Sunday, October 04, 2009

WIPIP, session 5

Leah Chan Grinvald, Saint Louis University School of Law

A Well-Known Mark Carol: Moving Beyond the Spirits of Our Trademark Past

Doctrine is not well-known in the US, and courts don’t apply it. Often confused with dilution, called “famous marks doctrine.” But it does stand on its own. A nonbinding international obligation since 1905 and binding since TRIPS, but not embraced by the US courts. Why?

Courts are using territoriality and use as roadblocks to foreign mark owners. They view protecting foreign marks as an exception to territoriality. We have a circuit split: Grupo Gigante (9th Circuit) versus Punchgini (2d Circuit). But in our Singapore and Jordan FTAs we’re committed to protecting foreign marks regardless of use! This will become more pressing as China, India etc. come into their own as sources of marks.

Courts only protect foreign marks through §43(a), finding Paris Convention non-self-executing. Goodwill can only arise through some sort of physical experience—“in commerce” has to be actual physical sales. Except we find “use in commerce” very broadly—any sort of effect on commerce will be enough; the foreign use cases fail to recognize erosion in the restrictive force of the use in commerce limit. Also ignoring §2(d) interpretation which allows “use” to be use analogous to TM use—advertising, anything that has an impact on consumers—as sufficient to support an opposition to registration or petition for cancellation. Consumers are no longer hemmed in by national boundaries. Foreign movies show foreign products; NYT reviews foreign products (though in the 4th Circuit that would be enough to be use in commerce if they advertise in the US and people then eat there). Foreign use has relevance in many TM situations—the ACPA takes into account foreign registrations of TMs in deciding cybersquatting. Genericism cases: when considering when a mark is generic in a foreign language, courts now consider how foreign uses work with respect to the relevant market.

Courts say it’s a matter of deference to Congress, which has yet to speak. Mostly the cases don’t look to the legislative history of the 1946 Act, which suggests that Congress may have intended to adopt the provisions of the Paris Convention. If use is the impact on the consumer, we should use that as a definition for well-known marks.

Courts may want to foster their own notion of how trademarks should be transmitted. We want consumers to have an actual experience with the product before granting rights. And they’re making economic policy. Instead of focusing on information transmission, they’re protecting an American entrepreneur: Punchgini, with new American immigrants making a new life, building their own personal wealth. That’s not a proper role for the courts.

What are the options? Amend the Lanham Act. (This would get us, she says, reciprocal rights in other countries.) If we don’t like the doctrine, then we need to amend TRIPS, but we need to discuss our reasons.

Beebe: Even with Grupo Gigante, there was some sort of territoriality—plaintiff had to show “secondary meaning plus,” whatever that means—is that what you want? Also, is there any correlation between the politics of judges and their rulings on territoriality? (Cf. debate over relevance of comparative law to US law.)

A: She wants to look into geographic as well as political factors—Grupo case comes from San Diego, near the Mexican border. Political/cultural/something else may be going on.

Karjala: Doesn’t see how territoriality comes in if the law is just governing conduct in the US. Reciprocity: we get the best of both worlds already—our famous foreign mark holders can already go in other countries and stop copying, but theirs can’t come in here and do the same.

A: Yes, we’re more protectionist for our entrepreneurs, which is contrary to our announced free trade ideals.

Deven Desai, Thomas Jefferson with Spencer Waller, Loyola (Chicago)

The Law of the Brand

Law/economic theory don’t account for the way in which brands drive corporate decisions. Thus policy is misguided. The law has no clue how it’s feeding brand power.

Historically: national manufacturers had to overcome local loyalties to retailers. They realized that they had to get market power over the retailers—if Uneeda Biscuits were unique, and demand could be generated in consumers, then the retailers would have to pay a premium. Ads used to educate consumers about why it was important to shave at home, etc. Branding was explicitly intended to eliminate price sensitivity. Marketing was important only to circumvent retailers and control prices; quality was secondary. Of course, manufacturers did have to start taking responsibility for quality and somewhat for conditions of production. That function overlapped with the Progressive movement, but didn’t explain the manufacturers’ intentions and actions.

First half of 20th century: had to compete over essentially the same goods and manage excess production capacity. Lack of obvious differences made good design a necessity: the rise of trade dress. New emphasis on design connected to new emphasis on integrated brand/corporate image. Branding allows company to move beyond product, price, placement and promotion—all of which could be copied. Personality was harder to copy.

This can explain some developments that traditional TM doctrine can’t—initial interest confusion, for example, protects investment in personality. The law should be much more aware of how it’s enabling these acts. Congress was even more explicit with dilution law: protection for an “aura.” Companies offer much more than information—it’s true that dilution isn’t about search costs, but then search cost already had lost its connection to TM law.

Empirically: brand advertising raises prices for both national brands and average price. Private labels: do they cut into the branded world? Stores still have to carry branded goods, even at a loss, or they’ll lose customers. And branded goods are less price sensitive than private label goods. 72% of customers would pay a 20% premium for their brand of choice; 25% said that price didn’t matter if the brand owned their loyalty.

Conclusion: brands are powerful tools, far beyond source/quality. Allow manufacturers to reach consumers directly, past retailer.

Q: How can law deal with the various components of the unitary construct of a brand?

A: it may be impossible. Courts may not need to protect TMs to avoid increasing search costs.

Zahr Stauffer: Consider scholarship on consumer investment in brands—can that be disaggregated when we think about the value of the brand?

A: Brand theory may show that owners’ ability to absorb information and use it to keep control is so great that criticism/consumer attempts to alter meaning are simply unlikely to have any effect.

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