Ninth Circuit: Congress Expanded Definition of Dilution When It Adopted TDRA

In Levi Strauss & Co. v. Abercrombie & Fitch Co., Ninth Circuit Case No. 09-16322 (9th Cir. Feb. 8, 2011) (cited as “Slip Op.”), the Ninth Circuit Court of Appeals recently confirmed that Congress expanded the definition of dilution when it adopted the Trademark Dilution Revision Act of 2006 (“TDRA”). The court acknowledged that restrictive rules developed under the predecessor statute, the Federal Trademark Dilution Act (“FTDA”), only protected against dilution caused by “identical or nearly identical” marks. But it ruled that new provisions of the TDRA eliminated this “identicality” requirement and expanded protection for famous trademarks. The new standard requires that district courts consider the marks' “degree of similarity,” along with other factors, in order to determine whether dilution is likely.

Background of the Litigation

Levi Strauss has used a pocket stitching design to mark its blue jeans since 1873. At trial, Levi Strauss proved that its pocket stitching ' called its “Arcuate” trademark ' is likely the oldest apparel trademark in the United States, older than the LEVI's' mark itself. Levi Strauss has used the Arcuate trademark on products generating approximately $50 billion in sales over the past 30 years. On the strength of this showing, an advisory jury held that the Arcuate trademark was famous and, therefore, eligible for protection against dilution. The Arcuate trademark is reproduced in Design 1, below.

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Levi Strauss challenged Abercrombie's use of a pocket stitching design on its Ruehl brand jeans. Abercrombie had applied for a federal registration of the Ruehl design, and adopted the design for use on all of its Ruehl women's jeans. The Ruehl design has arcs that are similar to the arcs in the Arcuate trademark, but the design includes what variously was described at trial as an elliptical sign or “dipsy-doodle.” The Ruehl design is reproduced in Design 2, below.

[IMGCAP(2)]

The district court framed a threshold question for determining likelihood of dilution: whether the Ruehl design was “identical or nearly identical” to the Arcuate trademark. Unless this threshold was established, the district court held that there could be no likelihood of dilution. It stated ' and so instructed the advisory jury ' that the standard for similarity in the dilution context “is more stringent than in the infringement context.” See Slip Op. at 2376. Under this standard, the advisory jury and the district court found no likelihood that the Ruehl design would dilute the Arcuate trademark. Id. at 2377.

Ninth Circuit's Prior Decisions Appeared to Limit Dilution Challenges

Under the FTDA, starting in 2002, a number of Ninth Circuit decisions required that challenged marks be “identical or nearly identical” to the famous mark in order to be actionable. See, e.g., Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894 (9th Cir. 2002); Playboy Enterprises, Inc. v. Welles, 279 F.3d 796 (9th Cir. 2002). Abercrombie pointed to similar decisions from other circuits under the FTDA, and argued that Congress said nothing in the TDRA that explicitly announced any intention to change the “identical or nearly identical” rule.

Abercrombie emphasized two Ninth Circuit decisions that suggested the “identical or nearly identical” rule also applied under the TDRA. Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628 (9th Cir. 2008); PerfumeBay.com Inc. v. eBay, Inc., 506 F.3d 1165 (9th Cir. 2007). In both cases, the Ninth Circuit reversed the dismissal of a dilution claim, ruling that sufficient evidence supported the claims that the marks were nearly identical. Perfumebay, 506 F.3d at 1181 (PERFUMEBAY and EBAY); Jada Toys, 518 F.3d at 635 (HOT WHEELS and HOT RIGZ). Both decisions included statements ' ostensibly binding on district courts ' that suggested the “nearly identical” requirement was alive and well under the TDRA. Perfumebay, 506 F.3d at 1180 (marks must be “nearly identical” or “essentially the same”); Jada Toys, 518 F.3d at 634 (same).

The Ninth Circuit panel in the Levi Strauss v. Abercrombie case, then, was faced first with the need to determine whether it had authority even to consider Levi Strauss' argument that the TDRA had eliminated the identicality requirement. The court reviewed the origins of the “identical or nearly identical” standard and concluded that it was derived from case law under New York's dilution statute. After a detailed examination of the Perfumebay and Jada Toys cases, the court concluded that it was “the first [Ninth Circuit] panel to address the issue whether the 'identical or nearly identical' standard survives Congress's adoption of the TDRA.” Slip Op. at 2395.

