FALL 2010
Course No.: 9200-710 (& 810)-001
Course ID:  85723 & 85725
Time: M, W 4:45-6:15 p.m.
Room TBD
Professor Jay Dratler, Jr.
Across from Room 231D (IP Alcove)
Home: 330-835-4537
Copyright © 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2008, 2010  Jay Dratler, Jr.  
For permission, see CMI.

Introductory Note: The Uniqueness of Trademark and Unfair-Competition Law

Trademarks and unfair competition are unique among the four major fields of intellectual property—patents, copyrights, trademarks and trade secrets.  They cannot properly be understood without reference to their uniqueness.  Accordingly, we begin the study of these two important fields of law by noting in what respects they are unique.

1.  Blend of federal and state law.  Perhaps the most important respect in which the trademarks and unfair competition are unique is that they are governed by a complex blend of both state and federal law.  Patents and copyrights are creatures of federal statutes, and jurisdiction over them is vested exclusively in the federal court.  See 28 U.S.C. § 1338(a).  There are federal criminal sanctions for misappropriation of trade secrets, see Economic Espionage Act of 1996, codified at 18 U.S.C. § 1831-1839, and federal law gives the federal Attorney General the power to request civil injunctive relief.  See 18 U.S.C. § 1836(a).  Yet state law—principally adopted versions of the Uniform Trade Secrets Act and common law—provides general civil sanctions for claims of misappropriation of trade secrets made by private plaintiffs.

Only the law of trademarks and unfair competition involves both state and federal civil laws that operate in tandem, generally without preemption.  The federal jurisdictional statute itself reflects this point: while it vests original jurisdiction over trademark matters in the federal district courts, trademark law is conspicuously absent from the list of subject matter over which federal jurisdiction is exclusive.  See 28 U.S.C. § 1338(a).

2.  Claims under federal and state law.  The coexistence of state and federal law in the field of trademarks and unfair competition is not just legal theory.  Every State of the Union has at least one statute (and often several) addressing various aspects of trademarks and unfair competition.  Moreover, because the entire field developed at common law, the common law of the several States continues to operate within the interstices of the state statutes.

Careful plaintiffs' lawyers therefore invoke applicable state law in virtually every case.  They generally do so out of an abundance of caution, in the hope that state law may provide substantive or remedial advantages that federal law does not.  Or they may do so in fear that the courts will find lacking the effect on interstate or foreign commerce needed to invoke federal jurisdiction.  In most cases the hopes are vain: since the 1970s federal law on this subject has expanded, both by interpretation and amendment, to a point at which it generally offers equally powerful or more powerful claims and remedies than state law.  Similarly, the fears are usually misplaced; especially in this age of the Internet and World Wide Web, few matters in this field affect only a single state.  Nevertheless, the practice of pleading both state and federal causes of action goes on because, in the rare case, state law may offer some advantage, or the necessary effect on interstate or foreign commerce may be lacking.

3.  "Interstate commerce" or "weak" paradigm.  Trademarks and unfair competition law are also nearly unique in the constitutional source of their authority.  Congress derives its power to adopt patent and copyright laws from the so-called Patent and Copyright Clause—Article I, Section 1, Clause 8 of the Constitution.  In contrast, the power to regulate trademarks and unfair competition arises from the Commerce Clause, Article I, Section 8, Clause 3.  The Supreme Court struck down the very first attempt by Congress to adopt federal legislation governing trademarks under the Patent and Copyright Clause.  It ruled that trademarks, being in general neither novel nor original, do not meet the constitutional standards for patent or copyright protection.  See Trade-Mark Cases, 100 U.S. 82, 93-94, 25 L.Ed. 550 (1879).  (As a matter of state law, insofar as civil actions are concerned, trademark protection does not rely on any federal source of constitutional authority.)

4.  No time limit on protection.  Because trademark law relies on the Commerce Clause as a source of federal power, trademarks are not subject to the temporal limitations of the Patent and Copyright Clause.  That clause permits protection of intellectual property only "for limited Times."  Yet trademark protection can go on forever, as long as the legal prerequisites for it are met.  (Although federal trademark registrations now last only ten years, they can be renewed indefinitely.  See Lanham Act § 9(a), 15 U.S.C. § 1059 (a)).

It would be a strange world of commerce indeed if this were not so.  Imagine a world in which trademarks somehow expired on a fixed date like patents or copyrights.  What confusion and commercial chaos would ensue if mighty trademarks like Kleenex, Cadillac, Tiffany, IBM, or Microsoft suddenly expired and went "up for grabs" by competitors?

In this respect trademarks and unfair competition are like trade secrets.  Both fields of intellectual property law follow the "weak" paradigm of intellectual property protection, under which protection may last forever but is relatively weak.  In contrast, patent and copyright protection follow the "strong" paradigm, in which protection is relatively strong (nearly absolute, in the case of patents) but lasts only for a limited time.  See 1 Jay Dratler, Jr., Intellectual Property Law: Commercial, Creative, and Industrial Property § 1.07[1] (Law Journal Press, 1991).

5.  Different underlying policy.  A fifth important respect in which trademarks and unfair competition are unique relates to policy.  In all other fields of intellectual property, incentives for innovation are a central feature of the governing policy.  In the field of trademarks and unfair competition, however, innovation is only a minor and subsidiary policy.  See 2 Dratler, supra, at § 9.02[1] (discussing trademark-related policies generally).

