TRADEMARKS AND PRIVATE ENVIRONMENTAL GOVERNANCE.

• Author: Adelman, David E.

This Article examines the relationship between private environmental governance and trademark law. Over the past two decades, green trademarks and other forms of private governance have flourished in tandem with the retreat from national and international public law modalities of environmental regulation. The rising political opposition to environmental regulation partly accounts for this change. Also relevant is the rise of globalization, which due. to jurisdictional and trade constraints has diminished the effective regulatory control countries have over products sold in their markets.

Private environmental governance is premised on consumers "voting with their wallets " by selecting products that reflect not just their instrumental preferences, but also their values. The potential of this form of private governance has not been realized, however, in part because consumers are often overwhelmed by information from multiple green trademarks with different standards or criteria. The resulting congestion of market information has undermined the communicative function of green trademarks that is essential to enabling consumers to make environmentally responsible choices.

For a variety of reasons, trademark law is premised on a narrowly prescribed role for trademarks that is poorly adapted to facilitating information-based forms of private governance. Instead, intramural battles over the scope of trademark rights--ignited by overreaching corporate branding strategies--have elevated a reactionary turn in trademark theory that reduces trademarks solely to identifying the specific source of a product or service. We argue that the normative ends of private environmental governance should factor into, though by no means determine, trademark policy.

INTRODUCTION

Can trademark law empower consumers to select products that reflect not just their instrumental preferences but also their values? The answer might seem obvious. Consumer markets are awash in product certifications that, to name just a few, alert consumers to corporate labor standards, fair trade policies, and environmental practices. (1) In this Article, we focus on "green trademarks"--or "ecolabels"--that convey information about the sustainability of production and manufacturing processes, the environmental impacts of commercial operations, and the safety of materials in end-products. (2) In part as a response to economic globalization, (3) hundreds of ecolabels have been established and reputable programs have emerged over time and succeeded commercially. (4) Third-party environmental certification is now a mainstream form of private governance and, by implication if not always by design, trademarks are essential to its success. (5)

This Article examines the legal boundary issues impacting information-based forms of private governance that incorporate elements of intellectual property and environmental law.'' The principal source of tension we identify is the divergent motivations that animate the two legal domains. Environmental governance in the form of product certification fills information gaps related to public goods and common pool resources. (7) Most certification programs are established by private entities, both nonprofit and commercial, to provide information that enables consumers to select products that reflect their environmental values; in doing so, they create market incentives for businesses to meet heightened standards by facilitating product differentiation and premium pricing. (8) Trademarks, by contrast, safeguard market competition by preventing free riding and reducing consumer search costs. (9) The narrow focus reflected in these ends has been reinforced by widespread concerns about corporate branding strategies that threaten markets and free speech. (10) This experience has fostered an orthodoxy among academics and other commentators that strictly limits trademarks to "signaling" the origin of a product or service; (11) all other communicative functions are considered suspect--including those that facilitate product differentiation. (12)

We argue that the prevailing cabined view of trademarks is ill-adapted to the growing importance of private governance in a globalized world where markets, politics, and social policy are intertwined. (13) Understood broadly, private governance involves consumers "voting with their wallets," that is, making market decisions that are not limited to satisfying purely self-interest-driven preferences. (14) The noninstrumental nature of these interests implicates intangible characteristics, as opposed to directly discernible product qualities, that knowledge of a product's source alone typically does not address. (15) Recognizing these limitations, the Lanham Act contains a separate class of marks, "certification marks," (16) that are specifically designed to communicate complex or less readily discernible product information. (17) Unlike conventional trademarks, certification marks are not used in commerce by the owner of a mark; nor do they signal a unique commercial source. (18) Instead, licenses to use certification marks may be issued to any company that meets the standards of a certifying entity. (19)

It would be a mistake, however, to conclude that the availability of certification marks resolves the shortcomings of trademark policy. First, the formal legal distinctions between certification marks and conventional trademarks are often meaningless for consumers; they view ecolabels of either variety as operating the same way in shared commercial spaces. (20) This functional overlap effectively erases any boundary between certification marks and conventional trademarks. In the case of sustainably grown coffee, for example, numerous third-party certification organizations exist, but many companies--including market leaders such as Starbucks (21)--use conventional trademarks as ecolabels to convey information about their sustainable practices. (22) Similar to certification marks, the use of private ecolabels is motivated by an amalgam of normative environmental commitments and marketing objectives that reflect consumer preferences. (23)

Second, the efficacy of ecolabels is vulnerable to consumer information overload, (24) which the proliferation of private ecolabels has greatly exacerbated. (25) The information conveyed by ecolabels is particularly vulnerable to this type of marketplace congestion because ecolabels correct information asymmetries related to a good's origin or manufacture that are not directly evident to consumers. (26) With these kinds of "credence" goods, (27) information asymmetries must be corrected before trademarks can enable consumers to trace products with environmental characteristics they like (or wish to avoid) back to a specific company. (28) The technical nature of this information increases the risk of information overload: the more ecolabels there are, the more information there is to process, and the more likely consumers will be to use shortcuts (that savvy marketing can exploit) or to give up entirely. (29) In addition, competition between third-party certification and private ecolabels (covered by conventional trademarks) can undermine environmental standards by propelling a "race to the bottom" in which certification organizations relax their standards to retain commercial users. (30)

It is not necessary to adopt a particular stance on the relative merits of private governance and legal centralism (31) to recognize the virtues of private governance given contemporary politics. The intensifying ideological opposition to national environmental regulations and multilateral treaties has elevated the importance of private governance. (32) Almost daily, the prospects of government responses to pressing environmental and other global problems appear more remote. (33) In this context, private market-oriented interventions are among the few remaining viable responses to national and global environmental issues.

The political currents today also reflect, and in part are a response to, the rapid globalization that occurred following the end of the Cold War. The resulting expansion in trade was instrumental in stimulating interest in private environmental governance. (34) In the United States, widespread movement of manufacturing offshore drastically limited the government's capacity to regulate the exploitation of natural resources and production processes associated with goods entering its markets. (35) Free trade policies reinforced this loss of national control because they were premised on like goods being treated equivalently irrespective of their origin or how they were made. (36) As a result, commodities and manufacturing that were once largely domestic, and thus under the jurisdiction of U.S. regulators, were increasingly extracted or manufactured in countries with lax or nonexistent standards. (37) The impacts of this shift were hotly contested when the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) were established in the mid-1990s. (38) It was this experience along with faltering negotiations on multilateral environmental treaties that first prompted environmental activists to gravitate towards private governance. (39)

The ultimate success of these market-oriented initiatives depends on consumers being able to identify goods and services that reflect their environmental values. Trademarks are universally recognized as the principal tool consumers use to select commercial products. (40) And yet, because orthodox trademark theory restricts trademarks to ensuring that consumers can efficiently identify the source of a good or service, (41) measures that could enable consumers to select products based on their environmental preferences are significandy compromised. This Article undertakes a critical examination of trademark law and the opportunities for reforming it to encompass environmental values and preferences...