TRADEMARK

POLICY
Trademarks are words or symbols that consumers use to identify where goods or services
come from. For instance, "CREST" is a trademark because people know that every tube of
toothpaste with that label comes from the same source. When a mark like "CREST" uniquely
identifies a source, consumers can use it to find information about the product they want to
buy, which reduces the time and effort needed to search for information.
These are the economic arguments - consumer search costs and encourage businesses to
maintain and improve product quality by letting them communicate quality-related
information to consumers.

DOCTRINE
To win a trademark infringement case, a company must show two things:
(1) that it owns the exclusive rights to the mark, and
(2) that the defendant's use of a similar mark violates those rights.

1. Ownership of Exclusive Rights:

- Trademarks fall into categories: fanciful, arbitrary, suggestive, descriptive, and generic.
- Fanciful, arbitrary, and suggestive marks are inherently distinctive and are owned by
proving first use in trade.
- Descriptive marks require proving "secondary meaning," where consumers associate the
mark with a single source.
- Generic marks can't be owned as trademarks because they designate a product class.

2. Infringement:
- After establishing exclusive ownership, the company must show that the defendant's use
of a similar mark is likely to confuse consumers.
- Courts employs a multifactor test- which consider factors like mark strength, similarity,
product proximity, evidence of confusion, and defendant intent.
- Different types of confusion include source confusion (believing plaintiff sells defendant's
products) and sponsorship confusion (believing plaintiff endorses defendant's products, it
goes further and expands trademark rights beyond source confusion).
- Confusion can occur before, during, and after purchase.

History of the Likelihood of Confusion Test:

A. 1910-1940: Trademark Protection Against Noncompeting Uses:

- Trademark protection initially focused on source confusion and competing goods.
- In the early twentieth century, however, firms began to integrate
horizontally, and consumers gradually came to expect that the same firm
might sell different products. Expansion to noncompeting products began due to changing
market conditions and consumer expectations.
- Some courts broadened protection to include source confusion and sponsorship confusion.
- Frank Schechter's influential article “The Rational Basis of Trademark Protection,”
advocated for broad trademark protection to preserve the distinctiveness and commercial
magnetism of marks without regard to consumer confusion.
- The Second Circuit Court also endorsed a broad approach for expansive trademark
protection. However, this broad approach faced challenges as courts grappled with the
complexities of balancing protection against potential overreach.
- Turning Points: While early rulings supported a liberal interpretation of trademark
infringement, a shift occurred in the mid-1930s and 1940s. Judges, including Learned Hand
and Jerome Frank, began advocating for a more restrained approach, requiring stronger
evidence of harm to the trademark owner's reputation or market position.
- Introduction of Multifactor Test: The Restatement of Torts in 1938 introduced the first
comprehensive framework for assessing trademark infringement, distinguishing between
competing and noncompeting products. This multifactor test aimed to evaluate the
likelihood of confusion while considering the specific circumstances of each case.
- Focus on Reputation Harm: Both judicial opinions and the Restatement emphasized the
importance of protecting the trademark owner's reputation. Liability hinged on the potential
harm to the trademark's goodwill, highlighting the dual objectives of consumer protection
and safeguarding commercial interests.

B. 1940-1960: Conflict in the Second Circuit

- Growing Concerns: By the 1940s, economists and legal scholars expressed worries about
trademark monopolies. They feared that protecting powerful marks could create barriers to
market entry and lead to undesirable monopolies. Of particular concern was the rise of
psychological advertising, which aimed to emotionally connect consumers to brands,
potentially influencing purchasing decisions irrationally.

- Impact on Judges Hand and Frank: Judges Learned Hand and Jerome Frank were
particularly influenced by these concerns. They sought to address monopoly costs by
imposing gatekeeping requirements in trademark cases. Their efforts aimed to balance the
protection of trademarks with the need to prevent anticompetitive practices.

- Opposition from Judge Charles Clark: Judge Charles Clark opposed Hand and Frank's
approach, advocating for a different perspective on trademark law. This intra-circuit conflict
within the Second Circuit Court of Appeals reflected broader policy tensions regarding
trademark protection and market competition.

