Almost Famous? Comments On The Trademark Dilution Revision Act

Thursday, February 1, 2007 - 01:00

Introduction

On October 6, 2006, President Bush signed the Trademark Dilution Revision Act of 2006 ("TDRA"). The TDRA amends the Federal Trademark Dilution Act ("FTDA") in a number of important ways, both broadening and narrowing the dilution protection afforded to famous marks and clarifying certain provisions.

The TDRA provides that a mark is "famous" and therefore entitled to dilution protection "if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner." Marks having only "niche fame," i.e., local or regional geographic fame, or fame within a specific category, will no longer be considered famous for trademark dilution purposes.

Trademark law developed principally in order to protect the interests of consumers to receive dependable information about products and services. Suppliers of these goods and services were granted rights to regulate the use of their brands. But there were limitations on these rights. One of those limitations was the principle of "confusion''; trademark rights were only enforceable where another's use was likely to cause consumer confusion. Dilution represents an extension of traditional trademark law, and stems from a desire to maintain the value of famous trademarks, even when the products at issue do not compete and when there is no likelihood of confusion. Unlike traditional trademark law, the dilution theory primarily serves to protect the investment made by owners of famous marks rather than the interests of the consuming public.

The FTDA

Although the concept of dilution was introduced in 19271 , there was no federal dilution law until Congress passed the Federal Trademark Dilution Act in 19952 . There was only a patchwork of state dilution laws. The FTDA was passed as a result of intense lobbying by the consumer product companies of the 1980s. It provides equitable relief to the owner of a famous mark against commercial use of a mark or trade name that lessens the "distinctive quality of the famous mark,'' "regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception.''3 The statute also sets forth criteria that a court should consider in determining whether a mark is famous, establishes an injunction as the primary form of relief and provides statutory defenses to a dilution claim. In 1999, Congress added dilution as grounds for inter partes proceedings in the Trademark Office: opposition to an application and cancellation of a registration.

However, to many owners of famous marks, the FTDA failed to provide the protection that they had hoped for, and left a number of issues unresolved. Since the introduction of the FTDA in 1995, courts have reached different conclusions on various issues, such as what constitutes fame and whether the FTDA applies to marks that are not inherently distinctive.4 One key concern was that the language of the statute required plaintiffs to show that the objectionable use caused actual dilution. Under traditional trademark infringement law, which focuses on marketplace protection for consumers, only a showing of a likelihood of confusion is required.

Moseley

The issue appeared settled when the U.S. Supreme Court decided Moseley v. V Secret Catalogue, Inc .5 In Moseley , the Court was faced with deciding "whether objective proof of actual injury to the economic value of a famous mark (as opposed to a presumption of harm arising from a subjective 'likelihood of dilution' standard) is a requisite for relief under the FTDA." The Court held that the FTDA "unambiguously required a showing of actual dilution, rather than a likelihood of dilution," but also decided that "actual loss of sales or profits" is not necessary to show that actual dilution occurred. Unfortunately, the Court did not provide much guidance as to how plaintiffs could establish actual dilution, other than to state that "direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proven through circumstantial evidence."6

Trademark owners were rightfully concerned that courts did not expand on how to make the requisite showing of actual dilution. Proof of actual harm became very difficult to obtain, even in cases in which the blurring effect seemed clear. Many courts have rejected dilution claims out of hand in the wake of Moseley. In addition, the Court in Moseley raised the question as to whether tarnishment was even covered by the FTDA. Accordingly, after that decision, it became evident that certain parts of the FTDA needed to be clarified.

Revision Of The FTDA

The Trademark Dilution Revision Act helps to resolve these issues. The TDRA not only goes against the key holding of Moseley , it clarifies a number of other uncertainties left after the Supreme Court's decision, and introduces a number of other changes designed to strengthen the rights of trademark owners:

(i) Fame : a mark need not be unique or even inherently distinctive to qualify as "famous," but it must be widely recognized by the general consuming public of the United States" Thus, marks that are only recognized in limited geographic areas or niche markets do not qualify for dilution protection under the TDRA.

Marks with acquired distinctiveness (i.e., marks that are descriptive but become distinctive based on extensive use), as well as inherently distinctive marks, can be protected by the TDRA. To ensure that only truly distinctive marks are protected, the TDRA provides that both forms of distinctiveness be considered when determining if a mark is famous.

Other factors to be used in determining whether a mark has achieved the requisite degree of fame relate to advertising and publicity of the mark, sales of goods or services offered under the mark, the extent of actual recognition of the mark, and whether the mark is registered.

