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

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BThe Cumulative Effect of Modern Doctrinal Changes

Virtually every doctrinal development in of the last century has worked to provide mark owners greater control over the use and the meaning of their brands so that they can use those brands to create wealth. Dilution, which is at least nominally limited to famous marks, is the most obviously beneficial to extremely valuable brands, but it is hardly the only such expansion. The likelihood of confusion analysis is itself heavily influenced by brand building. Strong marks are given much broader protection against uses that courts believe suggest “sponsorship or endorsement,”^²⁸⁴ and advertising expenditures are generally considered as highly probative of the strength of a mark.^²⁸⁵ Similarly, initial interest confusion, to the extent it reflects a real phenomenon, is based on recognition of a well-known mark, and post-sale confusion is also much more likely for brands that are immediately recognizable. Cybersquatting protection depends on bad faith, and courts have held that use of a well known mark is presumptively bad faith.^²⁸⁶

Succinctly stated, the doctrinal innovations of the twentieth century reflect a concerted effort to protect to protect brand value.^²⁸⁷ This expansion was at least enabled by courts’ and commentators’ rejection of the natural rights conception of trademark rights, which freed courts from many of trademark law’s traditional limits. Consumer expectations now carry all the weight for those who hope to limit trademark protection, yet those expectations have proven almost infinitely pliable. Indeed, when tied only to consumer understanding, expansion is self-reinforcing – broader protection begets consumer expectations of greater control, which begets even broader protection.

There may be good reasons to be concerned about the scope of modern trademark law, which essentially amounts to nothing more than industrial policy.^²⁸⁸ It may be shortsighted and may be the result of a particularly serious public choice problem. And even if the goal is worthy, it may place unacceptably high burdens on speech. But because critics have mischaracterized traditional trademark law, they have misunderstood the reasons for its expansion. If it has accomplished anything, this paper will have freed us from our falsely imagined past and will allow us to get beyond claims that modern trademark law is illegitimate because it does not sufficiently focus on consumers. Because it never really did.

1 Assistant Professor of Law, Saint Louis University. This paper benefited from feedback received at workshops at Seton Hall Law School and Saint Louis University School of Law, and at the Works-In-Progress Intellectual Property Colloquium in St. Louis. I also thank Eric Goldman, Fred Bloom and Eric Claeys for particularly valuable insights, and Kelly Doherty and David Kullman for excellent (and often tedious) research assistance.

2 See Richard A. Posner, Economic Analysis of Law 6 (1973) (“As we shall see, many areas of the law, especially the great common law fields of property, torts, and contracts, bear the stamp of economic reasoning. Few legal opinions, to be sure, contain explicit references to economic concepts and few judges have a substantial background in economics. But the true grounds of decision are often concealed rather than illuminated by the characteristic rhetoric of judicial opinions.”) (emphasis added).

3 Id. at 25 (“It would not be surprising to find that many legal doctrines rest on inarticulate gropings toward efficiency. Many legal doctrines date back to the nineteenth century, when a laissez-faire ideology based on classical economics was the dominant ideology of the educated classes.”). Without assessing the accuracy of Posner’s general statement about the ideology of the nineteenth century educated classes, I believe his claim is demonstrably inaccurate with respect to nineteenth century property law and theory.

4 See Mario J. Rizzo, The Mirage of Efficiency, 8 Hofstra L. Rev. 641, 641-43 (1980) (discussing the folly of conflating normative and positive economic accounts of the law).

5 Posner, then, might view those results as “efficient.” The significance of that conclusion is questionable, however, because modern law and economics scholars tend to operate under an artificially narrow definition of efficiency. See, id. at 641-48 (criticizing Posner, among others, for restricting the notion of efficiency in their positive analysis). Rizzo also criticizes law and economics scholars for making normative arguments that focus on partial-efficiencies when we cannot determine “with any reasonable degree of accuracy when an overall efficiency improvement has occurred.” Id. at 642.

