Trademark law in the United States requires use of a mark in commerce as the basis for both acquisition and infringement of exclusive rights. This requirement is justified, in part, as a way of focusing trademark on its core purpose—protecting the mark owner’s goodwill that arises from such use. Most of the rest of the world relies on the formality of registration as the basis for protection. How did the law in the United States take this nearly-unique evolutionary path? In her extensively-researched article, Professor Barbara Lauriat succeeds in correcting the record about this question by lengthening the relevant historical period to at least the sixteenth century in England and by showing that commercial goodwill had an established recognition in both business practice and in common law as a business’s residual asset distinct from its trademarks.
Lauriat makes a number of contributions to the literature. First, she provides a tantalizing account of the not-always coherent legal treatment of goodwill as a distinct form of intangible property. Second, she argues that understanding this history informs how judges in the nineteenth and early twentieth centuries incorporated protection for goodwill with trademark protection in the United States. Third, by providing a comparative lens, she shows how trademark law in the United States and the United Kingdom share ancestral roots but took quite different evolutionary paths. Last, she argues that even though the registration-based protection for marks in the United Kingdom treats them as personal property that can be assigned separate from a business’s goodwill, the scope of protection in the United Kingdom can be constrained, and is likely to be narrower than in the United States, because the suppleness of a use-based conception of protection has enabled courts to extend protection beyond trademark law’s traditional scope.
After canvassing sources attempting to define goodwill in a variety of contexts, Lauriat reasonably settles on a working definition of it as the “the intangible value of an existing enterprise arising from it being an ongoing concern.” (P. 1139.) She then explores three centuries of the concept’s treatment in business practice and in law. In the published record, she cites wills from the latter sixteenth century as the earliest sources of the term’s appearance. But, there were other contemporary sources indicating that goodwill as an intangible asset already had a recognized meaning.
I said this account is tantalizing because Lauriat identifies various class and gender dynamics in the development of goodwill’s treatment that invite further investigation. Lauriat’s sources indicate that initially goodwill captured the value of a non-owning tenant’s improvements on the land. This labor-based theory of value then evolved to comprise commercial goodwill developed through the course of cultivating valuable customer relationships through the course of trade.
Lauriat identifies seventeenth-century sources showing that small business owners, in particular, relied on the distinct valuation of commercial goodwill as a source of funds for dowries or retirement. Also, interestingly, these businesses generally operated in a competitive environment outside of control of the guilds. Lauriat demonstrates that by the eighteenth century, the growing value and importance of commercial goodwill as an intangible asset required courts to engage with this form of intangible asset in a number of legal contexts.
In the marketplace, sales of goodwill, particularly in connection with sales of public houses and coffee houses, were commonplace. Valuation problems ensued. Lauriat explains that the legal contexts in which the conception of goodwill as an intangible asset and how to value it evolved primarily in connection with testamentary dispositions, government takings, landlord-tenant disputes, and a range of issues in both the law and equity courts. Lauriat argues that the bridging disputes that led to judicial connection between goodwill protection and trademark protection involved uses of periodical names, often after a sale.
Matters get more complicated in the latter part of the nineteenth century; Lauriat shows how during this period the law in the United Kingdom and the United States took different paths. Lauriat provides a detailed account of how U.K. courts had to adapt the common law tort of passing off after passage of legislation that united the courts of law and equity and that established a system of trademark registration. Registered trademarks enjoyed protection as property. What to do with unregistered marks? Lauriat shows how U.K. courts continued to protect them in passing off actions while relaxing the requirement of fraudulent intent.
Lauriat then shows how the United States may have followed a similar path except that the Supreme Court struck down the initial attempt to establish a registration system in The Trademark Cases,1 and subsequent attempts at legislative substitutes were too limited. Lauriat argues that instead, U.S. courts adapted the tort of passing off to relax the intent requirement to the point that the Court was able to adopt protection of goodwill as the basis for strict liability for trademark infringement. 2 Since goodwill arises from the conduct of an ongoing concern, relying on it as the basis for trademark protection committed the United States to its focus on use in commerce. This focus was then cemented in the mid-twentieth century with passage of the Lanham Act.
In her concluding section, Lauriat aligns herself with those commentators who have argued that common-law use-based trademark protection has enabled skillful litigants to convince sympathetic courts, and Congress, adopt expansive interpretations of trademark owner’s need for protection from unfair competition.
Throughout her article, Lauriat engages with the relevant scholarship, pointing out her disagreements or amendments with accounts by Robert Bone, Mark McKenna, and the McCarthy treatise among others. Rather than attempt to summarize this aspect of the article, I encourage readers to engage with that conversation directly.
I want to close by first commending Professor Lauriat for her very impressive research. I have only summarized the main points, but the rich detail makes for very interesting reading. This research also points to many potential directions for future work. In this Article, Lauriat uses historical sources to provide a close-up view of trademark law’s evolution. She acknowledges that her selections are illustrative, and I would have liked more information about the scope of the corpus of sources that discuss goodwill to have a better sense of how selective she had been.
Future work could develop in parallel tracks. One could involve more extensive narrative development of some of the key cases to provide the reader with a better understanding of the social and commercial context in which the parties were situated. Another would pull the lens back to connect the conceptual evolution in the law’s treatment of goodwill with the evolution in judicial thinking about property rights in general and intangible property rights in particular. A third would be to explore whether, or to what extent, the modern, more financialized, understanding of goodwill in the accounting context continues to influence judicial understandings of the commercial value of trademarks. For me, perhaps the most important follow-on work would bring the consumer out of the wings and center-stage to see when and how consumer interests are recognized in connection with the protection of commercial goodwill through American trademark law.
- 100 U.S. 82, 94 (1879).
- See Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 414 (1916), superseded by statute, Lanham Act of 1946, Pub. L. No. 79-489, 60 Stat. 427, as recognized in Park ’N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189 (1985).
