Howard Wintner

This article will discuss the law of “dilution” under the federal trademark laws. A key element of a trademark infringement claim is a likelihood of confusion resulting from the defendant’s use of the offending mark. For a dilution claim, however, there is no requirement to show a likelihood of confusion from the defendant’s use of the offending mark. Nor is it required that the goods or services for which the marks are used are in competition with those of the defendant, or that the owner of the mark will suffer actual economic injury as a result of the use of the offending mark. The threshold requirement for a dilution claim is that the mark is “famous.” Dilution can occur in one of two ways, either dilution by “blurring” or “tarnishment.”

The Current Dilution Statute

In 1996, Congress passed the Federal Trademark Dilution Act (the FTDA), contained in 15 U.S.C. §1125(c), with separate statutory provisions for a dilution claim. In 2006, Congress enacted the Trademark Dilution Revision Act (the TDRA), which replaced the FTDA. It altered the requirements for a dilution claim in significant respects. In broad stroke, the changes include: (1) altering the standard for a dilution claim from “actual dilution” to a “likelihood of dilution;” (2) a reconfiguration of the factors used to determine whether a mark is “famous;” (3) that non-inherently distinctive marks are subject to protection; and (4) expanding the exceptions to a dilution claim.

The elements of a dilution claim under the TDRA are: (1) the mark is “famous” and “distinctive”; (2) the defendant is making use of the mark in commerce; (3) the defendant’s use of the mark began after the mark became “famous,” and (iv) a likelihood of dilution by “blurring” or “tarnishment.”

Subsection (2)(A) of §1125(c) defines a “famous” mark as one that “is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” The non-exclusive factors to be used in determining whether a mark is “famous” are: (1) the “duration, extent and geographic reach of advertising and publicity of the mark;” (2) the “amount, volume and geographic extent of sales of the goods or services” using the mark; (3) the “extent of actual recognition of the mark,” and (4) whether the mark is registered on the principal register.

Dilution by “blurring” is defined in subsection (2)(B) of §1125(c) as an “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” The non-exclusive factors to be used include: (1) the “degree of similarity between the mark … and the famous mark”; (2) the “degree of inherent or acquired distinctiveness of the famous mark;” (3) the “degree of recognition of the famous mark;” (4) “[w]hether the user of the mark … intended to create an association with the famous mark,” and (5) “[a]ny actual association between the mark … and the famous mark.” In contrast, dilution by “tarnishment” is defined as an “association arising from the similarity between a mark … and a famous mark that harms the reputation of the famous mark.”

The TDRA enumerates several exceptions to a dilution claim. These are: (1) “[a]ny fair use, including a nominative or descriptive fair use;” (2) “advertising or promotion that permits consumers to compare goods and services;” (3) a parody, criticism, or commentary of the “famous mark owner or the goods and services of the famous mark owner;” (4) “[a]ll forms of news reporting and news commentary”; and (5) “[a]ny noncommercial use of [the famous] mark.”

What Is a Famous Mark?

Prior to the enactment of the TDRA, certain courts found that a dilution claim could be based on fame limited to a particular channel of trade, segment of an industry or service or geographic region, referred to as “niche” fame. This is no longer the case under the TDRA. To qualify as “famous” (and therefore protectable), the mark must be “widely recognized by the consuming public in the United States.” The cases and legislative history state that the TDRA only protects a truly famous mark. Examples given include Budweiser Beer, Camel Cigarettes, Barbie Dolls, Dupont, Kodak, Buick, McDonalds, Pepsi and the like. In practice, the courts have given protection to a somewhat broader class of marks. In determining whether a mark is “famous” under the TDRA, the courts have often looked to marks that have multi-million dollar advertising budgets, generate hundreds of millions in sales annually, and are almost universally recognized by the general public.