(ii) Tarnishment & Blurring : likelihood of dilution by tarnishment, as well as by blurring, is expressly made actionable, regardless of whether there is actual economic injury.

Tarnishment is defined as an "association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark." Tarnishment generally arises when the plaintiff's trademark is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner's product.7

Blurring is defined as an "association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark." Blurring has typically involved "the whittling away of an established trademark's selling power through its unauthorized use by others upon dissimilar products.8

(iii) Proof of Dilution : The TDRA makes clear that only a likelihood of dilution need be shown to obtain relief. This is intended to provide a means for trademark owners to stop dilution in its inception, rather than waiting until actual harm occurs.

In a claim for dilution by blurring, the TDRA provides that courts should consider several factors to determine whether dilution is likely to occur, including the similarity between the allegedly dilutive mark and the famous mark (the marks need not be identical); the degree of inherent or acquired distinctiveness of the famous mark; whether use of the famous mark is "substantially exclusive"; the extent of recognition of the famous mark; the intent of the user of the allegedly dilutive mark; and any "actual association" between the allegedly dilutive mark and the famous mark.

Famous Marks

The FTDA applied to "famous marks" though did not expand on the meaning of that term. Instead, it provided a non-exclusive list of factors for courts to apply. These factors led some circuits to award anti-dilution protection to marks in "niche markets."9 The TDRA, on the other hand, affords anti-dilution protection only to marks "widely recognized by the general consuming public of the United States," and lists a non-exclusive set of factors for courts in determining whether a mark is famous or not.

In determining whether a mark possesses the requisite degree of recognition, the court may consider all relevant factors, including the following:

(i) The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties.

(ii) The amount, volume, and geographic extent of sales of goods or services offered under the mark.

(iii) The extent of actual recognition of the mark.

(iv) Whether the mark is registered.

"Actual recognition of the mark," is probably meant to encompass evidence such as surveys, but this is not entirely clear. Moreover, two major factors were omitted which had been included in the FTDA - the trading areas and type of market involved.

We still do not have a bright line as to what constitutes a famous mark. Future decisions will undoubtedly be needed to clarify the test.

Conclusion: Best Practices

There are certain practices that are recommended. One of the concerns with the FTDA was that many trademark owners believed their marks to be "famous" when they were not. Accordingly, dilution claims were filed that were beyond the scope of what the law intended. There were so many such lawsuits that courts became suspicious of what they perceived as dilution's slippery slope, and overburdened judges began to make it difficult for plaintiffs by creating hurdles to dilution claims that also interfered with bona fide claims involving truly famous marks. To avoid this situation under the revised law, it is advisable that plaintiffs not include dilution in every complaint involving trademarks. However, in cases where dilution really is the key issue, the dilution claim should be emphasized, and if there is no real likelihood of confusion, trademark owners should prepare themselves as to how best to focus on the claim that matters most, and to persuade courts about the need for a dilution remedy.

1 Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harv. L. Rev . 813 (1927), as reprinted in 60 Trademark Rep. 334, 344 (1970).

2 Pub. L. No. 104-98, 109 Stat. 985 (1996) (codified at 15 U.S.C. 1125(c), 1127).

3 15 U.S.C. 1125(c)(1 ).

4 See New York Stock Exchange, Inc. v. New York, New York Hotel LLC , 293 F.3d 550, 557 (2d Cir. 2002). The Second Circuit found that the NYSE word marks were not inherently distinctive and could not be the basis for a federal dilution claim. Under the new law, these marks would likely be protected.

5 537 U.S. 418 (2003).

6 537 U.S. at 434.

7 See, e.g., Coca-Cola Co., 346 F.Supp. at 1183 (defendant sold posters reading "Enjoy Cocaine" in script and color identical to that used for Coca-Cola trademark ).

8 Mead Data Central v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d at 1031 (providing examples of blurring, such as, DuPont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, Bulova gowns ).

9 See , e.g. , Times Mirror Magazines, Inc. v. Las Vegas Sporting News, 212 F.3d 157 (3rd Cir. 2000); Syndicate Sales, Inc. v. Hampshire Paper Corp., 92 F.3d 633 (7th Cir. 1999).

Jeffrey C. Katz is a Partner and David A. Weems is an Associate in the Intellectual Property Department of Davis & Gilbert LLP in New York.

Please email the authors at jkatz@dglaw.com or dweems@dglaw.com with questions about this article.