- Significance of the Second Circuit: The Second Circuit Court of Appeals held significant
influence in trademark law during the mid-twentieth century. Its decisions not only shaped
trademark jurisprudence within its jurisdiction but also influenced courts in other circuits,
leading to conflicts and debates across the legal landscape.

- Development of Likelihood of Confusion Test: The Second Circuit's case law during this
period laid the groundwork for the development of the likelihood of confusion test. This
test, which evaluated the likelihood of consumer confusion in trademark cases, emerged
from the policy tensions and conflicts within the Second Circuit and subsequently influenced
similar tests in other jurisdictions.
1. 1940-1953: A Rift Develops
a. Judge Learned Hand and Judge Jerome Frank:
- Judge Hand and Judge Frank advocated for a restrictive approach regarding the expansion
of trademarks to noncompeting products.
- They emphasized the importance of preventing trade-name monopolies that could harm
consumers.
- Judge Hand required a strong showing of harm to the mark owner's reputation or plans to
enter the defendant's market for trademark protection.
- Judge Frank's dissent in Triangle Publications v. Rohrlich highlighted his belief that free
riding on goodwill did not necessarily warrant trademark protection.
b. Judge Charles Clark:
- Judge Clark opposed the restrictive approach, arguing that confusion alone should be
sufficient for infringement.
- He interpreted the Lanham Act to eliminate the common law requirement of harm in
noncompeting product cases.
- Judge Clark believed that confusion harmed consumers and emphasized the unfairness of
free riding on a mark owner's goodwill.

2. 1953-1960: The Rift Repairs

- The Second Circuit's trademark law experienced inconsistency during this period, with
decisions split between two camps aligned with Judges Clark and Hand/Frank.
- Towards the latter half of the 1950s, the court gradually shifted towards Judge Clark's
confusion-only approach.
- The changing composition of the court and Judge Clark's influence contributed to this shift.
- Judge Clark's endorsement of the Restatement's multifactor likelihood of confusion test
further solidified his approach.
- However, conflicting precedent from the 1940s and early 1950s continued to influence
trademark jurisprudence until further developments by Judge Friendly.

C. 1961-1962: The Likelihood of Confusion Test Emerges

In 1961-1962, Judge Friendly's opinion in Polaroid Corp. v. Polarad Electronics Corp.
introduced the modern multifactor test for likelihood of confusion, which became
influential in other circuits. Friendly's analysis replaced conflicting Second Circuit precedents
with a unified infringement test, drawing partly from sections 729 and 731 of the
Restatement.

The Polaroid test comprised eight factors, notably diluting the Hand-Frank injury
requirements by transforming them into factors in a balancing test aimed at estimating
confusion likelihood.
1. The strength of [the plaintiffs] mark,
2. the degree of similarity between the two marks,
3. the proximity of the products,
4. the likelihood that the prior owner will bridge the gap,
5. actual confusion,,
6. the reciprocal of the defendant's good faith in adopting its own mark,
7. the quality of the defendant's product, and
8. the sophistication of the buyers."
Reputation injury became "the quality of defendant's product," and likely market entry
became "the likelihood that the prior owner will bridge the gap," subordinating these factors
to confusion likelihood.

In the Polaroid case, although decided on laches grounds, the court briefly discussed how
the multifactor test might apply. It emphasized those 8 factors while ignoring product quality
and bridge-the-gap factors embodying Hand-Frank requirements.

Triumph Hosiery Mills, Inc. v. Triumph International Corp. solidified the multifactor test,
with the court indicating acceptance of Polaroid's propositions. The opinion underscored
likelihood of source confusion as the touchstone of Lanham Act infringement, stating that
Hand's and Frank's traditional limitations were now mere factors in the multifactor test.

Following Polaroid and Triumph Hosiery, Second Circuit judges increasingly embraced the
multifactor test, influencing similar tests in other circuits. While variations existed among
these tests, many were shaped by Second Circuit precedents.

