Friday, November 20, 2015

Trademark Law's Fundamental Purposes, part 2

The role of justifications and equitable considerations in trademark law:  Stacey Dogan
Many of the early cases are limiting protection b/c of some interest they’re trying to protect on the other side—Borden is an exception.  Maybe a public right to use the term—e.g., American Washboard.  Troubled by recognizing a right in a private party that would preclude others from truthfully describing their goods. 
From Borden to Aunt Jemima: in the latter, the court says there doesn’t seem to be a reason for the D’s use of the TM—there’s consumer deception, there’s possible harm to the P, and there’s no reason to give access to this term w/singular meaning.  Concept of justification does help explain case law through early-mid 20th-c.  Courts start thinking in terms of likely confusion—instinctive/intuitive feeling that unexplained/unjustified Ds who are trying to free ride create a costless case for judicial intervention.  That takes us through much of the contemporary case law as well, even in cases involving counterfeit goods, post-sale confusion.  Courts are moved by a natural rights feeling that TM owners are entitled to the fruits of their labor unless the D has some justification.
Courts initially responded to use of keywords in search engines as “unfair,” using guise of confusion; as courts have been educated about the value of these uses for competing or complementary products, they scaled back the scope of TM rights, insisting on a showing of real likely confusion.  Amazon v. MTM; Tiffany v. eBay; even Rescuecom.  Most limits have been imposed in the expressive use context.  Increasingly Rogers v. Grimaldi: very defendant-protective, and the reason courts do this is that they see the speech value of allowing people to incorporate TMs into expressive works.
Wendy Gordon: Boston Hockey—merchandising right.  Investment protection rationale? Hard to tell a good incentive story.  Cheaper sweatshirts for poorer people—better access to status competition.
Dogan: Natural experiment? Europe has broad protection for design; US has less protection for designs that integrate form and function.  Design patent does protect design, but much design developed in last ½ of 20th century is no longer protected if it ever was. Lots of furniture still under protection in Europe but not here—someone should do empirical work to figure out effects on product diversity, price spectrum.  Recent injunction against generic manufacturer of a drug that just went off patent—a purple pill, and the plaintiff/brand owner sued when the generic manufacturer used the same color, and got a PI.  There has been some work done suggesting that old people in particular really rely on pill color.  Compliance w/drug regimen declines if people aren’t allowed to use pills.  [McKenna interjects that it also supports drug effectiveness.]  To the extent that we can harness evidence like this and present it to courts, they might be more persuaded about the costs associated with recognizing rights.
Bone: Dogan is describing sort of a presumption of protection; he would say today’s TM is about worrying about risk.  Smack Apparel: the D had justifications, they were just ignored.  [So basically TM owners and the courts that enable them are as lily-livered as Donald Trump and his ilk’s fear of refugees.]  P had an established licensing market, and if that were impaired, who knows what would happen? Erring on the side of the TM owner.  Same w/prestige goods—court isn’t going to say that signalling status through purchases is wrong.  If the Ferrari gets too plentiful, then prestige plummets, and we don’t want that risk. Tarnishment/dilution is the same.
Dogan: these aren’t unrelated.  Tarnishment is distinct because while she doesn’t like it, there is a theoretical harm narrative there [just one whose mechanism violates the First Amendment, NBD].
McKenna: courts are relying more on justifications, but the problem is that courts don’t uniformly accept those justifications—they don’t buy the argument for competition in luxury markets. They buy the harm argument that P will lose customers who want snob appeal. You need justifications, but you also need to know when justifications will trump the harm story, and courts ever expand their willingness to accept ever more fanciful harm stories.  We don’t need to figure out what TM law was once about to make TM law now, but the reason he wrote was that the dominant discourse was that TM law was about search costs and we should get rid of doctrines that don’t further that.  Courts don’t think they’re doing search costs so they won’t be responsive to those arguments.  Bone/McKenna dispute is a conclusive argument against originalism, but agreeing w/him isn’t key—wants to convince people to take on the harm story on its own terms rather than just say cts aren’t doing what they’re supposed to do. And you can’t do that if you say the doctrine has abandoned its old consumer protection rules.  There is both continuity and a radical shift.
Gordon: remember that Holmes reminds us that just b/c something has value doesn’t mean that it should be property; and there are complicated questions about courts v. legislatures.
McKenna: note that 1-800 (10th Cir.) channels its concerns through the harm story—it doesn’t say “keyword ads are good so this is ok” it says no one is clicking on these ads and therefore there’s no confusion/no harm.
Dogan: what is it that TM law ought to do?  Unrealistic to go back to trade diversion. 
