The Comparative Law and Economics of Counterfeits and Post-Sale Confusion

Abstract

Post-sale confusion is a concept used to protect trademark holders even when no consumer confusion exists at the point of sale. Instead, protection is granted based on the fact that future purchasers or other bystanders will be confused after the sale and that such confusion will harm trademark holders. Despite the widespread criticisms of this doctrine—with many commentators calling for either its abolition or substantial reform—courts continue to grant such protection.

This chapter interrogates the economic justifications for the doctrine of post-sale confusion at both the domestic and international levels. It begins by exploring those justifications in the trademark holder's home market. For analytical purposes, the discussion uses the United States as the proverbial home market and focuses on U.S. trademark law, including the different justifications identified by the U.S. Court of Appeals for the Sixth Circuit in General Motors Corp. v. Keystone Automotive Industries, Inc. A close scrutiny of the rationales provided in this case shows rather weak economic justifications for the doctrine of post-sale confusion except in cases where the presence of counterfeits will undermine the rarity or other quality-unrelated attributes of status goods.

This chapter then turns to the trademark holder's foreign markets—in particular, those in developing countries where counterfeits are frequently made. This comparative analysis shows that the economic justifications for the doctrine of post-sale confusion are even weaker in these markets. Because many foreign jurisdictions have not adopted the doctrine of post-sale confusion, the analysis focuses on a special category of counterfeits that does not cause point-of-sale confusion: nondeceptive counterfeits. Based on the economic analyses of this doctrine in both developed and developing country markets and in relation to varying types of counterfeits, this chapter concludes by offering five recommendations for courts, legislators, and policymakers to reform trademark law in the area of post-sale confusion.