What is Trademark Dilution?

Guest post by Dave Owens, an attorney who lives in the San Francisco Bay Area.

Generally in trademark disputes, the parties compete in similar markets. To prove trademark infringement, a plaintiff must prove that there is a likelihood of consumer confusion. However, just because the marks are being used in different markets doesn’t necessarily mean that a defendant has escaped legal liability.

Owners of famous trademarks may bring a federal claim for trademark dilution (note: under state law, a mark does not necessarily have to be famous in order for the trademark holder to bring a dilution claim). This occurs when the defendant’s use of the mark creates an association that weakens the famous mark.

Federal law allows a plaintiff to enjoin (to stop the use of) the defendant from using the mark. A plaintiff may receive additional remedies, including damages and attorney’s fees, if it can be shown that the defendant willfully intended to trade on the owner’s reputation or to cause dilution of the famous mark. Before you use your mark in commerce you should first consider whether it could potentially dilute a famous trademark.

Elements

For a federal dilution claim, the plaintiff must prove:

  • the mark is famous and distinctive;
  • the mark was used in commerce;
  • the use of the mark occurred after the plaintiff’s mark became famous;
  • the use is likely to cause dilution of the mark’s distinctive quality through blurring or tarnishment.

Famous Marks

Under the Federal Dilution Revision Act of 2006, the factors for determining whether a
mark is famous include:

  • the duration, extent, and geographical reach of advertising and publicity of the
  • mark, whether advertised or publicized by the owner or third parties;
  • the amount, volume, and geographic extent of sales of goods or services offered
    under the mark;
  • the extent of actual recognition of the mark;
  • whether the mark was federally registered.

This is actually a difficult standard for the plaintiff to meet. The Ninth Circuit has defined a famous mark as one “with such powerful consumer associations that even non-competing uses can impinge on their value.” The obvious examples are businesses you could think of off the top of your head: Nike, McDonald’s, Coca Cola, Microsoft.

Commerce

To bring a federal claim, a defendant must have used the mark in a way in which has an effect on interstate commerce. This will likely be satisfied if you are selling anything (goods or services) with a famous trademark. One court even found that using an Internet domain name to operate a website was “use in commerce” because it affects a party’s ability to offer services.

After Mark Became Famous

In 2011 it would be ill advised to name your restaurant Nike Steakhouse. However, if you started the same business in the 1960’s when Phil Knight was still running on the Oregon track team there wouldn’t be a dilution issue. This protects businesses in the event that another business in a different market suddenly becomes famous.

Likelihood of Dilution

In Moseley v. V Secret Catalogue, Inc., the United States Supreme Court held that the current federal dilution law required a showing of actual dilution. However, that decision was superseded by the Federal Dilution Revision Act of 2006, which now only requires a plaintiff to prove that there is a likelihood of dilution — an easier standard for a plaintiff to meet.

Types of Dilution

There are two main types of dilution: blurring and tarnishment.

Blurring is the “association arising from the similarity between the mark or trade name and a famous mark that impairs the distinctiveness of the mark.” This is like if you had a bowl of water and you added a drop of food coloring to the bowl, thus making the water less clear. For example, if you started Nike Steakhouse, the shoe company would argue that the steakhouse’s use of the name was blurring their mark.

Tarnishment is the “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” This occurs when the trademark is linked with shoddy quality or used in an unwholesome manner. For example, if you started Nike Sex Shop, the plaintiff would argue that the uses of the name was tarnishing their mark.

Defenses

Among the defenses that may be raised, there are several statutory defenses that Congress put in place to prevent courts from enjoining speech protected by the First Amendment:

  • Fair uses are exempted under the statute, such as comparative advertising or promotion to identify the competing goods or services and uses that parody, criticize, or comment upon the famous trademark or trademark owner. Because of this defense, Adidas is allowed to use the Nike trademark in a commercial
  • comparing its tennis shoes to Nike’s tennis shoes. Furthermore, a political cartoonist is free to use the Nike swoosh symbol in a cartoon that criticizes Nike’s policies about outsourcing.
  • Noncommercial work is exempted under the statute. Courts have disagreed about the definition of “noncommercial.” Some courts have held that parody and political speech are protected noncommercial uses because they are not purely commercial. Whereas another court found that a non-profit organization was
  • engaged in commercial activity because, amongst other things, it was selling books with the famous trademark.
  • All forms of news reporting and news commentary are exempted under the statute. Congress included this defense in recognition of the heightened First Amendment protection afforded to the news industry.

Dave Owens is an attorney based in the San Francisco Bay Area.  He can be reached at dao1282@gmail.com.

 

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