The TDRA Turns Two: But Are Trademark Owners Better Off?

When the Federal Trademark Dilution Act (“FTDA”) was enacted in 1996, it was expected to provide much-needed uniformity and consistency to the protection of famous marks, not to fundamentally change the traditional standard for proving trademark dilution. Under the traditional standard, as adopted in many states, a trademark owner could protect against another's use of the same or similar mark even on noncompeting goods if it could show that such use was likely to blur (or weaken) the distinctive significance of the senior user's mark.

The U.S. Supreme Court, however, saw things differently. In its 2003 decision in Moseley v. V. Secret Catalogue, 537 U.S. 418 (2003), the Court found that the FTDA's language required a showing of “actual dilution,” not “likelihood of dilution.” The Court offered little guidance on how to prove an actual lessening of a mark's distinctive significance, but a few things seemed certain: First, consumer surveys increasingly would be necessary and, more generally, it had just become considerably more difficult to prove a federal dilution claim.

With the Trademark Dilution Revision Act of 2006 (the “TDRA”), Congress acted to firm up the path toward a successful dilution claim. Among other amendments, the TDRA re-established “likelihood of dilution” as the applicable test and set forth a list of non-exclusive factors courts could consider in determining whether blurring is likely to occur. See 15 U.S.C. '1125(c). At the same time, however, Congress tightened up the requirements for proving fame, requiring that a mark be “widely recognized by the general consuming public” of the United States and rejecting the notion that “niche” market fame would be sufficient. See 15 U.S.C. '1125(c)(2)(A).

On its face, the TDRA appeared to establish a more favorable course for trademark owners. But to echo an election-year phrase, are trademark owners in fact “better off than they were two years ago”? The early returns appear to suggest a qualified “yes,” though the case law certainly is not uniform and, as discussed below, the judicial landscape remains unsettled.

Fame: Policing the Select Class

Under the TDRA, to be considered “famous” a mark must be “widely recognized by the general consuming public of the United States '” 15 U.S.C. '1125(c)(2), and the House Report makes clear that the TDRA denies protection to marks that are famous only in “niche” markets (e.g., in a particular geographic market or in a specialized market segment). See House Report on Trademark Dilution Revision Act of 2006, H.R. Rep. 109-23 at 8, 25. One court noted that the mark “must rise to the level of a household name,” Milbank Tweed Hadley & McCoy LLP v. Milbank Holding Corp., 2007 WL 1438114 *5 (C.D. Cal. Feb. 27, 2007), while another found fame to be reserved for “those marks with such powerful consumer associations that even non-competing uses can impinge their value.” Cosi, Inc. v. WK Holdings, LLC, 2007 U.S. Dist. LEXIS 31990 *5 (D. Minn. May 1, 2007) (citations and internal quotations omitted).

Although the TDRA lists four nonexclusive factors to assist courts in the “fame” determination, the application of the standard has been neither uniform nor simple. To be sure, early TDRA cases reveal some arguably easy “calls” on the nationwide fame issue. “Nike” and “Pepsi,” for example, were found to have achieved nationwide fame, while “ComponentOne” failed to meet the standard. Some decisions, however, are more arguable and reveal the difficulty of applying a nationwide fame test to certain marks. For example, one might argue that Cosi, a well-known restaurant chain, has achieved nationwide fame. A Minnesota district court, however, rejected this argument, largely because the company had restaurant locations in only 16 states and the District of Columbia. See Cosi, Inc., 2007 U.S. Dist. LEXIS 31990 at *5. Conversely, the TDRA's fame test has been applied to include plaintiffs whose marks, though arguably unknown to many Americans, are nonetheless advertised and sold on a national scale. See Harris Research, Inc. v. Lydon, 505 F. Supp. 2d 1161, 1165-66 (D. Utah 2007) (“Chem-Dry” mark, advertised internationally, sold through 4,150 franchisees and used for 30 years, held to be famous); Pet Silk v. Jackson, 481 F. Supp. 2d 824, 830 (S.D. Tex. 2007) (appearing to apply an erroneous “market fame” analysis in finding “Pet Silk” mark for pet grooming products to be famous).

Perhaps not surprisingly, courts are struggling to delineate between famous and non-famous marks, and some of the decisions described above may yet prove to be judicial outliers. If any common theme emerges from the first two years of “fame” decisions, it is that a significant period of use, and national advertising and sales, are critical and that, when such evidence is presented, the courts may expand the “fame” umbrella even to marks which may not truly be “household names.”

