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Marks, morals, and markets.

A. Trademark as Promise (144)

The contractualist theory of producer-consumer relationships in trademark law offers a highly attractive justification of core trademark doctrine that is at least as convincing as that of consequentialist theory, if not more so. Consider the classic case of infringement by passing off (145) (or what one might refer to today as point-of-sale confusion as to source). (146) What would a contractualist consider wrongful about one producer using a trademark on his goods that confuses consumers into thinking the goods actually originated with another producer, and how might the contractualist view differ from the consequentialist view on this point?

The consequentialist, as noted above, explains this problem in terms of search costs. (147) If passing off were permitted--that is, if a mark used as a source identifier by one producer could be used by that producer's competitors on the competitors' goods--then consumers could be misled about the unobservable qualities of the products to which the mark is affixed. (148) A consumer might buy a shoddy widget from Producer A thinking he was buying a quality widget from Producer B, suffering injury in the amount of the value attributable to the difference in quality. Moreover, because producers know more about the unobservable qualities of their products than consumers do, a world in which passing off is permitted is one in which consumers would have to undertake their own search for relevant information to avoid the kind of injury that would result in the widget example, raising the transaction costs associated with gathering and disseminating that information and lowering aggregate welfare as a result.

The problem with this analysis is that it fails to account for an important aspect of infringement doctrine: the relevance of product quality. Under the Lanham Act, infringement includes a use of a trademark that is likely to cause confusion. (149) The Second Circuit--one of the most active (150) and authoritative courts in trademark law--has thoroughly explored the relevance of comparative product quality to the question of likely confusion, and its conclusion is difficult to square with a search costs theory. In the Second Circuit, the more similar the quality of the defendant's goods to that of the plaintiff's goods, the more likely the defendant will be held liable for infringement. (151) Several other circuits have adopted the Second Circuit's approach, with similar disregard for search costs. (152) While these courts recognize that divergent quality may suggest an injury of greater magnitude where confusion exists despite that divergence, they (understandably) consider such an inference relevant only to the availability of particular remedies, not to the determination of liability. (153)

This treatment of product quality is precisely the opposite of what we would expect if we believed that trademark infringement liability was designed to reduce consumers' search costs. Obviously, not all uses of a trademark by a competitor of the mark's owner will mislead as to the unobservable qualities of the competitor's products that are relevant to the consumer's search. If trademarks really are about efficiently conveying information about such qualities to consumers, we should encourage, or at least excuse, the use of a well-known trademark by someone other than its first user where such use will efficiently convey accurate information about the user's goods to consumers. (154) Thus, the more similar the products are with respect to their unobservable qualities, the weaker the case for liability under a search costs theory. To hold otherwise--as some circuits do--merely encourages wasteful duplication of search costs. On the one hand, it might require competitors of the owner of an established trademark to undertake their own investments to create a redundant source of information capital. On the other hand, it might require consumers to undertake an additional costly search themselves to identify attractive substitutes for the mark owner's products. Moreover, a consequentialist would have to account for the possibility that use of a mark by the mark owner's competitors on goods of high quality might increase the value of the mark, to the benefit of the original owner.

Some circuits have attempted to justify the role of product quality in infringement analysis, but their efforts are not flattering to consequentialists. The Ninth Circuit, for example, while adopting the Second Circuit's position, noted in the alternative that treating similar product quality as probative of infringement is justified because "present quality is no assurance of continued quality." (155) This argument, while consistent with consequentialist theory, seems to allow a plaintiff who suffered no injury to obtain a judgment against a defendant who may (or may not) injure him someday, ignoring standing (156) and ripeness (157) doctrines that would seem to be directly applicable. Moreover, the language of the Ninth Circuit (and of the Seventh Circuit in a similar opinion) is more Lockean than consequentialist: it evinces a concern for the trademark owner's right to control the reputation he built up in an ongoing business, not the reduction of search costs or the preservation of incentives. (158) In short, consequentialism has some difficulty defending this basic feature of a core area of trademark doctrine. (159)

A contractualist, in contrast, faces no such difficulty. Contractualism analyzes passing off in terms of the relationship between the defendant producer and his customers, and their mutual respect for one another's autonomy. Consider a producer, D, a consumer, C, and a trademark, M, that C believes is indicative of goods that originate with another producer, P. Where D uses trademark M on D's goods and C purchases those goods in the belief that he is acquiring a good made by P, D may be guilty of violating one or more of the moral principles that emerge from contractualist analysis. (160) In the easier case in which D's product is inferior to P's products, we would say that D has violated Scanlon's Principle M. (161) That is, he has caused C to take an action (purchasing the product) that he would not otherwise have taken, in the expectation that he would receive something from D (a product consistent with the quality of P's products) that D failed to provide, thereby injuring C.

But perhaps C doesn't simply want a product consistent with the qualities he has come to expect of P's products. Perhaps C also wants to be assured that the product was in fact made by P--whether as a guarantee of the product's unobservable qualities or for any other subjective reason--and in the absence of such assurance, C would not have purchased the product. In such a circumstance, we would say that D has violated Scanlon's Principle F--the principle of fidelity. (162) Importantly, this conclusion does not in any way depend on the actual qualities of D's product--it depends on our respect for C's autonomy and for the moral value of C's power of choice.

Principle F, unlike Principle M, cannot be satisfied by delivering something of equivalent value or quality. (163) If C wants and expects a product made by P, then D (knowing of this desire of C's) may not defend his delivery of a product made by D instead on the grounds that it is just as good. In this view, the use of a trademark is tantamount to a promise--an assurance concerning the nature of the good that the seller must perform unless the buyer explicitly releases him. To hold otherwise would fail to respect the consumer as an end in himself. It would fail to respect his autonomy-based right to make purchasing decisions on the grounds that seem best to him, and would instead substitute a producer's (or a court's) judgment that the consumer ought to be satisfied with what he received. This view of trademark as promise offers, in my view, a much more plausible descriptive account of the courts' treatment of product quality in infringement cases than the search costs theory of consequentialism.

B. Contractualism Versus Consequentialism: Products or People?

Turning from the descriptive to the prescriptive, recall the argument made in Part III that the distinction between contractualist and consequentialist approaches to the regulation of information transfers among parties engaged in market exchange is a matter of competing priorities. The consequentialist prioritizes the efficient creation and dissemination of information about the subject matter of exchange. The contractualist, however, refuses to elevate that goal above the obligations that market participants possess to respect one another's autonomy--particularly the obligation not to knowingly take advantage of asymmetric access to information about the subject matter of exchange. To apply this insight to trademark law, we must identify a circumstance in which the law purports to regulate trademark-related transactions on the basis of the information conveyed through those transactions to third parties. I believe there is only one area of trademark law that meets this description, and it is one that I have previously written about at some length.

The doctrine of post-sale confusion--a subset of infringement--is designed to prevent confusion among the general public arising from the conspicuous consumption or downstream sale of a product bearing an unauthorized trademark, even where the original purchaser of that product was not in any way confused at the point of sale. (164) I will focus here on two theories of post-sale confusion, each of which involves a defendant seller, D; a plaintiff trademark owner, P; a nonconfused purchaser of D's product, C; and an observer of C's consumption of D's product, O.

The first theory--which I have elsewhere called "bystander confusion" (165)--refers to a situation in which D sells a shoddy product bearing P's trademark to C, and then O observes C consuming D's product and mistakes it for P's product (due to the presence of P's trademark on it). As a result, O draws negative inferences about the quality of P's products that influence O's future purchasing decisions. The second theory--which I have elsewhere called "status confusion" (166)--refers to a situation in which D is selling knockoffs of P's well-known luxury goods. These cases depend on the proposition that C-who knows he is buying a knockoff--intends to conspicuously consume the product in view of O "for the purpose of acquiring the prestige gained by displaying what many ... would regard as a prestigious article," (167) "thereby confusing the viewing public and achieving the status of owning the genuine article at a knockoff price." (168) I have argued elsewhere that bystander confusion liability can be justified under a consequentialist theory, while status confusion liability is far more difficult--albeit not necessarily impossible--to justify under such a theory. (169)

It should be noted at the outset that neither of these theories of infringement is a perfect analogue for the insider trading example discussed in Part III. Rather, they are in a sense mirror images of that example. In the insider trading context, the insider and his counterparty have different levels of access to material information about the subject matter of their transaction. In the post-sale confusion cases, however, C knows exactly what he is buying from D--he knows that it is D's product, not P's. Thus, in the insider trading cases, a contractualist would block a transaction on grounds of respecting a less-informed party's autonomy, while in the case of post-sale confusion, respecting C's autonomy would require allowing the transaction to be completed. Conversely, where the interest of third parties in the insider trading example is in swifter dissemination of accurate information about the subject matter of exchange (by allowing the insider to trade, revealing his nonpublic information through the price mechanism), in the post-sale confusion context the worry is that C will convey inaccurate information to third party O by conspicuously consuming D's product bearing P's trademark.

These are meaningful distinctions. In the bystander confusion context, it is C and O who have unequal access to knowledge about the subject matter of the relevant exchange--P's and D's goods. Moreover, C presumably knows that O lacks C's level of access to this information. Thus, respecting C's autonomy by allowing C to complete his desired transaction would be inconsistent with respect for O's autonomy, insofar as C's conspicuous consumption of D's goods would mislead O into refraining from doing something he would otherwise do (buying P's products), to his detriment. (170) In the insider trading example, benefits flowing to third parties were deemed insufficient to justify violation of the autonomy of the insider's counterparty; here we have the opposite problem. Just as the benefit to third parties is an insufficient justification--from the contractualist perspective for allowing the violation of autonomy inherent in an insider trading transaction, (171) the benefit to C of permitting his desired transaction is an insufficient justification for allowing the violation of O's autonomy inherent in the bystander confusion case. Put differently, an understanding of autonomy that would allow C to enter his desired transaction would be inconsistent with an equal sphere of autonomy for O. Thus a contractualist--like a consequentialist--would likely consider bystander confusion wrongful.