The most important policy governing trademarks and related unfair-competition law is promoting competition.  The law does this by making comparison-shopping simple and thereby increasing the efficiency of markets in goods and services.  The same basic policy can be expressed in two ways.  Expressed positively, it promotes comparison shopping by making sure that the symbols consumers use to identify products and services in the marketplace have unique and stable meanings.  Expressed negatively—as is done in the federal statute—it avoids consumer confusion, mistake, and deception.  See, Lanham Act §§ 32(1), 43(a)(1), 45 (last ¶), 15 U.S.C. §§ 1114(1), 1125(a)(1), 1127 (last ¶).  However expressed, it is the primary policy that underlies most doctrine in the field.

Two other related policies also are relevant.  First, trademark and unfair-competition laws seek to promote commercial morality and keep competition "fair" by discouraging "dirty tricks" in commerce that impede the smooth functioning of markets.  See Lanham Act § 45 (last ¶), 15 U.S.C. § 1127 (last ¶).   Second, those laws encourage and protect investment in marketing and in the quality of products and services by protecting producers' reputations from usurpation and disparagement.  See id.  Only this last policy reflects the desire to create incentives for innovation that motivate other fields of intellectual property, and the reflection is pale indeed.

6.  The "dead hand" of history.  The sixth respect in which trademark and unfair-competition law are unique in the field of intellectual property relates to history.  Much of the substance of these fields of law developed case by case at common law, long before their codification in statute.  Indeed, most of the basic principles of the law of trademarks and unfair competition developed before Erie decreed that federal courts could not make general common law.  See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Thus, the fundamental principles of trademark and unfair-competition law arose at a time when the common-law courts made no distinction between state and federal common law.  Consequently, those principles were generally congruent throughout the nation.  Later, to the extent governed by state law, they diverged slightly over the years in the several States, as those States Erie-ly went their separate common-law ways and adopted different codifying statutes.

More important for practical purposes, the federal statute was historically derived from the common law.  Indeed, after the Supreme Court had rebuffed Congress for citing the wrong source of federal constitutional authority, Congress' first valid trademark statute was quite timid in scope.  It did little more than recognize state-granted rights in trademarks and provide a central place in which to record those rights, in order to give the public notice of them.  The rights themselves were governed by state law and based upon priority of use.  See, e.g., United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 98, 100, 39 S.Ct. 48, 63 L.Ed. 141 (1918); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 413, 36 S.Ct. 357, 60 L.Ed.713 (1916).

That pattern continued for most of a century.  It was only in the post-World War II period, with the advent of the Lanham Act (adopted in 1946), that Congress passed a statute which had some substantive "bite" not present in the common law of trademarks.   The trend has accelerated since 1988, when Congress adopted the Trademark Law Revision Act of 1988 (a plenary revision) and has culminated most recently in the anti-cybersquatting provisions of Lanham Act § 43(d), 15 U.S.C. § 1125(d), which provide a cause of action for Internet domain-name usurpation never seen at common law.

7.  A conceptually incomplete statute.  Unlike the patent and copyright statutes, the federal trademark statute historically was not an attempt to set out a complete set of rules governing the subject.  Rather, it was an attempt to overlay a system of central, federal registration and its consequences on a pre-existing system of common-law rights based upon use.  Insofar as those common-law rights were concerned, the federal statute was descriptive, rather than prescriptive, and that only incompletely.

This strange history has two principal consequences.  First, one of the most important principles of American trademark law—that valid trademark rights arise from use of a mark, before or even without registration—is buried in the statute.  It appears only indirectly, in such provisions as Section 1(a), which permits registration based upon use, Section 7(c), which gives registration the effect of constructive use nationwide, retroactive to the date of application, and Section 33(b)(5)'s so-called "limited area defense," which gives prior users of conflicting marks defenses in infringement actions even against owners of "incontestable" registrations.  See Lanham Act §§ 1(a), 7(c), 33(b)(5), 15 U.S.C. § 1051(a), 1057(c), 1115(b)(5).  This point, so murky in the statute, distinguishes American trademark law from the laws of most foreign countries (i.e., civil-law countries), in which trademark rights depend upon registration, not use (apart from some residual protection provided by laws compelled by international convention).

The second important consequence is really a generalization of the first.   Because the Lanham Act was originally incompletely descriptive of the common law, and not entirely prescriptive, many other important features of trademarks and unfair competition appear only murkily, if at all, in its text.  For example, it is well established that the "distinctiveness spectrum" in trademark law contains four hues—arbitrary/ fanciful, suggestive, descriptive, and generic marks.  Yet the statute mentions only the latter two, and them in widely separated sections.  See, e.g., Lanham Act § 2(e), 14(3), 15 U.S.C. § 1052(e), 1064(3).  There is no mention of arbitrary, fanciful, or suggestive marks.

There are other important examples of this phenomenon.  In the plenary revision in 1988, as well as in later amendments, Congress tried to make the federal statute more complete in both terminology and coverage.  But the attempt has not been entirely successful.  As a result, it it virtually impossible to learn the law of trademarks and unfair competition from the statute alone.

We start with the statute not because it provides, like the patent and copyright statutes, a reasonable outline of the law's structure.  Rather, we start with it because it is the most useful and powerful law in the field, and because virtually every case in the field of trademarks and unfair competition (unless an effect on interstate or foreign commerce is lacking) turns on its provisions.  It is therefore important for every lawyer working in the field to know this statute, regardless of how incomplete it may be, and precisely because it is badly organized and becomes transparent only with long familiarity.

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