Oversight
Hearing on the
Federal Trademark Dilution Act
Ethan Horwitz
Partner
Darby & Darby PC
Subcommittee on Courts, the Internet and Intellectual Property
February14, 2002
Good morning, Mr. Chairman. My name is Ethan Horwitz. I am a partner at Darby & Darby PC, a law
firm in
By way of background, I am the author of the five
volume treatise World Trademark Law and
Practice (Matthew Bender) and co-author of Patent Litigation: Procedure
and Tactics (Matthew Bender) and the editor of Intellectual Property Counseling and Litigation (Matthew
Bender). I am an Adjunct Professor of
Advanced Trademark Law at
A trademark is customarily protected against use of that mark or a similar mark that may cause consumer confusion. The owner of a mark may stop a third party from using a similar mark on similar goods in a way that may cause consumers to believe that the third party’s products originate from the trademark owner or are sponsored or approved by the trademark owner. For example, MCDONALD’S was able to stop a third party from selling bagels under the mark MCBAGEL’S.[1]
The theory of dilution stems from a recognition that there are some marks that are so famous and distinctive that they deserve special protection. For these famous marks, the traditional protection from confusion is not enough. The classic examples are BUICK, DUPONT and KODAK. When you say the word BUICK, the car automatically comes to mind. Similarly, saying KODAK brings film to mind. Whereas, with an ordinary mark like UNITED or FIRST NATIONAL, there is no specific image that comes to mind. Marks like BUICK and KODAK are so powerful because they are distinctive and famous, and dilution law gives them the added protection they need.
Dilution theory provides that regardless of whether there is confusion or whether the parties’ goods are in competition, a distinctive and famous mark can be protected against damage to its distinctive quality -- its “selling power” -- from third party use of the mark on unrelated goods.[2] This damage, called “blurring,” has been described as third party uses that “blur the distinctiveness of the mark or tarnish or disparage it, even in the absence of a likelihood of confusion.”[3]
For example, if a clothing manufacturer were to start selling KODAK ties, it is likely that a court would conclude that the average consumer would not be confused into believing that the KODAK film company was the maker of the ties or even licensed or approved the ties. That is, the court likely would conclude there is no infringement. Yet, this unauthorized use still harms the KODAK mark. This use begins to chip away at the unique image of KODAK, namely the ability of the KODAK mark to summon up a specific image of a film company.
This damage has been described as the “gradual diminution or whittling away of the value of the famous mark by blurring uses by others.”[4] Obviously, one small use of KODAK on ties is going to have little effect by itself. Yet, if this use cannot be stopped and other third party uses of KODAK on soft drinks, KODAK on perfume, KODAK on pens and KODAK on clocks cannot be stopped, then the distinctiveness of KODAK will be damaged. Soon, KODAK will no longer signify or call to mind the film company.
The Federal Trademark Dilution Act (“FTDA”)[5] must protect against this gradual whittling away and give KODAK the ability to stop this first use of KODAK on ties. That is why we are here today.
The FTDA provides:
The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as provided in this subsection.[6]
The FTDA has been interpreted in two ways by the courts. One way, exemplified by the Second Circuit’s decision in Nabisco[7], holds that the proper interpretation of the FTDA is that use of a mark can be enjoined if it is likely to dilute the famous mark. In contrast, the Fourth Circuit in Ringling Bros.,[8] held that the FTDA requires proof of actual dilution before an injunction can issue.
The difference between these two interpretations is very important. Going back to the KODAK ties example, we can see how this is the first step on the slippery slope to the loss of the distinctiveness of the KODAK mark. The question raised is, how does Kodak show that this one use on ties has actually caused damage?
As a trademark trial lawyer, I can tell you that proving actual damage is extremely difficult. If proof of actual damage is the standard, then in effect, the protections afforded by the FTDA are a nullity. At trial, I can show that through a series of uses on third parties, the KODAK mark will be damaged and I can put marketing experts on the stand to explain how this damage will occur. But to prove that a specific single use has actually already caused actual damage is impossible except in rare cases.
I urge you to pass this legislation so that the FTDA has the effect Congress intended when it was enacted in 1995 and that famous marks, which are one of the pillars of the American economy are protected.
Modern trademark law as originally codified by the Lanham Act of 1946,[9] recognizes a cause of action for trademark infringement where the owner of a trademark may bar another from using the same or similar mark in a manner that creates a likelihood of consumer confusion as to the source or origin of goods or services.[10] Trademark infringement on unfair competition is defined as:
(1) Any person who shall, without the consent of the registrant-
A. use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion or to cause mistake, or to deceive; or
B. reproduce, counterfeit, copy, or colorable imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising, of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive;
shall be liable in a civil action by the registrant for the remedies herein after provided. . . .[11]
Traditional trademark law has always distinguished between marks which lack distinctiveness and those which are inherently distinctive, by according protection to those marks which by their nature are inherently distinctive.[12] In Abercrombie & Fitch,[13] Judge Friendly explained this difference with a scale progressing from marks that are least to most distinctive: (1) generic; (2) descriptive; (3) suggestive; and (4) arbitrary or fanciful.[14]
The
passage of the FTDA in 1995 was a monumental step towards enhanced protection
for famous and distinctive trademarks.
