Trademark & Marketing Roundtable, Notre Dame

Alfred Yen (Boston College), Trademark’s Dynamic Construction of the Consumer

Commenters go first here:

Barton Beebe (NYU)

Common theme of papers: irrationality/strange behavior of consumers—false memories, ratio bias.  How we conceive of the consumer in trademark law: a figure whose image is manipulated by lawyers, courts, industry—no reality, but forming a “consumer” in a way that serves other policy goals.  Yen: TM and consumer behavior affect one another in a self-reinforcing feedback loop.  Can the same be said of false advertising law as well?

Yen: We calibrate doctrines to the level of sophistication that consumers bring to the marketplace, but that sophistication is dependent in part on TM law itself.  Circularity is a pervasive problem. 

It’s just marketing’s world, and TM law just lives in it?  TM conceives of itself and reacts to the reality of the marketplace world.  But law isn’t sensitive enough to its own effects.  We aren’t just potted plants.

The idea of the consumer as having fully formed preferences, sovereign; but plaintiffs tend to insist that they are also fools/easily fooled, encouraging expansion.  Circularity allows plaintiffs to continuously push out the scope of TM protection.  TM producers are only happy to assume the “search costs” of their consumers, which also allows them to persuade consumers.

Two forms of sophistication; consumer sophistication in search and sophistication in resisting persuasion, which are not the same.  Also goes to themes in Yen and Manta’s papers about whether TMs are evil—forming preferences in some artificial way that could be changed.

When do courts notice this?  Vornado: TM can become a self-fulfilling prophecy. De facto secondary meaning in functionality cases: courts are willing to allow a certain level of confusion on the assumption that consumers will ultimately learn that a product feature isn’t being protected as a TM.  Over time, consumers will see it on a bunch of products and realize that it’s not a source indicator—court can recognize that there will be initial confusion but the ruling will eventually teach consumers.  New Kids on the Block: nominative fair use—the court was willing to allow defendant to appropriate plaintiff’s mark regardless of confusion in order to accomplish larger goals as an information system.  (And over time consumers will learn that newspapers etc. can use marks at will.)  Michael Grynberg’s general thesis about TM law: TM law ignores nonconfused consumers, the other 95%, and we should focus on their goals.  Genericism: Thermos case, where the court recognizes that some consumers think a term is a mark (but thinks that time will teach them the term is generic).

Why don’t courts talk more about this? Because they are focusing on the competitors, not consumers over time. Courts have the case in front of them and are overworked.  When courts see these cases, it’s the equities driving the outcomes.  Bad faith actor v. good faith actor.

Knockoff Ferrari kit case, with Ferrari shell on other car’s body: court does not require consumers to learn that this can happen.  Basic idea: people should know their place. Simple misappropriation is more of a driver (no pun intended) than consumer understanding. The real circularity is not so much consumer perception as “if value, then right,” as Felix Cohen said. Ferrari spent money on the brand and now defendant wants a free ride.  Doesn’t really matter whether there’s confusion. That contributes to the circularity with respect to educating consumers.

Deborah Gerhardt (UNC)

Consider cases enjoining unauthorized college T-shirts, even when no one would think that consumers were truly confused about what they were getting. Consumer interests aren’t at the table; it’s all about allocating value to the universities. Do courts even know what consumers are thinking?  Treated as much less sophisticated than they are in torts or false advertising—there doesn’t seem to be a true reasonable person standard, but instead it’s about economic rights.

Look also at liability outside confusion: Adidas v. Payless sued over 4- or 2-stripe shoes.  Not point of purchase confusion, conceded at trial, and still a huge verdict.

Yen: Agreed that there are other things going on: misappropriation, blunt interest group power.  Not trying to describe all of what’s going on in TM, but trying to take the rhetoric of cases seriously.  It’s unusual for a straight-up TM case to be decided without the court making some kind of claim about some kind of confusion. Maybe we don’t believe it, but they say it.  So how do we think about that?

Chicken and egg problem: we talk about it in the specific—if we allow Gallo Nero, eventually consumers will distinguish that from E.&J. Gallo. But does the specific cross over to the general?  By having encountered generic band-aids and branded band-aids, etc., will that cross over into general attentiveness to distinctions.  And the converse: if I encounter lots of licensees of the name brand, do I pick up the intellectual habit of assuming authorization? Seems to be intuitive—part of growing up is learning what to pay attention to and what not to.  (Sounds a lot like educating lawyers.)

The unconfused: also very interesting.  Maybe TM should be much more concerned about them. Every time a defendant loses, we create confusion—people who wanted Gallo Nero have to wonder, where did my wine go?  Once someone has a habit of looking for a source identifier, that can be hard to break.

