TRADE REGULATION: INTERPRETING THE FEDERAL TRADEMARK DILUTION ACT

[p107] Petitioner owned and managed an adult novelty store named “Victor’s Little Secret.”[1] Respondent, owner of the “Victoria’s Secret” trademark, brought a trademark dilution suit under the authority granted by the Federal Trademark Dilution Act (FTDA) [2] against Petitioner. [3] The District Court for the Western District of Kentucky granted summary judgment in favor of Respondent, finding Respondent’s trademark was diluted by Petitioner’s use of a similar name. [4] Petitioner appealed and the Sixth Circuit Court of Appeals affirmed.[5] The U.S. Supreme Court granted certiorari, and in reversing the decision of the appellate court HELD, that [p108] dilution of a trademark as defined by the FTDA requires a showing of actual dilution, which Respondent failed to establish.[6]

The FTDA provides for injunctions and monetary remedies for the dilution of famous trademarks.[7] In order for trademark dilution to occur, the FTDA states that the original trademark must be famous and distinctive. [8] The FTDA further defines dilution as a use that adversely affects the ability of the trademark to be associated with a particular good or service, regardless of whether competition between the parties exists, or if there is a “likelihood of confusion, mistake, or deception,” between the two trademarks. [9] Since the enactment of the FTDA, courts have struggled with interpreting and applying the standard for trademark dilution because of the broad language used in the statute.[10]

In Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Development,[11] the Fourth Circuit Court of Appeals was required to analyze the concept of trademark dilution in accordance with the FTDA.[12] The issue in this case was whether the use of the registered trademark slogan, “THE GREATEST SNOW ON EARTH,” diluted the similar and more famous trademark, “THE GREATEST SHOW ON EARTH,” as defined by the FTDA. [13] As evidence of trademark dilution, the Ringling Bros. court was provided with a consumer survey indicating that observers of the two trademarks made a mental association between the slogans.[14]

[p109] The Ringling Bros. court held the injunctive relief sought would not be granted because sufficient evidence was not presented to show that trademark dilution had occurred.[15] In order to prevail in a trademark dilution claim, certain requirements must be satisfied. [16] The three requirements are that first, the senior trademark, “THE GREATEST SHOW ON EARTH,” must be famous; second, the use of the junior trademark, “THE GREATEST SNOW ON EARTH,” must begin after the senior trademark has become famous; and finally, the use of the junior trademark must have diluted the senior trademark.[17] In defining dilution, the court of appeals indicated that dilution by “blurring” occurs when consumers form an instinctive mental association between the two marks based on their similarities, and this mental association caused actual harm to the selling power of the senior trademark, not merely to the distinctiveness of the mark.[18]

The parties agreed the senior trademark was famous and had become famous before the first use of the similar slogan.[19] Consequently, the appellate court was left to decide the third element, whether dilution by “blurring” had occurred.[20] Applying the definition established by the Ringling Bros. court, it found consumers formed a mental association between the slogans. However, the requirement of showing actual economic harm due to defendant’s use of the similar trademark, [21] such as actual loss in sales or profits, was not met.[22] Although recognizing that a showing of actual dilution was a burdensome task, the Ringling Bros. court [p110] nevertheless concluded it was the proper standard of injury for trademark dilution.[23] For this reason, the Ringling Bros. court held defendant’s trademark did not amount to dilution of plaintiff’s trademark.[24]

Several federal courts, including the Fifth Circuit Court of Appeals, adopted similar requirements for trademark dilution disputes.[25] However, despite some acceptance of the elements used in Ringling Bros., other circuit courts have derived different variations in defining the term “dilution” and the proper standard of injury which should be applied. [26] In Nabisco, Inc. v. PF Brands, Inc., [27] the Second Circuit Court of Appeals implemented a less stringent interpretation of the FTDA that expressly opposed the reasoning used by the Ringling Bros. court.[28]

In Nabisco, the plaintiff brought suit against another manufacturing business seeking a preliminary injunction against the marketing and production of the defendant’s similarly designed cheese cracker.[29] In response to a trademark dilution claim, defendant argued that no proof of actual harm or injury as a result of the alleged dilution had been provided to the district court.[30]

Analyzing the language of the FTDA and rejecting the standard of injury used in Ringling Bros.,[31] the Nabisco court reasoned that if actual proof of harm was required to show trademark dilution, then the senior user would never be compensated as a matter of law because when there [p111] is no willful intent, the FTDA’s only remedy for trademark dilution is an injunction.[32]

