Monday, February 09, 2015

WIPIP, Part 2, Session 2, Trademark

Glynn Lunney, Inefficient Trademark Law
Older TM lawyer would be surprised at breadth: inherently distinctive marks were the only marks, and double identity was essentially the rule.  Today: looks very different. What will it look like in 100 years—will expansion continue? Even if we could change the Lanham Act today, would it be that Act in 50 years after the courts were done with it.
De-evolution: trademark protection has expanded radically in ways undesirable normatively and unjustified by the language of the Act.  Expansion not due to changing markets or marketing/advertising. Flaws inherent in the judicial process: party-driven nature of judicial process (wrong set of cases before the courts) + judicial myopia because courts focus on parties before them not on society. Too easy to give into the restitutionary impulse/instinctive dislike of copyist. 
Example: The “Who Dat” controversy.  Saints tried to control the phrase but that was unpopular with local businesses/politicians. Then two brothers who popularized the phrase sued Fleurty Girl and a couple of other T-shirt shops; their claims were weak—limited use, likely naked licensing, not much likelihood of confusion. Attorneys around town agreed to represent the Ds pro bono.  Court rejects sj motion: factual issues on abandonment, ownership, validity, confusion.  Ds all settle.  Not worth it to them to litigate.  They wouldn’t win enough by winning: right to compete w/other merchants to sell the shirts, and it’s distracting from their business.  Ps have a greater incentive: if they prevail, they get lots of licensing revenue.  That’s the story of the 20th century: TM owners have strong incentive to litigate and develop legal rules that benefit them and similarly situated TM owners in the future; TM defendants usually have no systematic interest in developing TM law on lines more favorable to competition.
Trade dress: Congress relegated it to the Supplemental Register; In re Haig & Haig (Comm’r 1958) Daphne Robert said that she didn’t care what Congress said; 8th Circuit said it was protectable under §43(a) for trade dress of corn hopper.  Two Pesos said secondary meaning wasn’t required by Congress (b/c they didn’t mean to protect trade dress); Qualitex says “symbol” means anything even though the term was added to the Act precisely to refute that contention.

New forms of confusion: post-sale; initial interest confusion; Boston Hockey/promotional goods.  Some are desirable—Aunt Jemima should be allowed to control pancakes, not just pancake syrup to avoid confusion. Case by case v. systematic: the cost of false positives and false negatives; court doesn’t consider the long-run consequences, like Boston Hockey or post-sale confusion.  In some cases, we should let the wrong go despite the false negatives. Consumers could figure out that Aunt Jemima pancakes were from a different source.
Good law becomes extended and becomes bad. Arguments aren’t made by attorneys: failed to argue that Congress explicitly excluded trade dress.  Respect for precedent preserves bad decisions, but not good decisions—why is Two Pesos still good law?  Silly excuses offered for expansion, like the 1962 Amendments mean any confusion is actionable and “commerce” means anything even though that’s put in to satisfy the Commerce Clause.
Parties set the agenda: decide whether to act, sue, settle.  Present info on which decision is based. Consumers are not allowed to participate.  Not necessarily a problem when resolution affects only the parties.  Sometimes nonparties are affected: asymmetric stakes—win for P increases market power and rents, while win for D leads to competition and no rents.
Thus, as problematic as TM is, it’s likely to get worse.  Increasingly broad protection w/increasingly narrow, complex and specialized exceptions.
Remedies: adjust stakes: attorneys’ fees/boundies to get right cases before the courts. Eliminate collective action by mandatory joinder of possible Ds; eliminate private enforcement. Also need courts to reach right results. Better information; create defense bar; ideology can create results by focusing attention—property-philia is a problem.
Sheff: Is TM exceptional in this regard or like any other regime in which stakes are asymmetric? Also, Q of institutional competence. If this is a structural problem w/ the nature of litigation, then courts aren’t the proper institution to balance in favor of competition and we need other institutions, maybe legislative.
A: can do it: antitrust, where ideology and other factors have produced counterbalances.  Or remove law-making authority from courts altogether.
Ramsey: nominative fair use—entertainment/news companies have an interest in pushing back. We have to identify companies w/broad interests and bring them in.
