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

I.The Conventional Wisdom About Trademark Law

It would be difficult to overstate the consensus in the literature that the goal of trademark law is to improve the quality of information in the marketplace and reduce consumer search costs. Trademarks, the conventional wisdom holds, are means by which consumers can organize information about products or services. Trademark law works protects consumers in both a narrow sense (by protecting them from being deceived into buying products they do not want) and a broad sense (by allowing consumers to rely on source indicators and thereby reduce search costs in the market generally).⁷

According to Glynn Lunney, trademark “[o]wnership was assigned to the person who adopted the mark for her trade, not because she had created it or its favorable associations, but because such person was conveniently placed and strongly motivated to vindicate the broader public interest in a mark’s ability to identify accurately the source of the goods to which it was attached.”⁸ Trademark protection enhances marketplace efficiency, Lunney argues, because

by enabling consumers to connect information to precise product[s] more accurately, trademarks help consumers express more accurately their preferences and tastes for the varying mix of product features, quality, and prices each finds desirable. Trademarks can, therefore, help ensure that the pricing signals received by producers from the market (or “expressed demand”) more accurately reflect consumers’ actual tastes and preferences (or “actual demand”).⁹

Working from this unquestioned premise, commentators have sharply criticized modern doctrinal growth. Courts in recent times have greatly expanded trademark protection to cover more attenuated forms of confusion on the part of more people, and many of these expansions, the critics contend, are difficult to explain as attempts to promote the flow of information in the marketplace.¹⁵ Dilution is the most popular target for criticism,¹⁶ but expansions of trade dress protection and recognition of new forms of actionable confusion have also raised the ire of trademark scholars.¹⁷ Trademark critics widely characterize the expansion of modern law as a move away from confusion-based trademark law and towards a property-based regime that is focused only superficially on consumers.¹⁸

This characterization is important to critics for two reasons. First, it situates the debate about trademark expansion within the raging debate regarding whether the objects of intellectual property law should be regarded as “property.”¹⁹ Second, and more importantly for this paper, the characterization of modern trademark law having moved towards a property-based regime pits modern doctrinal innovations against the normative premises of trademark law and suggests that, not only do expanded trademark rights impose costs on competitors and the public, they cannot be justified on their own terms. In other words, criticisms of trademark law tend not to engage in a balancing of legitimate concerns but rather claim there is only one legitimate concern (for consumers and the quality of information in the marketplace) and that the law is illegitimate to the extent it deviates from that goal.²⁰

This criticism, however, is premised on a “falsely imagined past.”²¹ In reality, “traditional” American trademark law was unapologetically producer-centered.²² Trademark law, indeed all of unfair competition law, developed to promote commercial morality and to prevent competitors from diverting a producer’s customers through “illegitimate” means. Consumer confusion was relevant to the traditional determination of infringement only for instrumental reasons; confusing consumers was a particularly effective way of stealing a producer’s trade. To put it another way, if Bork was right that antitrust laws have only one legitimate goal – to promote consumer welfare, and not to protect competitors, though competitors might also benefit²³ – then traditional trademark law was its conceptual mirror image. Trademark law traditionally sought to regulate the relationship among competitors, though consumers might also have benefited.

Moreover, American courts from the very beginning protected producers’ interests against illegitimate diversions of trade by recognizing property rights. Because those property rights were grounded in the natural rights theory of property that most judges and commentators relied on in the nineteenth century, however, the property rights courts traditionally recognized were considerably narrower than the rights recognized today. Specifically, trademark owners were entitled to relief only against others that illegitimately interfered with their ability to profit from their labors by dishonestly marking their products and passing them off as those of the trademark owner.

This characterization of traditional trademark law poses serious problems for modern criticisms of trademark law. If “traditional” trademark law was not intended primarily to protect consumers, then the fact that modern trademark law seems producer-centered is not particularly damning. More importantly, it suggests that the critics worship a false idol when they claim that trademark law can be limited by tying protection to consumer expectations. In fact, virtually all of trademark law’s modern doctrines are more difficult to square with the natural property rights approach nineteenth century judges applied than with the economic efficiency theory currently in vogue. To take just one example: there is a reasonable argument that information clarity would be promoted, not hindered, if trademark law prevented all conflicting uses of a mark. After all, a market with only one party using APPLE or FORD is the easiest for consumers to navigate.

The following section revisits traditional American trademark law in greater detail and describes the theoretical construct in which the law developed.