Moseley v. v Secret Catalogue, Inc.: the United States Supreme Court's Actual Harm Standard of Dilution Whittles Away Ftda Protection Offered to Famous Trademarks

• Publication year: 2022

37 Creighton L. Rev. 709. MOSELEY V. V SECRET CATALOGUE, INC.: THE UNITED STATES SUPREME COURT'S ACTUAL HARM STANDARD OF DILUTION WHITTLES AWAY FTDA PROTECTION OFFERED TO FAMOUS TRADEMARKS

Creighton Law Review

Vol. 37

INTRODUCTION

The historical foundations for the concept of trademark dilution correlate to the uniqueness of a trademark.(fn1) The threat dilution poses to a trademark owner involves the owner's right to preservation of the trademark's uniqueness.(fn2) The harm of dilution takes the form of a trespass damaging the owner's incorporeal property right in the trademark.(fn3) Congress passed the Federal Trademark Dilution Act ("FTDA") in 1995 establishing federal protection against dilution.(fn4) Judicial interpretation of the requirements for a dilution claim under the FTDA caused a split among the federal circuits regarding the appropriate standard of harm to apply, i.e. whether the statute required a showing of actual injury of dilution.(fn5)

In Moseley v. V Secret Catalogue, Inc.,(fn6) the United States Supreme Court resolved this split in the circuit courts.(fn7) In Moseley, the Supreme Court unanimously held the FTDA required a showing of actual dilution.(fn8) The Court reasoned that the language of the statute unambiguously called for actual dilution, rather than a likelihood of dilution.(fn9) The Court stated that direct evidence of dilution or circumstantial evidence of dilution may satisfy the evidentiary standard.(fn10) The Court noted that a showing of actual dilution does not requireproof of the consequences of dilution, such as actual lost sales or profits.(fn11) The Court maintained that the difficulty of proving actual dilution was not a suitable reason for dispensing with proof of an essential component of a federal dilution claim.(fn12)

This Note will first review the facts and holding of Moseley.(fn13) This Note will then discuss the development of dilution as a basis for trademark protection under state and federal statutes.(fn14) Next, this Note will argue that the Supreme Court adopted the wrong standard of harm for dilution under the FTDA and therefore narrowed federal protection to owners of famous trademarks.(fn15) This Note will criticize the Supreme Court's rejection of the likelihood of harm standard for dilution under the FTDA.(fn16) This Note will demonstrate Congress passed the FTDA to extend the protections of state anti-dilution law which nationally interpreted the standard of dilution as a likelihood of harm.(fn17) This Note will argue a likelihood of harm standard offers greater protection to trademark owners because it safeguards the distinctiveness of a mark while recognizing the present and potential power of a trademark.(fn18) This Note will analyze actual harm under Moseleyand contrast the MoseleyCourt's analysis with other federal circuit actual harm cases.(fn19) This Note will argue Moseley'sactual harm standard deviated from the actual harm test for dilution.(fn20) Specifically, this Note will demonstrate Moseley'sactual harm standard bears more resemblance to probable harm under a likelihood of harm standard than actual, consummate harm under an actual dilution standard.(fn21) Finally, this Note will conclude if Moseleyapplied the correct standard of harm in response to the incremental harm of dilution and in order to safeguard a famous mark's uniqueness as well as its selling power, then famous trademarks would receive extensive protection from federal dilution.(fn22)

FACTS AND HOLDING

Victoria's Secret ranked ninth among the most famous brands in the clothing industry, according to a recent survey.(fn23) V Secret Catalogue, Inc., owner of the VICTORIA'S SECRET trademark, registered the mark with the United States Patent and Trademark Office in January 1981.(fn24) V Secret Catalogue licensed use of the VICTORIA'S SECRET mark to Victoria's Secret Catalogue, LLC and Victoria's Secret Stores, Inc. (collectively, "Victoria's Secret").(fn25) Victoria's Secret sells women's lingerie and other clothing and accessories.(fn26) Victoria's Secret operates over 750 stores and distributes 400 million copies of the Victoria's Secret catalog annually.(fn27) In 1998, Victoria's Secret spent more than fifty-five million dollars advertising its products.(fn28)

