of the applicant's mark. In cases of this type not only the opposer but other members of the general public as well would be damaged by the proposed registration, so that the opposer really appears vicariously in the interest of all concerned. But where the Commissioner's adjudication in the inter partes case has the earmarks of a determination of such predominantly private issues as priority of use, damage to reputation, and many others, the public need not be represented in a subsequent equity action at all. In such situations, the stake of the public in the outcome of the litigation is no greater and no more immediate than that which is present in all civil trade-mark infringement or unfair competition litigation. The Commissioner of Patents need not and should not be called upon in the future to appear and act as guardian of such remote and inconsequential "public" interest. It is believed that the Lanham Act, by conferring upon the Commissioner a mere option to intervene in appropriate cases, has struck the proper balance between adjudications of private rights and cases involving a substantial public interest.

TRADE-MARKS, MONOPOLY, AND THE
RESTRAINT OF COMPETITION

SIGMUND TIMBERG*

I

INTRODUCTION

Patents and copyrights were decisively deprived, during the 1947 term of the Supreme Court, of their potency for commercial regulation contrary to the antitrust laws.1 Why then, should trade-marks, in so many aspects less substantial than patents and copyrights, still present antitrust problems?

Patents and copyrights have the specific constitutional blessing of the Founding Fathers; trade-marks have none. Patents and copyrights stress standards of inventiveness and artistic expression and are hallmarks of originality; they call for a high level of understanding and sagacity on the part of both their utilizers and their audience. Successful trade-marks, on the other hand, are largely matters of giving conventional forms of syllabification and ornamentation a reiteration prolonged and attractive enough to evoke a conditioned reflex on the part of their audience—the so-called consumer response. It was Judge Learned Hand, and no crusading sociologist, who said in a trade-mark case that "The art of advertising spuriously reinforced a genuine demand by the power of reiterated suggestion." Furthermore, a view has always been strongly held that a trade-mark is, at best, a qualified type of property, designed primarily to ward off unfair competition, rather than an inde pendent type of property such as a patent or a copyright.

On the other hand, for large corporations desirous of promoting a monopoly or advancing a trade restraint, a trade-mark or trade name has its advantages. The trade-mark “monopoly," limited though it may be to a segment of the English language or of the art of design, is a perpetual one. Unlike a patent, a mark or name is not limited to a specific product or class of products, but can cover all products worked on or distributed by a single firm. Furthermore, in an era when the consumer is beleaguered by a host of commodities of whose production he can know nothing, he must order by ear rather than sight or touch, and a monopoly of the

B.A. and M.A. 1930, Columbia University; LL.B. 1933, Columbia University. Chief, Judgments and Judgment Enforcement Section, Antitrust Division, Department of Justice, and Special Assistant to the Attorney General. Member of the New York and United States Supreme Court bars. Contributor to legal periodicals.

This article is intended to state the personal views of the author and does not necessarily reflect the views of the Department of Justice.

1United States v. Line Material Co., 333 U. S. 287 (1948); United States v. Paramount Pictures, Inc., 334 U. S. 131 (1948).

2

* Shredded Wheat Co. v. Humphrey Cornell Co., 250 Fed. 960, 962 (C. C. A. 2d 1918).

only familiar or convenient way to describe a commodity to a consumer-“Worcestershire sauce" or "linoleum," for example-gives the owner of this semantic monopoly a strong competitive advantage.3 Competitors who must resort to elaborate chemical names, for example, to denote a common drugstore product like aspirin, or an industrial product like cellophane, are blocked from access to our market-minded economy. Furthermore, copyrights are, to all practical intents, limited to the media of mass communication and edification, and, for the bulk of American industry, patents are now concerned with relatively minor improvements in technology, at a time when American courts have been raising the level of inventiveness necessary to the validity of patents. Trade-marks and trade names, directed as they are to distribution rather than production, have thus by comparison expanded their prominence on the American industrial scene.

