I posted the following on the Mises blog and the Against Monopoly blog a couple years ago. See also here for other posts on trademark; both of these are discussed extensively in episode 93 of the excellent Complete Liberty podcast.
David–sure, it is understandable why you are “much more favorably inclined towards trademarks than other forms of intellectual property.” As you say, “It seems to me a good thing that it is possible to tell who you are doing business with, and no downside monopoly”. As I noted here, the primary justification for trademark rights is based on the notion of fraud–that the “infringer” is defrauding his customers by misrepresenting his identity and the source of the goods being sold (see pp. 43-44 of my Against Intellectual Property, pp. 59-63 of Reply to Van Dun: Non-Aggression and Title Transfer, p. 34 of A Theory of Contracts: Binding Promises, Title Transfer, and Inalienability).But this analysis would give a cause of action to customers, however, not to the holder of the mark, who is not defrauded. Moreover, it would protect the customer only when there is fraud. For example, neither the customer (nor Rolex) should be able to sue Rolex knock-off companies, because people who buy fake Rolexes for $10 are not being defrauded. They know they are buying a cheap knock-off. But trademark law does give trademark holders–not customers–the right to sue infringers, regardless of whether there is really fraud to the consumer.
So while we can condemn fraudulent sales to customers, this is not what modern trademark law prevents. Modern state-run trademark law is almost as bad as cpoyright and patent, even if it has a less-objectionable core or origin. The fundamental problem with trademark law is that it is state law–it is created and administed by the state, which is a criminal organization. To expect justice from the state is like expecting a cat to bark.
Thus we have trademark rights granted to trademark holders, instead of to customers, the real victims of fraud. Thus we have a statutory scheme establishing an arbitrary, artificial legal system and an inept bureaucracy to construe and enforce it. Thus we have ridiculous extensions of trademark to cover “anti-dilution” rights, much as the term and scope of copyright and patent are gradually increased over time. And thus we have the government’s courts used like trademark’s more infamous cousins, copyright and patent, to stifle competition and squelch free speech. See, e.g., A Bully-Boy Beer Brewer, Straight Talk; 9th Circuit Appeals Court Says Its Ok To Criticize Trademarks After All; Trademarks and Free Speech; Beemer must be next… (BMW, Trademarks, and the letter “M”); Hypocritical Apple (Trademark); ECJ: “Parmesian” Infringes PDO for “Parmigiano Reggiano”; Engadget Mobile Threatened For Using T-Mobile‘s Trademarked Magenta.
Clearly, this is just another example highlighting why the state is worse than useless; it is a harmful criminal organization.
And in fact, US trademark law is unconstitutional. While the US Constitution, to the extent it is legitimate and not just the de facto result of a successful coup d’etat, unwisely authorizes Congress to enact copyright and patent law, no provision is made for trademark law. Instead, trademark law is based on an unconstitutionally expanded reading of the Interstate Commerce clause. As James J. Kilpatrick noted in The Sovereign States: Notes of a Citizen of Virginia, in describing the Supreme Court’s illegitimate expansion of power under the guise of the Constitution’s interstate commerce clause:
It was an insidious process, conducted with the care of the cat that stalks her prey – now creeping forward, now pausing to sniff the air; now advancing, now lying still as the bird takes alarm; then edging forward again, and so, step by inexorable step, moving to the ultimate seizure.
But it started at the very beginning of the United States. Tom Dilorenzo, in The Founding Father of Constitutional Subversion, explains:
“Hamilton was also likely to be the first to twist the meaning of the Commerce Clause of the Constitution, which gave the central government the ability to regulate interstate commerce, supposedly to promote free trade between the states. Hamilton argued that the Clause was really a license for the government to regulate all commerce, intrastate as well as interstate. For “What regulation of [interstate] commerce does not extend to the internal commerce of every State?” he asked. His political compatriots were all too happy to carry this argument forward in order to give themselves the ability to regulate all commerce in America.”
So don’t stop with copyright and patent: abolish the unconstitutional Lanham Act, and its unjustifiable grant of trademark rights to trademark holders instead of defrauded customers, and maintain the link to fraud (knockoffs are fine; no anti-dilution law).
But trademark law does give trademark holders–not customers–the right to sue infringers, regardless of whether there is really fraud to the consumer.
