INTA Bulletin

December 15, 2006 Vol. 61 No. 23 Back to Bulletin Main Page

An Insider’s Guide to the U.S. Trademark Dilution Revision Act of 2006

INTA’s successful efforts to promote the U.S. Trademark Dilution Revision Act of 2006 (TDRA) have brought several long-awaited changes to U.S. dilution law. At the 2006 Leadership Meeting in Phoenix, three distinguished panelists parsed the TDRA’s key language, discussed how the new statute relates to the 1995 Federal Trademark Dilution Act (FTDA) and reviewed the TDRA’s implications for trademark practitioners, litigants and courts.

David H. Bernstein, partner at Debevoise & Plimpton LLP in New York, is Association Counsel and was one of INTA’s key negotiators and advocates in the political process leading to the passage of the TDRA.

Scot A. Duvall, who chairs the Dilution and Well-Known Marks Committee, is a partner at Middleton Reutlinger in Louisville, Kentucky. Mr. Duvall represented Victor Moseley in the landmark U.S. Supreme Court case Moseley v. V Secret Catalogue, which created the need for the TDRA.

Anne Gundelfinger, vice president and associate general counsel of Intel Corporation in Santa Clara, California, was 2005 INTA President—during some of the most active periods in the TDRA legislative process—and was one of several Association Presidents to testify before the U.S. Congress on the statute.

All three panelists were primary drafters of the TDRA, and had previously served as members of INTA’s 15-member Select Committee on the FTDA, which was charged with analyzing federal dilution law and making recommendations for its reform.

Significant Changes Introduced by the TDRA

According to the panelists, the TDRA introduces several significant changes to federal dilution law. The statute:

•    Establishes an express likelihood of dilution standard, ensuring that dilution can be stopped at its inception.
•    Narrows the definition of famous marks to cover only those marks that have achieved widespread fame among the general consuming public, to help ensure that dilution remains the extraordinary remedy it has always been intended to be.
•    Clarifies that famous marks with acquired distinctiveness, if they otherwise meet the statutory standards, can be protected against dilution.
•    Provides a clear definition of dilution by blurring that includes several nonexclusive factors, to make analysis of dilution cases more predictable.
•    Includes an express cause of action for tarnishment, the existence of which had been called into question by the U.S. Supreme Court in Moseley.
•    Codifies a broad fair use defense that encompasses nominative and descriptive fair use as well as the facilitation of fair use, but places limits on what is considered “fair.”

As explained by Mr. Duvall, the new Section 43(c) of the Lanham Act begins by setting forth the elements of the dilution cause of action:

(c) Dilution by Blurring; Dilution by Tarnishment–
(1) INJUNCTIVE RELIEF–Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, 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.

Among the questions raised by this provision are, What makes a mark famous? and What is dilution? The statutory provisions that follow give guidance for answering those questions.

What Makes a Mark Famous
In Mr. Duvall’s opinion, the TDRA’s heightened requirements for proving fame should help keep the dilution cause of action in check. Given the breadth of the dilution remedy, it is necessary to limit the number of marks protected under the dilution provisions, he said, because dilution protection is an extraordinary remedy to be reserved for extraordinary marks. Indeed, the 1987 Trademark Review Commission that proposed the original federal dilution law stated that such a statute should be highly selective. Accordingly, the INTA Select Committee decided that a strong, workable dilution statute must limit the number of marks that could qualify for protection.

Specifically, the TDRA’s fame definition was designed to disqualify from dilution protection those marks possessing either type of “niche fame” previously recognized by some courts under the FTDA: (1) local or regional geographic fame, or (2) industry-specific or product submarket fame. For a mark to qualify for protection under the TDRA, the mark must be “widely recognized by the general consuming public of the United States.” The breadth of fame required is significant, as the mark must now be famous both nationwide (though not necessarily in every town and hamlet) and among consumers generally.

(2) DEFINITIONS–(A) For purposes of paragraph (1), a mark is famous if it 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. In determining whether a mark possesses the requisite degree of recognition, the court may consider all relevant factors, including the following:
    (i)     The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties.
    (ii)    The amount, volume, and geographic extent of sales of goods or services offered under the mark.
    (iii)   The extent of actual recognition of the mark.
    (iv)   Whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.

Factors (i), (ii) and (iv) are variations of the factors provided by the old FTDA for “determining whether a mark is distinctive and famous.” Mr. Duvall said that the third factor, “actual recognition of the mark,” is meant to encompass evidence such as surveys, brand awareness studies and third-party accolades.

