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The concept of trademark dilution has been the subject of debate for more than a half century. About only half the states provide for a cause of action, and the federal government did not join the club until 1995, with the passage of the Federal Trademark Dilution Act (FTDA). In March 2003, the Supreme Court stepped into the fray when it decided Moseley v. V Secret Catalogue Inc.,more commonly known as the Victoria’s Secret case. The Court’s decision was clear and decisive on the limited issue it addressed. Writing for a unanimous Court, Justice John Paul Stevens determined that the text of the FTDA “unambiguously requires a showing of actual dilution, rather than a likelihood of dilution.” To assert a successful claim under the FTDA, the owner of a famous trademark must present evidence that the defendant’s commercial use of a mark has caused “actual dilution” of the famous mark by rendering it less capable of identifying and distinguishing the owner’s goods or services. For all the certainty of the Court’s pronouncement, however, the undertones of its crisp legal sound bite are not as clear. Conspicuously absent is any substantive discussion as to how, exactly, one should prove that a mark has been actually diluted. Instead, the Court framed its opinion in terms of evidentiary negatives, explaining that “the consequences of dilution, such as an actual loss of sale or profits,” need not be shown to establish dilution, and that “direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proven through circumstantial evidence,” such as when the two marks are identical. In short, the Court failed to stake out any real evidentiary boundaries. Moreover, it would be premature to interpret the Victoria’s Secret decision as heralding the completedemise of an incipiency standard. As the Court recognized, the definition of “dilution” sanctioned by Congress is in many ways prospective, focusing on the capacity of a mark to function as an indicator of source. By such logic then, a trademark owner may still be able to establish a claim of actualdilution of a famous mark by presenting evidence of the potential futureeffects of a junior party’s actions. Indeed, this incongruity was noted (and sanctioned by) Justice Anthony Kennedy in his concurrence, where he remarked that actual dilution “can be shown by the probable consequences flowing from use or adoption of the competing mark.” At least one court has since embraced this actual/potential connection. On March 21, the U.S. District Court for the Middle District of North Carolina, in Pinehurst Inc. v. Wick,held that the economic value of a mark has been “diminished” when the defendant’s use of the mark effectively prevents the trademark owner from exploiting the full value of its property, such as by a futureexpansion of services under that mark — a line of reasoning further suggesting that a sharp delineation between actual and prospective dilution may be impossible to draw. WHAT WILL WORK? Given these uncertainties, the logical question to consider is what sort of evidence can support a showing of actual dilution? Direct evidence of dilution — namely, proof of lost sales and consumer surveys — will surely remain the gold standard. The Court expressly recognized, however, that indirect evidence might also suffice, although it failed to offer specific guidance. The burden will therefore fall upon the circuit courts to articulate the form and quantum of circumstantial evidence that will suffice as proof. Despite conflicts found in the case law, the circuits should not rush to foreclose reliance on any particular category of evidence. Indeed, the Supreme Court suggested that certain contextual factors traditionally used in a likelihood-of-dilution analysis may constitute indirect evidence of actual dilution. A party’s ability to argue that its famous mark has been rendered less capable of functioning as an indicator of source would appear to be limited only by its power of persuasion. Ultimately, some or all of the following types of evidence may be accepted as helping to establish actual dilution: DILUTION SURVEYS Once considered practical necessities in actual dilution cases, consumer surveys can now officially be classified as evidentiary luxuries. Still, courts are likely to regard a properly conducted survey as compelling evidence, and many jurisdictions may look askance at an owner of a famous mark who is unwilling to commit the resources to perform a proper survey. In the end, courts may treat dilution surveys as they do surveys on genericness. To wit, although there is no legal requirement that a party introduce a survey to support its claim that a mark is generic, surveys are often viewed as de rigueurfor establishing that a term has become generic. (This contrasts with likelihood-of-confusion cases, where surveys, although highly valued by courts, are frequently not offered.) How dilution may be experimentally tested is still in the developmental stages, and likely will be driven by the nature of each case. OTHER CONSUMER STUDIES Although the Court probably envisioned case-specific quantitative studies when it referred to consumer surveys, other consumer studies might also prove valuable in helping support a dilution claim. Unlike surveys designed to demonstrate a likelihood of confusion, wherein a result of at least 15 percent confusion is usually required to support a trademark infringement claim, there is, as yet, no threshold for the level of dilution that renders it actionable. Therefore, a trademark owner might usefully offer qualitative evidence based on in-depth group interviews, which could show that at least some consumers’ perceptions about the brand have changed. A trier of fact might then draw a broader inference that the capacity of the mark to function as an indicator of source had been lessened to some degree. Similarly, traditional marketing studies, such as those that monitor company image, advertising effectiveness, brand awareness, etc., could be mined for data that would tend to show that a mark’s strength is being eroded. EXPERT TESTIMONY One group likely to benefit from the Victoria’s Secret decision is marketing consultants, who may well find their services in greater demand. When the Court stressed that the expert witness retained by Victoria’s Secret “had nothing to say about the impact of [the junior user's] name on the strength of [the trademark owner's] mark,” the Court clearly implied that, if offered, such opinion testimony could support a showing of actual dilution — even in the absence of any consumer study to serve as the basis for that opinion. EVIDENCE OF ACTUAL CONFUSION Evidence of actual consumer confusion — the Holy Grail in likelihood-of-confusion cases — should constitute powerful evidence of actual