Bush Signs Trademark Dilution Revision Act of 2006
By Michael G. Atkins
October 9 , 2006
New Statute Overrules Moseley v. V Secret Catalogue, Inc.; Confirms Causes of Action for Blurring and Tarnishment; and Reinstates "Likelihood of Dilution" Standard for Proving Dilution of a Famous Trademark
On October 6th, President Bush signed the Trademark Dilution Revision Act of 2006 ("TDRA"), which clarifies the standard of proof trademark owners must meet to prove dilution of a famous trademark. By amending the Federal Trademark Dilution Act of 1995 (the "1995 Act"), TDRA overrules the confusing standard the U.S. Supreme Court established three years ago in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003). It also removes the doubt V Secret cast over whether trademark owners can establish dilution through the traditional showing of blurring. This is important news for owners of famous marks.
Legal Framework
Trademark dilution is defined by statute. It generally occurs when the strength of a well-known mark is weakened by another party's use, even if the consuming public is not likely to be confused about which product comes from which source. In this way, dilution differs from trademark infringement, which depends on a likelihood of consumer confusion. Classic hypothetical examples of dilution are third-party use of DUPONT for shoes, BUICK for aspirin, and KODAK for pianos. Even if consumers would not think that Dupont had gotten into the shoe business, General Motors in the aspirin business, and Kodak in the piano business, courts would find that third-party use would erode the strength of those marks. Putting a stop to such use was the purpose of the 1995 Act, which TDRA amends.
Moseley v. V Secret
Congress primarily intended TDRA to address the Supreme Court's controversial opinion in V Secret. In that case, the Supreme Court considered whether an adult novelties store called "Victor's Little Secret" diluted Victoria's Secret's famous mark, VICTORIA'S SECRET. Victoria's Secret offered evidence of a customer who associated "Victor's Little Secret" with VICTORIA'S SECRET but did not as a result think any less of the well-known lingerie store his wife and daughter patronized. Victoria's Secret also did not provide any evidence that "Victor's Little Secret" had lessened the strength of the VICTORIA'S SECRET trademark. V Secret, 537 U.S. at 434.
The Supreme Court found the 1995 Act "unambiguously" required a showing of "actual dilution," rather than the "likelihood of dilution" test the Sixth Circuit had applied. Applying the actual dilution standard, the Court held that Victoria's Secret had not proven its claim. The Court found that at least where the marks are not identical, a trademark owner must offer a survey or other direct evidence that its mark has been measurably impaired to prove actual dilution. In the case of identical marks, the Court suggested that circumstantial evidence may be sufficient, but did not elaborate further. Id.
These vague standards left trademark owners wondering how they were supposed to prove actual dilution. The Seventh Circuit commented that the Supreme Court "did not explain and no one seems to know what [its required] "circumstantial evidence" might be." Ty Inc. v. Softbelly's Inc., 353 F.3d 528, 536 (7 th Cir. 2003). Some critics noted that the "actual dilution" standard required trademark owners to suffer the very harm that the 1995 Act was supposed to prevent before they were entitled to a remedy. The International Trademark Association, which represents trademark owners, argued that the 1995 Act provided a cause of action to remedy dilution, but "the Supreme Court has interpreted it in a manner that makes it at best ambiguous and at worst nearly impossible to establish." Trademark Dilution Revision Act of 2005: Hearing on H.R. 683 Before the Subcomm. on Courts, Internet, and Intellectual Property of the House Comm. on Judiciary, 109 th Cong., 1 st Sess. 9 (2005) (statement of Anne Gundelfinger, INTA).
New Standard for Proving Dilution
TDRA solves these problems. It restores the likelihood of dilution standard similar to the one the Second, Sixth, Seventh, and Ninth Circuit had applied before V Secret. Now, the owner of a famous mark can prevail against another person who:
15 U.S.C. § 1125(c)(1) (2006) (emphasis added).
Express Recognition of "Blurring" and "Tarnishment"
TDRA pegs the specific proof needed to establish a likelihood of dilution to the type of dilution alleged. Its recognizing dilution in both blurring and tarnishment forms is important in light of V Secret, where the Supreme Court cast doubt on whether blurring remained a viable form of dilution.
