Friday, April 16, 2010

Second Trademark Scholars Roundtable

Hosted by Graeme Dinwoodie (DePaul/Oxford) & Mark Janis (Indiana)

Session 1: Permissible Uses of Marks: Rationales and Sources of Law. To what extent are the permissible uses of marks implicit in the rationales for recognizing trademark protection? More broadly, to what extent are the justifications or explanations for unauthorized third party uses of marks internal to trademark law? To what extent should we look to external sources (such as principles of free speech) to identify and justify such permissible uses? What consequences flow from situating a justification for a permissible use of a mark in one place or another?

Introduction: Stacey Dogan

Thoughts from the competition corner of TM law. The search costs label is unduly narrow—lowering search costs is part of a broader goal of promoting competition in markets. Wants to rebrand as a competition-oriented view of TM law, promoting free/truthful flow of information in order to achieve that underlying goal. If that’s normatively what TM is about, that implies sets of uses to be allowed to promote internal TM goals. E.g., the classic Chanel case, allowing not just imitation but advertising of the fact of the imitation through use of the TM. Compare to Europe, which hasn’t quite figured out what it wants from TM law in a modern economy. Still has protectionist impulses. ECJ opinions are all over the place normatively. Comparative advertising: not allowed to advertise the fact of imitation despite permission to imitate.

Courts should be thinking about access to markets by competitors as well as access for purposes of informing rather than deceiving (a hard line to draw, admittedly). Strive to accommodate access despite risks of some level of potential confusion. Materiality is one way to do this. More use of disclaimers. Room for more empirical work on the kinds of confusion that courts have found actionable. Courts can work within existing doctrine; even if courts won’t adopt trademark use as a threshold doctrine, but the principles of distinguishing between using a mark as a brand and promoting/facilitating others’ uses ought to be preserved. eBay offers some promise of this (though I’d note that the false advertising ruling takes un unknown amount of that back). Direct/contributory infringement is still up for grabs; courts ought to look to TM first principles.

Unfair competition model of TM makes it harder to determine what principles are endogenous to TM. If you believe in free riding as a basis for a TM cause of action, it’s hard to look to that goal for limiting principles. You need to look externally in that case, for example to free speech. Dinwoodie has identified other principles: Competition can be exogenous in this model; innovation. Bob Bone: burden on judicial system of resolving disputes in cases in which the harm alleged, especially to consumers, is not very persuasive or significant.

Margreth Barrett: Agrees that competition is a more helpful overall characterization. Most permitted uses, then, are just a part of the whole body of TM: endogenous. Dividing marks by degree of distinctiveness and protecting them according to concerns about how protection will affect competitors, for example. Exhaustion, similarly. Descriptive fair use comes straight from common law unfair competition. Abandonment too. Even nominative fair use flows logically from the basic TM rationale: we only give rights to the extent that unauthorized uses will create likely confusion, and nominative fair uses in theory don’t. The First Amendment should also be brought in—potential external limit?

Materiality makes sense to her as a limit—avoids protecting marks at the expense of other competitive interests. Materiality was implied by the older competition requirement. (Note that current false advertising law requires both competition and materiality, separately.) But there’s little express recognition of materiality as a requirement in the case law, or the common law. It would be easy to pass off materiality as a byproduct of the initial narrow view of when consumers can be confused.

Barrett thinks we’re unlikely to see more defenses created by the courts. Maybe legislation, as Bill McGeveran suggests, is the appropriate solution, though Barrett argues that these issues should not be defenses but rather parts of plaintiff’s case in chief. Dinwoodie thinks that judicial creation of new limiting principles is still possible, but Barrett wants specifics.

Jessica Litman: Takes the point that defenses are needed to get us out of likely confusion inquiries pretrial. Recharacterizing internal limits as defenses, though, feeds mission creep. We spend less time critiquing the plaintiff’s theory that, of course, confusion is likely. This comes back and bites us next time when the specific defense may be unavailable. To the extent that it’s possible to reinvigorate limits on the TM cause of action itself, that’s better.