Eric Goldman: Sleekcraft was very nuanced in the 9^th Circuit—thought there might be confusion, but concerned about defendants’ customers, so the result was a limited injunction to preserve both parties’ brands. 

Disagrees that consumers are sophisticated about domain names (from the paper)—overwhelmed by the domain name system, so they use search engines to find domain names. They know they’ll find what they want through search.  Domain name system failed at a core level.

FTC has guidelines for what “free” means but consumers have no idea what those guidelines are. So marketers constantly try to take advantage of consumer lack of understanding. The rule, he thinks, doesn’t help shape consumer perceptions. Everything here about interplay between consumer expectations, rules, and what marketers will do applies to advertising claims generally.

Goldman values consistency: when the refs call a game differently during the same game, it’s anarchy. He’d much prefer consistency, around which players can adjust, versus divergence across courts.  A backdoor application of the Coase theorem.

Yen: that’s part of his idea about limiting the number of things that can count as source identifiers—so you don’t have to worry about whether you can use a particular color for pants.

Goldman: we need to account for divergence—there are different stages in a search; there isn’t just one reasonable consumer but rather a bunch of different reasonable consumers with different styles.

Yen: agrees; he wants to think about priming people to think in certain ways.  If we in the abstract decided that it would be good if consumers were relatively discerning, will they respond if the law asks them to? We may all have different learning styles, but there are things we can all learn.

Nicole Votaloto Montgomery: presumes that consumers are paying attention, but consumers often preserve cognitive resources and make decisions on something like brand. Difficult to teach them to pay attention in domains where they traditionally haven’t devoted cognitive resources.

Yen: but if you live in a world with a lot of close-together marks, you’d become adept at making the relevant distinctions.

Montgomery: what’s the time lag is a big question.

Yen: consumers learn rapidly about store brand v. name brand. Or if the consumer is heavily involved, with risk either financial or to sense of self-concept, the consumer will learn rapidly.

McKenna: function is in part how many other resources consumers have available. Store brands: allow packages to get close, but not the name.  When you layer packaging, brand name, configuration, etc. consumers could learn faster.

Yen: give consumers something to fasten onto, like the name.

Irina Manta: why is it worth it? Say we can’t educate consumers, or that costs money spent on advertising.  How do we do a cost-benefit analysis? 

Fewer source identifiers: is it true that fewer source identifiers are better?  We might be able to test this.  Has mixed feelings about Qualitex: the court does say that there are certain types of products where words aren’t practical source identifiers, and that seems to have had a fairly large impact on the decision.  That helps determine areas where color protection works.

Yen: you could have had Qualitex written right on the pad. 

Heymann: the market in which press pads are being sold is a non-English-speaking market.

Manta: small goods.  Not defending scent marks, but there are non-word marks that make sense.

Empirical uncertainty: what is the principle that trumps in situations of ambiguity?  Perhaps if you’re the one who doesn’t have lots of empirical evidence, you lose.  Or: if you created something that has value, that should be protected, so you should win in cases of uncertainty.  (The Restatement of Unfair Competition says that the baseline is competition/freedom.)

Yen: his point is to have the conversation about what the courts are saying: what would happen if we took rhetoric seriously?  As for the default, in the absence of clear evidence, why would a court intervene to stop a defendant’s behavior—nonintervention is a principle.  If value, then protection is questionable at best.

RT: Montgomery’s point about consumers conserving cognitive energy is an important one—but preserving cognitive resources through brand choice isn’t necessarily the decision that TM law makes easy for consumers.  This is a feature of the disconnect between what marketers know and what lawyers know. (Interpret “know” how you wish.)  Tide for toothpaste: probably actionable at least as dilution, but probably not likely to trigger that cognitive miserliness.  Following marketers’ understanding of conservation of cognitive energy would lead to a different standard for infringement and different ideas of what’s actionable.  T-shirts, for example: cognitive miserliness is easy: does the T-shirt say Notre Dame on it?  Good, that’s what I want.  If I actually want the University to make money on it, that’s a different matter and we have a standard way of advertising “X% of your purchase goes to …”

New Kids: court insists the use isn’t confusing as a matter of law, not just that it’s protected by the First Amendment.  The argument is a way of having your cake and eating it too—build on that with the notion of dynamic consumer understanding, which over time diminishes the loss from allowing uncontrolled use.

I agree more with Manta on Qualitex than with Yen: Color may be justified for non-English speakers (compare to uses of images on ballots in various countries). 

Yen: would allow use of logos too—we have more to gain in a TM system by just using logos and words and not dickering about color.  Producers, he thinks, would be quite good at figuring out how to make that work.