In the status confusion scenario, however, there are complications. Status confusion arises in the context of commerce in luxury goods and other products that trade on social meaning. Social scientists have documented the complex ways in which conspicuous consumption of such brands forms part of the process of forging and communicating individual identity and social affiliation in modern consumer societies such as our own. (172) Where brands take on these social connotations, consumption of products bearing the brands conveys information not only (perhaps not even meaningfully) about the product itself, but also about the people who consume the brand. (173) Thus, as I have argued elsewhere, "markets for status goods may be the only type of consumer markets where buyers are at no significant informational disadvantage relative to sellers regarding the subject matter of exchange: a signal of social status." (174)

To be sure, C knows more about himself than O does, just as C knows more about the product he bought from D than O does. But with respect to brands that convey social meaning, we cannot be so sure that C's conspicuous consumption of D's product--even where it bears P's trademark--will mislead O in any morally relevant way. As I have argued previously, conspicuous consumption of these socially charged brands constitutes a form of expression, but not about the unobservable qualities of the product consumed. Rather, the consumer uses the product to send a message to his social audience about the kind of person he is. (175) And if we view conspicuous consumption of these brands as a form of expression by which C stakes a claim to a particular social identity and position, it is difficult to see how the truth or falsity of that claim can be made to depend on the identity of the manufacturer from whom C purchased the means of communicating it. (176)

Now, we might raise a series of related objections to this defense of C's actions in the status confusion case. First, we might object that, insofar as O bases his own decisions to purchase status goods on his judgments of those goods' exclusivity (maintained by P through a combination of high price and intentionally limited production), C's actions in the status confusion case mislead O in precisely the same way they do in the bystander confusion case. Second, we might object--in the "trademark as promise" vein--that if C's efforts to claim social status through P's trademark were successful, they would interfere with P's efforts to offer its customers an assurance of the exclusivity they desire. (177) Third, we might object that C, in using P's trademark to send his desired social message, is using P as a mere means to acquire social status. Fourth and finally, we might add that, to the extent C's actions purport to challenge O's judgment that social status should depend on wealth, it is wrongful to use deception as the means of levying this challenge, insofar as the deception interferes with O's ability to decide for himself whether his conception of social status should be reevaluated. (178)

There are two arguments that I would offer as alternative but comprehensive responses to these objections. The first argument challenges two unspoken premises underlying each of the aforementioned objections: that O is free to allocate social status according to wealth, and that P is free to exclude C from a means of claiming social status based on C's wealth. I do not believe a contractualist would accept either of these premises--to the contrary, I believe both would be rejected as inconsistent with contractualist morality. As noted above, (179) contractualism--in perhaps its most fundamental disagreement with consequentialism (180)--defends fairness in itself as a moral value. In Scanlon's words: "We have reason to object to principles simply because they arbitrarily favor the claims of some over the identical claims of others: that is to say, because they are unfair." (181) The objections set forth in the previous paragraph all assume that P's customers' efforts to claim social status by purchasing P's goods ought to be treated differently from C's effort to claim social status by purchasing D's goods simply because C did not pay as much for the claim. I submit that this reasoning must be rejected for the simple reason that wealth is an arbitrary and therefore impermissible basis for allocating social (as contrasted with market) benefits.

The second argument in response to the objections raised above is somewhat less ambitious, and yet more problematic from a contractualist perspective. Even if one does not agree with the argument that O is not flee to allocate social status according to wealth, one would have to concede that frequently it would not be in O's interest to do so. O might--in drawing conclusions about the appropriate social relationship between himself and C based on the products C consumes--be misjudging C in ways that will leave O worse off (from O's perspective) than if he had approached C with an open mind. Thus, we might invoke Feinberg's soft paternalism (182) to allow C to mislead 0 (183) in order to ensure that O actually takes the time to gather the information necessary to rationally determine (for himself) what the proper relationship between him and C ought to be.

As discussed above, (184) not all contractualists agree that this is a permissible move. We thus face in this argument the first example of the indeterminacy of contractualism with respect to basic rules of trademark law. In the status confusion example, we can avoid the problem of indeterminacy if we adopt my earlier argument grounded in the moral value of fairness. But such an alternative argument will not always be available in addressing a rule of law. Indeed, the question whether and under what circumstances paternalism is permissible poses the most serious challenge to a contractualist theory of trademark law, as plausible opportunities for paternalist intervention arise with considerable frequency in consumer markets.

C. Hard Cases for Contractualism

The status confusion example raised the possibility of paternalist intervention to correct for an agent's lack of information. But a far more common ground for such intervention in the context of consumer markets is the case of diminished capacity. As I have documented at length in previous work, (185) buyers in consumer markets display a broad range of deviations from rational decisionmaking. Moreover, sellers are invariably more aware of these boundedly rational features of consumer cognition than buyers themselves are. Indeed, much of modern marketing is based on taking advantage of these predictable consumer tendencies in ways that consumers are unlikely to be able to detect or resist. (186) This raises two competing concerns for the contractualist: On the one hand, the analysis in Part III implies that trademark law ought to intervene to prevent producers from taking advantage of their superior access to knowledge of consumers' boundedly rational decisionmaking processes--from using those consumers as mere means. (187) On the other hand, producers might use their superior knowledge to help consumers make choices more consistent with rational decisionmaking than they otherwise would make, and some consumers might well appreciate the help. (188)

To a strict Kantian, the latter possibility would be irrelevant; any effort to manipulate the consumer's decisionmaking--whether for his own good or otherwise--must be wrongful. (189) But of course not all contractualists agree with this assessment--a disagreement that poses a fundamental challenge to the robustness of contractualist analysis in this area. Moreover, even for the many modern contractualists who are willing to tolerate paternalist intervention in some circumstances, sorting permissible from impermissible manipulation of consumer cognition is a complex problem that suggests the contractualist approach, even if theoretically sound, might be infeasible in practice. Thus, boundedly rational consumer decisionmaking threatens to destabilize the contractualist enterprise on at least two levels.

One area of trademark law that starkly raises these issues is the doctrine of initial-interest confusion. In initial-interest confusion cases, the defendant is accused of using another producer's trademark to lure customers into considering the defendant's products in the belief that they are somehow affiliated with the plaintiff, even though all parties concede that by the time the consumer has decided whether or not to purchase the defendant's product he is not in any way confused. For example, in Mobil Oil Corp. v. Pegasus Petroleum Corp., (190) the defendant, a small new entrant in the "tight-knit and sophisticated" bulk oil trading market, was held liable based on the likelihood that a vague association with Mobil's well-known flying horse logo would allow it to get a hearing from customers who might not otherwise have bothered to listen to its sales pitch, giving the defendant "crucial credibility during the initial phases of a deal." (191)

We can tell ourselves two stories about the moral implications of this case. In the first, Pegasus is engaged in deception along the lines of a bait-and-switch scheme. Bulk oil traders might have good reasons for declining to do business with new entrants. For example, it may be costly to engage in the search necessary to satisfy oneself that a new entrant is likely to be as reliable as industry incumbents with whom a trader has a long and stable relationship, and even then there is a risk that the new entrant will fail to meet expectations. (192) By circumventing this rational risk aversion on the part of potential customers through the suggestion--however fleeting or attenuated--of an affiliation with a trusted industry incumbent, Pegasus is misleading those customers into doing something that they would not otherwise do, causing them to incur search costs they would not have otherwise incurred, all the while knowing that it could not deliver on any expected association with Mobil. Moreover, in some cases the decision to ultimately do business with Pegasus might be driven in part by a desire that those sunk search costs not go to waste. We thus might characterize the conduct proscribed by initial-interest confusion doctrine as a violation of Scanlon's Principle M. (193)

The other account of Pegasus's behavior invokes the paternalist exception to Principle M. In this account, bulk oil traders' reluctance to investigate potential new trading partners is not rational risk aversion, but an irrational and stubborn form of loss aversion. It may be that Pegasus offers a much better deal than its incumbent competitors, and that bulk traders are systematically under-weighting that possibility because of a lack of rational capacity in the form of a cognitive bias against the unfamiliar. (194) Thus, in getting its potential customers to overlook that bias in the early stages of negotiation--even by means of misleading them--Pegasus could argue that it is helping its customers to overcome their own diminished capacity and making them better off--by their own lights--in the long run. In other words, there is an argument that at least some of the conduct proscribed by initial-interest confusion doctrine is a permissible form of paternalist intervention. Following Feinberg, we might characterize such conduct as a mere "temporary intervention" that helps consumers determine whether a decision not to deal with the defendant is in fact rational and voluntary. (195) Following VanDeVeer, we might conclude that consumers would hypothetically consent to having their boundedly rational decisionmaking corrected in this way. (196)

Even assuming we found the second account of the Pegasus Petroleum case more persuasive than the first--that we agreed that Feinberg's and VanDeVeer's theories are applicable--we would still face the question whether such paternalist intervention is ever permissible as a matter of principle. As we have seen, this is a question that will generate heated debate even among contractualists. (197) But we may well never reach that issue, because it is not at all clear that parties seeking a contractualist consensus would agree on which of these accounts of the conduct proscribed by initial-interest confusion doctrine is more persuasive. As behavioral economists admit (under constant needling from rational choice economists), cognitive biases are not exhibited equally by all individuals, nor even across time by the same individual. (198) Thus, by imposing infringement liability on grounds of initial-interest confusion, we are siding with those consumers who are willing to forego the benefits of paternalist intervention in order to avoid the risk of subtle manipulation, but by allowing the conduct currently proscribed by initial-interest confusion doctrine we would be leaving those same consumers open to manipulation on grounds that another group of consumers is willing to tolerate the risk of such manipulation to gain the benefits of paternalism. Each group of consumers has a basis to reject the other's desired rule; neither group's desired rule is consistent with the other's. Unless we can characterize one group's rejection as unreasonable (as a strict Kantian would for the pro-paternalist group), initial-interest confusion doctrine seems to generate precisely the indeterminacy that I previously raised as a fundamental objection to contractualist analysis. (199)

Despite this indeterminacy, I think contractualism remains a worthwhile lens on trademark law, and consumer protection law generally. To understand why, consider the prospect of multiple and complementary moral values and approaches I raised earlier in response to the charge of indeterminacy, (200) The fact that contractualist analysis neither requires nor forbids the current rule on initial-interest confusion doctrine means that there is room for other types of normative content to fill the gap. We might well resort to consequentialist analysis, but we could also, for example, resort to democratic decisionmaking processes to choose from among the policy options permitted by contractualist morality. This pluralist approach to policymaking, in which various sources of normative content can be invoked and applied in the process of practical reasoning, is consistent with what Lawrence Solum has referred to as "public legal reason." (201) And importantly, the flexibility inherent in such an approach to legal policy is seldom entertained in standard consequentialist analysis, which tends to cut off such normative argumentation in what I think are undesirable ways.

As an example of the consequentialist approach, consider the work of Jennifer Rothman on initial-interest confusion. Rothman argues that extant initial-interest confusion doctrine is motivated by misappropriation-based theories of trademarks as property, rather than by more cabined consequentialist rationales for trademark protection. (202) Using those consequentialist rationales as a guide, she argues that initial-interest confusion liability plays a salutary role in a bait-and-switch scenario. (203) But Rothman distinguishes the bait-and-switch scenario from other circumstances in which a defendant's use of a mark or product feature generates "interest" based on an association with the plaintiff without generating "confusion" (or perhaps without generating more than "de minimis" confusion) as to source, sponsorship, or affiliation. (204)

At the core of Rothman's approach--which insists on the consequentialist framework as a bulwark against the unbounded expansiveness of Lockean notions of trademark rights--are empirical questions about the effects of various marketing practices on the outcomes of consumer decisionmaking processes. The problem with this critique, as I have pointed out elsewhere, is that it makes our rules of trademark law dependent on fiendishly complex and generally unanswerable questions about the balance of welfare gains and transaction costs that might be causally related to a particular marketing practice (or worse, to a rule that permits or forbids such a practice). (205) This is not in any way a knock on Rothman; she is well within the mainstream of contemporary trademark critics in adopting this approach. (206) 1 myself have engaged in similar lines of analysis, and I have in the past relied on her work, with which I largely agree. But because of this inescapable empirical uncertainty, the reformer who invokes consequentialism to expand competition by imposing limits on the scope of trademark rights frequently has no stronger case than the apologist for broad trademark rights who argues that further limits would impose undue search costs on consumers or undue administrative costs on the legal system. In both cases the policy advocate is relying on plausible but unprovable parables about the effects of certain trademark-related practices on consumer decisionmaking, the legal system, and (ultimately) aggregate welfare. (207)

In the face of the inevitable empirical uncertainty that attends consequentialist analysis of the problems posed by boundedly rational consumer decisionmaking, the consequentialist's only possible answer is to demand more data--no matter how futile or unreasonable the demand may be. A great strength of the contractualist approach I have described is that it frees us from the fool's game of arguing these empirical questions in the absence of relevant data, without requiring us to adopt a misappropriation theory that lacks discernible boundaries. (208) The contractualist does not ultimately care whether allowing a particular suggestive marketing tactic will lead to welfare gains (in the form of preference satisfaction and reduced administrative costs) that exceed the welfare losses (in the form of search costs, error costs, and the potential for rents) created by the tactic itself. Rather, the only question is whether the marketing tactic in question is inconsistent with due respect for the consumer's autonomy, and the debate on that question can be focused through the other-regarding consequentialist exercise. Such an exercise requires us to determine how we, putting ourselves in a consumer's shoes, would want producers competing for our business to behave (rather than how we think they will behave), and at the same time to determine what we, putting ourselves in a producer's shoes, expect a reasonably prudent purchaser to be capable of (rather than what we think they will actually be capable of). (209) In short, it invites a debate over the substance of what we want our consumer markets to look like, rather than over the plausibility of various alternative and ultimately unprovable causal inferences regarding how players in those markets might respond to one or another legal rule.