But, TM use was the most visible attempt to do this—her position, the statute says “use in commerce” and we should interpret it that way. No court will go along with this today as stated. We all had our own ideas about how to characterize trademark use, and the courts did too, and generated an absolutely incoherent set of doctrines across and within circuits. If we’re fighting with each other, even in a friendly way, we can’t expect courts to do better.

Everybody makes the point that the likelihood of confusion test is fundamentally deeply broken and is messing everything up. So can we replace it with something else? (I had similar thoughts last time.)

Mark Lemley: Trademarks do serve competition, specifically by reducing search costs. What’s important to understand is that the well-functioning marketplace is the important thing, not the TM itself. All the other stuff is not TM-promoting but limiting doctrines (functionality, exhaustion). Defenses/limitations/places TM ought not go are often about a well-functioning marketplace; there are also things that are just external. Not clear that we need parody for a well-functioning marketplace.

Mark McKenna: The issue is people who conclude that making you think harder in any way is a search cost. So we should think about what consumers want to accomplish in the marketplace. Sometimes consumers don’t care about search costs/like them. Search cost terminology makes it easier for courts to think “initial interest confusion” is legitimate.

Bob Bone: Why protect TM? Costs of alternatives to getting information may be too high, so that consumers wouldn’t get info at all without TM; or the costs of alternatives may be inefficient, so we want TMs to do it more cheaply. But neither of these theories deals with why we have functionality doctrine. The theory of functionality is that we want a product to be made, and making it requires use of a mark. This is about satisfying consumer preferences. Similar with nominative fair use: you need to use the mark to do the thing you actually want people to do—polls about New Kids are goods in the marketplace whose presence for consumers to choose increases social value. The idea of promoting competition is just too big; we should break it down in particular ways.

Dogan: Functionality reflects endogenous and exogenous values. To the extent that it has competition benefits (access to product features is necessary to prevent an undue competitive advantage), then functionality is consistent with a competition rationale for TM. Traffix says that’s not how we think about it—could think of it as Sears/Compco type balancing which says that patent’s goals trump TM’s here; or you could think of it as an error-cost rationale, we think that courts are likely to get it wrong and suppress competition more often than they will get it right. The latter she thinks can harmonize functionality with other parts of TM law.

Maybe the Supreme Court is ripe to revisit likely confusion and give us a better test than currently exists. (I think KP Permanent shows that this won’t work, because though the Court likes to limit TM, it also loves multifactor test and allowing lower courts to add in new factors that make a difference.)

My comment: This discussion of competition is beginning to sound potentially regressive to me, capable of generating the same disputes we have under the TM rubric. Competition to do what? To offer the non-TM benefits of the branded product/service? But what are those non-TM benefits, especially in the case of something like product placement? Or comparative advertising that “steals the aura” of the branded product, which I understand to be the European theory of wrongfulness? How do we fit in the idea that speakers should be free to talk about/make movies about/sing about/etc. branded products and services, when there is also a licensing market for such activity? That is, the very fact that most of these TM owners are outside their core markets when they attempt to control communicative activity makes it hard to talk about competition. Consider Lemley’s uncertainty that parody is part of a well-functioning marketplace: communication about the ways in which we shop and the reasons we buy is, at least under some reasonable and well-accepted theories of speech not incidentally including commercial speech doctrine, fundamentally about a well-functioning marketplace. Lemley’s uncertainty is itself, to me, evidence that “competition” slots into the place where “trademark” is, open to the same inconsistent interpretations.

Laura Heymann: Who is supposed to be benefiting from TM’s goals? TM is conflicted about this.

McKenna: “Promoting competition” suggests that TM is supposed to do a much bigger job than it does. TM should perhaps be thought of as removing certain impediments to competitive markets, rather than promoting competition in general. What should an online marketplace look like? We could use TM, but maybe overall consumer protection is a better source of principles. Bone: thinking more specifically about the kinds of interests protected—McKenna thinks these can’t so easily be disentangled. E.g., functionality/aesthetic functionality. Why is orange soda always orange? It’s about flavor, even though there is no mechanical link between color and flavor. The link between communication and content can’t be severed.

