Marks on Marks

Aug 2, 2010 Sara Stadler

Sara Stadler

There’s nothing like the realpolitik of copyright to push you into the arms of trademark law (see Dotan Oliar on Bill Patry, supra), but as Mark Lemley and Mark McKenna reveal in Owning Mark(et)s, there’s plenty of corporatism at work in the evolution of trademark law, too. Lemley and McKenna don’t put it that way, and they probably wouldn’t. But it’s hard to read Owning Mark(et)s without reflecting on how thoroughly legal rules are changing to favor the great and powerful, whose primary goal, as ever, is to foreclose markets to new entrants—including markets that the great and powerful haven’t entered.

Knowing that it doesn’t pay to be a bully, trademark owners have styled themselves victims of junior users who, in using established marks in “unrelated” markets, “are mere free-riders, reaping where they have not sown.” This may sound appealing, but trademark rights are supposed to flow from use in trade. One who hasn’t entered a market isn’t supposed to “own” it. As Lemley and McKenna write, “[t]he idea that a mark owner is harmed because a defendant interferes with its ability to expand operates on a presumption that the mark owner ought to have the right to expand without interference.” But the trademark owner doesn’t have that right unless the law says it does. This is the circularity that “seems to have carried the day in copyright,” and as Lemley and McKenna demonstrate, it’s transforming trademark law, too, as courts give trademark owners priority in markets that their trade hasn’t entered, but to which it might conceivably extend.

Fortunately, the authors have a plan.

I’ve divided Owning Mark(et)s into three parts: the law; the evidence; and the proposal. In the first part, Lemley and McKenna relate the “traditional” case for trademark protection—namely, the prevention and punishment of source confusion—and then describe how, beyond that, things “get a little more complicated.” The complication lies in the fact that trademark owners now allege, as harm, not the diversion of existing trade, but the usurpation or destruction of future trading opportunities. If, for example, a third party were to offer Apple watches for sale, Apple’s complaint wouldn’t be, “They deceived my customers,” but instead would be that “the existence of another Apple in the watch market impedes the original Apple’s ability to expand—either into the watch market or other related markets.”

This is a powerful argument for trademark owners precisely because it’s always available, regardless of how little proximity there is between plaintiff and defendant in the marketplace. Lemley and McKenna illustrate the point by describing a handful of recent trademark cases in which source confusion was absent, but in which, nonetheless, courts acted to remedy the “harms” of market preemption and free riding. None of these cases should be news to trademark scholars (or practitioners), but taken together, they tell an interesting story. It’s a coherent and engaging read.

This part also contains more than a few sentences that made me reach for my pen. In revealing how trademark owners characterize benefits to defendants as harms to themselves, for example, Lemley and McKenna write, “[i]n fact, however, these claims of harm and claims of benefit run together, particularly in [intellectual property], where the entire concept of harm is in some sense an artificial construct based on the government’s decision to create a right.” The authors’ focus on the relationship between harms and benefits is one of the more intriguing aspects to Owning Mark(et)s. As they point out, we now appear to live in a world in which it’s not enough to suffer no harm; others must not be allowed to benefit, either. Copyright already has embraced this orthodoxy, which is why it’s so hard to care about copyright law any longer. Et tu, trademark? As Lemley and McKenna observe, “a right to control ancillary markets bears striking resemblance to the derivative work right in copyright law.” It’s all coming together now, and not in a good way for consumers.

The second part of the article discusses marketing studies showing that brand extension doesn’t damage consumers’ perceptions of the “core brand” (e.g., Neutrogena hand lotion) but, at worst, damages their perceptions of the “parent brand” (e.g., Neutrogena) in an abstract sense. According to Lemley and McKenna, this doesn’t translate to much, if any, harm to brand value, and I think they’re right, although I’ve always been suspicious of the sorts of studies on which they rely. The problem is that trademark owners aren’t likely to take much, if any, comfort from this, which means they aren’t likely to stay their hands as a result. The great majority of trademark scholars know, in their hearts, that these harms to brands aren’t occurring. But we’re not the ones bringing the cases.

Which brings me to the third part of the article. A solution to the problem that Lemley and McKenna describe isn’t obvious, primarily because courts have used a variety of doctrines to satisfy the demands of trademark owners. Lemley and McKenna resolve this difficulty by proposing to require plaintiffs in trademark actions to show “trademark injury,” which the authors define as a material amount of “confus[ion] about actual source or about responsibility for quality.” This is a nifty solution because, like antitrust injury, the doctrine could be created by courts. Congress is not about to adopt such a thing because the International Trademark Association, which drafts the bills, is not about to propose it. Now, I’m the last person to ask courts to legislate, but when Congress uses lawmaking to cultivate its most powerful constituents, it’s hard not to look to courts for help—particularly where, as here, there’s precedent for courts to act. Of course, “[a] trademark injury doctrine is not a panacea.” But at least it’s something workable, and maybe even wise. That, in itself, is worth celebrating.

Finding a Place for Data in the Patent Troll Debate

Jun 24, 2010 Jason Schultz3 comments

Jason Schultz

Patent lawyers, like many of our kind, are obsessed with classifications, determinations, and definitions: is a patent claim a true invention or is it part of the prior art? Is it an abstract idea or a specific method? Does it claim a means or a function? In fact, the very notion of intellectual “property” is premised on the idea that we can discern one category of things from another in order to establish metes and bounds and enforce exclusion.

No patent classification schema has been more controversial in recent years than that applied to patent litigation plaintiffs that do not make, use, sell or offer for sale a product or service. Are they trolls or investors? Are they rent-seekers or research incubators? Are they pests or pioneers? Such rhetoric has filled essays, academic articles, courtrooms and legislative halls without much actual evidence to support one characterization versus another.

