Marks, morals, and markets.

• Author: Sheff, Jeremy N.
• Position: Introduction to IV. Toward a Contractualist Theory of Trademark Law, p. 761-796

INTRODUCTION I. MORAL THEORIES OF TRADEMARK LAW A. Consequentialism: The Chicago School B. Deontology: Locke, Labor, and Desert II. CONTRACTUALISM: A THEORETICAL ALTERNATIVE A. The Wellspring of Contractualism: Kant and the Categorical Imperative B. Contractualist Approaches to Lies and Deception C. Tensions Within Contractualism: The Problem of Paternalism D. Objections to Contractualism III. MORALS AND MARKETS IV. TOWARD A CONTRACTUALIST THEORY OF TRADEMARK LAW A. Trademark as Promise B. Contractualism Versus Consequentialism: Products or People? C. Hard Cases for Contractualism D. Further Implications and Future Directions CONCLUSION INTRODUCTION

The word property as applied to trade-marks ... is an unanalyzed expression of certain secondary consequences of the primary fact that the law makes some rudimentary requirements of good faith.

--Justice Oliver Wendell Holmes, Jr. (1)

The law of trademarks and unfair competition is at once both over-theorized and undertheorized. Countless commentators, myself included, have devoted considerable energies to fleshing out and critiquing the dominant law and economics model of trademarks. While this model is theoretically rigorous and intuitively appealing, it has obvious descriptive failings in its predictions of consumer and producer behavior. Moreover, the expansion of trademark doctrine over the past half century has led to the creation of new trademark rights and remedies that find little justification in economic theory--and in some cases are arguably inconsistent with that theory. Trademark law is thus overtheorized to the extent that we view it through the lens of a theory that fails to accurately describe the world in which the law is developed and applied.

But the absence of equally rigorous and developed theoretical models to compete with the law and economics model has led to an inverse problem of undertheorization. To be sure, alternatives to the law and economics model exist. Most notably, Lockean theories of "natural rights" or "moral rights," so common in theoretical discussions of property and intellectual property generally, have been brought to bear on trademark doctrine. In general, though, such theories have been found unpersuasive by the scholars who develop them, largely on grounds that they lack intelligible limiting principles. The result is that trademark doctrine depends for its justification on one of two unsatisfactory theoretical alternatives--the Lockean account that offers little guidance for shaping doctrine, or the economic account that rests on mistaken assumptions about the behavior that doctrine purports to regulate.

What all these theories have in common is their understanding of trademarks as instruments for conveying meaning between producers and consumers. Trademark law's focus on regulating the invocation and manipulation of symbols' meanings can be understood as not just a legal concern, but also a moral one. Indeed, the law and economics framework and the Lockean framework map directly to the two great schools of moral philosophy: consequentialism and deontology. These two schools famously clash over the sources and content of moral obligations, and the trademark literature has been no exception. But the Lockean framework--inasmuch as it focuses on the moral claims of labor as a justification for property rights--has always seemed better suited to copyright or patent than to trademark, which has often, throughout its history, chafed against the analogy to property. Lockean theory is thus a poor deontological foil for the economic theory of trademark law. To the extent that the economic theory is found wanting, then, we lack a suitable theoretical alternative to help understand and shape trademark doctrine. In this Article, I hope to remedy that deficiency. I propose to examine trademark law by analogy not to property, nor even to its other historical analogue, tort, but rather to contract. In so doing, I will introduce a new deontological framework for the analysis of trademark law based on the Kantian, rather than the Lockean, tradition.

The interactions that the trademark system governs are first and foremost commercial interactions--between and among buyers and sellers in a competitive market. To be sure, trademark law deals with the regulation of information, just as copyright and patent law do. But trademark law is less about incentivizing the laborious creation and dispersal of new information (which then itself becomes the subject of commercial exchange, as in copyright and patent) than it is about regulating the flow of information that already exists, as an aid to the completion of consumer transactions in goods and services other than the information in question. Locke has less to say about this latter type of interaction than he does about the former.