In February 1998, Victor and Cathy Moseley ("the Moseleys") opened a gift and novelty store in a strip mall located in Elizabethtown, Kentucky.(fn29) The Moseleys named the shop "Victor's Secret."(fn30) The Moseleys' store sold an assortment of merchandise, including lingerie, accessories and videos, keeping in line with the store's slogan "Everything for Romantic Encounters."(fn31) The Moseleys publicized the opening of their shop in local newspapers, including "Inside the Turret," the paper of the U.S. Army base at Fort Knox.(fn32) Army Colonel John Baker of the Judge Advocate General ("JAG") Corps, offended by what he thought was an attempt to use a popular trademark to sell distasteful merchandise, sent a copy of the ad to Victoria's Secret.(fn33) On February 25, 1998, counsel for Victoria's Secret sent the Moseleys a cease-and-desist letter demanding the discontinuance of the name "Victor's Secret."(fn34) Subsequently, the Moseleys changed the name of their store to "Victor's Little Secret."(fn35)

Dissatisfied with the name change, Victoria's Secret sued the Moseleys in the United States District Court for the Western District of Kentucky.(fn36) Victoria's Secret alleged that the Moseleys' use of the name "Victor's Little Secret" constituted federal trademark infringement and unfair competition pursuant to the Lanham Act, and dilution of a trademark in violation of the Federal Trademark Dilution Act ("FTDA").(fn37) Victoria's Secret also alleged that the Moseleys violated Kentucky state trademark and unfair competition law.(fn38) The district court reviewed motions for summary judgment filed by Victoria's Secret and the Moseleys.(fn39) The Moseleys also filed motions to strike Victoria's Secret's pleadings because Victoria's Secret included persons not identified as witnesses in the pleadings' affidavits.(fn40)

The district court denied the Moseleys' motions to strike, reasoning the court did not rely upon the disputed affidavits to rule on the motions for summary judgment.(fn41) The court granted summary judgment in favor of the Moseleys on the federal and state trademark infringement and unfair competition claims.(fn42) In a Memorandum Opinion, Chief Judge Charles Simpson noted that Victoria's Secret failed to show that the Moseleys' use of Victor's Little Secret created a likelihood of confusion.(fn43) The district court stated that the VICTORIA'S SECRET mark was strong and the court assumed that the Moseleys' products were in direct competition with Victoria's Secret products.(fn44) However, the district court determined that little similarity existed between the two stores selling the products, demonstrating the distinct context for products sold.(fn45) Furthermore, the court stated that, although Victoria's Secret and Victor's Little Secret use identical channels for marketing, there was no evidence that the Moseleys intended to expand their business beyond Elizabethtown.(fn46) The court concluded that Victoria's Secret had not offered sufficient evidence to show a likelihood of confusion existed between the two marks.(fn47) Be-cause a likelihood of confusion is the standard for trademark infringement and unfair competition, the court determined summary judgment was proper in favor of the Moseleys on the federal and state trademark infringement and unfair competition claims.(fn48)

The district court granted summary judgment in favor of Victoria's Secret on the federal dilution claim, noting that unlike trademark infringement, dilution can occur between non-competing products where no likelihood of confusion is possible.(fn49) The court described two kinds of dilution: 1) blurring product identification and 2) damaging positive associations to a particular trademark, i.e. tarnishment.(fn50) Also, the district court stated that dilution of a senior mark by a junior mark requires the two marks be sufficiently similar.(fn51) The court applied a four factor test under the FTDA to determine whether dilution existed: 1) the plaintiff's trademark was famous, 2) the defendant used its trademark commercially, 3) use of defendant's trademark followed the plaintiff's mark becoming famous, 4) defendant's use of mark diluted the quality of the plaintiff's trademark.(fn52) The district court noted that in this case, the parties did not dispute the first three factors, leaving the question of whether the Moseley's mark diluted the quality of the VICTORIA'S SECRET mark.(fn53) The court stated that despite the addition of the word "little" to the Moseleys' business name, the two marks were substantially similar for dilution purposes.(fn54) The court determined the Moseleys' use of Victor's Little Secret diluted the quality of the VICTORIA'S SECRET mark.(fn55) Specifically, the court stated that the Moseleys' mark had a tarnishing effect on the VICTORIA'S SECRET mark because it resulted in an association of the famous mark with insalubrious goods.(fn56) Thus, the court determined that the Moseleys' mark diluted the distinctiveness of the VICTORIA'S SECRET mark.(fn57) Consequently, the court enjoined the Moseleys from use of the mark Victor's Little Secret.(fn58)

The Moseleys appealed...