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April 01, 2004

FAME, BUT NOT FORTUNE—The State of Federal Trademark Dilution Law in the United States

In 1995, the United States Congress passed the Federal Trademark Dilution Act ("FTDA"). Prior to that, U.S. law on trademark dilution was left to each of the fifty states to decide individually. With the coming of the federal law that would apply uniform standards throughout the country, trademark owners rejoiced. However, that enthusiasm has clearly been tempered by recent court decisions that have made it much more difficult to prevail on claims under the FTDA.

Dilution Must Be More Than "Likely"

The United States Supreme Court, in Moseley v. V. Secret Catalogue, Inc.,1 held that the FTDA "unambiguously requires a showing of actual dilution, rather than a likelihood of dilution."2 The Court made additional comments on the type of proof necessary to establish actual dilution. The Court noted that the actual dilution standard "does not mean that the consequences of dilution, such as actual loss of sales or profits, must be proved" and that "direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can be reliably proven through circumstantial evidence - the obvious case is one where the junior and senior marks are identical."3 But the Court also cautioned that "at least where the marks are not identical, the mere fact that the consumers mentally associate the junior user's mark with a famous mark is not sufficient to establish actionable dilution" by itself.4

This "actual dilution" standard is much stricter than the "likelihood of dilution" requirement many of the lower courts had applied prior to the Moseley decision.5 Since the Moseley decision, the lower courts have expressed uncertainty as to what type of evidence will establish actual dilution, noting that the Supreme Court "did not explain and no one seems to know what that 'circumstantial evidence' might be"6 and "it is unclear what type of showing [the dilution claimant] must make."7

Regarding surveys as proof of actual dilution, one court questioned whether any "question could be put to consumers that would illicit a meaningful answer" concerning actual dilution.8 Another court turned a plaintiff's own surveys (introduced to establish the fame of its mark) against it, noting that the survey results from before and after the introduction of the junior mark showed that no lessening of the capacity of the plaintiff's mark to identify the plaintiff's goods had occurred and, as a result, there was no actual dilution.9

Whatever the standard of evidence is, claimants have generally had a difficult time establishing it in the post-Moseley era when the marks are not identical.10 When the marks are identical, the courts have been more willing to find that actual dilution exists.11 However, as one court noted, the Moseley decision is not clear as to, when the marks are identical, whether (1) the fact of their being identical is in itself "sufficient circumstantial evidence to prove actual dilution" or (2) additional "circumstantial evidence" is still necessary to prove dilution.12

Is the FTDA a Tarnish Remover?

Under most state dilution laws, a junior mark can dilute a senior mark either by (1) blurring the association between the senior mark and its owner or (2) tarnishing the reputation of the famous mark. In Moseley, the Supreme Court questioned, but did not decide, whether the FTDA extended to tarnishment of a famous mark. The legislative history of the FTDA suggests that Congress intended the statute to cover dilution by tarnishment, but the Supreme Court questioned whether this intent was fulfilled in the actual wording of the statute.13 Since Moseley, several lower courts have noted this issue but they have failed to squarely decide it.14

If future courts hold that the FTDA does not cover dilution by tarnishment, the statute's usefulness to mark owners will be further restricted.

Only Inherently Distinctive Marks Need Apply

While the FTDA on its face seems to clearly suggest that its protection extends both to marks that are inherently distinctive and those that have acquired distinctiveness,15 at least one of the eleven Circuit Courts of Appeal has held that a mark must be inherently distinctive to invoke the FTDA. In TCPIP Holding Company, Inc. v. Haar Communications, Inc.,16 the Second Circuit concluded "that a descriptive mark does not come within the protection of the [FTDA]."17 This ruling has been followed in numerous subsequent cases in the Second Circuit.18

While so far the Second is the only Circuit to reach this conclusion, a requirement of inherent distinctiveness would eliminate many well-known marks from the protection of the FTDA, such as FORD, McDONALD'S, AMERICAN AIRLINES, GUCCI and many others.

