Welfare-Reducing Trade Dress Monopolies: An Empirical Approach

This article presents a new empirical approach for courts to identify anticompetitive consequences of trademarking product features, so-called “trade dress”. Granting a firm rights in its trade dress (imagine the first candy company to employ a heart-shaped Valentine’s Day box) can diminish competition and harm consumers (consider the high price a heart-box monopolist could charge). Therefore, U.S. courts recognize such trade dress as “aesthetically functional” and reject to grant a trademark right, even if the trade dress identifies the source of the product to consumers. However, it is practically difficult for courts to discern what kind of trade dress, if trademarked, would diminish competition in specific cases. Despite plentiful doctrinal commentary on this issue, no empirical studies have explored the anticompetitive consequences of trademarking a disputed trade dress. This article fills the gap by a data mining and a human-subject experiment on color trademarks, a subcategory of trade dress. The article first mines the data of different colored products on the Amazon website, revealing several colors might have larger market shares than alternative colors. It further experiments on relations between prices and colors, showing that some colors can keep a higher price than other colors. Based on these studies, the article proposes an empirical approach for litigants and judges to employ in deciding aesthetic functionality in litigations. (This article is funded by AHRC Centre of Excellence for Policy & Evidence in the Creative Industries (PEC) (reference: AH/S001298/1). )