From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Friday, 21 November 2014

The Consumer Protection Function of Trade Marks: Just so?

This Kat been has thinking a lot lately about trade mark first principles in connection with his participation, together with
fellow Kat Jeremy, in a forthcoming program sponsored by the International Trademark Association (INTA) on the subject of trade marks and overlapping IP rights. One such principle is the recurring assertion that consumer protection is a bedrock of trade mark protection. Is this indeed the case and, if so, how does consumer protection fit within the trade mark protection structure?

Consider the observations made by the distinguished chief judge of the U.S. Ninth Circuit Court of Appeals, Judge Alex Kozinski, in his iconic article, “Trademarks Unplugged” (October 1993, 68 N.Y.U.L. Rev. 960), based on the text of his Boal Memorial Lecture. In the piece, Judge Kozinski considered three situations: the trading of Rolex watches, the sale of clothing bearing the marks of the New York Mets baseball team, and a pirated adaptation of Sega's Cool Spot video game. Going beyond the source function of trade marks, he posited four other kinds of interests embodied in the ownership of a trade mark-—moral, utilitarian, goodwill and free expression. Take the ROLEX watch, being for many a quintessential aspirational good. Because of the low price point of a fake watch, no consumer is deceived into thinking that he has purchased a genuine ROLEX product, nor has the purveyor of the branded watch likely lost a customer because of the sale of the fake watch. This is not to say that the brand holder may not have suffered harm. The question is how to understand the property right of the trade mark owner in such a way as to support the grant of relief in such a situation.

Speaking generally about this question, Judge Kozinski concluded as follows:
"We've considered four different kinds of interests implicated by giving trademark owners a more extensive property right in their marks: moral, utilitarian, goodwill, and free expression. How does a court or legislature go about balancing all of these? Well, as I tell my kids when they ask what I'll do if they run away and join the circus, I don't give advisory opinions. In truth, the hypotheticals I've sketched here indicate that results may be case-specific; many of these are close judgment calls, requiring one to balance interests that point in different directions. Applying these considerations to a particular set of facts requires a normative judgment about the relative importance of competing interests.

It is enough for today to recognize that in our culture, trademarks are doing all kinds of work they weren't originally meant to do. As their new functions become more important, so will the need for law to keep up. It's critical that we consider all the interests at stake and weigh those interests by reference to current reality, not according to rules made up at another time to deal with another reality. Trademarks, trade names, logos, and the other symbols of commerce have evolved. The law must evolve with them.”
The focus of Judge Kozinski’s comments is on the proprietary nature of the trade mark right. In so doing, he does not demonstrate any need to also embrace consumer protection as an alternative basis for the expansion of the trade mark right, even in the light of changing commercial circumstances.

Lest Kat readers think that this approach is limited to the American view of the issue, consider as well the pithy observation made recently to this Kat in an exchange with a highly regarded colleague in CTM practice, who put it simply as follows:
“In the EU, the understanding is that trade marks are IP assets, their protection serving their owners' interests. They do NOT protect consumers, we have other laws for achieving that.”
Here, as well, the position is clear. The trade mark right is a propriety right; protection of the consumer with respect to the use of a mark is not the concern of the trade mark laws.

And so the question: how does the consumer protection function fit as part of the trade mark system? After all, and especially so in certain European countries, unfair competition is a distinct statutory right with respect to trade marks, rather than being an element of the trade mark right itself. Is there any reason to treat consumer protection with respect to a trade mark in a different fashion?

KATNOTE from Jeremy, who has a bit of a bee in his bonnet about the consumer protection function of trade mark law: this seems to be a popular debating topic in the US to the point at which it has generated a rich and energetic literature. So influential is this debate that, in his editorial capacity, he sometimes receives articles submitted for publication in JIPLP that state it as being axiomatic that a function of trade mark law (and often the only function of trade mark law) is the protection of the consumer.

It's worth taking a look at the law in wider terms. The word "consumer" is entirely absent from the Paris Convention on the Protection of Industrial Property;  Part II Section 2 of TRIPS, which deals with trade mark law, makes no mention of the word "consumer" except in the tail end of Art.23.3, which deals with extra geographical indication protection for wines and spirits ("Each Member shall determine the practical conditions under which the homonymous indications in question will be differentiated from each other, taking into account the need to ensure equitable treatment of the producers concerned and that consumers are not misled"). The Community Trade Mark Regulation and Harmonisation Directive, which each actually containing the "c" word, do not articulate a notion of a consumer protection function, and no rights or remedies are open to consumers who are unprotected. While the "essential function" of the trade mark in Europe is 
"to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin" (Case C-206/01 Arsenal v Reed)
the protection is given not to the consumer but to the trade mark owner as guarantor of the identity of the origin of the marked goods. 

