We All Know It’s a Knock-off! Re-evaluating the Need for the Post-sale Confusion Doctrine in Trademark Law

• Jurisdiction: North Carolina,United States
• Citation: Vol. 14 No. 2012
• Publication year: 2012

NORTH CAROLINA JOURNAL OF LAW & TECHNOLOGY VOLUME 14, ISSUE 1: FALL 2012

WE ALL KNOW IT’S A KNOCK-OFF!

RE-EVALUATING THE NEED FOR THE POST-SALE CONFUSION DOCTRINE IN TRADEMARK LAW

Connie Davis Powell*

Counterfeit luxury goods have become an undeniable part of the global economy. It is estimated that these goods account for roughly seven percent of the global marketplace. With the emergence of the counterfeit market, consumers have become sophisticated shoppers who are knowledgeable and educated about their brand preferences as well as the availability of counterfeits, replicas and knock-off luxury goods. Indeed, research suggests that consumers are eager to purchase unauthentic products to gain status, without the cost. To combat this trade, trademark holders have sought infringement actions against the purveyors of counterfeit goods alleging post-sale confusion. Post-sale confusion provides a basis for finding a likelihood of confusion where the purchaser is aware that the product is fake, but the general consuming public may believe the counterfeit article to be a legitimate good. This Article evaluates whether the post-sale confusion doctrine is a legitimate expansion of trademark law and argues that such a doctrine is no longer necessary in a sophisticated marketplace where other remedies are available to curtail the trade in counterfeit goods.

1. INTRODUCTION

   Canal Street1 exists almost everywhere. Whether at a mall

   
   

   * Professor Powell is an Associate Professor, Baylor University School of Law; J.D., Indiana University Maurer School of Law, B.A., University of North Carolina at Chapel Hill. Professor Powell would like to thank her research assistants Jessica Edwards, Chantesia Hodges, and Sara McMullen for their work on this project and Tyrone Nichols for his engaging dialogue.

   1. Canal Street is the infamous street located in New York’s Chinatown known for the availability of replica bags, watches, and other high-end goods. See

      Christine Hauser, City Agents Shut Down 32 Vendors of Fake Items, N.Y.

      
      

      1

      
      

      kiosk, at a street vendor, at a flea market, or on the Internet, vendors are making available to many consumers what they desire—counterfeit luxury goods.2 Many consumers are eager to obtain replicas of well-known designer products. These purchasers are neither deceived nor preyed upon—they are bargain-hunting, savvy consumers interested in achieving their desired social status.3 However, such savvy consumers are not the focal point of the post-sale trademark confusion doctrine.4 Rather, the post-sale trademark confusion doctrine targets a hypothetical, non- purchasing consumer that might be deceived by the consumer accomplices—the purchasers of counterfeit goods.5 Post-sale trademark confusion provides a remedy to the trademark holder when an inferior product bears a mark that is identical or confusingly similar to the trademark holder’s mark, which has the potential to diminish the reputation of the trademark holder’s brand by potentially confusing a non-purchaser that the inferior product belongs to the trademark holder.6 Indeed, much like traditional‌

      
      

      
      

      TIMES, Feb. 27, 2008, http://www.nytimes.com/2008/02/27/nyregion/27chinato wn.html?_r=0.

   2. Luxury goods are goods that are expensive and associated with a high- prestige designer. See Arghavan Nia & Judith Lynne Zaichkowsky, Do

      Counterfeits Devalue the Ownership of Luxury Brands?, 9 J. PROD. & BRAND

      MGMT. 485, 485–86 (2000). The traditional definition of luxury goods defines these commodities as status goods—goods for which the mere use or display of the good conveys prestige upon the owner apart from any functionality or utility. Id. The mere use or display of a particular branded product brings prestige on the owner, apart from any functional utility. Id.

   3. See Keith Wilcox et al., Why Do Consumers Buy Counterfeit Luxury Brands?, 46 J. MKTG. RES. 247, 255 (2009).

   4. See U.S. v. Torkington, 812 F.2d 1347, 1352 (11th Cir. 1987) (explaining that post-sale confusion refers to the mistaken belief of potential consumers that a product is that of the trademark holder); see also Payless Shoesource, Inc. v.

      Reebok Int’l Ltd., 998 F.2d 985, 988–90 (Fed. Cir. 1993) (commenting that

      post-sale confusion is found when a potential consumer is likely to associate the product with the trademark of another).

