This article originally was pubished by Law360 on October 11, 2017.

The Nobel Prize in economics that was awarded on Monday is relevant to the development of trademark law. The recipient is Richard Thaler, a professor at the University of Chicago School of Business. The Nobel Committee cited him for contributions to behavioral economics, explaing as follows: “By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes.” More pointedly or roughly, Bloomberg published an article on the award titled, “Richard Thaler, The Economist Who Realized How Crazy We Are.”

Traditionally, trademark infringement has been one tort of many postulating the legal fiction of the “reasonably prudent person.” The peculiarity in trademarks is that the standard applies, not to the tortfeasor-infringer, but to a class of victims: customers of the brand in issue. If they are “ordinary reasonable persons exercising due care” regarding the products, and the accused brand is likely to confuse them, it is an infringement.

While tort jurisprudence generally holds tortfeasors to the “reasonable person” standard in the safety interests of public policy, the question of confusion in the minds of consumers is one of fact, be they rational or not. Trademark law, however, excludes as irrelevant protection of indifferent, foolish or negligent persons; they are not, by definition, “reasonably prudent.”

Traditional economic theory as applied to trademarks comparably posits “rational optimizers” as agents operating in the marketplace, following brand signals and making purchase choices based on previous experience of brand quality, competitive price, utility, etc. Economics and trademark law, in sharing assumptions of rationality, have worked together and obeyed these same dictates for many decades. Trademark infringement jurisprudence has coalesced in the form of dicta by judges expressing their assumptions about consumer mentality and actions. The result is what may be called “authority-based” analysis of trademark infringement cases, which are structured, as in every field of law nowadays, by a “multifactor” test with many judicial nostrums or dicta under each factor.

By contrast, the economic theories of Thaler are “observation-based,” the fruit of many empirical studies proving the limits of rationality in the behavior of persons making economic choices. He did not overthrow the classical model of rational optimizer, but showed that rationality is “bounded,” one factor of many in the decision-making even of reasonably prudent persons.

When this refinement or improvement in understanding of human perceptions and behavior is imported into the trademark realm, trademark jurisprudence may start learning what business brand managers have known all along — that consumers respond to brands not only with their heads but also with their hearts; rationality per se is not the only or even the most important path to brand purchase decision-making.

Brands conjure feelings as much as calculations. According to a leading brand management treatise by Kevin Keller of Dartmouth College, brands “may take on personality traits or human values *** Thus, consumers often choose and use brands that have a brand personality consistent with their own self-concept.” Your history with a brand “may recall distinctly personal experiences and episodes or past behaviors and experiences.” The brand manager’s goal is to create resonant “brand feelings” that lead to “brand loyalty.” The “emotional connection is critical.” Depending on the product, “brand-building feelings” include warmth, fun, excitement, security, social approval and self-respect. Such feelings tend to be collective, and customers “feel a kinship or affiliation with other people associated with the brand.” Optimally, the brand loyalist becomes a brand evangelist. Trademark infringers poach on such feelings as much or more as they do on the rationality of purchasers.

Of course, such influences, if at work in a particular trademark case, must be proved as matters of fact. Generally in such cases, qualified experts conduct surveys to provide empirical evidence of consumer recognition of brands and confusion by brands. To be admissible or weighty, the surveys are conducted according to scientific method. Random or quasi-random samples are taken of the relevant population, so that the results are statistically projectable. Respondents are screened for bias; they are exposed to “stimuli” (branded products) that reflect as much as possible actual marketplace conditions; controls are used to eliminate “noise,” that is, confusion not caused by the accused mark; etc.

Litigation surveys, of course, always serve their masters, so their scientific reliability is subject to their utility as forensic evidence or rhetorical tools of the parties to the litigation. Such surveys invariably generate countersurveys and a lot of criticism from the opposing party, sometimes so intense that surveys become virtual satellite litigations. By attracting so much attention, surveys may even, so to speak, devour the main litigation, which may indeed be the very objective of one party or the other. Surveys tend to elevate one relevant factor — actual confusion — over the other factors in the multifactor analyses mandated by all courts.

Apart from surveys, brand psychology — cognitive and behavioral — is a vast field of study. It has received some attention by trademark experts. Brand management professors at business schools have published in scholarly journals an ocean of empirical studies like those by Thaler. These may be as enlightening, depending on the case, as the law review articles more freely cited by judges. Such brand studies have the objective merit of not being designed and conducted specially for use in specific litigations by advocates on behalf of interested parties.

The Nobel recognition of Thaler’s work on bounded rationality, and the influence of nonrational factors on consumer perception and behavior, will influence the evolution of economic thought, and, in turn, of the jurisprudence of trademark infringement.