Finding Your Niche

There's also a split among the Circuit Courts of Appeal regarding whether fame in a "niche market" is sufficient to qualify for FTDA protection. A "niche market" is something less than the general nationwide consumer market, such as a specific limited geographic region or a specific product category. Some courts have held that fame in such markets as the "sports periodical market,"19 the "car rental industry"20 and the "non-stationary bicycle" market21 would be sufficient to qualify for protection under the FTDA, but only against junior uses in the same market. Other courts have refused to extend FTDA protection to marks famous in "the world of interior design and high-end bathroom fixtures"22 and "only a small area or segment of the nation."23

As can be seen from these cases, niche market fame may be one area where the courts have actually taken a broader perspective on the scope of dilution protection under the FTDA.

Conclusion

In summary, the FTDA has not been the panacea for trademark owners that some had foreseen when it was enacted. Rather, the courts appear to be viewing it with somewhat of a jaded skepticism. There are clearly conflicts in the Circuit courts on a number of issues, and there may be legislative reaction as well. Thus, at this point, the state of federal trademark dilution law in the U.S. is anything but well settled, and those bringing FTDA claims may be in for a bumpy ride.

Endnotes

1123 S.Ct. 1115 (2003).

2123 S.Ct. at 1124.

3123 S.Ct. at 1124-25.

4123 S.Ct. at 1124.

5See, e.g., Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2nd Cir. 1999); Moseley v. V. Secret Catalogue, Inc., 259 F.3d 464 (6th Cir. 2001).

6Ty, Inc. v. Softbelly's, Inc., No. 03-1592, 2003 WL 22994564 (7th Cir. Dec. 22, 2003).

7Caterpillar Inc. v. Walt Disney Co., 287 F. Supp. 2d 913, 922 (C.D. Ill. 2003).

8Ty, Inc. v. Softbelly's, Inc., 2003 WL 22994564 at 6.

9Kellogg Co. v. Toucan Golf, Inc., 337 F.3d 616, 628 (6th Cir. 2003).

10See, e.g., Ty Inc. v. Softbelly's, Inc., at 6-7; Caterpillar Inc. v. Walt Disney Co., 287 F. Supp. 2d at 922.

11See, e.g., Savin Corp. v. The Savin Group, No. 02 Civ. 9377, 2003 WL 22451731 (S.D.N.Y. Oct. 24, 2003); Scott Fetzer Co. v. Gehring, 288 F. Supp. 2d 696 (E.D. Pa. 2003); Nike Inc. v. Variety Wholesales, Inc., 274 F. Supp. 2d 1352 (S.D. Ga. 2003).

12The Savin Group, 2003 WL 22451731 at 14.

13Moseley, 123 S.Ct. at 1124.

14See, e.g., Caterpillar Inc. v. Walt Disney Co., 287 F. Supp. 2d at 922.

15One of the FTDA's factors for determining whether a mark is sufficiently "distinctive and famous" to be covered by its provisions is "the degree of inherent or acquired distinctiveness of the mark." 15 U.S.C.§ 1125(c)(i)(A).

16244 F.3d 88 (2nd Cir. 2001).

17244 F.3d at 93.

18See, e.g., Solow Building Company LLC v. Nine West Group, Inc., No. 01-7878, 2002 WL 31303237 (2nd Cir. Oct. 11, 2002); New York Stock Exchange, Inc. v. New York, New York Hotel, LLC, 293 F.3d 550 (2nd Cir. 2002); Malaco Leaf, AB v. Promotion in Motion, Inc., 287 F. Supp. 2d 355 (S.D.N.Y. 2003).

19Times Mirror Magazines, Inc. v. Las Vegas Sports News, LLC, 212 F.3d 157 (3rd Cir. 2000), cert denied, 531 U.S. 1071 (2001).

20Advantage Rent-a-Car, Inc. v. Enterprise Rent-a-Car, Co., 238 F.3d 378 (5th Cir. 2001).

21Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894 (9th Cir. 2002).

22I.P. Lund Trading Aps. v. Kohler Co., 163 F.3d 27 (1st Cir. 1998).

23TCPIP Holding Company, 244 F.3d at 99.

* * *

R. Scott Keller is a partner in the Technology and Intellectual Property Group of Warner Norcross & Judd LLP specializing in trademark, copyright, licensing, litigation and Internet law. Scott may be reached in the Grand Rapids office at 616.752.2479. Warner Norcross & Judd is a full-service law firm with offices in Grand Rapids, Holland, Metro Detroit and Muskegon. Because each business situation is different, this information is intended for general information purposes only and is not intended to provide legal advice.

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