Trademark Dilution: Likelihood of Confusion Among the Courts?

While Congress may have enacted the FTDA with the purpose of providing uniform relief to owners of famous trademarks, no such uniformity has actually been provided. The Supreme Court has been left to interpret the metes and bounds of the FTDA to settle a dispute over whether proof of actual harm or likelihood of harm is required. However, there are several other cases that illustrate how various courts have dealt with the problem differently, further compounding the confusion.

Moseley v. V Secret Catalogue, Inc.

In the most recent and widely publicized Supreme Court case, V Secret Catalogue Inc. v. Moseley d/b/a Victor's Little Secret, 259 F.3d 464, 59 U.S.P.Q.2d 1650 (6th Cir. 2001), cert. granted, 70 U.S.L.W. 3422 (U.S. April 15, 2002) (No. 01-1015 ). Moseley operated a lingerie and adult toy business in Kentucky under the name 'Victor's Little Secret.' Allegedly unbeknownst to them, a well-known lingerie monstrosity, 'V Secret Catalogue, Inc.' was operating a network of 750 lingerie stores nationwide and had a magazine with a circulation of 400 million circulation of its magazine to households across the nation under the registered mark VICTORIA'S SECRET. After becoming aware of Moseley's little secret, V Secret filed suit in the district court alleging trademark infringement based upon a likelihood of confusion and dilution under the FTDA. The district court found that although no likelihood of confusion existed, V Secret did satisfy the requirements that its mark was famous and, as such, was entitled to protection under the FTDA. Moseley appealed to the Sixth Circuit arguing that V Secret was required to prove actual economic loss or harm, as the Fourth Circuit held in Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Dev., 170 F.3d 449 (4th Cir. 1999). The Sixth Circuit upheld the district court's decision, rejected the Fourth Circuit's decision, and adopted the Second Circuit's reasoning set forth in Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2d Cir. 1999), wherein a likelihood of harm, and not actual proof of actual harm, is required to prove a dilution claim under the FTDA.

What will the Moseley decision resolve?

As Chief Justice Rehnquist aptly stated to Moseley's counsel during oral arguments 'your client doesn't come off well in this case.' In all likelihood, this spring the Supreme Court will affirm the lower courts and hold that Moseley diluted the VICTORIA'S SECRET brand name. Despite the apparent confusion and misunderstandings of the Justices, as demonstrated at oral arguments, to reverse the Sixth Circuit and require proof of actual harm or injury would effectively strip a dilution claim of any value and significance. Instead, to allow for a showing of a likelihood of dilution, it will be easier for trademark owners to allege and prove a claim of dilution. Moreover, by affirming the lower court, the Supreme Court can avoid entangling itself in the debate about the meaning of dilution and what is a 'famous' mark.

What will the Moseley decision not resolve?

Ty, Inc. v. Perryman

The Supreme Court is not the only court struggling with the scope of protection given to marks under the FTDA and the application of the statute. For example, Judge Posner of the Seventh Circuit struggled with the application of dilution law in Ty, Inc. v. Perryman, 64 U.S.P.Q.2d 1689 (7th Cir. 2002). In Ty, Inc., the maker of BEANIES BABIES toys sued Perryman for trademark infringement and dilution because Perryman sold second-hand beanbag stuffed animals. The district court enjoined Perryman from using the mark BEANIE or BEANIES 'with any business name, Internet domain name, or trademark, or in connection with any non-Ty products.' Judge Posner reasoned that 'Ty is seeking ' [to extend] antidilution law to forbid commercial uses that accelerate the transition from trademarks (brand names) to generic names (product names).' However, one of the principles behind dilution is to prevent a brand from becoming generic. Consequently, it is very difficult to follow Posner's logic and whether he confused the concepts of trademark dilution and trademark infringement. It is even more difficult to predict how other courts will interpret this decision in future dilution analysis.

Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc.

This confusion is further illustrated by a decision of Judge Sweet in Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 10 U.S.P.Q.2d 1961 (2d Cir. 1989). In his dilution analysis, Judge Sweet considered six factors, similar to the likelihood of confusion factors, including the 'similarity of products covered by the marks.' This particular factor demonstrates the inability of the courts to differentiate between trademark dilution and infringement of a trademark under a likelihood of confusion analysis. Dilution statutes are to protect marks regardless of the product similarities or 'competition between the owner of the famous mark and other parties,' as stated in the FTDA. While the test espoused by Judge Sweet has been rejected by the Second Circuit, other courts continue to rely on this test in analyzing dilution claims and this further demonstrates the breadth of confusion in how to apply the FTDA.

