October 15, 2006

A thorough understanding of the 2006 Act will be essential to trademark owners as they assess their options for protecting their rights in famous marks. Equally important, companies must appreciate the evolving law of dilution in order to understand their risks in adoption and use of new marks.

Key Changes:

• Likelihood of Dilution: the 2006 Act requires that the plaintiff demonstrate only a likelihood of dilution – a showing of actual dilution, as was required under the FTDA as interpreted by the Supreme Court in Moseley v. V.Secret Catalogue, Inc., 123 S.Ct. 1115 (2003), no longer is necessary

• Fame: to show that its mark is "famous” and thus qualified for dilution protection, the plaintiff must demonstrate that its mark “is widely recognized by the general consuming public of the United States as a designation of source …” (some courts had held under the FTDA that “niche fame,” or fame within a particular industry or segment of the public, would suffice)

• Blurring and Tarnishment: the 2006 Act explicitly provides protection against both dilution by blurring and dilution by tarnishment (the Supreme Court suggested in Moseley that dilution by tarnishment might not have been protected under the FTDA)

• Descriptive Marks: the 2006 Act makes clear that descriptive marks with acquired distinctiveness are eligible for protection if famous (the Second Circuit Court of Appeals had held in TCPIP Holding Company, Inc. v. Haar Communications, Inc., 244 F.3d 88 (2d Cir. 2001), that descriptive marks were not eligible for protection under the FTDA)

• Parody: the 2006 Act expressly excludes liability for “identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner” (N.B.: the parody exclusion does not expressly exempt parodying or criticism of the famous mark)

Key Features Substantially Carried Over from the FTDA:

• Damages: damages (in addition to an injunction) are available only if the defendant willfully intended to trade on the recognition of the famous mark or to harm the reputation of the famous mark

• Grandfathered Uses: uses that commenced before the plaintiff’s mark became famous continue to be immune

• Exempted Uses: non-commercial uses, uses in news reporting and commentary and fair uses (e.g., fair comparative advertisements)

• Federal Registration and State Dilution Claims: the defendant’s ownership of a federal trademark registration for the mark at issue continues to provide a complete defense to a state law dilution claim

The Spotted History of the FTDA

Although the laws of several states provided redress for dilution before enactment of the FTDA in 1996, the FTDA created for the first time a federal dilution cause of action.(The state causes of action continue to exist independently of the federal statutes.) In several respects, however, the FTDA proved to be unsatisfactory. Over the course of the past 10 years, courts in various regions of the country began to diverge in their interpretations of several key provisions of the FTDA. In 2003, the U.S. Supreme Court in Moseley v. V.Secret Catalogue, Inc., 123 S.Ct. 1115 (2003), resolved at least one of these contested issues, holding that a plaintiff must show actual dilution -- as opposed to a mere likelihood of dilution -- in order to prevail under the FTDA. The Moseley case, however, did not address many of the points of disagreement among the courts and, in fact, may have raised as many new issues as it resolved. The 2006 Act represents Congress’s attempt to provide a clearer statement of the law.

Trademark Infringement and Dilution Distinguished

Trademark dilution provides a distinct cause of action from trademark infringement. Trademark infringement law finds its roots in consumer protection and unfair competition law. Infringement occurs when two parties’ use of similar marks causes among the public a “likelihood of confusion” that there is some relationship or affiliation between the goods or services of those parties. For example, one party’s use of PANTHER for toothpaste, notwithstanding another party’s ownership of rights in PANTHER EXTREME for mouthwash, would constitute trademark infringement if the public were likely to believe mistakenly that the two products emanate from the same source, or that one of the parties sponsored or was affiliated with the other party or approved of its products. Dilution law, on the other hand, does not aim to protect the consumer. Rather, the protections of dilution law are reserved only for the most famous marks and are intended to prevent diminution of the trademark owner’s substantial investment in such marks. In contrast to infringement -- and because of the nature of the right protected -- dilution does not require a likelihood of confusion. Dilution generally has been understood to come in at least two different species: “blurring” and “tarnishment.” The 2006 Act defines “dilution by blurring” as the “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” For example, use of KODAK on pianos -- even in the absence of any likelihood of confusion -- would constitute dilution if the distinctiveness of the famous KODAK mark were blurred, in other words, if the associations created by the KODAK mark became less focused on the imaging company. In contrast, “dilution by tarnishment” is defined in the 2006 Act as the “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” For example, in Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 467 F.Supp. 366 (S.D.N.Y. 1979), the court held that use of the famous Dallas Cowboys Cheerleaders’ outfit in a pornographic movie constituted impermissible dilution by tarnishment.

Observation on Retroactivity

The 2006 Act does not clearly address its retroactivity. Claims concerning allegedly diluting marks that first were used after the effective date of the 2006 Act clearly will be governed exclusively by the 2006 Act. On the other hand, whether or not the FTDA or 2006 Act will govern continuing uses that commenced before the effective date of the 2006 Act is open to debate. The Supreme Court indicated in Landgraf v. USI Film Prods., 114 S.Ct. 1483 (1994), that it will presume non-retroactivity of federal statutes that attach new legal consequences to events completed before the statute’s enactment. In the case of the 2006 Act, however, a court may determine -- depending on whether the changes in the law would yield a different result given the particular facts of the case -- that Landgraf does not apply. Moreover, a court might determine that Landgraf does not apply if the violation continues after the effective date of the 2006 Act. (For example, several courts held that the FTDA applied to dilutive uses that commenced before enactment of the FTDA but continued after enactment. In those cases, however, the only available remedy was prospective injunctive relief. Damages, which address past conduct, were unavailable.) In light of this uncertainty concerning retroactivity, one must consider the implications of both the FTDA and 2006 Act, at least in those circumstances in which the alleged violator’s use commenced before the 2006 Act’s effective date. by John C. Nishi

Mr. Nishi is a Member in the Firm’s Ann Arbor office, with extensive expertise in trademark and copyright counseling, licensing, prosecution, transactional matters and litigation. John can be reached at (734) 623-1938 or [email protected].