Dilution: Keep Your Data Close

The TDRA established a non-exclusive list of six factors to show dilution by blurring: 1) the degree of similarity between the marks, 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 junior mark intended to create an association with the famous mark, and 6) any actual association between the junior mark and the famous mark. 15 U.S.C. '1125(c). Although this six-factor test was meant to relax the FTDA's “actual dilution” standard, the test remains a strict one. Not surprisingly, the early cases indicate that the similarity of marks factor is critical. They also indicate, however, that plaintiffs who proceed without a good survey do so at their own risk.

In numerous cases, a finding that the marks are identical or similar has weighed heavily, and perhaps dispositively, in the court's decision in favor of or against the trademark owner. See, e.g., Pet Silk, 481 F. Supp. at 831-32 (defendant's unauthorized use of plaintiff's “Pet Silk” mark held to constitute dilution); Nike, Inc., v. Nikepal Int'l, Inc., 2007 U.S. Dist. LEXIS 66686 *18-25 (E.D. Cal. Sept. 10, 2007) (“Nikepal” mark likely to dilute famous “Nike” mark); Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 559 F. Supp. 2d 472, 476-78 (S.D.N.Y. June 5, 2008) (rejecting dilution claim where it found that “Starbucks” and “Mr. Charbucks” were not substantially similar, and noting that the finding of dissimilarity “is sufficient to defeat Plaintiff's blurring claim.”); Century 21 Real Estate LLC v. Century Insurance Grp., 2007 U.S. Dist. LEXIS 9720, *44-45 (D. Ariz. Feb. 9, 2007) (marks incorporating the term “Century” substantially dissimilar to marks incorporating the term “Century 21″).

More broadly, however, the cases reveal that there is nothing like a good survey to demonstrate a likelihood of dilution, and that some courts expect a survey to prove an “actual association between the marks” and, perhaps, even the ultimate issue of impairment of the famous mark's distinctive significance (though it is still unclear exactly what type of survey will suffice to show the latter). For example, in Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 636 (9th Circ. 2008), the court relied heavily on the survey evidence presented by the owner of the “Hot Wheels“ mark to show that consumers associated plaintiff's “Hot Rigz” mark with the “Hot Wheels” mark. See also Nike, 2007 U.S. Dist. LEXIS at *24-25 (survey showed that 87% of Nikepal customers associated the stimulus “Nikepal” with plaintiff.) Conversely, in Nissan Motor Co., LTD. et. al. v. Nissan Computer Corp., 2007 U.S. Dist. LEXIS 90487 *53-54 (C.D. Cal. Sept. 20, 2007), the court, in considering whether the use of “nissan.com” by a computer company was dilutive, found the “association” factor to be the “most important” factor in the blurring test and faulted the plaintiff for not providing a survey or other evidence showing that “those who visited nissan.com now associated the NISSAN mark with more than one source.” Id. at **49-53. Finally, in V Secret Catalogue, Inc. v. Moseley, 558 F. Supp. 2d 734, 744-749 (W.D. Ky 2008) ' a remand of the earlier Supreme Court case ' the court found in favor of the famous mark owner on all of the TDRA's listed factors, but still found no likelihood of impairment of the mark's distinctive significance (though it did find dilution by tarnishment). The court indicated that although the evidence demonstrated an “actual association,” it failed to demonstrate a likelihood of impairment. Id. at 747-49. See also Starbucks, 559 F. Supp. 2d at 478 (while plaintiff presented a survey, it counterposed the “Starbucks” name with the word “Charbucks,” when the full name of defendant's mark was “Mr. Charbucks.”) Thus, while the “likelihood of dilution” test may have appeared to steer courts away from empirical analysis, early decisions under the TDRA suggest that mark owners who cannot show hard data run the risk of being shot down by a skeptical court.

Conclusion

Through the TDRA, Congress intended to clarify the standards of fame and dilution for trademark owners, but the courts have struggled to come up with a uniform application of these tests. On the fame issue, the TDRA's new fame standard has not eliminated certain marks which arguably were meant to be excluded from the TDRA's exclusive club. On the other hand, demonstrating a likelihood of dilution by blurring remains a difficult task. Particularly where marks are not identical, courts often require hard data to demonstrate that blurring is likely, and those who proceed without such data risk suffering the fate of Nissan, Starbucks, and other famous brands.

Michael A. Bucci is a partner in Day Pitney LLP's Intellectual Property Department and practices out of the firm's Hartford, CT office. He can be reached at 860-275-0523, or by e-mail at [email protected]. Lex Paulson, who is resident in the Stamford, CT office, is an associate in the firm's IP Department. He can be reached at 203-977-7340, or by e-mail at [email protected].

