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President Signs Trademark Dilution Bill

10/6/2006
     

DILUTION UPDATE

Owners of famous trademarks now have a new weapon in trademark litigation. On September 26, 2006, the United States House of Representatives approved the Senate version of the Trademark Dilution Revision Act of 2006 (H.R. 683). H.R. 683 became law on October 6, 2006 upon the President's signature.

H.R. 683 is in large part a response to courts' interpretation of the previous Federal Trademark Dilution Act of 1995 ("FTDA"). Following the passage of the FTDA, the circuit court of appeals split as to whether the statute required the owner of a famous mark to prove actual harm as a prerequisite to injunctive relief. The Supreme Court decision in Mosley v. V Secret Catalogue, 537 U.S. 418 (2003), addressed this issue. Mosley involved a dilution action between Victoria's Secret, a lingerie company, and Victor's Little Secret, a small-town adult novelty shop. The Court held that plaintiff had to show objective proof of actual injury to the economic value of a famous mark, but did not offer any specific guidance on how to prove actual dilution. Congress came to regard the Mosley standard as an undue burden for trademark holders who contest diluting uses, and therefore sought to revise the FTDA.

In passing H.R. 683, Congress also aimed to resolve other issues related to dilution. After the FTDA's passage, the circuits also split on the meaning and application of other core provisions of the statute, including what constitutes a famous mark, whether marks with acquired distinctiveness are protected under the statute, and whether the FTDA covers dilution by tarnishment. This absence of uniformity was deemed to complicate the ability of mark holders to protect their property and businesses to plan their commercial affairs.

In sum, H.R. 683 serves as a legislative response to said problems, and is meant to provide guidance to the courts and ensure uniform application and interpretation of the federal dilution law. However, the new law does leave open certain issues to which only court decisions will provide answers. For example, how well known by the general public must a mark be need to be deemed “Famous”?

Definition of a Famous Mark

Under the new legislation, a mark is famous only if it is recognized by the general consuming public as a designation of source of goods or services of the mark's owner. The relevant factors a court may consider in assessing a mark's fame, include: (1) the duration, extent, and geographic reach of advertising and publicity of the mark; (2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; (3) the extent of actual recognition of the mark; and (4) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.

In addition, federal dilution claims are no longer limited to owners of inherently distinctive marks, but also to owners of famous marks that have acquired distinctiveness

Definition of Dilution

H.R. 683 specifically recognizes two types of dilution: (A) dilution by blurring, and (B) dilution by tarnishment.

Dilution by blurring is an association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.

Here, the court may consider all relevant factors when determining whether a mark or trade name is likely to cause dilution by blurring, including: (1) the degree of similarity; (2) the degree of inherent or acquired distinctiveness of the famous mark; (3) the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (4) the degree of recognition of the famous mark; (5) whether the user of the mark or trade name intended to create an association with the famous mark; and (6) any actual association between the mark or trade name and the famous mark.

Dilution by tarnishment is association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.

Trade Dress Considerations

H.R. 683 requires the person who asserts trade dress protection for trade dress not registered on the principal register in a civil action for trade dress dilution to prove that: (1) the claimed trade dress, taken as a whole, is not functional and is famous; and (2) if the claimed trade dress includes any mark or marks registered on the principal register, the unregistered matter, taken as a whole, is famous separate and apart from any fame of such registered marks.

Preliminary Injunction & Other Remedies

Significantly, under H.R. 683, there is no longer a requirement to prove actual dilution, a plaintiff only has to show that defendant's use causes a "likelihood" of dilution. Thus, an owner of a famous mark that is distinctive is entitled to an injunction against another person who commences use of a mark or trade name, after it has become famous, in commerce in a manner that is likely to cause dilution by blurring or tarnishment, regardless of the presence or absence of actual or likely confusion, competition, or actual economic injury.

The owner of a famous mark can seek additional remedies in an action if the person against whom the injunction is sought: (1) first used the mark or trade name in commerce after the date of enactment of this Act; (2) willfully intended to trade on the recognition of the famous mark; or (3) willfully intended to harm the reputation of the famous mark.

Defenses

Fair use is now a carved-out defense to a cause of action for dilution. Specifically, acts that are not actionable as dilution by blurring or tarnishment, include: (1) any fair use of a famous mark by another person other than as a designation of source for the person's own goods or services, including for advertising or promotion that permits consumers to compare goods or services, or identifying and parodying, criticizing, or commenting upon the famous mark owner or the owner's goods or services; (2) all forms of news reporting and news commentary; and (3) any noncommercial use of a mark.

In addition, ownership of a valid registration is a complete bar to an action under state common law or statute that seeks to prevent dilution by blurring or tarnishment or that asserts any claim of actual or likely damage or harm to the distinctiveness or reputation of a mark, label, or form of advertisement.

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If you have any questions or need additional information about H.R. 683, please contact a member of the Trademark Group at Sughrue Mion PLLC at (202) 293-7060.

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