Home | Search | Contact Us

	Famous Marks and Dilution: Protecting the Crown Jewels of Trademarks Against Blurring and Tarnishment Intellectual Property  by Craig Aronson Pursuant to Section 43 (c) of the Trademark Act of 1946, as amended by 15 USCS 1125 (c), the owner of a famous mark may seek relief, including an injunction, against another’s unauthorized commercial use of a mark that dilutes the distinctive quality of the mark. Only the most exclusive marks earn the designation of being famous marks: “Dilution is a cause of action invented and reserved for a select class of marks—those marks with such powerful consumer association that even non-competing uses can impinge their value.” Avery Dennison v. Sumpton, 189 F.3d 868 (9th Cir. 1999). The basic elements of a dilution claim are that (1) The plaintiff is the owner of a mark which qualifies as a famous mark; (2) the defendant is making commercial use of the mark; (3) the use is in interstate commerce; (4) the use occurs after the mark has become famous, and (6) the use of the mark results in dilution of the famous mark (blurring and/or tarnishment). There are two basic types of dilution—“tarnishment” and “blurring.” “Tarnishment” is the damage to a famous mark when consumers mistakenly connect the famous mark with an inferior or offensive product. Panavision Int’l L.P. v. Toeppen, 141 F.3d 1316, 1326. “Blurring” is the injury that occurs when consumers see the plaintiff’s famous mark on a variety of unrelated goods thereby lessening the role of the famous mark as a specific identifier of the famous mark’s goods. McCarthy On Trademarks and Unfair Competition, section 24.13 (1)(a)(1)(3rd ed.) Dilution is frequently pled as an alternative to an infringement claim. A primary benefit of litigation based upon dilution of a famous mark is that an action can be successfully prosecuted against a defendant company in a wholly different industry, even absent any evidence of actual or likely consumer confusion. This is THE key distinction between a dilution action and a standard infringement claim. While most trademark claims are premised on the consumer’s right to be free from confusion, the famous mark holder’s rights are based on the protection of the mark itself against reduced recognition in connection with the mark holder’s products, regardless of actual confusion or likelihood of confusion. The holder of a famous mark has legally recognized rights that are essentially based upon the intrinsic commercial value of the mark, the investment in the mark, and the desire to protect the exclusivity that accompanies the mark regardless of any proof of harm to consumers, as opposed to harm to the mark holder’s interest itself. The dilution claim may be the only viable way for a trademark holder to go after THE use of a mark in an unrelated industry. Thus, the Ritz Carlton hotel chain might have problems showing that the Ritz Carlton Auto Wrecking business is confusing to consumers, nonetheless, there can be harm to the famous mark from the Ritz Carlton Auto Wrecking mark. The court in Nissan Motor Company v. Nissan Computer Corp., 378 F.3d. 1002 (2004) observed “NISSAN pianos would dilute Nissan” assuming Nissan is a famous mark even absent consumer confusion (though an infringement claim on the same facts would be harder to prove). “The owner of the famous mark shall be entitled to an injunction, subject to the principles of equity and upon such terms as the court deems reasonable, against another person’s commercial use in commerce 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.” 15 USCS 1125(c). Injunction is the only remedy available for a dilution claim absent a showing that defendant sought willfully to trade on the owner’s reputation so as to cause dilution of the mark. In this latter instance, the famous mark holder shall be entitled to the remedies of 15 USC 1117 (a) and 1118. Whether a mark is “famous” is determined based upon a multi-factor analysis, including: (a) the degree of inherent or acquired distinctiveness of the mark; (b) the duration and extent of use of the mark in connection with the goods or services with which the mark is used; (c) the duration and extent of advertising and publicity; (d) the geographical extent of the trading zone in which the mark is used; (e) the channels of trade for the goods or services in which the mark is used; (f) the degree of recognition of the mark in the trading areas and channels of trade used by the mark’s owner and the person against whom the injunction is sought; (g) the nature and extent of use of the same or similar marks by third parties, and (h) whether the mark was registered and if so when on the federal register. Proof of a mark’s fame typically focuses first and foremost on amount of sales, extent of advertising, and name recognition as inferred from the preceding, together with trademark history. A famous mark is readily demonstrated as to legendary household names, such as General Motors, Aunt Jemima, DuPont, and Kodak. However, even where the names are not household names, the claim of fame can be substantiated through suitable proof of sales, advertising and market presence. In Palm Bay Imports Inc. v. Veuve Clicquot, etc., 396 F.3d 1369 (2005), for example, the court noted the evidence supporting Veuve’s status as a famous mark: since 1990, Veuve was the second largest selling brand of champagne, sold in 8000 restaurants and stores nationwide, and