Thus, it was refreshing to read Colleen Chien’s “Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents”, 87 N.C. L. Rev. 1571 (2009). In this article, Chien looks beyond the mere labels applied to patent plaintiffs and studies actual data from cases filed to discern the narratives, practices, and strategies that could legitimately distinguish one patent plaintiff from another.¹ The article also demonstrates the fruits born by the enormous effort of Stanford’s Intellectual Property Litigation Clearinghouse to collect and make available data on U.S. patent litigation.

Chien’s key contribution is taking the narratives of Trolls (or “non-practicing entities” – NPEs), Davids, Goliaths, and Kings and applying context to them via data. In other words, she tells us how much we might care about a given narrative by looking at the actual practices of those entities instead of the rhetoric or the hype. As she notes in her introduction, “Although the ‘squeakist wheel’—that is, the patent story that gets the most attention—may deserve the grease, without data it’s hard to be sure.” Chien breaks the data down into meaningful categories based on who sues whom and the size and revenue of each party.

So who deserves the grease? According to Chien, non-NPE corporations still bring the largest number of patent lawsuits (76%) and thus, the Sport of Kings (multiple-patent, often multiple-venue, lawsuits between large corporations) remains a strong narrative. Yet Trolls still deserve the attention they are receiving, not for their sheer numbers perhaps, but instead for their growing business model. The data shows that NPEs account for 17% of all high-tech patent lawsuits from 2001-2008, with the numbers of cases and defendants-sued-per-case increasing over time. This was particularly true with financial patents – 26% of all financial patent suits were initiated by NPEs – where decisions such as State Street Bank & Trust Co. v. Signature Financial Group, 149 F. 3d 1368 (Fed. Cir. 1998) broadened and reinforced the scope of patentable subject matter for financial methods and products.

Chien also uses the data to call into question “defensive patenting” – a practice of patenting to prevent offensive lawsuits via a strategy of détente instead of patenting to pursue licensing fees or exclusion – noting that the high number of large corporate suits suggests it may be failing to prevent such litigation.

In the end, I found Chien’s paper useful and interesting not so much for its conclusions (she is understandably conservative about how far the data can take us), but for its forthright attempt to challenge the narratives that patent lawyers have historically relied upon to make their policy points and rhetorical courtroom arguments. Mapping data to these narratives provides much needed insight into the real practices in the world of patent litigation and leaves us much better informed about the trends and trajectories to consider when entering any conversation about patent reform. For those who wish to tread on this ground, I highly recommend this article as a primer to help orient the conversation.

1. It is worth noting that Chien limits her study to software, hardware, and financial patents, as those are the categories where plaintiff classification has been the most contested.

Bill Patry’s War on Copyright Rhetoric

May 28, 2010 Dotan Oliar3 comments

Dotan Oliar

Bill Patry’s “Moral Panics and the Copyright Wars” is the latest word on the way in which copyright law has responded to technological change. In eclectic and humorous prose, drawing on history, linguistics, philosophy, behavioral economics and the Bible, among other sources, Patry provides harsh criticism of the ways in which Congress and the copyright system have responded to disruptive technologies such as the VCR and file-sharing networks – and by “responded”, Party means did whatever the content industries demanded.

The book sets out the well-formed perspective of an important figure within the copyright cognoscenti. For almost three decades now, Patry has engaged with the copyright system in various roles, including a practitioner in private practice, full-time academic, author of a multi-volume copyright law treatise, copyright law blogger, copyright advisor to the House of Representatives and policy advisor to the Copyright Office. His intimate familiarity with the copyright system makes the pessimistic tone of his book especially notable.

Patry sees a pattern: technology companies generate innovation, and in response copyright industries generate litigation. According to Patry, “This cycle of copyright owners shaking down innovators is a central trope in the business of the Copyright Wars and has been repeated over and over again with almost every new innovation.” Importantly, “Copyright has become the mechanism to eliminate consumer choice, innovation, and the creation of culture. Copyright is now a serious impediment to technological and social progress.”

Patry’s book focuses on the role rhetoric and metaphor have played in legislative and public debates relating to copyright lawmaking, and how they were instrumental in the continuous expansion of copyrights in both duration and scope. In particular, Patry explores the function metaphors like “property” and “piracy” have played in the lawmaking process. Because abstract concepts such as copyright law are difficult to grasp, people tend to rely upon and fall prey to imperfect metaphors, especially when they are used repeatedly by industry lobbyists.

Patry is no fan of a common stock of well-worn copyright metaphors, and he attacks one after another: expressive works as bearing a personal relation to their author (the “copyright as giving birth” and “orphan works” metaphors), ownership of copyrighted works as an absolute, unlimited title (the “property” metaphor), copyrighted works as the singular product of genius (the “creation on a clean slate” metaphor), and the money to be earned from copyrighted works as the rightful reaping of what an author has sown (the “agrarian” metaphor).

In Patry’s view, these inapt metaphors serve only to distract us from the real issue, which is how to structure copyright law – a form of economic regulation – to best promote authorship, learning, innovation and progress. And while Patry documents various rhetorical tricks played on Congress’s floor, he also laments what has been missing from the debate: “in my 27 years of practicing copyright law, I have never seen a study presented to Congress that even makes a stab at demonstrating that if the proposed legislation is passed, X number of works that would not have been created will be.”

Central to Patry’s argument is the structural role that “moral panics” have played in this process, namely the furtherance of a public state of hysteria respecting illusory threats emanating from “folk devils”. Such panics often concern youth behavior and new technologies, both of which are not well understood and portrayed as a danger to core social values. Such panics are manufactured in order to capitalize on public (over)reaction to such (imaginary) threats in order to advance economic and social regulation that entrenches incumbent interests. Moral panics contain the following elements: the suggestion that a dire state of emergency is being brought about by a new threat to social order; the suggestion that swift action must be taken in order to prevent imminent social harm; the presentation of false and misleading data to lawmakers regarding the magnitude of that harm; and the suggestion that preemptive action – in this case action protecting copyright industries – serves the national interest. As one would suspect, Jack Valenti makes guest appearances throughout the book.

