Trademark Law's Fundamental Purposes at BU

IP Conversations:  Trademark Law’s Fundamental Purposes, Boston University School of Law

 

The debate over normative foundations:  Mark McKenna: up until the 1920s-40s, courts uniformly understood that unfair competition was about trade diversion, illegitimately getting business that should have gone to someone else. Structuring competitive relationship between commercial actors.  Case from 1871: in all cases, invariably held that essence of wrong is sale of goods as those of another.  Direct competition was required; source confusion was required, not something like affiliation confusion. 

 

Difference b/t TM and unfair competition in this light, oversimplified, was about being attentive to the fact that attempts to divert trade by competitors is the definition of competition: unfair competition had to be distinguished from competition.  Focus on deception allowed these distinctions.  Where P’s mark didn’t indicate anything about the goods, no plausible explanation of use of same mark for same goods, so illegitimacy could be presumed.  “Trademarks” or “technical trademarks”—no separate need to prove intent to pass off. But other designations, like geographic references, descriptive terms, trade dress: more ambiguous, could be used in deceptive or nondeceptive ways, and courts dug into the use more deeply: that was the law of unfair competition.  Initially had to show intent to pass off/rule out legitimate explanation.

 

Confusion of consumers was not itself enough to intervene—these courts weren’t unclear about why they denied relief.  Deception wasn’t enough; if you couldn’t show that deception was going to divert your customers, or if you couldn’t show that it wasn’t deception that diverted your customers, then you lost—American Washboard, false use of “aluminum” wasn’t actionable even though consumers might well be confused.  Fraud on the public isn’t enough; incidental effect of protecting P’s property right is to protect the public.  Consumers might have their own claims, or the gov’t might intervene on behalf of consumers to protect them.

 

Natural rights reasoning shifted to legal realism; also the commercial marketplace changed compared to the 19^th century—geographic and product markets expanded.  Modern branding put pressure on courts maintaining their notion of harm.  The earlier courts clearly understood and ruled out claims involving noncompeting goods.  Also, they didn’t encounter noncompeting goods cases very often because companies didn’t often offer multiple products.  Later courts didn’t want to stop there, not because of harm to the consumer but because of more recognition of harms to producers.  Bone documents the rise of the previously unneccessary likelihood of confusion factors—weren’t needed in a world where TM is about direct competition, and the only question is whether there’s sufficient similarity.  When courts started considering other harms, they were thinking of harms to producers—market foreclosure, reputational harm.

 

Radical shift therefore is not that they started caring more about mark owners than they used to—the Progressive era didn’t care more about producers than the Lochner era courts did.   But that means the law hasn’t recognized many limits—confusion itself is the harm, rather than confusion being a predicate to some other harm.  That has proven infinitely pliable to mark owners. Often they don’t have to be pinned down about the consequence of that confusion.  Paying more attention to harm = progress.  Also limiting principles from outside: interference w/patent, copyright.  Increasingly necessary because there are no internal limits.  Doesn’t think we should go all the way back to trade diversion, but there has to be something in between.

 

Robert Bone: Interpretive exercise: what did the late 19^th century/early 20^th century courts think they were doing?  Distinguish 2 questions: (1) Why do we condemn certain practices as TM infringement/unfair competition. (2) What are the requirements for a private right of action.  Some judges during this period separated these questions—we might call (2) today standing.  Guard against anachronism.  We are policy analysts, but they didn’t think of themselves that way.

 

His interpretation of the history: One reason for (1): protect sellers from harm to reputation, loss of sales.  Another reason, equally important: to protect purchasing public from fraud—not prioritized behind protecting sellers.  Why protect reputation?  Labor/desert.  Consumers?  Morality, and promoting market competition, both.

 

McKenna recognizes both purposes but wants to prioritize seller protection; Bone doesn’t see that.  Canal Co. v. Clark: no secondary meaning = no injury from appropriation; nor can the public be deceived—no need to say the second thing if only the first mattered.  [I myself think that courts do the “have your cake and eat it too” thing all the time.]

 

Common law was natural law—TM was property right.  McKenna and Bone disagree—McKenna sees it as a right to customer flow/patronage, w/harm being trade diversion.  Bone sees it as a right to goodwill as property. Trade diversion isn’t at the core of unfair competition, but rather appropriation of/injury to reputation/goodwill.  Goodwill is the thing drawing customers, not the customers themselves.  He doesn’t want to accept that taking customers away could, even at the beginning of the analysis, impair a property right.  More importantly, McKenna’s focus on deception doesn’t come from the nature of these rights. It’s superimposed on the right to customer flow. But why deception, if it doesn’t follow from the nature of the right?  Because of public harm.  Bone’s approach derives the deception limitation from the right itself: the goodwill of the 19^th c. is the goodwill of the product sold by the seller.  The way you take that goodwill is by representing yourself to be the seller.

