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Tuesday, May 01, 2012

Who Are You Wearing? Part 3: The Reveal

At the start of my stint here on Prawfs, I noted the high stakes of intellectual property enforcement in the luxury goods market.  A bit later, I returned to the subject by noting that the form of intellectual property law that regulates this market--the trademark doctrine of post-sale confusion.  But again, this doctrine imposes infringement liability based on the fact that someone might see the purchaser of a knock-off luxury good--who knew full well that they were buying a knock-off--and mistakenly believe they were actually carrying a genuine luxury good.  In my last post on the subject, I asked what social or moral ill is threatened in such a circumstance.  Courts have given two different answers to this question, one of which I find plausible in theory but problematic in practice, and the other of which I find morally and perhaps even constitutionally repugnant.  I'll review each (incorporating shameless plugs for my prior writings on the subject) after the jump.

The first justification for imposing liability in these circumstances is what I have called in previous work  the “bystander confusion” theory.  This is the situation in which a defendant sells a knock-off product to a non-confused purchaser; observers who see the non-confused purchaser using the knock-off product mistake it for the genuine product; and those observers draw conclusions from their observations about the quality of the genuine product that influence their future purchasing decisions.  In theory, this sounds like a real problem.  One could understand why, say, Christian Louboutin might be worried that someone who sees a woman fall and shatter her ankle when the heel breaks off her red-soled stiletto pump might blame his fashion house for shoddy workmanship and decide never to purchase his shoes again.  So bystander confusion theory has some intuitive appeal.

The problem is that bystander confusion is, in practice, a hopelessly speculative theory of liability.  Direct evidence of such mistaken attributions of quality based on second-hand observation is essentially non-existent; the theory is often little more than a just-so story.  This is especially so in the luxury goods market, where the purchasers of genuine luxury goods are typically highly sophisticated consumers who are aware of the wide availability of knock-offs.  That isn't to say that courts don't invoke bystander confusion theory, it's just that in doing so they often end up shifting the burden of proof on the question of trademark infringement from the plaintif to the defendant, in essence demanding that the defedant prove two negatives: that potential customers of the plaintiff will not observe knock-offs being consumed, and that even if they do observe such consumption these customers  will not attribute the poor quality of the observed goods to the plaintiff.

This might seem bad enough as a matter of basic civil litigation principles, but the real problem with the law of luxury goods is that it seldom turns on bystander confusion at all.  Rather, courts in knock-off luxury goods cases tend to rely on a theory I've referred to as "status confusion."  In the clearest statement of the theory, the Second Circuit in Hermès International v. Lederer de Paris Fifth Avenue, Inc. stated that an injury "to the public" occurs "when a sophisticated buyer purchases a knockoff and passes it off to the public as the genuine article, thereby confusing the viewing public and achieving the status of owning the genuine article at a knockoff price."

What is interesting to me about this explanation of status confusion theory is that it has nothing at all to do with the quality assurance function that trademarks are usually thought to provide, or indeed with products in any sense.  Rather, it is all about the effect of consumption of trademarked goods on social relations: about the level of social status afforded the surreptitious consumer of knock-off goods who has not paid an appropriate price for that status.  The real knock-off, in the Second Circuit's analysis, isn't the cheap handbag, it's the woman carrying it.  My own view, laid out more fully in my recent article in the Minnesota Law Review, is that policing this kind of social hierarchy ought not to be the business of the federal courts.

Of course, some type of social comparison based on consumption is natural and perhaps inevitable--as Thorstein Veblen documented over a century ago.  And the Second Circuit is clearly right that modern brands serve more functions than merely indicating source or guaranteeing quality of products.  Brands are increasingly freighted with social meaning--what you consume sends a message about who you are.  As I've written in the NYU Journal of IP and Entertainment Law, the social dimension of even everyday brands has given rise to a fragile symbiosis between the brand owner, its customers, and the social audience, and law is increasingly being called on to mediate this web of relationships.  But because brands are increasingly used to construct social meaning, and because social meaning can only be constructed through exchange among individuals and groups, the consumption of branded goods as social signals has not only a commercial dimension, but also an expressive one.  And when it comes to expression, our legal system has a thumb on the scale in favor of speakers and against those who would suppress their chosen expression.  Socially competitive consumption may be inevitable, but that does not mean the government should referee the competition.

Once we see consumption as a form of social expression, giving brand owners control over how we use their brands to convey and understand social identities and affiliations is troubling enough.  Giving them the right to comandeer the federal courts into enforcing social hierarchies based on something as arbitrary as wealth--as status confusion doctrine does--is something else entirely.  I would go so far as to say it is fundamentally anti-democratic--the kind of use of state power that the Founders fought a revolution to prevent.  That this power is exercised in the context of an intellectual property claim should not obscure the profound state interference in the process of social identification, affiliation, and differentiation that post-sale confusion doctrine represents.

Nor is the troubling entanglement of courts in policing social expression limited to trademark law.  Indeed, the Supreme Court this very term is considering the extent to which the government may constitutionally proscribe even a patently false factual statement made in an effort to win social acclaim.  As TJ Chiang noted in an earlier post here at Prawfs, and as the Justices themselves seem at least dimly aware, the conceptual connections between the Stolen Valor Act and trademark law, between bogus boasting and modern branding, run very deep; and they all implicate core First Amendment values.  It may be a cliché to observe that we all wear masks, that even misleading claims about who we are implicate universal human processes of self-expression and self-definition.  But cliché or no, it bears remembering as we consider how law intervenes in those processes, and whether we are content with such intervention, or would rather defend some broader sphere of freedom to form social identities and bonds without paying a licensing fee or getting a government seal of approval.

Posted by Jeremy Sheff on May 1, 2012 at 09:49 PM in Intellectual Property | Permalink


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"The problem is that bystander confusion is, in practice, a hopelessly speculative theory of liability. Direct evidence of such mistaken attributions of quality based on second-hand observation is essentially non-existent; the theory is often little more than a just-so story."

Isn't this generally true with respect to consumer confusion? Is post-sale confusion any different on this score than point-of-sale confusion? Most TM claims are grounded at this in part on indirect evidence (consumer surveys, etc.)

Also, why would the burden of proof inevitably have to shift to the defendant to disprove post-sale confusion? Why not allow for claims of post-sale confusion to be asserted by plaintiffs, but leave the burden of proof with the plaintiffs?

Posted by: Rachel | May 2, 2012 1:45:24 PM

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