Examples of Cases Finding the Mark to Be Famous. Nike v. Nikepal Int’l, 2007 WL 2782030 (E.D. Cal. Sept. 18, 2007) (mark famous where “Nike” was the largest seller of athletic footwear and apparel in the United States; its revenues from the sale of its products was over $5 billion annually; it spent hundreds of millions of dollars annually for promotion of “Nike” products, and was consistently ranked as one of the leading brands in the United States); George Nelson Foundation v. Modernica, 12 F. Supp. 3d 635 (S.D.N.Y. 2014) (“George Nelson” mark was “famous” for purposes of a motion to dismiss where it was alleged that the mark had been used for more than 60 years with some of the most famous furniture designs of the 20th century; generated revenue of hundreds of million dollars; the designs had received numerous awards, and numerous books had been published about such designs); North Face Apparel v. Dahan, 2014 WL 12558010 (C.D. Cal. Oct. 6, 2014) (plaintiff’s “North Face” and other marks for apparel were “famous” where, inter alia, sales of the trademarked products were in excess of a $1 billion during the past five years, and hundreds of millions of dollars had been spent in advertising for products bearing the marks during the past four years).

Examples of Cases Finding Mark Not Famous. Boarding School Review v. Delta Career Education, 2013 WL 6670584 (S.D.N.Y. March 29, 2013) (allegations that complainant owned at least 14 educational institutions, provided educational services to at least 16,000 people, had operated a subsidiary for over one hundred years, and conclusory allegations that it had invested “enormous sums of money in marketing and had experienced ‘extraordinary and longstanding’ sales success,” did not make it plausible that the marks were “famous”; at best, the allegations made it plausible that the marks were recognized within the niche market for profit, post-secondary schools); Heller v. Design Within Reach, 2009 WL 2486054 (S.D.N.Y. Aug. 14, 2009) (finding plaintiff’s mark not “famous” for purposes of motion to dismiss where the complaint did not include any information about the advertising budget of the products bearing the mark or the strength of consumer recognition of the mark in the general public, and annual sales of the products were $1 million); Paleteria La Michoacana v. Productos Lacteos Tocumbo S.A. De. C.V., 69 F. Supp. 3d 175, 220 (D.D.C. 2014) (finding that the “alleged awareness of [plaintiff’s] mark among Hispanic immigrants or within certain localized regions of the country, without more, was insufficient for a dilution claim because that is the very definition of a niche marketplace’”).

Dilution by Blurring

The most extensive discussion of dilution by “blurring” in the Second Circuit under the TDRA is Starbucks v. Wolfe’s Borough Coffee, 588 F. 3d 97 (2d Cir. 2009). The case involved the “Starbucks” marks for retail coffee products; the mark was concededly “famous.” The allegedly infringing mark was “Charbucks,” and was also for coffee products. The Second Circuit stated that some “classic examples of blurring include ‘hypothetical anomalies [such] as Dupont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, Bulova gowns and so forth.’” With respect to the first statutory factor for a dilution by blurring claim, i.e., the degree of similarity of the marks, the Second Circuit found that the district court did not err in finding that the marks were “minimally similar.” The Second Circuit reasoned, among other things, that the defendant’s coffee was presented as either “Mister Charbucks” or “Charbucks Blend” in packaging that displayed the defendant’s name, Black Bear. Furthermore, defendant’s package design was “different in imagery, color and format” from that of Starbucks. Also, the packaging made clear that Black Bear was a “Micro Roastery” located in New Hampshire. The Second Circuit found, however, that the district court erred in finding that the lack of substantial similarity was itself enough to deny Starbuck’s dilution by blurring claim. The Second Circuit stated that in pre-TDRA cases, it had found that there was a requirement of substantial similarity, but that this was no longer the case under the TDRA. Rather, the relevant inquiry is the degree of similarity. While the Second Circuit agreed that “similarity” was an integral part of the “blurring” analysis, it was only one of the six statutory factors. The Second Circuit reasoned that to give it dispositive weight would materially diminish the other factors. Defendant only disputed two of the other statutory factors, whether: (1) the defendant intended to create an association with the famous mark, and (2) there was evidence of any actual association between defendant’s mark and the famous mark. The Second Circuit found that the district court erred in finding that the requisite intent to associate required a showing of “bad faith” by the defendant. It also found that in analyzing the “actual association” factor, the district court erred in looking to “actual confusion” because the absence of actual or even a likelihood of confusion, while having relevance to the analysis, did not undermine evidence of trademark dilution. Given these flaws, the Second Circuit remanded the case for a blurring analysis consistent with its opinion. (Upon remand, the District Court rejected Starbucks’ dilution by “blurring” claim, which was affirmed by the Second Circuit, 736 F.3d 198 (2d Cir. 2013).)

