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


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IV.Expansion of American Trademark Law

Critics of modern trademark law are indisputably correct about one thing: trademark law has significantly broadened since the beginning of the twentieth century. But as this review of traditional trademark law makes abundantly clear, the evolution of trademark law cannot be described as a shift from “consumer-centered” to “producer-centered” or from “confusion-based” protection to “property-based” protection. Trademark law traditionally was predominantly producer-centered and was based on a property right.

Recent doctrinal expansions, however, do reflect a fundamentally different approach to the question of what property trademark law seeks to protect. Early cases regarded the “property” as the mark user’s customer base and protected the mark owner from illegitimate diversions of those customers. By contrast, modern trademark law, taken as a whole, views the brand, construed broadly, as the relevant property.

The reasons for this shift are many, and it is always risky to attempt to isolate them. Nevertheless, there are at least two factors that seem clearly to have influenced the evolution of trademark law. First, traditional trademark law was built upon a conception of commerce as predominantly local and limited to a small range of closely related products. While that view many have accurately reflected nineteenth century commerce, the economy evolved in the twentieth century as producers diversified this product offerings and broadened their geographic reach. As a result, producers began to view a trademark law that focused on parties in close competitive proximity as overly restrictive.227 Thus, there was social and economic pressure to broaden trademark law’s conception of the goodwill embodied in a trademark.228

Second, and simultaneously, the institution of property as it was known came under attack at the hands of the Legal Realists. Trademark law and the property rights it claimed to protect were not immune from attack on this front. In fact, Felix Cohen, one of the original Realists, specifically mentioned trademarks as an example of the transcendental nonsense property had become.229 During this time the argument that property generally, and trademarks in particular, protected a form of monopoly, made a re-appearance.230

This was not the first brush trademark law had with “monopoly-phobia”: at various points in the history of trademark law, opponents have argued that allowing companies exclusive rights in their marks was tantamount to granting monopolies.231 And in one sense, this concern about creating monopolies was reasonable. Unfair competition law was intended to prevent competitors from stealing each other’s customers. Interpreted broadly, such claims strike at the heart of a market economy; after all, attempting to steal a competitor’s customers is what competition is all about.

Supporters of trademark protection recognized this potential conflict between trademark law and competition, however, and they defended against it by distinguishing between honest competition, with which trademark law did not interfere, and dishonest infringement. Doctrinally that distinction manifested itself in limitations on the scope of protection to situations where consumers were likely to be confused as to the actual source of the product. Courts following the natural rights tradition were interested, in other words, in preventing only a very specific type of trade diversion – that which resulted from tricking consumers into thinking they were getting something they were not. There were innumerable ways in which competitors could lure away customers that were not “unfair competition.”

That traditional distinction no longer satisfied critics in the early twentieth century, in part because they were worried about a different sense in which protecting trademarks might create market power – the “artificial” differentiation problem. Supporters of trademark rights responded to these concerns about property and monopoly by focusing on the limited scope of trademark rights and arguing that, by preventing consumer confusion, the law actually enabled competition and benefited consumers.232 This line of argument apparently was so persuasive that it engendered a kind of selective amnesia whereby courts and commentators began believing not only that trademark protection ultimately benefited consumers, but that consumers were the actual intended beneficiaries all along.233

Notably, as courts and commentators began to embrace the consumer protection model as a justification for a claim by a trademark user, courts stopped referring to possible actions by consumers themselves for fraud or deceit. Thus, while courts traditionally distinguished conceptually between trademark claims and claims aimed at protecting consumers, courts in the twentieth century began to conflate the two interests.234

Despite the rise of the consumer protection rationale as an alternative justification of trademark law, however, courts maintained most of the doctrinal structure that was created under the natural rights conception. But when stripped of the theoretical framework that had always limited the scope of trademark rights, the concepts that had been so central to traditional trademark law, such as “goodwill” and “likelihood of confusion,” became susceptible to a variety of meanings.


