Trademarks in an Algorithmic World

According to the sole normative foundation for trademark protection—“search costs” theory—trademarks transmit useful information to consumers, enabling an efficient marketplace. The marketplace, however, is in the midst of a fundamental change. Increasingly, retail is virtual, marketing is data-driven, and purchasing decisions are automated by AI. Predictive analytics are changing how consumers shop.

Search costs theory no longer accurately describes the function of trademarks in this marketplace. Consumers now have numerous digital alternatives to trademarks that more efficiently provide them with increasingly accurate product information. Just as store shelves are disappearing from consumers’ retail experience, so are trademarks disappearing from their product search. Consumers may want to buy a product where the brand is the essential feature of the product such that the brand is the product, but they no longer need the assistance of a trademark to find the product.

By reflexively continuing to protect trademarks in the name of search costs theory, courts give only lip service to consumer interests without questioning whether trademarks are fulfilling any useful information function. In many cases, trademarks may actually misinform consumers by masking the identity of the producer or its distanced relationship with the trademark owner. Without having deliberately decided to do so, trademark law is now protecting “brands as property” without any supportive normative rationale. Removing the veil of search costs theory will enable courts to consider whether trademark protection is justified in particular cases.