Despite my dislike for the way trademarks are currently being used, there is some argument to be made against allowing certain cheap knock-offs to use the markings of a well-known brand. The one I have in mind is cheapness. If a fake Rolex breaks at a dinner party, perhaps the wearer will be outed, but if not, it is possible for others observing the breakdown to reduce their opinion of the Rolex brand. “Rolex isn’t what it used to be,” they might say.
I would agree that, in the case of a perfect replica, there is no argument to be made for trademark dilution because there is no damage. There is also no misrepresentation if each seller properly identifies it as a fake (or a circumstance in which a buyer would easily infer), and it would be even better for the device to have some discrete but visible marking to that effect.
[Comment at 07/24/2008 10:07 PM by Mark]
[Comment at 07/25/2008 10:36 AM by Anonymous]
“Despite my dislike for the way trademarks are currently being used, there is some argument to be made against allowing certain cheap knock-offs to use the markings of a well-known brand. The one I have in mind is cheapness. If a fake Rolex breaks at a dinner party, perhaps the wearer will be outed, but if not, it is possible for others observing the breakdown to reduce their opinion of the Rolex brand. “Rolex isn’t what it used to be,” they might say.”
So what? Don’t people have a right to form whatever opinion they want of Rolex, based on however shoddy evidence?
Anon: “Trademark holders also have a claim against those who defraud customers. The trademark holder’s reputation can suffer harm by the actions of the perpetrator. The previous commetor makes much the same point.”
This all ties in together. Sure, if there are reputation rights, you can justify parts of trademark law; but reputation rights are just as illegitimate as copyright, patent, and modern statutory trademark law. See on this Rothbard, Ethics of Liberty, chapter 16, “Knowledge, True and False”, pp. 126-128.
[Comment at 07/25/2008 02:23 PM by Stephan Kinsella]
Reputation rights are needed for as long as people are easily swayed by simply repeating a falsehood enough times AND people have unequal access to the ability to market (and defend) themselves through hiring their own PR agency or similarly.Otherwise, the poor are disadvantaged and can easily be destroyed by any enemies that decide to gang up and publicly vilify them, as they’ll be unable to reply with anything like the reach and volume of their attackers. Basically, they are at a disadvantage in any shouting match, and sooner or later there will be one.
[Comment at 07/28/2008 05:00 AM by Nobody nowhere]
An edited excerpt from my comment in an email discussion:
It seems to me that the primary justification for trademark rights is based on the notion of fraud–that the “infringer” is defrauding his customers by misrepresenting his identity and the source of the goods being sold (see pp. 43-44 of my Against Intellectual Property, pp. 59-63 of Reply to Van Dun: Non-Aggression and Title Transfer, p. 34 of A Theory of Contracts: Binding Promises, Title Transfer, and Inalienability). This would give a cause of action to customers, however, not to the holder of the mark, who is not defrauded.Now just as some a “class representative” is given the right to sue on behalf of the whole class in a class action lawsuit for efficiency/incentive reasons, the more law-and-economics minded types might say that the right to sue for such consumer fraud ought to be transferred from the diffuse group of defrauded customers, to the trademark holder himself. That is, the trademark user can sue infringers, but his right to do this is based on the right of customers’ fraud cause of action.
There are problems, to my mind, with transferring the customers’ rights to the trademark holder, but even if you were to do this, the trademark holder should not be able to sue an infringer unless there is clear fraud of the customer. For example, Rolex could not sue Rolex knock-off companies, because people who buy fake Rolexes for $10 are not being defrauded. They know they are buying a cheap knock-off. But trademark law–both statutory and common law–does give trademark holders the right to sue infringers, regardless of whether there is really fraud to the consumer.
This is my main problem with current trademark law–that in transferring the customer-fraud-based right to trademark holders, the fraud basis is lost over time, as the trademark right is conceived of as a right of the trademark holder. Then it gets broadened and extended, as all IP law does, just like money is continually debased and rights are continually diluted–for example, now trademark law has the horrendous “anti-dilution” cause of action, which does not even require “consumer confusion,” which at least standard trademark infringement claims do.