Those familiar with Patry’s writing and public speaking have probably noted his penchant for linguistic playfulness, and the book further speaks to his fascination with the potency of language. It is thus probably a testament to Patry’s engagement with and immersion in the subject matter of his research that the reader is at times left wondering whether his interest in rhetorical hype is merely deconstructive. Strung throughout the book are such statements as: “Corporatism was previously thought to have reached its zenith during Mussolini’s Fascist Italy, but [now] it is enjoying a healthy resurgence.”  Or, “Amazon.com’s Kindle ebook reader has more digital locks than CIA headquarters”.  Or, topping it all perhaps, that “The DMCA is the twenty-first century equivalent of letting copyright owners put a chastity belt on someone else’s wife.”

These ornamental bits aside — and perhaps partly because of them — “Moral Panics and the Copyright Wars” is not only a worthy and substantive read, but also a fluent and enjoyable one. The at-times amusing tone certainly serves, whether deliberately or not, as comic relief that softens Patry’s harsh and pessimistic underlying message. The book is likely to attract public notice and controversy not only for its content, but also because of who’s written it, and – most importantly – because its conclusion comes close to saying that the system is beyond repair, the last sentence hinting (although in a somewhat obscure way) that we might be better off abolishing it.

Patent Utility Reduxit

May 5, 2010 John F. Duffy1 comment

John F. Duffy

In academic scholarship, it sometimes happens that an entire field of inquiry becomes neglected year after year—to the point that nearly everyone believes the area incapable of yielding anything much of intellectual interest.   Such beliefs are almost always wrong, for it is the fallow fields of thought that are prime to be fruitful again.  An excellent example is patent utility doctrine, and specifically the issue whether inventions must be proven commercially useful as a prerequisite to patentability.  The conventional wisdom is that the law resolved this question against imposing such a requirement  more than a century and a half ago.  The issue is long dead; forgotten; abandoned.  Until now.

In his new article Reinventing Usefulness, Michael Risch reexamines patent utility doctrine and advances creative and insightful arguments for requiring that all inventions demonstrate “commercial utility” prior to patenting.  The highest compliment I can pay this article is not that I agree with it—I’m still somewhat doubtful—but that the article has forced me to think hard about an area I foolishly thought to be largely barren.  The article is memorable precisely because its thesis is unsettling; it demands rethinking of utility doctrine and other aspects of the patent law.

The standard, nutshell version of current utility doctrine begins by recognizing utility as one of three great requirements of patentability.  To be patentable, inventions must be “new, useful and nonobvious.”  Those three requirements are a familiar mantra to any modern patent attorney, but “useful” is typically viewed as the poor cousin of the other two.   Novelty analysis is the ubiquitous first step in every single patent examination, and it is a fruitful area yielding both interesting cases and scholarship.  (Recent cases include, for example, the controversial inherent anticipation case of Schering Corp. v. Geneva Pharmaceuticals, Inc., 348 F.3d 992 (Fed. Cir. 2003), as well as cases such as In re Klopfenstein, 380 F.3d 1345 (Fed. Cir. 2004), which involved an especially close question about whether certain materials qualified as novelty-defeating prior art.)  Nonobviousness is the “ultimate gatekeeper” of the patent system.  It is nearly always contested in patent prosecutions and litigations; it accounts for numerous Supreme Court decisions on patent law, most recently KSR v. Teleflex; and it has generated rich veins of scholarship (see, for example, the collection of articles from the post-KSR conference in 12 Lewis & Clark L. Rev. 323 et seq. (2008)).

By contrast to ubiquitous issues of novelty and nonobviousness, utility is rarely even contested.  The doctrine is conventionally divided into three strands, “operability,” “beneficial utility,” and “specific and substantial utility,” with each strand relevant only in unusual circumstances.  Of course, a patented invention must be operable, but few seek patents on the unworkable and fewer still seek to infringe such patents.   Thus, operability doctrine typically bars patents only to the trickle of loony inventors who continue to pursue perpetual motion machines and the like.  The “beneficial utility” requirement, even at its historical zenith, barred patents only in limited fields viewed to be deceptive or immoral, such as gambling devices.  Recent case law now emphasizes that this doctrine “has not been applied broadly in recent years” and that institutions other than the Patent Office and the courts are best positioned to regulate matters of personal or business morality.   Similarly, the leading scholar in the area, Margo Bagley, argues that Congress, not the courts, “is the only actor competent to clarify … the extent to which moral issues should be considered in patentability determinations, if at all.”  Margo A. Bagley, Patent First, Ask Questions Later: Morality and Biotechnology in Patent Law, 45 Wm. and Mary L. Rev. 469 (2003).

The requirement of a specific and substantial utility has been the most important part of utility doctrine, but it wins that title only because competition is so weak.  Though the requirement of a “substantial utility” may sound demanding, the courts have repeatedly held that the doctrine does not require developing the invention to the point where it would be “presently commercially salable in the marketplace.”  In re Langer, 503 F.2d 1380, 1393 (CCPA 1974).  The Patent Office has expressly endorsed that view (see 66 Fed. Reg. 1092, 1094 (Jan. 5, 2001)) and emphasized that the “utility threshold is not high.”  In re Fisher,  421 F.3d 1365, 1370 (Fed. Cir. 2005) (summarizing the position of the Patent Office).

Against this background of nearly moribund utility doctrine comes Michael Risch’s new article, which argues that patents should not issue except on proof of “commercial utility,” which he defines as requiring “that a) there is a market for the invention, and that b) the invention can be manufactured at a cost sufficient to fulfill market demand.” (P. 38)  Risch doesn’t hide that he is attempting to resurrect a position very similar to that argued by Daniel Webster, and firmly rejected by Justice Story, in a case decided nearly two centuries ago (see Lowell v. Lewis, 15 Fed. Cas. 1018 (C.C D. Mass. 1817)).  Risch also candidly acknowledges that the courts have never required a commercial utility of the sort he envisions.  Still, there many excellent reasons that even skeptics (like myself) should consider Risch’s article carefully.  I will focus on only three of them.

