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Two years have passed since the U.S. Supreme Court rendered its decision in Moseley v. V. Secret Catalogue Inc., 537 U.S. 418 (2003), which raised significant questions as to how a plaintiff would prove its claim under the Federal Trademark Dilution Act. For situations in which a trademark owner seeks to enjoin the use of an identical mark under the FTDA, some progress has been made, and a consensus is developing regarding the Supreme Court’s suggestion that direct evidence of dilution would not be necessary “if actual dilution can reliably be proved through circumstantial evidence — the obvious case is one where the junior and senior marks are identical.” Id. at 426. The courts have yet to provide useful guidelines, however, for plaintiffs who seek to pursue a nonidentical trademark under the FTDA, which has left many trademark owners frustrated. A solution may be forthcoming, however, as Congress is currently considering the Trademark Dilution Revision Act of 2005, which would address the proof issues raised by the Moseley decision. The FTDA was enacted in January 1996 for the purpose of protecting “famous trademarks from subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it, even in the absence of confusion.” H.R. Rep. No. 104-374, 1995 U.S. Code Cong. & Admin. News, 1029, 1030. The FTDA provided that the owner of a famous mark was entitled to obtain an injunction against the commercial use of a mark by others, “if such use begins after the owner’s mark has become famous and causes dilution of the distinctive quality of the mark.” Trademark Act of 1946 (Lanham Act) �43(a), 15 U.S.C. 1125(c)(1). In an effort to resolve a conflict among the circuit courts, the U.S. Supreme Court granted the petition for certiorari submitted by owners of a retail store in Kentucky, who sought to reverse a decision that their use of “Victor’s Little Secret” tarnished the famous “Victoria’s Secret” trademark and therefore should be enjoined. The Supreme Court found that under the FTDA, the plaintiffs were required to prove actual dilution, rather than a likelihood of dilution, basing that determination on the use of the phrase “causes dilution of the distinctive quality of the mark” in the operative portion of the statute, 15 U.S.C. 1125(c)(1), and on the definition of dilution in 15 U.S.C. 1127, which states that dilution “means the lessening of the capacity of a famous mark to identify and distinguish goods and services.” Moseley, 537 U.S. at 432-433. LITTLE GUIDANCE ON PROOF Having made that determination, however, the Moseley court offered little guidance as to how actual dilution should be proven: First, it rejected the argument that actual loss of sales or profits was a required element of the claims. Second, it determined that mere mental association by consumers of the marks at issue would not be sufficient to establish dilution. Third, as a response to concerns raised by both the owner of the Victoria’s Secret mark as well as many amicus curiae as to the cost and efficacy of survey evidence, it offered a single sentence observation: “It may well be, however, that direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proved through circumstantial evidence — the obvious case is one where the junior and senior marks are identical.” The court offered no further guidance on how the “lessening of capacity,” which is referred to in the definition of dilution, should be measured. Since Moseley, plaintiffs have generally met with success only when they have sought to enjoin the use of an identical mark. Faced with that situation, most courts have relied on the Supreme Court’s suggestion that no additional proof of actual dilution would be required. See Savin Corp. v. The Savin Group, 391 F.3d 439 (2d Cir. 2004); Ty Inc. v. Softbelly’s Inc., 353 F.3d 528, 535-536 (7th Cir. 2003); Everest Capital Limited v. Everest Funds Management L.L.C., 393 F.3d 755, 763 (8th Cir. 2005); Corbond Corp. v. Core Foam Inc., 2005 WL 256353, at 9 (W.D. Wis. Jan. 31, 2005); but see Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002 (9th Cir 2004) (remanding for development of a record on actual confusion); Nike Inc. v. Circle Group Internet Inc., 318 F. Supp. 688, 695 (N.D. Ill. 2004) At the same time, the courts have also found that identical means identical. Thus, when Savin Corp., a company that sold business equipment for office use, sued Savin Group, which provided civil engineering consulting services, the district court rejected both Savin Corp.’s argument that the parties’ respective marks were identical and its argument that no addition proof of dilution was required if the marks were found to be identical. Savin Corp., 391 F.3d at 448, 451. As to the evidence required when two marks are identical, the 2nd U.S. Circuit Court of Appeals reversed, concluding that the Supreme Court’s language meant that no further evidence of dilution should be required in that situation. However, the court also went on to state that it was critical that the marks be identical. It rejected the suggestion that mere similarity or even close similarity would be sufficient. The court noted that the record before it suggested that there might be factual issues in the case before it, because “the marks at issue may be identical in some contexts but not in others,” and remanded the matter for further consideration by the district court. Savin Corp., 391 F.3d at 453. Similarly, in Everest Capital, the 8th Circuit rejected as “frivolous” Everest Capital’s claim that its mark, which consisted of the words Everest Capital underlined, and had the underlining form a stylized mountain between the two words, was identical to the Everest Funds Management marks, as Everest Funds Management used “Everest Investment Management,” “Everest Funds Management” and “Everest Funds,” all in capital letters in a font style distinct from that used by Everest Capital, and with a fuzzy drawing of Mount Everest in a square border above or to the side of the names. Everest, 393 F.3d at 763. THE ISSUE OF ‘ACTUAL DILUTION’ While plaintiffs have had success in proving claims under the FTDA when the marks are identical, they have not succeeded in getting a court to define, or even discuss, the proof of “actual dilution” that should be required in situations where the trademarks are not identical. Given the position of the circuit courts prior to the Moseley decision, the lack of such discussions is hardly surprising. In Ringling Bros.