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

BThe Nature of the Property

With some understanding of the natural rights property framework within which eighteenth and nineteenth century judges created trademark law, we can now return to the question of what “property” the trademark cases sought to protect. There are at least three reasonable possibilities: that the right to a mark was merely incidental to rights in physical property; that trademarks themselves were protected as property; and that trademarks merely symbolized goodwill, which was the property. The following sections look more closely at each.

(1)Trademarks as Incident to Physical Property Rights

A first possible reading of the cases is that trademark rights were simply incident to underlying property rights in physical assets. In other words, protecting the exclusive right to use a trademark was required to protect one’s right to make full use of other property, and to reap the economic benefits thereof. This is an understandable reading since some strains of nineteenth century property theory were relatively physicalist – property rights were discussed in relation to some thing, a physical or reified intangible object.¹⁷⁶ Some of the trademark doctrines nineteenth century courts developed also are consistent with this view, particularly trademark law’s initial refusal to allow trademark assignment without transfer of the underlying physical assets of the business.¹⁷⁷ Ultimately, however, this view does not sufficiently account for the way the majority of courts articulated of the harm of trademark infringement, which rarely mentioned physical assets and focused on the flow of customers.¹⁷⁸ The view of trademark rights simply as incident to rights in business assets also may not explain the traditional restriction of trademark rights to the particular trade in connection with which the mark owner used his mark.¹⁷⁹ A right intent on protecting free use of physical assets probably would not determine the range of uses to which the assets could be put.

(2)Property Rights in a Trademark Itself

A second possible reading of the cases, one that at least some commentators have embraced,¹⁸⁰ is that courts sought to protect a property right in the trademark itself. That is also an understandable reading. To begin with, courts sometimes said that exclusive use of a mark made it the producer’s property.¹⁸¹ Also, there is a natural tendency to relate property rights to an identifiable res, and clearly the mark was the locus of attention. I believe there is a better reading of the cases that makes more sense of the various doctrinal rules courts developed, but contrary to some suggestions, it is possible to conceive of a property right in the mark itself that is coherent and sufficiently attenuated to account for the doctrinal restrictions courts placed upon trademark rights.

This conception of property in the mark itself has troubled other commentators because trademark rights traditionally were so limited. As we have seen, a mark owner traditionally had only the exclusive right to use of the mark in connection with particular products and services. Infringement of those rights took place then only when the mark was used by others in competitive proximity. Trademark owners could not prevent others from using the mark in non-competitive contexts, and they could not alienate the mark independent of the underlying business.

Some have suggested that these restrictions make the notion of property rights in the mark incomprehensible because, during the nineteenth century, property rights were “absolute” and impossible to limit or reduce.¹⁸² But that view is based on a misunderstanding of nineteenth century property law and theory. While it is true that judges and commentators sometimes referred to property rights as absolute, in contrast to “relative” rights,¹⁸³ those terms generally had different meaning than they do today. “Pre-1900, ‘absolute’ was a rough synonym for ‘personal’ and ‘pre-political’—as opposed to ‘relative,’ which referred to a political right, or a right necessarily created in civil society.”¹⁸⁴ Under that framework, “the right of religious conscience is absolute, the right to vote is relative, and the right of property is a combination of an absolute right to one’s labor and the relative rights created by a society’s civil property laws.”¹⁸⁵ Thus, while American natural property rights might have been considered “absolute” in the sense that they were pre-political, they were never “absolute” in the sense that they were not qualified for the rights of others or for the public.¹⁸⁶

The conception of trademark law protecting property in the trademark itself, then, is not objectionable simply because the rights courts recognized were highly qualified.¹⁸⁷ Nevertheless, I do not find this understanding particularly helpful. First, courts frequently referred to the value of the business as the relevant property, probably more frequently than they referred to the mark as property. Second, and more importantly, the harm of trademark infringement almost universally was described in the same terms as the harms caused by other forms of unfair competition that did not involve use of the mark at all.¹⁸⁸

Consequently, it makes more sense, in my view, to focus on the interest courts uniformly referred to as central to the trademark system: the interest in avoiding illegitimate diversions of consumers who were habituated to patronizing the mark owner.¹⁸⁹ Thus, I would define the property interest as the right to be subject only to fair competition for consumers a producer had attracted through labor.

(3)Property Rights in Honestly Acquired Customer Flows

As was clear in Upton’s 1860 treatise, the property in trademarks has always been quite distinct from that protected by patent or copyright. Trademarks were

a property, not in the words, letters, designs or symbols, as things – as signs of thought – as productions of mind – but, simply and solely, as a means of designating things – the things thus designated being productions of human skill, or industry, whether of the mind or the hands, or a combination of both: and this property has no existence apart from the thing designated – or separable from its actual use, in accomplishing the present and immediate purpose of its being.¹⁹⁰
This is what the court in Hanover Star Milling Co. v. Metcalf¹⁹¹ understood when it said that:

[i]n the English courts it often has been said that there is no property whatever in a trademark, as such. But since in the same cases the courts recognize the right of the party to the exclusive use of marks adopted to indicate goods of his manufacture, upon the ground that '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 practise such a deception, nor to use the means which contribute to that end. He cannot therefore be allowed to use names, marks, letters, or other indicia, by which he may induce purchasers to believe that the goods which he is selling are the manufacture of another person;’ it is plain that in denying the right of property in a trademark it was intended only to deny such property right except as appurtenant to an established business or trade in connection with which the mark is used.¹⁹²

When a plaintiff brought a trademark infringement claim, “[t]he gist of the complainant [sic] [was] that the defendant, by placing the complainant’s trade-mark on goods not manufactured by the plaintiff, ha[d] induced persons to purchase them, relying on the trade-mark as proving them to be of plaintiff’s manufacture.”¹⁹⁵ A trademark, as Shoemaker stated plainly, “merely distinguishes and designates the business in which it is used, and it is the business which is to be protected, and not the trade-mark as a mere collection of words or symbols.”¹⁹⁶

Earlier cases did not always describe this right in one’s business as “goodwill” as courts would become accustomed to doing, since that terminology was just developing in the nineteenth century.¹⁹⁷ But the concept of rights in the flow of business dates back at least as far as the early eighteenth century, when the court in Keeble, citing a case from the early fifteenth century, protected the right to the fruits of legitimate labor: “when a man useth his art or his skill to take [the ducks he has lured], to sell and dispose of for his profit; this is his trade; and he that hinders another in his trade or livelihood is liable to an action for so hindering him.¹⁹⁸