How Trademark Law Has Turned From A Consumer Protection Law, Into A Weapon To Hinder Competition

Trademark

from the abuse-of-the-system dept

We’ve talked, regularly, about how trademark law is quite different than patent and copyright law. Patent and copyright law come from the “progress clause” of the Constitution, and are there to create incentives for “promoting the progress.” Trademark law, on the other hand, falls under the “commerce clause” of the Constitution and is really about protecting consumers from confusion and harm (such as believing a product is from one reputable source, when it’s really from someone else). Unfortunately, after some lawyers successfully lumped them all together as “intellectual property law,” there’s been an ongoing effort to treat trademark law more and more like copyright law — and that’s a problem. This is most clearly seen in the more recent “innovation” within trademark law of moving beyond “a likelihood of confusion” into the concept of “dilution.”

Trademark lawyer Ron Coleman, who runs the excellent Likelihood of Confusion blog, has now written a paper that highlights his concerns about where trademark law has been trending recently, and comparing it to the excesses of copyright law these days. The first part of the paper details just how ridiculous copyright law has become lately, way outside of its Constitutional moorings. For example, he highlights the serious problems and misunderstandings of the purpose behind statutory damages by the court, to produce awards that make little sense, and clearly go beyond the law’s intended purpose:

Under the Copyright Act, statutory damages are, contrary to popular belief, not intended to be a windfall for the lucky holder of an infringed copyright. Rather, they are meant to effect just compensation that bears a reasonable relationship to compensatory damages that may be difficult or impossible to prove, albeit with an added consideration–added, but not disproportionately dominant–of the need to deter future infringement.

[….]

In fact, statutory damages are not penalties. The purpose of statutory damages is to permit a wronged plaintiff to recover where there is insufficient proof of actual damages or profits. Substantial damages are, the courts typically hold, only be awarded for substantial injury.

Yet something–it is not obvious what this something is–within the judicial system keeps fighting against these fundamentally fair principles, and doing so with increasing vigor. Only months ago a jury awarded $2 million–little more collectible than “all the money in the world”–to the Lords of Music for what was indeed knowing copyright infringement of two dozen songs.

And, unfortunately, rather than recognizing the problems of this kind of excess, trademark law appears to be moving in that same direction:

Many “IP enforcement” attorneys believe that while there is no shortage of bona fide infringement to occupy at least a large number of them, trademark law practice has, to a very large extent, descended to an anti-competitive methodology utilized by dominant market players not to prevent consumer confusion, as was its original rationale, but to reduce consumer choice and overall welfare by preventing competition.

Combined, Coleman notes, copyright and trademark law have both become unhinged and threaten legitimate business interests:

The civil litigation system was not designed for the use of large companies to put small enterprises out of business, but it is perfectly suited for doing so. Copyright and trademark law, in tandem and with reference to each other, were meant to protect, respectively, creativity and reputation or consumer interests. They were crafted to apply to narrow bands of behavior affecting specifically identified bundles of rights. The enterprise of convincing a court to invoke them and restrain the behavior of others once required admissible and reasonably rigorous proof of infringement consistent with ancient Anglo-Saxon judicial norms. Today, however, trademark and copyright are methodologies of “IP enforcement,” and even of censorship. Notwithstanding the existence, and even the growth, of real threats to intellectual property rights, especially in copyright, strategies for abusing IP claims to achieve entirely unrelated tactical goals are utilized routinely, formulaically, and often successfully.

The Internet has provided a post-industrial economy with once unimaginable vistas of entrepreneurial possibility. Yet the more central the Internet becomes to the economy, the more of a threat its relatively untamed nature is to companies with the most to lose to innovators.

Those are just a few snippets from the overall paper, which is an excellent read.

Filed Under: competition, consumer protection, trademark