   5. See Mark P. McKenna, A Consumer Decision-Making Theory of Trademark Law, 98 VA. L. REV. 67, 102 (2012).

   6. See, e.g., Gibson Guitar Corp. v. Paul Reed Smith Guitars, LP, 423 F.3d 539, 552 (6th Cir. 2005) (finding that post-sale confusion is appropriate when

      inferior products have the potential to damage one’s reputation in the

      
      

      trademark confusion,7 post-sale confusion analysis must take into consideration the sophistication of the marketplace as well as the potential purchaser of the goods and services being counterfeited.8 As such, when evaluating the likelihood of post-sale confusion, the focus initially is on the ordinary or reasonably prudent consumer.9 However, in identifying the ordinary or reasonably prudent consumer, it is imperative to look to the degree of consumer care and the consumer’s relative sophistication.10 If a consumer can be expected to exercise a high degree of care in the purchasing decision and is determined to be of above average sophistication, the likelihood of confusion is diminished.11

      In a society where counterfeits are not only sought out by consumers, but also recognized by the sophisticated shopper, it is important to re-evaluate trademark doctrine to ensure that it has not been expanded beyond its core policy principles. Research conducted by social scientists suggests that consumers are indeed aware of counterfeit goods and seek them out for a variety of reasons, ranging from price to status associated with the luxury brand.12 This Article argues that the post-sale confusion doctrine is unnecessary in a sophisticated marketplace and is not aligned with

      
      

      
      

      marketplace).

   7. J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 23:95 (4th ed. 1994).

   8. Forum Corp. of N. Am. v. Forum, Ltd., 903 F.2d 434, 442 (7th Cir. 1990).

   9. Savin Corp. v. Savin Group, 391 F.3d 439, 461 (2d Cir. 2004) (“[T]he pertinent question is whether numerous ordinary prudent purchasers would

      likely be misled or confused as to the source of the product in question because of the entrance in the marketplace of [Defendants’] mark.”).

   10. See id.

   11. See Thomas R. Lee, Glenn L. Christensen & Eric D. DeRosia, Trademarks, Consumer Psychology and the Sophisticated Consumer, 57 EMORY L.J. 575,

   579 (2008) (arguing that the more sophisticated a consumer the less likely it is

   that consumer confusion will occur); see also First Nat’l Bank in Sioux Falls v. First Nat’l Bank, S.D., 153 F.3d 885, 889–90 (8th Cir. 1998).

   1. Nia & Zaichkowsky, supra note 2 at 486–87; see also Mourad Siham, The Effect of Counterfeit on Luxury Brand Buying Behavior, In Terms of

      Consumption Experience (Jan. 16, 2012) (unpublished Ph.D. dissertation, Pierre Mendès France University), available at http://halshs.archives-ouvertes.fr/docs/

      00/66/04/17/PDF/CR_2011-11_E3.pdf.

      
      

      the core principles of trademark law. Purchasers of high-end goods are less likely to be confused in the post-sale context because of their keen awareness of their preferred brands and their knowledge of the existence and prevalence of counterfeit luxury goods in the marketplace.13 Moreover, trademark law was not established to create actionable confusion in the abstract.14 It is only when confusion is likely to persuade preferences that the law should intervene.15

      This Article will proceed in five parts. Part II provides a synopsis of the two core policies of trademark law: consumer protection and protection of the goodwill of the mark. Part III examines the development of the post-sale confusion doctrine and identifies the principle that the courts sought to address when adopting the doctrine. Part IV evaluates post-sale confusion in the context of a sophisticated marketplace. Part V concludes by arguing that the post-sale confusion doctrine is an illegitimate expansion of trademark law and is unnecessary in a luxury goods context where the consumers are exceedingly sophisticated.

      
      

2. POLICY OF TRADEMARK PROTECTION

   Merchants have used trademarks to denote their goods and services for thousands of years.16 Not surprisingly, debates regarding the restrictions and regulations on uses of these marks

   
   

   
   

   1. Hermès Int’l v. Lederer de Paris Fifth Ave, Inc., 219 F.3d 104, 109 (2d Cir. 2000).

   2. See Blake Tierney, Missing the Mark: The Misplaced Reliance on Intent in Modern Trademark Law, 19 TEX. INTELL. PROP. L.J. 229, 246 (2011)

      (commenting that trademark cases are not abstract but are, and should be, subject to precise rules).

   3. See Robert G. Bone, Taking the Confusion Out of “Likelihood of Confusion”: Toward a More Sensible Approach to Trademark Infringement,

   106 NW. U. L. REV. 1307, 1347–48 (2012) (“Confusion is not a problem in itself. . . . Probability of confusion is certainly relevant to liability, but liability should also depend on the severity of the harm that confusion is likely to generate.”).

   1. See generally FRANK I. SCHECHTER, THE HISTORICAL FOUNDATIONS OF THE

      LAW RELATING TO TRADE-MARKS (1925) (detailing a history of the origins of trademark and its development).

      
      

      date back equally as far.17 Throughout this extensive history, fluctuating policies and purposes have continually worked to alter the nature of trademark law. For example, trademark law initially developed to protect the trademark holder’s interests from trade diversion.18 The law then shifted its focus to consumer protection,19 ultimately finding a balance between the two.20 The Lanham Act of 194621 is the first comprehensive statute that governs both the registration and the protection of trademarks.22 The Lanham Act grants a property right to the trademark holder, which enables the trademark holder to assert a cause of action for any use that causes a likelihood of consumer confusion.23 In 1962, Congress amended the Lanham Act by striking out...