regularly advertised in both wine specialty and general publications, such as Vanity Fair. It was described by Wine and Spirits as the most popular and widely consumed champagne in the United States. Another potential indicator of fame is widespread status and recognition of the plaintiff’s mark amongst the defendant’s potential customers. (Thomas McCarthy, McCarthy On Trademarks and Unfair Competition, 24:112 ). The Moseley v. V. Secret Catalogue decision, 537 U.S. 418 (2003), is probably the most influential dilution case of the past decade and has substantially revitalized and altered the discussion of dilution cases. It also arises out of highly unusual circumstances, a small store in Kentucky that wound up before the Supreme Court on a matter that for it was probably more a matter of pride than commercial necessity. The store was a store known as Victor’s Secret, a lingerie and “adult” apparel store located in Elizabethtown, Kentucky (not far from Fort Knox). The whole matter started when a Colonel who was rather upset with the “tawdry” merchandise being shown at Victor’s Secret wrote the national chain Victoria’s Secret about the problem. In response, Victoria’s Secret sent a warning letter to Victor’s Secret. The owner of the Victor’s Secret changed the store’s name to Victor’s Little Secret in an apparent effort to appease Victoria’s Secret, which didn’t work. Victoria Secret sued in federal court for trademark infringement and dilution. The court considered reciprocal motions for summary judgment and ruled as follows: it found in favor of defendant Victor’s Little Secret as to the trademark infringement claim given a lack of evidence concerning likelihood of confusion; but on the dilution claim, the court found in favor Victoria’s Secret based upon undisputed evidence of fame and substantial similarity in the marks, and issued an injunction. The case was appealed to the Sixth Circuit Court of Appeals which affirmed. The matter did not end there. The Supreme Court of the United States accepted review. The Supreme Court’s decision in Moseley both clarified old ground and redefined certain of the issues as to dilution. The Supreme Court’s decision eliminates any doubt that a dilution claim can lie wholly apart from any showing of likelihood of confusion. The Court references a German trademark case cited in a Harvard Law Review involving a mouthwash company and a steel company both using the mark “Owl” to illustrate how a famous mark may be diluted by a product in another industry; people may not buy Rolls Royce chewing gum thinking that it is made by Rolls Royce or take their car to a Starbucks Car Wash thinking it is owned by the coffee company, but the famous mark analysis is interested in the value and pedigree of the mark, regardless of consumer confusion. As the Moseley court noted, the focus is on whether the celebrity of the mark is diluted or tarnished by the other unauthorized usages. E.g. if there were a Rolls Royce dry cleaners, and a Rolls Royce chicken takeout, and a Rolls Royce convenience store, that would undercut the market and commercial cachet of the Rolls Royce brand. Another key aspect of the Moseley decision, and one that has been a real thorn in the side of plaintiff’s attorneys, is the Court’s holding that as to famous mark claims, other than claims based upon an identical mark (and identical does not mean just similar), plaintiff must prove as part of its case in chief actual dilution. Moseley, 123 S. Ct. 1115 at 1124. Because Victoria’s Secret had not offered proof of actual dilution through circumstantial or direct evidence, the Supreme Court reversed and remanded to the District Court for further proceedings consistent with its ruling. In many cases since Moseley, the famous mark holder has taken a perfunctory, or presumptive, approach towards proof of actual dilution and, at least with the exception of identical marks, this approach has not worked. The courts have had an easier time saying what does not satisfy the actual dilution requirement than clarifying exactly what does satisfy the requirement. In Ringling Brothers Barnum & Bailey Combined Shows, Inc., v. Utah Div. Of Travel Dev., 170 F.3d 449 (4th Cir., 1999), the court found that the mere showing that a consumer might associate the phrase “greatest snow on earth” with the phrase “Greatest Show On Earth” is insufficient to show actual dilution. The Supreme Court in Moseley noted that a “blurring” of the mark does not necessarily flow from mental association, at least not in the case of nonidentical marks (and identical means in that context identical or virtually identical) Moseley, 123 S. Ct. 1115 at 1124. Justice Ginsburg’s comments in oral argument reflected her view that, at a minimum, dilution required that Victoria’s Secret’s own customers must be aware of, and affected by, the diluting mark’s use. In her view, it was not enough to show that the Kentucky store’s customers drew an association between Victoria Secret and the Kentucky store. (Justice Ginsburg: “When you see Victor’s Secret, of course you’re going to be thinking of Victoria’s, but what counts is, when you think of Victoria Secret, do you think of Victor’s. That’s what dilution is, and if it’s the latter, then its—these are two very different things, aren’t they? ” November 12, 2002 Transcript, at 24). Justice Stevens seemed to share that view that the necessary focus is the senior mark holders’ customers, as he indicated concern that the colonel who had brought the matter to the attention of Victoria Secret had spoken of his disdain for the Kentucky store but not of any effect of the mark Victor’s Secret on the Colonel’s view of the Victoria Secret brand, as might evidence tarnishment. Moseley, 123 S. Ct. 1115 at 1125. Congress indicated in its deliberations the lack of governing authority in defining what constitutes actual dilution, especially given that state statutes usually required only a likelihood of dilution: “There are no known cases under existing state dilution statutes in which actual dilution (as opposed to likelihood of dilution) has been presented.” 