PROBLEMS WITH THE LIKELIHOOD OF CONFUSION TEST

The general multifactor likelihood of confusion test that all the circuits follow in one form or
another is flawed along three dimensions.
First, it produces bad results.
Second, it is doctrinally incoherent.
Third, it is inadequately supported on normative grounds.

BAD RESULTS
The likelihood of confusion test, while designed to protect trademark rights, can yield
adverse outcomes due to its open-ended nature and susceptibility to broad interpretations.
Two primary concerns arise: chilling effects and broad interpretations.

1. Chilling Effects:
Trademark owners often send cease-and-desist letters to alleged infringers, leveraging
legal uncertainty and high litigation costs. This situation fosters frivolous assertions of
trademark rights and deters socially valuable uses. The test's vagueness makes litigation
outcomes hard to predict, leading legitimate users to capitulate to trademark owners'
demands to avoid costly legal battles.

2. Broad Interpretations:
Courts' expansive interpretations of the likelihood of confusion test over the past few
decades exacerbate social costs without clear trademark-related benefits. Notably:
- Intent Factor: Originally focused on subjective intent to deceive, courts now infer bad
faith from a defendant's adoption of a similar mark with knowledge of the plaintiff's prior
use. This expansion can deter socially desirable trademark uses, like copying aesthetically
attractive product features without intending to confuse consumers.
- Types of Actionable Confusion: Courts have broadened actionable confusion beyond
whether the plaintiff is selling the defendant's product to include confusion about licensing
or post-sale confusion. This allows trademark owners to enjoin uses that don't confuse
buyers at the point of purchase, hindering competition and innovation.
Recent expansions, like sponsorship confusion and initial-interest confusion theories, have
faced criticism for impeding expressive uses of marks, preventing innovative product
features, and deterring creative Internet uses that benefit consumers.

In summary, the likelihood of confusion test's ambiguity and broad interpretations can lead
to chilling effects on legitimate users, frivolous litigation, and adverse impacts on
competition, innovation, and expressive freedoms.

DOCTRINAL INCOHERENCE
"Doctrinal incoherence" refers to a lack of consistency or clarity within a legal framework
or set of principles. In the context of trademark law, it means that the rules or factors used
to determine infringement or likelihood of confusion may not align logically or may produce
conflicting outcomes. This can lead to confusion for judges, lawyers, and those involved in
trademark disputes, as well as inconsistency in how similar cases are decided.
1. Bridge the Gap:
- Originally, this factor looked at whether a trademark owner planned to enter the same
market as the alleged infringer. But now, it's more about whether other similar companies
might enter that market, which is basically the same as asking how similar the products are.
So, it doesn't really add anything new to the analysis.

2. Comparative Product Quality:

- This factor used to be important for considering whether the alleged infringement could
harm the reputation of the original trademark. But since the focus shifted to just measuring
confusion, it's become less relevant. If two products are similar in quality, they'll seem more
alike to consumers, which is already covered by the "proximity" factor.

3. Strength of the Mark:

- Originally, this looked at how unique or recognizable the trademark was. But now, it's not
very clear how it relates to confusion. Strong trademarks might imply more potential harm if
there's confusion, but it's not a direct connection.

4. Defendant's Intent:
- This factor used to be about whether the alleged infringer purposely copied the
trademark to deceive customers. But in a test that's supposed to be all about measuring
confusion, this factor doesn't fit well. It's like trying to mix apples and oranges—it just makes
things confusing and inconsistent.

In simpler terms, these factors don't really help in figuring out if consumers are likely to be
confused, which is the main point of the test. Instead, they create extra complications and
don't add much clarity to the decision-making process.

INADEQUATE NORMATIVE FOUNDATION

This section discusses the lack of a clear moral foundation for the likelihood of confusion
test in trademark law. It argues that confusion alone is not inherently problematic and
should only be addressed if it is associated with morally blameworthy behavior or significant
harm.
The main points are:

1. Confusion is not inherently bad: People often experience confusion in various situations
without legal consequences. Thus, preventing confusion through trademark law should
only be justified if it is linked to morally wrong actions or causes significant harm.

