Virtual Trade Dress: A Very Real Problem
56 Md. L. Rev. 384, 406-09 (1997)
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Email Listserve[NOTE: This article excerpt has been edited for classroom use by the omission of text and footnotes. See this alternate source for the full article.]
IV. Why Protect Trade Dress?
The justifications for protecting trade dress, as distinct from trademark, have not received much scholarly attention. Arguments in defense of trademarks fit trade dress quite well, and would have done so even if Two Pesos had not essentially equated the two areas of law.n135 Trade dress and trademarks share common roots and serve common ends. Section A argues that trademark law has as its fundamental goal revealing otherwise hidden information about the quality of goods and services. Section B explains why free riders threaten this informative function and how granting property rights to marks that identify commodities inhibits free riding. . . .
A. Revealing Hidden Qualities
To put the matter in fundamental terms, trademark law aims at providing information about the otherwise hidden qualities of particular goods or services. Economists classify goods with hidden qualities as "experience" goods or "credence" goods. Experience goods (and, by extension, services) possess qualities that consumers can detect only after purchase. Examples of experience commodities include boxed products, medicine, and new employees. Credence goods and services, in contrast, possess qualities that might never become apparent. Consumers purchase these based on authoritative advice. Examples of credence commodities include vitamins, legal advice, and a good education.
At least with regard to experience commodities, protectable marks and trade dress help consumers to perceive immediately qualities that would otherwise remain hidden until after purchase. Trademarks reduce consumers' search costs by making it easier for them to identify goods. This, in turn, encourages producers that hold trademarks to invest in the quality of their products because they can develop valuable goodwill by maintaining consistent quality over time and across consumers. Both of these effects—reducing consumers' search costs and encouraging producers' consistency—stem from the fundamental purpose of trademark law: to reveal information about the hidden qualities of goods and services.n142
Trademarks thus add no value to goods that have no hidden qualities.n143 Consumers can perceive the qualities of such "inspection goods" immediately, before paying anything more to consume them. Examples of inspection goods include nonoccasion greeting cards, paintings, and screen savers. A similar analysis applies to inspection services; a simple street performance, for example, wears its value on its face. Certain contexts can, of course, obscure the otherwise apparent value of inspection commodities. A retailer ordering cards in bulk may thus benefit from reference to the "Blue Mountain" mark. Consumers browsing through a card rack, however, will find the same mark useless. They need only inspect a card to determine its worth.
This same analysis applies to trade dress. In its usual, proper role, trade dress informs consumers about the hidden qualities of goods and services. Trade dress runs the peculiar risk, however, of constituting the very commodity that consumers value and, thus, becoming virtual trade dress. Virtual trade dress can do nothing to inform consumers of its own hidden qualities. The proof of its value, like that of the proverbial pudding, is in its consumption. Virtual trade dress thus cannot serve the primary goal of trademark law: to inform consumers about the hidden qualities of goods and services.
B. Preventing Free Riders from Copying
Competitors have a powerful incentive to copy the trademarks that identify successful goods and services. Landes and Posner explain that "[t]he free-riding competitor will, at little cost, capture some of the profits associated with a strong trademark because some consumers will assume (at least in the short run) that the free rider's and the original trademark holder's brands are identical." A tragedy of the commons thus threatens trademark law. If not prevented, free riding will corrupt the information about hidden qualities that trademarks send to consumers. Unable to trust trademarks, consumers will ignore them. With no way to convince consumers about the hidden quality of their commodities, producers will let that quality fall.
As with other problems arising out of common ownership, assigning property rights to the contested resource provides a workable solution. In this commons problem, trademarks represent the contested resource, and property rights thereto provide their holders with the power to bar other parties from using the marks in manners likely to confuse consumers. This property right could theoretically vest in consumers themselves, who would bring class action misrepresentation claims against infringing parties.n148 Such a scheme would give rise to large administrative costs, however. In practice, therefore, trademark rights vest in those who create the products to which the trademarks attach.
FOOTNOTES
135. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 763 (1992) ("There is no textual basis for applying different analysis to [trademarks and trade dress].").
142. It bears noting that this function has nothing to do with encouraging innovation, fundamentally distinguishing trademark law from patent and copyright law. Courts have sometimes overlooked this distinction. See, e.g., Keene Corp. v. Paraflex Indus., Inc., 653 F.2d 822, 825 (3d Cir. 1981) (criticizing the aesthetic functionality doctrine on the grounds that it discourages imaginative and attractive marks); Hartford House, Ltd. v. Hallmark Cards, Inc., 647 F. Supp. 1533, 1540 (D. Colo. 1986) ("One salutary purpose of the Lanham Act . . . is to protect a creative artists' [sic] rights in his or her creation and thus provide incentive to be creative."), aff'd, 846 F.2d 1268 (10th Cir. 1988). The court in Duraco Products, Inc. v. Joy Plastic Enterprises, Ltd., 40 F.3d 1441, 1446 (3d Cir. 1994), among others, recognized the fault in such views.
143. To speak more comprehensively, trademarks add less value to goods that have fewer hidden qualities. This pragmatic hedge accommodates an argument that Dan L. Burk made when commenting on an earlier draft of this Article: Every commodity has some hidden qualities; inspection, experience, and credence goods thus differ only in how rapidly consumers can assess them. Even granting Burk's argument, however, it remains true that the costs of protecting trademarks in inspection goods almost always outweigh the benefits.
148. Despite the broad language of 15 U.S.C. § 1125(a) (1994), allowing "any person who believes that he is or is likely to be damaged by" violation of its terms, courts are divided on whether to give consumers standing to sue. Compare Colligan v. Activities Club, 442 F.2d 686 (2d Cir. 1971) (standing denied), with Arnesen v. Raymond Lee Org., Inc., 333 F. Supp. 116 (C.D. Cal. 1971) (standing allowed).
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