Congress Changed the Definition of Dilution in the TDRA

The TDRA is widely perceived as having resulted from Congress' desire to supersede the Supreme Court's holding in the Victoria's Secret case ' that the FTDA only protected against actual, but not likely, dilution. Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003). In the district court, Abercrombie successfully limited the significance of the changes effected by the TDRA to the Victoria's Secret issue of actual vs. likely dilution. But as the Ninth Circuit pointed out, the amendments embodied in the TDRA went well beyond that question. Slip Op. at 2385.

When it passed the TDRA, Congress defined dilution by blurring as “association arising from the similarity between a mark or a trade name and a famous mark that impairs the distinctiveness of the famous mark.” 15 U.S.C. ' 1125(c)(2)(B). The TDRA includes a specific factor test for dilution by blurring, which provides that the “degree of similarity” between the marks, along with other factors such as distinctiveness, exclusive use, public recognition, intent, and actual association, determines whether there is a likelihood of dilution. 15 U.S.C. ' 1125(c)(2). The TDRA does not mention any threshold requirement that the junior and senior marks be “identical or nearly identical.”

Analyzing these provisions, the Ninth Circuit concluded that the statutory text did not support the district court's restriction of the statute. “Congress's implementation of [a non-exhaustive list of relevant factors] is simply not compatible with a determination that identity, near identity or substantial similarity are necessary to constitute a threshold showing for relief under ' 1125(c).” Slip Op. at 2396-97. Congress' use of the word “similarity,” the court reasoned, “sets forth a less demanding standard than that employed by many courts under the FTDA.” Id. at 2396. Helpful to Levi Strauss, while its appeal was pending, the Second Circuit considered similar arguments and ruled that its parallel “substantially similar” standard was not supported by the TDRA. Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 588 F.3d 97 (2d Cir. 2009).

The Ninth Circuit took care to ensure that its decision would not trivialize the importance of similarity in the dilution analysis. It noted that the forbidden association must arise from similarity between the challenged and famous marks, and observed that similarity was the first item in Congress' multi-factor test. Slip Op. at 2397. But it concluded that “Congress's decision to make 'degree of similarity' one consideration in a multi-factor list strongly suggests that it did not want 'degree of similarity' to be the necessarily controlling factor.” Id.

The TDRA Now Promises to Provide Incremental Protection for Famous Brands

When Congress first passed the Federal Trademark Dilution Act in 1996, there was a great deal of hope among trademark owners that their famous brands and design marks would enjoy an extra measure of protection. Consumer “association” was believed to be easier to prove than likely consumer confusion, which is necessary for trademark infringement. Those hopes, in many respects, have been substantially compromised until now. Victoria's Secret required a showing of actual dilution, and under the FTDA and until recently the TDRA as well, the “identical or nearly identical” rule likewise undermined the special protection thought to be available for famous trademarks.

Now, famous trademark owners again have reason for optimism. Congress has eliminated the “actual” dilution requirement and spelled out in non-exhaustive factor tests the requirements for fame and dilution. The Ninth and Second Circuits have eliminated any rule that a high degree of threshold similarity is necessary to establish the forbidden consumer associations that are likely to impair a famous mark. These changes should make it easier for trademark owners to avoid the barriers that have impeded protection under the federal dilution statute.

The benefit of these developments may be felt most acutely by owners of famous design marks. Word marks are apprehended by consumers on several dimensions, including sound and meaning. Similarity ' or, for that matter, a perception that marks are “identical or nearly identical” ' can be observed across these several dimensions. See, e.g., Jada Toys, 518 F.3d at 635 (marks nearly identical because both contain “hot,” giving them a “similar meaning and connotation,” and include flames and similar colors). Design marks, on the other hand, are perceived only visually, and therefore the search for similarity or “identicality” only typically arises in a side-by-side comparison. Now that the focus explicitly has shifted to the “degree of similarity,” along with all of the other factors that are likely to bear on consumer associations, the TDRA may genuinely become a tool for protection against erosion of famous design marks.

Gregory S. Gilchrist is a partner and Gia L. Cincone is counsel in Kilpatrick Townsend & Stockton LLP. Gilchrist and Cincone were trial and appellate counsel for Levi Strauss & Co. in the litigation discussed in this article.

