Monday, April 21, 2008

New trademark dilution rules working as intended

By Stacey C. Friends and Steven L. Feldman

Just over a year ago, our article in this publication outlined the then-recently enacted Federal Trademark Dilution Revision Act (TDRA), which sought to clarify certain ambiguities with trademark dilution under the previous law. Dilution law protects owners of famous trademarks (such as "Google" or "Starbucks") from uses that diminish the distinctiveness of such marks ("blurring") or that harm their reputation ("tarnishment"). More specifically, the dilution act sought to clarify the standard for deeming a mark "famous," the proof required to obtain relief for dilution of famous marks and defenses to dilution claims. Now, one year later, the cases decided so far under the act show that its goals are largely being achieved -- namely that the dilution act has raised the bar for proving the fame of a mark, but once fame is proven, it is generally easier for a famous mark's owner to obtain an injunction or damages.

One clear and intended effect of the act was to make it more difficult for a trademark owner to prove that its mark is truly famous. Prior to the enactment of the dilution act, trademark owners were able to assert claims by demonstrating "niche fame" -- fame in a specialized market. For example, "The Sporting News" was found to be famous in the sports news market and "Savin" possibly famous in the office equipment market. In sharp contrast, recent cases decided under the act, relying on the act's definition of fame as "widely recognized by the general consuming public," have specifically rejected the concept of "niche fame." For example, the mark "ComponentOne" was recently found not to be famous under the dilution act, despite its renown among IT developers, and "Sunshine in a Box" was not found to be famous simply because it was well-known in the lighting-products market.

The act was also specifically designed to clarify the type of proof required to obtain relief for dilution. In 2003, the U.S. Supreme Court decided that Victoria's Secret Stores Inc. could not prevail in a dilution action against "Victor's Little Secret" (a lingerie and "adult" shop) because it did not prove actual economic harm ("actual dilution"). As a result, Congress enacted the TDRA which set the lower "likely to dilute" standard for proof of dilution claims. Now, one year later, the cases decided under the dilution act make clear the burden faced by owners of famous marks is indeed much lower. For example, a court recently found "Perfumebay" was likely to dilute the famous "eBay" mark, and Pepsi cans converted into "safes" were held likely to dilute by tarnishment the Pepsi mark due to the common use of the safes to conceal drugs or drug paraphernalia.

The act has also provided some clarity to three main defenses to a dilution claim: fair use, news reporting and commentary, and noncommercial use. Parody is included under fair use and was one of the main considerations in what was certainly the most humorous dilution case during the past year and a half: Louis Vuitton Malletier SA v. Haute Diggity Dog LLC. Haute Diggity Dog (HDD) sells dog toys that parody famous brands, such as "Chewnel No. 5," "Jimmy Chew," and in this case, "Chewy Vuiton," which also imitated Louis Vuitton's famous trade dress. Louis Vuitton objected, and Haute Diggity Dog claimed parody as a defense. The court found that the Louis Vuitton mark and trade dress were certainly famous and the company had shown an association between the Chewy Vuiton mark and its marks. However, such an association was necessary for the parody to be successful, and Louis Vuitton had not shown that this use was likely to impair the distinctiveness of its marks -- in fact, the court found that such a parody would tend to increase the fame of the Louis Vuitton marks.

In short, the act sought to provide much clearer guidance on what dilution law will protect and how the owner of a famous trademark can seek such protection. The case law after one year seems to demonstrate that the goals of the dilution act are being achieved -- famous marks are more difficult to prove but, once proven, they are generally entitled to greater protection than under prior federal trademark law. As a result, the dilution act has also had an impact on owners of nonfamous trademarks, who need to be more careful that their marks do not dilute truly famous marks.

Stacey C. Friends and Steven L. Feldman are shareholders of Ruberto Israel & Weiner PC. Friends is a member of the firm's intellectual property, corporate, technology and retail, food and hospitality groups. Feldman is a member of the firm's intellectual property, litigation, technology and construction groups.