44 H.R. Rep. No. 103-374. Much of the trademark case law has focused on refining the prove-up of likelihood of confusion as the benchmark for establishing trademark infringement, which is essentially an irrelevancy for dilution purposes. The courts themselves have expressed some puzzlement about how to show actual dilution: “It is not entirely clear how courts should determine whether a junior user causes a senior mark to suffer dilution.” Nabisco Inc. v. PF Brands, 191 F.3d 208 (2nd Dist. 1999). Indeed, most of the reported dilution cases during the past three years reflect the difficulties of counsel for the famous mark holder in understanding and applying the requirement of actual dilution, typically because actual dilution has only been presented in a presumptive or perfunctory manner. Several cases highlight this problem, including; Qwest Communications International Inc. v. Arnette, 2006 US Dist. Lexis 17 (Qwest and Homeqwest are not identical marks and, therefore, proof of actual dilution must be directly shown); Resource Lenders Inc. v. Source Solutions, 404 F. Supp.2d 1232 (Identical marks are the only exception to the requirement of direct proof of actual dilution); Mashantucket Pequot Tribe v. Redican, 403 F. Supp.2d 184 (2005) (Actual dilution cannot be presumed absent non-identical marks); Edina Reality v. Themlsonline.com, 2006 U.S. Dist. Lexis 13775 (Consumer confusion is irrelevant to prove up of dilution and, thus, offer of proof failed.) The required proof of actual dilution is most readily accomplished in cases where the marks are identical, which is generally assessed based upon review of the marks themselves under the criteria of whether to the average consumer the marks would be seen as the same. In the situation where the marks are the same/identical, then the courts generally will allow actual dilution to be directly inferred from the circumstantial evidence, including the marks and the contexts in which they appear. In the instance of identical marks, this inference can approach a presumption. Thus, the court in 7-Eleven, Inc. v. Douglas McEvoy, 300 F.Supp.2d 252 (2004), observed: “Though dilution claims require evidence of actual confusion, that requirement is satisfied when, as here, the defendant uses the plaintiff’s mark.” The tougher case clearly is where the marks are similar but not identical, especially if the famous mark holder has mistakenly assumed that it could simply persuade the court that actual dilution is presumed. Because the courts have been strict in holding that identical means identical, and not just strongly similar, various decisions which have involved marks which were similar but not identical have found that the famous mark holder incorrectly took the position that absolute dilution could be inferred from the use of the marks itself—e.g. CareFirst of Md., v. First Care, P.C., 434 F. 3d 263. The court found that Care First and First Care were not similar enough marks to allow for a circumstantial finding of dilution. In Autozone Inc. v. Tandy Corp., 373 F.3d 786 (2004), the court found that the terms Autozone and Powerzone were not “identical.” There are famous marks that stand out because they are household words. Dilution of these household names is more likely to be based on circumstantial evidence, even if the marks are not identical, e.g. if the defendants were Tylenol Snowboards, or Netscape Candy. The decisions have largely focused on what does not prove actual dilution, what is needed to prove dilution, and the law is still not that refined as to what constitutes appropriate proof of dilution. Actual financial loss need not be shown. Dilution does not mean “that the consequences of dilution, such as an actual loss of sales or profits, must also be proved.” Moseley, supra, 537 U.S. 418, 433. Given the fact that a famous mark tends to have enduring presence, notwithstanding dilution, some courts have questioned whether proof of economic loss from dilution is ever reasonable to establish the right to an injunction. Eli Lilly & Company, v. Natural Answers, Inc., 233 F. 3d 456 (2000). Whether a claim of economic loss from dilution is sufficient to demonstrate actual dilution is an issue that has not generally been addressed. Survey evidence has been used to support a showing of actual dilution, but famous mark holders have struggled with defining and conducting the right type of survey. The primary problem with surveys has been that they are typically designed to measure consumer confusion, but consumer confusion is an irrelevancy for purposes of showing dilution. 