AuthorHusovec, Martin
  1. INTRODUCTION II. TRIPS III. JAPAN IV. EUROPEAN UNION V. CONCLUSION There was once a theory that the law of trademarks [...] was an attempt to protect the consumer against the 'passing off of inferior goods under misleading labels. Increasingly the courts have departed from any such theory and have come to view this branch of law as a protection of property rights in diverse economically valuable sale devices. (1)

    --Felix Cohen (1935)


    The scope of the regulatory power of trademark law in the marketplace is constantly being tested against new developments in technology. Similarly, as waves hit a cliff and wash away its parts over the years, social progress constantly questions the old trademark law structure and gradually extends the horizon of its scope. Today, rights arising from trademarks often cover many activities going beyond the mere misrepresentation of goods and services. Market transparency is not the sole goal anymore. In this comparative study, we will contrast European and Japanese approaches to the doctrine of trademark use, a doctrine that decides whether the trademark laws extend rights to regulate a particular use of a sign prior to any considerations of confusion or unfair advantage. As this article will address, the selection of these two countries is not random. The evolution of trademark law in these two countries illustratively shows the gradual departure from the origins of trademark protection that persist in Japan to a more advanced but not necessarily better system of protection in the European Union.

    To conceptualize this historical development, it is helpful to contrast the two different roles of today's trademark law: (1) protection against misrepresentation and (2) protection against misappropriation. To be sure, the two are not hermetically sealed in water-tight compartments. (2) Nor can I expect readers to have a single coherent understanding of what constitutes their content. In fact, the jurisprudence of the United States courts in the first half of nineteenth century is a good illustration of the fact that legal tests of confusion can easily be hijacked to introduce additional protection. (3) Still, the two categories help to distinguish two distinct goals of today's trademark policy: (1) guaranteeing market transparency for existing businesses; and (2) guaranteeing the exploitation of other business opportunities embodied in the sign, such as expanding to dissimilar markets, exercising control over references to one's own business, or engaging in cross-border price discrimination.

    It is virtually undisputed that the essential function of the trademark is to identify the source of products. If consumers can rely on the indicators of origin of the products, they reward and punish the producer by purchasing more-- more often--for even higher prices or by recommending them to others. If they dislike the products, consumers may punish producers by purchasing less or none ever again, and by telling others to do the same. The producers react to consumer's signals by adjusting the quality, price or other characteristics of the products. This two-sided exchange of signals, however, requires that the communication channel between the consumers and producers is clear of any unnecessary and misleading noise. Otherwise, uncertainty about the source of the goods and services will lead to significant economic costs because the returns for good quality will be accrued to an entire group of sellers instead of the individual seller who undertook the effort to improve it. (4) As shown by George A. Akerlof, this uncertainty will then incentivize sellers to market poor quality goods, which will result in a reduction in the overall quality and market size. (5) The role of protection against confusion (or misrepresentation) is to prevent this situation from happening. Protection against confusion keeps the communication channel open and working, thus reducing uncertainty in the market.

    If the communication channel works and trade flourishes, it is inevitable that a trademark will accumulate a lot of economic value. The mark becomes a value independent of the products it labels. Others, especially the competitors, will then naturally try to take the advantage of this value by either comparing themselves to established players or building upon their products. The law tries to prevent this from happening by allocating exclusive exploitation of this accumulated value with the trademark holders, even when any effective distortion to the communication channel is absent. When the law does this, it protects against misappropriation. To paraphrase the U.S. Supreme Court, it protects against "reaping without sowing." (6)

    Consider the following five examples as a reference for the further debate: (1) a counterfeiter's label of its own products as genuine; (2) an importer's resale of genuine products that were produced for a different market; (3) a competitor's reference to genuine products as comparable or compatible; (4) a newspaper article's claim that a trademark owner's goods are faulty; and (5) Andy Warhol's unauthorized use of Campbell's logos for his thirty-two Campbell's soup cans artwork. (7)

    The first case concerns a false designation of goods because the counterfeiter pretends that he is a trademark owner. This is a clear-cut case of protection against consumer confusion. Such use is source identifying because it attempts to mislead the consumers about the origin of goods or services. When there is confusion about the source, the use must be source identifying. The second use of a sign by the importer is also source identifying, but confuses no one because the importer sells what he claims. Hence, if the law wants to prohibit importer's acts, it must do so to protect the producer only, and not the consumers. (8) The other three cases are less clear. The competitor, newspaper and artist all work with the trademark and its associations. The message they wish to convey is, however, different. They do not claim to be the source, but rather talk about the true trademark owner. The competitor wants to promote his own distinctive goods; the newspaper wants to identify the subject of its critique; and the artist wants to build upon the consumer's associations in the domain of art. Unless these uses are misconceived as a message about the origin of goods, the actors use the trademarks only to refer to the original owner, hence "referential use" of trademarks. (9) These instances of referential use differ only by the person who makes them and his intentions. Whereas, an artist wants to exploit the association of consumers for his artwork, competitors want the attention of a trademark owner's customers. Both uses can be inherently commercial.

    Increasingly, trademark laws also try to regulate referential uses of trademarks, not only source-identifying uses. Providing exclusive rights in these situations is the motivation of protection against misappropriation, which guards against non-source-identifying use. The rationale of this protection is to allow the trademark owner to exploit other business opportunities provided by his trademark. (10)

    But the fact that something accumulates economic value does not indicate whether this value should be legally ascribed to its originator. People often benefit from actions of others without compensating them. (11) There is no general ethical or legal principle that unsolicited positive externalities should be always compensated. (12) The absence of such principle is what Justice Holmes summarized in his famous dissent in International News Service v. Associated Press when he stated "[property, a creation of law, does not arise from value, although exchangeable--a matter of fact." (13) That viewpoint-- more than just plain economic value is needed to attract legal recognition as one's own--seems generally accepted. (14) But finding the convincing justification can be more difficult than it seems. As Robert G. Bone recently aptly noted, ever since Frank Schechter, who proposed anti-dilution protection, "judges have had trouble understanding it and scholars have had difficulty justifying it." (15) Still, dilution manages to hang on.

    The purpose of this article is not to engage in this core debate of the modern trademark law. However, the aim in this article is much more humble. By comparing the two big economies of the European Union and Japan, this article will demonstrate how the doctrine of trademark use (or use as a trademark), which is based upon applicability of the trademark statutes, itself contributes to the extended protection against misappropriation.

    Anti-dilution protection--the overarching label used for misappropriation protection in the trademark law--is often presented as a (preventive) extension of protection to dissimilar goods and services for well-known or famous marks. (16) However, such extension is only effective if non-source identifying uses are also covered. When the trademark law continues to require non-source identifying use for dissimilar goods and services, the law basically must abandon its test of confusion for dissimilar products. It must find illegal conduct in source-identifying use that misleads no one or less people than normally required. (17) But this is still not a full picture of the anti-dilution protection. In fact, I would argue it is the least significant one. (18) The notion of source-identifying use soon becomes too limiting--a kind of straitjacket--for protection of other related economic interests different from market transparency. Anti-dilution protection de facto dictates that, in absence of confusion, other functions need to be offered separate legal significance. This leads to a pressure on the doctrine of trademark use to include non-source identifying uses of the trademarks. When the courts allow this enlargement, because the trademark use is often universal for all signs, they not...

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