2. Correlation between confusion and harm: While confusion might be a concern in cases
involving competing products, where it often indicates deceit or potential harm to
consumers, it's not as straightforward in cases involving non-competing products. In such
cases, a defendant might use a similar mark without intending to deceive or causing
significant harm. In such cases involving non-competing products, the situation is different.
Here, a defendant might use a similar mark without intending to deceive or causing
significant harm. Instead, the defendant might simply be leveraging the goodwill associated
with the original mark to benefit their own brand or might be a coincidence.

3. Liability should reflect moral character or harm: Liability in trademark cases should
depend on the moral character of the defendant's actions or the expected harm from
confusion. Therefore, the likelihood of confusion test is either irrelevant or incomplete. If
liability is based on the morality of the defendant's actions, then the likelihood of confusion
is irrelevant. If liability is based on confusion-generated harm, then the likelihood of
confusion test is incomplete because it doesn't fully consider the severity of the harm
caused by confusion.

RESTRUCTURING INFRINGEMENT TEST

There are two main perspectives in understanding trademark law's goals:

the economic approach and the unfair competition approach.
- The economic perspective emphasizes reducing consumer search costs, asserting that
problematic expansions in trademark law occur when judges prioritize concerns other than
efficient consumer search, such as anti-free-riding principles.
- The unfair competition perspective views trademark law as a broader unfair competition
tort, considering a complex balance of values that vary depending on the specifics of each
case.

The economic model underscores the importance of policing the transmission of

information through marks to facilitate efficient consumer search. However, it tends to
overlook the moral dimension of trademark law.
The unfair competition model acknowledges the moral aspect by allowing judges to assess
the fairness and morality of market conduct. Yet, it can be imprecise and relies on subjective,
case-by-case decisions.

To address these shortcomings, a more thorough analysis of the moral dimension of

trademark law is needed, along with critical examination of candidate moral theories. While
arguments against free-riding on a trademark owner's goodwill have been scrutinized, other
moral arguments, such as those concerning consumer autonomy and identity rights, also
deserve attention to ensure they don't unduly influence trademark decisions. Such an
approach aims to strike a balance between economic efficiency and moral considerations in
trademark enforcement.

MORAL JUSTIFICATION

1. Intentional Deception: Trademark law historically emerged from the tort of fraud,
requiring proof of intentional deception. Although intent is no longer a necessary element
for infringement liability, courts still consider it, especially when intentional deception is
involved. Intent to deceive is morally condemnable, and when combined with the inference
of harm through deception, it supports trademark liability. The current likelihood of
confusion test, however, often misapplies the concept of intent. It extends strong
presumptions of likely confusion even to cases where the intent is not morally culpable, such
as intent to copy or free-ride on goodwill. This is problematic because not all types of intent
qualify for moral condemnation. Thus, the focus should shift from purely predictive factors
to the moral function of intent in constructing liability rules.

2. Consumer Autonomy: This concept suggests that consumers have a moral right to make
informed and autonomous choices based on accurate product information. However, it's
challenging to enforce in trademark law due to the subjectivity of interpretation and the
high variance in consumer abilities. Guaranteeing perfect accuracy in product information
is impractical, and recognizing such a right would render it impossible for sellers to behave
morally. While consumer autonomy might influence trademark law as a moral value, its
scope and weight need clarification.

3. Free riding: Free riding refers to benefiting from the reputation and goodwill associated
with a trademark without actually investing in its development or earning it through one's
own efforts. Trademark law aims to prevent this practice to protect the original trademark
owner's investment and reputation.
However, there has been historical debate and disagreement over the significance of free
riding in trademark law. Some judges and scholars argue that preventing free riding is
crucial to maintaining the integrity of trademarks and ensuring fair competition. They
believe that free riding on another's trademark is morally wrong because it unfairly exploits
the efforts of the trademark owner. On the other hand, critics of the anti-free-riding
principle argue that free riding is pervasive and often acceptable in many contexts. For
example, when a new entrant in a market benefits from the promotional efforts of an
established brand, it might not be considered morally objectionable. Moreover, they argue
that trademark law should primarily focus on preventing consumer confusion rather than
solely targeting free riding.

