On May 1, Seal Team Six killed Osama bin Laden. On May 3, the Walt Disney Company—usually known for animated films about princesses and singing bears–applied for a trademark on the term “Seal Team Six.”
The standard economic rationale for trademark law is that trademarks reduce search costs for consumers. Think about a trip to buy new running sneakers. There may be dozens of pairs on the shelves of your local store. And many hundreds more online. How do you choose?
This is where trademarks come in. Say you’ve had a few pairs of Adidas, and you’ve had a good experience with them. So when you’re out buying a new pair, you look for the famous Adidas three-stripe logo. The logo allows you to efficiently apply your experience to choose a new pair of shoes. Your search costs are greatly reduced when you can reliably infer product attributes from a trademark.
So is Disney trademarking “Seal Team Six” to reduce search costs for tweens seeking animated films about the killing of Osama bin Laden? No one associates Disney, home of Bambi, with crack hunter-killer teams dispatching terrorists with bullets to the chest and head. And in fact, Disney’s private goals have nothing to do with reducing consumers’ search costs. So why is Disney seeking the trademark?
Because Disney wants to increase search costs. How’s that? We all know the Navy SEALs are big news right now, and will be for some time. Competing studios will want to make films about Seal Team Six. Disney wants to ensure that they are the only ones able to make a movie about Seal Team Six with that name in the title. If someone else makes a Seal Team Six movie, they had better find another title, or face Disney’s lawyers in court. (It’s possible that a rival studio might be able to claim that their use of “Seal Team Six” is fair use, and therefore cannot be trademark infringement, but the fair use doctrine in trademark law is not well developed, and an outcome is difficult to predict. Any would-be competitor in the market for movies about the Navy Seals will face some risk, especially against a big player like Disney.)
The problem is that for people interested in movies about Seal Team Six, it’s helpful to have that term in the title – it reduces their costs of figuring out which movie to see. Without the trademark, consumers are forced to spend more time and effort searching out awesome movies about Navy Seal teams.
This episode thus offers an important lesson: trademarks are justified as a way to reduce search costs, but they can also be used to raise them – and that is advantageous to firms which are, as Disney is here, moving to box out competitors. That’s good for Disney, but bad for consumers and competition.