To be sure, the specter of illiberality hovers over this debate, (210) and to the extent we believe judges are both likely to indulge their own moral intuitions and atypical of market participants at large, we might be uneasy about entrusting them with the contractualist exercise. But an important counterweight to this unease is the common law tradition--so consistent with the vision of normative debate outlined above (211)--of courts publicly giving reasons to support the results they reach, and being subject to correction through the political process. (212) On an issue like the debate over the appropriate policy response to boundedly rational consumer decisionmaking, for example, this may be the only sensible way to resolve the irreconcilable differences evoked by the debate over paternalism. Admittedly, this solution reveals that on the most contested issues of public policy--issues where no moral theory can claim to have an airtight case in a pluralist society--contractualism may frequently run into the problem of indeterminacy (or underdeterminacy). One attractive response to this social pluralism is value pluralism, (213) which I believe is entirely compatible with the contractualist framework I have developed in this Article. So long as it remains aware of its own limitations, a contractualist approach that is open to complementary sources of normative content and accepts both the moral relevance of consequences and the moral weight of democratic consent offers a way out of the impasse into which overreliance on consequentialism leads us. It allows for a public debate over competing normative visions of consumer protection in which the reasons supporting those visions are fully aired and tested. Such normative openness in a democratic procedural framework is more likely to lead to satisfying policy outcomes, in my view, than insisting on a normative position that can only be satisfactorily justified by expert analysis of data that will never materialize. (214)

D. Further Implications and Future Directions

If I am correct that contractualist analysis offers a useful lens for analyzing trademark doctrine, it is worth briefly sketching out some implications of contractualist theory beyond the particular doctrinal issues discussed above. While these implications are beyond the scope of the current paper, they merit further attention and study.

First, a contractualist approach to producer-consumer relationships implies obligations not only on a mark owner's competitors, but on the mark owner itself. The idea of trademark as promise (215) would suggest that once consumers form certain expectations about the products to which a mark is affixed, the mark owner has an obligation to continue to provide products consistent with those it has offered in the past or else adequately disclose that it will no longer do so. This limitation on a producer's right to surreptitiously reformulate its products is not unique to contractualism; Shahar Dillbary has argued for a similar limitation based on consequentialist analysis. (216) But current law does not impose such a restriction on trademark owners, nor does it restrict other stealth marketing practices--such as "unbranding"--that arguably interfere with consumer expectations and autonomy in a similar way. (217) The state of doctrine in these areas obviously poses a challenge to the descriptive power of contractualist analysis, but it also presents unexplored opportunities for development of prescriptive argument and suggestions for doctrinal reform.

Second, this Article has intentionally avoided examining contractualist theory's implications for trademark law's regulation of producer-producer relationships. To be sure, there will be contrasts with consequentialism and its free-riding account. But perhaps the more interesting question is whether and how the contractualist framework I have developed here differs from the Lockean labor-desert theory on which trademark law has historically depended. To the extent that Lockean theory valorizes the labor inherent in appropriation, it may lead to different results than my contractualist approach with respect to areas of trademark law in which one producer claims rights by virtue of his labor while another claims competing rights by virtue of some other aspect of autonomy. (218)

Such conflicts arise constantly in copyright and patent law, and it is entirely conceivable that similar competing claims could arise in trademark law as well. (219) As an example, consider the law concerning descriptive trademarks and descriptive fair use. (220) A Lockean would allow descriptive trademarks to become protectable over time upon a showing that they had acquired a source-identifying meaning (subject to a residual right in competitors of descriptive fair use). (221) It is conceivable, however, that a contractualist would reject such a rule on grounds that it is never appropriate for a descriptive term to become exclusive given the availability of nondescriptive terms as source identifiers and the burdens of establishing a descriptive fair use defense in litigation. Similarly, with respect to the doctrine of dilution by blurring (222)--perhaps the most obvious example of labor-desert theory at work in American trademark law--the contractualist approach may well differ from the Lockean. In this area as in the case of descriptive trademarks, contractualist assessment of the relevant doctrines will depend on whether one views the labor that justifies the doctrine from a Lockean perspective as an arbitrary basis for affording different rights to the mark in question as between the senior user and the junior user--even in the absence of confusion in the case of dilution doctrine, or in the event of confusion in the case of descriptive terms. (223) These two doctrines suggest that there is useful work to be done on contrasting the contractualist approach to interproducer relationships with the Lockean model that has historically prevailed.

In sum, this Article aims not to provide a comprehensive account, but to add a new voice to the conversation. The contractualist tradition has been unjustifiably ignored in trademark law theory to date. This Article is a first step in remedying that oversight, but there remains much useful work to be done on further developing a contractualist theory of trademarks and contrasting that theory with the Lockean and consequentialist models that have historically informed our thinking about trademark law.


Trademark law theory is in dire need of a fresh approach. The contractualist approach, which has at its core a fundamental reciprocity of respect for the autonomy of market participants, offers productive ways of thinking about, justifying, and reforming trademark doctrines based on a liberal normative vision of the proper relationship between buyers and sellers. While the approach has some limitations, they are at the least no worse than the limitations of the currently available alternatives--consequentialism and Lockean labor-desert theory. Moreover, adopting a contractualist approach to problems in consumer protection law encourages policymakers and critics to formulate and defend substantive principles of consumer autonomy rather than resting on unprovable empirical assumptions about consumer behavior to justify a particular allocation of rights and duties in consumer markets. As such, contractualism offers at the very least a useful complement to other theories and a welcome additional source of normative content.

Finally, the contractualist approach holds considerable promise not only for trademark law, but for consumer protection law generally. It is no coincidence, I think, that the academic literature in these areas has recently been turning away from technical economic analysis and in favor of normative principles that promise to unify various branches of doctrine under a coherent model of the consumer that depends neither on rational actor assumptions nor on empirical evidence of consumer behavior. (224) To the extent these models have independent normative content, I would suggest that the contractualist framework can be a useful vehicle for critical development of that content, to the potential benefit of a number of areas of important legal policy.

(1.) E.I. du Pont de Nemours Powder Co. v. Masland, 244 U.S. 100, 102 (1917).

(2.) My definition of "contractualist" is broader than the typical definition in contemporary philosophy--where the term is used to refer to a particular subset of my definition-but also distinct from the older (and previously more encompassing) "contractarian" label, now reserved for the Hobbesian line of social contract thought that purports to derive moral content from the implications of mutual rational self-interest (which I would not include within my definition of contractualism). I use the term "contractualist" here to align as closely as possible with contemporary philosophical usage, notwithstanding the tendency in the legal academic literature (and other nonspecialist literatures) to subsume all social contract theories under the heading "contractarian." For an overview of the distinction between what is now known as contractarianism and what has come to be known as contractualism within the moral philosophy literature, and the relationship of both to Kant's moral philosophy, see Elizabeth Ashford & Tim Mulgan, Contractualism, STAN. ENCYCLOPEDIA PHIL. (Fall 2012 ed.),

(3.) This Part expands on ideas first suggested in an essay I wrote for a symposium hosted by the Fordham Intellectual Property, Media & Entertainment Law Journal, and portions of this Part borrow from that earlier essay. See Jeremy N. Sheff, The Ethics of Unbranding, 21 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 983 (2011) [hereinafter Sheff, Unbranding].

(4.) The discussion in this Subpart incorporates and adapts some material from my earlier article, Jeremy N. Sheff, Biasing Brands, 32 CARDOZO L. REV. 1245, 1249-50 (2011) [hereinafter Sheff, Biasing Brands].

(5.) The definitive statement of this economic model of trademark law is William M. Landes & Richard A. Posner, Trademark Law: An Economic Perspective, 30 J.L. & ECON. 265 (1987). A more theoretically rich, but less mathematically and doctrinally rigorous, treatment is Nicholas S. Economides, The Economics of Trademarks, 78 TRADEMARK REP. 523 (1988).

(6.) Economides, supra note 5, at 526-27; see also Landes & Posner, supra note 5, at 275-80 (outlining the formal economic model of trademark protection, centered on the tradeoff between consumer search costs and the informative content of trademarks, the cost of which is borne by producers).

(7.) Landes & Posner, supra note 5, at 269-70.

(8.) See id. at 269-70.

(9.) See id. at 270; cf. George A. Akerlof, The Market for "Lemons": Quality Uncertainty and the Market Mechanism, 84 Q.J. ECON. 488, 489-91, 499-500 (1970) (describing the market failure that results when producers are unable to credibly convey accurate information about product quality).

(10.) See Louis Kaplow & Steven Shavell, Fairness Versus Welfare, 114 HARV. L. REV. 961, 976-99 (2001).

(11.) See generally JEREMY BENTHAM, AN INTRODUCTION TO THE PRINCIPLES OF MORALS AND LEGISLATION (J.H. Burns & H.L.A. Hart eds., Oxford Univ. Press 1996) (1789); JOHN STUART MILL, UTILITARIANISM (Roger Crisp ed., Oxford Univ. Press 1998) (1863).

(12.) See, e.g., Walter Sinnott-Armstrong, Consequentialism, STAN. ENCYCLOPEDIA PHIL. (Winter 2012 ed.),

(13.) See, e.g., Mark A. Lemley & Mark McKenna, Irrelevant Confusion, 62 STAN. L. REV. 413, 429-46 (2010) (sponsorship or affiliation confusion); Jennifer E. Rothman, Initial Interest Confusion. Standing at the Crossroads of Trademark Law, 27 CARDOZO L. REV. 105, 162-67 (2005) (initial-interest confusion); Jeremy N. Sheff, Veblen Brands, 96 MINN. L. REV. 769, 816-26 (2012) [hereinafter Sheff, Veblen Brands'] (post-sale confusion); Rebecca Tushnet, Gone in Sixty Milliseconds." Trademark Law and Cognitive Science, 86 TEX. L. REV. 507, 558-61 (2008) (dilution).

(14.) See generally, e.g., Mark P. McKenna, Testing Modern Trademark Law's Theory of Harm, 95 IOWA L. REV. 63 (2009); Sheff, Biasing Brands, supra note 4; Tushnet, supra note 13.

(15.) See Sheff, Biasing Brands, supra note 4, at 1311-13. I am hardly the first person to raise this form of critique. See, e.g., Ralph S. Brown, Jr., Advertising and the Public Interest. Legal Protection of Trade Symbols, 57 YALE L.J. 1165, 1167 (1948); Mark A. Lemley, The Modern Lanham Act and the Death of Common Sense, 108 YALE L.J. 1687, 1687-97 (1999); Glynn S. Lunney, Jr., Trademark Monopolies, 48 EMORY L.J. 367, 430-36 (1999).

