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It took nearly 70 years to pass a federal law after professor Frank Schechter first articulated a compelling case for giving famous trademarks extra protection. It has taken only 10 years to conclude that the 1996 federal law targeting dilution is not working as hoped. Now, Congress has acted again. The proposed Trademark Dilution Revision Act, which is expected to become law this year, will reinvigorate the doctrine of dilution. Lessons from a decade of dilution cases have gone into improving the dilution law. With this legislation, the distinctiveness of America’s iconic brands will once again be protected against erosion by unauthorized uses. Few in the trademark community predicted in 1996 that the dilution law would need revamping so soon. When the Federal Trademark Dilution Act (FTDA) went into effect in January of that year, its passage crowned a decades-long campaign by scholars, brand owners, and trademark lawyers to add protection against dilution to the Lanham Act. Almost from the start, though, the FTDA failed to live up to its promise. Trademark owners overused the law to seek protection for marks of all types, famous and obscure. Litigation counsel invoked dilution to enjoin a variety of ills that went far beyond the protection that Schechter had envisioned. Trial judges were confused by the nebulous concepts of “blurring” and “tarnishment.” Appeals courts issued contradictory rulings, which encouraged forum-shopping. And in 2003 the Supreme Court eviscerated dilution by making it so hard to prove that the FTDA became a toothless tiger. The Trademark Dilution Revision Act, H.R. 683, is designed to bring dilution back to its roots. The legislation clarifies that this powerful protection is meant only for marks that are truly famous and distinctive. It provides specific standards to assist courts in determining when dilution has occurred. It strengthens fair-use protections to ensure that dilution is not used to suppress free speech. And it resolves the various splits that emerged among the circuits to ensure national uniformity in the application of dilution law. ACTUAL LOSS REQUIRED A major impetus for revision of the FTDA is the need to reverse the effects of the 2003 decision in Moseley v. V Secret Catalogue Inc. The Supreme Court in that case ruled that plaintiffs must prove actual dilution, not merely a likelihood of dilution, to prevail in a dilution claim. The Court accepted the Moseley case to resolve a split between the U.S. Courts of Appeals for the 2nd and 4th circuits. Four years earlier, in Ringling Bros.-Barnum & Bailey Combined Shows Inc. v. Utah Division of Travel Development (1999), the 4th Circuit rejected the claim that Utah’s slogan, “The Greatest Snow on Earth,” diluted the legendary circus cry “The Greatest Show on Earth.” The court held that to prevail on a dilution claim, a plaintiff must prove “actual economic harm to the famous mark’s economic value.” Ringling Bros. lost because it was unable to show a reduction in its mark’s power to advertise its goods and services. The 2nd Circuit disagreed. In Nabisco Inc. v. PF Brands Inc. (1999), a case involving the famous Goldfish cracker and another fish-shaped cracker inspired by the CatDog television cartoon, the court held that the proper standard was whether dilution was likely. Requiring the plaintiff to prove actual dilution would undermine its ability to stop another party’s use of its mark before such use caused a loss of distinctiveness. The problem, as the 2nd Circuit recognized, is that the first misuse of a famous mark on disparate goods or services might not immediately lessen the selling power of the famous mark, but if a plaintiff cannot stop that first use, it may beget a flood of such uses that will destroy the distinctiveness of the mark. For this reason, the harm of dilution has been compared to death by a thousand paper cuts. Thus, if the dilution law is to be effective, it must allow injunctive relief against the first use, when the harm is only likely, instead of forcing the plaintiff to wait until the mark has suffered actual harm, by which time the damage to the brand will be irreversible. The opportunity to resolve this circuit split soon presented itself in Moseley, which raised the question of whether Victor Moseley was diluting the Victoria’s Secret trademark with his adult novelty store, called Victor’s Little Secret. The 6th Circuit, following the 2nd, held generally that proof of a likelihood of dilution was sufficient and, particularly, that Moseley’s sex-toy shop did create a likelihood of dilution. The Supreme Court reversed, though it ostensibly charted a middle path. The Court ruled that the 6th Circuit’s likelihood-of-dilution standard could not be reconciled with the specific text of the FTDA, which entitled the owner of a famous mark to relief if the defendant’s use of a mark “causes dilution of the distinctive quality” of the famous mark. The Court contrasted this language with the infringement provision of the Lanham Act, which specifically prohibits uses that are “likely to cause confusion.” But the Court also rejected the 4th Circuit’s requirement that plaintiffs demonstrate actual economic harm. Although a plaintiff has to show that the defendant’s use causes actual dilution, it need not show that the dilution has already had deleterious economic effects. The Moseley decision threw dilution law