By Scott Hervey

In October, Congress signed into law the Trademark Dilution Revision Act of 2006 (“TDRA”). This Act overrules the High Courts holding in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003) and lays to rest a number of other issues that had long split the federal circuits.

Prior to the enactment of the TDRA, the Federal Trademark Dilution Act (“FTDA”) provided protection to the owner of a “famous mark” “against another person’s commercial use…of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark.” The Federal Trademark Dilution Act defined dilution as the lessening of the capacity of a famous mark to identify and distinguish goods and services, regardless of a presence or absence of competition between the owner of the famous mark and other parties, or likelihood of confusion, mistake or deception.

In the latter part of 1999 and 2000 there was a pronounced split among the circuits concerning whether proof of dilution required a showing of actual or merely threatened economic harm.

In Westchester Media v. PRL USA Holdings Inc., 214 F.3d 658 (5^th Cir. 2000) the Fifth Circuit addressed an appeal concerning a finding of trademark infringement by the publisher of a magazine titled “Polo” as to the mark POLO owned by PRL (Ralph Lauren). Although not addressed by the lower Court, the Fifth Circuit discussed Ralph Lauren’s trademark dilution claim. To prevail on is dilution claim, Ralph Lauren was required to prove that its marks were famous and distinctive; that Westchester adopted its mark after Ralph Lauren’s marks had become famous and distinctive; and that Westchester caused dilution of Ralph Lauren’s marks.  The parties did not contest the first two of these requirements. Rather, the parties were in dispute as to whether proof of dilution required a showing of actual or merely threatened economic harm. 

In coming to its conclusion, the Court relied on Ringling Brothers– Barnum and Bailey Combined Shows Inc. v. Utah Division of Travel, 170 F.3d 499 (4^th Cir. 1999) which held that proof of dilution under the Federal Trademark Dilution Act requires proof of an actual lessening of the senior mark’s selling power. In other words, a plaintiff claiming dilution must show actual economic harm to the famous mark’s economic value by lessening its former selling power as an advertising agent for its goods or services. The Fifth Circuit endorsed the Fourth Circuit’s decision in Ringling Brothers and held that proof of actual harm must be shown in order to prove dilution.

The Second Circuit, in Nabisco Inc. v. PF Brands Inc., 191 F.3d 208 (2^nd Cir. 1999) disagreed with the Fourth Circuit regarding the need to prove actual dilution and injury to the famous mark. There the court stated:

[n]otwithstanding the use of the present tense in “causes dilution,” [in the wording of the statute] it seems possibly within Congress’s meaning to understand the statute as intending to provide for an injunction to prevent the harm before it occurs…[W]e read the statute to permit adjudication granting or denying an injunction, whether at the instance of the senior user or the junior seeking declaratory relief before the dilution has actually occurred.

The Second Circuit also attempted to reduce the number of marks held to be eligible for anti-dilution protection by requiring that marks be both “famous” and “distinctive.” The Court reasoned that some marks might be “famous” but not “distinctive.” While the Court was not very clear in how it wanted to define “distinctive,” it appears as if it meant that the anti-dilution law does not protect “famous” but non-inherently distinctive marks, such as surname marks, geographic terms and self-laudatory terms. 

In April 2002, the Third Circuit made it clear in its opinion in Times Mirror Magazines, Inc. v. Las Vegas Sporting News, LLC, 212 F.3d 157 (3^rd Cir. 2000)that it did not agree with the Second Circuit’s addition of the requirement that a mark be both “famous” and “distinctive.” The Court held that a mark may become famous in a niche market and be entitled to protection from dilution in that market. 

In 2001, in V. Secret Catalogue, Inc. V. Moseley, 259 F.3d 464 (6^th Cir. 2001) the Sixth Circuit chimed in on the split between the Second and Forth Circuits. The Sixth Circuit did not give its opinion on the famous/distinctive issue addressed by the Third Circuit. Rather, it focused on whether the FTDA requires proof of economic loss or merely a showing of the potential for economic loss. In V.Secret Catalogue, Inc. the defendants appealed the district court’s ruling on the plaintiff’s motion for summary judgment, contending that the district court improperly analyzed the “dilution" question by failing to require proof of actual economic loss. The court held that, to the extent that Ringling Brothers and Nabiscoare not entirely consistent in their analysis of the FTDA’s requirements, the Second Circuit has developed standards that follow more closely Congress’s intent. The court affirmed the district court’s analysis and confirmed that, at least in the Sixth Circuit, under the FTDA, a senior trademark holder may prevail on a dilution claim by showing likelihood of harm rather than having to prove actual harm.

Moseley made it all the way to the United States Supreme Court where the Court, for the first time, addressed the FTDA. The court had to address the issue splitting the circuits: what does the phrase “causes dilution” mean. The Court unanimously reversed the Sixth Circuit (and rebuffed the findings of the Second and Seventh Circuits as well), finding favor with the analysis of the Fourth and Fifth Circuits which require some showing of actual dilution. The Court’s opinion does not specify how to show evidence of such harm, but it did hint to the possibility of survey evidence. The Courts decision also casts some doubt on whether trademark tarnishment (where an offending user associates a famous mark with activities that are unflattering to the famous mark’s image) exists under the FTDA

With the enactment of the TDRA, Congress has laid to rest a number of the above issues. First, the TDRA amends Section 43(c) of the Lanham Act  to allow an owner of a famous mark to bring a claim based on likelihood of dilution “regardless of the presence or absence of actual or likely confusion, or competition, or the presence or absence of actual economic injury.”  

The TDRA also resolves the open issue of whether a claim for trademark tarnishment exists. The TDRA now expressly allows for a claim of “dilution by tarnishment” which results from an “association arising from the similarity between a mark or trade name and famous mark that harms the reputation of the famous mark.” 

The TDRA also allows for dilution by blurring; the “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” The TDRA also sets out factors which are to be considered when determining whether dilution by blurring has occurred. Those factors are: (i) The degree of similarity between the mark or trade name and the famous mark; (ii) The degree of inherent or acquired distinctiveness of the famous mark; (iii) The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv) The degree of recognition of the famous mark; (v) Whether the user of the mark or trade name intended to create an association with the famous mark; and (vi) Any actual association between the mark or trade name and the famous mark.

The TDRA also resolves open issues that had been raised by the Second, Third and Sixth Circuits. First, the TDRA, following the Second Circuit’s holding in Nabisco, makes clear that protection from dilution is available to marks that are both “famous” and “distinctive.” However, the TDRA then departs from anti-dilution law in the Second Circuit by granting protection to marks that are inherently distinctive or that have acquired distinctiveness through secondary meaning, rather than limiting dilution protection to marks that are inherently distinctive.  

The “fame” of a mark, according to the TDRA, is established by showing that the mark is “widely recognized by the general consuming public of the United States as a designation of source of the goods or service of the mark’s owner." This overrules the Third Circuit’s holding in Times Mirror Magazines, Inc. which allowed for “fame” in a niche market.

In addition, trademark practitioners may now see dilution claims raised by trademark examiners during the trademark registration process as well as in civil proceedings. Under the TDRA, likelihood of dilution, either by blurring or tarnishment, may be raised by a trademark examiner as grounds for refusing registration of an application, or by a third party in an opposition or cancellation proceeding.

Scott Hervey is a shareholder with Weintraub Genshlea Chediak Tobin & Tobin and practices in the firm’s technology and corporate sections. Scott’s practice primarily involves assisting companies in commercializing and protecting their intellectual property assets. Scott’s clients range from software companies to film production companies to digital content aggregators. For additional articles on IP law, visit www.theiplawblog.com.