When the Federal Trademark Dilution Act (“FTDA”) was enacted in 1996, it was expected to provide much-needed uniformity and consistency to the protection of famous marks, not to fundamentally change the traditional standard for proving trademark dilution. Under the traditional standard, as adopted in many states, a trademark owner could protect against another's use of the same or similar mark even on noncompeting goods if it could show that such use was likely to blur (or weaken) the distinctive significance of the senior user's mark.

The U.S. Supreme Court, however, saw things differently. In its 2003 decision in Moseley v. V. Secret Catalogue , 537 U.S. 418 (2003), the Court found that the FTDA's language required a showing of “actual dilution,” not “likelihood of dilution.” The Court offered little guidance on how to prove an actual lessening of a mark's distinctive significance, but a few things seemed certain: First, consumer surveys increasingly would be necessary and, more generally, it had just become considerably more difficult to prove a federal dilution claim.

With the Trademark Dilution Revision Act of 2006 (the “TDRA”), Congress acted to firm up the path toward a successful dilution claim. Among other amendments, the TDRA re-established “likelihood of dilution” as the applicable test and set forth a list of non-exclusive factors courts could consider in determining whether blurring is likely to occur. See 15 U.S.C. '1125(c). At the same time, however, Congress tightened up the requirements for proving fame, requiring that a mark be “widely recognized by the general consuming public” of the United States and rejecting the notion that “niche” market fame would be sufficient. See 15 U.S.C. '1125(c)(2)(A).

On its face, the TDRA appeared to establish a more favorable course for trademark owners. But to echo an election-year phrase, are trademark owners in fact “better off than they were two years ago”? The early returns appear to suggest a qualified “yes,” though the case law certainly is not uniform and, as discussed below, the judicial landscape remains unsettled.

Fame: Policing the Select Class

Under the TDRA, to be considered “famous” a mark must be “widely recognized by the general consuming public of the United States '” 15 U.S.C. '1125(c)(2), and the House Report makes clear that the TDRA denies protection to marks that are famous only in “niche” markets (e.g., in a particular geographic market or in a specialized market segment). See House Report on Trademark Dilution Revision Act of 2006, H.R. Rep. 109-23 at 8, 25. One court noted that the mark “must rise to the level of a household name,” Milbank Tweed Hadley & McCoy LLP v. Milbank Holding Corp., 2007 WL 1438114 *5 (C.D. Cal. Feb. 27, 2007), while another found fame to be reserved for “those marks with such powerful consumer associations that even non-competing uses can impinge their value.” Cosi, Inc. v. WK Holdings, LLC, 2007 U.S. Dist. LEXIS 31990 *5 (D. Minn. May 1, 2007) (citations and internal quotations omitted).

Although the TDRA lists four nonexclusive factors to assist courts in the “fame” determination, the application of the standard has been neither uniform nor simple. To be sure, early TDRA cases reveal some arguably easy “calls” on the nationwide fame issue. “Nike” and “Pepsi,” for example, were found to have achieved nationwide fame, while “ComponentOne” failed to meet the standard. Some decisions, however, are more arguable and reveal the difficulty of applying a nationwide fame test to certain marks. For example, one might argue that Cosi, a well-known restaurant chain, has achieved nationwide fame. A Minnesota district court, however, rejected this argument, largely because the company had restaurant locations in only 16 states and the District of Columbia. See Cosi, Inc., 2007 U.S. Dist. LEXIS 31990 at *5. Conversely, the TDRA's fame test has been applied to include plaintiffs whose marks, though arguably unknown to many Americans, are nonetheless advertised and sold on a national scale. See Harris Research, Inc. v. Lydon , 505 F. Supp. 2d 1161, 1165-66 (D. Utah 2007) (“Chem-Dry” mark, advertised internationally, sold through 4,150 franchisees and used for 30 years, held to be famous); Pet Silk v. Jackson , 481 F. Supp. 2d 824, 830 (S.D. Tex. 2007) (appearing to apply an erroneous “market fame” analysis in finding “Pet Silk” mark for pet grooming products to be famous).

Perhaps not surprisingly, courts are struggling to delineate between famous and non-famous marks, and some of the decisions described above may yet prove to be judicial outliers. If any common theme emerges from the first two years of “fame” decisions, it is that a significant period of use, and national advertising and sales, are critical and that, when such evidence is presented, the courts may expand the “fame” umbrella even to marks which may not truly be “household names.”