First, Risch unearths some fascinating history to support his view.  The central piece of legislative history associated with the 1836 Patent Act—a Senate Report written by Senator John Ruggles, the primary author of the legislation—seems to be quite critical of Justice Story’s lax utility requirement.  (P. 35)  Moreover, the relevant passages in the Report are not merely unenacted comments in a legislative report, for the 1836 Act did restore a requirement, which had been repealed in 1793, that patents should only be granted on “sufficiently useful” inventions.  Patent Act of 1836, § 7, 5 Stat. 117, 120 (July 4, 1836).  Risch concludes, however, that the courts “quickly gutted” this restored statutory requirement.   (P. 36)

The implication of this history is that modern utility doctrine may be based on a radical form of judicial activism—willful disregard of a congressional attempt to overturn prior judicial precedent.  The history is not, it should be noted, unambiguous.   In one crucial passage, the Senate Report describes Justice Story’s take on utility as “settled” doctrine, and the overarching focus of the Report is on the evils of the then-existing patent registration system (which included no administrative examination of patent applications), not on the evils of a lax utility doctrine.  Still, the passages identified by Risch raise serious historical questions about the legitimacy of modern utility doctrine.  Defenders of the status quo will have to respond.

A second reason to pay attention to Risch’s article is that it may turn out to be both prescient and practical.  When I first read an early draft of this paper, I had thought it interesting but completely divorced from the realities of legal doctrine.  Soon thereafter, however, a split panel of the Federal Circuit decided Janssen Pharmaceutica v. Teva, 583 F.3d 1317 (Fed. Cir. 2009), which was an extremely rare decision holding a patent invalid for lack of utility in infringement litigation. The patent in Janssen disclosed a method of using a particular drug as a treatment for Alzheimer’s disease.  It turns out that the disclosed method was highly useful and valuable, but the court nonetheless invalidated the patent because, at the time of filing, the inventor did not have sufficient proof that the method would be useful—i.e., that it would work.   Janssen seems to signal a new judicial willingness to enforce the utility requirement more stringently than in the past, and to cut back on the availability of what has been known as “prophetic patents”—patents that make accurate prophesies about technology that the inventor has not yet reduced to practice and thus not yet fully proven.

More recently, in Ariad Pharmaceuticals v. Eli Lilly, the en banc Federal Circuit articulated a view of the patent system that might very well, the court acknowledged, bar patents on “[m]uch university research.”  598 F.3d 1336, 1353 (Fed. Cir. 2010) (en banc).  The result, the court believed, was consistent with the “intention” of the patent system because “[p]atents are not awarded for academic theories .”   Id. To prove that point, the court referred to the only modern Supreme Court case on the utility requirement, Brenner v. Manson, 383 U.S. 519, 536 (1966), which famously stated that “a patent is not a hunting license.”   While certainly neither Janssen nor Ariad imposes a commercial utility requirement of the sort Risch endorses, both cases push patenting away from more fundamental research work and toward the practical and commercial, and both cases rely in part on utility precedents to justify the shift.

A third reason to pay attention to Risch is that his article is theoretically complex and nuanced.  The article is part of a growing body of theoretical literature that focuses on the timing of innovation and the importance of commercialization.  The roots of this literature trace back to Ed Kitch and his famous prospect theory.  Recently a new generation of scholars, including Scott Kieff, Ted Sichelman, Benjamin Roin, Michael Abramowicz and myself, have devoted increased attention to the problems of patent timing and commercialization. ((Professor Kitch’s prospect theory was first outlined in Edmund W. Kitch, The Nature and Function of the Patent System, 20 J. Law & Econ. 265. (1977).  Recent patent scholarship focusing on timing and commercialization considerations includes F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 Minn. L. Rev. 697 (2000); Ted Sichelman, Commercializing Patents, 62 Stan. L. Rev. 341 (2010); Benjamin Roin, Unpatentable Drugs and the Standards of Patentability, 87 Tex. L. Rev. 503 (2009); Michael Abramowicz, The Danger of Underdeveloped Patent Prospects, 92 Cornell L. Rev. 1065 (2007); Michael Abramowicz & John F. Duffy, Intellectual Property for Market Experimentation, 83 N.Y.U.L. Rev. 337 (2008); and John F. Duffy, Rethinking the Prospect Theory of Patents, 71 U. Chi. L. Rev. 439 (2004).))  Michael Risch joins this group but brings an original perspective in arguing that patent law should begin imposing a much different utility doctrine than has ever been applied in the U.S. courts.

Risch’s proposal, it should be noted, is not merely imposing more burdens on patent applicants.  A commercial utility standard would mean that inventions would not be complete until they were market-tested and commercialized.  Thus, the “experimental use” exception to patent law’s one-year statutory bar would have to be expanded to encompass such market experimentation—a distinct change from current law which would afford innovators more leeway in market testing their innovations prior to seeking patents.  (P. 41)  Also, because innovators could file later, the patent term would end later, and thus the early years of the patent would not be eaten away by efforts to begin commercialization  (P. 43) That change might be especially helpful to pharmaceutical firms, for the early years of their patents are often lost as they try to develop a safe, effective and commercially feasible versions of their patented drugs.   In sum, Risch’s proposal has a theoretically interesting basis and cannot be dismissed as merely reflexively anti-patent.

