In her excellent addition to the Akron Law Review’s intellectual property volume, The Erie/Sears/Compco Squeeze: Erie’s Effects on Unfair Competition and Trade Secret Law, Sharon Sandeen “tells the story of the efforts undertaken in the aftermath of Erie to fill the gaps it left in the law of unfair competition.” Sandeen is particularly interested in the effect of Erie on what I would describe as the non-trademark-related areas of unfair competition, and especially the failed efforts to broaden the Lanham Act to cover trade secrets or otherwise develop general federal unfair competition legislation.
The tale goes like this: Prior to the Supreme Court’s decision in Erie, federal courts developed a robust common law of unfair competition. Sandeen describes that law as general federal common law, though it is only through the lens of Erie that the “federal” part of that formulation stands out. Federal courts developing unfair competition law before Erie didn’t think they were developing a different law than were state courts, and as Sandeen illustrates, federal courts were considerably more active in this area than state courts. Those federal courts thought they were developing the law of unfair competition. Erie created substantial uncertainty by throwing the status of that body of law into doubt and threatening disuniformity as states developed their own bodies of unfair competition law. Disuniformity was a significant concern, particularly to large commercial entities doing business nationally. Reformers made a variety of efforts to solve that problem with federal unfair competition legislation, and as Sandeen describes in detail, they largely failed. The reasons for that failure shed some interesting light on the coherence of the category of unfair competition—a category that has evolved considerably over time.
Sandeen thoroughly recounts concerns that the Erie decision “left gaps” in unfair competition law. But many of those purported “gaps” weren’t really attributable to Erie. As Sandeen shows, the substance of unfair competition was in considerable flux over the middle of the twentieth century. When Edward Rogers, the primary drafter of the Lanham Act, and others pushed for a federal law of unfair competition, they weren’t just trying to restore federal courts’ ability to rely on and develop federal common law. They were trying to create a considerably more expansive understanding of unfair competition.
For one thing, Rogers and others wanted courts to allow unfair competition claims even when the parties were not in competition. But the requirement of competition was not invented by state courts after Erie. It was always central to the concept of unfair competition, which was, after all, so named for a reason. The advocates for a federal unfair competition statute were also pushing for recognition of claims against a wider range of conduct than was traditionally recognized. Erie was, in a significant sense, more of an opportunity to change the law than the cause of new problems.
Sandeen also highlights another way in which the changing scope of “unfair competition” makes generalization in this area so difficult. On the one hand, courts did not respond to efforts to interpret §44 of the Lanham Act to create a general federal law of unfair competition. And as she documents exhaustively, efforts to pass other federal legislation largely failed. In that respect, unfair competition writ large was never federalized. Importantly in terms of Sandeen’s interests as a trade secret scholar, trade secrets were not swept into a broader federal unfair competition framework.
Courts did, however, federalize one very important part of unfair competition law when they radically expanded the scope of §43(a) of the Lanham Act to recognize causes of action involving “unregistered” trademarks. I use scare quotes there because calling the designations at issue in those cases unregistered trademarks was really a sleight of hand. In general, parties brought unfair competition claims precisely because they did not own (technical) trademarks. A much smaller universe of designators were considered trademarks in that era—only words or logos that did not provide any direct information about the nature of the products, their geographic origin, etc. Only designations that qualified as technical trademarks were federally registrable, and only federally registered trademarks could be enforced under federal law. Passing off by means other than use of a technical trademark was remediable by common law unfair competition. That difference was not only jurisdictional—unfair competition claims had different proof requirements and more limited remedies.
By re-denominating the designations at issue in unfair competition cases as “unregistered trademarks,” courts were doing much more than federalizing unfair competition claims. They were changing the nature and structure of trademark and unfair competition doctrine by expanding the subject matter of trademark law proper and emptying that part of unfair competition. In this context, then, federalization was not only, and perhaps even primarily, about solving a problem of disuniformity. It was instead a chance to expand the law to accommodate a wider range of designators and to treat them more favorably.
The most interesting thing about Sandeen’s chapter is the way it highlights substantial differences in the evolution of different parts of what many now consider unfair competition law. Courts had little resistance to federalizing the historical core of unfair competition—cases alleging passing off by means other than a technical trademark—using the Lanham Act to assimilate those claims to trademark law. They also recognized certain other semi-related claims (false endorsement) under the same section. But reformers were much less effective pushing federalization of a broader range of claims, including trade secrets.
That history is instructive because it suggests something implicit and unarticulated about the boundaries of unfair competition. Once upon a time, unfair competition had a fairly coherent and narrow meaning. All the claims recognized involved deceptive conduct that had the effect of diverting customers who otherwise would have gone to the claimant. The clearest example was passing off, which consisted of falsely indicating that your goods were those of another in order to secure the patronage that otherwise would have gone to the other. But other kinds of claims fit this pattern too. Product disparagement, for example, was recognized because it entailed a false claim about a competitor’s product for the purpose of diverting that competitor’s customers to oneself. Over time, unfair competition became a catch-all for claims based on bad things someone does in commerce. No longer do the claims require direct competition, and the “unfair” part of the formulation appears to have lost any independent meaning.
Sandeen helps us see one part of the explanation for that by highlighting the efforts the reformers made over the middle of the twentieth century to expand the concept of unfair competition to include a broader range of claims. But it’s notable that courts and Congress resisted the breadth reformers sought. The point shouldn’t be overstated. The fact that courts and Congress weren’t persuaded to dump everything into a general federal unfair competition law doesn’t mean none of those claims were recognized in some form (certainly trade secrecy long has been). The reasons for resisting full federalization are varied and sometimes context-specific. Still, one can’t help thinking there’s something to the reluctance to lump all of the purported unfair competition claims together. Perhaps by thinking through the distinctions sometimes made implicitly, we can make some progress on a theory of unfair competition that has substantive content.