(16.) See ROBERT P. MERGES, JUSTIFYING INTELLECTUAL PROPERTY 1-27 (2011) (describing the turn away from utilitarian theories and toward the normative systems of Locke, Kant, and Rawls, in attempting to justify patent and copyright law); see also id. at 3 ("The sheer practical difficulty of measuring or approximating all the variables involved means that the utilitarian program will always be at best aspirational.").

(17.) See generally Larry Alexander & Michael Moore, Deontological Ethics, STAN. ENCYCLOPEDIA PHIL. (Fall 2008 ed.), ethics-deontological.

(18.) In particular, the aretaic approach to ethics--erived from the philosophy of Aristotle and embodied in the modern philosophical program known as virtue ethics--has recently begun to challenge the two dominant ethical systems, winning a few adherents in the legal academy. See generally ROSALIND HURSTHOUSE, ON VIRTUE ETHICS (1999); VIRTUE JURISPRUDENCE (Colin Farrelly & Lawrence B. Solum eds., 2008); Lawrence B. Solum, Virtue Jurisprudence: A Virtue-Centred Theory of Judging, 34 METAPHILOSOPHY 178 (2003); Rosalind Hursthouse, Virtue Ethics, STAY. ENCYCLOPEDIA PHIL. (Summer 2012 ed.), In property and intellectual property theory, the personhood perspective grounded in post-Kantian German Idealism (and in particular Hegelian philosophy) also has its adherents. See, e.g., Margaret Jane Radin, Property and Personhood, 34 STAY. L. REV. 957 (1982); see also Justin Hughes, The Philosophy of Intellectual Property, 77 GEO. L.J. 287, 330-64 (1988).

(19.) See IMMANUEL KANT, GROUNDING FOR THE METAPHYSICS OF MORALS (James W. Ellington trans., Hackett Publ'g Co. 3d ed. 1993) (1785) (laying the foundation for Kant's moral philosophy); see also PAUL GUYER, KANT 177-303 (2006).

(20.) JOHN LOCKE, SECOND TREATISE OF GOVERNMENT, ch. V, [paragraph] 27 (Richard H. Cox ed., Harlan Davidson, Inc. 1982) (1690) (editor's footnote omitted).

(21.) See Mark P. McKenna, The Normative Foundations of Trademark Law, 82 NOTRE DAME L. REV. 1839 (2007).

(22.) See id. at 1860-63.

(23.) See id. at 1860-61 (citing HERBERT SPENCER, The Morals of Trade, in ESSAYS: MORAL, POLITICAL AND AESTHETIC 107, 107-08, 122 (1865)).

(24.) See id. at 1858 ("The defendant's fraud or deception was what made some attempts to divert improper."); cf. Keeble v. Hickeringill, (1707) 103 Eng. Rep. 1127 (Q.B.) 1128; 11 East 574, 575-76 (contrasting competition--which is not actionable--with interference with a competitor's conduct of his own business--which is).

(25.) See McKenna, supra note 21, at 1873-93 & nn.156-57.

(26.) See Felix S. Cohen, Transcendental Nonsense and the Functional Approach, 35 COLUN. L. REV. 809, 815 (1935) ("The current legal argument runs: One who by the ingenuity of his advertising or the quality of his product has induced consumer responsiveness to a particular name, symbol, form of packaging, etc., has thereby created a thing of value; a thing of value is property; the creator of property is entitled to protection against third parties who seek to deprive him of his property.... [This argument] purports to base legal protection upon economic value, when, as a matter of actual fact, the economic value of a sales device depends upon the extent to which it will be legally protected."); see also Rochelle Cooper Dreyfuss, Expressive Genericity: Trademarks as Language in the Pepsi Generation, 65 NOTRE DAME L. REV. 397, 400-12 (1990) (criticizing the "if value, then right" argument for trademark rights); Mark A. Lemley & Mark P. McKenna, Owning Mark(et)s, 109 MICH. L. REV. 137, 181-84 (2010) (criticizing natural rights theories of trademark rights as arbitrary in the absence of some "social welfare calculus"). Adam Mossoff has notably espoused a contrary view, arguing that Locke's theory of labor and value has been unfairly maligned and offers a perfectly coherent justification for intellectual property rights (by which he means patents and copyrights). See Adam Mossoff, Saving Locke from Marx: The Labor Theory of Value in Intellectual ProperO, Theory,. Soc. PHIL. & POL'Y, July 2012, at 283 [hereinafter Mossoft, Saving Locke]; Adam Mossoff, The Use and Abuse of IP at the Birth of the Administrative State, 157 U. PA. L. REV. 2001 (2009).

(27.) See, e.g., Lemley & McKenna, supra note 26, at 184 ("Saying 'someone must (or deserves to) own this,' even if true, doesn't help answer the question of who should own it and what the scope of their ownership right should be. Those questions can be answered only by resort to social welfare.").

(28.) See Bos. Prof'l Hockey Ass'n v. Dall. Cap & Emblem Mfg., 510 F.2d 1004, 1012 (5th Cir. 1975); Stacey L. Dogan & Mark A. Lemley, The Merchandising Right. Fragile Theory or Fait Accompli?, 54 EMORY L.J. 461, 478-84 (2005).

(29.) See Elvis Presley Enters. v. Capece, 141 F.3d 188, 202-03 (5th Cir. 1998); Lemley & McKenna, supra note 13, at 415.

(30.) See Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 108-09 (2d Cir. 2000); Sheff Veblen Brands', supra note 13, at 817-20.

(31.) See Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 260 (2d Cir. 1987); Rothman, supra note 13, at 162-67.

(32.) See 15 U.S.C. [section] 1125(c) (2011); Kenneth L. Port, The "Unnatural" Expansion of Trademark Rights: Is a Federal Dilution Statute Necessary?, 18 SETON HALL LEGIS. J. 433, 470-75 (1994).

(33.) See Robert G. Bone, Hunting Goodwill: A History of the Concept of Goodwill in Trademark Law, 86 B.U.L. REV. 547, 592-618 (2006) (documenting the subtle and often unspoken influence of theories of goodwill and moral desert on contemporary trademark doctrine).

(34.) See McKenna, supra note 21, at 1857 ("[P]laintiffs in these [early trademark] actions at law were not vindicating the rights of consumers--they were making claims based on injuries to their own interests that resulted indirectly from deception of consumers.").

(35.) See 15 U.S.C. [section] 1125(a)(l)(A) (imposing liability for uses of trademarks that are "likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of [the defendant] with another person, or as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities by another person").

(36.) See supra Part I.A.

(37.) The exception deals with expressive (as contrasted with commercial) uses of trademarks, where commentators argue that a mark owner's property right must be circumscribed, on Lockean grounds, so as to allow the public to invoke and even change the meaning of well-known marks as part of social discourse. See Wendy J. Gordon, A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property, 102 YALE L.J. 1533 (1993); cf. Alex Kozinski, Essay, Trademarks" Unplugged, 68 N.Y.U.L. REV. 960, 972-77 (1993) (arguing that expressive interests must be taken into account in setting the scope of trademark rights).

(38.) See McKenna, supra note 21, at 1850-5l & n.37 (citing Southern v. How, (1618) 79 Eng. Rep. 400 (K.B.) 402; 3 Cro. Jac. 468); id. at 1870-71 & nn. 136-37; see also Lever v. Goodwin, [1887] 36 Ch. 1 at 2 (Eng.) ("The law applicable to the case is plain, it is founded on fraud. The simplest case is where the seller misrepresents to the buyer that the goods which are being offered for sale are the goods, not of the person who made them, but of some other manufacturer. That is a case merely between the buyer and seller.").

(39.) See McKenna, supra note 21, at 1863-71.

(40.) See id. at 1865-66 & n. 115; see also Jeremy N. Sheff, Accentuate the Normative: A Response to Professor McKenna, 98 VA. L. REV. IN BRIEF 48, 52-54 (2012), The fact that the Chicago School has a story to tell about consumer interests in the trademark system may be attributable to the fact that its origins postdate this historical turn. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 29-30 (8th ed. 2011) (dating the origins of the law and economics movement to approximately 1960).

(41.) See, e.g., MERGES, supra note 16, at 31-67; ROBERT NOZICK, ANARCHY, STATE, AND UTOPIA 174-82 (1974); Edwin C. Hettinger, Justifying Intellectual Property, 18 PHIL. 8,: PUB. AFF. 31 (1989); Hughes, supra note 18, at 296-329; Seana Valentine Shiffrin, Lockean Arguments for Private Intellectual Property, in NEW ESSAYS 1N THE LEGAL AND POLITICAL THEORY OF PROPERTY 138 (Stephen R. Munzer ed., 2001).

(42.) For example, Robert Nozick is entirely focused on patentable inventions, Robert Merges does not mention trademarks at all in his exposition of Lockean arguments regarding intellectual property, and Edwin Hettinger refers to them only once, in a single footnote, as an example of the "intellectual objects" that are implicated by his analysis. See MERGES, supra note 16, at 31-67; NOZICK, supra note 41, at 178-82; Hettinger, supra note 41, at 34 n. 10. Justin Hughes's application of Lockean theory to trademark law is limited to the problem of genericness and the abolition of the token use doctrine. See Hughes, supra note 18, at 32223, 329 n.164. Seana Valentine Shiffrin admits that she is primarily concerned with patents and copyrights, and merely notes that Lockean arguments might justify some forms of trademark protection, but not others. See Shiffrin, supra note 41, at 141, 157 & n.55.

(43.) See, e.g., Gordon, supra note 37, at 1583-91 (arguing that the Supreme Court's ruling in S.F. Arts & Athletics, Inc. v. U.S. Olympic Comm., 483 U.S. 522 (1987), is inconsistent with a proper application of Lockean theory); Kozinski, supra note 37, at 966-69, 972-77 (contending that arguments in favor of trademark protection--including moral rights arguments--must give way to expressive interests in many cases); see also The Trade-Mark Cases, 100 U.S. 82, 94 (1879) ("The trade-mark may be, and generally is, the adoption of something already in existence as the distinctive symbol of the party using it.... It requires no fancy or imagination, no genius, no laborious thought. It is simply founded on priority of appropriation."); cf. Hughes, supra note 18, at 353 ("When the Supreme Court originally refused to grant property status to trademarks, it largely was because there is no apparent labor in their creation."); Port, supra note 32, at 472-75 (arguing that Lockean theory fails to justify dilution doctrine).


(45.) See, e.g., Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 157 (1989) ("The law of unfair competition has its roots in the common-law tort of deceit: its general concern is with protecting consumers from confusion as to source. While that concern may result in the creation of 'quasi-property rights' in communicative symbols, the focus is on the protection of consumers, not the protection of producers as an incentive to product innovation."); United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97 (1918) ("There is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed."); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 413 (1916) ("Common-law trade-marks, and the right to their exclusive use, are of course to be classed among property rights; but only in the sense that a man's right to the continued enjoyment of his trade reputation and the good-will that flows from it, free from unwarranted interference by others, is a property right, for the protection of which a trade-mark is an instrumentality." (citation omitted)). This historical ambivalence is not unique to trademark law; the history of intellectual property law generally, and copyright in particular, is similarly charged with philosophical and historiographical debates over the appropriateness of the word "property." See Justin Hughes, Copyright and Incomplete Historiographies: Of Piracy, Propertization, and Thomas Jefferson, 79 S. CAL. L. REV. 993 (2006); Justin Hughes, A Short History of "Intellectual Property" in Relation to Copyright, 33 CARDOZO L. REV. 1293 (2012).