AModern Doctrinal Expansions

The scope of trademark rights steadily expanded during the twentieth century. This was, I suggest, somewhat inevitable. Loosed from its natural rights moorings and tied only to the possibility of consumer confusion, however remote, modern trademark law essentially embodies a one-way ratchet to greater protection. With every doctrinal change that grants trademark owners broader rights, consumers grow to expect that trademark owners have increasingly broad control over their marks. These changed consumer expectations then become the basis for even broader trademark rights.235

The following sections discuss some of the most significant doctrinal changes of the last century, each of which has contributed to the near total control mark owners now enjoy. This is not intended to be an exhaustive catalog of trademark law’s expansion, but only highlights some of the most significant changes from a normative standpoint.

(1)Unfair Competition No Longer Presupposes Competition

Traditional trademark protection, as I have characterized it above, focused on producers’ attempts to steal away customers from those in close competitive proximity. Producers’ property interests were defined with respect to the markets in which they operated, because the “property” traditionally recognized was in the mark owner’s business and not in the mark itself. Consistent with this understanding of trademark law, courts defined trademark rights to give the mark owner the exclusive right to use a mark in a particular trade.

Courts therefore refused to find infringement when the defendant did not use the mark on competitive products, even when the defendant used an identical mark to that of the plaintiff. In Borden Ice Cream Co. v. Borden’s Condensed Milk Co.,236 for example, the court refused to allow the owner of the trade name “Borden” for milk and milk products to prevent use of the “Borden” name for ice cream. Because the purpose of unfair competition law was to protect a company from diversion of its trade, the court noted that “unfair competition presupposes competition of some sort.”237 Without competition, the plaintiff could not demonstrate that the defendant was using the mark to divert its customers.

As the economy evolved into one in which producers entered a wider array of product markets, however, courts began to view competition as overly restrictive, and trademark law gradually moved away from its insistence on competition and that consumers be confused as to the physical source of a product. This development was far from an orderly linear progression from the restrictive view to the modern, more expansive view. Nevertheless, it can be described generally as a marked expansion of the range of uses against which trademark owners can assert infringement claims.

The first step in that expansion was the Trademark Act of 1905,238 which required that the defendant use the same or a similar mark on goods of “substantially the same descriptive properties.”239 This slightly loosened the requirement of direct competition between the two parties, allowing claims against uses for goods that were descriptively similar, even if the proprietors did not directly compete with one another.240 On its face, this was only a modest expansion, and courts at first continued to reject claims against uses for goods that were only related.241

Some courts, however, began to allow claims against uses of a mark on unrelated products, at least where the plaintiff was likely to enter into the defendant’s market. The Second Circuit’s decision in Aunt Jemima Mills Co. v. Rigney & Co.242 is often cited as the beginning of that trend. In that case, the court allowed the owner of the mark AUNT JEMIMA for pancake batter to prevent defendant’s use of the same mark for pancake syrup. The court made little effort to come to terms with governing language of the 1905 Act, finding that while “no one wanting syrup could possibly be made to take flour,” the products were “so related as to fall within the mischief which equity should prevent.”243 Because the public might conclude that the defendant’s syrup was made by the plaintiff, the plaintiff’s reputation was put in the hands of the defendants.244 If a customer was unsatisfied with the AUNT JEMIMA syrup, they might impute that poor quality to AUNT JEMIMA pancake batter.

Likewise, in Yale Electric Corp. v. Robertson,245 the court allowed the owner of the YALE mark for locks to prevent registration of YALE for flashlights and batteries. Judge Learned Hand conceded that his decision “[did] some violence” to the language of the statute, but determined that the statute could not be as restrictive as its language suggested.246 The court echoed the decision in Aunt Jemima when it expressed concern that the trademark owner’s reputation could be injured if its mark was used by another, “whose quality no longer lies within his control.”247 Turning the traditional rule on its head, Judge Hand claimed that “it ha[d] come to be recognized that, unless the borrower’s use is so foreign to the owner’s as to insure against any identification of the two, it is unlawful.”248

Courts did not unanimously accept the related goods doctrine,249 but Congress ultimately embraced it when it passed the Lanham Act in 1946.250 Under the statute, mark owners were not required to prove that the junior user directly competed with the senior user in the market in which the senior user gained recognition.251 Nor was the mark owner required to prove that the products themselves were related in the sense that they are complimentary or sold in proximate markets. Instead, as courts would interpret the Lanham Act, any use that caused confusion as to a producer’s potential connection with the junior user constitutes infringement.252 As a result, the scope of a party’s rights is tied exclusively to consumer understanding.

