The Normative Foundations of Trademark Law, 82 Notre Dame L

Notre Dame Law Review Volume 82 | Issue 5 Article 3 6-1-2007 The orN mative Foundations of Trademark Law Mark P. McKenna University of Notre Dame, [email protected] Follow this and additional works at: http://scholarship.law.nd.edu/ndlr Recommended Citation Mark P. McKenna, The Normative Foundations of Trademark Law, 82 Notre Dame L. Rev. 1839 (2013). Available at: http://scholarship.law.nd.edu/ndlr/vol82/iss5/3 This Article is brought to you for free and open access by NDLScholarship. It has been accepted for inclusion in Notre Dame Law Review by an authorized administrator of NDLScholarship. For more information, please contact [email protected]. THE NORMATIVE FOUNDATIONS OF TRADEMARK LAW Mark P. McKenna* INTRODUCTION .................................................... 1840 I. THE CONVENTIONAL WISDOM ABOUT TRADEMARK LAW ..... 1844 II. A SECOND LOOK AT EARLY TRADEMARK PROTECTION ........ 1849 A. Medieval Marks as Liabilities ........................... 1849 B. English Trademark Cases ............................... 1850 1. Trademarks in Courts of Law and Equity ......... 1852 2. Reconciling Law and Equity Approaches .......... 1855 C. Early American TrademarkJurisprudence ................. 1858 1. Trademark Law Targets Dishonest Trade Diversion .................................. 1858 2. Trademarks and Unfair Competition ............. 1860 3. Benefits to Consumers an Added Bonus .......... 1863 a. Evidence of Confusion Was Not Sufficient .... 1866 b. The Cases Involving Expired Patents Are Consistent With The Trade Diversion Conception .................................. 1871 III. TRADITIONAL TRADEMARK LAw's NATURAL RIGHTS ORIGINS. 1873 A. Natural Rights Principles............................... 1875 B. The Nature of the Property .............................. 1881 1. Trademarks as Incident to Physical Property Rights .................................. 1881 2. Property Rights in a Trademark Itself ............. 1882 3. Property Rights in Patronage ..................... 1884 © 2007 Mark P. McKenna. Individuals and nonprofit institutions may reproduce and distribute copies of this Article in any format, at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision and copyright notice. * Assistant Professor of Law, Saint Louis University. This Article benefited from feedback I received at workshops at Seton Hall Law School and Saint Louis University School of Law, and at the Works-In-Progress Intellectual Property Colloquium in St. Louis. I also received particularly valuable comments from Fred Bloom, Eric Claeys, Eric Goldman, and Adam Mossoff, and excellent research assistance from Katie Barrett, Kelly Doherty, and David Kullman. 1839 1840 NOTRE DAME LAW REVIEW [VOL. 82:5 C. The Natural Rights Theory Explains a Variety of LongstandingDoctrines ................................ 1887 1. Trademark Rights Are a Function of Use ......... 1887 2. Unfair Competition Requires Competition ........ 1888 3. Evidence of Fraud Not Required ................. 1890 4. Trademarks and Trade Names ................... 1890 5. Abandonment Rules Reflect Trade Diversion T heory .......................................... 1893 6. Limitations on Alienation Reflect Close Connection to Mark Owner's Trade .............. 1893 IV. EXPANSION OF AMERICAN TRADEmARK LAW ................. 1896 A. Unfair Competition No Longer Presupposes Competition .... 1899 B. Expansion of Actionable Forms of Confusion .............. 1904 1. Initial Interest Confusion ......................... 1905 2. Post-sale Confusion .............................. 1907 C. Expansion of Trade Dress Protection ..................... 1909 D. Liberalization of Licensing Rules ........................ 1910 E. M erchandising ........... ............................ 1911 F Dilution Does Not Even Require Evidence of Confusion ..... 1912 G. Trademarks as Domain Names .......................... 1914 CONCLUSION ..................................................... 1915 INTRODUCTION Trademark law has come unhinged from its traditional consumer protection moorings. That is the clear message of modern scholarship.1 Doctrinal innovations like dilution and initial interest confusion are illegitimate, many commentators suggest, because they reflect a property-based conception of trademarks that is inconsistent with trademark law's core policies of protecting consumers and improving the quality of information in the marketplace. These critics are only half right. Trademark law unquestionably covers much more ground now than it did at the beginning of the twentieth century, and many of its more recent developments are fun- damentally inconsistent with the normative goals of traditional trademark protection. 