The renewed academic focus on commercialization has been spurred by an intensely practical, indeed even populist, industrial revulsion to what are known as “patent trolls,” entities that have obtained patents but that do not attempt to commercialize or otherwise to practice their patented technologies.  The backlash against patent trolls presents a deep challenge to the dominant theory of the patent system that the courts embraced in the twentieth century.  If, as the Supreme Court has said, “[t]he disclosure required by the Patent Act is ‘the quid pro quo for the right to exclude,’” J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., 534 U.S. 124, 142 (2001) (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 484 (1974)), then the hostility to patent trolls is inexplicable, for their disclosures must pass the same legal standards applied to patentees who have commercialized their innovations.  Yet the industrial reaction to patent trolls suggests that the judicial theory of the patent system may be incomplete, and that perhaps commercialization efforts should be given more importance in interpreting and applying the general provisions of the Patent Act.  Michael Risch has shown one way to accomplish that end as his article returns to, and provides new intellectual support for, a long abandoned doctrinal argument.  Even those skeptical of his ultimate conclusions can appreciate that his work is fresh, original and theoretically provocative.  Under the most demanding of standards, it is “useful” scholarship.

“This Milk Doesn’t Taste Hormone-free”: Creating Trademark Liability when Companies Alter Credence Qualities

Mar 13, 2010 Christopher J. Buccafusco1 comment

Christopher J. Buccafusco

What if you learned that those Niman Ranch steaks you’ve been purchasing for $40 per pound were no longer pasture-raised?  What if Aveda, without notifying you, decided to begin testing its products on animals?  Or if your Bridgestone tires were no longer union-made?  In each of these cases, it would be nearly impossible to detect the change merely by using the product.  For an increasing number and variety of products, consumers choose a particular brand or pay premium prices based on imputed qualities that they never experience.  Trademark and false advertising law exist to protect consumers from deceptive branding practices, but the situations described above are currently immune from liability.  Or at least they will be until more people read Shahar Dillbary’s new paper.

Since its origin in the tort of deceit, trademark law’s goal has been the prevention of passing-off, or as Dillbary refers to it, inter-brand fraud.  The typical case is one where the consumer, intending to purchase A’s goods is fraudulently induced to purchase B’s.  Trademark law exists to protect both producers and consumers and to minimize the substantial deadweight losses that would otherwise exist if consumers were forced to undertake extensive searches to obtain the appropriate products.  As Dillbary notes, however, trademark law is substantially less concerned with situations of intra-brand fraud where “the trademark owner uses its own mark to misrepresent its own goods.”  Dillbary, at 334.  According to Dillbary the unequal treatment of trademark misuse stems from the widely accepted premise that “the only legally relevant function of a trademark is to impart information as to the source or sponsorship of the product.” Id. at 332, quoting Smith v. Chanel, 402 F.2d 562 (9^th Cir. 1968).  This premise ignores the substantial role that a mark play in providing information about the product itself, and it enables a particularly insidious class of consumer fraud.

Because trademark jurisprudence is concerned only with false or misleading attributions of product source, its application to fraudulent uses of marks by the mark owners themselves is considerably limited.  Section 43 of the Lanham Act establishes a hierarchy of marks based on their distinctiveness, that is, their ability to distinguish the seller’s goods from others’.  At the top of the hierarchy are fanciful marks–those that have no apparent relationship to the product (e.g., Kodak cameras).  At the bottom are descriptive marks–those that seem to describe some feature of the product (e.g., Stevia sweetener which is derived from the stevia plant).  A number of legal issues follow from a mark’s classification in the hierarchy, but one is of particular importance to Dillbary’s point.  According to the current interpretation of the Lanham Act, descriptive marks but not fanciful marks may not be registered or may be cancelled if they are or become misleading.  Thus, if consumers incorrectly believed and purchased it because they so believed that Stevia was made from the stevia plant, then the mark would be “deceptive” and unregisterable.

At first blush, this distinction seems to make sense.  How could a fanciful mark, which is definitionally not descriptive of the product, ever be misdescriptive of it?  How could a Kodak camera not be sufficiently kodak-y?  It can occur, Dillbary argues, when a fanciful, arbitrary, or suggestive mark develops what he calls “secondary descriptive meaning.”  Id., at 330.  Marks that, when introduced, were fanciful or arbitrary may, over time, become associated with a variety of qualities.  Kodak, for example, may come to symbolize in consumers’ minds high quality paper, easy to focus lenses, or “green” manufacturing, and consumers purchase Kodaks or pay premiums because of these associations.  If, overnight, Kodak executives switched to cheap paper or complicated lens or environmentally-unfriendly production, purchasers who relied on the secondary descriptive meaning attached to the brand would be defrauded.  Dillbary’s recognition and elaboration of this concept alone would make the paper worth reading.

But Dillbary is too much the economist to be carried away by his new idea.  He realizes that just because he has a hammer, everything isn’t a nail, and like Holmes he recognizes that the “cumbrous and expensive machinery [of the state] ought not to be set in motion unless some clear benefit is to be derived from disturbing the status quo.”  Holmes, The Common Law, p. 96.   Accordingly, not all product changes should be treated identically.  Obviously, if the changed characteristic isn’t material to consumers’ decisions, it shouldn’t matter.  Similarly, if Kodak began using poor quality paper or lens, consumers would rapidly detect the change.  They could return their purchases and take their complaints to the Internet, seriously damaging Kodak’s reputation and goodwill.  The threat of consumer backlash is a sufficient deterrent.

Switching away from green manufacturing, however, presents a different situation.  The camera might work identically, and consumers would have no way of knowing about the shift.  They happily pay more because they want to protect the environment, and they end up defrauded while the manufacturer pockets the premium.  For so-called credence qualities like green manufacturing the consumer is not in a position to distinguish products experientially, and she is prevented by prohibitive search costs from detecting noncompliance.  Without the threat of consumer backlash associated with experience qualities (those like paper quality that are more or less immediately detectable), producers are not deterred from fraudulently misrepresenting the credence qualities of their products.

