Trademark Law's De-Evolution: Why Courts Get Trademark Cases Wrong Repeatedly
71 Pages Posted: 21 Dec 2016 Last revised: 14 Jan 2017
Date Written: December 21, 2016
This article examines trademark law’s de-evolution from efficient market regulator to inefficient rent protector. This article shows that the standing rules which govern trademark litigation have played a key role in trademark law’s de-evolution. Under trademark law, only commercial market participants, i.e. trademark owners and their competitors, have standing. Consumers do not. This creates two problems. First, it brings the wrong cases to court for judicial resolution. Trademark owners repeatedly bring cases challenging efficient interpretations of trademark law, seeking to replace them with inefficient interpretations in order to capture the resulting rents. Potential trademark defendants, on the other hand, avoid conduct that will lead to, or settle rather than litigate, cases either defending efficient, or challenging inefficient, interpretations of trademark law. While efficient interpretations of trademark law can sharply increase welfare, most of the benefits flow to consumers in the form of reduced prices, rather than to any given potential trademark defendant. As a result, trademark owners repeatedly bring litigation challenging efficient interpretations of trademark law until trademark law becomes inefficient, at which point, potential defendants largely accede. Second, standing rules also frame the question presented in a misleading fashion. By defining who may appear in court and who thereby has a voice in the courtroom, the standing rules implicitly frame the question to be decided as whether the plaintiff or the defendant should prevail. But that frame completely mis-states the question presented in trademark litigation. It omits entirely the interests of consumers. Properly framed, the question that a court should be answering in trademark litigation is not whether the plaintiff or the defendant should win, but how the court can rule so that consumers win. But the standing rules obscure the true nature of the dispute.
Having identified the reasons courts get trademark cases wrong repeatedly, this article proposes two types of solutions. These proposed solutions aim not at substantive doctrinal reform, but at: (i) changing the incentives for bringing and defending trademark lawsuits; and (ii) more accurately framing the question presented in trademark litigation for judicial resolution. Within existing law, these reforms include: (i) broader availability of enhanced attorneys’ fees awards for prevailing defendants; (ii) increased viability of antitrust counterclaims in trademark litigation; and (iii) increased use of Federal Rule of Evidence 706 to appoint a neutral expert to identify and explain the consumer interests at stake in trademark litigation. In addition, Congress should amend the Trademark Act to add a strategic lawsuit against competition defense to trademark law, modeled after existing state strategic lawsuit against public participation laws. Only through such procedural reforms can we halt the otherwise ongoing substantive de-evolution of trademark law.
Keywords: trademark law, consumer welfare, common law evolution, asymmetric stakes
JEL Classification: K41, k29, k00
Suggested Citation: Suggested Citation