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October 10, 2006
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.
Posted by Eric at October 10, 2006 02:25 PM | Trademark
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Comments
Professor:
I enjoyed your analysis of the Revision Act. I am a trademark attorney practicing on the East Coast. For years, the Second Circuit had only permitted dilution claims for inherently distinctive marks. This effectively barred dilution claims for descriptive marks that had gained widespread secondary meaning (and fame) in the marketplace. I note Section (c)(1) of the Act changes that, by expressly stating "or through acquired distinctivenss."
To me, this is a significant development because it now opens up dilution claims to a whole new class of marks (at least in the Second Circuit).
Any thoughts?
Thanks,
Jed Ferdinand
Grimes & Battersby, LLP
Posted by: Jed Ferdinand at October 17, 2006 07:41 AM
Jed, thanks for the comment. I think that's right. I had thought most courts had steered away from the inherent distinctiveness requirement, but that may have been masked by the general downdraft of dilution cases post-Moseley. Note that some of the acquired distinctiveness claims still will be barred by the more rigorous definition of "famous." Eric.
Posted by: Eric Goldman at October 17, 2006 09:51 AM
"n the past, dilution remedies were limited to an injunction. Now, damages are available for willful dilution."
The previous version of 43(c) included this provision: "In an action brought under this subsection, the owner of the famous mark shall be entitled only to injunctive relief as set forth in section 34 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. If such willful intent is proven, the owner of the famous mark shall also be entitled to the remedies set forth in sections 35(a) and 36, subject to the discretion of the court and the principles of equity."
Was this section not previously enforced? If not, is there reason to think that courts will enforce it now?
Posted by: question at October 22, 2006 12:20 PM
Question, thanks for the comment. I've tinkered with the language to clarify my point. The caselaw on dilution damages is confusing already, and I'm not sure how revised standards triggering damages will affect damages computations. Eric.
Posted by: Eric Goldman at October 23, 2006 04:18 PM
I came across this while researching related material on trademark issues affecting domain names. After reading this, I figured I'd ask a hypothetical qustion for clarification (but not seeking legal advice, of course.)
Let's say I register trendmicrosoftest . com with the intent to sell bowling balls. Given this recent development you wrote about, is it "safe" to assume I won't be able to use that domain name because it's cutting too close to 2 famous marks, despite the intended use being unrelated to the 2 mark holders'?
Well one famous and one potentially famous, anyway.
On the side, this won't affect the Perfumebay . com dispute currently being heard since this law isn't retroactive, will it?
Again, just seeking clarification and not legal advice. Thanks.
Posted by: Dave Zan at November 13, 2006 10:16 PM
The standard ,from “actual dilution” to “likelihood of dilution”,why changed so soon??what is Congress"s intend??I dont understand ,do you favour me a answer??Thanks a lot.
Posted by: KUYPER at November 20, 2006 06:33 AM