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Thursday, April 26, 2012

Who Are You Wearing? Part 2: The Law

In an earlier post, I flagged the high stakes surrounding intellectual property disputes over luxury goods, but questioned the rationale for making a federal case out of, say, a fake purse.  In this post, I'll be examining the legal regime that allows such a case to be made.

That regime, in the United States at least, comprises a particular sub-field of federal trademark law.  Section 43(a) of the Lanham Act provides the primary statutory authority for the federal law of trademark infringement and unfair competition.  It imposes civil liability against any person who uses a trademark in commerce that "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods...."  But if you know the market for knock-off luxury goods, you know that the people who buy them almost always know full well that they're buying fakes.  Nobody thinks the Rolex he bought for $10 in Times Square has any actual relationship to the Rolex company, nor does anybody think the vinyl Kelly Bag she bought for $20 on Canal Street has any relationship to the house of Hermès.  So what is the "confusion, or... mistake, or... dece[ption]" that provides the basis for trademark liability against the makers and sellers of such knock-offs?

The answer that courts have come up with has come to be known as "post-sale confusion."  Luxury knock-offs do not infringe the luxury house's trademark because of their effect on the purchaser of the knock-offs, but because of their effect on people who observe that purchaser consuming the product after it has been purchased.  Such observers, the theory goes, will see the non-confused purchaser consuming the defendant's product, but mistake it for the plaintiff's product due to the similarity of the products' trademarks or overall designs.  This "mistake" is the hook on which trademark liability hangs in the luxury knock-off arena, and the question I'm interested is why this type of mistake is something the federal government ought to concern itself with.  

What is the social or moral ill that results if I mistakenly believe that a woman walking down Fifth Avenue is carrying an authentic Louis Vuitton purse when in fact she is carrying a cheap imitation?  Trademark law is often thought to be designed to prevent producers from misleading consumers as to unobservable product qualities, either to lower consumers' search costs (as Judge Posner and Professor Landes have famously argued) or out of respect for consumers' autonomy (as I argue in a forthcoming piece in the Stanford Law Review).  But, again, the purchasers of luxury knock-offs know exactly what they're buying; they aren't being deceived at all.  So what gives?  Why should we make post-sale confusion actionable, let alone criminal?

Once again, I'll throw this open to commenters before revealing my own thoughts in a future post; those who can't wait for the reveal can read my take in the latest issue of the Minnesota Law Review.

Posted by Jeremy Sheff on April 26, 2012 at 10:30 AM in Intellectual Property | Permalink

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I think the problem is threefold. First, the original trademark holder will lose the possibility of an actual sale of their goods to a consumer because, (particularly for fashion philistines and tourists) there is little to no incentive to pay $200 for something when you can get its (not really) perfect knockoff for $20. This results in lost profit opportunities for the trademark holder.

Second, I think it is fair to say the bootlegger is being unjustly enriched by knocking off the product of another, even when selling it for drastically less than the original, they are essentially stealing the attractive design of someone else. Profiting without talent.

Third, directly to the "post-sale confusion" point, a trademark holder might point to the flimsy, cheap, and generally awful quality of these knockoffs as potentially damaging to their brand. If a tourist buys a Henri Bendel knockoff on Canal street, takes it home for everyone to see it fall apart in three weeks, consumer perception of Henri Bendel (rightly or wrongly) takes a hit in places where people simply don't know any better. For example, I am from Iowa, and had a friend when I was in high school get a "Rolex" in Chicago which broke after a few months, and we wrongly thought that Rolex was cheap crap thereafter.

Posted by: Nathan Chiaravalloti | Apr 28, 2012 1:45:57 PM

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