From earlier comments in the same email thread:
Identity theft is usually a form of fraud. But the concept of fraud, like that of IP (as well as “labor” and “creation” etc.) is bandied about imprecisely. To my mind, “fraud” is a type of crime not if it’s merely “being dishonest,” but if it’s one way to gain unconsented-to use of another’s property. Just as sex with a child is effectively rape, because the child has no capacity to consent–no effective consent is given–so the transfer of possession and title to a good based on false representations made by the recipient is one where no effective consent is given. In other words, it’s a way of stealing property; it’s “theft by trick.” If you give me your pig, for my bucket of (good) apples, but my apples are all rotten or fake, then title to the pig does not pass to me, and I know it. My right to have and use your pig is conditioned on my not tricking you about the quality of the apples made in payment. So if you give me bad payment, you know you have my pig without my effective consent. And what is theft or trespass but the use of others’ property without consent?
But what is important to realize here, and in the case of fraud, is that it is the party actually being defrauded who is the victim. If you try to base trademark, or reputation rights, on fraud, it fails. In the case of trademark, the company using the mark is held to be infringed. If it were really based on a fraud claim, then the buyers of fake Louis Vuitton purses are not defrauded (they know they are buying a fake $10 purse), so there would be no trademark infringement; yet there is.
To address some of Professor Reisman’s particular points:
“Is identity theft, about which so many people are concerned, some form of mirage or is it a real phenomenon”
Identity theft describes a real phenomenon, one in which fraud is almost always involved. For example, I lie to a bank and persuade them I am Reisman, and they hand over Reisman’s gold to me. I am in possession of gold I do not own and have no right to control. I have defrauded, and stolen from, at least Reisman or the bank. I see no reason to invent “IP” to describe this.
“If it is a real phenomenon and identities are actually being stolenâ€”as many thousands of victims of identity theft are prepared to swear, and as the banks and credit card companies of these victims also swearâ€”then does it not follow that identities are a form of property? For nothing can be stolen that is not first owned by someone.”
I do not think it implies identity is a form of property. It only implies that you only have a right to use others’ property if they consent to it.
“If identities are a form of property, are they not intellectual property, since they consist entirely of words and symbols, not the physical persons of the people to whom the identities refer?”
I think it is not “intellectual property,” since the property at issue is always real property. The question is who is controlling it. If someone uses it or takes or controls it without the consent of its owner, it’s a form of theft or trespass.
“If individuals do have a property right in their own identities, do they not also have a property right in the words and symbols that uniquely identify their products and services? And, by extension, do not voluntary associations of individuals, such as business partnerships and private corporations have a property right in the words and symbols that uniquely identify them and their products and services? Thus, for example, does not General Motors have a property right in its name and logo and in the names and logos of its various individual products and services? In other words, are not brand names and trademarks legitimate forms of intellectual property?”
If I claim to sell a Mont Blanc pen, but it’s a knockoff, then the buyer is defrauded, unless he knows what is is buying is a fake. The company “Mont Blanc” is not defrauded in either case, as far as I can see.
“Are trademarks and brand names not essential for the operation of free competition, in which better producers benefit from their record of past good work and poorer producers suffer from their record of past poor work?”
It is perhaps essential that people be able to identify themselves, and communicate, but this does not mean there are property rights in identifications or ways of communication (languages or words). I see no reason to believe that absent IP there would be no records or reputations, or no ways to prevent or penalize fraud.
And let’s face it: who publishes public domain works now, under false names? Who claims to be the new author of the Nichomachean Ethics? Any serious businessman wants to establish his own name, not pirate others’.
“I want to say that I recognize that we live in an age of intellectual disintegration, in which philosophers, lawyers, and judges have proved themselves capable of corrupting practically any concept. As a result, it should not be surprising that there are corruptions of the concept of intellectual property and its application. One that comes readily to mind is Ralph Lauren’s ability, according to John Stossel, to appropriate the word “Polo,” to the point that even organizations of actual polo players cannot use the word without being held guilty of violating an alleged intellectual property right of Lauren’s. The truth, of course, if Stossel is right, is that Lauren’s appropriation of the word “Polo” is a violation of their intellectual property rights.”
In my view, this is the inevitable and predictable result of entrusting the state with the production and adminstration of law.
“I’ve deliberately avoided any discussion of patents and copyrights here because my purpose has been simply to establish the legitimacy of the concept of intellectual property as such.”
As far as I can see, there is no legitimacy to this concept. To the extent it’s legitimate, it’s just the application of principles of fraud and property. To the extent it goes beyond these things (e.g., giving the right to sue to the trademark user instead of to the customer) it’s not legitimate.