into chaos. While the holding was arguably true to the language of the statute, it made it very difficult to show dilution in the real world. As Judge Richard Posner of the 7th Circuit later noted in Ty Inc. v. Softbelly’s Inc. (2003), the Supreme Court’s requirement of proof of “actual dilution” implied “a need for trial-type evidence” to determine whether the capacity of the Victoria’s Secret mark to identify and distinguish goods had been lessened. Wrote Posner: “We are not sure what question could be put to consumers that would elicit a meaningful answer either in that case or this one.” The Trademark Dilution Revision Act will resolve the problem created by Moseley. The legislation entitles the owner of a famous mark to injunctive relief against a person who “commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.” This embraces the likelihood-of-dilution standard the 2nd and 6th circuits use. DOES TARNISHMENT COUNT? Although Moseley dealt primarily with the subset of dilution known as blurring, the Supreme Court included in dicta a question about whether the FTDA was also intended to cover dilution by tarnishment. Blurring refers to the whittling away of a famous mark’s distinctiveness through the use of the same or a similar mark on unrelated goods and services. Tarnishment involves the injury to a famous mark’s reputation caused by gratuitously associating the mark with unseemly concepts such as pornography, violence, or drugs. Despite the fact that tarnishment was not implicated in Moseley, the Court noted in an aside that, although many state dilution statutes refer to both dilution and “injury to business reputation,” the FTDA refers only to dilution, and thus it was not clear whether the FTDA was intended to cover tarnishment claims. The Trademark Dilution Revision Act will put any such questions to rest. The legislation specifically provides that “dilution by tarnishment” is actionable, thus harmonizing the federal law with most state laws. Consistent with those state laws, the revised federal act defines dilution by tarnishment as “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” CONSIDER THIS, CONSIDER THAT Another reason the FTDA faced difficulties in the courts was that judges struggled to understand the meaning of blurring and what factors they should consider in assessing whether a famous mark was diluted by a later junior use. In the 1999 Nabisco case, for example, the 2nd Circuit articulated 10 factors that courts could consider in weighing dilution claims. Some of those factors were similar to factors normally considered in infringement cases, such as the similarity of the marks, the sophistication of consumers, the proximity of the products, and the existence of actual confusion. Other factors were unique to dilution, such as the degree of distinctiveness of the famous mark, the referential quality of the junior use, and the interrelationship among the senior mark’s distinctiveness, the junior mark’s similarity, and the products’ proximity. The 7th Circuit criticized the Nabisco test as being too similar to the likelihood-of-confusion test used for trademark infringement. Issues such as the proximity of the products and the existence of actual confusion might be relevant to whether confusion is likely, but they are less relevant to the analysis of blurring. Thus, in Eli Lilly & Co. v. Natural Answers Inc. (2000), a case involving whether an herbal remedy called Herbrozac diluted the Prozac trademark, the 7th Circuit held that only two factors were relevant: the similarity between the junior and senior uses and the renown of the senior mark. But the Eli Lilly test was as deficient in its simplicity as the Nabisco test was in its complexity. Although the two factors the 7th Circuit identified are certainly important, they are not the only factors relevant to dilution. The Trademark Dilution Revision Act helps resolve this debate. It lists six nonexclusive factors that may be considered in assessing whether a junior mark or trade name blurs a famous mark: 1. The degree of similarity between the junior mark and the famous mark

2. The degree of inherent or acquired distinctiveness of the famous mark 3. The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark 4. The degree of recognition of the famous mark 5. Whether the user of the junior mark intended to create an association with the famous mark 6. Any actual association between the junior mark and the famous mark The goal is to keep courts focused on the factors that are most relevant to whether the junior mark is likely to impair the distinctiveness of the famous mark while granting them the flexibility to consider other facts that may be relevant in particular cases. ABSOLUTELY FAMOUS Another problem that plagued the FTDA during its 10-year run was that it did not sufficiently limit the types of marks for which dilution protection was appropriate. Professor Schechter had envisioned dilution as applying only to the nation’s most famous and distinctive marks, such as Kodak, Buick, and Schlitz. Some courts, however, extended protection to marks such as Panaflex and Wawa, and even to the particular configuration of a plastic funeral urn. Such marks may be well known within a specific industry or geographic region, but that hardly qualifies them as nationally famous. Other courts, seeing that dilution seemed to apply to a wide swath of trademarks, were reluctant to extend protection to any