House Subcommittee Hears Testimony on Amendment to FTDA

In a potential step toward amending the Federal Trademark Dilution Act of 1995 (FTDA), codified at 15 U.S.C. '1125(c), the House Committee on Courts, the Internet and Intellectual Property held a hearing on April 20, 2004 to discuss the “Committee Print of a Bill to Amend the Federal Trademark Dilution Act.” The draft legislation seeks to reverse the U.S. Supreme Court decision in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003) by providing that the FTDA requires proof of likely dilution, not actual dilution. It also adds a definition of the term “famous” to the Act, clarifies that the Act applies to both blurring and tarnishment of famous marks, and includes defenses intended to safeguard free speech.

The hearing came slightly more than a year after the Supreme Court's unanimous decision in Moseley, a decision that has generated a great deal of discussion in the trademark community. In Mosely, the Supreme Court relied on the text of the statute, stating that it “unambiguously requires a showing of actual dilution, rather than a likelihood of dilution.” While actual lost sales or profits do not need to be proved before an injunction can be issued, the Court held that a plaintiff must provide at least circumstantial evidence of actual dilution of its trademark before such relief may be granted.

The drive to amend the FTDA since Moseley was decided has been gaining momentum in large part due to the difficulty among trademark owners in determining the amount of proof and type of evidence required to establish dilution. In his prepared testimony before the Committee, Robert Sacoff, the chair of the American Bar Association's Section of Intellectual Property Law, stated that: “the Moseley decision requiring actual dilution has proven unworkable in practice.”

The Committee Print would also add a definition of the term “famous.” The current law, which does not provide a definition of the term “famous,” lists the following eight factors to be considered in determining whether a mark is famous (15 U.S.C. '1125(c)(1)): 1) the degree of inherent or acquired distinctiveness of the mark; 2) the duration and extent of use of the mark in connection with the goods or services with which the mark is used; 3) the duration and extent of the advertising and publicity of the mark; 4) the geographical extent of the trading area in which the mark is used; 5) the channels of trade for the goods or services with which the mark is used; 6) the degree of recognition of the mark in the trading areas and channels of trade used by the mark's owner and the person against whom the injunction is sought; 7) the nature and extent of use of the same or similar marks by third parties; and 8) whether the mark was registered under the Act of March 3, 1881, or the Act of Feb. 20, 1905 or the principal register.

Under the Committee Print language, a mark would be 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.” The Committee Print would replace the existing eight factors with three simplified factors, which incorporate some aspects of the existing factors. The proposed new factors are: 1) the duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties; 2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; and 3) the extent of actual recognition of the mark. According to Jacqueline A. Leimer, president of the International Trademark Association, the factors were lessened and simplified because they are already contained in the proposed definition of fame or “not relevant to the issue of fame.”

The Moseley decision also created ambiguity as to whether dilution by tarnishment is actionable. In its current form, the FTDA defines dilution as “the lessening of the 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.” Although not an issue directly before the Justices, the opinion, in dicta, questioned whether the statutory text embraced a cause of action for dilution by tarnishment.

To clarify this uncertainty, the Committee Print would strike the existing definition of dilution and replace it with a new section titled “DILUTION BY BLURRING; DILUTION BY TARNISHMENT.” This new section provides that the owner of a famous mark would be entitled to injunctive relief against another person, who, after the owner's mark has become famous, “commences use in commerce as a designation of source of the person's goods or services, a mark or trade name that is likely to cause dilution by blurring or dilution by tarnishment, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.”

The Committee Print also defines dilution by blurring as “association arising from the similarity between a designation of source and a famous mark that impairs the distinctiveness of the famous mark.” It defines dilution by tarnishment as “association between a designation of source and a famous mark, arising from their similarity, that harms the reputation of the famous mark.”

In cases involving alleged dilution by blurring, the proposed amendment provides for several nonexclusive factors a court may consider when determining whether such dilution has occurred. They are: 1) the degree of similarity between the designation of source and the famous mark; 2) the degree of inherent or acquired distinctiveness of the famous mark; 3) the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; 4) the degree of recognition of the famous mark; 5) whether the user of the designation of source intended to create an association with the famous mark; and 6) any actual association between the designation of source and the famous mark. As for dilution by tarnishment, the Committee Print only provides for a definition of the term and does not list factors to be considered in determining whether dilution by tarnishment has occurred.

Finally, to safeguard free speech, the Committee Print explicitly provides for exclusion of actions based on fair use in comparative advertising, noncommercial use of a designated source and all forms of news reporting and commentary.

The Supreme Court in Moseley created a great deal of ambiguity regarding the ability of owners of famous marks to prove dilution. The proposed legislation is intended to rectify this ambiguity and strengthen the ability of these owners to prevent dilution of their famous trademarks.