This was a tremendously significant change in trademark law – a much more significant change than commentators generally recognize. It was not, as McCarthy suggests, “a mere historical accident that the label ‘unfair competition’ was adopted to denominate a certain area of the law.”253 Rather, the label “unfair competition” was particularly apt because competition was at the theoretical and doctrinal cynosure of all of the claims in that constellation.

A company unrelated to the Coca-Cola Company, for example, would infringe Coca-Cola’s rights in its COKE mark only if it used COKE to sell soda, or at least some drink product, that consumers believed was made by Coca-Cola. The harm of passing off was that it diverted to a deceptive competitor customers whose patronage Coca-Cola had earned. Passing off is conceptually impossible if the mark owner and the defendant do not make substitute goods.

Under the modern “related goods” theory, mark owners are protected against a much more attenuated risk than traditionally actionable. Purchasers of the junior user’s products, the argument goes, may be disappointed with their experience and impute their disappointment to the senior mark owner, which they mistakenly believe stood behind the junior use. The senior user then might lose future sales in its market as a result of disappointment with an experience in the junior user’s market. Alternatively, unrestrained use outside of the senior user’s market might create a barrier to the senior user entering other markets, or at least force the senior user to battle the potentially negative consequences of the junior user’s use.

These are plausible risks, but allowing mark owners claims in these situations reflected a fundamental shift in trademark theory. Traditional trademark law protected only a trademark owner’s existing business in its own market, because natural property rights focused on labor and investments one had already made. A mark owner made no investment in markets in which it had never been a participant, nor could it have developed rights to hypothetical future customers. Modern trademark law has been freed from these natural law restraints and protects a trademark owner’s hypothetical future business in its market and other potential markets.

There is great irony here. Though natural rights theories are often derided for being overly protective of property, trademark law’s great expansion in fact is a direct result of its rejection of the natural rights conception. Unfair competition law focused on passing off was relatively simple and had natural boundaries. Moreover, by unplugging trademark law from the requirement of competition, courts were left with no normative framework within which to judge if a particular practice was “unfair”254 and no obvious method for determining infringement. Thus, it was only after courts jettisoned the requirement of competition that they were forced to develop the unpredictable likelihood of confusion factors.255 Not surprisingly, this unpredictability has worked in mark owners’ favor.256

(2)Expansion of Actionable Forms of Confusion




(a)Initial Interest Confusion

Several courts have gone further in attenuating the link between confusion and purchasing decisions by allowing claims against uses of a trademark to gain initially the attention of consumers, even if consumers ultimately are not confused about any type of relationship between the trademark owner and the third-party user of the trademark.257 This doctrine of “initial interest confusion” was judicially created a little over thirty years ago but has been applied most frequently in the internet context.258 It has been particularly notorious for its application in metatag and keyword advertising cases and in cases involving internet search engines and their search terms.259

In its most defensible form, the initial interest confusion doctrine would apply to combat bait and switch schemes. In those situations, a party uses a competitor’s mark to mislead consumers, who otherwise likely would have avoided the junior user altogether, into coming into contact with that party. Once the contact is achieved, any possible confusion is dispelled on the hope that the consumer will decide, for lack of time or interest or because she has been persuaded of the competitor’s superior product, to purchase the competitor’s product rather than continue her search.260 Such a claim would fit less neatly within the natural rights framework of trademark rights, but might ultimately be deemed justifiable if there were real evidence of deception at the outset rather than mere attention-getting.