dilution as well. In cases where the parties compete, the nexus between the evidence and the conclusion is clear: If a consumer has purchased goods from the junior party believing them to emanate from the senior party, the trademark owner’s sales have been commensurately reduced, thus establishing the requisite “actual harm.” However, even in the absence of competition, evidence that some consumers believe that the defendant’s products originate from (or are sponsored by) the trademark owner would tend to support an inference of actual economic harm. Such evidence would be especially strong if accompanied by proof that the defendant’s goods were inferior to or offered less value than the trademark owner’s goods, or that the confused consumer had a bad purchasing experience with the defendant. CONSUMER COMPLAINTS A corollary to proof of actual confusion, complaints from consumers who are notconfused may still diminish the economic drawing power of a mark. If a consumer encounters a junior party using a famous trademark in a way that the consumer considers unwholesome, that perception could haunt the owner of the famous mark as well. For example, consumers may not want to associate with the trademark owner’s product out of concern that others, who may be confused, might then think less of them. Consumers may also believe that the owner is shirking its duty by “allowing” this unsavory activity to take place, rather than policing the marketplace. The Victoria’s Secret decision appears to recognize that anger directed at the trademark owner for the actions of the junior party may create an inference of actual harm, even where the consumer is not confused as to any affiliation between the parties. CONSUMER TESTIMONY In the Victoria’s Secret case, the Court did not give any weight to the testimony of an Army officer who said that when he saw an advertisement for the junior party, he made a “mental association” with the trademark owner. In the Court’s view, “the mere fact that consumers mentally associate the junior user’s mark with a famous mark is not sufficient to establish actual dilution,” at least where the marks at issue are not identical. But the Court noted that the officer “did not . . . form any different impression of the [trademark owner's] store” and “did not change his conception of Victoria’s Secret.” The obvious inference here is that if a consumer mentally associates a junior user’s mark with the famous mark and, as a consequence, forms a different impression of the trademark owner, that may suffice to establish actual dilution. REDUCTION IN SALES Clear proof that a trademark owner’s sales have declined as a result of the defendant’s use of a similar mark (and not from any other cause) constitutes the quintessential direct evidence of actual dilution. In most cases, though, such unassailable proof will be difficult, if not impossible, to find. Instead, a trademark owner will likely have only marginal evidence that suggeststhat sales have declined or not grown as quickly as they would have otherwise. A change in sales patterns in a specific geographic region or product market where the junior party is using the mark may support such an inference better than broad historical trends. Even though the sales figures alone might be insufficient, a court could rely on such information as part of a mosaic of circumstantial evidence to support a finding of actual dilution. CHANGES IN ‘TRAFFIC’ In the Internet era, traffic to a Web site can be viewed as a surrogate for the strength of a brand’s drawing power. Evidence of a reduction in Web traffic could thus be viewed as a signal of deterioration in the strength of that mark. Such evidence would be especially effective if the junior user were using the mark in a way that directly interfered with traffic — perhaps by altering search engine “scoring” of Web site visitors. That might serve to demonstrate that the “likely” effect of reduced activity has become “actual” dilution. Conversely, it might also be argued that a statistically significant increase in Web traffic is also evidence of a dilution effect as a result of the junior use. Perhaps the increase in “hits” is due to consumers seeking out the junior user and reaching the senior user’s site instead. Such increase may be slowing down response to legitimate inquiries, damaging the senior user in the eyes of those consumers. FORECLOSED OPPORTUNITIES If a junior party’s use of a mark has denied the trademark owner an opportunity that it otherwise would have had, one could argue that the trademark owner has been actually harmed because its ability to exploit its mark has been curtailed. As the District Court noted in Pinehurst,a junior party’s activity might effectively foreclose the trademark owner’s use of its mark in a new geographic territory, product market, or distribution chain. Establishing the nexus between the junior use and the foreclosure may be difficult. Markets in which one party’s activities can completely prevent another party’s entry are not common. However, the Internet domain name system offers one example: Only one party can hold the rights to a specific domain name. CONTEXTUAL FACTORS Finally, there are contextual factors — the very factors from which the Supreme Court appeared to distance itself when it adopted an actual dilution standard. The similarity between two marks would appear to be of critical importance, but other factors may also influence a court. The extent of the junior mark’s exposure, the strength of the senior mark, and, arguably, the proximity of their goods and the likelihood that the trademark owner will enter a market similar to that in which the junior user operates could all be regarded as circumstantial evidence of actual dilution. This list of types of evidence that may help prove actual dilution is not — indeed, cannot be — comprehensive. As more cases are argued and appealed in the wake of the Victoria’s Secret decision, courts will begin to shake out what is and is not sufficient proof. In the meantime, before prosecuting a claim under the FTDA, a trademark owner would be well-advised to consider whether sufficient evidence (either direct or circumstantial) of actual dilution is readily available. If not, the owner must consider whether it is prepared to commit the resources necessary to conduct a consumer survey or, at minimum, to engage a qualified marketing expert. Edward T. Colbert and Brian S. Mudge are partners, and William M. Merone is a senior associate in the D.C. office of Kenyon & Kenyon. Colbert handles IP litigation and other adversarial proceedings. Mudge focuses on IP litigation and counseling. Merone focuses on trademark law. They can be reached at [email protected], [email protected], and [email protected], respectively.

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