A Search-Costs Theory of Limiting Doctrines in Trademark Law

Abstract

Trademarks have value because they reduce consumer search costs and thus promote overall efficiency in the economy. While the search costs theory provides a compelling argument for trademark rights, it also compels an equally important - but often overlooked - set of principles for defining and limiting those rights. Certainly, trademark laws can make it easier and cheaper for consumers to locate products with desired qualities, thus making markets more competitive. Yet if carried too far, trademark law can do the opposite: it can entrench market dominance by leading firms and make it harder for competitors to crack new markets. The evolution of trademark law reflects a continual balancing act that seeks to maximize the informational value of marks while avoiding their use to suppress competitive information. Most of the literature on the search costs theory of trademark law has focused on the theory as a rationale for trademark protection. In this article, we examine its role in supporting trademark defenses. We find that some trademark defenses unambiguously lower consumer search costs and thus promote the goals of trademark law. Another group of defenses, however, involves behavior that increases consumer search costs for some individuals even as it improves economic conditions for others. We believe that these latter defenses - genericness, functionality, and abandonment - may sometimes go too far in accepting increased consumer search costs as the cost of achieving competition. Rather than the all-or-nothing approach suggested by these doctrines, we suggest that consumers would benefit from a more nuanced approach in these doctrines.