Trademark Dilution Revision Act of 2006

By Eric Goldman

Last week, President Bush signed the Trademark Dilution Revision Act of 2006 into law. Ostensibly, this law was intended to overturn the Moseley case’s requirement that plaintiffs show “actual dilution” instead of a “likelihood of dilution.” However, the act morphed into an omnibus dilution revision effort that reshapes dilution law on a number of fronts. The result is a mixed bag–there is a little good news mixed in with the bad. Based on my new sunny California optimism, I’m going to start with the good news:

The Good News

* No Third Basis of Dilution. The law defines dilution by blurring and dilution by tarnishment and limits dilution claims to one of those. Some courts had suggested that there might be activities other than blurring and tarnishment that would constitute dilution. The statutory revisions eliminate the possibility of a third basis of dilution.

* No Niche Fame. The statute defines a famous mark as being “widely recognized by the general consuming public of the United States.” This should eliminate niche fame, where a mark is famous only within a narrow subcommunity. Thus, many marks should not qualify for dilution protection.

* Fair Use Defenses. The fair use defenses were clarified a bit, including express protections for comparative advertising, parodies, criticism and comments. These aren’t radically different from the past statute, though, and all of these behaviors could have been more clearly protected through a tighter definition of “use in commerce” (see below).

The Bad News

* Likelihood of Dilution standard. The “actual dilution” standard was a high bar for plaintiffs, so the Moseley case had the practical effect of stopping a lot of dilution claims in their tracks. From the perspective of academics who didn’t think much of the theoretical underpinnings of dilution law, this was not a bad practical outcome from the case. The “likelihood of dilution” standard is a more relaxed standard, and it had supported a lot of questionable dilution outcomes pre-Moseley. The problem is that no one knows how to measure a “likelihood of dilution,” so this standard allows for a lot of intuition-driven results that lack any empirical evidence and may be completely inconsistent with social science literature.

* Definitions of “Blurring” and “Tarnishment.” No one exactly understood what behavior caused blurring or tarnishment before. Now, we have definitions, which is a positive development. Unfortunately, the definitions are sweepingly broad:

– Blurring = an association that impairs a mark’s distinctiveness. The statute provides some unhelpful factors to evaluate this. However, I have no idea what this language means, and on the surface it appears to cover a lot of behavior.

– Tarnishment = an association that harms the mark’s reputation. Once again, I have no idea what this means or how broadly courts will interpret it.

* Use in Commerce. The good news is that statutory revisions reduced the awkward “commercial use in commerce” requirement to just “use in commerce.” The problem is that no one knows what “use in commerce” means. There’s a raging debate over whether the phrase is Congress’ nod to the Commerce Clause, which simply means that any behavior regulatable under the Commerce Clause is covered by the dilution act, or if it requires the behavior described in the definition for “use in commerce” in 15 USC 1127 (Lanham Act Sec. 45), which generally contemplates some display of the trademark on external packaging. The latter interpretation acts as a meaningful bar to dilution claims; the former interpretation exposes lots of non-commercial actors to coverage under the dilution act. Combined with the amorphous definitions of blurring and tarnishment, there is plenty of room for courts to nail socially beneficial speech under the dilution act.

* Damages. The act has modified the damages provision to apply if the defendant willfully trades on the mark’s recognition or intends to harm the mark’s reputation. I’m not sure how courts will evaluate willfulness here, and perhaps more importantly, I have no idea how courts will measure these damages. But we’re dealing with famous marks that by definition should have significant economic value. Dilution arguably jeopardizes all of this value, so huge damage awards seem possible. This is particularly problematic for any non-commercial actors caught in the dilution cross-fire, who could face life-altering damage awards under the statute. However, I expect we’ll also see some strategic litigation between competitors to try to game the possibility of enormous dilution damages.

Conclusion

On balance, the news is generally unfavorable for trademark dilution defendants. There was some narrowing of dilution law through the redefinition of famous marks, but this is substantially outweighed by the amorphous likelihood of dilution standard and the possibility of big damages. Ultimately, we’ll have to wait to see how the courts interpret the statute before we know the full extent of the damage.