Finally, the TDRA’s definition of a famous mark removes the issue of inherent distinctiveness from the fame analysis—the focus is on recognition by consumers. Contrary to the holdings of some courts under the FTDA, the TDRA makes it clear that a mark that is not inherently distinctive, but that has strong secondary meaning, can be famous and appropriate for dilution protection. Mr. Duvall remarked that while this definition reopens the door to dilution protection for marks having acquired distinctiveness, such marks still must satisfy the heightened fame standard.

What Dilution Is—Blurring
One of the most significant features of the TDRA is its express definition of dilution by blurring, which includes a list of nonexclusive factors for courts to consider. An essential clarification to dilution law is the TDRA’s recognition that the consumer associations giving rise to blurring result only from the similarity between the famous mark and the junior mark (and not other circumstances such as marketplace competition or the goods or services in question). The ultimate harm sought to be prevented is impairment of the famous mark’s distinctiveness in the marketplace:

(B) For purposes of paragraph (1), ‘dilution by blurring’ is association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark. In determining whether a mark or trade name is likely to cause dilution by blurring, the court may consider all relevant factors, including the following:
    (i)    The degree of similarity between the mark or trade name and the famous mark.
    (ii)    The degree of inherent or acquired distinctiveness of the famous mark.
    (iii)    The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark.
    (iv)    The degree of recognition of the famous mark.
    (v)    Whether the user of the mark or trade name intended to create an association with the famous mark.
    (vi)    Any actual association between the mark or trade name and the famous mark.

Factor (i) considers the degree of similarity—a logical starting point, given that similarity is a focus of the blurring definition. The more similar the marks, the more likely the distinctiveness of the famous mark will be impaired. Indeed, even the Supreme Court in the Moseley decision recognized that it would be easiest to show that distinctiveness had been impaired when the famous and junior marks were identical.

Factors (ii) through (iv) focus on three different types of “distinctiveness” of the famous mark that can be impaired (to potentially varying degrees) for blurring to occur. Factor (ii) considers traditional distinctiveness, that is, the degree of inherent or acquired distinctiveness. Factor (iii) considers the degree to which the mark is already diluted in fact, depending on the extent of third-party use of the same or similar marks. However, factor (iii) is not intended to limit dilution protection only to marks that could be said to be “singular” or “unique” in the marketplace. As Mr. Duvall explained, the INTA Select Committee rejected such a proposal because it would require that there be no third-party uses of the famous mark, which would be an unreasonably high bar. Factor (iv) considers the degree of recognition (i.e., the degree of “fame”) the famous mark has achieved.

Factor (v) addresses intent. The defendant’s intent to create an association with a famous mark suggests an admission that consumers are likely to associate the defendant’s mark with the famous mark and that the famous mark’s distinctiveness will be impaired. Finally, factor (vi)—any actual association between the marks—encompasses any evidence of actual association, for example, survey evidence, evidence that actual consumers have drawn an association and the like. The panel acknowledged that there are not yet any generally accepted standards in the United States for surveying the association caused by the similarity between marks, but observed that surveying association should be more manageable than surveying whether dilution has occurred. Surveying association requires a narrower inquiry, and association surveys have been conducted successfully under the trademark laws of other countries.

What Dilution Is—Tarnishment
In addition to defining dilution by blurring, the TDRA expressly defines a cause of action for dilution by tarnishment. It clarifies that (as with blurring) the consumer associations giving rise to tarnishment result from the similarity between the famous mark and the junior mark. However, the ultimate harm the tarnishment cause of action seeks to redress is different from that addressed by the blurring cause of action. The focus of the tarnishment cause of action is harm to the reputation of the famous mark:

(C) For purposes of paragraph (1), ‘dilution by tarnishment’ is association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.

Although the definition of tarnishment does not provide a list of factors, Mr. Duvall observed that the tarnishment definition’s language tracks the language of state antitarnishment statutes, so existing case law interpreting such statutes should serve as a guide for applying this provision of the TDRA. Ms. Gundelfinger further noted that the dilution by blurring factors that consider the question of association would be equally useful for assessing association in cases of dilution by tarnishment.

What Dilution Is Not—Statutory Exclusions
Ms. Gundelfinger discussed trademark uses that are not actionable under the TDRA. As enacted, the TDRA contains a section of defenses that enumerates conduct that does not constitute dilution by blurring or tarnishment:

(3) EXCLUSIONS–The following shall not be actionable as dilution by blurring or dilution by tarnishment under this subsection:
(A) Any fair use, including a nominative or descriptive fair use, or facilitation of such fair use, of a famous mark by another person other than as a designation of source for the person’s own goods or services, including use in connection with—
    (i)    advertising or promotion that permits consumers to compare goods or services; or
    (ii)   identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.
(B) All forms of news reporting and news commentary.
(C) Any noncommercial use of a mark.

