Brand Spillovers

Abstract:     
This Article considers the spillover effects of trademarks - in particular, brand spillovers, which occur when consumer interest in a trademark increases the profits of third parties who do not own the trademark. Using techniques such as loss leaders and shelf space adjacency, retailers routinely create brand spillovers for their profit, and trademark law generally has not restricted these activities. Online intermediaries, such as search engines, also create and profit from brand spillovers by selling manufacturers' trademarks for advertising purposes (keyword triggering). However, in contrast to retailer practices, keyword triggering has sparked a heated and irresolute battle over its legitimacy under trademark law. By drawing lessons from retailers' experiences with brand spillovers and through an analysis of the ways intermediaries can add value to consumers, this Article offers a new way to resolve the keyword triggering debate. The Article proposes that all intermediaries - including both retailers and online intermediaries - should be permitted to use brand spillovers as part of their effort to reduce consumer search costs, even if the intermediaries profit from the brand spillovers along the way.

Keywords: trademarks, trademark infringement, advertising, retailers, search engines, retailing, merchandising, loss leaders, house brands, private label brands, store brands

JEL Classifications: D11, D18, D62, D83, K20, L15, L86, M31, O34

Accepted Paper Series