For a deontological moral theory that addresses the world of trademark law, I propose we look to Immanuel Kant and his successors in the contractualist school. I use the term "contractualist" here to refer to the strain of social contract theory beginning with Kant's effort to rationally derive abstract and universal moral principles, and proceeding through contemporary philosophers who purport to derive moral principles from hypothetical reason giving and consensus, the common thread being the ideal of the social contract and the underlying assumptions of equality and mutual respect among moral agents. (2) Scholars have already applied contractualist analysis to other types of markets--commercial markets and securities markets, for example--but such analysis is curiously absent from the literature on consumer markets of the type that trademark law regulates. This is a significant omission, as the contractualist tradition has at least as much relevance to the atomized consumer marketplace as it does to the sophisticated and highly institutionalized spheres of commercial and financial markets. This Article will attempt to construct a new contractualist approach to trademark law and to test the resulting theoretical structure by reference to various controversial trademark doctrines. I hope to show that contractualist analysis has considerable promise as both a descriptive and a prescriptive theory of trademark law.

This Article proceeds as follows. Part I outlines the various extant approaches to the moral dimension of trademark law, identifying a large gap in the literature--dealing with relationships between producers and consumers--that calls out for a new deontological approach. Part II reviews a body of deontological theory that might fill this gap--contractualist moral philosophy. Part III then explores the differences between these theories' approaches to legal doctrine in two areas that, like trademark law, regulate the conduct of parties engaged in market exchange: contract and securities law. This analysis shows that the conflict between consequentialist and contractualist theories with respect to information transfers in the course of market exchange reflects a difference in priorities: where consequentialist theories place the highest importance on the efficient creation and distribution of information about the subject of exchange, contractualist theories subjugate that concern to an overriding duty of moral agents engaged in market interactions to respect one another's autonomy.

Part IV applies the features of contractualist moral theory identified in Parts II and III to a sampling of trademark law doctrines that implicate the competing priorities of consequentialism and contractualism in governing the relationships between sellers and buyers. In so doing, it argues that the contractualist principles outlined in Part II do a better job than consequentialism in justifying the traditional core doctrines of trademark law in terms of consumer rather than producer interests. It then goes on to examine areas of trademark law that present the conflict of priorities identified in Part III, finding that contractualism's response to such conflicts depends on competing normative arguments about the proper scope of individual autonomy. I conclude Part IV by bringing these arguments about the scope of autonomy to bear on novel and controversial doctrines in trademark law, demonstrating some of the implications and the limits of the new contractualist theory I develop in this Article. In doing so, I defend the theory as a potentially superior mode of analysis to the currently dominant law and economics approach, which unsatisfyingly elides fundamental normative questions by replacing them with unanswerable empirical questions.

I conclude the Article by suggesting some implications of my contractualist framework for other areas of unfair competition and consumer protection law.

1. MORAL THEORIES OF TRADEMARK LAW (3)

   1. Consequentialism: The Chicago School (4)

      The dominant theoretical account of trademark law today comes from the law and economics movement of the Chicago School. (5) The economic justification for trademark protection, as described in the models of Chicago School commentators, is twofold. First, it is argued that trademark protection lowers consumer search costs, thereby facilitating welfare-increasing transactions. The mechanism by which trademarks accomplish this feat is by shifting search costs from buyers--who face high costs of obtaining product information--to sellers, who face far lower information costs. As Nicholas Economides explains:

      In many markets, sellers have much better information as to the unobservable features of a commodity for sale than the buyers.... Unobservable features, valued by the consumer, may be crucial determinants of the total value of the good.... [I]f there is a way to identify the unobservable qualities, the consumer's choice becomes clear.... The economic role of the trademark is to help the consumer identify the unobservable features of the trademarked product. This information is not provided to the...