Trademark Dilution: Part I

* This article is for non-lawyers, or attorneys practicing in areas of law other than trademark law, seeking to familiarize themselves with the basics of trademark dilution. This article is Part I of a two part series. Introduction Trademark law has evolved to give what is, in essence, a quasi-property right in a “word, name, symbol or device” that identifies and distinguishes one person’s goods (or services) from those of another. 15 U.S.C. § 1127. The justification for this is twofold. First, to protect the public from confusion or deception about who is the source of a given product or, in the case of a service mark, a given service. Second, to protect a business’s investment in the goodwill in the mark. Enforcement of such “right” typically takes one of two forms: “Infringement” or “dilution.” Laws barring trademark “infringement” seek to protect the first interest. They focus on whether consumers are likely to be confused by the public use of two similar marks. Conversely, laws governing “dilution” seek to protect the second interest. In so doing, dilution jurisprudence focuses on whether the owner’s investment in a mark has been lessened or diminished when someone a third party uses a similar identifier. Put another way, it protects from a “free riding on the investment” the trademark holder has made. I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 50 (1st Cir. 1998). Trademark Dilution is a Cause of Action in its Own Right Trademark dilution is not a mere fallback position for an unsuccessful someone who was not able to prove infringement plaintiff. 4 McCarthy on Trademarks and Unfair Competition § 24:70 (4th ed.) (citing 15 U.S.C. § 1127, and Playboy Enterprises, Inc. v. Netscape Communications Corp., 55 F. Supp. 2d 1070 (C.D. Cal. 1999)). Rather, it is a distinct wrong and, therefore, a distinct cause of action. The First Circuit explained this distinction rather eloquently in I.P. Lund Trading ApS v. Kohler Co.: [I]f a cocoa maker began using the “Rolls Royce” mark to identify its hot chocolate, no consumer confusion would be likely to result. Few would assume that the car company had expanded into the cocoa making business. However, the cocoa maker would be capitalizing on the investment the car company had made in its mark. Consumers readily associate the mark with highly priced automobiles of a certain quality. By identifying the cocoa with the Rolls Royce mark, the producer would be capitalizing on consumers’ association of the mark with high quality items. Moreover, by labeling a different product “Rolls Royce,” the cocoa company would be reducing the ability of the mark to identify the mark holder’s product. If someone said, “I’m going to get a Rolls Royce,” others could no longer be sure the person was planning on buying an expensive automobile. The person might just be planning on buying a cup of cocoa. Thus, the use of the mark to identify the hot chocolate, although not causing consumer confusion, would cause harm by diluting the mark. I.P. Lund., 163 F.3d at 50. The concept of dilution can be further subdivided in two categories: “Blurring” and “tarnishment.” Blurring is best described above in the I.P. Lund Trading ApS v. Kohler Co. decision-to wit, it occurs when the “unique and distinctive link” between the plaintiff’s mark and its goods or services is muddied and so its value is depressed. Tarnishment, occurs when a famous mark is associated with an offensive or inferior good, or is portrayed in a degrading context, thus lessening the value of the senior mark. In short, the nature of dilution is to eat away at the value of another’s trademark. And, in precluding the otherwise competitive acts that might dilute a mark, the anti-dilution statute gives the mark-holder a much broader property right than a mere claim for infringement does. E.g., The Toro Co. v. Torohead, Inc., 2001 WL 1734485 (Trademark Tr. & App. Bd.), 61 U.S.P.Q.2d 1164. (It is a “bedrock principle of trademark law” that multiple uses of a term as a mark can co-exist when used for non-related goods. Dilution upsets this balance and enables the owner of a famous mark to prohibit the use or registration of the same or substantially similar mark even on unrelated goods.) Dilution Cases Are Subject to a High Degree of Scrutiny Dilution is thus deemed to be an “extraordinary remedy.” Advantage Rent-A-Car Inc. v. Enterprise Rent-A-Car Co., 238 F.3d 378, 381 (5th Cir. 2001). As the Fourth Circuit explained: [W]e simply cannot believe that, as a general proposition, Congress could have intended, without making its intention to do so perfectly clear, to create property rights in gross, unlimited in time (via injunction), even in ‘famous’ trademarks. Ringling Bros.-Barnum & Bailey Combined Shows v. Utah Division of Travel Development, 170 F.3d 449, 459 (4th Cir. 1999). See also Nabisco, 191 F.3d at 224 n.6 (quotation marks omitted) (“We agree that the dilution statutes do not prohibit all use of a distinctive mark that the owners prefer not be made …. [W]e agree with the Fourth Circuit that the dilution statutes do not create a ‘property right in gross”‘); I.P. Lund, 163 F.3d at 47 (“[T]he standard for fame and distinctiveness required to obtain anti-dilution protection is more rigorous than that required to seek infringement protection”). Thus, a plaintiff in a dilution case is likely to face an uphill battle. 