Examples of Cases Involving Dilution by Blurring. Compare Miss Universe, L.P., LLLP v. Villegas, 672 F. Supp. 2d 575 (S.D.N.Y. 2009) (“Miss Asia USA” did not impair distinctiveness of “Miss USA” mark, even though such mark was widely recognized, there had been substantially exclusive use of it, and it was moderately distinctive; the marks were not sufficiently similar in that the use of “Asia” was a noticeably distinguishing feature, there was no intent to associate, and no showing of actual association), with Louis Vuitton Malletier, S.A. v. Hyundai Motor America, 2012 WL 1022247 (S.D.N.Y. March 22, 2012) (brief use in commercial by automobile manufacturer of a basketball containing a design similar to plaintiff Louis Vuitton marks constituted dilution by blurring, where such marks and the defendant’s design in the commercial were virtually indistinguishable, plaintiff’s marks were widely recognized luxury marks, defendant’s design was admittedly intended to create an association with plaintiff’s marks, and there was substantial evidence of actual association).

Dilution by Tarnishment

The Second Circuit in Starbucks also addressed a dilution by tarnishment claim. The crux of dilution by tarnishment is that the plaintiff’s mark will suffer a negative association as a result of defendant’s use of it. The Second Circuit stated that a famous mark may be tarnished when it is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavory context, resulting in the public association of the lack of quality or lack of prestige in the defendant’s goods with the plaintiff’s goods. Tarnishment may be established if the “famous” mark loses its ability to serve as a “wholesome identifier” of plaintiff’s product. The central element is damage to the reputation of the “famous” mark. The Second Circuit found that Starbuck’s failed to establish dilution by tarnishment. It stated that the relevant inquiry would have been how a hypothetical coffee named “Mister Charbucks” or “Charbucks’ Blend” would affect the positive impressions about the coffee sold by Starbucks. In rejecting Starbucks’ tarnishment claim, the Second Circuit stated that it might even be that the use of ‘“Charbucks’ would strengthen the positive impressions of Starbucks because it brings to the attention of consumers “that the ‘Char’ is absent in ‘Star’ bucks, and, therefore of the two ‘bucks,’ Starbucks is the ‘uncharred’ and more appealing product.” The Second Circuit also rejected Starbuck’s argument that “Charbucks” is a pejorative term for Starbucks’ coffee and, accordingly, that the “Charbucks” name had negative associations that consumers were likely to associate with Starbucks’ coffee. It reasoned that defendant was using “Charbucks” to promote a positive impression for its brand of coffee, which it marketed as a product of a very high quality. This undercut Starbucks’ claim that the use of “Charbucks” harmed its reputation.

Examples of Cases Involving Dilution by Tarnishment. North Face Apparel (finding dilution by tarnishment where it was likely that consumers would associate plaintiff’s marks with defendants’ counterfeit products; the offending goods replicate plaintiff’s marks and bore a striking visual similarity to plaintiff’s products bearing the marks, and there was evidence that defendant’s products were of a lower quality of workmanship and used lower quality materials); Lorillard Tobacco v. Ahmad’s Pizza, 866 F. Supp. 2d 872 (N.D. Ohio 2012) (finding dilution by tarnishment where defendant was selling counterfeit cigarettes bearing plaintiff’s “Newport” mark, plaintiff’s genuine “Newport” cigarettes tasted better than defendant’s counterfeit ones, and plaintiff had “received reports from consumers and retailers alike of consumers returning “Newport” cigarettes complaining of bad taste, only to find out that the cigarettes in question were counterfeit”).