2 But the critics have mischaracterized traditional trademark law and therefore misunderstand the nature of trademark law's normative reorientation. As this Article demonstrates, trade- ] See infra Part IV. 2 This Article uses "traditional trademark law" to refer to the body of trademark law developed by courts in the nineteenth and early twentieth centuries. This law is traditional in that these were the rules American courts originally developed to address imitation of another's distinguishing mark. 2007] THE NORMATIVE FOUNDATIONS OF TRADEMARK LAW 1841 mark law was not traditionally intended to protect consumers. Instead, trademark law, like all unfair competition law, sought to protect producers from illegitimate diversions of their trade by competitors. Courts did focus on consumer deception in these cases, but only because deception distinguished actionable unfair competition from mere competition, which was encouraged. In fact, courts denied relief in many early trademark cases despite clear evidence that consumers were likely to be confused by the defendant's use. Invariably they did so because the plaintiff could not show that the defendant's actions were likely to divert customers who otherwise would have gone to the plaintiff. Moreover, American courts protected producers from illegiti- mately diverted trade by recognizing property rights. This property- based system of trademark protection was largely derived from the natural rights theory of property that predominately influenced courts during the time American trademark law developed in the nineteenth century. Significantly, this approach did not generate broad and abso- lute rights in a trademark. Instead, courts traditionally protected the exclusive right to use a trademark only within a particular field of trade and as against direct competitors. Revisiting traditional trademark principles is important because it calls into question much of the dominant account of modern trademark law. Specifically, reading traditional trademark decisions in their proper historical and philosophical context shows that trademark law was never focused primarily on consumer interests. Conse- quently, this Article steals the normative force of many commentators' criticisms of modern trademark law, which focus on the law's devia- tion from its supposed foundational (and sole) purpose of improving the quality of information in the marketplace. While modern trademark law deserves sustained scrutiny, any criticisms leveled against it must fairly confront modern policy goals. These criticisms cannot draw their normative force by contrasting modern doctrines with "traditional" principles that did not exist. This lesson hints at a broader methodological flaw in some appli- cations of the law and economics approach. Law and economics scholars gained prominence in trademark discourse, as they did in many other contexts, by claiming that economic analysis explained various legal doctrines. Underneath the formal doctrinal means through which courts reached their results, they argued, many legal rules were best understood as attempts to promote economic effi- 1842 NOTRE DAME LAW REVIEW [VOL. 82:5 ciency.3 Courts simply lacked the necessary sophistication to articu- late the true bases of their decisions. 4 The law and economics scholars then relied on this descriptive account to lend legitimacy to their normative conclusions; economic analysis not only explained legal doctrines, but efficiency was the right goal for the law to pursue. 5 This form of intellectual bootstrapping cannot be sustained, how- ever, when the foundational descriptive claims prove erroneous. And at least in the trademark context, courts were not pursuing economic efficiency when they developed doctrine. They sometimes reach out- comes in trademark cases that improved the quality of information in the marketplace. 6 But they also tolerated substantial confusion in many cases. Rather than forcing square pegs into the round holes of economic efficiency, advocates of the efficiency approach should acknowledge that courts traditionally operated under a different theo- retical framework and be upfront about their own normative agenda. 3 See RicHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 6 (1973) ("[W]e shall see in subsequent chapters that many areas of the law, especially but not only the great common law fields of property, torts, crimes, and contracts, bear the stamp of economic reasoning. Granted, few judicial opinions contain explicit references to economic concepts. But often the true grounds of legal decision are concealed rather than illuminated by the characteristic rhetoric of opinions.") (emphasis added)); William M. Landes & Richard A. Posner, Trademark Law: An Economic

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