Eric Goldman: Examples that keep popping up: the Insinkerator on Heroes and the Slip ‘n Slide in Dickie Roberts. These are not so much about competition as about communication. What levers keep them out of the courts/give us an easy resolution? We all agree on very little, but we all seem to agree that these are illegitimate cases, so why not focus on fixing that?

Bone: Doesn’t think that materiality is just one way to handle these problems. He thinks it is part of the wrong as we understand the TM wrong. If you go back far enough, TM comes from the common law of fraud. Harm is presumed with direct competition, but that doesn’t mean it’s not there. Whether you think of it in terms of harm or materiality, it’s incoherent and unjustified to think of TM as simply about trying to prevent likely confusion. There’s no normative case for TM that identifies confusion in itself as the thing we’re trying to target. So solve the Insinkerator problem with materiality.

He thinks/hopes that what’s happening is that when the TM prima facie case meets First Amendment concerns, courts then recognize that harm is important. And then we construct these doctrines without admitting that they’re taking materiality into account.

Lemley: It’s not that TM law is about promoting a competitive marketplace, it’s that we should evaluate TM by whether it in fact improves marketplace functioning. In certain respects it does, but it can also interfere with functioning, as with functionality or ways in which it’s used to increase search costs (internet search engine cases). Materiality helps answer the question whether TM is doing something useful to balance against its potential harms. You can fit parody in that critique (and he agrees with that characterization of parody as part of a well-functioning marketplace), though the question of whether we want to do that also depends on how much protection we think an internal limit will provide to parody when balanced against a search costs claim. The First Circuit does that in cases where it says that parody is protected as long as it doesn’t confuse. The question he raises: are there some things we think are important for reasons unrelated to defense of the marketplace so that we give them primacy even if the competition analysis might not protect them?

(I don’t think that was exactly my point about parody; rather, I was trying to argue that the marketplace itself is constituted in part by trademarks—information is one of the things that both shapes and is sold in the marketplace. You can’t have a theory of the proper functioning of the marketplace that is independent of your theory of what TMs are for. That’s why it seems to me to be possible to recast any TM argument as a competition argument.)

Beebe: Likely confusion is evidence of something (harm), but not the something itself. Schecter too hated likely confusion as too unpredictable. But maybe TM restriction does best when focusing on consumers: reasonable consumers. Shift to “efficient functioning of marketplace” is rhetorically business-friendly in a way that we might not want.

It might be worthwhile to recognize that TM isn’t promoting the efficient functioning of marketplace, but rather promoting the marketplace: capitalism, the system of markets. He’s trying to find out whether there are alternatives. His research: Maoist TMs justify themselves as methods of allocative efficiency: enforcing quality and discipline.

Dogan: Whether we ought to think of defenses or limitations on the cause of action/whether we ought to think of internal or external limits on TM. Chewy Vuiton is an example of looking within TM to cabin the dilution claim, and there was value in doing that because the statutory defense turned out to be narrower perhaps than it should have been (drafted by INTA)—needed broader background limit on the affirmative right. Which also goes to Litman’s point about the risks of defenses expanding the right. Some have argued that the defenses in the statute shows that there’s no reason to limit the right, but that’s wrong. Danger of codifying defenses: suggests by implication that there are no other defenses. Can see the same thing happening with parody. (Compare Chewy Vuiton to Charbucks.)

McGeveran: Two different ways of thinking about defenses/limits—one normative and one doctrinal. First: what interest is TM supposed to serve? And then other interests might weigh against that one. That’s not the same as the question of implementation—whether or how we should limit the prima facie case or create separate defenses. His opinion: as long as there are interests in conflict with likely confusion (e.g., KP Permanent), we need some doctrinally external structure, not part of the likely confusion inquiry, that will need to intercede.

Lionel Bently: Largely agrees with McGeveran. Distinctiveness inquiry includes values about personal names and rights to one’s own name. Likely confusion includes, with Rogers v. Grimaldi, external values about speech. Doctrines already incorporate many external values. But then there is a problem of a bizarre drive to purify those doctrines. Thus, courts increasingly ignore the right to use one’s own name/the special status of names. And yet the considerations that justified special treatment of things like names keep creeping back in, so he’d rather have them explicitly part of the standard all along.