4 McCarthy On Trademark Law section 24:94:2. The courts have recognized in essence that surveys, though potentially probative, need to be differently designed for a dilution claim than might suffice for an infringement claim. In Bell v. Starbucks US Brands, Corp., 389 F.Supp.2d 766 (U.S.D.C 2005), the court considered a survey used in a Starbucks dilution claim against Starbock Beer. The survey was flawed, but the court apparently felt that survey evidence of mistaken consumer belief showing an affiliation or co-sponsorship between the famous mark’s products and the defendants’ might support a showing of actual dilution and went beyond a merely de minimus showing of mental association between the marks. In Ty Inc. v. Softbelly’s Inc., 353 F.3d 528, the court expressed some consternation as to how a dilution survey would be framed: “the Supreme Court held in the Victoria’s Secret case … that the statute requires proof of “actual dilution … We are not sure what question could be put to consumers (in a survey) that would elicit a meaningful answer either in that case or in that one. We are not alone in having those doubts.” Ty supra at 535. Since survey evidence has a recognized place in trademark law, litigation over dilution claims involving non-identical marks (e.g. marks that the strong majority of consumers would not regard as essentially the same) would appear to invite carefully constructed survey evidence to substantiate an actual dilution claim. Any such survey evidence though must be conducted with a view towards what will satisfy the court’s requirements as to actual dilution, and with that thought in mind, a standard likelihood of confusion survey is not going to suffice to meet the more specific showing required, and indeed might well be deemed irrelevant. Rather, the focus needs to be on designing a survey that demonstrates a breakdown in the capacity of the famous mark to solely designate the famous mark holder’s product. A survey needs to focus on the blurring that tends to occur when products bearing the famous mark, and products bearing the diluter’s marks are perceived as co-sponsored. This may require guiding the survey expert away from a more conventional or pro forma approach to the survey. An alternative, or added prong, in proving actual dilution in cases involving nonidentical mark can be use of an industry expert. Thus, in Estate of Ellington v. Gibson Piano Ventures, Inc., 75 U.S.P.Q. 2d 1724 (Ind. Dist. Ct.), the court found persuasive the testimony of an industry expert opining on the effect in the industry of the diluting mark in undercutting the exclusivity of the famous mark holder. Another cautionary note on the dilution remedy is that any injunctive relief is discretionary and lies in the equities. Generally, injunctive relief requires continuing wrongdoing and lack of sufficient legal remedy. del Tobaco v. Culbro. Corp., 123 F.Supp.2d 203, 209-210; Ringling Brothers Barnum Bailey Combined Shows v. Utah Div. Of Travel, 170 F.3d 449, 465 (4th Cir. 1999). Thus, in the instance of wrongs purely in the past, no injunctive relief will lie. Freudenberg Household Products LP v. Time Inc., 2006 U.S. Dist. Lexis 20774. By statutory prescription, damages for dilution lie only for willful violation. Thus, for those famous mark holders who seek in the dilution action to recover damages, proof must include a showing of willful violation. This issue has not been all that much in the vogue in dilution cases. This is probably in part because there is substantial case law generally dealing with willfulness issues in the trademark infringement context. Also, the fact that the mark is famous, and one that the defendant actually or presumptively had exposure to and recognized as a strong mark, helps the famous mark holder in building a case around willfulness. Indeed, the bigger hurdle may not be willfulness, but proof of damages. Sometimes, as in the Moseley case, the diluting mark is like the gnat on the elephant, e.g. the defendant’s presence in the marketplace probably does not substantially undercut the plaintiff’s business and, to the extent it does, it may be hard to prove. Indeed, many dilution cases are driven more by the injunctive potential than by the expectations of damages. Accordingly, dilution bridges a gap in trademark law. It solves the problem of a clear misappropriation or misuse of a trademark which might go unresolved because the defendant user is in a different industry and the likelihood of actual customer confusion is slim. Dilution recognizes the practical problem that a certain “je ne sais quoi” may be lost if the famous mark holder is confronted with a number of diluting usages—e.g. if the Trump mark appears on a chain of 99 cent stores, or on massage parlor. The issue that continues to have the most play is the question of what constitutes adequate showing of actual dilution. This likely means that the prudent plaintiff will fully arm itself with the arsenal of available tools, e.g. industry expert, survey, etc. to show actual dilution, and statistics and visuals to back up the status of the mark as “famous” (sales, market share, advertisements and reputational evidence, amongst other things). Meanwhile, defense counsel will challenge the adequacy of actual dilution evidence and any damage claims. It is likely that the case law on these issues will continue to evolve over the next ten years, including through a major Supreme Court decision that will complete the issues analysis process that began in Moseley. ©2006 The Business Suit, Defense Research Institute. All Rights Reserved. Back
	© 2010 Berger Kahn, A Law Corporation    Disclaimer