Prior to the enactment of the FTDA, owners of famous trademarks had to
look to a patchwork of state laws and courts to redress dilution of their
marks, resulting in inconsistent decisions.
The FTDA was intended to create a uniform anti-dilution law and provide
a national remedy:
Presently, the nature and extent of the remedies against trademark dilution varies from state to state and, therefore, can provide unpredictable and inadequate results for the trademark owner. The federal remedy provided in H.R. 1295 against trademark dilution will bring uniformity and consistency to the protection of famous marks . . . A federal dilution statute is necessary because famous marks ordinarily are used on a nationwide basis and dilution protection is currently only available on a patch-quilt system of protection. . . .[15]
Moreover,
the legislative history of the 1946 Lanham Act demonstrates that Congress had a
dual purpose in enacting it. First, to
protect consumers from confusion as to the source and quality of goods. Second, to “protect the owner of a trademark
who has spent time, energy, and money in the pursuit of the first purpose
[protecting consumers from confusion] from those who would trade upon the
mark’s goodwill.”[16] While protecting consumers from confusion can
be easily accomplished through traditional trademark infringement claims,
protecting trademark owners is more difficult, especially where the same or
similar marks are used on different, non-competing goods. Frequently, confusion is unlikely to result
in that situation, leaving the trademark owner with little recourse.[17]
The FTDA
was intended to remedy this situation.
It specifically permits the owner of a famous trademark to enjoin a
junior user “throughout commerce, regardless of the absence of competition or
confusion”.[18] And, because the protection afforded a mark
under the FTDA is much broader than that under a likelihood of confusion
standard, the class of marks entitled to protection under the FTDA is limited[19]
to highly distinctive, famous trademarks which the public recognizes as
signifying something “unique, singular, or particular.”[20]
BUICK,
KODAK and DUPONT are marks which the courts and Congress have repeatedly
pointed to as examples of such highly distinctive and famous trademarks
deserving of protection from dilution.[21] Because no reasonable consumer would believe
that BUICK aspirin or BUICK shoes were related to BUICK cars, the traditional
likelihood of confusion test for trademark infringement would do little to
protect BUICK. Nevertheless, this junior
user is trading on the goodwill created by the effort and money spent by Buick
over the years. If BUICK aspirin and
BUICK shoes are permitted to coexist with BUICK cars, and other unrelated
“Buick” products are permitted to come along, the BUICK trademark will slowly
but surely lose its cache.[22] These unauthorized uses will “reduce the
public’s perception that the mark signifies something unique, singular, or
particular.”[23] The FTDA was intended to prevent this.
Since its enactment, the courts have inconsistently interpreted the standard for granting an injunction[24] under the FTDA. The resulting split in the circuits has undermined the purpose of the FTDA. Thus, despite its enactment, there is still no national dilution law; decisions continue to be unpredictable and unreliable. The two leading decisions come out of the Fourth and Second Circuits.
In Ringling
Bros.-Barnum & Bailey Combined Shows, Inc. v.
On appeal, Ringling Bros. challenged the District Court’s interpretation of the definition of “dilution” and the elements of a dilution claim under the FTDA.[27] In affirming, the Fourth Circuit held that dilution under the FTDA consists of “(1) a sufficient similarity of marks to evoke in consumers a mental association of the two that (2) causes (3) actual harm to the senior marks’ economic value as a product-identifying and advertising agent.”[28] It is the Fourth Circuit’s requirement that “actual harm” to the senior user’s mark be shown which has caused the greatest debate and disagreement among the courts that have addressed this issue.[29]
The Fourth Circuit based its interpretation on its reading of the legislative history, state anti-dilution statutes and the evolution of state and federal trademark law. In particular, the Court relied on the fact that many state anti-dilution statutes used a “likelihood of dilution” standard while the FTDA uses the language “causes dilution.”[30] The Court conceded that its interpretation of the FTDA was “stringent.”[31]
In Nabisco, Inc. v. PF Brands, Inc.,[32] the
Second Circuit had the opportunity to consider the issues raised in Ringling
Bros. Nabisco brought a declaratory
judgment for non-infringement against Pepperidge Farm, the producer of the
famous Goldfish snack crackers.
