Cato, “Derby Pie” ®, the “Super Bowl” ® and Trademark Law

by Stephan Kinsella on May 7, 2016

In a recent Cato Podcast, Trademarks and Derby-Pie®, host Caleb Brown interviews Walter Olson about trademark law, with reference to a recent controversy where the Kentucky Derby was threatening restaurants from selling a “Derby Pie” (see NPR, What’s Inside A ‘Derby Pie’? Maybe A Lawsuit Waiting To Happen), and similar absurd situations such as the NFL using trademark law to coerce companies not to use the term “Super Bowl.”

Unlike many other libertarian groups, which are willing to condemn intellectual property as unlibertarian or at least feature thinkers who argue against IP, Cato routinely hosts panels, speeches, and publications that promote IP and rarely, if ever, features the anti-IP position,¹ which is ironic given that former Cato scholar Tom Palmer was one of the early libertarian IP abolitionists.²

I was hoping this short podcast would condemn trademark law in general, as I have done,³ or at least condemn these uses of trademark as clear examples of abuse and injustice and as obviously incompatible with libertarian principles, as I have also done.⁴ But Olson nowhere clearly does either. Instead, he insinuates trademark law is an ostensible sensible policy (it’s not), and tries to explain some basic aspects of trademark law. Which is odd, for a libertarian institute; you would think it would make some comments about the policy aspects of IP. And not give a legal commentary on how the law works. Especially when the commentary is not especially illuminating or correct. Indeed, the comments about trademark and IP law are confused, perhaps not surprising as Olson doesn’t appear to be a trademark or IP law specialist.

First, Olson indicates that trademark holders can’t really be blamed for aggressively enforcing their trademarks (e.g. by sending out cease and desist letters to potential infringers, filing suit, etc.), since the way trademark law works, it “presses” them to be aggressive—since, if they do not enforce their trademarks, they might lose their trademark protection, for example by allowing it to become generic (as aspirin has become). However, if you hold a trademark and it becomes generic, you are still able to use it. It just means that others can too; you can’t stop them from doing so. So it makes no sense to say that you are forced by trademark law to threaten to sue people, merely to retain your right to sue them.

Second, Olson implies that it was clear to the Founders that unlike copyright, trademarks originally were limited geographically; it’s not clear why the Founders are invoked here, since they had nothing to do with trademark law. The Founders authorized Congress to enact patent and copyright law in the Constitution—but not trademark law. At the time of the ratification of the Constitution, trademark was protected in the common law by the states. Congress did not even attempt to enact the first federal trademark law until 1870. (I’d argue federal trademark law is unconstitutional precisely because there is no authorization for it; but courts rely on a broad reading of the Interstate Commerce clause to validate the law, since it purports to regulate trademarks for goods sold in interstate commerce—which is why state trademark law still exists, alongside federal trademark law.)

Third, Olson implies that copyright prevents an infringer from selling the work of someone else, “as your own.” I.e., that it merely is meant to stop some form of “plagiarism”—for example, if I were to try to sell John Grisham’s novel The Firm under my own name, as Stephan Kinsella’s The Firm, say. But copyright has nothing to do with plagiarism.⁵ For one, even if you accurately represent the name of the author—give credit, or attribution—copying another’s work is still copyright infringement. If I try to re-sell copies of Grisham’s The Firm under his name, you can be sure I’ll get sued. Plagiarism is irrelevant to copyright, and stopping plagiarism is not the purpose of copyright law. Stopping copying is, regardless of whether the real author’s name is used or not.

Olson characterizes trademark law as being aimed at stopping someone from confusing consumers by selling goods under the original manufacturer’s name. He indicates this is a type of “quasi-fraud.” Well either’s it’s fraudulent, or it’s not. If it is, then the guy selling fake goods to consumers is already covered by fraud law; there is no need for trademark law. It’s only redundant with fraud law. Further, in such as case, the consumer would be the one with the right to sue the knockoff provider, not the original manufacturer. But trademark law gives that right to the trademark holder, not to the allegedly defrauded consumers. Further, trademark law does not even require that a consumer be defrauded for the trademark holder to have a case against the infringer: “likelihood of confusion” is all that needs to be shown, not actual confusion (and not actual fraud or even likely fraud). So, even when the consumer is aware of the “fake” nature of the goods he is purchasing, and wants the fake goods (for example if you buy a fake Chanel purse for $20 to save money), and thus is clearly not defrauded or even confused, the trademark holder can still sue and have the knockoff items seized and destroyed, even though there are no victims of confusion or fraud, or even “quasi-fraud,” whatever that is. And finally, trademark law now doesn’t even require likelihood of confusion—in the US, the Federal Trademark Antidilution Act of 1995 “protects famous trademarks from uses that dilute their distinctiveness, even in the absence of any likelihood of confusion or competition.”

Thus, trademark law is totally unlibertarian, just as patent and copyright are—and for the same reasons that all reputation rights (defamation law, libel and slander) are illegitimate, as Rothbard long ago definitively showed.⁶ It would have been nice of Olson had realized and mentioned this.⁷