Following this interpretation, the circuit court developed a standard similar to Ringling Bros.,[33] but it differed in stating that only a presumption of harm caused by a “likelihood of dilution” or “likelihood of injury” was required to prevail in a trademark dilution claim. [34] In Nabisco, an association in the minds of consumers was formed between the senior and junior mark by the use of the junior mark. The circuit court found that this lessening of distinctiveness of the senior mark met the “likelihood of dilution” standard for trademark dilution. [35] Subsequently, the circuit court held in Nabisco that the respondent showed a likelihood of success in the dilution claim and therefore issued a preliminary injunction.[36]

In the opinion for the instant case, authored by Justice Stevens, the Court did not reach the same result as the Nabisco court. [37] Instead, the instant Court relied on the legislative history and an analysis of the FTDA [38] to find that trademark dilution under the statute requires proof of actual dilution.[39] Considering the committee report of the FTDA, the Court concluded dilution requires a blurring of the famous trademark with the junior trademark. [40] Additionally, in examining state trademark dilution statutes enacted before the FTDA, the instant Court noted the state statutes repeatedly make reference to a “likelihood of harm” as opposed to the [p112] FTDA’s requirement of a showing of actual dilution. [41] Furthermore, the definition of “dilution” [42] in the FTDA only confirmed the instant Court’s conclusion that actual dilution must be established.[43]

In applying Ringling Bros. to the instant case, the instant Court agreed consumers must form a mental association between the two trademarks, but this alone is not enough to support a trademark dilution claim where the two marks are not identical. [44] The instant case explained dilution in the form of blurring is not a necessary consequence of the association of the famous with similar trademarks.[45] However, this Court’s conclusion differed from the opinion of the Fourth Circuit because there, the consequences of dilution injury, such as economic loss in the form of sales or profits, may be used to prove actionable trademark dilution, but the showing is not essential.[46]

In the instant case, Respondent made a similar argument to that which found in Ringling Bros., that requiring the Petitioner to demonstrate actual dilution creates an impractical and undue burden.[47] In response, the instant Court stated that, where the trademarks are identical, circumstantial evidence can be used to meet this burden of proof. [48] Moreover, the difficulty of obtaining such proof does not outweigh the statutory requirement to show actual dilution.[49]

In a concurring opinion, Justice Kennedy further placed emphasis on the term “capacity” found in the FTDA statute to require an evidentiary [p113] showing of actual dilution. [50] Justice Kennedy characterized “capacity” within the meaning of the statute as the power of a famous mark to identify and distinguish a particular good or service.[51] Justice Kennedy concluded that a decreased ability of the famous mark to serve as an indicator regarding the quality and satisfaction of a good or service signifies dilution of the trademark.[52] According to the concurring opinion, this capacity diminishment of the famous trademark as a result of the use of the similar trademark could be used to prove actual dilution.[53]

In its decision in the instant case, the U.S. Supreme Court unanimously agreed on proof of actual dilution as the standard injury in trademark dilution disputes. According to the reasoning used by the instant Court, while a “likelihood of dilution” standard may not be derived from an interpretation of the FTDA, [54] analysts of the statute suggest that requiring a showing of actual dilution may not achieve the intended effect of the FTDA for trademark protection.[55] In adopting a harsher standard than the “likelihood of dilution” found in most state statutes, [56] combined with some adherence to Ringling Bros.,[57] the instant Court appears to support a policy that provides less protection to the owners of famous trademarks than provided for in Nabisco.

Even though the holding of the instant case is a unanimous decision, the concurrence of Justice Kennedy seems to suggest an opinion in favor of the “likelihood of dilution” standard.[58] In the concurrence, Justice Kennedy reasons that if the use of a similar mark will erode or lessen the power of the famous mark, then the elements of dilution are present. [59] [p114] Justice Kennedy also states the purpose of injunctive relief is to prevent a future wrong. [60] These statements refer to trademark dilution harm that has not yet occurred, but is likely to happen in the future.

The instant Court also may have failed to provide clear guidelines for lower courts to apply in finding actual dilution. In situations where the two trademarks are identical, the instant Court states circumstantial evidence may be used if actual dilution can be proven.[61] However, the instant Court’s opinion does not specify what kind of circumstantial evidence might satisfy this requirement. [62] Furthermore, the instant Court provides even less guidance as to what may constitute evidence for a showing of actual dilution when the trademarks are similar.