Pepperidge Farm moved for a preliminary injunction on the ground that
Nabisco’s planned introduction of a goldfish shaped snack cracker would dilute
the distinctive quality of Pepperidge Farm’s Goldfish cracker in violation of
the FTDA and
Relying on Ringling Bros., Nabisco argued that in order to prevail, Pepperidge Farm had to show actual harm, consisting of an actual reduction in the selling power of its Goldfish mark.[34] The Second Circuit rejected Nabisco’s argument and disagreed with the Fourth Circuit’s interpretation of the FTDA.[35]
While recognizing that the language of the FTDA
might support the
To read the statute as suggested by the Ringling opinion would subject the senior user to uncompensable injury. The statute could not be invoked until injury had occurred. And, because the statute provides only for an injunction and no damages (absent willfulness), . . . such injury would never be compensated. The Ringling reading is also disastrously disadvantageous for the junior user. In many instances the junior user would wish to know whether it will be permitted to use a newly contemplated mark before the mark is launched rather than after. . . If the statue is interpreted to mean that no adjudication can be made until the junior mark had been launched and has caused actual dilution, businesses in Nabisco’s position will be unable to seek declaratory relief before going to market. They will be obligated to spend the huge sums involved in a product launch without the ability to seek prior judicial assurance that their mark will not be enjoined.[37]
While most courts that have addressed this issue since Nabisco have followed the Second Circuit,[38] this split goes to the heart matter.[39]
The Second Circuit recognized that requiring a showing of actual harm made little sense in the context of a dilution claim because actual harm is so difficult to prove:
If the famous senior mark were being exploited with continually growing success, the senior user might never be able to show diminished revenues, no matter how obvious it was that the junior use diluted the distinctiveness of the senior. Even if diminished revenue could be shown, it would be extraordinarily speculative and difficult to prove that the loss was due to dilution of the mark.[40]
Surveys, which the
The purpose of the FTDA will continue to be undermined so long as the courts continue to interpret its language in an inconsistent manner. This is particularly true for those courts that follow Ringling Bros. because the requirement that “actual consummated” harm be shown by the owner of a famous mark will have the effect of nullifying the FTDA. Not only is this requirement illogical from the standpoint of dilution theory in general, but it is equally illogical given that the only real remedy available under the FTDA is injunctive relief.[44]
Commentators, the courts and the legislative history of the FTDA have uniformly recognized that the harmed caused by dilution is a slow, creeping harm which occurs over time and is difficult to measure:
Dilution is an injury that differs materially from that arising out of the orthodox confusion. Even in the absence of confusion, the potency of a mark may be debilitated by another’s use. This is the essence of dilution. Confusion leads to immediate injury, while dilution is an infection, which if allowed to spread, will inevitably destroy the advertising value of the mark.[45]
Relying on this passage from the legislative history, the Sixth Circuit followed Nabisco because this language “evinces an intent to allow a remedy before dilution has actually caused economic harm to the senior mark. In such a case, proving actual harm would be extremely difficult, as no such harm would have taken place when the remedy became available. . . requiring proof of actual economic harm will make bringing a successful claim under the FTDA unreasonably difficult. With such a broad remedy [injunctive relief] considered in the Act’s legislative history, we find it highly unlikely that Congress would have intended to create such a statute but then make its proof effectively unavailable.”[46]
By its very nature, injunctive relief
has value only if it is granted prior to harm actually
occurring. In this instance, dilution is
no different from traditional trademark infringement, patent or copyright
infringement or for that matter, any other tort where injunctive relief is an
available remedy.[47] If a famous mark owner must wait until actual
dilution has occurred before being entitled to an injunction, the remedy it
ultimately obtains will be an empty one.
“Although enjoining junior use of a mark after years of use in the
marketplace may take the junior mark out of commerce, an injunction cannot
erase the association consumers have made between the junior mark and the
senior mark in their minds. This type of
damage is not only difficult to compensate, but also causes irreparable harm to
the identifying function of a trademark.”[48]
In view of these points, I believe that the FTDA should be amended to clarify Congress’ original intent that the proper standard is a likelihood of dilution.
Thank you for this opportunity to share my views on this important issue of trademark law.
There is no money I have received as part of a federal grant or subgrant thereof or contract or subcontract thereof which is relevant to my testimony, during this year or the two preceeding fiscal years. I do not represent anyone at my testimony.
[1] McDonald’s Corp. v. McBagel’s, Inc., 649 F. Supp. 1269 (S.D.N.Y. 1986).
[2] Mead
Data Central, Inc. v.
[3] H.R. Rep. No. 104-374, 104th Congress (1995), at 2.
[4] 3 J. Thomas McCarthy, McCarthy On Trademarks And Unfair Competition § 24:94, at 24-161 (1999).
[5] Pub. L. No. 104-98, 109 Stat. 505 (1995).
[6] 15 U.S.C. § 1125(c)(1).
[7] Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2d Cir. 1999).
[8] Ringling
Bros.-Barnum & Bailey Combined Shows, Inc. v.