The incentive to misrepresent credence qualities is surely growing.  As painfully ironic as it must seem to a certain class of Crits, consumers are increasingly turning to the market as a medium for social and political communication.  Consumers routinely spend millions of dollars on sweatshop-free clothes, humane food and cosmetics, hormone-free milk, and products that are made in the USA, or by unions, or sustainably for reasons entirely irrelevant to their experiential quality.  (Not to mention the considerable boost in perceived experiential quality derived from the placebo effect of knowing that the product has some valued credence quality.)  While this kind of social policy driven purchasing might not be maximally efficient, it would certainly be disastrously inefficient to allow companies to bilk consumers by surreptitiously altering purchased credence qualities.

Dillbary’s solution to the problem is straightforward and politically feasible:  convince courts to follow the plain meaning of the Lanham Act to establish a private right of action in competitors to sue for intra-brand fraud.  According to Dillbary, the text of 1988 amendment to the Lanham Act clearly provides for such an action, but through tortuous misinterpretation, the action has been read out of the statute.  A proper reading of the Act would establish all classes of trademarks on the same footing for purposes of deceptiveness.  Mark owners would be liable when they changed without notice a materially important credence quality of their product, that is, one that substantially motivated consumer purchases.

Dillbary leaves until a future paper the task of establishing the precise contours of the cause of action.  While we wait, a number of questions present themselves for consideration:  Are competitors rather than consumers the appropriate plaintiffs in such actions?  How should the law treat hybrids of experience and credence qualities where the credence quality acts as a proxy for an experience quality (e.g., the belief that organic foods taste better)?  How should damages be calculated, and should defendant culpability (e.g., by inducing belief in the credence quality through advertising) affect damages?  And would liability create perverse incentives by discouraging producers from adopting certain valuable techniques if they are subject to liability when they switch away from them?

Trademark Use on the Loose

Nov 12, 2009 Ann Bartow1 comment

Ann Bartow

Not all uses of a trademark constitute trademark use. It is this proposition that brings consternation and confusion to courts and legal scholars alike. Mark McKenna looked into this abyss, the abyss looked back at him, and neither liked what they saw: a pitched but ultimately unhelpful ongoing debate about the “trademark use” doctrine. And so he sought to shrink this chasm with insightful analysis.

The abstract for Mark P. McKenna’s recent article Trademark Use and the Problem of Source is as follows:

This paper mediates a scholarly debate regarding the existence and desirability of a trademark use doctrine. It argues that trademark use is a predicate of liability under the Lanham Act, but those who advocate treating trademark use as a threshold question put much more weight on that concept than it can bear. Courts cannot consistently apply trademark use as a distinct element of the plaintiff’s prima facie case because trademark use is not separable from the question of likelihood of confusion. Under modern trademark law, courts can determine whether a defendant has made trademark use of a plaintiff’s mark only by asking whether consumers are likely to view the defendant’s use as one that indicates the source of the defendant’s products or services. Because such an inquiry is, by its nature, highly context-sensitive, trademark use is not a concept capable serving the limiting function advocates hope. The trademark use debate, however, reveals a fundamental problem in modern trademark law and theory. Consumer understanding, and particularly consumer understanding of source, defines virtually all of modern trademark law’s boundaries. But as trademark law’s dramatic expansion aptly demonstrates, these boundaries are never fixed because consumer understanding is inherently unstable, particularly with respect to an ill-defined term like source.

It is a terrific article because it lays out the complexities of the “trademark use” doctrine in a clear and comprehensive manner. McKenna does a wonderful job of explaining the approaches that courts take to defining and using the “trademark use” doctrine, and also summarizes and critiques the scholarly debate over the concept. McKenna astutely notes that if “trademark use” could be delineated with bright lines, the doctrine could bring predictability to trademark disputes in which courts need to determine whether the unauthorized use of a trademark ought to trigger liability under the Lanham Act. But unfortunately, he ruefully observes, defining “trademark use” in a clear and consistent manner has so far proven impossible. This is because “trademark use” is not susceptible to a fixed definition. Instead it is inextricably linked, piecemeal, to any given court’s determination, usually based on intuition rather than facts, about whether consumers will perceive the use to be source identifying.

McKenna correctly criticizes the view that a signifier of “trademark use” is a deployment that is likely to cause confusion. If likelihood of confusion is the benchmark that creates an actionable wrong, the “trademark use” doctrine adds nothing to a court’s analytical toolbox. But if it is unbound from courts’ projections about consumer understandings of source, and instead given boundaries related to specific relationships, McKenna argues that a reconfigured “trademark use” doctrine can bring renewed coherence to trademark law.

The scope of trademark rights are delineated by use of the mark. If the mark “Smith” is used as a trademark for screwdrivers in commerce, the rights that accrue preclude others from using the same or similar mark on the same or similar products. That is simple enough. Where things start to get complicated is when an online hardware store uses the “Smith Screwdrivers” mark to indicate that Smith screwdrivers can be purchased there. Or when an artist writes a song referencing Smith Screwdrivers and releases it commercially. Or when an Internet search engine assumes the people searching for web pages using the words “Smith Screwdrivers” would like to see results relating to competing brands of screwdrivers as well as the authorized Smith website.  Consumers may well believe that these uses cannot legally be undertaken without the permission of the mark holder, but that does not transmogrify these uses of the Smith trademark into trademark uses. None is an effort to mark or sell counterfeit or competing screwdrivers, so none are uses of the mark in commerce as a trademark. Seems pretty clear to me, but as McKenna aptly illustrates, many courts and commentators would not agree.

In iterating the deficiencies with current conceptions of the “trademark use” doctrine McKenna also constructs a broader critique of trademark law generally; there is a pervasive over-reliance on alleged consumer understandings, which are often discerned primarily via instinct and divination by judges who harbor a wide range of assumptions about the mental capacities of their fellow citizens. This leads to uncertainty and precludes effective checks upon inappropriately broad assertions of trademark powers.

