Trademark’s Judicial De-Evolution: Why Courts Get Trademark Cases Wrong Repeatedly

Trademark’s Judicial De-Evolution: Why Courts Get Trademark Cases Wrong Repeatedly

Trademark law has de-evolved. It has transitioned from an efficient mechanism for ensuring competition into an inefficient regime for capturing economic rents. In this Article, I focus on the role that party self-interest has played in biasing the evolution of trademark law. This self-interest tends to lead parties to (1) challenge efficient legal rules and seek to replace them with inefficient, anticompetitive rules, and (2) accede to inefficient, anticompetitive rules once they are in place. Almost by definition, when a rule of trademark law promotes competition, it reduces the market surplus or rents that current producers capture. As a result, parties will seldom spend resources either to defend an efficient trademark rule or to challenge an inefficient trademark rule in the hope of replacing it with a more efficient rule. Instead, inefficient trademark rules offer a party, usually the trademark owner, the opportunity to capture rents. As a result, at least one party will have a correspondingly strong interest in defending such inefficient trademark rules or, if necessary, challenging efficient trademark rules in the hope of replacing them with inefficient trademark rules.

The net result has been something of a perfect storm for trademark law. Efficient legal rules are repeatedly challenged until they are replaced with inefficient legal rules, at which point no one challenges them. The entirely predictable result of this process is exactly what scholars have observed: courts have re-written trademark law so that it protects far too much and far too broadly. Rather than ensure competition, it serves to restrict competition and to maximize the profits of trademark owners. Rather than promote consumer welfare, it has become a form of corporate welfare.

We cannot, however, fix the problems with trademark law through substantive trademark doctrine. Substantive reform, even radical substantive reform, would simply provide a new starting point from which inefficient common law evolution would again proceed. To fix the ongoing de-evolution of trademark law, we need to change the process of trademark litigation to ensure, first, that parties have an adequate incentive to defend and fight for efficient legal rules, and second, that courts have the information they need to recognize the efficient legal rule and render judgment accordingly. In this Article, I identify and evaluate several possible mechanisms for solving trademark’s ongoing common law de-evolution.

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