[9] 15 U.S.C. § 1051, et seq. (1946).
[10] 15 U.S.C.§ 1125(a).
[11] 15 U.S.C. § 1114(1).
[12] TCPIP Holding Co., Inc. v. Haar Communications Inc., 244 F.3d 88, 93 (2d Cir. 2001) (citing Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9-11 (2d Cir. 1976)). The Lanham Act expanded protection to trademarks which while not inherently distinctive, had acquired secondary meaning through use. See 15 U.S.C.§ 1052(e), (f).
[13] Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4 (2d Cir. 1976).
[14]
[15] H.R. Rep. No. 104-374, supra note 3, at 2-3.
[16] Terry Ahearn, Comment: Dilution By Blurring Under The Federal Dilution Trademark Act of 1995: What Is It And How Is It Shown?, 41 Santa Clara L. Rev. 893, 903 (2001).
[17]
[18] TCPIP Holding, 244 F.3d at 95; 15 U.S.C. § 1127 (dilution may be found “regardless of the presence or absence of . . . (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception”).
[19] TCPIP Holding, 244 F.3d at 95.
[20] H.R. Rep. No. 104-374, supra note 3, at 3.
[21] H.R. Rep. No. 104-374, supra note 3, at 3 (“Thus, for example, the use of DUPONT shoes, BUICK aspirin, and KODAK pianos would be actionable under this legislation”); TCPIP Holding, 244 F.3d at 96.
[22] Federal Express Corp. v. Federal Espresso, Inc., 201 F.3d 168, 175 (2d Cir. 2000) (“Trademark dilution statutes are designed to cover those situations where the public knows that the defendant is not connected to or sponsored by the plaintiff, but the ability of the plaintiff’s mark to serve as a unique identifier of the plaintiff’s goods or services is weakened because the relevant public now also associates that designation with a new and different source. . . . Thus, where the classic likelihood of confusion test leaves off, the dilution theory begins.”) (citations omitted).
[23] H.R. Rep. No. 104-374, supra note 3, at 3.
[24] As discussed below, except in very limited circumstances, the only remedy available to the owner of a famous mark under the FTDA is injunctive relief. 15 U.S.C. § 1125(c)(2).
[25] 170 F.3d 449 (4th Cir. 1999).
[26]
[27]
[28]
[29] See, e.g., V Secret Catalogue, Inc. v. Moseley, 259 F.3d 464 (6th Cir. 2001); Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456 (7th Cir. 2000); Times Mirror Magazines, Inc. v. Las Vegas Sports News, L.L.C., 212 F.3d 157, 179 (3d Cir. 2000).
[30] Ringling Bros., 170 F.3d at 458; see also Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658, 670 (5th Cir. 2000).
[31] Ringling Bros., 170 F.3d at 458.
[32] 191 F.3d 208 (2d Cir. 1999). I represented PF Brands and Pepperidge Farm, Inc. at trial and on appeal.
[33]
[34]
[35]
[36]
[37]
[38] See supra note 29.
[39]
One could argue that Ringling Bros reached the right conclusion for the
wrong reason, or bad facts make bad law.
Ringling Bros. and
[40]
[41] Ringling Bros., 170 F.3d at 464-65.
[42] Nabisco, 191 F.3d at 224; see also Eli Lilly, 233 F.3d at 468 (“[W]e doubt that dilution of the distinctiveness of a mark is something that can be measured on an empirical basis by even the most carefully crafted survey.”).
[43] Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813, 825 (1927).
[44] 15 U.S.C. §§ 1125(c)(2).
[45] H.R. Rep. No. 104-347, supra note 3, at 3 (quoting Mortellito v. Nina of California, Inc., 335 F. Supp. 1288, 1296 (S.D.N.Y. 1972)); see also V Secret Catalogue, 259 F.3d at 475.
[46] V Secret Catalogue, 259 F.3d at 476.
[47] See, e.g., United States v. Oregon State Medical Society, 343 U.S. 326, 333 (1953) (“The sole function of an action for an injunction is to forestall future violations.”); Roe v. Cheyenne Mountain Conference Resort, Inc., 124 F.3d 1221, 1230 (10th Cir. 1997) (“The purpose of an injunction is to prevent future violations. . . .”)(citations omitted); Caplan v. Fellheimer Eichen Braverman & Kaskey, 68 F.3d 828, 839 (3d Cir. 1995) (purpose of a preliminary injunction is to “protect the moving party from irreparable injury until the court can render a meaningful decision on the merits”); 13 James Wm. Moore, Moore’s Federal Practice § 65.02[2], at 65-13 (3d ed. 1997) (“[T]he purpose of injunctive relief is to prevent future harm.”).
[48]
Jennifer Mae Slonaker, Comment: Conflicting Interpretations of the Federal
Trademark Dilution Act Create Inadequate Famous Mark Protection, 26