In a potential step toward amending the Federal Trademark Dilution Act of 1995 (FTDA), codified at 15 U.S.C. '1125(c), the House Committee on Courts, the Internet and Intellectual Property held a hearing on April 20, 2004 to discuss the “Committee Print of a Bill to Amend the Federal Trademark Dilution Act.” The draft legislation seeks to reverse the U.S. Supreme Court decision in Moseley v. V Secret Catalogue, Inc. , 537 U.S. 418 (2003) by providing that the FTDA requires proof of likely dilution, not actual dilution. It also adds a definition of the term “famous” to the Act, clarifies that the Act applies to both blurring and tarnishment of famous marks, and includes defenses intended to safeguard free speech.

The hearing came slightly more than a year after the Supreme Court's unanimous decision in Moseley, a decision that has generated a great deal of discussion in the trademark community. In Mosely, the Supreme Court relied on the text of the statute, stating that it “unambiguously requires a showing of actual dilution, rather than a likelihood of dilution.” While actual lost sales or profits do not need to be proved before an injunction can be issued, the Court held that a plaintiff must provide at least circumstantial evidence of actual dilution of its trademark before such relief may be granted.

The drive to amend the FTDA since Moseley was decided has been gaining momentum in large part due to the difficulty among trademark owners in determining the amount of proof and type of evidence required to establish dilution. In his prepared testimony before the Committee, Robert Sacoff, the chair of the American Bar Association's Section of Intellectual Property Law, stated that: “the Moseley decision requiring actual dilution has proven unworkable in practice.”

The Committee Print would also add a definition of the term “famous.” The current law, which does not provide a definition of the term “famous,” lists the following eight factors to be considered in determining whether a mark is famous (15 U.S.C. '1125(c)(1)): 1) the degree of inherent or acquired distinctiveness of the mark; 2) the duration and extent of use of the mark in connection with the goods or services with which the mark is used; 3) the duration and extent of the advertising and publicity of the mark; 4) the geographical extent of the trading area in which the mark is used; 5) the channels of trade for the goods or services with which the mark is used; 6) the degree of recognition of the mark in the trading areas and channels of trade used by the mark's owner and the person against whom the injunction is sought; 7) the nature and extent of use of the same or similar marks by third parties; and 8) whether the mark was registered under the Act of March 3, 1881, or the Act of Feb. 20, 1905 or the principal register.

Under the Committee Print language, a mark would be 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.” The Committee Print would replace the existing eight factors with three simplified factors, which incorporate some aspects of the existing factors. The proposed new factors are: 1) the duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties; 2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; and 3) the extent of actual recognition of the mark. According to Jacqueline A. Leimer, president of the International Trademark Association, the factors were lessened and simplified because they are already contained in the proposed definition of fame or “not relevant to the issue of fame.”

The Moseley decision also created ambiguity as to whether dilution by tarnishment is actionable. In its current form, the FTDA defines dilution as “the lessening of the 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.” Although not an issue directly before the Justices, the opinion, in dicta, questioned whether the statutory text embraced a cause of action for dilution by tarnishment.

To clarify this uncertainty, the Committee Print would strike the existing definition of dilution and replace it with a new section titled “DILUTION BY BLURRING; DILUTION BY TARNISHMENT.” This new section provides that the owner of a famous mark would be entitled to injunctive relief against another person, who, after the owner's mark has become famous, “commences use in commerce as a designation of source of the person's goods or services, a mark or trade name that is likely to cause dilution by blurring or dilution by tarnishment, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.”

The Committee Print also defines dilution by blurring as “association arising from the similarity between a designation of source and a famous mark that impairs the distinctiveness of the famous mark.” It defines dilution by tarnishment as “association between a designation of source and a famous mark, arising from their similarity, that harms the reputation of the famous mark.”

In cases involving alleged dilution by blurring, the proposed amendment provides for several nonexclusive factors a court may consider when determining whether such dilution has occurred. They are: 1) the degree of similarity between the designation of source and the famous mark; 2) the degree of inherent or acquired distinctiveness of the famous mark; 3) the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; 4) the degree of recognition of the famous mark; 5) whether the user of the designation of source intended to create an association with the famous mark; and 6) any actual association between the designation of source and the famous mark. As for dilution by tarnishment, the Committee Print only provides for a definition of the term and does not list factors to be considered in determining whether dilution by tarnishment has occurred.

Finally, to safeguard free speech, the Committee Print explicitly provides for exclusion of actions based on fair use in comparative advertising, noncommercial use of a designated source and all forms of news reporting and commentary.

The Supreme Court in Moseley created a great deal of ambiguity regarding the ability of owners of famous marks to prove dilution. The proposed legislation is intended to rectify this ambiguity and strengthen the ability of these owners to prevent dilution of their famous trademarks.