Lemley: in defense of purification. Substantial chunk of bad TM doctrine comes out of a half-expressed anti-free riding instinct. There a bunch of things that TM law nominally does not purport to be about that nonetheless anger judges and lead them to decide cases badly. He worries that we should have to examine the unarticulated goal.

Mid-point summary: Bob Bone

Normative level: external v. internal values of TM law. Doctrinal level: translation of values. We might say that we want liability when certain features exist (regardless of what is a defense or an element). So, liability when there’s likely confusion plus harm. Then add in things like Rogers v. Grimaldi—what ought to be the elements that go into core liability? Then, ask: who has the burden on the requisite elements? Nonfunctionality is part of the prima facie case when you have an unregistered mark, to deal with issues of strike suits etc. Plaintiff’s access to information also goes into pleading and proof burdens. Finally, how do we construct the rules to execute these elements? Could be open ended or specific (rules v. standards).

Levels of generality: promote competition? Even if we do generalize, there are costs that just don’t fit—because they’re costs with a moral character, which doesn’t work in a utilitarian framework. They can be balanced against utilitarian considerations, which we do all the time, but their character seems to make them external. So, the First Amendment seems to be an external constraint. There can also be social costs which don’t correspond to/are not commensurable with the benefits. If we adopted an instrumental view of the First Amendment, we could mark impairment of free speech rights as a social cost, but not easily weigh it against the benefits of TM. A moral theory of TM? Anti-free riding, perhaps. Or perhaps: protection of corporate or firm identity, in a way analogous to protection of personhood.

Robert Burrell: We have no agreement on why we have TM in the first place. Another note of caution: the outcome of any given case need not be made dependent on the TM owner demonstrating it has suffered a particular kind of harm, even if we believe TM is about that kind of harm. Bone’s work on enforcement costs: the costs for TM owners of demonstrating likely confusion could be disproportionate to the risks of false positives. Double identity rules in registration systems—flat prohibitions on use of identical mark on identical goods when a mark is registered for a class of goods—can be justified on enforcement cost rules. You also have to take into account the role of the register. If TM is valuable for business clearance costs, you have to provide an incentive to register. May justify broader protection than strict confusion test—a second basis for the double identity rule. Also explains why we protect a legal abstraction: the mark as it appears on the register rather than the mark as it appears in the marketplace—leads to broader protection than strict confusion analysis would.

You have to bite the bullet and accept false positives in such a system.

Bigger problem than particular outcomes: the cloud of C&D letters. McGeveran suggests that express internal defenses have some role in limiting misuse. He is worried about TM owners arguing for “balance”—expanding rights to compensate for “decreased” rights from new defenses. Also not convinced that freedom of expression will help as a limit, certainly not outside the US, and based on the copyright precedent not so much in the US either.

Real solution: reconfigure likely confusion. Address misuse of threats to sue when there’s no real prospect of success.

Eric Goldman: Asks Burrell to clarify how to restrict C&Ds.

Burrell: Threats action in commonwealth jurisdiction has been really useful: most such jurisdiction allows a lawsuit over a threat to sue, and the only defense is to demonstrate that there was in fact infringement (or, for example, in Australia if the TM owner initiates suit within a reasonable period). Damages for any harm suffered are available, along with fees.

Lemley: In terrorem effect of threat letters is big, but solving that problem is bound up with the nature and the fuzziness of the boundaries of the law. No question there are a bunch of C&Ds out there, but it’s awfully hard to know under the current morass whether there is no legitimate basis, precisely because TM is so broad and so amorphous and it’s difficult to say “no court could possibly be persuaded this.” Courts have enjoined the publication of a book about Godzilla that said on the front that it was unauthorized by the TM owner. They’ve enjoined sucks.com domain names. With Burrell in spirit, but wants to know how to get there. Poetic justice: three strikes and you’re out—void TMs or copyrights for three allegations of improper behavior by the owner. Maybe TM misuse has to play a role.