But most initial interest confusion involve no attempt to affect a bait and switch. Indeed in some cases it is not clear that the defendant even knew about the plaintiff’s use of the mark prior to using the term in some manner.261 In the worst of the initial interest confusion cases courts have premised liability on the use of a mark, such as in metatags or in keywords, for the purpose of making competitive information available to consumers and where there is no likelihood of confusion at all. In Brookfield, for example, the court concluded that the defendant’s use of “moviebuff” in the metatags for its web site was infringement because search engines used that term to generate search results that listed the defendant’s site higher than the plaintiff’s. While the court conceded that confusion was unlikely, it believed that consumers, now presented with both web sites in response to a search employing “moviebuff” as a search term, might choose the defendant’s web site rather than the plaintiff’s.262

These types of cases treat a trademark itself as the exclusive property of a mark owner, and suggest that only the mark owner may use the mark to generate business, whether or not others do so through deception. The cases, then, lose sight of a fundamental distinction traditional trademark law drew between attempts to divert trade (competition) and attempts to divert trade deceptively. Recognition of such a doctrine is contrary to supporters’ assurances that competition would be restricted only in a narrow class of cases: if traditional trademark law focused on instances of the junior user “stealing” the senior user’s customer, initial interest confusion targets “stealing” in a much broader sense than traditionally embraced.263

(b)Relevant Confusion Includes Non-Purchasers

Since traditional trademark law targeted passing off, the only relevant confusion was that of actual consumers of the junior user’s products (which, because of the requirement of competition, were also consumers of the senior user’s products). The issue was whether those shared consumers were likely to be misled at the point of sale.

Some modern cases go much further, making actionable confusion of non-purchasers based on their interaction with a product post-sale. In the earliest such case, Mastercrafters Clock & Radio Co. v. Vacheron & Constantin-Le Coultre Watches,264 the defendant copied the distinctive appearance of the plaintiff’s expensive “Atmos” clock. Though it was clear that consumers would not be misled into purchasing the defendant’s clock as that of the plaintiff, Judge Frank wrote that:

at least some customers would buy [the copier's] cheaper clock for the purpose of acquiring the prestige gained by displaying what many visitors at the customers' homes would regard as a prestigious article. [The copier's] wrong thus consisted of the fact that such a visitor would be likely to assume that the clock was an Atmos clock. … [T]he likelihood of such confusion suffices to render [the copier's] conduct actionable.265


Trademark law traditionally focused on uses likely to mislead consumers actively searching for a party’s goods. The modern cases, by contrast, allow claims based on potential confusion among non-consumers, about whom we have no reliable information with respect to future purchasing potential. Notwithstanding attempts to characterize the post-sale confusion doctrine as a manifestation of the trade diversion rationale,266 these cases clearly seek to ensure a mark owner that only it will reap the benefits of its desirable products. The real concern of these cases, as McCarthy notes, is that “consumers could acquire the prestige value of the senior user's product by buying the copier's cheap imitation.”267

(3)Expansion of Trade Dress Protection

During the nineteenth century trademark law was predominantly concerned with word marks and, on occasion, with labels applied to goods. The natural rights theory did not rule out claims based on other features, as long as consumers in fact associated the relevant features with a particular source and those features were used by competitors for the purpose of diverting trade that would have gone to the senior user. But there is a good reason why cases involving trade dress were less frequent in the nineteenth and early to mid-twentieth century. Because the only goal was preventing trade diversion, there was little reason to recognize and protect secondary or tertiary indications of source for when products could be labeled effectively. Thus, courts generally required parties claiming trade dress protection to demonstrate that the claimed features were material to consumers purchasing decisions.268

Since trademark plaintiffs no longer need to demonstrate the potential of trade diversion, they can and have claimed rights in product packaging, and product design, much more frequently. Courts have developed limitations on trade dress rights,269 but those limitations generally have been driven by concerns about trade dress protection conflicting with patent law, rather than because of some internal limitation.