4 McCarthy on Trademarks and Unfair Competition § 24:89.50 (4th ed.); e.g., The Toro Co. v. Torohead, Inc., 2001 WL 1734485 (Trademark Tr. & App. Bd.), 61 U.S.P.Q.2d 1164 (stating that unlike in trademark infringement cases, doubts are not resolved in favor of the party claiming dilution). This article explains the elements and scope of a federal cause of action for dilution for a mark. Infringement is discussed in [Related Article]. Elements of a Federal Dilution Claim Section 43(c) of the federal Lanham Act lays out the requirements for pleading and proving a federal dilution claim. 15 U.S.C. § 1125(c). This section, which comes from legislation called of the Federal Trademark Dilution Act (FTDA), says states that the holder of a “famous mark” may stop another from using “in commerce” an identifier that “is likely to cause dilution by blurring or dilution by tarnishment.” That definition sets up a neat four-part test courts can follow to determine if a mark has been, or is likely to be, diluted. To prove dilution, then, a mark holder must establish all of the following: (1) the mark is distinctive and famous; (2) the defendant is using its own mark in commerce (3) the defendant’s use begin after the plaintiff’s (4) the defendant’s use is “likely” to cause dilution by blurring or tarnishment 15 U.S.C. § 1125(c). A Distinctive and Famous Mark The Lanham Act lays out four non-exclusive areas of proof that can weigh into whether a mark is sufficiently famous to warrant protection from the diluting use of a similar mark. These are: (1) the duration and extent of advertising or publicity of the mark; (2) the amount and breadth of sales of the item; (3) the extent to which it is actually recognized by the public and (4) whether the mark was registered. 15 U.S.C. § 1125(c)(A). These factors are looked at on a “totality of the circumstances” basis, to help a court decide if the mark 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.” Times Mirror Magazine, Inc. v. Las Vegas Sports News, LLC, 212 F.3d 157 (3rd Cir. 2000) The Lanham Act was amended in October 2006 and these factors are revised substantially from the list of eight included in the previous version of the law. Amending 15 U.S.C.A. § 1125(c). Pub.L. 109-312, § 2, 120 Stat. 1730 (Oct. 6, 2006). It is unclear as yet whether the new formulation will change what marks might be considered sufficiently “famous” to be diluted. Under the earlier version, most courts disposed of the “fame” question summarily. E.g., Amica Online, Inc. v. IMS, 24 F. Supp. 2d 548 (E.D.Va. 1998). So it is possible that the “I know it when I see it” nature of this inquiry might be unaffected. Under the earlier formulation of the law, however, and as examples to illustrate how the factors historically were applied, the following marks are some examples of those that have been considered to be sufficiently famous and distinctive to warrant protection: AOL, Barbie, Budweiser, Ford, Nike, NASDAQ, and Velveeta. America Online, Inc. v. IMS, 24 F. Supp. 2d 548, 48 U.S.P.Q.2d 1857 (E.D. Va. 1998); Mattel Inc. v. Jcom Inc., 48 U.S.P.Q.2d 1467 (S.D.N.Y. 1998); Anheuser-Busch, Inc. v. Andy’s Sportswear, Inc., 40 U.S.P.Q.2d 1542 (N.D. Cal. 1996); Ford Motor Co. v. Lloyd Design Corp., 184 F. Supp. 2d 665, 62 U.S.P.Q.2d 1109 (E.D. Mich. 2002); Nike Inc. v. Variety Wholesalers, Inc., 274 F. Supp. 2d 1352, 1372 (S.D. Ga. 2003), aff’d, 107 Fed. Appx. 183 (11th Cir. 2004); Kraft Foods Holdings, Inc. v. Helm, 205 F. Supp. 2d 942, 63 U.S.P.Q.2d 1353 (N.D. Ill. 2002). The following marks were deemed not sufficiently famous and distinctive to justify protection: Avery Dennison, for office supplies; Fun Ship, for a cruise line; Weather Guard, for vehicle tool boxes for contractors; We’ll Take Good Care of You, as a slogan for a chain of retail pharmacies. Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 51 U.S.P.Q.2d 1801, 1806 (9th Cir. 1999); Carnival Corp. v. SeaEscape Casino Cruises, Inc., 74 F. Supp. 2d 1261, 52 U.S.P.Q.2d 1920 (S.D. Fla. 1999); Knaack Mfg. Co. v. Rally Accessories, Inc., 955 F. Supp. 991, 42 U.S.P.Q.2d 1649 (N.D. Ill. 1997); Genovese Drug Stores, Inc. v. TGC Stores, Inc., 939 F. Supp. 340 (D.N.J. 1996). Use in Commerce “Use,” very simply put, means commercial use. Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903 (9th Cir. 2002) (the inquiry is basic, thought the requirement seems “ungainly.”) In other words, the defendant must have employed the famous and distinctive mark – or one nearly identical to it – to sell goods other than those produced or authorized by the mark’s owner. Panavision Int’l, LP v. Toeppen, 141 F.3d 1316, 1324-25 (9th Cir. 1988); Mattel, Inc., 296 F.3d at 903 (dilution found where MCA created and sold to consumers in the marketplace commercial products – the Barbie Girl single and the Aquarium album – that bear Mattel’s “Barbie” mark). A non-commercial use of another’s mark, on the other hand, is specifically exempt from the Lanham Act. This ensures that references to marks that would otherwise fall within the penumbra of First Amendment protections are not inadvertently, and unconstitutionally, also brought within the ambit of the statute. Mattel, Inc., 296 F.3d at 903. As such, the following activities are specifically authorized by statute: 1. Advertising that invites the consumer to compare goods or services; 2. Speech that “parodies, criticizes or comments upon” the famous mark owner, or the goods or services identified; 3. In news reporting or commentary; 4. In any other non-commercial fashion. 15 U.S.C. § 1125(c)(3). Part II of this series will issue in two weeks.

Mr. Taillieu is a partner of Zuber & Taillieu LLP. He earned his J.D. with highest honors from George Washington University School of Law, where he graduated #1 in the day class and was Managing Editor of the Law Review.

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