While the economic significance of trade-marks has thus become greater, there was not, until the beginning of 1949, a single litigated case bearing directly on the relationship between trade-marks and the Sherman Act. Some businesses, therefore, had begun to look hopefully at the trade-mark as an affirmative defense for trade restraints which could clearly no longer be regarded as valid as an exercise of rights under patents or copyrights. Concurrently, the Antitrust Division had launched a series of cases in which the use of trade-marks was regarded as a primary and direct source of antitrust violation.

Whether trade-marks are a threat or an incentive within the American competitive system (they can of course be both) can best be gauged after we have reviewed, first, the antitrust history of trade-marks and trade names prior to the enactment of the Lanham Act and, second, the provisions of the Lanham Act possessing antitrust significance.

II

TRADE-MARKS AS DIRECT RESTRAINTS OF TRADE

It has been fashionable in the last ten years to pose the question whether trademarks are an antitrust problem, and to conclude that trade-marks per se do not involve monopoly or the restraint of competition, but that they may be reinforcing and peripheral elements of schemes for the illegal restraint of trade, the illegality of which is complete and evident before the trade-mark features of the scheme are reached. Such a conclusion may fit the actual litigation program of the Antitrust Division in the trade-mark field in the past, but it appears somewhat deficient as applied to the larger facts of social and economic life.

3

Lea v. Deakin, 15 Fed. Cas. 95, No. 8,154 (N. D. Ill. 1879); Linoleum Mfg. Co. v. Nairn, 7 Ch. D. 834 (1878).

The chemical name for aspirin is "acetyl salicylic acid" or "monoaceticacidester of salicylicacid." See Bayer Co. v. United Drug Co., 272 Fed. 505, 510 (S. D. N. Y. 1921). Cellophane, when you come right down to it, is transparent glycerinated cellulose hydrate regenerated from viscose. See DuPont Cellophane Co. v. Waxed Products Co., 85 F. 2d 75 (C. C. A. 2d 1936).

A. Trade-marks as a Direct Vehicle of Monopoly Power

Perhaps the most striking illustration of trade-marks as a direct source of monopoly power is the situation to which American Tobacco Company v. United States was directed. In 1947, after the Supreme Court had affirmed the criminal conviction of the three leading cigarette manufacturers of the country for violation of the antitrust laws, those three manufacturers had 84.7 per cent of total cigarette sales. The three leading trade-marked brands (one brand to a manufacturer) accounted for 80.2 per cent of the domestic market sales of cigarette tobaccos. After reviewing the other factors affecting competition in the tobacco industry, some students have concluded that competition will be hard to restore unless these valuable trade-marks, and the advertising expenditures in connection therewith, are in some way brought under control. The soap industry, also involving highly advertised trade-marked commodities marketed by a very few firms, may present a similar problem, since the three largest soap companies control an estimated 80 per cent of total production." Trade-mark protagonists contend that trade-marks promote competition by pointing to a common source of origin for all articles with the same mark, thereby enabling the consumer to make an informed choice among competitively produced or marketed articles. It is in this sense that the protection of a trade-mark is the protection of the trade-mark owner and the general public against unfair competition, and an assurance of fair competition. Inherent in such an approach is the further assumption that it is trade-mark protection which makes quality competition possible.

Professors Chamberlin and Brown do not believe that this is what actually takes place. They say instead that the result of effective trade-mark promotion is to differentiate the trade-marked article from other trade-marked and nontrade-marked articles possessing the same general physical and chemical characteristics and the same utility to the consumer, and to create for the trade-marked article a monopoly and an immunity from the rigors of competition. The trade-mark creates for its specific product an entirely separate market, where demand becomes inelastic and prices are established which are independent of the prices of other articles of the same class that would otherwise be competitive with it. Implicit in this analysis is the notion that, particularly in dealing with goods of a character closely approaching the fungible, the differentiation of a product accomplished by a trade-mark is necessarily spurious, because the trade-marked product is not in fact substantially different from that of other articles of the same class. The trade-mark, and the advertising '328 U. S. 781 (1946).

