19-24; Mossoff, What is Property? at 418-23; Vandevelde, supra note __ at 341-48. Those who embrace this view presumably mean that courts treated the words or symbols that actually made up the mark as property. If, by saying that it protects “the mark itself” commentators mean something broader than that – the property being the meaning of the mark – that is closer to what trademark law has become today.

181 See, e.g., Derringer v. Plate, 29 Cal. 292, 294-95 (1865) (describing trademark rights as property which accrues without the aid of statute, “like the title to the good will of a trade, which it in some respects resembles”).

182 Bone, for example, criticized the conception of property rights in the trademark itself, which he believed nineteenth century jurists accepted, on the ground that the doctrinal rules were much less absolute than real “property” rights recognized in that era. Bone, Hunting Goodwill at 19-23. See also, Vandevelde, supra note __ at 345 (“By creating limited property [in trademarks], the courts essentially robbed the term ‘property’ of its meaning.”).

183 See Upton on Trademarks at 10 (“Property in trademarks, exclusive and absolute, has existed and been recognized as a legal possession which may be bought and sold and transmitted, from the earliest days of our recorded jurisprudence.”).

184 Eric R. Claeys, Jefferson Meets Coase: Train Sparks, Natural Rights, and Law and Economics at 22-23 (unpublished draft on file with author) (hereinafter “Claeys, Train Sparks”) citing 1 Blackstone’s Commentaries at 121-124; Robert P. Burns, Blackstone’s Theory of the “Absolute” Rights of Property, 54 U. Cin. L. Rev. 67, 71-73 (1985).

185 Claeys, Train Sparks at 23. In fact, this is the sense of “absolute” property rights that Bone described in his article Normative Theory and Legal Doctrine in American Nuisance Law: 1850 to 1920, 59 S. Cal. L. Rev. 1101, 118 (1985)

186 Many who hold that nineteenth century property rights were absolute in the modern sense cite as evidence Blackstone’s description of property as “that sole and despotic dominion which one man claims and exercises over the external things of the world.” See Vandevelde, supra note __ at 332-33. But careful reading of Blackstone’s discussion demonstrates that Blackstone did not view property rights as incapable of restriction: Blackstone specifically acknowledged that property could be taken through eminent domain and regulated in many ways by the civil law. 2 Blackstone, Commentaries, at *2; see 1 id. at *134-35; 2 id. at *2-*15. Cf. Thomas W. Merrill, Henry E. Smith, What Happened to Property in Law and Economics?, 111 Yale L.J. 357, 361 (2001) (“Blackstone's talk about property being a "sole and despotic dominion" was clearly a bit of hyperbole and is inconsistent with the balance of his treatment of property, not to mention with the complexities of modern property law.”); Carol M. Rose, Canons of Property Talk, or, Blackstone’s Anxiety, 108 Yale L.J. 601, 604 (1998) (describing Blackstone's talk of an exclusive right to property as "a rhetorical figure describing an extreme or ideal type rather than reality").

187 Trade secrets also were regularly protected, though highly qualified, property rights. See Peabody v. Norfolk, 98 Mass. 452, 457-58 (1868) (analogizing trade secrets to trademarks and calling both instances of courts protecting business goodwill as “property”).

188 See, e.g., Perry v. Truefitt, 6 Bevan 66 (stating that “the principle on which both courts of law and equity proceed, in granting relief and protection in cases of this sort, is very well understood. A man is not to sell his own goods under the pretense that they are the goods of another man; he cannot be permitted to practice such a deception, nor to use the means which contribute to that end.”).

189 Courts frequently referred to this flow of customers seeking the mark owners’ goods as “goodwill.” Courts that did so borrowed from a concept developed elsewhere in the law to describe a similar phenomenon. In Cruttwell v. Lye, for example, the court considered whether a purchaser in bankruptcy could prevent the bankrupt from carrying on the same trade as the old established trade. See, e.g., Cruttwell v. Lye, 17 Ves. Jun. 335 (1810). The court defined “the good-will, which had been the subject of sale,” as “nothing more than a probability that old customers will return to the old place,” and held that, absent evidence that the bankrupt fraudulently diverted those who would return to the old place, it could not enjoin the bankrupt from carrying on his trade. Id. at 346. As Bob Bone recently observed, the goodwill courts have protected in trademark cases has undergone dramatic expansion. See Bone, Hunting Goodwill, supra note __ at 24-28, 34-44.

190 Upton, supra note __ at 15. Upton further notes that even in 1860 it was recognized that “an unlawful encroachment on the good will of a business is sometimes the essence of the wrong involved in the violation of a trade mark.” Id. at 59.

191 240 U.S. 403 (1916).

192 240 US at 413-14. See also, Schechter, Historical Foundations at 158 (describing trade reputation as the property at issue).