TDRA defines "dilution by blurring" as "the association arising from the similarity between a mark or trade name and a famous mark" that impairs the ability of the famous mark to distinguish goods produced by the owner of the famous mark from goods produced by the owner of the similar mark or trade name. Id. at § 1125(c)(2)(B). An example of blurring is Victoria's Secret's evidence that one of its customers mentally associated "Victor's Little Secret" with its famous mark, VICTORIA'S SECRET. Though the Supreme Court found that evidence insufficient to prove actual dilution, it would be evidence of a likelihood of dilution under TDRA's new standard because the association arose from the similarity or identity of the two marks.
In considering dilution by blurring, TDRA authorizes courts to consider "all relevant factors," including:
- The degree of similarity between the mark or trade name and the famous mark;
- The degree of inherent or acquired distinctiveness of the famous mark;
- The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark;
- The degree of recognition of the famous mark;
- Whether the user of the mark or trade name intended to create an association with the famous mark; and
Any actual association between the mark or trade name and the famous mark.
Id. at § 1125(c)(2)(B)(i)-(vi).
TDRA defines "dilution by tarnishment" as the "association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark." Id. at § 1125(c)(2)(C). In V Secret, for example, tarnishment may have existed if Victoria's Secret had produced a survey showing that consumers who were not aware of "Victor's Little Secret" regarded "Victoria's Secret" as "tasteful," while consumers who were aware of Victor's Little Secret" regarded " Victoria's Secret" as "tasteless."
New Definition of "Famous" Trademark
Dilution assumes that a mark is "famous." Yet, the 1995 Act did not define that term. Its failure to do so led to a split in the circuits as to how well known a mark had to be to qualify for protection. Six of the twelve federal circuits recognized "niche market" fame in a local area or specialized market; three circuits rejected that concept; and three had not addressed the issue. TDRA resolves this conflict by requiring fame on a national level. It defines a "famous" mark as one that 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." Id. at § 1125(c)(2)(A). This definition limits dilution remedies to those marks that literally are household names.
TDRA also clarifies that a famous mark need only be capable of functioning as a trademark " that is, able to distinguish one source of goods from another. Contrary to treatment in the Second Circuit, it now does not matter whether the mark was distinctive from inception (because the mark is inherently strong) or became distinctive through use (because the public has come to associate the mark with the source). All famous marks are now created equal.
In determining whether a mark is famous, TDRA replaces the eight nonexclusive factors listed in the 1995 Act with four nonexclusive factors. They are:
- The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties;
- The amount, volume, and geographic extent of sales of goods or services offered under the mark;
- The extent of actual recognition of the mark; and
- Whether the mark was federally registered.
Id. at § 1125(c)(2)(A)(i)-(vi).
Remedies
Like the 1995 Act, TDRA primarily provides injunctive relief. TDRA also provides for the recovery of damages, lost profits, treble damages, and destruction of the infringing articles, subject to the court's discretion, if the defendant's mark is first used in commerce after October 6, 2006 " the date TDRA was enacted " and the defendant either intends to trade on the recognition of the famous mark (in the case of blurring) or intends to harm the reputation of the famous mark (in the case of tarnishment). In very limited circumstances, TDRA provides for an award of attorneys" fees and costs.
Exclusions
Addressing free speech concerns, TDRA excludes causes of action involving fair use of a famous mark, including such use in advertising, parody, criticism, or commentary involving the mark's owner; news reporting; and noncommercial use.
Conclusion
TDRA simplifies and strengthens the federal dilution cause of action by both narrowing and broadening its scope. It limits protection to nationally known marks where, before, some courts recognized niche market fame. At the same time, it expands protection after V Secret by enabling owners of famous marks to curtail dilution before actual harm occurs. In short, TDRA restores an important tool for protecting well-known marks.
TDRA Text
The full text of H.R. 683, introduced by Rep. Lamar Smith (R-Tex) and passed by an overwhelming majority, is available here.
Please feel free to contact Michael G. Atkins (206.340.9614 or matkins@grahamdunn.com) should have any questions or wish to discuss this topic further.