4. Appropriation of Firm Identity: Some argue that taking trademarks is morally wrong
because it amounts to stealing a firm's identity. This idea draws parallels to personal identity
rights protected under publicity laws. However, while individuals may have moral rights to
protect their identities, corporations are artificial entities and do not possess the same
autonomy as individuals. Moreover, while there may be cases where a business is closely
tied to the personal identity of its owner, such as in the case of a small, individually owned
repair shop, extending moral rights protection to trademarks requires careful consideration
and may not apply universally.
ECONOMIC JUSTIFICATION

While moral arguments focus on fairness and justice, economic justifications aim to
maximize social welfare by minimizing expected social costs. In trademark law, economic
analysis centres on reducing the harm caused by confusion and not just the likelihood of
confusion occurring.

1. Expected Harm, Not Likely Confusion: From an economic standpoint, the expected cost
of unauthorized trademark use is the product of two factors: the probability of confusion
occurring and the magnitude of the social harm when confusion happens. The current
likelihood of confusion test in trademark law primarily emphasizes the probability factor
but overlooks the significance of the harm factor. This overlooks situations where even a
low probability of confusion can lead to substantial social harm if confusion materializes.

2. Constructing the New Liability Test: To address this, an optimal liability test should
consider both the probability of confusion and the magnitude of confusion-related harm.

a. Estimating Probability of Confusion: This involves factors strictly relevant to estimating

the likelihood of consumer confusion, such as similarity of marks, proximity of products,
consumer sophistication, instances of actual confusion, and specific market context.
Factors like bridge the gap and comparative quality, which collapse into product proximity,
should be excluded from this part of the test. Similarly, factors like strength of the mark and
morally neutral forms of intent (such as intent to copy or free ride) should be cautiously
considered or omitted.

b. Estimating Confusion-related Harm: The second part involves estimating the harm
caused by confusion, focusing on impairments to the mark's informational function. This
harm includes increased consumer search costs, reduced product quality due to market
responses, and potential consumer deception leading to undesirable purchases. Trademark
law's concern is to prevent impairment of the mark's efficient information transmission
function, linking harms to this core objective.

- Competing Products: In cases of competing products, where confusion as to actual

source exists, there is a presumption of trademark-related harm. However, exceptions exist,
such as merchandising rights cases, where the mark is the product itself, and
confusion-related harm is unlikely.

- Noncompeting Products: In cases involving noncompeting products, harm may arise if

source confusion exists, leading consumers to mistakenly believe the plaintiff is the actual
source. However, no presumption of harm should apply if there is no source confusion, and
the trademark owner must prove harm. Harm in these cases can stem from information
distortion due to the defendant's use of an inferior product or efficiency losses associated
with preventing the plaintiff from using the mark in the new market.
Overall, the new liability test aims to balance the prevention of consumer confusion-related
harm with the maintenance of efficient information transmission through trademarks, thus
optimizing social welfare in trademark law.

How do we figure out if people might get confused between different brands or products.

It says we should look at two main things: morals (like what's right and wrong) and
economics (like money stuff).

First, with morals, it says intentional lying should be treated separately from confusion.
Sometimes, it might be okay to use someone's name for your business, especially if it's really
personal to you. But in most cases, using someone's name without permission isn't cool.

Then, with economics, it suggests splitting the test into two parts: how likely people are to
get confused and how much harm it causes. It says if products are similar and could be
mixed up easily, that's a problem. But if they're totally different, confusion might not matter
as much.

It also talks about how judges should decide if there's harm. If two products are similar,
there should be a presumption that it's harmful, unless there's a good reason. But if they're
not similar, then harm should be looked at more closely.

Lastly, it says we shouldn't focus too much on quality or how good something is without a
clear definition. And to make sure trademark laws don't stop people from using names or
symbols in important ways, there should be some exceptions or clear rules.