6 Because Schechter articulated this conception of a trademark in The Rational Basis of Trademark Protection, that article probably was the most influential contribution to twentieth century trademark law even though the dilution claim he proposed has developed in fits and starts. See, Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813 (1927).

7 See William M. Landes & Richard A. Posner, The Economic Structure of Intellectual Property Law 166-68 (Harvard Univ. Press 2003).

8 Glynn S. Lunney, Jr., Trademark Monopolies, 48 Emory L.J. 367, 417 (1999).

9 Id. at 432.

10 Stacey L. Dogan & Mark A Lemley, The Merchandising Right: Fragile Theory or Fait Accompli?, 54 Emory L.J. 461, 467 (2005) (hereinafter “The Merchandising Right”). The authors see also describe concerns about the effect of particular rights on consumers or competitors, and on the competitiveness of the marketplace as a whole, as the “core values of trademark law.” Id. at 475.

11 Id. at 479 n.74.

12 See 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 2.1 (4^th ed. 1996) (citing Landes and Posner for the proposition that trademark law is best understood as trying to promote economic efficiency); Stacey L. Dogan and Mark A. Lemley, Trademarks and Consumer Search Costs on the Internet, 41 Hous. L. Rev. 777, 778 (2004) (arguing that the historical normative goal of trademark law is to foster the flow of information in markets, thereby reducing search costs for consumers); Mark A. Lemley, The Modern Lanham Act and the Death of Common Sense, 108 Yale L.J. 1687, 1690-93 (1999) [hereinafter Lemley, Death of Common Sense] (stating that the single purpose of trademark law is to “enable the public to identify easily a particular product from a particular source”); John F. Coverdale, Trademarks and Generic Words: An Effect-on-Competition Test, 51 Univ. Chi. L. Rev. 868, 869-70 (1984); Nicholas Economides, Trademarks, in the New Palgrave Dictionary of Economics and the Law 601 (1998); Nicholas Economides, The Economics of Trademarks, 78 Trademark Rep. 523, 525-27 (1988); I.P.L Png. & David Reitman, Why are Some Products Branded and Others Not?, 38 J.L. & Econ. 207, 208-11 (1995) (presenting empirical evidence in support of search cost rationale); Diego Puig, To God What is God’s and to Caesar What is Caesar’s: Aesthetic Functionality as a Value Between Trademark Rights and Religious Freedoms, 9 J. Tech L. & Pol’y 81, 91 (2004) (describing the first policy reason behind trademark protection as consumer protection by “ensuring purchasers are not confused about the source” of the product and thereby reducing transaction costs); Clarisa Long, Dilution, 106 Colum. L. Rev. 1029, 1033-34 (2006) (contrasting dilution protection with traditional trademark protection and arguing that the former is producer-centered while the latter is consumer-centered). Some commentators have credited as a second purpose of trademark protection protecting producers’ goodwill, though even then they describe that goal in market efficiency terms, arguing that trademark law seeks to protect producer goodwill in order to encourage investment in product quality. See Eric Goldman, Deregulating Relevancy in Internet Trademark Law, 54 Emory L.J. 507, 554-55 (2005); Landes & Posner, supra note __ at 166-68.

13 Courts do mention more frequently than do commentators the goal of protecting producers’ goodwill as an additional concern, though they also often describe that goal in market efficiency terms. See Qualitex Co. v. Jacobsen Products Co., 514 U.S. 159, 163-64 (1995) (stating that trademark law “reduce[s] the customer’s cost of shopping and making purchasing decisions,” and “helps assure a producer that it (and not an imitating competitor) will reap the financial reputation-related rewards associated with a desirable product”); Union National Bank of Texas, Laredo, Tex. v. Union National Bank of Texas, Austin, Tex., 909 F.2d 839, 844 (5th Cir. 1990) (“The idea is that trademarks are ‘distinguishing’ features which lower consumer search costs and encourage higher quality production by discouraging free-riders.”).