With regards to similar trademarks, the instant case ambiguously suggests consumer surveys or testimony showing consumers have a different impression of the senior trademark as a result of the use of the junior trademark may suffice as proof of actual dilution.[63] Additionally, the Court only implied that expert testimony showing an adverse impact on the strength of the senior trademark as a result of the use of the junior trademark, may also be used. [64] However, existence of this kind of evidence as derived from the consumer’s viewpoint, may signify economic injury or actual harm has already occurred. Thus, the instant Court, by not specifying precise guidelines, may cause owners of famous trademarks in dilution disputes to prove “actual injury” rather than the less stringent standard of “actual dilution.”[65]

The instant Court also implicitly rejects the reasoning used by the Second Circuit Court of Appeals in Nabisco.[66] Unlike Nabisco, the instant opinion does not address the issue of whether an injunction will provide [p115] an equitable remedy for a complaining trademark owner, whose mark is being diluted by another party’s use of a similar trademark.[67] The Court states actionable dilution does not require a showing of actual economic harm, but the Court implies a trademark owner experiencing actual injury, such as loss of revenue, will also be able to seek an injunction under the authority of the FTDA. [68] However, in his concurring opinion, Justice Kennedy states the purpose of an injunction is to prevent the violation of a constitutionally provided right.[69] This, combined with the fact that the FTDA only grants injunctive relief absent willful intent, [70] affirms the instant Court’s reliance on a strict interpretation of the statute. The instant case thus implies an injunction without monetary relief will be an equitable remedy for a trademark owner whose mark is diluted, even though the mark owner has suffered economic injury, such as a loss in profits or sales.[71]

Future trademark dilution litigation in the U.S. Supreme Court may clarify this and other issues. However, until that time, lower courts will struggle in deciding trademark dilution disputes. Furthermore, adopting the “actual dilution” standard of injury may also have two other consequences. Congress may rewrite the FTDA in light of recent litigation to resolve any future confusion regarding trademark dilution. [72] Additionally, owners of famous trademarks may prefer to rely strictly on state trademark dilution statutes since most require only a “likelihood of harm” rather than a showing of “actual dilution.” [73] The instant Court, thus, may have settled the standard of injury but has left many questions unanswered, which may lead to unpredictable and inconsistent results in trademark dilution claims in lower federal courts.

[*] J.D. Candidate, University of Florida Levin College of Law, 2005. I dedicate this Comment to my family and friends for all of their continuing support and encouragement throughout all the years. I would also like to thank Professor Cotter, for without his enthusiasm, dedication, and teachings devoted to Intellectual Property Law, this Comment and my IP education would not be possible.

[1] Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 422 (2003). Petitioner changed the store’s name from “Victor’s Secret” to “Victor’s Little Secret” in an unsuccessful attempt to meet the demands of Respondent. See id. at 423.

[2] 15 U.S.C. § 1125(c) (2000) (stating “[t]he owner of a famous mark shall be entitled . . . to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark . . .”).

[3] Moseley, 537 U.S. at 423-24. The complaint also contained trademark infringement and unfair competition claims. See id.

[4] Id. at 425. With respect to trademark infringement and unfair competition claims, the district court granted summary judgment in favor of Petitioner, finding no “likelihood of confusion” between the parties’ marks. See id.

[5] Id. In affirming the district court’s finding of trademark dilution, the court of appeals applied a subjective “likelihood of dilution” standard. V Secret Catalogue, Inc. v. Moseley, 259 F.3d 464, 470-71 (6th Cir. 2001); see generally Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2d Cir. 1999) (applying a “likelihood of dilution” standard for the injury in trademark dilution disputes).

[6] Moseley, 537 U.S. at 433.

[7] See id. at 421. The Federal Trademark Dilution Act allows monetary damages only when there is willful intent to use a similar trademark name in order to benefit from the reputation of the owner of the famous trademark. See 15 U.S.C. § 1125(c)(2) (2000).

[8] See Moseley, 537 U.S. at 421-22.

[9] See 15 U.S.C. § 1127 (2000).

[10] See generally Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Dev., 170 F.3d 449, 456-58 (4th Cir. 1999); see also John F. Hacking, Trademark Dilution: Setting the Dilution Standard Under the Federal Trademark Dilution Act, 5 Tul. J. Tech. & Intell. Prop. 115, 123 (2003).

[11] Ringling Bros., 170 F.3d at 449.

[12] See id. at 451.

[13] See id. at 452. The similar trademark slogans were both used for advertising purposes, each promoting a different good or service. The owner of the famous trademark slogan, “THE GREATEST SHOW ON EARTH,” used the slogan in advertisements for circus performances, while the owner of the trademark slogan, “THE GREATEST SNOW ON EARTH,” used the slogan primarily on vehicle license plates to promote tourism. See id. at 451.

