Rationales for the Protection of Trademarks with a Reputation TRADEMARK LAW INSTITUTE ‘The Protection of Trademarks with a Reputation’ 15 October 2010 W. Sakulin Institute for Information Law (IViR) Universiteit van Amsterdam

2 Need for and (minimum) requirements of a rationale The need for a rationale  Trademark rights exclude third parties from certain uses of trademarks  Interdependency in communication  Distributive justice – equal opportunities The (minimum) requirements of a rationale  A convincing reason for protection  Ability to determine the appropriate scope and limitations of the rights

3 The Functional Approach 1. Source identification and product distinction founction 2. Quality and guarantee function 3. Advertising function ECJ:  The essential function (1 and 2)  The other functions: communication, advertsing, investment (3)

4 The Essential Function ECJ 12 November 2002 Arsenal Football Club, para 48: “to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. For the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish and maintain, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality.“

5 Economic Rationales TM right to achieve an economic optimum  Existence & scope of TM rights only as far as benefits outweigh costs Remedying a market failure 1. High search costs -> search cost rationale 1. Insufficient revenues to TM right holder -> dynamic efficiency rationale

6 Economic Rationales Consumers / Society Right holders Source identification & product distinction function SC rationale Quality and guarantee function Dynamic efficiency rationale Advertising function ?

7 Economic Rationales – The advertising function Search cost rationale  Blurring  Depends on the definition of distinctive character and harm  Tarnishment  Truthful information should be permitted  Free-riding  Not about search cost reduction – ECJ L’Oréal v. Bellure Dynamic efficiency rationale  Does TM law have the aim to stimulate the ‘production’ of trademarks with a reputation?  “No economic harm in pure free-riding” Landes and Posner

8 Negative effects of protecting the advertising function Negative economic consequences  Adverse selection by consumers – (tab water)  Inertia of consumers  Monopoly power & barriers to market entry (antitrust) The ‘freedom’ argument  “Consumers are free to chose the products they like – advertising does not force products or services on them.”  -> Consumers need adequate knowledge of alternatives Possible negative social consequences  Directed against advertising  Promotion of consumerism  Promotion of stereotypes

9 Ethical Rationales TM right as moral entitlement or reward BUT always grounded in a framework of justice or fairness This implies mutual duties and rights of all people vis-à-vis each other 1. Unjust enrichment 2. Lockeian Labour Theory

10 Unjust Enrichment Basic principle of civil law Action of last resort  Impoverishment  Enrichment  Causal link  Unjust  No other means of recuperation Does not fulfill the (minimum) requirements of a rationale  What is ‘unjust’? Misappropriation/own efforts?  Not possible to deduce an indication for defining the scope of trademark rights  If ‘unjust’ is defined in the negative i.e. “free competition must remain possible”, then the application of economic theories seems more appropriate.

11 Lockeian Labour Theory Based on a mutual “no-harm principle”  A labourer owns his body and his labour  He mixes his labour with objects from the commons  The objects embody the labour  Taking of the objects by others harms the labourer  -> others have a duty to refrain from causing harm

12 Lockeian Labour Theory Application to trademark rights?  physical labour / investment  the commons / signs  state of nature / monetary economy  corn, apples / repute, distinctive character (in the mind of consumers) Need to modify the original theory  Investments  Signs

13 Lockeain Labour Theory The object of protection must be the result of the labour or investment  Trademarks with a ‘reputation’  Exclusion of alternative causes of reputation – Schechter(!)  What about reputation (ECJ Chevy), repute & distinctive character (ECJ l’Óreal and Intel)? ‘Enough and as good’ must be left to third parties  Results from the no-harm principle

14 Labour & ‘Enough and as good’ No appropriation of descriptive or cultural connotations,  e.g. Lief! (Sweet!) – Goldhase – Raffael’s Putti (A. Ohly) Room for descriptive, generic and referential uses  3rd party uses need to remain ‘as good’(!) – ECJ Gilette  Generic uses –use as product standard should be possible  L’Oréal v. Bellure – enough and as good? Freedom of Expression  Parody, criticism, artistic uses, educational use… Other social values

15 Thank You! W. Sakulin Institute for Information Law (IViR) Universiteit van Amsterdam