14 Barton Beebe, The Semiotic Analysis of Trademark Law, 51 U.C.L.A. L. Rev. 621, 623-24 (2004). Beebe’s alternative account describes trademark protection in terms of semiotic theory. Trademark law, according to Beebe, developed largely, though unintentionally, in accordance with semiotic theory and has worked to protect sign value and the integrity of a sign’s meaning. It should be noted, however, that Beebe’s account is entirely descriptive. It makes no judgment as to whether trademark law should protect sign value at the expense of other values.

15 Lunney, supra note __ at 435-36 (arguing in the trade dress context particularly, that consumers often do not rely on the features claimed as trademarks when making purchasing decisions).

16 See, e.g., Wendy J. Gordon, Introduction, 108 Yale L.J. 1611, 1614 n.19, 1615 (1999) (calling dilution a “disaster”); Lemley, Death of Common Sense at 1698 (arging that “dilution laws represent a fundamental shift in the nature of trademark protection”).

17 See, e.g., Lunney, supra note __ at 391-410; Jennifer E. Rothman, Initial Interest Confusion: Standing at the Crossroads of Trademark Law, 27 Cardozo L. Rev. 105 (2005) (criticizing the initial interest confusion doctrine); Goldman, supra note __ at __ (same). Interestingly, there are some doctrines within trademark law that are also inconsistent with the consumer-based market efficiency justification of trademark law but have escaped the attention of scholars. For example, the idea of inherent distinctiveness – that some marks receive protection based solely on their categorization and without any evidence that consumers actually associate the mark with a particular source – seems incompatible with trademark law based on matching consumer expectations. Indeed, most justifications of the concept of inherent distinctiveness reflect a sort of incentive/reward structure typical of patent and copyright. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 770-71 (1992) (accepting the Court of Appeals’ reasoning that “[w]hile the necessarily imperfect (and often prohibitively difficult) methods for assessing secondary meaning address the empirical question of current consumer association, the legal recognition of an inherently distinctive trademark or trade dress acknowledges the owner's legitimate proprietary interest in its unique and valuable informational device, regardless of whether substantial consumer association yet bestows the additional empirical protection of secondary meaning.").

18 See, e.g., Margaret Jane Radin and R. Polk Wagner, Thee Myth of Private Ordering: Rediscovering Legal Realism in Cyberspace, 73 Chic.-Kent L.Rev. 1295, 1305 n.29 (1998) (“Modern trademark law is moving … towards a … property rights regime.”); Mark A. Lemley, Romantic Authorship and the Rhetoric of Property, 75 Tex. L. Rev. 873, 900 (1997) (arguing that trademark owners “are well on their way to owning the exclusive right to pun”); Lunney, supra note __ at 371-72 (describing “radical and ongoing expansion of trademark protection” as a shift from “deception-based trademark,” which focused on a trademark’s value merely as a device for conveying otherwise indiscernible information about a product, to “property-based trademark,” which regards a trademark as a valuable product in itself). Lemley says, on this basis, that trademark law reflects “the death of common sense.” Lemley, Death of Common Sense.

19 For some discussion of this debate, see Richard A. Epstein, Liberty Versus Property? Cracks in the Foundation of Copyright Law, 42 San Diego L. Rev. 1 (2005); Adam Mossoff, Is Copyright Property?, 42 San Diego L. Rev. 29 (2005); Mark A. Lemley, Property, Intellectual Property, and Free Riding, 83 Tex. L. Rev. 1031, 1037-39 (2005).

20 Even Bob Bone, who has looked closely at trademark law’s historical development, suffers from this law and economics myopia. Bone recognizes that a focus on producer goodwill fits uneasily with the information transmission model. Nevertheless, he criticizes courts for departing from the information transmission model even in old cases and even though producer goodwill has a much longer pedigree in trademark law than does the economic view of trademarks. See, Robert G. Bone, Hunting Goodwill: A History of the Concept of Goodwill in Trademark Law, __ Boston Univ. L. Rev. __ (forthcoming 2006). As I demonstrate below, the growth of trademark law was not a result of courts’ focus on goodwill, but rather by the expansion of that concept that resulted took place when trademark law was uncoupled from its traditional natural rights moorings.

