In 2006, thousands of soccer fans showed up to the World Cup game between the Netherlands and the Ivory Coast wearing pants in the colors of the Dutch national team. The pants had been given out as promotional gifts by a beer company. FIFA, the governing body of international soccer, objected. It claimed trademark rights in the team colors, and giving out pants in those colors was in FIFA?s view "ambush marketing" that was likely to confuse those who saw (or even those who wore) the pants into thinking that the soccer team had sponsored the pants. And in FIFA?s view, not only was giving out the pants illegal, but individuals wearing them were falsely suggesting some affiliation with the Dutch national team. Prohibited from wearing the pants into the stadium, more than one thousand fans dutifully took their pants off and cheered the Dutch team to victory in their (largely orange) underwear. This was Europe, after all, and it was an important match.

Trademark law centers its analysis on consumer confusion. With some significant exceptions, the basic rule of trademark law is that a defendant’s use of a mark is illegal if it confuses a substantial number of consumers and not otherwise.

As a general matter, this is the right rule. When it works well, trademark law facilitates the workings of modern markets by permitting producers to accurately communicate information about the quality of their products to buyers, thereby encouraging them to invest in making quality products, particularly in circumstances in which that quality wouldn’t otherwise be apparent. If competitors can falsely mimic that information, they will confuse consumers, who won’t know whether they are in fact getting a high quality product. Indeed, some consumers will be stuck with lemons...