(46.) See S. REP. NO. 79-1333, at 3 (1946) ("The purpose underlying any trade-mark statute is twofold. One is to protect the public so it may be confident that, in purchasing a product bearing a particular trade-mark which it favorably knows, it will get the product which it asks for and wants to get. Secondly, where the owner of a trade-mark has spent energy, time, and money in presenting to the public the product, he is protected in his investment from its misappropriation by pirates and cheats.").

(47.) See generally Mossoff, Saving Locke, supra note 26 (defending Locke's concept of productive labor and his capacious understanding of value as suitable moral foundations for property rights in inventors and authors).

(48.) Again, uses of trademarks by consumers as speakers give rise to an important exception to this proposition. See supra note 37 and accompanying text.

(49.) See generally, e.g., JOHN R.AWLS, A THEORY OF JUSTICE (rev. ed. 1999) [hereinafter RAWLS, A THEORY OF JUSTICE]; JOHN RAWLS, JUSTICE AS FAIRNESS: A RESTATEMENT (2001).

(50.) KANT, supra note 19.

(51.) IMMANUEL KANT, THE METAPHYSICS OF MORALS (Mary Gregor trans., Cambridge Univ. Press 1991) (1797).

(52.) KANT, supra note 19, at 13.

(53.) Id. (emphasis added).

(54.) Id. at 10.

(55.) Id. (emphasis added).

(56.) Id. at 11-12.

(57.) See id. at 13 ("Now an action done from duty must altogether exclude the influence of inclination and therewith every object of the will. Hence there is nothing left which can determine the will except objectively the law and subjectively pure respect for this practical law, i.e., the will can be subjectively determined by the maxim that I should follow such a law even if all my inclinations are thereby thwarted." (footnote omitted)).

(58.) See id. at 7.

(59.) Id. at 14 (emphasis added); see also id. at 30.

(60.) See id. at 26 ("Finally, there is one imperative which immediately commands a certain conduct without having as its condition any other purpose to be attained by it. This imperative is categorical. It is not concerned with the matter of the action and its intended result, but rather with the form of the action and the principle from which it follows; what is essentially good in the action consists in the mental disposition, let the consequences be what they may. This imperative may be called that of morality.").

(61.) See GUYER, supra note 19, at 179-95.

(62.) See KANT, supra note 19, at 39-40.

(63.) See RAWLS, A THEORY OF JUSTICE, supra note 49, at 226 (characterizing the original position as "a procedural interpretation of Kant's conception of autonomy and the categorical imperative within the framework of an empirical theory").

(64.) KANT, supra note 19, at 36 (emphasis added).

(65.) See GUYER, supra note 19, at 187 ("The term 'humanity' in Kant's formula thus seems to mean our capacity freely to set ourselves ends--form intentions and adopt aims--and to entail a duty to develop the various abilities that as rational beings we can see will be necessary in order to pursue effectively and thus realize the ends that we have set for ourselves.").

(66.) Onora O'Neill, A Simplified Account of Kant's Ethics, in EXPLORING ETHICS: AN INTRODUCTORY ANTHOLOGY 88, 88-89 (Steven M. Cahn ed., 2009) (italics omitted).

(67.) See KANT, supra note 51, at 225-26.

(68.) See id.

(69.) This stringency is one source of the famous "murderer at the door" hypothetical that squarely presented the contrast between deontology and consequentialism in Kant's own day. Compare BENJAMIN CONSTANT, DES REACTIONS POLITIQUES 36 (Jean-Marie Tremblay ed., 2003) (1797), available at (deriding the moral theories of the "philosophe allemand" who would condemn lying to assassins about the whereabouts of a friend who had taken refuge in one's house), with KANT, supra note 19, at 63-67 (disputing the formulation and the causal reasoning of Constant's "assassins" hypothetical and reaffirming the duty to refrain from making intentionally untrue statements where a statement cannot be avoided, even if harm to particular individuals may result).

(70.) See T.M. SCANLON, WHAT WE OWE TO EACH OTHER 1-7 (1998) (distinguishing Scanlon's interpersonal theory of contractualism from other traditional theories of social contract); Ashford & Mulgan, supra note 2 (identifying contemporary contractualism with Scanlon's theory of interpersonal duties).

(71.) SCANLON, supra note 70, at 4.

(72.) Id. at 298.

(73.) Id.

(74.) Importantly, it is the falsity of the expectation that renders A's actions wrongful. If A intends to perform Y when creating the expectation, this would merely be a morally acceptable form of cooperation--where A and B are treating one another not merely as means but also as ends. See O'Neill, supra note 66, at 89 ("Kant does not say that there is anything wrong about using someone as a means. Evidently we have to do so in any cooperative scheme of action. If I cash a check I use the teller as a means, without whom I could not lay my hands on the cash; the teller in trim uses me as a means to earn his or her living. But in this case, each party consents to her or his part in the transaction."); see also KANT, supra note 19, at 36. Indeed, Scanlon argues that once A has intentionally or negligently created an expectation of Y in B, even if A intended to perform Y, A has a duty to take reasonable steps to prevent any significant loss that will befall B if A does not in fact perform Y--such steps potentially including warnings or compensation. He refers to this as Principle L (for "loss prevention"). SCANLON, supra note 70, at 300-01.

(75.) See SCANLON, supra note 70, at 300 ("One must exercise due care not to lead others to form reasonable but false expectations about what one will do when one has good reason to believe that they would suffer significant loss as a result of relying on these expectations.").

(76.) The example Scanlon gives is the "guilty secret": a person may desire an assurance that an embarrassing (albeit not morally relevant) secret will not be divulged, not because if the secret is exposed the person would have to change plans made in reliance on the assurance, but because he (reasonably) prefers the state of affairs in which others are unaware of the embarrassing facts and so the assurance itself has value to him. See id. at 302-03.

(77.) Id. at 304 (emphasis added).

(78.) See id. at 304-05. It is these added features of the value of assurance that Scanlon argues--contra David Hume, Elizabeth Anscombe, and others--rescue the duty to keep promises from the Scylla of circularity and the Charybdis of reduction to a social convention (as opposed to a moral duty). See id. at 307-09 (citing G.E.M. ANSCOMBE, Rules, Rights and Promises, in 3 THE COLLECTED PHILOSOPHICAL PAPERS OF G.E.M. ANSCOMBE: ETHICS, RELIGION AND POLITICS 97 (1981)).

(79.) See id. at 299.

(80.) See supra text accompanying notes 64-66.

(81.) See KANT, supra note 51, at 236-40.

(82.) See IMMANUEL KANT, ON THE OLD SAW: THAT MAY BE RIGHT 1N THEORY BUT IT WON'T WORK IN PRACTICE 58-59 (E.B. Ashton trans., Univ. of Pa. Press 1974) (1793); KANT, supra note 51, at 248; see also Gerald Dworkin, Paternalism, STAN. ENCYCLOPEDIA PHIL. (Summer 2010 ed.), ("Kantian views are frequently absolutistic in their objections to paternalism. On these views we must always respect the rational agency of other persons. To deny an adult the right to make their own decisions, however mistaken from some standpoint they are, is to treat them as simply means to their own good, rather than as ends in themselves.").

(83.) Scanlon's own work is not particularly helpful in identifying circumstances in which paternalism would be permissible. See SCANLON, supra note 70, at 251-56 (defending a highly nuanced "value of choice" account of moral responsibility but impliedly conceding that his contractualist theory does not necessarily provide clear answers to the question whether paternalism is justifiable in any given set of circumstances because the value of a given choice may differ among persons, such that some might reasonably reject paternalist interventions that others might reasonably agree to); T.M. Scanlon, Jr., The Significance of Choice, in 8 THE TANNER LECTURES ON HUMAN VALUES 149, 177-85 (Sterling M. McMurrin ed., 1988), available at (setting forth a similar account of the value of choice and its imprecise implications for the permissibility of paternalist intervention).

(84.) Compare supra text accompanying notes 80-82, with JOHN STUART MILL, ON LIBERTY 9, 74 (Elizabeth Rapaport ed., Hackett Publ'g Co. 1978)(1859)("IT]he only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.... [N]either one person, nor any number of persons, is warranted in saying to another human creature of ripe years that he shall not do with his life for his own benefit what he chooses to do with it."). See generally Dworkin, supra note 82 (identifying both consequentialist and contractualist justifications for paternalism). As Joel Feinberg notes, consequentialist theories make a weak case for the antipaternalist attitudes of their most ardent defenders, and some recourse to deontological notions of personal autonomy is therefore required. See Joel Feinberg, Legal Paternalism, 1 CAN. J. PHIL. 105, 108-09 (1971).

(85.) See, e.g., GERALD DWORKIN, THE THEORY AND PRACTICE OF AUTONOMY 121-29 (1988); Gerald Dworkin, Moral Paternalism, 24 LAW & PHIL. 305 (2005); Gerald Dworkin, Paternalism, in MORALITY AND THE LAW 107 (Richard A. Wasserstrom ed., 1971); Dworkin, supra note 82.

(86.) See Dworkin, supra note 82; see also JOEL FEINBERG, HARM TO SELF 12-16 (1986). See generally Feinberg, supra note 84, at 124 (distinguishing between "strong" and "weak" paternalism).

(87.) FEINBERG, supra note 86, at 12.

(88.) DONALD VANDEVEER, PATERNALISTIC INTERVENTION 75 (1986); see also id. at 8187 (noting the similarities and differences between the Principle of Hypothetical Individualized Consent and the "weak paternalism" discussed in Feinberg, supra note 84, and arguing that Feinberg's weak paternalism "may call for quite invasive intrusions into the decisions of ordinary folk who are acting, more or less, at their rational best under more or less ordinary circumstances"). VanDeVeer's analysis of paternalism is one of the building blocks of the currently in vogue "libertarian paternalism" model that has grown out of the behavioral law and economics movement. See, e.g., RICHARD H. THALER & CASS. R. SUNSTEIN, NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS 4-6 & 255 n.3 (2008) (citing VanDeVeer and presenting libertarian paternalism as a "relatively weak, soft, and non-intrusive type of paternalism" whereby policymakers are "self-consciously attempting to move people in directions that will make their lives better").

(89.) Notably, even Kant allowed for paternalism toward "young children and the insane." See KANT, supra note 51, at 248.

(90.) See supra note 2.


(92.) Id. at 70.

(93.) See generally G.H. von Wright, Deontic Logic, 60 MIND 1 (1951) (formalizing the deontic categories).

(94.) This possibility is the subject of debates in moral philosophy around the ideas of value pluralism and moral relativism, and the type of flexibility I am here ascribing to contractualism has affinities with the pluralistic moral relativism defended by David B. Wong. See generally DAVID B. WONG, NATURAL MORALITIES: A DEFENSE OF PLURALISTIC RELATIVISM (2006). On the relationship between Scanlon's philosophy and moral relativism, see SCANLON, supra note 70, at 328-60. It is notable that even strict utilitarians seem to accept some version of value pluralism, as where, for example, Henry Sidgwick accepted that arguments about distributional fairness might be permissible grounds for choosing among arrangements of equal aggregate welfare. See HENRY SIDGWICK, THE METHODS OF ETHICS 416-17 (Hackett Publ'g Co. photo, reprint 1981) (7th ed. 1907).

