Trademark Dilution

Is Protection Against Dilution Back on Track?

by: Fernando Torres, M.Sc.

Dilution is a major threat to established and famous trademarks. Naturally, trademark owners look to federal regulations to protect their marks. The Federal Trademark Dilution Act of 1995 (FTDA) amended the Lanham Act (adding section 43(c)) and followed provisions of the Trade-Related Aspects of Intellectual Property Rights (‘TRIPS’), including Trade in Counterfeit Goods which was part of the Uruguay Round of the GATT agreement. The FTDA includes a provision designed to grant dilution protection specifically to “famous” marks, expanding to four the causes of action for unlawful business conduct in relation to famous trademarks:

  1. Trademark infringement;
  2. Counterfeiting;
  3. Unfair competition; and,
  4. Trademark dilution.

Trademark dilution is defined in the FTDA as the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of:

  • Competition between the owner of the famous mark and other parties, or
  • Likelihood of confusion, mistake, or deception

Courts had previously found that dilution can occur as a result of either “blurring” or “tarnishment.” “Blurring” typically refers to the “whittling away” of distinctiveness caused by the unauthorized use of a mark on dissimilar products. “Tarnishment” involves an unauthorized use of a mark which links it to products that are of poor quality, or which is portrayed in an unwholesome or unsavory context that is likely to reflect adversely upon the owner’s product.

Ordinarily, only injunctive relief is available under current law. However, if the defendant willfully intended to trade on the owner’s reputation or to cause dilution of the famous mark, the owner of that mark may also be entitled to other remedies available under Trademark Law, including defendant’s profits, damages, attorneys’ fees, and destruction of the infringing goods. The availability of monetary relief is a significant departure from state dilution laws, which have typically provided only for injunctive relief.

Trademark Law until 1995, as interpreted by state courts, generally required a showing of consumer confusion about the source or affiliation of goods and services. In contrast, Federal Dilution Law protects the distinctive quality and selling power of the trademark itself, even if consumers are not confused. Interpretations varied before the FTDA. The Fourth Circuit Court of Appeals required evidence of actual diminution of the established trademark’s “selling power,” while the Second Circuit required just a “likelihood of dilution”. The 1995 federal standard, by incorporating the spirit of TRIPS, began to be interpreted as requiring only “likelihood” of dilution or damage, and promoted uniformity and certainty in the face of varying state-by-state standards.

Following passage of the FTDA, the circuit courts of appeals split as to whether the statute required the owner of a famous mark to prove actual harm as a prerequisite to injunctive relief. This question was eventually addressed by the Supreme Court in the first dilution case heard, the case of Mosely v. V Secret Catalogue, Inc. In a dilution action between the lingerie company Victoria’s Secret and a small retail company (Victor’s Little Secret) that sold, among other items, adult “novelties,” the Court determined that the FTDA “…unambiguously requires a showing of actual dilution, rather than a likelihood of dilution.” And found against Victoria Secret’s dilution claim. More specifically, the Supreme Court opinion was that:

The mere fact that consumers mentally associate the junior user’s mark with a famous mark is not sufficient to establish actionable dilution…such mental association will not necessarily reduce the capacity of the famous mark to identify the goods of its owner…”Blurring is not a necessary consequence of mental association (Nor, for that matter, is “tarnishing.”) [1]

An important implication of that decision, for owners of famous marks, is that the difficulty, or standard, to protect a truly famous mark is now greater the more famous a mark is, since it becomes less likely that consumers will find that the diluting mark (junior use) actually impairs the distinguishing capacity of the mark. In other words, to succeed in prosecuting a dilution claim, a mark should be famous enough to warrant such protection, but not so much that proof of “actual dilution” becomes impossible.[2]

The Supreme Court decision prompted a second look at the FTDA. The balancing act between the interests of trademark owners, competitors and consumers needed to be addressed by the legislature. The House of Representatives (April, 2005) and the Senate (March, 2006) passed a bill (HR 683) that will establish the “Trademark Dilution Revision Act of 2006” (TDRA) when signed into law by the President.

TDRA amends the FTDA[3] and is, at least in part, based on a submission by the INTA. It specifies that a famous distinctive mark is entitled to an injunction against any person who commences use in commerce a mark that is likely to cause dilution by “blurring,” i.e., impair its distinctiveness, or “tarnishment,” i.e., harms its reputation, even if there is no:

  1. Actual or likely confusion among the public;
  2. Competition between the owner and the person; or
  3. Actual economic injury to the owner.

In an action based on dilution by blurring, beyond an injunction, if the infringer willfully intended to trade on the famous mark’s recognition, or in a case of dilution by tarnishment, willfully intended to trade on the famous mark’s reputation, the owner may also seek damages, costs, and attorneys’ fees, as well as destruction of the infringing articles under separate Lanham Act provisions.

In contrast to current law, precedent, and interpretations of the law, under TDRA actual harm is not a prerequisite to injunctive relief. The revised act also defines dilution by “blurring” as well as by “tarnishment,” expands the threshold of “fame” (denying protection for “niche-only” marks). Finally, trade dress will also be protected if the owner can prove that such claimed trade dress is not functional, is famous, and is famous separate from any famous registered marks included in the claimed trade dress. The first use in commerce of the diluting mark, however, must be after the enactment of the Revision Act for remedies beyond injunction.

For now, protection against dilution appears to be back on track, but until the new law is signed,[4] it still is not back up to speed.

_______________________
[1] 537 U.S. ___ (2003); 123 S.Ct. 1115 (2003) page 15.
[2] Snyder, T. “Diluting FTDA Claims: The Supreme Court Narrows the FTDA But By How Much?” Mealey’s Litigation Report: Intellectual Property , April 21, 2003, Vol. 11 #14.
[3] Subsection (c) changes title from “Remedies for dilution of famous marks” to “Dilution by Blurring; Dilution by Tarnishment.”
[4] HR 683 was passed by the House on April 19, 2005, by a vote of 411 – 8, and by the Senate, with amendments, on March 8, 2006. UPDATE: Signed into law on October 6, 2006.

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