193 See Hanover Star Milling, 240 U.S. at 413 (“Common-law trademarks, and the right to their exclusive use, are, of course, to be classed among property rights; but only in the sense that a man's right to the continued enjoyment of his trade reputation and the good will that flows from it, free from unwarranted interference by others, is a property right, for the protection of which a trademark is an instrumentality.”) (internal citations omitted).

194 Id. at __ (“It is not the trade-mark, but the trade, the business reputation and good will, that is injured; and the property or right in the trade is protected from injury by preventing a fraud-doer from stealing the complainants trade by means of using the complainant’s ‘commercial signature.’”). See also, Peabody v. Norfolk, 98 Mass. at 457 (“If a man establishes a business and makes it valuable by his skill and attention, the good will of that business is recognized by the law as property.”); Chadwick v. Covell, 151 Mass. 190, 193-94 (1890) (“When the common law developed the doctrine of trade-marks and trade-names, it was not creating a property in advertisements more absolute than it would have allowed the author of Paradise Lost, but the meaning was to prevent one man from palming off his goods as another’s, from getting another’s business or injuring his reputation by unfair means, and, perhaps, from defrauding the public.”); Perry v. Truefitt, 6 Beavan 66 (1842) (referring to a trademark simply as a means which contributes to the end of palming off one’s goods).

195 American Washboard Co. v. Saginaw Mfg. Co., 103 F. 281, 284 (6th Cir. 1900) (quoting Lord Cranworth in Leather Cloth Co. v. American Leather Cloth Co., 11 H.L. Cas. 523).

196 Shoemaker, supra note __, at 5 (citing Carrol v. McIlvaine & Baldwin, 183 F. 22 (2d Cir. 1910) (emphasis added)).

197 The notion of “goodwill” as a legal concept is often traced to Crutwell v. Lye, 17 Ves. Jun. 335 (1810). See note 187, supra.

198 Keeble v. Hickeringill, 11 East 574, 575, 103 Eng. Rep. 1127, 1128 (1707). Peabody v. Norfolk suggested that trade secrets also protected a manifestation of goodwill. See Peabody, 98 Mass. at 457-58. Thus, contrary to Bone’s reading of the nineteenth century trademark cases, I do not accept that there was a shift from protection of the trademark itself to protection of the goodwill as property.

199 McCarthy, supra note __ at § 2:9. The first use rule has historical pedigree. See American Washboard Co. v. Saginaw Mfg. Co., 103 F. 281, 287 (6th Cir. 1900) (quoting George v. Smith, 52 F. 830, 832 (C.C.N.Y. 1892) (“It is the party who uses [a designation] first as a brand for his goods, and builds up a business under it, who is entitled to protection, and not the one who first thought of using it on similar goods, but did not use it. The law deals with acts, not intentions.”).

200 One possible efficiency explanation for the first use in commerce trigger is that it provides a predictable benchmark against which parties can plan. But if clarity and ease of administration is the goal, a first to file regime seems obviously preferable. Moreover, even if it were true that first use was the clearest marker, its appeal is based on a different kind of efficiency and may lead to results contrary to consumer expectations.

201 This discussion of use and priority raises a possible objection that the natural rights theory cannot explain the reverse confusion doctrine. See McCarthy § __ (describing reverse confusion as confusion regarding the source of the plaintiff’s product in light of the defendant’s use). That doctrine did not exist during the nineteenth century, so it is possible that judges operating in the natural rights tradition would have refused the plaintiff a remedy in the reverse confusion fact scenario. Junior users who are larger and more visible than the senior user are not likely to divert consumers who otherwise would have gone to the smaller senior user. But certainly the natural rights approach offers a better explanation of reverse confusion than an economic efficiency justification. If our concern was to enhance marketplace efficiency and recognize consumer expectations, trademark law should award the rights to the junior user if and when consumers predominantly associate a mark with it. Natural rights theory, on the other hand, might preference the senior user despite consumer understanding because the senior user was the first laborer and therefore staked out her rights.

202 4 De. G. J. & S. 137 (1863)

203 Id. At 137.

204 L.R. 1 Eq. 518, 524 (1866).

205 Hanover Star Milling v. Metcalf, 240 U.S. 403, 413 (1916).

206 See Thomas J. Carroll & Son Co. v. McIlvaine & Baldwin, 183 F. 22 (2d Cir. 1910) (distinguishing between the Baltimore and New York markets for whisky and denying the plaintiff, which had prior rights in Baltimore, the right to prevent use of the same mark in New York).

207 4 De G.J. & S. at 141. See also Hopkins, supra note __, at § 5 at 15, quoting Kerly on Trademarks, supra note __ at 475 (“The qualified right in the tradename [or a trademark], a right to prevent a defendant from passing off his goods as those of the plaintiff by the use of it – exists only with regard to goods of the kind for which the plaintiff uses it, and to which the connection with his business suggested by the use of the name extends.”)