(95.) See DAVID HUME, AN ENQUIRY CONCERNING THE PRINCIPLES OF MORALS 85 (Tom L. Beauchamp ed., Oxford Univ. Press 1998) (1751) ("[M]oral relations are determined by the comparison of actions to a rule. And that rule is determined by considering the moral relations of objects. Is not this fine reasoning?").

(96.) See, e.g., SCANLON, supra note 70, at 194, 213-18 (defending the concept of "reasonableness" against the charge of circularity).

(97.) See id. at 215 ("It may seem that contractualism becomes viciously circular if it does not take well-being as the basic coin in which reasonable rejection is measured.... But this is so only if the claims of well-being are unique among moral claims in needing no further justification.... I believe that something like this is frequently assumed...."). Moreover, as Kant famously argued, the causal inferences on which a consequentialist's conclusions regarding right and wrong depend are subject to error insofar as nobody can perfectly predict the future. See KANT, supra note 19, at 63-67. This is the so-called "epistemic" objection to consequentialism. See generally James Lenman, Consequentialism and Cluelessness, 29 PHIL. & PUB. AFF. 342 (2000). Finally, as numerous philosophers have argued, to the extent that consequentialism implies monism--the ability to align all possible considerations relevant to moral reasoning along a single dimension--it is descriptively inaccurate and normatively objectionable. This is the so-called "incommensurability" objection to value-monist forms of consequentialism. See generally INCOMMENSURABILITY, INCOMPARABILITY, AND PRACTICAL REASON (Ruth Chang ed., 1997) (collecting essays on incommensurability). Legal scholars have also discussed problems of legal policy in light of the incommensurability critique. See, e.g., Richard A. Epstein, Are Values Incommensurable, or Is Utility the Ruler of the World?, 1995 UTAH L. REV. 683 (arguing that discussions of important legal policy may be distorted or distracted by incommensurability questions, and these questions should not be the focus of philosophical discourse or legal theory); Cass R. Sunstein, Incommensurability and Valuation in Law, 92 MICH. L. REV. 779 (1994) (arguing that incommensurability analysis is conducive to social differentiation and distinct kinds of valuation that are critical to broader legal theories).

(98.) See SCANLON, supra note 70, at 204-06.

(99.) See id. at 213-18.

(100.) See id. at 206-13.

(101.) See id. at 251-67.

(102.) See id. at 243 ("[T]he justificatory force of a given increment of well-being in moral argument is not constant in all situations, but depends on other factors of a clearly moral character. I have already mentioned two factors of this kind: considerations of responsibility and considerations of fairness. Whether I have a morally forceful demand to be better off in a certain way will often depend, intuitively, on whether my fate is or is not my own doing, and on whether institutions that benefited me in the way I am demanding would be fairer, or less fair, than those presently in operation.").

(103.) Kaplow & Shavell, supra note 10, at 1354.

(104.) SCHEPPELE, supra note 91, at 60.

(105.) See, e.g., Kevin Tobia et al., Moral Intuitions: Are Philosophers Experts?, PHIL. PSYCHOL. (forthcoming), available at (reporting experimental results that philosophers do sometimes have different moral intuitions than nonphilosophers, but that the philosophers' intuitions are not demonstrably better or more reliable); Jonathan M. Weinberg et al., Are Philosophers Expert Intuiters?, 23 PHIL. PSYCHOL. 331 (2010) (arguing that the literature on expertise does not support philosophers' claims to be experts in moral intuition).

(106.) See supra notes 80-88 and accompanying text.

(107.) See SCANLON, supra note 70, at 202 ("The aim of finding and acting on principles that no one similarly motivated could reasonably reject leads us to take other people's interests into account in deciding what principles to follow. More exactly, we have reason to consider whether there are standpoints other than our own present standpoint from which the principles we are considering could reasonably be rejected.... 'Others' figure twice in this schema: as those to whom justification is owed, and as those who might or might not be able reasonably to reject certain principles.").

(108.) Perhaps the most powerful contractualist foray into this debate can be found in the work of the contemporary contractualist philosopher Stephen Darwall, who argues that moral obligation is uniquely grounded in those demands that free and rational agents will recognize as being legitimately made of them by others. See generally STEPHEN DARWALL, THE SECOND-PERSON STANDPOINT: MORALITY, RESPECT, AND ACCOUNTABILITY (2006). Robin Kar is the scholar most responsible for bringing Darwall's insights to bear on legal theory in general and contract law in particular. See Robin Bradley Kar, Contract Law and the Second-Person Standpoint." Why Efficiency-Maximization Principles Can Neither Explain nor Justify the Expectation Damages Remedy, 40 LOY. L.A.L. REV. 977 (2007); Robin Bradley Kar, Contractualism About Contract Law (Loyola L.A. Law Sch. Legal Studies, Paper No. 2007-29, 2008), available at; Robin Bradley Kar, The Second-Person Standpoint and the Law (Ill. Pub. Law & Legal Theory Research Papers Series, No. 10-19, 2011), available at

(109.) This Part is a significantly expanded adaptation of portions of Sheff, Unbranding, supra note 3.

(110.) See, e.g., Laidlaw v. Organ, 15 U.S. (2 Wheat.) 178, 195 (1817) ("The question in this case is, whether the intelligence of extrinsic circumstances, which might influence the price of the commodity, and which was exclusively within the knowledge of the vendee, ought to have been communicated by him to the vendor? The court is of opinion that he was not bound to communicate it. It would be difficult to circumscribe the contrary doctrine within proper limits, where the means of intelligence are equally accessible to both parties. But at the same time, each party must take care not to say or do any thing tending to impose upon the other.").

(111.) See RESTATEMENT (SECOND) OF CONTRACTS [section] [section] 153-54 (1981).

(112.) See id. [section] [section] 153(b), 159-64; RESTATEMENT (SECOND) OF TORTS ch. 22 (1977) (laying out various distinctions among types of misrepresentations and nondisclosures, and identifying circumstances in which tort liability (i.e., damages) may attach).

(113.) See Eugene F. Fama, Efficient Capital Markets: II, 46 J. FIN. 1575, 1575 (1991); F.A. Hayek, The Use of Knowledge in Society, 35 AM. ECON. REV. 519, 525-27 (1945).

(114.) See e.g., United States v. O'Hagan, 521 U.S. 642, 651-53 (1997); Dirks v. SEC, 463 U.S. 646, 654-55 (1983); Chiarella v. United States, 445 U.S. 222, 230 (1980); 17 C.F.R. [section] [section] 240.10b-5 to 240.10b5-2, 240.14.e-3 (2012).

(115.) See, e.g., CHARLES FRIED, CONTRACT AS PROMISE 57-84 (1981) (contractualist analysis of contract doctrines that deal with mistake and fraud); SCHEPPELE, supra note 91, at 77-120 (explanation of contractualist analysis of secret-keeping and its relevance to legal policy, particularly contract law); Anthony T. Kronman, Mistake, Disclosure, Information, and the Law of Contracts, 7 J. LEGAL STUD. 1, 2 (1978) (economic analysis of unilateral mistake and the duty to disclose in contract law); Kim Lane Scheppele, "It's Just Not Right": The Ethics of Insider Trading, 56 LAW & CONTEMP. PROSS. 123, 124-25 (1993) (contractualist analysis of insider trading law); Alan Strudler & Eric W. Orts, Moral Principle in the Law of Insider Trading, 78 TEX. L. REV. 375, 380-82 (1999) (same); HENRY G. MANNE, INSIDER TRADING AND THE STOCK MARKET (1966) (economic argument for permitting insider trading); Dennis W. Carlton & Daniel R. Fischel, The Regulation of Insider Trading, 35 STAN. L. REV. 857, 861 (1983) (same); Jonathan Macey, Getting the Word Out About Fraud: ,4 Theoretical Analysis of Whistleblowing and Insider Trading, 105 MICH. L. REV. 1899, 1902, 1922-24 (2007) (economic argument for limited allowance of trading on inside information of corporate wrongdoing).

(116.) See FRIED, supra note 115, at 62-63, 77-85; Scheppele, supra note 115, at 155-63; Strudler & Orts, supra note 115, at 409-19. Whether the better-informed party is responsible for creating his own informational advantage is a separate question. Deontological accounts generally do not require a better-informed party to disclose information that the less-informed party has equal access to, or information that the better-informed party undertook significant effort and risk to obtain in the reasonable expectation of a return on his investment. See FRIED, supra note 115, at 82-83; Scheppele, supra note 115, at 162-63; Strudler & Orts, supra note 115, at 414-19.

(117.) See, e.g., Carlton & Fischel, supra note 115, at 866-68; Kronman, supra note 115, at 32-33; cf. Macey, supra note 115, at 1917-20 (arguing that insider trading can be a superior means of disseminating insider information of corporate wrongdoing). Alternatively, some consequentialist accounts may examine the amount and distribution of wealth generated by a particular choice of rule. See, e.g., Carlton & Fischel, supra note 115, at 869-72; Hayne E. Leland, Insider Trading." Should It Be Prohibited?, 100 J. POL. ECON. 859, 876-85 (1992).

(118.) See, e.g., SCHEPPELE, supra note 91, at 124-26, 161-67 (arguing that the consequentialist theory defended in Kronman, supra note 115, fails to explain most of the cases on the duty to disclose in contract law, while contractualist theory explains those cases quite well).

(119.) This type of case is reduced to hypotheticals in FRIED, supra note 115, at 78-85.

(120.) 27 A. 992 (Pa. 1893).

(121.) Id. at 992-93.

(122.) Kronman, supra note 115, at 2, 13-16, 19-21.

(123.) Id. at 2, 13-16.

(124.) 86 S.W.2d 787 (Tex. Civ. App. 1935).

(125.) SCHEPPELE, supra note 91, at 166; Feist, 86 S.W.2d at 788. Neill also disclosed an alternative ground for its result: that the price paid by the buyer was a fair market price even in light of the information known to the buyer. Neill, 27 A. at 992-93.

(126.) See Scheppele, supra note 115, at 125, 162-65.

(127.) See Chiarella v. United States, 445 U.S. 222, 230, 235 (1980) (holding that Rule 10b-5 is not violated when the party with inside information owes no independent duty to disclose to his counterparty, for example, as a fiduciary of the counterparty).

(128.) See United States v. O'Hagan, 521 U.S. 642, 658, 665 (1997) (validating the "misappropriation" theory of Rule 10b-5 liability, under which the defendant may be held liable for trading on information in violation of a duty to the source of that information).

(129.) See SEC v. Tex. Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir. 1968) (en banc).

(130.) See Chiarella, 445 U.S. at 247 (Blackmun, J., dissenting) ("I do not agree that a failure to disclose violates [Rule 10b-5] only when the responsibilities of a relationship of that kind have been breached. As applied to this case, the Court's approach unduly minimizes the importance of petitioner's access to confidential information that the honest investor, no matter how diligently he tried, could not legally obtain.").

(131.) Nevertheless, Strudler and Orts, supra note 115, at 384, argue that their deontological theory of insider trading provides a more coherent and persuasive account of the outcomes of some important Supreme Court cases than does the reasoning of those cases themselves.

