A Consumer Decision-Making Theory of Trademark Law

The consumer search costs theory has dominated discussion of trademark law for the last several decades. According to that theory, trademark law aims to increase consumer welfare by reducing the cost of shopping for goods or services. It accomplishes this by preventing uses of a trademark that might confuse consumers about the source of the goods with which they are used. This conceptual frame is wrong, and it is complicit in most of trademark law’s extraordinary expansion. Search costs are often irrelevant to consumer behavior, and even when they are relevant, it is not clear that consumers always want their search costs reduced. Moreover, courts focusing on search costs overwhelmingly have equated confusion and search costs and have therefore felt compelled to respond whenever a mark owner can describe the defendant’s use in confusion-based terms. 

But trademark law is not an all-purpose remedy against thinking, and courts should be concerned about confusion only when it is likely to interfere with consumer decisions. More specifically, courts should respond in trademark cases only when the defendant’s use is likely to deceive consumers and thereby prevent them from effectuating their choices. Reframing the issue in this way has significant ramifications for almost all of trademark law, from a variety of theories of infringement to the likelihood of confusion analysis, defenses, and even the scope of injunctive relief. It is, to put it simply, a better view of trademark law, and one that can identify reasonable limits in an area sorely lacking limits of any kind.