[14] See id. at 452-53. It was undisputed the slogan, “GREATEST SHOW ON EARTH,” was famous and distinctive. This left the Ringling Bros. court with only one issue to decide: whether dilution of the trademark occurred. See id. at 452.

[15] See id. at 464-65.

[16] See Ringling Bros., 170 F.3d at 461. The appellate court applied the same “economic harm” or “actual injury” test used by the district court to establish dilution of a famous mark. See id.

[17] See id. at 452.

[18] See id. at 461. The Ringling Bros. court derived this test by examining the language of the FTDA and concluded that it required more than a “likelihood of harm” because only requiring the senior trademark owner to show a presumption of harm would give that mark owner a “radical property right in gross” type of dilution. See id. at 459.

[19] See id. at 452. The trademark, “GREATEST SHOW ON EARTH” was introduced to the public in 1872 as an advertising slogan for a circus. More than 70 million people are exposed to the slogan each year and revenues from goods and services using the slogan exceeded $103 million for the fiscal year ending January 1997. Id. at 451.

[20] See id. at 452.

[21] See Ringling Bros., 170 F.3d at 462.

[22] See id. at 465. The Ringling Bros. court also stated proof of “actual harm” could be inferred by the results of a survey showing the consumer’s mental association of the marks with “further consumer impressions.” See id. (citing Patrick M. Bible, Defining and Quantifying Dilution under the Trademark Dilution Act of 1995: Using Survey Evidence to Show Actual Dilution, 70 U. Colo. L. Rev. 295, 327-28 (1999).

[23] See id.

[24] See supra text accompanying note 22.

[25] See generally Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658, 670 (5th Cir. 2000) (applying an “actual harm” standard of injury in the trademark dilution dispute).

[26] See Alfred W. Zaher & Hallum O. Bailey, Federal Trademark Dilution — Where Do We Go From Here?, 26 Pa. L. Wkly. 24 (2003). The Eighth Circuit Court of Appeals agreed that trademark dilution occurs when similarities between two trademarks lead consumers to connect the marks with different products. See Luigino’s, Inc. v. Stouffer Corp., 170 F.3d 827, 832 (8th Cir. 1999).

[27] 191 F.3d 208 (2d Cir. 1999).

[28] See id. at 224-25.

[29] See id. at 213. Petitioner Nabisco, Inc. entered into a contract with a third party to market and produce a goldfish-shaped cheese cracker to promote a television program. This cheese cracker had a similar appearance, shape, size, and taste to the famous trademark cracker of Respondent Pepperidge Farm, Inc. Id.

[30] See id. Respondent also alleged trademark infringement and unfair competition in addition to the trademark dilution claim. The district court granted the preliminary injunction based on the trademark dilution claim but found no evidence of trademark infringement or unfair competition. Nabisco, Inc. v. PF Brands, Inc., 50 F. Supp. 2d 188, 210-12 (S.D.N.Y. 1999).

[31] See Nabisco, 191 F.3d at 224.

[32] See id. The circuit court in Nabisco relied on the wording of FTDA, which states monetary damages will be awarded when the person against whom the injunction is sought willfully intended to cause the dilution. 15 U.S.C. § 1125(c)(2) (2000).

[33] See Nabisco, 191 F.3d at 215. The elements of the test used by the Second Circuit Court of Appeals for a claim of dilution are: the senior trademark must be famous and distinctive; the use in commerce of the junior trademark must begin after the senior trademark became famous; and the use of the junior trademark must cause dilution of the distinctive quality of the senior trademark. Id.

[34] See supra text accompanying note 18.

[35] See Nabisco, 191 F.3d at 217.

[36] See id. at 228.

[37] See generally Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 431 (2003).

[38] See id. The FTDA committee report stated the “purpose of [FTDA] is to protect famous trademarks from subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it, even in the absence of a likelihood of confusion.” H.R. Rep. No. 104-374 (1995).

[39] Moseley, 537 U.S. at 431-33.

[40] See supra text accompanying notes 38-39. The FTDA committee report mentioned the term “tarnish.” The instant Court suggested dilution may be caused by tarnishment, but noted Petitioners did not dispute the relevance of tarnishment, presumably because the subject was a prominent issue in state trademark dilution litigation and legislative history. See Moseley, 537 U.S. at 431.