Consumer protection: are we no more
than canaries in the cage?
As this Kat has remarked on previous occasions, the role of the consumer in European trade mark law is not to be protected but to help the trade mark owner be protected. The consumer is like the canary in the cage which miners used to take underground with them, to detect the presence of poisonous gases. When the canary falls off its perch, dead, the miner carrying the cage knows that it's time to act for his own good. So too, when the consumer falls off his perch, as it were, by being confused, the trade mark owner knows that it's time to act for his own good. In practical terms, neither the canary nor the consumer has much joy in terms of recovery.  

Whether this should be the case is a matter for discussion.  Consumer actions against rogue traders who confuse them, particularly with regard to lookalike packaging, not to mention class actions, might do much to clarify consumer choice in the marketplace and improve its standard of commercial morality.


Anonymous said...

"While the "essential function" of the trade mark in Europe is "to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin" (Case C-206/01 Arsenal v Reed) the protection is given not to the consumer but to the trade mark owner as guarantor of the identity of the origin of the marked goods."

I disagree. The beneficiary of the guarantee is he to whom it is given, not he who gives it.

The consistent principle underpinning CJEU jurisprudence is that when trademarks are misued, consumers suffer, through the diminishment of their ability to rely on the trademark guarantee of economic origin. That businesses suffer when their customers suffer, or more accurately when customers do not fully trust the guarantee being offered in the trademark, is a downstream consequence, not a primary effect.

TM lawyer said...

"The beneficiary of the guarantee is he to whom it is given, not he who gives it": boldly spoken, anonymous of 12:19.

I don't recognise this as an expression of any principle of European trade mark law though. Can you kindly provide a source to support this proposition?

Anonymous said...

A trademark owner is, however, free to license the trademark to whoever they please, leaving the consumer in the dark as to the origin of the goods.

Take for example goods marketed under the "Philips" brand. Since the Philips company has introduced a brand licensing program, the trademark is no longer an indication as to the origin of the goods.

Anonymous said...

Anonymous @ 13:27,

I think that perhaps you speak too glibly, as the concept of "naked transfer" and licensing without a proper quality control setup will wreck the viability of a trademark (at least such is true in the United States).

Anonymous said...

TM lawyer @ 13:05,

One can recognize a source to support that view in the United States, given that trademark law here is anchored not in the Patent and Trademark clause, but rather in the Commerce clause.

May I ask you then to provide a source that supports an alternative view (EP or US)?

TM lawyer said...

anonymous @14:59

I'm not from the US and have no expertise in regard to its law. However I looked up the Commerce Clause and got the following: "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes". Not much there to suggest that trade mark law has a consumer protection objective.

As for proof to contrary effect, the ECJ case law is full of statements as to the essential function of the trade mark and the other, not so essential functions. Not one of them mention the protection of the consumer, but they do mention things like protecting the mark's investment function and advertising function.

Anonymous said...

Thanks TM lawyer for that answer.

Not being familiar with US law, I should then inform you that our ENTIRE system places the individual (the consumer) as the basis for why the government exists. To that end, the suggestion is there abundantly, but I do understand why you do not see it.

I do ask in the manner that I ask exactly because I am not as familiar with the trademark underpinnings for your system of law. I am familiar with some of the treaty aspects, and of course with the foundations of our laws.

You raise points that have corollaries here. But those are indeed secondary effects here, not primary ones. Can you recommend any cases in particular that can inform me of this ECJ difference? Thank you in advance.

Andy J said...

I think any closer association between the protection of the consumer and trade mark law is highly undesirable because, ultimately, it could lead to the consumer having a presumed right as a stakeholder in trade mark disputes. If one of the 'benefits' arising from trade mark protection is that the consumer is invariably protected from buying [sub-standard] goods from an unauthorised source, then it could be argued that the trade mark owner becomes somehow liable to take action against an infringer in order that the consumer is not misled, rather than for any other commercial reason. How would this affect co-existence agreements? And indeed could the consumer ultimately become a party in proceedings for infringement with an entitlement to damages in compensation for his having been misled/confused as to the origin of the goods?
Hypothetical yes, but in our rights-obsessed age, not wholly unimaginable.

Anonymous said...

Until the TM Directive and the 1994 Act, the UK had "danger citations", for example to prevent the same mark being registered for both bleach and soft drinks. These are no longer available under modern EU trade mark law.

Now that is what I would call a "consumer protection" function, and it has been dropped. Consumer protection in Europe travels on different routes.

Anonymous said...

Andy J,

Thanks for the post as it highlights more differences here in the States.

Here, a trademark holder CAN lose his mark through non-policing of the mark, and as mentioned above, what we call "naked licensing" or licensing but not policing quality can also result in the loss of the mark.

Now I am not sure that these things are actions that fall to being initiated by a consumer per se, but they do go to show that the consumer is definitely an object of the protection system.

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