Dilution: Keep Your Data Close

The TDRA established a non-exclusive list of six factors to show dilution by blurring: 1) the degree of similarity between the marks, 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 junior mark intended to create an association with the famous mark, and 6) any actual association between the junior mark and the famous mark. 15 U.S.C. '1125(c). Although this six-factor test was meant to relax the FTDA's “actual dilution” standard, the test remains a strict one. Not surprisingly, the early cases indicate that the similarity of marks factor is critical. They also indicate, however, that plaintiffs who proceed without a good survey do so at their own risk.

In numerous cases, a finding that the marks are identical or similar has weighed heavily, and perhaps dispositively, in the court's decision in favor of or against the trademark owner. See, e.g., Pet Silk, 481 F. Supp. at 831-32 (defendant's unauthorized use of plaintiff's “Pet Silk” mark held to constitute dilution); Nike, Inc., v. Nikepal Int'l, Inc., 2007 U.S. Dist. LEXIS 66686 *18-25 (E.D. Cal. Sept. 10, 2007) (“Nikepal” mark likely to dilute famous “Nike” mark); Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 559 F. Supp. 2d 472, 476-78 (S.D.N.Y. June 5, 2008) (rejecting dilution claim where it found that “Starbucks” and “Mr. Charbucks” were not substantially similar, and noting that the finding of dissimilarity “is sufficient to defeat Plaintiff's blurring claim.”); Century 21 Real Estate LLC v. Century Insurance Grp., 2007 U.S. Dist. LEXIS 9720, *44-45 (D. Ariz. Feb. 9, 2007) (marks incorporating the term “Century” substantially dissimilar to marks incorporating the term “Century 21″).

More broadly, however, the cases reveal that there is nothing like a good survey to demonstrate a likelihood of dilution, and that some courts expect a survey to prove an “actual association between the marks” and, perhaps, even the ultimate issue of impairment of the famous mark's distinctive significance (though it is still unclear exactly what type of survey will suffice to show the latter). For example, in Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 636 (9th Circ. 2008), the court relied heavily on the survey evidence presented by the owner of the “ Hot Wheels “ mark to show that consumers associated plaintiff's “Hot Rigz” mark with the “Hot Wheels” mark. See also Nike, 2007 U.S. Dist. LEXIS at *24-25 (survey showed that 87% of Nikepal customers associated the stimulus “Nikepal” with plaintiff.) Conversely, in Nissan Motor Co., LTD. et. al. v. Nissan Computer Corp., 2007 U.S. Dist. LEXIS 90487 *53-54 (C.D. Cal. Sept. 20, 2007), the court, in considering whether the use of “nissan.com” by a computer company was dilutive, found the “association” factor to be the “most important” factor in the blurring test and faulted the plaintiff for not providing a survey or other evidence showing that “those who visited nissan.com now associated the NISSAN mark with more than one source.” Id. at **49-53. Finally, in V Secret Catalogue, Inc. v. Moseley, 558 F. Supp. 2d 734, 744-749 (W.D. Ky 2008) ' a remand of the earlier Supreme Court case ' the court found in favor of the famous mark owner on all of the TDRA's listed factors, but still found no likelihood of impairment of the mark's distinctive significance (though it did find dilution by tarnishment). The court indicated that although the evidence demonstrated an “actual association,” it failed to demonstrate a likelihood of impairment. Id. at 747-49. See also Starbucks, 559 F. Supp. 2d at 478 (while plaintiff presented a survey, it counterposed the “Starbucks” name with the word “Charbucks,” when the full name of defendant's mark was “Mr. Charbucks.”) Thus, while the “likelihood of dilution” test may have appeared to steer courts away from empirical analysis, early decisions under the TDRA suggest that mark owners who cannot show hard data run the risk of being shot down by a skeptical court.

Conclusion

Through the TDRA, Congress intended to clarify the standards of fame and dilution for trademark owners, but the courts have struggled to come up with a uniform application of these tests. On the fame issue, the TDRA's new fame standard has not eliminated certain marks which arguably were meant to be excluded from the TDRA's exclusive club. On the other hand, demonstrating a likelihood of dilution by blurring remains a difficult task. Particularly where marks are not identical, courts often require hard data to demonstrate that blurring is likely, and those who proceed without such data risk suffering the fate of Nissan, Starbucks, and other famous brands.

Michael A. Bucci is a partner in Day Pitney LLP's Intellectual Property Department and practices out of the firm's Hartford, CT office. He can be reached at 860-275-0523, or by e-mail at [email protected]. Lex Paulson, who is resident in the Stamford, CT office, is an associate in the firm's IP Department. He can be reached at 203-977-7340, or by e-mail at [email protected].