A New Economics of Trademarks

Barnes, David W. | January 1, 2006

Conventional wisdom holds that trademarks are nothing like other intellectual property. Copyright and patent law are theoretically based in public goods theory and are designed to promote creation and disclosure of original expressions and novel, useful innovations. By contrast, trademarks are private goods and trademark law is designed to promote trade and encourage competition.

This article challenges conventional wisdom by demonstrating that trademarks are a type of public good that contributes to the public stock of useful ideas just as patented and copyrighted works do. This economic perspective suggests, again contrary to conventional trademark theory, that competitive markets fail to supply an optimal amount of information about products and their sources. Conventional theory recognizes the difficulty in excluding competitors from using a supplier’s trademark unless there is a legal regime to protect marks. Conventional theory fails to consider the non-rivalrous character of referential and customary trademark use by consumers, competitors, non-competitors, and commentators.

The public use perspective on trademarks enriches our understanding of the structure of trademark law, the extent to which trademark law addresses the market failures associated with trademarks’ public goods character, and the current debate concerning the propertization of trademarks.