So first we have to define a universe of things that are beyond the pale. It can’t be folded into likely confusion, because that’s always factual—could I find a survey expert who, if paid enough, would have found confusion? Could I find evidence of bad intent in discovery, which would have played into the multifactor test?

Bone: Threat actions worry him. Liability for making threats can have bad effects on settlement negotiations prior to suit. (This is a version of his enforcement costs thesis, actually.) He’d prefer to tinker with procedure. Shifting burdens to the plaintiff. May also need to clarify them. But if plaintiff has to plead under Iqbal/Twombly, that can be an issue. Make (partial) summary judgment early—focused discovery on particular issues that are of main concern. There was a time when Rule 11 had some bite, but we don’t really any more. Nobody (lawyers) liked the old Rule 11.

Burrell: We’ve had threat actions since the 1880s. He doesn’t think the empirical evidence shows negative effects on settlements.

Lemley: First Amendment problem with threat actions in the US—Noerr-Pennington doctrine allows suits based on sham patent threats, but there are very few successful litigated cases.

Heymann: Course correction on eliminating some motivation to send the letters—rejecting the conventional wisdom that enforcement is relevant to TM validity. People believe that the number of letters they send is relevant to whether they own marks. Given that the costs of sending a letter are minimal, people err on the side of sending the letter. Question of whether TM serves as a source identifier is unrelated to whether people say “I’m going to xerox this.”

Rose Hagan: TM owners have been trained to think that they need to send C&Ds. Courts see all these letters; defendants can’t afford to defend themselves property; end up with bad law. Changing expectations about brand maintenance is important. (So basically we owe some thanks to Bing.) People aren’t thinking about consumers, only about assets.

McKenna: you can find cases that say things like “policing is important,” but lawyers have way oversold that. Laches/acquiescence depend on competitive uses.

McGeveran: The difference between what the lawyers say and what the law actually supports is vast.

Bently: In Europe, genericism requires action/inaction by the TM owner, which incentivizes policing.

McGeveran: McCarthy is adding something to his treatise saying that the conventional wisdom is wrong; this might help.

Beebe: Hagan’s point about assets v. consumers is important. Search costs can flip around: marks are searching for consumers. All sorts of TM doctrine minimizes search costs of corporations looking for consumers.

Goldman: Anti-SLAPP suits. Trouble is that it only kicks in once a case has gone to court and doesn’t deal with the cloud. But procedurally it might be useful in the arsenal.

Marshall Leaffer: TM law is what TM lawyers do—C&Ds are extremely cost-effective. There’s very little risk. They generate legal fees. They satisfy clients. The only negatives have to do with the C&Ds that get sent to people about domain names, where they get published. So some firms will say to clients that the publicity might not be worth it—dealing with “irrational” individuals who will snarl and fight. Advertising abusive C&Ds might help? (Chillingeffects already does this.)

Goldman: we could require C&D letters to be filed with the state.

Me: why not incorporate TM guidelines into the fair use guidelines that are being developed now, empowering users instead of just trying to deter TM owners? People have lay theories about appropriate use of TMs that can also be gathered and marshalled, among other things to show that the broad confusion theories are bull.

Bently: Outside the US, the normative goals of TM and false advertising are not the same. We think of TM as fundamentally about registration, which provides special benefits. Are the normative goals of false advertising and TM the same in the US?

Me: Absolutely—both of them have a normative component (protecting business against certain kinds of unfair practices) and a consumer protection compenent.

Dogan: Courts have required more free speech justifications from defendants who want to use a TM than from defendants who want to say something non-TM-based.

Here, we haven’t conceived of registration benefits on presuming confusion as a way to incentivize registration.

Litman: We had greater rights as an incentive, but Two Pesos screwed it up.

Congress refused to bite the bullet in 1988 and define standing, and the courts had to create a bunch of prudential standing doctrines to limit consumer standing, and none of them made much sense. So limiting the type of cognizable harm is a way to limit the number of cases under §43(a) (and has disproportionate effects on false advertising plaintiffs v. TM plaintiffs).