Toro Co. v. ToroHead, Inc.

This confusion lies not only in federal district courts, but also in the Trademark Trial and Appeal Board ('TTAB') of the U.S. Patent and Trademark Office. Despite 26 pleaded registrations, $35-40 million in annual advertising, use of the mark TORO for goods and services related to lawn and grounds care and maintenance since 1914 and annual sales in excess of one billion dollars, Toro was not able to prove its mark TORO was famous in a dilution context. Toro Co. v. ToroHead, Inc., 61 U.S.P.Q.2d 1164 (T.T.A.B. 2001). In this harsh decision, the TTAB readily accepted the proposition that 'fame for dilution purposes is difficult to prove.' In essence, the Board announced that to prove a mark is famous, the owner must 'demonstrate that the English language has changed,' in that the rights in the mark attributable to the owner trump all other rights to that mark. Id. Most telling is the following statement that: the trademark owner 'must provide evidence that when the public encounters [the] opposer's mark in almost any context, it associates the term, at least initially, with the mark's owner.' Obviously, a trademark owner should think twice before placing its brand before the TTAB and risking a ruling from the 'trademark experts' that its mark is not famous.

TCIP Holdings, Co. v. Haar Communications Inc.

Furthermore, courts disagree on whether a mark that is famous within some geographically geographically-defined area or within a defined market (a 'niche market') is sufficient to establish that it is famous for trademark dilution purposes. While both the Seventh and Ninth Circuits recognize some form of 'niche' fame, the Second Circuit in TCIP Holdings, Co. v. Haar Communications Inc., 57 U.S.P.Q.2d 1969, 1978 (2d Cir. 2001) has expressly rejected this theory. The court stated 'it seems most unlikely that Congress intended to confer on marks that have enjoyed only brief fame in a small part of the country, or among a small segment of the population' the fame protected by the FTDA. This discrepancy among the circuits has encouraged forum shopping and is important in choosing the proper forum. Thus, if your brand is only famous within a defined market, carefully consider where you file.

So what does all of this mean for you?

If you think another party is diluting your famous mark, think carefully before you sue for dilution. The risks are high and end result uncertain. If a court rules that your company's mark is not famous, this could have long-term adverse consequences on your trademark enforcement program. In Ty, Inc., Ty decided to drop its claim of trademark infringement and rely solely on dilution. Ty risked it all and lost. Is that a risk your company is willing to take? Moreover, beyond the issue before the Supreme Court in Moseley, proof of fame will be difficult and forum shopping will be more important if your company is considering alleging niche fame. Essentially, alleging dilution is a risky proposition because courts plainly do not understand dilution.

The old adage 'be careful what you wish for' rings true in the context of the Federal Trademark Dilution ActFTDA. Some corporations may have praised its enactment, nationalizing a dilution claim and providing a more 'uniform' interpretation of dilution claims across the country. However, with confusion among the courts as to how the FTDA should be applied, even after the Supreme Court rules in the Moseley case, many corporations should exercise caution when alleging dilution. Indeed, it may be time for Congress to revisit dilution, but until then, think twice before risking your company's brand.

Joseph V. Norvell, a shareholder, and Joseph T. Kucala, Jr., an associate, specializes in trademark and copyright law at the intellectual property law firm Brinks Hofer Gilson & Lione in Chicago.

As it stands now, if your company brings a trademark dilution claim in federal court, you are risking a ruling that your company's brand is not diluted or, even worse, 'not famous.' There is currently a great deal of confusion among the courts over the concept of trademark dilution, and none of the recent decisions are helping to clear the air. Courts across the country continue to struggle with the very concept of trademark dilution and its application. Issues the courts are struggling with include: How much fame is required for a mark to be 'famous' under the statute? What marks deserve protection under the Federal Trademark Dilution Act (FTDA)? What factors should a court consider when evaluating a dilution claim? Is proof of actual harm or injury required in order to prevail on a dilution claim? These issues are not easily resolved, and it is only the issue of proof of actual harm or injury on which the Supreme Court will provide guidance this spring. In light of these other continued uncertainties, companies should carefully analyze their case before putting their most prized brands at risk.