Consumers may indeed harbor many misconceptions about the accrual and scope of trademark rights, but asking judges to attempt to predict and account for projected misunderstandings one case at a time is not a good way to bring clarity or coherence to Lanham Act jurisprudence. Construction of reliable limiting principles for “trademark use” can serve as a model for reigning in expansionist trademark lawmaking generally; McKenna is quite convincing about this, and in my view, absolutely correct.

Patent Crisis?/Judicial Solution?

Oct 27, 2009 Michael W. Carroll1 comment

Michael W. Carroll

Is there a crisis in the patent system, and if so, what should be done about it?  Two recent books respond to cries of alarm emanating from some in the patent system, and each makes a large contribution to the understanding of this system:  James Bessen & Michael J. Meurer, Patent Failure:  How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (2008) and Dan L. Burk & Mark A. Lemley, The Patent Crisis and How the Courts Can Solve It (2009).  Both books proceed from, or demonstrate, a core empirical premise: those inside the patent system experience its effects quite differently depending on their industrial setting and technical field of innovative endeavor. Both books are well worth reading, but the space here allows only for a few comments on Burk and Lemley’s more recent contribution.

Reprising, updating, and extending arguments made in prior works, Burk and Lemley set out to persuade the reader of three propositions: (1) the tradition of a one-size-fits-all approach to patent law is out of step with the diverse needs of today’s innovators in wide range of industries; (2) the response to diversity should be to retain a single Patent Act rather than to provide industry-specific legislation; but (3) the federal courts should use the flexibilities embedded in that single Patent Act to tailor its application to account for industry diversity.

Not all readers will agree that they succeed in this quest, but the journey rewards all who travel along.  For teachers, Burk & Lemley’s initial summary of the patent system (pp. 7-20) provides an excellent reading assignment for any law or applied sciences class on patent law.  For scholars, the authors helpfully summarize the literature(s) on industry-specificity in innovation and patenting strategies, and they argue that this diversity helps explain the diversity in theoretical justifications for the patent system.

Now the argument.  The authors first sweep aside the prospect that Congress can solve the crisis posed by industry diversity by reviewing the history of some industry-specific legislation and four years of failure to pass broader systemic reform because of warring industry coalitions.  While Burk and Lemley raise many valid concerns and issues on this score, many readers, including this one, would need deeper institutional analysis and analysis of  the economically more important legislative tailoring done by the Bayh-Dole Act and the Hatch-Waxman Act, respectively, before conceding the point.

Nonetheless, the heart of the argument is that the existing Patent Act confers upon federal courts, and in particular the U.S. Court of Appeals for the Federal Circuit, interpretive discretion to take account of salient economic and technological differences among innovators.  This argument, which they first made in Policy Levers in Patent Law, 89 Va. L. Rev 1575 (2003), has been updated, extended, and strengthened by taking into account numerous intervening developments, including significant Supreme Court decisions, that further enlarge the scope of judicial discretion in the patent system.

The book closes with case studies of patent tailoring for inventions arising in the biotechnology and information technology industries.  While again not all readers will accept these accounts, Burk and Lemley succinctly summarize the literature on the economic effects of patents in these fast-moving, economically significant sectors and challenge readers to think more deeply about how the law could more coherently and consistently adapt to the scientific and business realities in these sectors.

The authors acknowledge the limits of their argument by allowing that the courts should not use each and every flexible provision of the Patent Act to fashion industry-specific interpretations and that courts could not realistically do so even if so inclined in light of the dynamism and uncertain trajectories of the innovative sectors.  But they challenge all who are interested in a well-functioning patent system to recognize the real differences in how innovators appropriate returns on their investments and the real costs of a one-size-fits-all approach to patent law imposed on the majority of these innovators.  They show that at least in the domestic context, the federal courts have a range of tools available to play a more active and helpful role in responding to industry difference.  Finally, they recognize that the argument is not complete, and they invite further analysis of innovation policy and institutional design options to respond to industry diversity.

Meet the Editors

Oct 26, 2009 Michael Froomkin

Section Editors

The Section Editors choose the Contributing Editors and exercise editorial control over their section.  In addition, each Section Editor will write at least one contribution (”jot”) per year.  Questions about contributing to a section ought usually to be addressed to the section editors.

Professor Pam Samuelson
Director of the Berkeley Center for Law & Technology, Richard M. Sherman Distinguished Professor of Law and Information at the University of California Berkley School of Law, Boalt Hall

Professor Christopher Sprigman
University of Virginia School of Law

Contributing Editors

Contributing Editors agree to write at least one jot for Jotwell each year.

Professor Ann M. Bartow
University of South Carolina School of Law

Professor Chris Buccafusco
Chicago-Kent College of Law

Professor Michael W. Carroll
Director of the Program on Information Justice and Intellectual Property at American University, Washington College of Law

Professor Kevin Emerson Collins
Indiana University Maurer School of Law

Professor Stacey L. Dogan
Northeastern University School of Law

Professor John Fitzgerald Duffy
Oswald Symister Colclough Research Professor of Law,
The George Washington University Law School

Professor Laura A. Heymann
William and Mary Law School

Professor Lydia Loren
Jeffrey Bain Faculty Scholar and Professor, Lewis & Clark Law School

Professor Paul Ohm
University of Colorado Law School

Professor Dotan Oliar
University of Virginia School of Law

Professor Jason M. Schultz
Director of the Samuelson Law, Technology & Public Policy Clinic at the University of California Berkley School of Law, Boalt Hall

Professor Sara K. Stadler
Emory University School of Law

Call For Papers

Oct 25, 2009 Michael Froomkin

Jotwell: The Journal of Things We Like (Lots) seeks short reviews of (very) recent scholarship related to the law that the reviewer likes and thinks deserves a wide audience. The ideal Jotwell review will not merely celebrate scholarly achievement, but situate it in the context of other scholarship in a manner that explains to both specialists and non-specialists why the work is important.