(132.) One leading commentator has suggested that this difference reflects a tension between "morality" and "policy," when in fact it merely suggests a tension between two different schools of moral thought, either one of which might have the upper hand on a particular policy issue at a given time. See Melvin A. Eisenberg, Disclosure in Contract Law, 91 CALIF. L. REV. 1645, 1653 (2003) ("In most issues in contract law, morality and policy point in the same direction. In the disclosure problem, however, morality and policy often point in different directions."). In fairness, it may be the case that Eisenberg is merely invoking idiosyncratic definitions of "policy" and "morality." See id. at 1651 & n.5.

(133.) See generally MANNE, supra note 115, at 93-110; Carlton & Fischel, supra note 115, at 861; Macey, supra note 115, at 1902, 1922-24. There is, however, a countertrend in more recent law and economics scholarship--particularly scholarship informed by empirical analysis--wherein commentators argue that insider trading imposes serious social costs and negatively impacts the efficiency of securities markets. For a summary, see Jesse M. Fried, Insider Trading via the Corporation 5-7 (Harvard Law Sch. John M. Olin Ctr. for Law, Econ., & Bus., Discussion Paper No. 725, 2012), available at

(134.) See e.g., Scheppele, supra note 115, at 150-68; Strudler & Orts, supra note 115, at 376-77, 380-82.

(135.) See supra notes 118-125.

(136.) In each of these situations, I assume that the party with greater information is the seller. This is not strictly necessary to the analysis, but is consistent both with the general principle that sellers tend to have more information about the goods they are selling than buyers and with the recognition of that principle as one basis for organizing theories of trademark law. On the particular issues raised by applying a duty to disclose to sellers, see Eisenberg, supra note 132, at 1674-80.

These hypotheticals are also set up so as to make superior access to information and investment in production of information appear to be mutually exclusive, which they obviously need not be. However, because this construction still generates the distinction between contract and insider trading law that is under discussion, it helps to advance the analysis while eliminating potentially confounding variables that are of no relevance to the present discussion. See infra text accompanying notes 140-142.

(137.) Cf. Kaplow & Shavell, supra note 10, at 1158-59 (arguing that in cases of asymmetric information or sophistication between sellers and buyers, "there may be little difference between welfare economic analysis and that based on notions of fairness").

(138.) The latter proposition rests on the resolution of the debate over paternalism discussed in Part II.C, above.

(139.) Cf. supra note 75 and accompanying text (discussing Scanlon's Principle D).

(140.) See supra text accompanying notes 118-126.

(141.) See, e.g., Scheppele, supra note 115, at 162 ("Equal access to information is the moral concept on which a prohibition on insider trading would be grounded."); Strudler & Orts, supra note 115, at 399.

(142.) See Carlton & Fischel, supra note 115, at 866-86; Strudler & Orts, supra note 115, at 400-03; supra note 113 and accompanying text.

(143.) This basis for the two schools' disagreement maps to the debate in moral philosophy over the justifiability of aggregation--whether and under what circumstances a small burden (or benefit) to a large number of persons may be balanced in moral reasoning against a large benefit (or burden) to a small number of persons (or even a single person). See generally, e.g., Derek Parfit, Justifiability to Each Person, 16 RATIO 368 (2003); Joseph Raz, Numbers, With and Without Contractualism, 16 RATIO 346 (2003); John M. Taurek, Should the Numbers Count?, 6 PHIL. & PUB. AFF. 293 (1977). The debate engages the passions not only of philosophers, but of literary minds as well. See FYODOR DOSTOYEVSKY, THE BROTHERS KARAMAZOV 245-46 (Richard Pevear & Larissa Volokhonsky trans., Alfred A. Knopf 1990) (1880); URSULA K. LE GUIN, The Ones Who Walk Away from Omelas, in THE WIND'S TWELVE QUARTERS 275, 283 (1975); STAR TREK II: THE WRATH OF KHAN (Paramount Pictures 1982).

(144.) The title of this Subpart intentionally invokes Fried and his deontological analysis of the moral value of promises in contract law. The analogy is not exact, as Fried defended his theory largely by reference to the expectation measure of damages and denied the claim of other contractualists that their moral theory requires--as this Subpart suggests trademark law may in fact require--specific performance. See FRIED, supra note 115, at 1-27 (introducing Fried's deontological account of contract as promise); Charles Fried, The Convergence of Contract and Promise, 120 HARV. L. REV. F. 1 (2007), (denying the claim of other contractualists that the contract as promise account implies a specific performance remedy).

(145.) See 1 MCCARTHY ON TRADEMARKS & UNFAIR COMPETITION [section] 1:12 (4th ed. West 2012) ("In the early common law, unfair competition was often equated with 'passing off (or 'palming off'). That is, 'passing off' one's product as the product of another seller by means of similar labeling, packaging or advertising. Such passing off is still a major form of unfair competition. However, today, the term 'passing off' or 'palming off' is more properly reserved for those cases where defendant has made an unauthorized substitution of the goods of one manufacturer when the goods of another manufacturer were ordered by the customer.").

(146.) See 4 id. [section] 23:5 ("The most common and widely recognized type of confusion that creates infringement is purchaser confusion of source which occurs at the time of purchase: point of sale confusion.").

(147.) See supra Part I.A.

(148.) Cf. Akerlof, supra note 9, at 488-91, 499-500 (modeling the market failure that results when better informed sellers can take advantage of less informed buyers and proposing brand names as a potential solution).

(149.) 15 U.S.C. [section] 1125(a)(1)(A) (2011). Each of the circuit courts of appeals has announced a multifactor balancing test for determining whether confusion is likely, and several of those tests include a factor that either explicitly addresses the difference in quality between the defendant's products and the plaintiffs products or has been used by courts and litigants to address that issue. See, e.g., Sullivan v. CBS Corp., 385 F.3d 772, 776 (7th Cir. 2004) ("similarity of the products"); Shakespeare Co. v. Silstar Corp. of Am., Inc., 1 I0 F.3d 234, 242 (4th Cir. 1997) ("the quality of the defendant's product in relationship to the quality of the senior mark owner's product"); Bos. Athletic Ass'n v. Sullivan, 867 F.2d 22, 29-30 (1st Cir. 1989) (similarity of the goods); AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1538 (11th Cir. 1986) (similarity of the products); AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 353-54 (9th Cir. 1979) (type of goods and the degree of care likely to be exercised by the purchaser, including a discussion of relative quality); Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961) (quality of defendant's product); see also Basile, S.p.A. v. Basile, 899 F.2d 35, 37 (D.C. Cir. 1990) (citing with approval the Polaroid standard).

(150.) Over the past decade, approximately 400 to 500 trademark cases have originated in the district courts of the Second Circuit every year--a number of cases second only to the Ninth Circuit. See LEX MACHINA, (last visited Nov. 21, 2012) (subscription required).

(151.) See, e.g., Savin Corp. v. Savin Grp., 391 F.3d 439, 461 (2d Cir. 2004) ("A marked difference in quality ... actually tends to reduce the likelihood of confusion in the first instance, because buyers will be less likely to assume that the senior user whose product is high-quality will have produced the lesser-quality products of the junior user. Conversely, where the junior user's products are of approximately the same quality as the senior user's, there is a greater likelihood of confusion...."); Morningside Grp. Ltd. v. Morningside Capital Grp., L.L.C., 182 F.3d 133, 142 (2d Cir. 1999); Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497, 505 (2d Cir. 1996).

(152.) See, e.g., Babbit Elecs., Inc. v. Dynascan Corp., 38 F.3d 1161, 1180-81 (11th Cir. 1994) (holding that identical goods produced by the same factory as the plaintiff's authorized goods infringe because "inferiority is not a prerequisite to a finding of [infringement]"); Societe des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 640 (1st Cir. 1992) (citing as error a district court's reasoning that inferior quality of the defendant's goods is essential to a finding of infringement); Sleekcraft, 599 F.2d at 354 ("[E]quivalence in quality may actually contribute to the assumption of a common connection."). The Fourth Circuit has adopted an incoherent position on the relevance of product quality to infringement, finding it relevant in some cases (with particularly unsympathetic defendants) but not in others. See George & Co. v. Imagination Entm't Ltd., 575 F.3d 383, 399 (4th Cir. 2009) ("[T]he quality of the defendant's product ... has no relevance in this case. It [is relevant] in 'situations involving the production of cheap copies or knockoffs of a competitor's trademark-protected goods.'" (quoting Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 467 (4th Cir. 1996)).

(153.) See Savin Corp., 391 F.3d at 461.

(154.) At least one court has come rather close to this position in the remedy phase of a trademark case. See Gucci Am., Inc. v. Daffy's, Inc., 354 F.3d 228, 233-35, 239-43 (3d Cir. 2003) (affirming denial of a recall order and an award of profits for sale of infringing goods where the defendant's infringement was not willful and the goods were not of noticeably lower quality than the plaintiff's goods).

(155.) Sleekcraft, 599 F.2d at 353 ("When the alleged infringer's goods are of equal quality, there is little harm to the reputation earned by the trademarked goods. Yet this is no defense, for present quality is no assurance of continued quality.").

(156.) See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (holding that Article III standing requires that the plaintiff have suffered "injury in fact" that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical" (internal quotation marks omitted)).

(157.) See 13B CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE [section] 3532.2 (3d ed. 2008) (summarizing cases barring adjudication of claims that are contingent on the occurrence of remote or uncertain future events).

(158.) Wesley-Jessen Div. of Schering Corp. v. Bausch & Lomb Inc., 698 F.2d 862, 867 (7th Cir. 1983) ("Even if the infringer's goods are of high quality, the victim has the right to insist that its reputation not be imperiled by another's actions."); Sleekcraft, 599 F.2d at 354 ("The wrong inheres in involuntarily entrusting one's business reputation to another business.").

(159.) To be fair, there is a better counterargument available to consequentialists on this issue, which depends on the disincentive effects of free riding and the administrative costs of charging courts with ascertaining quality. But this argument suffers from at least two infirmities. First, it ignores that courts already assess quality as part of the likelihood-of-confusion inquiry. Second and more importantly, it assumes that the aggregate disutility of the administrative costs of court intervention plus the disincentive effects of free riding are greater in magnitude than the aggregate social costs of requiring competitors to make duplicative investments in information capital or requiring consumers to undertake more costly searches on their own. This is an empirical conclusion, and one for which consequentialists conspicuously fail to offer relevant data--a fault of consequentialist approaches to trademark policy in general. See infra notes 205-209 and accompanying text (arguing that consequentialist analysis requires resolution of intractable empirical problems in the absence of relevant data, and is therefore often indeterminate).

(160.) See supra Part II.B.

(161.) See supra note 72 and accompanying text.

(162.) See supra note 77 and accompanying text.

(163.) See supra note 74.

(164.) I provide a more complete taxonomy of post-sale confusion theories in Sheff, Veblen Brands, supra note 13, at 776-94.

(165.) See id. at 778-85.

(166.) See id. at 790-804.

(167.) See Mastercrafters Clock & Radio Co. v. Vacheron & Constantin-Le Coultre Watches, Inc., 221 F.2d 464, 466 (2d Cir. 1955).

(168.) See Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 109 (2d Cir. 2000).

(169.) See Shelf, Veblen Brands, supra note 13, at 779-80, 792-93, 821-28; see also Sheff, Unbranding, supra note 3, at 1001-02.

(170.) We might say that in completing his desired transaction, C would be violating a version of Scanlon's Principle D. See supra notes 75, 141, and accompanying text.

(171.) See supra notes 141-143 and accompanying text.