marks. The Trademark Dilution Revision Act will reverse this trend. It defines a famous mark as one that is “widely recognized by the general consuming public of the United States” as designating the goods or services of the mark’s owner. The legislation thus makes clear that protection does not extend to marks that are “famous” only in a niche market. The legislation also provides more specific guidance on how to assess fame, including a tailored list of factors. These include the “duration, extent, and geographic reach of advertising and publicity of the mark”; 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 is registered with the U.S. Patent and Trademark Office. By making it clearer that dilution applies only to marks that enjoy extensive advertising, sales, and recognition, the revised act should encourage courts to extend protection. In one respect, the Trademark Dilution Revision Act expands existing law. In TCPIP Holding Co. v. Haar Communications Inc. (2001), the 2nd Circuit held that the FTDA applies only to marks that are “inherently distinctive.” Under this ruling, a descriptive mark that acquires distinctiveness can never qualify for protection against dilution. Although the result in that case was no doubt correct — a mark as undistinctive as “The Children’s Place” should not be protected against dilution — the court’s rationale swept much too broadly. By excluding dilution protection for any mark with acquired distinctiveness, the court appeared to exclude protection for all descriptive marks — no matter how famous — including marks based on a business owner’s surname, such as Kraft, Gallo, and Chrysler. Given that Schechter himself contemplated protection for surname marks that had become famous, the 2nd Circuit’s decision was inconsistent with the theoretical underpinnings of dilution law. The revised act reverses that decision by providing a cause of action to the owner of a famous mark “that is distinctive, inherently or through acquired distinctiveness.” Now all famous marks can be protected, whether they are inherently distinctive (like Yahoo!) or have acquired distinctiveness (like Hertz). SPEAKING FREELY When, in 1987, trademark owners pushed to add to federal law protection against dilution, the effort engendered substantial opposition from media and other First Amendment interests. Dilution was ultimately dropped from that year’s Trademark Law Revision Act. To address those concerns a decade later, the FTDA included a number of specific defenses to ensure that dilution could not be used to suppress free speech. These included a defense for fair use by a competitor using a famous mark in “comparative commercial advertising or promotion.” Yet some courts were insufficiently sensitive to the need to balance dilution protection with free-speech interests. For example, the historically broad First Amendment protection enjoyed by movie titles did not stop the U.S. District Court for Minnesota in American Dairy Queen Corp. v. New Line Productions Inc. (1998). The court enjoined use of the name “Dairy Queens” for a movie about beauty pageants in the Midwest on the grounds that it diluted the restaurant chain’s trademark. The producers were thus forced to change the movie’s name to “Drop Dead Gorgeous.” Similar problems emerged with courts interpreting state dilution statutes. For example, in Deere & Co. v. MTD Products Inc. (1994), a case brought under New York’s law, the 2nd Circuit enjoined a marketer of lawn tractors from running a humorous ad that compared its tractors with John Deere tractors by showing the latter’s deer logo running away from a small barking dog and an MTD tractor. To signal the importance of protecting free speech, the Trademark Dilution Revision Act adds an expanded fair-use provision. It specifically exempts purely nominative or descriptive uses of another’s mark, including in “advertising or promotion that permits consumers to compare goods or services” and in “parodying, criticizing, or commenting upon” the famous mark’s owner or its goods and services. Moreover, to protect publishers and Web search engines, the legislation also exempts the act of facilitating comparative advertising and other fair uses. But not all satiric uses are fair. To provide appropriate balance, the revised act indicates that it is not a fair use to employ another’s famous mark as a “designation of source” of one’s own goods or services, even in parody. Jay Leno can mock a famous mark in a comedy routine, but it may well be dilution to parody a famous mark in naming a commercial product. Makers of Tommy Holedigger dog perfume and “Don’t Leave Home Without Them” condoms, beware. As of this writing, the Trademark Dilution Revision Act had almost completed its congressional journey. With this act, America’s best-known brands will have a strong legal weapon against those who would trade on their hard-earned fame.

David H. Bernstein is a partner in the New York office of Debevoise & Plimpton, where he focuses on intellectual property and unfair competition matters. Bernstein also serves as counsel to the International Trademark Association. As counsel to the International Trademark Association, the author served on the INTA select committee that helped draft and lobby for the revised trademark act. He thanks Debevoise associate Christopher J. Hamilton for his assistance in preparing this article.

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