A: Wal-Mart. Sometimes you wonder: why did the Ds fight?  Why did Dallas Cap & Emblem fight so hard—were their sunk costs so high? Sometimes it’s idiosyncratic, and that can be really bad b/c defendants may make bad precedent.
McGeveran: when is there some other external doctrinal barrier for courts?  Speech or some kinds of competition get courts to take notice.  Results can be quite favorable. Part is just increasing salience to courts of those third rails, like the First Amendment.
Rosenblatt: there will still be uncertainties in the absence of rigid carveouts.  All the settlements hurt the law, they don’t help it.  Uncertainty drives settlement. [Compare fair use principles, though—we have been able to strengthen the resolve of at least some sectors in the © area.]
Gerhardt: I wonder about quality of lawyering. Smack Apparel: P has sophisticated TM counsel and D doesn’t.  Defense bar/more connections with people fighting = huge difference.
A: true, you can end up with a TM lawyer who usually is P-side and then you get the ridiculous argument in Two Pesos about secondary meaning in the making, or a non-TM lawyer who just misses the point.
Peter J. Karol, An Exclusive Right to Judicial Discretion: Learning from eBay’s Muddled Extension to Trademark Law
Most circuits had a rule presuming irreparable harm in TM cases.  Now: a mess.  9th Circuit: no longer receive presumption of irreparable harm, and generalized statements about losing control of TM/reputational harm won’t be enough. Need specific facts.  Middle: 11th: prevailing P don’t get categorical entitlement, but dcts may presume irreparable harm where cases bear substantial prallels to previous cases such that a presumption of irrep harm is appropriate exercise of discretion, per Roberts concurrence.  5th Cir. cites eBay but applies presumption in a laches case.  DCts are also completely over the map.  Many/most give lip service to no presumptions, but then find irreparable harm b/c P will lose control of TM; many cite eBay and then apply a presumption.  Platters cases: 9th Cir. reverses grant of PI; M.D. Fla. grants PI a year later, saying it can apply presumption if it wants to and offering general statements about reputational harm.
Theory: damages to business reputation are inherently irreparable, therefore extending eBay doesn’t make sense.  Evidence showing likely confusion then shows irreparable harm.  Rierson: presumption for traditional TM actions might be justifiable, but post-sale confusion and the like should show harm.
What about property/liability rules literature? Most focuses on ©/patent.  Most pre-eBay economic analysis assumed infringement finding meant the D would stop. Exception: Epstein, after eBay, concludes TM are more like property than patent/© based on indefinite duration and thus more suited to property rule treatment.
All the circuits are right. How could that be? The Lanham Act is a conflicted statute lacking a single coherent purpose. Sec. 33 tells us registration is prima facie evidence of exclusive right to use mark in connection w/goods. Sec. 34: courts can grant injunctions on the principles of equity. Ex ante and ex post.  Almost identical to Patent Act language, BTW. 
More problematic than patent: Likely confusion is element of TM claim; patent infringement doesn’t have a harm element—might be true that likely confusion doesn’t = harm, but there’s at least a potential as there is not in patent.  It’s very hard to get $ in a TM case; usually you want the injunction. Damages require actual confusion; accounting of profits requires deception/bad faith.
Can legislative history solve the problem? Overarching tension b/t those who want registration to be truly substantive, federal right to exclusive national use, and those who want the state-based substantive common law model; federal registration is merely procedural. Drafts show pendulum swing. Early drafts show pendulum from substance/entitlement to injunction; later drafts paper over the conflict as a result of concerns from people who thought the federal law was going too far federally.
Complete lack of clarity on expected remedy for prevailing Ps, except in counterfeiting and holdover licensee cases. Jarring feedback loop: we made it hard to get money because of the ease of obtaining an injunction; but the eBay test explicitly looks to availability of monetary relief in whether injunctive relief is available.  Maybe no true difference w/out presumption in most courts.  Maybe a creep in of materiality requirement by the back door of remedy.
Thoughtful reevaluation is required of what it means to own a registered TM. If you really have an exclusive right, maybe a presumptive remedy. If not, don’t call it an exclusive right and explain better what it is.
Next up: more empirical work.