In Levi Strauss & Co. v. Abercrombie & Fitch Co., Ninth Circuit Case No. 09-16322 (9th Cir. Feb. 8, 2011) (cited as “Slip Op.”), the Ninth Circuit Court of Appeals recently confirmed that Congress expanded the definition of dilution when it adopted the Trademark Dilution Revision Act of 2006 (“TDRA”). The court acknowledged that restrictive rules developed under the predecessor statute, the Federal Trademark Dilution Act (“FTDA”), only protected against dilution caused by “identical or nearly identical” marks. But it ruled that new provisions of the TDRA eliminated this “identicality” requirement and expanded protection for famous trademarks. The new standard requires that district courts consider the marks' “degree of similarity,” along with other factors, in order to determine whether dilution is likely.

Background of the Litigation

Levi Strauss has used a pocket stitching design to mark its blue jeans since 1873. At trial, Levi Strauss proved that its pocket stitching ' called its “Arcuate” trademark ' is likely the oldest apparel trademark in the United States, older than the LEVI's' mark itself. Levi Strauss has used the Arcuate trademark on products generating approximately $50 billion in sales over the past 30 years. On the strength of this showing, an advisory jury held that the Arcuate trademark was famous and, therefore, eligible for protection against dilution. The Arcuate trademark is reproduced in Design 1, below.

[IMGCAP(1)]

Levi Strauss challenged Abercrombie's use of a pocket stitching design on its Ruehl brand jeans. Abercrombie had applied for a federal registration of the Ruehl design, and adopted the design for use on all of its Ruehl women's jeans. The Ruehl design has arcs that are similar to the arcs in the Arcuate trademark, but the design includes what variously was described at trial as an elliptical sign or “dipsy-doodle.” The Ruehl design is reproduced in Design 2, below.

[IMGCAP(2)]

The district court framed a threshold question for determining likelihood of dilution: whether the Ruehl design was “identical or nearly identical” to the Arcuate trademark. Unless this threshold was established, the district court held that there could be no likelihood of dilution. It stated ' and so instructed the advisory jury ' that the standard for similarity in the dilution context “is more stringent than in the infringement context.” See Slip Op. at 2376. Under this standard, the advisory jury and the district court found no likelihood that the Ruehl design would dilute the Arcuate trademark. Id. at 2377.

Ninth Circuit's Prior Decisions Appeared to Limit Dilution Challenges

Under the FTDA, starting in 2002, a number of Ninth Circuit decisions required that challenged marks be “identical or nearly identical” to the famous mark in order to be actionable. See, e.g., Thane Int'l, Inc. v. Trek Bicycle Corp. , 305 F.3d 894 (9th Cir. 2002); Playboy Enterprises, Inc. v. Welles , 279 F.3d 796 (9th Cir. 2002). Abercrombie pointed to similar decisions from other circuits under the FTDA, and argued that Congress said nothing in the TDRA that explicitly announced any intention to change the “identical or nearly identical” rule.

Abercrombie emphasized two Ninth Circuit decisions that suggested the “identical or nearly identical” rule also applied under the TDRA. Jada Toys, Inc. v. Mattel, Inc. , 518 F.3d 628 (9th Cir. 2008); PerfumeBay.com Inc. v. eBay, Inc., 506 F.3d 1165 (9th Cir. 2007). In both cases, the Ninth Circuit reversed the dismissal of a dilution claim, ruling that sufficient evidence supported the claims that the marks were nearly identical. Perfumebay, 506 F.3d at 1181 (PERFUMEBAY and EBAY); Jada Toys, 518 F.3d at 635 (HOT WHEELS and HOT RIGZ). Both decisions included statements ' ostensibly binding on district courts ' that suggested the “nearly identical” requirement was alive and well under the TDRA. Perfumebay, 506 F.3d at 1180 (marks must be “nearly identical” or “essentially the same”); Jada Toys, 518 F.3d at 634 (same).

The Ninth Circuit panel in the Levi Strauss v. Abercrombie case, then, was faced first with the need to determine whether it had authority even to consider Levi Strauss' argument that the TDRA had eliminated the identicality requirement. The court reviewed the origins of the “identical or nearly identical” standard and concluded that it was derived from case law under New York's dilution statute. After a detailed examination of the Perfumebay and Jada Toys cases, the court concluded that it was “the first [Ninth Circuit] panel to address the issue whether the 'identical or nearly identical' standard survives Congress's adoption of the TDRA.” Slip Op. at 2395.