Although critique is welcome, reviewers should choose the subjects they write about with an eye toward identifying and celebrating work that makes an original contribution, and that will be of interest to others. First-time contributors may wish to consult the Jotwell Mission Statement for more information about what Jotwell seeks, and what it seeks to achieve.

Reviews need not be written in a particularly formal manner. Contributors should feel free to write in a manner that will be understandable to scholars, practitioners, and even non-lawyers.

Ordinarily, a Jotwell contribution will

• be between 500-1000 words;
• focus on one work, ideally a recent article, but a discussion of a recent book is also welcome;
• begin with a hyperlink to the original work — in order to make the conversation as inclusive as possible, there is a strong preference for reviews to focus on scholarly works that can be found online without using a subscription service such as Westlaw or Lexis. That said, reviews of articles that are not freely available online, and also of very recent books, are also welcome.

Initially, Jotwell particularly seeks contributions relating to:

• Administrative Law
• Constitutional Law
• Corporate Law
• Criminal Law
• Cyberlaw
• Intellectual Property Law
• Legal Profession
• Tax Law

We intend to add more sections in the coming months.

References

Authors are responsible for the content and cite-checking of their own articles. Jotwell editors and staff may make editorial suggestions, and may alter the formatting to conform to the house style, but the author remains the final authority on content appearing under his or her name.

• Please keep citations to a minimum.
• Please include a hyperlink, if possible, to any works referenced.
• Textual citations are preferred. Endnotes, with hyperlinks, are allowed if your HTML skills extend that far.
• Authors are welcome to follow The Bluebook: A Uniform System of Citation (18th ed. 2005), or the The Redbook: A Manual on Legal Style (2d Ed.) or indeed to adopt any other citation form which makes it easy to find the work cited.

Technical

Jotwell publishes in HTML, which is a very simple text format and which does not lend itself to footnotes; textual citations are much preferred.

Contributors should email their article, in plain text, in HTML, or in a common wordprocessor format (Open Office, WordPerfect, or Word) to ed.jotwell@gmail.com and we will forward the article to the appropriate Section Editors. Or you may, if you prefer, contact the appropriate Section Editors directly.

Jotwell Mission Statement

Oct 19, 2009 Michael Froomkin1 comment

The Journal of Things We Like (Lots)–JOTWELL–invites you to join us in filling a telling gap in legal scholarship by creating a space where legal academics will go to identify, celebrate, and discuss the best new legal scholarship. Currently there are about 350 law reviews in North America, not to mention relevant journals in related disciplines, foreign publications, and new online pre-print services such as SSRN and BePress. Never in legal publishing have so many written so much, and never has it been harder to figure out what to read, both inside and especially outside one’s own specialization. Perhaps if legal academics were more given to writing (and valuing) review essays, this problem would be less serious. But that is not, in the main, our style.

We in the legal academy value originality. We celebrate the new. And, whether we admit it or not, we also value incisiveness. An essay deconstructing, distinguishing, or even dismembering another’s theory is much more likely to be published, not to mention valued, than one which focuses mainly on praising the work of others. Books may be reviewed, but articles are responded to; and any writer of a response understands that his job is to do more than simply agree.

Most of us are able to keep abreast of our fields, but it is increasingly hard to know what we should be reading in related areas. It is nearly impossible to situate oneself in other fields that may be of interest but cannot be the major focus of our attention.

A small number of major law journals once served as the gatekeepers of legitimacy and, in so doing, signaled what was important. To be published in Harvard or Yale or other comparable journals was to enjoy an imprimatur that commanded attention; to read, or at least scan, those journals was due diligence that one was keeping up with developments in legal thinking and theory. The elite journals still have importance – something in Harvard is likely to get it and its author noticed. However, a focus on those few most-cited journals alone was never enough, and it certainly is not adequate today. Great articles appear in relatively obscure places. (And odd things sometimes find their way into major journals.) Plus, legal publishing has been both fragmented and democratized: specialty journals, faculty peer reviewed journals, interdisciplinary journals, all now play important roles in the intellectual ecology.

The Michigan Law Review publishes a useful annual review of new law books, but there’s nothing comparable for legal articles, some of which are almost as long as books (or are future books). Today, new intermediaries, notably subject-oriented legal blogs, provide useful if sometimes erratic notices and observations regarding the very latest scholarship. But there’s still a gap: other than asking the right person, there’s no easy and obvious way to find out what’s new, important, and interesting in most areas of the law.

Jotwell will help fill that gap. We will not be afraid to be laudatory, nor will we give points for scoring them. Rather, we will challenge ourselves and our colleagues to share their wisdom and be generous with their praise. We will be positive without apology.

Tell us what we ought to read!

How It Works

Jotwell will be organized in sections, each reflecting a subject area of legal specialization. Each section, with its own url of the form sectionname.jotwell.com, will be managed by a pair of Section Editors who will have independent editorial control over that section. The Section Editors will also be responsible for selecting a team of ten or more Contributing Editors. Each of these editors will commit to writing at least one Jotwell essay of 500-1000 words per year in which they identify and explain the significance of one or more significant recent works – preferably an article accessible online, but we won’t be doctrinaire about it. Our aim is to have at least one contribution appear in each section on a fixed day every month, although we won’t object to more. Section Editors will also be responsible for approving unsolicited essays for publication. Our initial sections will cover administrative law, constitutional law, corporate law, criminal law, cyberlaw, intellectual property law, legal profession, and tax law — and we intend to add new sections when there is interest in doing so.

For the legal omnivore, the ‘front page’ at Jotwell.com will contain the first part of every essay appearing elsewhere on the site. Links will take you to the full version in the individual sections. There, articles will be open to comments from readers.

The Details

Learn more about Jotwell:

• Style guide
• Acceptable use policy
• Copyright Policy
• Privacy policy