The Linguistic and Trust Functions of Trademarks

Ariel Katz is an Associate Professor at the Faculty of Law of the University of Toronto. Ariel holds the Innovation Chair in Electronic Commerce and is the Director of the Centre for Innovation Law and Policy of the University of Toronto.

Modern trademark scholarship and jurisprudence view trademark law as an institution aimed at improving the amount and quality of information available in the marketplace.  Under this paradigm—known as the search-costs theory of trademarks—trademarks are socially beneficial because they reduce consumer search costs, and as a consequence provide producers with an incentive to maintain their goods and services at defined and persistent qualities.

Working within this paradigm, my recent paper refines the search-cost theory of trademarks.  It highlights an important point whose significance hitherto has largely escaped notice, namely that reducing search costs and providing incentives to maintain quality are distinct functions, although they are related.  The paper first develops a distinction between two functions: the linguistic and the trust functions of trademarks.  It then shows how recognizing their distinct nature enriches our understanding of trademark law and provides a better framework for evaluating the normative strength of various trademark rules and doctrines.  The paper demonstrates how different rules can be regarded as normatively stronger or weaker depending on the degree to which they are compatible with both, one, or neither of these functions.

In addition to its theoretical contribution, the paper has important practical implications, especially as courts struggle to decide trademark cases involving non-traditional circumstances, such as those involving keyword advertising by search engines, or claims based on trademark dilution.  The paper can be freely downloaded here.