 

McKenna’s concerns go to (2)/standing—Bone doesn’t think answers to (2) tell us enough about (1).  Aluminum Washboard court finds no private right of action, even though there’s trade diversion.  If you didn’t buy an aluminum washboard from P, you had to buy one (marked as such) from D.  No property right, so no cause of action, not that there’s no fraud.  Fear of vexatious litigation.  FTC doesn’t change the name of the thing it can pursue—unfair competition. If trade diversion were the essence, we wouldn’t call the thing the FTC goes after is unfair competition.

 

Borden is the strongest case for McKenna—the court says there’s no property right; you need direct competition. This follows from notion that goodwill was limited to the P’s particular product.  That goodwill wasn’t taken.  At the end of the opinion, the court says there might be some equity jurisdiction if the defendant’s products were inferior, notwithstanding lack of competition. 

 

Bone also thinks the noncompeting goods expansion was earlier than McKenna does—could be accommodated easily by expanding goodwill of product to goodwill of firm, which was logical once firms diversified. Natural property right superstructure was jettisoned, as a major change, resulting from legal realists’ attack on natural common law property right. Period of policy-based functionalism, no longer limited because there was no “property.”  Policies were in conflict; needed to be balanced.  But the same 2 policies hung around in a general sense—protecting consumers and protecting sellers. What’s changed: mainly, once we start looking at those policies, views about appropriate balance/weighting differ across different folks.  One big thing is the rise of psychological advertising. Notion that advertising can give you an “identity.”  Concerns about monopoly weigh on the other side. 

 

Multifactor confusion test tries to paper over the underlying policy conflicts, but that conflict remains.  Goodwill gets expanded even further, from firm goodwill to “inherent” goodwill—popularity/value of the mark itself.

 

McKenna: doesn’t think we can say about the later 19^th c. cases that the problem was lack of a property right—that was the whole difference between TM proper and unfair competition—if property were the real explanation, we wouldn’t have an unfair competition cause of action.  Bone says it’s hard to think that competition is a harm, but McK’s point is that the idea was to protect legitimate exercises of one’s own property interests, not a stream of consumers—Keeble v. Hickeringell is about when it’s legitimate to divert ducks—yes by building your own duck pond, no by firing guns. So deception does naturally limit the scope of the right.

 

Unfair competition: Bone has a whole article about the changing meaning of “goodwill”—so too the meaning of “unfair competition” changed over time.  You can see in the same era, FTC hearings, child labor, convict-made goods—at the beginning, somebody suggests that we call that unfair competition. At the beginning of that period, people say that’s crazy, unfair competition is about passing off.  A few years later, people say “if my competitor can use child labor in another state, that’s unfair competition,” and everyone nods—a big shift.

 

Bone: yes, unfair competition is expansive. But American Washboard is an unfair competition case that rejects a claim b/c there’s no property. There’s no uniform view of this in 19^th c—there are tensions.  It wasn’t stable.

 

Prof. Chronopolous: English common law allowed tort of deceit, to be brought by consumer.

 

Wendy Gordon: One thing that intrigues her was the rise of rights in marks as such/licensing marks as objects of value.  What policies should TM serve, regardless of the history?

 

Prof. Alexandra Roberts: What did practitioners, producers, consumers think?  Are the judges similar?  Assumption of consistency: can we make overarching claims about what the goals of TM were?  Modern doctrines—no such consistency.

 

Dogan: relationship between normative/policy considerations driving doctrine and doctrine itself.  Natural rights approach/Lockean labor approach—to its logical conclusion, that doesn’t have limiting principles either, certainly not limited to trade diversion.  Given that goodwill, as long as enough and as good is left for others, I should be entitled to prevent others from appropriating it. Doctrinally, the early cases did tend to limit rights to trade diversion, but that can’t be equated to a natural rights theory that is limited to trade diversion as a matter of principle. Relatedly, in terms of what’s driving expansion of TM in 20^th c, the likelihood of confusion standard is loosey-goosey and enabled expansion, but when we think about what motivated that expansion, the cases that push the boundaries involve explanations that aren’t focused on confusion so much as they are focused on a kind of natural rights impulse—Boston Hockey, Smack Apparel, early initial interest confusion cases.  Courts seem to be interested in protecting producer’s ability to capture full value associated with their reputation.  Likely confusion is enabler, but not the real focus of courts that want to protect producers.

 

Jessica Silbey: What work is the word property doing in the early cases, in the story Bone is telling?  The market has a character and she can see how that moves doctrine, but not property.  In the early cases she sees impersonation, taking people’s names.  Relation to defamation, injury to reputation, might give us more information about ephemeral harms/kinds of harms that do produce standing.  (Robert Post’s excellent article about legal models of reputation has a lot of relevance here.)

 

Michael Meurer: what was the mix between consequentialism & deontology among judges at this time? 

 

Rebecca Curtin: Both McKenna and Bone commented on relation between commercial practice and law. But why?  What are the consequences of that for principled limits on TM?