Congress Changed the Definition of Dilution in the TDRA

The TDRA is widely perceived as having resulted from Congress' desire to supersede the Supreme Court's holding in the Victoria's Secret case ' that the FTDA only protected against actual, but not likely, dilution. Moseley v. V Secret Catalogue, Inc. , 537 U.S. 418 (2003). In the district court, Abercrombie successfully limited the significance of the changes effected by the TDRA to the Victoria's Secret issue of actual vs. likely dilution. But as the Ninth Circuit pointed out, the amendments embodied in the TDRA went well beyond that question. Slip Op. at 2385.

When it passed the TDRA, Congress defined dilution by blurring as “association arising from the similarity between a mark or a trade name and a famous mark that impairs the distinctiveness of the famous mark.” 15 U.S.C. ' 1125(c)(2)(B). The TDRA includes a specific factor test for dilution by blurring, which provides that the “degree of similarity” between the marks, along with other factors such as distinctiveness, exclusive use, public recognition, intent, and actual association, determines whether there is a likelihood of dilution. 15 U.S.C. ' 1125(c)(2). The TDRA does not mention any threshold requirement that the junior and senior marks be “identical or nearly identical.”

Analyzing these provisions, the Ninth Circuit concluded that the statutory text did not support the district court's restriction of the statute. “Congress's implementation of [a non-exhaustive list of relevant factors] is simply not compatible with a determination that identity, near identity or substantial similarity are necessary to constitute a threshold showing for relief under ' 1125(c).” Slip Op. at 2396-97. Congress' use of the word “similarity,” the court reasoned, “sets forth a less demanding standard than that employed by many courts under the FTDA.” Id. at 2396. Helpful to Levi Strauss, while its appeal was pending, the Second Circuit considered similar arguments and ruled that its parallel “substantially similar” standard was not supported by the TDRA. Starbucks Corp. v. Wolfe's Borough Coffee, Inc. , 588 F.3d 97 (2d Cir. 2009).

The Ninth Circuit took care to ensure that its decision would not trivialize the importance of similarity in the dilution analysis. It noted that the forbidden association must arise from similarity between the challenged and famous marks, and observed that similarity was the first item in Congress' multi-factor test. Slip Op. at 2397. But it concluded that “Congress's decision to make 'degree of similarity' one consideration in a multi-factor list strongly suggests that it did not want 'degree of similarity' to be the necessarily controlling factor.” Id.

The TDRA Now Promises to Provide Incremental Protection for Famous Brands

When Congress first passed the Federal Trademark Dilution Act in 1996, there was a great deal of hope among trademark owners that their famous brands and design marks would enjoy an extra measure of protection. Consumer “association” was believed to be easier to prove than likely consumer confusion, which is necessary for trademark infringement. Those hopes, in many respects, have been substantially compromised until now. Victoria's Secret required a showing of actual dilution, and under the FTDA and until recently the TDRA as well, the “identical or nearly identical” rule likewise undermined the special protection thought to be available for famous trademarks.

Now, famous trademark owners again have reason for optimism. Congress has eliminated the “actual” dilution requirement and spelled out in non-exhaustive factor tests the requirements for fame and dilution. The Ninth and Second Circuits have eliminated any rule that a high degree of threshold similarity is necessary to establish the forbidden consumer associations that are likely to impair a famous mark. These changes should make it easier for trademark owners to avoid the barriers that have impeded protection under the federal dilution statute.

The benefit of these developments may be felt most acutely by owners of famous design marks. Word marks are apprehended by consumers on several dimensions, including sound and meaning. Similarity ' or, for that matter, a perception that marks are “identical or nearly identical” ' can be observed across these several dimensions. See, e.g., Jada Toys, 518 F.3d at 635 (marks nearly identical because both contain “hot,” giving them a “similar meaning and connotation,” and include flames and similar colors). Design marks, on the other hand, are perceived only visually, and therefore the search for similarity or “identicality” only typically arises in a side-by-side comparison. Now that the focus explicitly has shifted to the “degree of similarity,” along with all of the other factors that are likely to bear on consumer associations, the TDRA may genuinely become a tool for protection against erosion of famous design marks.

Gregory S. Gilchrist is a partner and Gia L. Cincone is counsel in Kilpatrick Townsend & Stockton LLP. Gilchrist and Cincone were trial and appellate counsel for Levi Strauss & Co. in the litigation discussed in this article.