[41] See supra text accompanying note 9. Since the term “dilution” is defined as an actual “lessening of the capacity” of the trademark regardless of a “likelihood of confusion, mistake, or deception,” the instant Court explained the statute required an actual injury as opposed to merely the consumer’s association between the two trademarks. See Moseley, 537 U.S. at 433 (interpreting the wording of 15 U.S.C. § 1125(c)(1) (2003)).

[42] See Moseley, 537 U.S. at 433.

[43] See id.

[44] Applying the facts of Ringling Bros., the instant Court pointed out that, even though consumers may associate and think of the trademark slogan, “THE GREATEST SHOW ON EARTH,” when they see the similar slogan, “THE GREATEST SNOW ON EARTH,” consumers will not correlate the different goods and services of the similar trademarks. Thus, no blurring will have occurred in the minds of consumers. See id. at 433-34 (discussing Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Dev., 170 F.3d 449, 465 (4th Cir. 1999)).

[45] Id.

[46] See id. at 433.

[47] See Moseley, 537 U.S. at 434. In the instant case, arguments were made that “consumer surveys and other means of demonstration [of] actual dilution are expensive and often unreliable.” See also Ringling Bros., 170 F.3d at 464.

[48] See Moseley, 537 U.S. at 434.

[49] See id. The judgment in the instant case was reversed and remanded. On remand, Respondent prevailed upon a showing of actual dilution by presenting sufficient evidence. Id. at 436 (Kennedy, J., concurring).

[50] Id. at 435 (Kennedy, J., concurring).

[51] See id. Justice Kennedy stated capacity meant “the power or ability to hold, receive, or accommodate.” Id. (quoting Webster’s Third New International Dictionary, 330 (3d ed. 1961)).

[52] See id.

[53] Moseley, 537 U.S. at 435-36 (Kennedy, J., concurring).

[54] Id. at 432-33.

[55] See, e.g., Sue A. Mota, Victor’s Little Secret Prevails (for now) over Victoria’s Secret: The Supreme Court Requires Proof of Actual Dilution under the FTDA, 19 Santa Clara Computer & High Tech. L.J. 541, 548 (2003) (“[a]n FTDA plaintiff should not have to wait until there is actual harm, but should be able to show ‘diminishment of the capacity’ of the mark . . .”); Katherine Ruwe, The Federal Trademark Dilution Act: “Actual Harm” or “Likelihood of Dilution”?, 70 U. Cin. L. Rev. 1175, 1199 (2002) (“. . . the entire purpose of the FTDA would be defeated if the Supreme Court or Congress adopted the actual harm standard.”).

[56] See supra text accompanying note 41.

[57] See supra text accompanying note 47.

[58] See generally Moseley, 537 U.S. at 435 (Kennedy, J., concurring).

[59] Id.

[60] “The essential role of injunctive relief is to ‘prevent future wrong, although no right has yet been violated.’” Id. at 436 (Kennedy, J., concurring) (citing Swift & Co. v. United States, 276 U.S. 311, 326 (1928)).

[61] See supra text accompanying note 48.

[62] See Moseley, 537 U.S. at 434.

[63] In the instant case, the Court notes that when a consumer saw the ad for “Victor’s Secret,” he was offended, but his offense was directed to the owners of the junior trademark and it did not change his conception of Victoria’s Secret or lessen “. . . the capacity of the Victoria’s Secret mark to identify and distinguish goods or services sold in Victoria’s Secret stores or advertised in its catalogs.” Id.

[64] See id.

[65] In Ringling Bros., the appellate court states that in proving “actual injury,” dilution causing an “actual economic harm to the famous mark’s economic value. . .,” must be shown. See Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. Of Travel Dev., 170 F.3d 449, 461 (4th Cir. 1999).

[66] See supra text accompanying note 32.

[67] In Nabisco, the appellate court implied it would not be equitable for an owner of a famous trademark, who is suffering from an actual loss of revenues as a result of trademark dilution, to be only able to seek an injunction and not monetary relief. This reasoning led to the circuit court’s decision to use the “likelihood of dilution” standard. See Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 223-24 (2d Cir. 1999).

[68] See Moseley, 537 U.S. at 432-33.

[69] See supra text accompanying note 60.

[70] “. . . the owner of the famous mark shall be entitled only to injunctive relief . . . unless the person against whom the injunction is sought willfully intended to trade on the owner’s reputation or to cause dilution of the famous mark.” 15 U.S.C. § 1125(c)(2) (2000).

[71] See supra text accompanying note 32.

[72] See supra text accompanying note 10.

[73] See supra text accompanying note 41.


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