6

Brown, Advertising and the Public Interest, 57 Yale L. J. 1165, 1173 (1948).

7 Fortune, April, 1939, pp. 77, 82.

8

See EDWARD CHAMBERLIN, THE THEORY OF MONOPOLISTIC COMPETITION 56-70, 246-250 (5th ed. 1946); Brown, supra note 6. The reader, it is hoped, will pardon this indiscriminate merging of two distinctive approaches to the problem. The first is that of the classical economist preoccupied with whether the differentiation supplied by a trade-mark is consonant with the premises of free competition; the second is that of the lawyer-sociologist and critic of the institution of advertising. In fact, the interested reader would do well to consult both.

attendant upon the trade-mark, create in the consumer subjective illusions and expectancies of wide but indeterminate scope, and impart an element of economic irrationality to consumer demand, which is then assumed to justify a higher price for the article. Society should not reward a trade-mark owner for such an anti-competitive, intangible, and wasteful procedure.

Views of the type just outlined project us into conflicting considerations as to the commercial morality and social utility of trade-marks, the dollar value of consumer illusions, the irrationality of consumer choices, and the role of non-price competition under the Sherman Act. Also, both implicit and explicit in the Chamberlin-Brown school of thinking is criticism of the institution of advertising. The trade-mark, whatever its intellectual significance as an indicator of who gave the trade-marked commodity its manufacturing or marketing "style," is clearly also a bearer of advertising values. In certain situations, the skillful and massed use of advertising expenditures has effectively created for a trade-marked commodity and its producer or distributor a dominant or monopolistic position. To give other manufacturers of the same commodity an opportunity to use the trade-mark would be one way of diluting the values created by such strenuous advertising; this would reduce the monopoly position of the original trade-mark owner, if it resulted in a diversion of his business to the new users of the mark. Another possible way of meeting the situation would be through the direct limitation of advertising expenditures by the monopolistically situated trade-mark owner.

Here, as with respect to the tobacco and soap situations just outlined, the writer must abstain from trying to resolve economic disputes with undoubtedly widespread social ramifications but with thus far little accompanying legal grist. Before leaving this controversial topic, however, we may note that the more conservative school of trade-mark protection (and the one which is judicially accredited), which considers the trade-mark's sole function to be that of indicating source of origin, is obviously less likely to be vulnerable to these strictures than those which would claim for the trade-mark a more far-reaching significance as the conservator of independent property rights created by advertising.10 However, once the courts ceased insisting that a trade-mark denote a known and particularized "source of origin" and reconciled themselves to the notion that it could signify an anonymous "source of origin," they did more than to create a metaphysical contradiction. They were

'Kellogg Co. v. National Biscuit Co., 305 U. S. 111 (1938); Yale Electric Corp. v. Robertson, 26 F. 2d 972, 973 (C. C. A. 2d 1928); DuPont Cellophane Co. v. Waxed Products Co., supra note 4; Rogers, NEW CONCEPTS OF UNFAIR COMPETITION UNDER THE LANHAM ACT 203 (Practising Law Institute Lecture Dec. 11, 1947).

10 See Schechter, The Rational Basis of Trademark Protection, 40 HARV. L. REV. 813 (1927); Isaacs, Traffic in Trade-Symbols, 44 HARV. L. Rev. 1210 (1931). There seems to be more enthusiasm for this view among legal writers than among judges. To this writer, the cases still seem to favor the "source of origin" theory, although modern business conditions have deprived the source of origin of the continuity and specificity that was possible in a less mechanized world. See Mulhens & Kropff, Inc. v. Ferd. Muelhens, Inc., 43 F. 2d 937 (C. C. A. 2d 1930), including the dissenting opinion of Judge Learned Hand therein.