Sheff: Functional approach to distinction: bundle of rights approach. TM, unlike patent or ©, P must use IP to be entitled to the right. eBay is arguably about concerns over NPEs depriving public of access to the work/invention, and in TM you don’t have that concern. That would suggest that eBay’s motivation lacks bearing on TM law.  Treating eBay as inappropriate for TM, either formally or through the back door, is just recognizing that.
A: maybe the courts aren’t thinking about the differences.
Rosenblatt: There is a TM troll problem; it just looks different from patent and © trolling—expressive, ornamental, etc. uses that aren’t confusing. That may justify a similar rationale.
A: at least likely confusion filters that out a bit.
McGeveran: Civ pro perspective: preliminary injunction standard in general is messy, and there’s lots of complaining about lack of adequate remedy at law w/Q of irreparable harm. To what extent is what you’re observing just one manifestation of overall disorder in the state of injunctive relief decisionmaking? Relatedly, we have a general tradition of presuming reputational harm is irreparable, whether in defamation or in TM.  So, unless we put that to one side, it will be pretty easy for courts to plug in that long tradition.
A: Civ pro: part of what we’re seeing is eBay juggernaut disrupting injunctive relief across the board. Might be part of tidal wave. Courts want specific facts, not general statements about harm to reputation being irreparable.
[RT: arguments matter, though.  They told us it was statutory construction, and many courts are taking that seriously. Also, I think the arguments about how reputation is inherently irreparable are no longer as persuasive as they were.  (1) We have lots of ways to measure the economic value of reputation now. (2) I think the concept of reputation as dignity, priceless, has become less persuasive as commodification has become more pervasive. A judge 100 years ago would not think of a person’s “name” in the same way.]
Q: lack of consumer protection issue: how do you protect consumers from confusion w/out an injunction? Consumers can’t bring the injunction.  The remedy goes beyond the TM owner itself. [Though if we got damages right then many Ds would not infringe … ]
A: True, in every case the public interest seems like it would be served by stopping confusion. [Unless they don’t care?  That’s why materiality matters.]
Gibson: this is maybe why we keep going back to the substantive problems with TM’s breadth. If it’s a mess, rationalizing the remedies may not be possible.
David Welkowitz, Willfulness
Willfulness isn’t well defined in criminal or civil law.  Wants to examine meanings ascribed to it in TM and ask whether we should change/refine our understanding.  Comes in largely but not exclusively in the remedies area; counterfeiting. ACPA: presumption of willfulness from false contact info, seems to apply only to cybersquatting, though section applies by its terms to the whole remedies section, §35. Judges have also required willfulness in most circumstances to recover profits.  In inducement, line of cases deals with willful blindness.  Atty’s fees: willfulness is also a factor.  Bad faith: willful acts of copying will also influence the outcome of the liability test. 
Willful defiance of a child—not necessarily willful in TM.  Different views in SCt: FCRA case says generally willful means recklessness, but patent inducement cases say that willful blindness requires more than recklessness—some deliberate act on part of inducer that indicates knowledge of infringement.  Higher than recklessness.  Recklessness itself is difficult to define, and hard to distinguish from mere negligence. Another problem: how do we instruct juries?  Apple v. Samsung: TM and patent claims; did a careful definition of willfulness for patent, but didn’t define willfulness in TM, just gave the jury the statute.
How can we enhance remedies based on a word that is so inconsistent in meaning?  How do you prove it? In default judgments, courts use the fact of default as evidence of willfulness.
Tentative conclusion: if we use willfulness, we need to be very careful about remedy creep. When recklessness is distinguishable from willfulness, we are giving enhanced remedies in non-extraordinary cases and acting as if they are extraordinary.
McGeveran: should this even be a jury question?
A: that’s a legal q in many cases, especially if you just give them the statute, but after Hana Financial he expects SCt to say yes.
Ramsey: very troublesome when courts think knowledge is enough. What should be done?
A: not confident of Congress’s ability to do this because of legislative capture. Congress would draw the line too low, accepting recklessness w/out defining it.  Really nice if courts/SCt would say that the conflict needed to be resolved.  Not confident they’d do the same as in patent, but it might help.  If I ran the world, it would be like the patent standard: you have to intend to infringe.  Similarity alone wouldn’t be enough.

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