-Barnum & Bailey Combined Shows Inc. v. Utah Division of Travel Dev., 170 F.3d 449, 457, 464-465 (4th Cir. 1999), the 4th Circuit suggested that actual dilution could be proven through evidence of lost revenue or through the use of surveys. However, the 2nd Circuit, in Nabisco Inc. v. PF Brands, 191 F.3d 208, 223-224 (2d Cir. 1999), the 7th Circuit, in Eli Lilly & Co. v. Natural Answers Inc., 233 F.3d 456, 467-468 (7th Cir. 2000) and the 6th Circuit, in V. Secret Catalogue Inc. v. Moseley, 259 F.3d 464, 472-476 (6th Cir. 2001), reversed, 537 U.S. 418 (2003), noted the difficulty of proving lost revenue until the harm had already occurred, as well as the difficulty in conducting a survey that would provide unquestioned support for a claim of dilution. In addressing the issue of proofs, the Moseley court specifically rejected the 4th Circuit’s determination that proof of “the consequences of dilution, such as an actual loss of sales or profits” was a necessary element of an FTDA claim, 537 U.S. at 433, and instead suggested that the trademark owner was required to show that the alleged diluting activity lessened the capacity of the mark to serve as a strong mark. Id. at 434. The court did not, however, offer suggestions as to how such lessened capacity should be proven. The solicitor general, in the government’s amicus brief in Moseley, suggested that survey evidence could be used for this purpose, although the brief itself does not point to any actual surveys conducted for that purpose. Although J. Thomas McCarthy does not opine on the type of evidence that should be sufficient to establish such loss of capacity, he offers suggestions as to possible expert testimony: a marketing or advertising expert, to opine on how the mark would lose value; a licensing expert, to opine on loss of potential opportunities to expand the brand through licensing; or a valuation expert, to opine on the loss of value of the mark. See McCarthy on Trademarks and Unfair Competition, �24:94.2 (4th edition 2004). McCarthy also describes the types of surveys that the solicitor general suggested in the government’s amicus brief in Moseley, but offers no opinion on whether such surveys would be appropriate. Neither expert opinion nor survey evidence has achieved success in reported opinions to date. In Playboy Enterprises Inc. v. Netscape Communications Corp., 354 F.3d 1020, 1034 (9th Cir. 2004), the plaintiff claimed that its marks were diluted by the defendant’s use of those marks to determine when to display certain banner advertisements. In support of that claim, Playboy had presented survey evidence that a substantial percentage of Internet users searching the terms “playboy” and “playmate” would believe that Playboy sponsored the advertisements containing adult content that appeared on the search results page. 354 F.3d at 1026. The 9th Circuit held that under Moseley, which was decided while the case was before it, such survey evidence was not sufficient to prove actual confusion, but remanded to allow the plaintiff to develop proof that would satisfy Moseley. Although this article treats Playboy as a case where the marks at issue are not identical, the opinion itself never addresses that issue. Relying on Playboy, a district court in Monster Cable Products Inc. v. Discovery Communications Inc., 2004 WL 2445348 (N.D. Calif. 2004), rejected the opinions of two experts whose testimony was offered, in part, to support a dilution claim. The first expert offered an opinion from the standpoint of a hypothetical consumer. The second expert stated that the defendant’s show conveyed an image that was likely to lead to a blurring or tarnishing of Monster’s trademarks. Neither expert relied on a survey. The district court held that expert opinion that was simply based on assumptions, academic principles and hypothetical consumers did not suffice under Playboy. Id. at 8. THE PROPOSED LEGISLATION Recently, Congress has shown signs of addressing the issues raised by Moseley. Representative Lamar Smith, R-Texas, introduced the Trademark Dilution Revision Act of 2005 (2005 FTDA Revision) on Feb. 9. On April 19, the House passed the 2005 FTDA Revision by the vote of 411 to 8, and forwarded it to the Senate, which promptly read the bill and referred it to the Committee on the Judiciary on April 20. As of the date that this article was finalized, no further action had been taken. The 2005 FTDA Revision rewrites the FTDA and replaces the language that the Supreme Court relied upon in concluding that proof of actual dilution was required with language that allows a dilution claim to proceed “regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.” 2005 FTDA Revision, �2(c)(1). The 2005 FTDA Revision also specifically allows for claims based on dilution by blurring and dilution based on tarnishing, as there has been concern that the FTDA would not support claims based on both types of dilution, based on language in the Moseley opinion. Given the issues and dilemmas posed by the current FTDA, many parties would welcome and encourage congressional action. All parties will benefit from a statute that clearly establishes the applicable rules for trademark use by addressing the issues identified in the current FTDA, so as to avoid the uncertainties caused by the courts’ interpretation of the current FTDA. Ira J. Hammer is a director of Newark, N.J.’s Gibbons, Del Deo, Dolan, Griffinger & Vecchione and a member of the intellectual property department. He has extensive experience in both transactional and litigation matters involving computer software, trademarks, patents, copyrights and trade secrets.

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