(4)Licensing of Trademarks Has Been Liberalized

Like the other traditional doctrines, the bar on licensing or assignment discussed above was not universally or consistently applied.270 The evolution of the law relating to licensing, however, has generally liberalized together with other trademark doctrines. As courts embraced the view that trademarks might designate relationships other than physical source, such as sponsorship or affiliation, courts dropped the absolute bar on licensing and replaced it with a flexible rule that allowed licensing as long as the mark owner ensured a consistent level of quality in the products or services offered under its mark.271 This change reflects the broader notion of goodwill protected under current law. Instead of goodwill attaching to the business of a particular producer, it attaches to the mark and travels with it into other markets.


(5)Merchandising

Use of a mark or logo on ancillary merchandise, such as caps or t-shirts, has been the subject of some recent attention.272 A complete analysis of the legal issues related thereto is beyond the scope of this article. While it does represent an extreme expansion of the relevant likelihood of confusion standard, the fact that some courts have recognized claims by universities or sports teams against parties that used their logos or marks on merchandise should not really be a surprise.

Modern law condemns any use that is likely to cause confusion as to a mark owner’s sponsorship of or affiliation with a particular use.273 This test is bounded only by consumer understanding: if consumers believe a particular use requires permission, then it does. Importantly, while use of the mark by the junior party to sell products or services was an important feature of traditional trademark law, there is no reason why consumers’ beliefs about sponsorship or affiliation would necessarily be so limited. Virtually any type of use of the mark is potentially within the mark owner’s control if consumers believe that it is. And since the evidence suggests that consumers believe names and creative content, some of which are marks, are subject to substantial control.274

Assuming that evidence translates even approximately to beliefs about use of marks or logos on merchandise, then modern law would grant mark owners the control consumers believe they have.


(6)Dilution Does Note Even Require Evidence of Confusion

Dilution claims are the most clearly antithetical to the traditional natural rights approach to trademark rights. Dilution claims focus on cases where there is no potential confusion and no risk at all that the junior user will steal away customers from the senior user. Use of the mark BUICK for shoes harms the senior user, in theory, not because anyone who is looking for a new car will buy it from the wrong party, but because BUICK will no longer occupy as prominent a position in consumers’ minds and Buick will have to work harder to lure future purchasers.275 Notably, the dilution defendant is not likely the beneficiary of any of Buick’s lost business. The defendants gain is a result of its borrowing the “selling power” or “commercial magnetism” of the mark, but it is using the mark in a different market than the senior user and not siphoning any customers. So, while the shoe manufacturer’s gain and Buick’s loss are linked in some remote sense, the additional purchasers of Buick shoes are not people who otherwise would have bought Buick cars.276

Even though dilution is the clearest example of a shift in trademark principles, by the time it was widely accepted as an alternative basis for relief, it was not a particularly significant change.277 By then the relevant likelihood of confusion standard had expanded so far that owners of truly distinctive and famous trademarks, those to which the Federal Trademark Dilution Act are supposedly limited,278 could achieve through likelihood of confusion arguments virtually all of the results of a dilution claim.279 If the FTDA has been significant at all, it has only been to encourage courts to expand further the number of “famous” marks to which dilution claims apply.280

(7)Trademarks as Domain Names

Very recently, courts and Congress sought to address the registration and use of domain names that correspond to pre-existing trademarks. While parties sought relief under a variety of legal theories when another registered their mark as a domain name applied, Congress passed the Anticybersquatting Consumer Protection Act281 particularly for the purpose of protecting mark owners from this practice. The details of that statute are mostly beyond the scope of this article. What is important to recognize is conception of trademarks on which the statute is based. In granting trademark owners a claim against third parties who use their mark as a domain name, the statute tends to view the mark devoid of the type of context traditional trademark law relied on for assurance that a junior user intended to divert sales from a particular mark owner. In fact, the ACPA is so far removed from a requirement that the junior and senior user be in competition that the statute does not even require a comparison of the businesses of the parties but rather condemns domain names that are confusingly similar to a mark on a purely semantic basis.282 Indeed, it is irrelevant under the ACPA that confusion about a website's source or sponsorship could be resolved by visiting the website identified by the accused domain name.283


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