Silbey: Take seriously the idea that consumers are harmed when they get the wrong thing.
Dogan: Materiality!
Silbey: better explanation for why mistake is a problem when we buy.   Take the idea of impersonation seriously—is that a consumer interest apart from market balance issues, if the consumer is otherwise satisfied.
Gordon: should the P have to show that the D is making something whose purchased by a confused consumer would hurt the consumer in some relevant way?  Hand says TM owner shouldn’t have to be at risk, have to wait for bad quality to materialize, but over time Hand began to think that was too generous for Ps.  Sees the point of allowing P to vindicate rights before the harm materializes, once you accept the theory that if it materializes it will do P harm.
Dogan: there’s also a consumer autonomy interest in preventing a purchase that is caused by deception.
Bone: Autonomy is a description of information/choices. Why do we care? Maybe b/c it makes market work better—allocative efficiency.  We might care if consumers have the right to perfect information, but that’s impossible.  Third reason: more to do with enforcement costs—ideally, we wouldn’t give protection where products are of equal quality, but broader rule has fewer error and enforcement costs.
RT: Autonomy is more than a descriptive term.
Silbey: early cases focus on manufacturer autonomy.  The taking of the name is a harm in itself, and I don’t understand that for the reasons Bone articulates for dismissing consumer autonomy standing alone.  [That is, it can either be market based or rights-based, and neither work well.]
McKenna: we can sweep consumer autonomy under the rug if you focus on lost sales/harm to TM owner.  Also, quality concerns: you have to start thinking about what the components of quality are—conditions of production.  There’s no a lot of real diving into where real consumer autonomy is.
Dogan: Ferrari case is an example where the harm story is not really doing the work—it’s about free riding, and the court sees no social value in this form of copying.
McKenna: features of TM promote informational clouding, not clarity.  For example, Clorox is no different from other bleach (Posner thinks there’s more of a guarantee that it won’t explode but nobody else thinks this—people buy Clorox because that’s what they’ve always done).  It’s also easy for TM owners to obscure true ownership of company.  It’s easy to change a TM to disguise your identity.  If goal were info clarity, TM law would restrict these things.
Bone: it just doesn’t go as far as it could. That’s not clouding.
Dogan: provisions for information—nominative fair use, allowing communication about TM owners—enable others to correct problems.
McKenna: mismatch exists though. Comparative advertising can reach particular components. But you can’t get the limits of TM law from “it’s about promoting the flow of information” b/c then you need to know why it’s about this kind of information rather than others and why it doesn’t cover other uses involving a TM (e.g., your health insurer’s use of a TM with its incomprehensible disclosures).
Gordon: Social welfare v. formalists.  Formalists would say you have a right b/c you have a right.  Consequentialism asks why these people have these rights in these conditions.  Law & economics answer: usually starts w/sharp distinction b/t distribution and allocation.  Distribution = who is richer & poorer. Allocation = how is a particular resource being used. We seem to usually make policy arguments in TM that say let us give rights to people who will use them in a way that gets resources to higher-valued uses.  That’s allocation, but we also worry about the distributional aspect.  So we tend to react to changed circumstances—we thought copying facts was great—with changed law—1918, SCt says that problems w/news services justify new allocation.  And yet: We don’t want people who have vested rights to suddenly lose what they have simply b/c they’re not economically useful.  We have a few ways of protecting that. One is the takings clause.  The other is the gradualism w/which law operates.
One difficulty w/TM is that we can see distributions being made w/out any allocational justification, b/c we assume that past allocations had some social welfare justification.  New prestige goods/merchandising rights etc. evolve w/o any clear sense of why it helps society. Its recency makes it hard to credit the distributional claims made for it.  Similar w/publicity rights.
Bone: Another piece is that we’re starting to enlist TM law for dynamic efficiency purposes, which is a new thing.  Some people are concerned about incentives in a dynamic way—merchandising rights. Goes beyond incentives to maintain product quality.
Dogan: In an unexamined way—implicit in the opinions rather than explicit and examined and challenged. 
Meurer: Merchandising rights might be justified by claiming that sports teams capturing more rents leads to bigger stadiums, bigger payouts to players (I’m sure they’ll start building their own stadiums any day now).  Maybe more plausible w/r/t George Lucas and the next Star Wars movie.  Affects incentives about which kinds of movies to invest in. 
Many economists think the more ads, the better, b/c ads are typically informative. Strong protection for goodwill might induce more investment in advertising, which is better for society. If you think ads are bad you’d reach an opposite conclusion. 

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