Ms. Gundelfinger pointed out that the activities detailed in subparagraphs (B) and (C) are likely encompassed by the broad language of subparagraph (A). The redundancy results largely from the substantial changes this section went through during the legislative process. Subparagraphs (B) and (C) were retained from the FTDA. Subparagraph (A) was added in part during the House consideration of the bill and in part during the Senate consideration of the bill. Subparagraphs (B) and (C) were never removed or modified despite the addition of (A), for fear that such changes would further slow the legislative process.

Subparagraph (A) codifies for the first time the nominative fair use defense, recognizes the descriptive fair use defense and makes it clear that facilitation of a fair use (e.g., by publishers or Internet service providers) is not actionable. Ms. Gundelfinger noted, however, that the protection provided to “facilitators” applies only if the use is indeed fair—liability is not necessarily avoided if the facilitated use is not fair.

Subparagraph (A) does not purport to define all aspects of “fair use,” but some clear parameters are set. Comparative advertising, parody, criticism and commentary are recognized as potential fair uses. However, two fundamental requirements must still be met: (1) the use must be determined to be “fair,” and (2) the use must be other than as a “designation of source.”

As to the first requirement, it is intentional that the statute does not define “fair.” The Select Committee thought that courts would be in a better position to address what is or is not “fair” in the context of particular cases.

As to the second requirement, the TDRA makes clear that a use as a “designation of source”—for example, as a name or mark—will not qualify as a fair use, no matter how humorous or satirical or comparative. This is an important limitation on the fair use defense and is in line with decisions such as American Express Co. v. Vibra Approved Laboratories Corp., which enjoined the sale of replica “America Express” credit cards that contained a condom and bore the phrase NEVER LEAVE HOME WITHOUT IT. 10 U.S.P.Q.2d 2006 (S.D.N.Y. 1989).

Putting the TDRA to Use
Mr. Bernstein discussed some of the practical issues created by dilution law, and how practitioners can ensure that the law will achieve maximum effectiveness. He cautioned that one of the problems under the FTDA was that almost all brand owners thought their marks were famous, and their rush to file dilution claims in contexts that clearly went beyond the theoretical basis for dilution undermined the entire concept of dilution. For example, because of a quirk of fate, the FTDA became law just as cybersquatting emerged as a new harm. Some trademark owners thus tried to use dilution to act against cybersquatting, even for marks that were hardly famous or distinctive. The result was a backlash in the courts, as judges became suspicious of dilution’s potential breadth and created obstacles to dilution claims that also interfered with valid claims involving truly famous and distinctive trademarks.

To avoid this fate again, Mr. Bernstein urged the attendees to show some restraint—plaintiffs should not add dilution to the complaint in every case that involves trademarks. Rather, dilution should be pleaded only when the case really is about dilution. In those cases, though, the dilution claim should be emphasized, and if there is no real likelihood of confusion, trademark owners should be prepared to focus on the claim that matters and educate courts about the need for a dilution remedy.

Mr. Bernstein also noted that the TDRA expressly protects trade dress, such as the famous undulating curves of the COCA-COLA bottle. He cautioned, however, that the fame of all aspects of the trade dress—especially unregistered aspects—must be shown, and that the plaintiff bears the burden of proving that the trade dress is nonfunctional (a provision that parallels a similar provision applicable in infringement cases).

Finally, Mr. Bernstein explained the statute’s retroactive effect. Diluting uses that began before the effective date of the TDRA (October 6, 2006) and continue after that date can be enjoined under the TDRA’s injunction provisions. Damages for willful infringement under the TDRA are available, though, only for diluting uses beginning after the TDRA’s effective date. Mr. Bernstein suggested that the victim of willful dilution that began before October 6 can instead seek damages under the FTDA, if the plaintiff can satisfy the elements of the old law (including, as required by Moseley, a showing of actual dilution).

A further analysis of the TDRA by David Bernstein, Scot Duvall and Anne Gundelfinger will appear in an upcoming issue of INTA’s journal, The Trademark Reporter®.

Although every effort has been made to verify the accuracy of items carried in the INTA Bulletin, readers are urged to check independently on matters of specific concern or interest.