Ann Schlosser: Search costs and display benefits: I get to carry around Tiffany bags and I don’t want other people to have similarly colored bags from cheaper stores.

McKenna: some consumers gain by that and others lose. At some point you’re favoring certain categories of consumers.

Yen: not the purpose of his paper to take that on. We have cases that are essentially courts saying that “you’re the one who sells red-soled shoes, so you should get all the money from red-soled shoes,” but they give the reason for that as confusion.

Schlosser: people process images much faster than they process words. But there are differences in consumers in processing.  Removing cues in an information overload environment and making them process words might be a problem.  (Is seeing a red sole an information overload environment? Are consumers buying dry cleaner press pads overloaded?  Again, I think marketers might be talking about categories that TM law doesn’t recognize, even if it should.)

Yen: but marketers pile identifier on identifier on identifier—Nike shoes claim zillions of elements as TM/trade dress. What are they thinking there?

McKenna: product differentiation.  We have to consider costs and benefits of a system that protects differently.

Yen: One study: as features multiply, consumer tends to value hedonic features over functional ones.

McKenna: Yi Qian from previous roundtable: increased shoe counterfeiting in China induces investment in functional features of shoes.

Raghu Rao: protection creates product proliferation. Literature on choice overload—you are actually turning people off from searching because there’s too much.

Stephen Garcia: To increase market share for A, you add an inferior version of A, and then more people go for A.  In Adidas v. Payless or CVS v. Motrin, if CVS adds an emulation of Motrin, Motrin’s market share should go up at least relative to Bayer.  This is the “decoy effect.”  Also the possibility that imitation tells consumers that this is the best product on the market: CVS wouldn’t copy Motrin if it weren’t the market leader.

Laura Heymann: Consumers can make distinctions that TM often doesn’t: consumers can hold Xerox in their minds as a brand and also say “I’m going to go xerox this.”  Thermos: you can think of that as a case of granularity, where Thermos is a mark and thermos isn’t—likewise aspirin was held to be generic for patients but not for pharmacists initially.  (I think this is actually dynamic: I don’t think either of those distinctions can hold up over time, so the courts’ rulings are actually transitional rulings encouraging consumer learning.)  Tide for detergent: Tide for toothpaste would be in a different part of the store, which would help avoid any confusion.  Would it be different online? The physical world is (by retailer’s choice, Goldman points out) configured differently.

McKenna: note that powerful brands have influence over where they are in the store.

Goldman: could decide that they wanted to be cross-marketed with other goods, though.  And retailers could organize store by brand. Think of department store, or CD store (organized by brand/artist).

Heymann: That’s source, not brand: the Tommy Hilfiger area.

Jeremy Scheff: ownership of multiple brands is often unified.

Heymann: you still wouldn’t have all the Tide-named products in one place.

Goldman: bookstores. Retailer acts as proxy for consumers in how we organize information.

McKenna: grocery store organizes to maximize sales, not ease of finding what consumer wants.

Heymann: wants to call for a more granular approach.

Scheff: Need to consider effects of law on competitors—Jim Gibson’s Yale piece—as feedback loop, just as a short tangential point.  Heterogeneity among consumer capacities.  TM law is redistributive in favor of a (certain kind of) unsophisticated consumer. We need a normative framework to make that move.

Garcia: suggests model—what other information can influence consumers?  Do high-status goods have a different information flow than low-status goods?

Schlosser: product differences seem likely to play a huge role in the extent to which consumers invest mental effort. When there are fewer choices or high investment words would work better, but with less investment you see more reliance on imagery/easy processing.  Frustrating to have to walk down the aisle and read every box to make sure it’s Tide if they’re all orange.

McGeveran: the law doesn’t protect consumers against the very common case in which the producer makes differentiations and consumers can easily buy the wrong variety.  (Like when Diet Sprite changed color on me, dammit.) The law is hands off so consumers train themselves.

McKenna: literature on how people adjust to sub-brands is relevant. For some consumers, shifting these things will be a loss. How do we know what the magnitude of the loss is? Some consumers might not actually care. Do you gain better market access by other competitors as a result?  Sheff’s point about distribution of consumers is relevant here.  Consumers are cognitive misers, but sometimes enjoy searching and like to challenge themselves—again, a distribution question; you can’t make everyone happy all the time. That’s another reason why it’s really clear that courts aren’t really using search costs but using consumers as a foil.

Manta: Producers can fix too-confusing extensions, as when Coca-Cola screwed up by making Diet Coke cans mostly red and Coke mostly white for a seasonal change.

McGeveran: the incentives are properly aligned: the producer internalizes the costs and benefits of that.

McKenna: Shahar Dillbary has a paper on how TM owners can change brand quality and deceive consumers, arguing that this should be recognized as a form of deception.