(172.) I have reviewed some of this literature in previous work. See Jeremy N. Sheff, Brand Renegades, 1 N.Y.U.J. INTELL. PROP. & ENT. L. 128, 130-34 (2011) [hereinafter Sheff, Brand Renegades].

(173.) See Sheff, Veblen Brands, supra note 13, at 794-804.

(174.) Sheff, Unbranding, supra note 3, at 1001-02; cf. Laura A. Heymann, The Public's Domain in Trademark Law. A First Amendment Theory of the Consumer, 43 GA. L. REV. 651, 691-702 (2009) (arguing that consumers have a First Amendment interest in helping construct the meanings of the brands they encounter).

(175.) See Sheff, Brand Renegades, supra note 172, at 156-58; see also Sheff, Veblen Brands, supra note 13, at 792-808.

(176.) It is for this reason, among others, that I argue that status confusion liability suffers from serious First Amendment problems. See Sheff, Veblen Brands, supra note 13, at 80430; cf. MERGES, supra note 16, at 90-91 ("[T]he internal logic of Kant's theory of property fits comfortably with First Amendment limits on appropriation, better even than the labor theory of John Locke.").

(177.) This is in fact one of the arguments the Second Circuit has invoked in defense of status confusion doctrine. See Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 108 (2d Cir. 2000) ("[T]he purchaser of an original is harmed by the widespread existence of knockoffs because the high value of originals, which derives in part from their scarcity, is lessened.").

(178.) Cf. Sheff, Unbranding, supra note 3, at 1001-02 (making a similar argument with respect to a stealth marketing tactic I call "sabotage unbranding").

(179.) See supra text accompanying note 100.

(180.) See generally Kaplow & Shavell, supra note 10 (rejecting fairness as a legitimate normative concern in legal policy).

(181.) SCANLON, supra note 70, at 216. Similar concerns about fairness underlie the contractualist preoccupation with distributive justice, a topic that consequentialists generally treat as a second-order concern at best. Compare RAWLS, A THEORY OF JUSTICE, supra note 49 (giving distributive justice a central role in the development of rules to govern the just society), with SIDGWICK, supra note 94, at 416-17 (relegating distributive justice to a tiebreaker status in the event of two options of equal aggregate utility).

(182.) See FEINBERG, supra note 86, at 12.

(183.) Again, paternalism is one of the special justifications for departure from Scanlon's Principle M. See supra notes 72-79 and accompanying text.

(184.) See supra Part II.C.

(185.) See Sheff, Biasing Brands, supra note 4; see also Jeremy N. Sheff, The (Boundedly) Rational Basis of Trademark Liability, 15 TEX. INTELL PROP. L.J. 331 (2007).

(186.) See Sheff, Biasing Brands, supra note 4, at 1287-95 (discussing the persistence of consumer biases even in the face of disconfirmatory evidence and even when consumers are warned of their tendency toward biased decisionmaking); id. at 1295-98 (discussing strategic manipulation of boundedly rational consumer psychology by marketers).

(187.) See supra text accompanying notes 132-143; cf. Sheff, Unbranding, supra note 3, at 1002-04 (arguing that marketers' superior knowledge about the decisionmaking processes of consumers gives rise to a duty not to use that knowledge to lead consumers to make purchasing decisions consumers would not otherwise make).

(188.) I have previously discussed this tension in the context of the stealth marketing tactic known as "unbranding," where I distinguish between "corrective concealment unbranding" and "deceptive concealment unbranding" along the lines suggested in the text. See Sheff, Unbranding, supra note 3, at 996-1000.

(189.) See supra notes 80-82 and accompanying text; cf. Sheff, Unbranding, supra note 3, at 1004 ("Importantly, the deontological view does not condition ethical condemnation of concealment unbranding on the corrective or deceptive nature of the practice. Rather, it is the practice itself, and its interference with consumer autonomy, that is wrongful." (footnotes omitted)).

(190.) 818 F.2d 254 (2d Cir. 1987).

(191.) Id. at 256, 259-60.

(192.) Cf. Sheff, Biasing Brands, supra note 4, at 1287-89 & n.146 (describing a theory of brand loyalty consistent with the rational actor assumptions of the Chicago School).

(193.) See supra text accompanying note 72.

(194.) Cf. Sheff, Biasing Brands, supra note 4, at 1289-94 (describing a similar theory of brand loyalty grounded in the psychology and marketing literatures).

(195.) See FEINBERG, supra note 86, at 12.

(196.) See VANDEVEER, supra note 88, at 75.

(197.) See supra Part II.C.

(198.) See Sheff, Biasing Brands, supra note 4, at 1294-95 (discussing the literature on the variability of cognitive bias in consumer decisionmaking); cf. supra note 83 (discussing Scanlon's efforts to grapple with similar variability in capacities and values in his "value of choice" model for determining the permissibility of paternalism).

(199.) See supra text accompanying notes 91-94.

(200.) See supra note 94 and accompanying text.

(201.) See Lawrence B. Solum, Public Legal Reason, 92 VA. L. REV. 1449, 1481, 1501 (2006) (arguing that the invocation of principles that emerge from deep moral theories as a nonexclusive input into legal decisionmaking does not offend principles of public reason).

(202.) See Rothman, supra note 13, at 159-67. The misappropriation theory, of course, is rooted in Lockean labor-desert theory. See generally Bone, supra note 33.

(203.) See Rothman, supra note 13, at 161-62.

(204.) See id. at 180-83.

(205.) See Sheff, Biasing Brands, supra note 4, at 1311-13.

(206.) For examples of this form of critique, see supra notes 13, 28-33, and accompanying text.

(207.) Cf. Stacey L. Dogan & Mark A. Lemley, A Search-Costs Theory of Limiting Doctrines in Trademark Law, 97 TRADEMARK REP. 1223, 1240-50 (2007) (arguing that search costs theory leads to ambiguous policy prescriptions across a broad swath of trademark doctrines).

(208.) Cf. supra note 16 and accompanying text (discussing the impossibility of answering the empirical questions on which consequentialist justifications of intellectual property rights depend and the resulting need for nonconsequentialist justifications).

(209.) See generally Barton Beebe, Search and Persuasion in Trademark Law, 103 MICH. L. REV. 2020 (2005) (exploring the varied and inconsistent models of consumer capacities at work in various areas of trademark doctrine and the differing limits these models impose on producer behaviors and prerogatives).

(210.) See supra text accompanying notes 103-107.

(211.) See supra text accompanying notes 200-201.

(212.) Indeed, precisely such an episode occurred in trademark law within the past decade. See Federal Trademark Dilution Act of 1995, Pub. L. No. 104-98, 109 Stat. 985 (1996) (the first federal dilution law); Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 432-33 (2003) (interpreting the Federal Trademark Dilution Act as requiring a showing of actual, as opposed to likely, dilution), superseded by statute, Trademark Dilution Revision Act of 2006, Pub. L. No. 109-312, 120 Stat. 1730 (abrogating Moseley and further amending the federal dilution statute); 152 CONG. REC. 2941-42 (2006) (statement of Sen. Patrick Leahy) (describing the Trademark Dilution Revision Act as a measure to clarify Congress's intent in the wake of Moseley and to undo that case's central holding). Obviously, the text paints an idealized picture of the give-and-take of policymaking in a mature and bureaucratized democracy, and I recognize and am largely persuaded by the public choice theory critique of such systems. While traditionally, intellectual property owners have held considerable sway over Congress with respect to the content of trademark and copyright legislation, recent events suggest that may be changing. Compare Reza Dibadj, Regulatory Givings and the Anticommons, 64 OHIO ST. L.J. 1041, 1043-44, 1055-58 (2003) (arguing that organized intellectual property owners have succeeded in extracting regulatory largesse from Congress), with Jenna Wortham & Somini Sengupta, Bills to Stop Web Piracy Invite a Protracted Battle, N.Y. TIMES (Jan. 15, 2012), (reporting the recent success of organized technology interests in fighting off an effort by intellectual property owners to obtain desired regulatory benefits from Congress).

(213.) See supra notes 94, 201, and accompanying text.

(214.) Cf. Shelf, Biasing Brands, supra note 4, at 1312 ("[Consequentialist] argument based on theory alone merely uses the language of efficiency to mask an underlying argument about distribution: an irreducibly normative claim as to which segment of society should bear the transactions costs inherent in consumer markets.").

(215.) See supra text accompanying notes 160-163.

(216.) See J. Shahar Dillbary, Trademarks as a Media for False Advertising, 31 CARDOZO L. REV. 327, 339-42 (2009).

(217.) See Sheff, Unbranding, supra note 3, at 1002-04.

(218.) For a discussion of how Kantian and Lockean theories contrast in their implication for property owners and creative producers, see MERGES, supra note 16, at 90-91.

(219.) See id. at 128-29 (citing fair use in copyright law, experimental use in patent law, and nominative use in trademark law as examples where the public has legitimate moral claims to the subject of an intellectual property right).

(220.) See 15 U.S.C. [section] 1052(e)(1), (f) (2011) (barring federal registration of descriptive marks absent a showing of acquired distinctiveness); KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 117-23 (2004) (holding that a defendant is entitled to use a registered trademark in its descriptive sense even if the use creates some degree of consumer confusion); Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 211-12 (2000) (holding that product design, like color, usually serves a purpose other than source identification and is therefore not protectable absent a showing of acquired distinctiveness); Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 10 (2d Cir. 1976) (holding that descriptive trademarks are not protectable absent a showing of acquired distinctiveness).

(221.) See Gordon, supra note 37, at 1590 ("Under the proviso the genericness doctrine and the descriptive-use defense are necessary prerequisites for grants of trademark rights.").

(222.) See 15 U.S.C. [section] 1125(c)(1) ("Subject to the principles of equity, the owner of a famous mark ... shall be entitled to an injunction ... regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.").

(223.) See SCANLON, supra note 70, at 216 ("We have reason to object to principles simply because they arbitrarily favor the claims of some over the identical claims of others: that is to say, because they are unfair.").

(224.) See generally, e.g., Mark P. McKenna, A Consumer Decision-Making Theory of Trademark Law, 98 VA. L. REV. 67 (2012) (arguing, by analogy to false advertising and First Amendment law, that trademark liability should only be imposed against conduct that deceives consumers as to their purchasing decisions); Rebecca Tushnet, Running the Gamut from A to B: Federal Trademark and False Advertising Law, 159 U. PA. L. REV. 1305 (2011) (arguing for consistent evaluation of consumer capacities and behavior between trademark and false advertising law).

Jeremy N. Sheff, Associate Professor of Law, St. John's University. This Article has benefited from comments, critiques, and suggestions from Bob Bone, Marc DeGirolami, Justin Hughes, Michael Kenneally, Paul Kirgis, Mark Lemley, Jason Mazzone, Larry Solum, Rebecca Tushnet, Molly Shaffer Van Houweling, Adam Zimmerman, and participants at the 11th Annual Intellectual Property Scholars Conference (DePaul Law School), the Second Annual Tri-State Area Intellectual Property Workshop (Fordham Law School), the faculty colloquia at Brooklyn Law School and Temple Law School, and the Intellectual Property Scholarship Seminar at the University of California, Berkeley School of Law (with particular thanks to Rob Merges and Pam Samuelson). All errors are the author's alone.
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Title Annotation:IV. Toward a Contractualist Theory of Trademark Law A. Trademark as Promise through Conclusion, with footnotes, p. 797-815
Author:Sheff, Jeremy N.
Publication:Stanford Law Review
Date:Apr 1, 2013
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