McKenna: The focus on competition in false advertising is the way TM used to be. If we were consumer-focused in false advertising we’d relax the competition standards, because noncompetitors can do various kinds of damage. TM goes to source of products/responsibility of quality. False advertising goes to other kinds of statements—thus important that we focus TM not just on the integrity of information, but on a particular kind of information, fitting in with other information regulations. (I’m not sure I get the payoff: what’s special about responsibility for quality? There might be something special about the way people think about that—certainly because it’s more specific, maybe we can derive better rules/presumptions than we can for the general prohibition on false statements, but I need more.)

Brand owners think of brands as assets. It’s hard to resist the idea that this is just industrial policy meant to squeeze value out of monetizing/commoditizing assets. This should make us think more about the harms of such commoditization.

Bone: Autonomy rights of consumers. To what? Not to full information, but to something. Courts often say that we protect the mark even without any harm to consumers in quality difference, because firms have a right—a moral right—to protect their reputations. He doesn’t think this is defensible. Perhaps we can think of (some) marks as vehicles/devices for creating products—marks whose value consists mostly of affective associations. Consumers prefer such products. Chanel No. 5 creates emotional associations with advertising. Protection of TMs is essential to the creation of such products, and if we want those products in the name of diversity, then we need TM. (I guess the alternative is that such products are generated as side effects of the other justifications for protecting TMs.)

Michael Grynberg: fundamental continuity between false advertising and TM: market actors have regulatory power over third parties. This gets lost on the IP side—tendency to talk about things in terms of property. But property is power over third parties! We just think of it very differently from how we think of other kinds of power over third parties. Courts are more modest in areas like false advertising law.

Lemley: Why do we need TM if we have false advertising? A special case of a general proposition. So what makes it special? We’re willing to make a series of presumptions on a utilitarian basis of the things we should and shouldn’t permit because of our experience. But also, we may be taking TM out of the utilitarian calculus by replacing it with rights talk. This gears us away from thinking about costs and benefits, as if there were something intrinsically different about property rights. This allows us to avoid asking harm questions, ignore materiality, etc. Putting TM back into the broader false advertising framework enables us to avoid the rights dodge.

Hagan: Brands and marks are different. The mark is Chanel No. 5. The brand identity is what people agonize over. TM law doesn’t protect brands, except for dilution. (Though TM owners act like it does.) There’s been some thought among TM owners that TM should be treated like copyright and patent, promoting progress. But innovation precedes TM; it doesn’t follow it.

McKenna: Remarkable to him how European economists were willing to think about TMs as ways of leveraging/promoting innovation. The reason they gave to protect TMs was to allow people to capture value that would then be used to fund innovation.

Burrell: Wants to be careful of non sequitur of saying TM should be about protecting brands/emotional association and then concluding that certain results follow. Even though anyone can buy a fake Rolex, Rolex remains a Veblen good. Expansive protection need not follow the commitment to brand value.

Dogan: Businesses view TM as protection of brand, as logical consequence of legal protection of mark, but scholars and courts need to avoid seeing the consequences as normative goals.

McGeveran: Couple this with the reminder that value is not right. But these are powerful gravitational pulls—people look for tools to protect their multibillion-dollar assets.

Matt Sag: It’s not just jumping from value to right. Businesspeople use tools aggressively, not for the reasons we gave them the tools. People use patent law to do TM work. (Copyright too.) Doctrinal purity can help here. (My thought: but we do a much better job of noticing this aggressive use of law in false advertising law, except sometimes when we notice this in expressive uses of TM.)

Leaffer: Dilution protects brands; but TM generally has protected the aura of marks with implicit notions of tarnishment—the “Enjoy Cocaine” case was decided on confusion grounds.

Litman: 1920s justification for false designation of origin/false representation was that we’d use business self-interest and desire to harm competitors to police truthful advertising in the marketplace, without requiring an administrative agency to enforce it. Are we giving out the wrong tools or allowing businesses to do each other more damage than we want? (Preemption/preclusion debates over the FDA bring this up as well: what the FDA has decreed, let not the Lanham Act rewrite.) The extent to which this is kludgy, and the public interest may diverge more from private interest than it did 90 years ago, should be addressed.

1 comment:

Greg Lastowka said...

Thanks so much for taking notes, Rebecca!