21 Robert H. Bork, The Antitrust Paradox: A Policy at War With Itself 15 (The Free Press 1993) (1978) (“One of the uses of history is to free us of a falsely imagined past. The less we know of how ideas actually took root and grew, the more apt we are to accept them unquestioningly, as inevitable features of the world in which we move.”).

22 In fact, while courts and commentators sometimes did mention a side benefit to consumers, I am unaware of any nineteenth century court or commentator ever discussing trademark protection in terms of information transmission policies. And in fact it would be quite odd for courts to have discussed trademark law in those terms, since that understanding of trademark law is mostly a product of the law and economics movement that would not take root until at least the middle of the twentieth century.

23 Bork, supra note __ at 51.

24 For more thorough historical accounts, see Frank I. Schechter, The Historical Foundations of the Law Relating to Trade-Marks (Columbia Univ. Press 1925); Edward S. Rogers, Some Historical Matter Concerning Trade-Marks, 9 Mich. L. Rev. 29 (1911); Sidney A. Diamond, The Historical Development of Trademarks, 65 Trademark Rep. 265 (1975); Benjamin G. Paster, Trademarks – Their Early History, 59 Trademark Rep. 551 (1960); Daniel M. McClure, Trademarks and Unfair Competition: A Critical History of Legal Thought, 69 Trademark Rep. 305 (1979).

25 Diamond, supra note 23 at 273; Schechter, Historical Foundations at 20-21.

26 Schechter, Historical Foundations at 26-31. Owners also carved identifying marks into the beaks of swans they were allowed to own by royal privilege. Id. at 35-37.

27 Schechter, Historical Foundations at 38-63. Not coincidentally, these mandatory marks also made it possible for the Crown to regulate conduct, particularly in the printing industry, where the Crown policed heresy and piracy. Id. at 63-77 See also, Paul Goldstein, Copyright’s Highway 42 (2994) discussing Crown’s censorship mechanism).

28 Schechter, Historical Foundations at 42-47 (describing guild efforts to prevent members from establishing individual goodwill).

29 There are some examples in the cutlers’ trade of the government treating marks as property that could be passed by will and of owners advertising to suppress piracy. Schechter, Historical Foundations at 119-20.

30 Id. at 120.

31 Id. at 55.

32 2 Popham 144 (16__).

33 See Francis H. Upton, A Treatise on the Law of Trade Marks With a Digest and Review of the English and American Authorities 11-12 (1860); James Love Hopkins, The Law of Trademarks, Tradenames and Unfair Competition at § 6 at 15-16 (1905).

34 The other reports were in J. Bridgeman’s Reports 125 (1659); Croke’s Reports, Cro. Jac. 469 (1659); and two reports in Rolle’s Reports, 2 Rolle 5 (1676) and 2 Rolle 28. The report attributed to Popham, moreover, was not even reported by Popham himself but was included in the volume in the section titled “Some Remarkable Cases Reported by other learned Pens since his death.”

35 See J. Bridgeman’s Report and the report at 2 Rolle 5 (1676).

36 Croke’s Report stated: “Dodderidge cited a case to be adjudged 33 Eliz. in the Common Pleas: a clothier of Gloucestershire sold very good cloth so that in London if they saw any cloth of his mark they would buy it without searching thereof; and another who made ill cloths put his mark upon it without his privity; and an action on the case was brought by him who bought the cloth, for this deceit; and adjudged maintainable.” Cro. Jac. 469 (emphasis added). The second of Rolle’s Reports, 2 Rolle 28, is somewhat ambiguous, but that report also suggests it may have been the purchaser who brought the case.