What is dilution?

Congress enacted the FTDA in 1995 in an attempt to provide more uniform relief than was available under state antidilution statutes. The FTDA defines dilution as 'the lessening capacity of a famous mark to identify and distinguish goods or services, 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.' 15 U.S.C. ' 1127. The statute lists eight factors to be considered in determining whether or not a mark is famous. Id. Two distinct subsets of dilution have developed: 1) dilution by blurring occurs when a junior user's use of a mark 'blurs' the distinction between the junior and senior user; and 2) dilution by tarnishment occurs when the junior party's use of the mark has a negative or distasteful connotation, 'tarnishing' the senior user's famous mark.

While Congress may have enacted the FTDA with the purpose of providing uniform relief to owners of famous trademarks, no such uniformity has actually been provided. The Supreme Court has been left to interpret the metes and bounds of the FTDA to settle a dispute over whether proof of actual harm or likelihood of harm is required. However, there are several other cases that illustrate how various courts have dealt with the problem differently, further compounding the confusion.

Moseley v. V Secret Catalogue, Inc.

In the most recent and widely publicized Supreme Court case, V Secret Catalogue Inc. v. Moseley d/b/a Victor's Little Secret, 259 F.3d 464, 59 U.S.P.Q.2d 1650 (6th Cir. 2001), cert. granted, 70 U.S.L.W. 3422 (U.S. April 15, 2002) (No. 01-1015 ). Moseley operated a lingerie and adult toy business in Kentucky under the name 'Victor's Little Secret.' Allegedly unbeknownst to them, a well-known lingerie monstrosity, 'V Secret Catalogue, Inc.' was operating a network of 750 lingerie stores nationwide and had a magazine with a circulation of 400 million circulation of its magazine to households across the nation under the registered mark VICTORIA'S SECRET. After becoming aware of Moseley's little secret, V Secret filed suit in the district court alleging trademark infringement based upon a likelihood of confusion and dilution under the FTDA. The district court found that although no likelihood of confusion existed, V Secret did satisfy the requirements that its mark was famous and, as such, was entitled to protection under the FTDA. Moseley appealed to the Sixth Circuit arguing that V Secret was required to prove actual economic loss or harm, as the Fourth Circuit held in Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Dev., 170 F.3d 449 (4th Cir. 1999). The Sixth Circuit upheld the district court's decision, rejected the Fourth Circuit's decision, and adopted the Second Circuit's reasoning set forth in Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2d Cir. 1999), wherein a likelihood of harm, and not actual proof of actual harm, is required to prove a dilution claim under the FTDA.

What will the Moseley decision resolve?

As Chief Justice Rehnquist aptly stated to Moseley's counsel during oral arguments 'your client doesn't come off well in this case.' In all likelihood, this spring the Supreme Court will affirm the lower courts and hold that Moseley diluted the VICTORIA'S SECRET brand name. Despite the apparent confusion and misunderstandings of the Justices, as demonstrated at oral arguments, to reverse the Sixth Circuit and require proof of actual harm or injury would effectively strip a dilution claim of any value and significance. Instead, to allow for a showing of a likelihood of dilution, it will be easier for trademark owners to allege and prove a claim of dilution. Moreover, by affirming the lower court, the Supreme Court can avoid entangling itself in the debate about the meaning of dilution and what is a 'famous' mark.

What will the Moseley decision not resolve?

Ty, Inc. v. Perryman

The Supreme Court is not the only court struggling with the scope of protection given to marks under the FTDA and the application of the statute. For example, Judge Posner of the Seventh Circuit struggled with the application of dilution law in Ty, Inc. v. Perryman, 64 U.S.P.Q.2d 1689 (7th Cir. 2002). In Ty, Inc., the maker of BEANIES BABIES toys sued Perryman for trademark infringement and dilution because Perryman sold second-hand beanbag stuffed animals. The district court enjoined Perryman from using the mark BEANIE or BEANIES 'with any business name, Internet domain name, or trademark, or in connection with any non-Ty products.' Judge Posner reasoned that 'Ty is seeking ' [to extend] antidilution law to forbid commercial uses that accelerate the transition from trademarks (brand names) to generic names (product names).' However, one of the principles behind dilution is to prevent a brand from becoming generic. Consequently, it is very difficult to follow Posner's logic and whether he confused the concepts of trademark dilution and trademark infringement. It is even more difficult to predict how other courts will interpret this decision in future dilution analysis.

Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc.

This confusion is further illustrated by a decision of Judge Sweet in Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 10 U.S.P.Q.2d 1961 (2d Cir. 1989). In his dilution analysis, Judge Sweet considered six factors, similar to the likelihood of confusion factors, including the 'similarity of products covered by the marks.' This particular factor demonstrates the inability of the courts to differentiate between trademark dilution and infringement of a trademark under a likelihood of confusion analysis. Dilution statutes are to protect marks regardless of the product similarities or 'competition between the owner of the famous mark and other parties,' as stated in the FTDA. While the test espoused by Judge Sweet has been rejected by the Second Circuit, other courts continue to rely on this test in analyzing dilution claims and this further demonstrates the breadth of confusion in how to apply the FTDA.

Toro Co. v. ToroHead, Inc.

This confusion lies not only in federal district courts, but also in the Trademark Trial and Appeal Board ('TTAB') of the U.S. Patent and Trademark Office. Despite 26 pleaded registrations, $35-40 million in annual advertising, use of the mark TORO for goods and services related to lawn and grounds care and maintenance since 1914 and annual sales in excess of one billion dollars, Toro was not able to prove its mark TORO was famous in a dilution context. Toro Co. v. ToroHead, Inc., 61 U.S.P.Q.2d 1164 (T.T.A.B. 2001). In this harsh decision, the TTAB readily accepted the proposition that 'fame for dilution purposes is difficult to prove.' In essence, the Board announced that to prove a mark is famous, the owner must 'demonstrate that the English language has changed,' in that the rights in the mark attributable to the owner trump all other rights to that mark. Id. Most telling is the following statement that: the trademark owner 'must provide evidence that when the public encounters [the] opposer's mark in almost any context, it associates the term, at least initially, with the mark's owner.' Obviously, a trademark owner should think twice before placing its brand before the TTAB and risking a ruling from the 'trademark experts' that its mark is not famous.

TCIP Holdings, Co. v. Haar Communications Inc.

Furthermore, courts disagree on whether a mark that is famous within some geographically geographically-defined area or within a defined market (a 'niche market') is sufficient to establish that it is famous for trademark dilution purposes. While both the Seventh and Ninth Circuits recognize some form of 'niche' fame, the Second Circuit in TCIP Holdings, Co. v. Haar Communications Inc., 57 U.S.P.Q.2d 1969, 1978 (2d Cir. 2001) has expressly rejected this theory. The court stated 'it seems most unlikely that Congress intended to confer on marks that have enjoyed only brief fame in a small part of the country, or among a small segment of the population' the fame protected by the FTDA. This discrepancy among the circuits has encouraged forum shopping and is important in choosing the proper forum. Thus, if your brand is only famous within a defined market, carefully consider where you file.

So what does all of this mean for you?

If you think another party is diluting your famous mark, think carefully before you sue for dilution. The risks are high and end result uncertain. If a court rules that your company's mark is not famous, this could have long-term adverse consequences on your trademark enforcement program. In Ty, Inc., Ty decided to drop its claim of trademark infringement and rely solely on dilution. Ty risked it all and lost. Is that a risk your company is willing to take? Moreover, beyond the issue before the Supreme Court in Moseley, proof of fame will be difficult and forum shopping will be more important if your company is considering alleging niche fame. Essentially, alleging dilution is a risky proposition because courts plainly do not understand dilution.

The old adage 'be careful what you wish for' rings true in the context of the Federal Trademark Dilution ActFTDA. Some corporations may have praised its enactment, nationalizing a dilution claim and providing a more 'uniform' interpretation of dilution claims across the country. However, with confusion among the courts as to how the FTDA should be applied, even after the Supreme Court rules in the Moseley case, many corporations should exercise caution when alleging dilution. Indeed, it may be time for Congress to revisit dilution, but until then, think twice before risking your company's brand.

Joseph V. Norvell, a shareholder, and Joseph T. Kucala, Jr., an associate, specializes in trademark and copyright law at the intellectual property law firm Brinks Hofer Gilson & Lione in Chicago.