Trademark Dilution, Search Costs, and Naked Licensing
Daniel M. Klerman
USC Gould School of Law
December 1, 2005
74 Fordham Law Review 1759-73 (2006)
USC Law Legal Studies Paper No. 05-23
USC CLEO Research Paper No. C05-16
Trademark dilution needs to be rethought to ensure that it enhances social welfare. Blurring should only be considered harmful when it increases consumer search costs. The fact that a trademark calls to mind two different products should not itself be considered actionable. Blurring only causes real harm when it interferes with consumers' ability to remember brand attributes. The Coase Theorem suggests that anti-dilution statutes will not block beneficial, non-competing uses of a mark, because, if transactions costs are low and the use is socially beneficial, the trademark owner will license the use. Unfortunately, the "naked licensing" rule, which forbids unsupervised licenses, adds unnecessary transactions costs and blocks potentially beneficial uses. Some commentators think free riding is or should be the essence of dilution. If free riding causes no harm - no consumer confusion, no blurring, and no tarnishment - then it is socially beneficial and should be allowed.
Number of Pages in PDF File: 16Accepted Paper Series
Date posted: December 14, 2005 ; Last revised: December 17, 2014
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