37 See, e.g., Blanchard v. Hill, 2 Atkyns 484 (1742); Crawshay v. Thompson, 4 Man. & G. 357, 385-86 (1842) (citing Popham’s and Croke’s reports); Burgess v. Burgess, 3 De. G. M. & G. 896, 902 (1853); Hirst v. Denham, L.R. 14 Eq. 542, 549 (1872).

38 2 Atkyns 484 (1742).

39 Id. at 484.

40 For a discussion of the struggle between Parliament and the Crown over who would be able to grant exclusive privileges, see Thomas Nachbar, Monopoly, Mercantilism, and the Politics of Regulation, 91 VA. L. Rev. 1313 (2005).

41 See The Case of Monopolies, 11 Co. Rep. 84 b, 77 Eng. Rep. 1260, 1266 (K.B. 1603) (calling the playing card monopoly granted by Queen Elizabeth under her royal prerogative an “odious monopoly”). Marks were an important part of that privilege scheme because cardmakers were required to use their seals so that the exclusive privilege could be enforced.

42 Blanchard, 2 Atkyns at 485.

43 Id.

44 Blanchard, 2 Atkyns at 485.

45 3 B. & C. 541 (K.B. 1824). There are some accounts of an earlier decision in a case called Cabrier v. Anderson, apparently tried before Lord Mansfield in 1777, in which the court awarded the plaintiff damages of £ 100 under a statute of William III when the defendant put plaintiff’s name on defendant’s watches. There are no published reports of the case, though contemporary press accounts claimed that the case was “remarkable … and the first of its kind.” See Schechter, Historical Foundations at 137-38 (quoting St. James Chronicle, Dec. 4, 1777).

46 Sykes, 3 B. & C. at 543.

47 Id.

48 See, e.g., Blofeld v. Payne, 4 B. & Ad. 410 (K.B. 1833)

49 See, e.g., Edelsten v. Edelsten, 1 De. G. J. & S. 185, 199 (1863) (stating that in actions for trademark infringement “at law the proper remedy is by an action on the case for deceit; and proof of fraud on the part of the defendant is the essence of the action”).

50 See Blofeld, 4 B. & Ad. at ___ (upholding the verdict for the plaintiff and holding that the defendant’s use of envelopes resembling those of plaintiff’s, and containing the same words, was a “fraud against the plaintiff”). See also, Jamieson & Co. v. Jamieson, 15 Rep. Pat. Cas. 169, 191 (1898) (holding that the case was not based on “a breach of any right of property in the Plaintiffs. It is merely an exercise by the Plaintiff of a right that he has that he should not be injured by the fraud of the Defendant in pretending that the goods manufactured by him, the Defendant, are of the Plaintiff’s manufacture.”).

51 A prior instance of an injunction restraining trademark infringement was noted, with no elaboration, in Robert Henley Eden, A Treatise on The Law of Injunctions 314 (1821) (citing Day v. Day (1816)).

52 3 Myl. & Cr. 338 (1838). In that case, the court said that it would interfere to protect the plaintiff if ordinary or unwary purchasers are likely to be misled to mistake the defendant’s goods for the plaintiff’s. Id. See also Singer Machine Manufacturers v. Wilson, L.R. 3 App. Cas. 376 (1877)

53 Millington, 3 Myl. & Cr. at 352. See also, Schechter, Historical Foundations at 138-39.

54 4 D.J. & S. 150 (1863).

55 Id. at 156.

56 4 De G.J. & S. 137, 141 (1863).

57 Id. at 141; see also Schechter, Historical Foundations at 143.

58 Leather Cloth Co., 4 De G.J. & S. at 140.

59 Id.

60 L.R. 10 Ch. Div. 436 (1879).

61 Id. at 448.

62 See Bone, Hunting Goodwill at __.

63 Leather Cloth, 4 De G.J. & S. at 139. Here it is clear that the various reports of Southern v. How created some confusion as to whether the action on the case was brought by the clothier, the purchaser, or both.

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