University of Southern California
University of Southern California Law and Economics Working Paper Series
Trademark Dilution, Search Costs, and Naked Licensing
Abstract
Trademark dilution needs to be rethought to ensure that it enhances social welfare. Blurring should only be considered harmful when it increases consumer search costs. The fact that a trademark calls to mind two different products should not itself be considered actionable. Blurring only causes real harm when it interferes with consumers’ ability to remember brand attributes. The Coase Theorem suggests that anti-dilution statutes will not block beneficial, non-competing uses of a mark, because, if transactions costs are low and the use is socially beneficial, the trademark owner will license the use. Unfortunately, the “naked licensing” rule, which forbids unsupervised licenses, adds unnecessary transactions costs and blocks potentially beneficial uses. Some commentators think free riding is or should be the essence of dilution. If free riding causes no harm – no consumer confusion, no blurring, and no tarnishment – then it is socially beneficial and should be allowed.
Subject Area
Law and Economics
Recommended Citation
Daniel M. Klerman,
"Trademark Dilution, Search Costs, and Naked Licensing"
(January 2006).
University of Southern California.
University of Southern California Law and Economics Working Paper Series.
Working Paper 42.
http://law.bepress.com/usclwps/lewps/art42
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