The new wild west: measuring and proving fame and dilution under the Federal Trademark Dilution Act.

• Author: Nguyen, Xuan-Thao N.

INTRODUCTION

The passage of the Federal Trademark Dilution Act of 1995 (the Dilution Act or Act) has been widely celebrated, as evidenced by the number of related articles, speeches and symposia.(1) Commentators who applauded the adoption of the Dilution Act believed that a dilution claim would now be easier to prove by trademark owners against diluters because trademark owners would not have to establish the troublesome factual issue of consumer confusion.(2) The courts have embraced the Act, and it has already proven to be an effective weapon for trademark owners.(3) One court has even suggested trademark owners asserting claims of dilution bear a lighter burden than that required under section 43(a) of the Lanham Act because they do not have to demonstrate competition between the owners and the diluters or a likelihood of confusion as to the source of the products or services.(4)

As three years have gone by since the Act first went into effect, it has become clear that proving dilution under the Act is not as easy as many had previously thought. Indeed, the Fourth Circuit, in Ringling Bros.--Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Development,(5) has recently begun an open season in the Wild West of dilution land by requiring proof of actual economic harm to the famous mark's selling power.(6)

The problems encountered by trademark owners attempting to pursue a dilution claim are inherent in the Act itself. The Act provides no concrete guidance on how fame and dilution should be measured or proven.(7) This limitation has led judicial interpretation of the Act to a new Wild West where courts confront the task of measuring fame and dilution without the benefit of any criteria for making such measurements.(8) In analyzing the Act, no court has provided a cut-off percentage for finding fame and/or dilution under either the likelihood of dilution or actual dilution standard. As a result, a wasteland of case law has developed with cases that either superficially(9) or erroneously(10) analyze dilution claims or avoid the dilution issue altogether by finding trademark infringement under the traditional theory of likelihood of confusion.(11) Consequently, trademark owners who wish to assert dilution claims are faced with the harsh reality that, despite all the fanfare about the passage of the Act, getting protection under the Act is difficult, given the current inconsistent and incoherent jurisprudence addressing the measurement and proof of fame and dilution.(12)

This Article will attempt to conquer that new Wild West. Section I provides an overview of the Act, explains two traditional theories of dilution--tarnishment and blurring--and discusses the new diminishment theory of dilution recognized by courts in cases involving domain names on the Internet.(13) Section II explores the limitations of the Act.(14) Section III examines four authoritative cases that have addressed quantitative measurements of fame and/or dilution, and discusses the shortcomings in each case with regard to quantitative measurements.(15) Section IV suggests a new approach to measuring and proving fame and dilution.(16) This Article concludes with the assertion that this proposed approach would arm trademark owners with certainty in navigating the new Wild West of dilution claims analysis under the Dilution Act.(17)

1. OVERVIEW OF THE FEDERAL DILUTION ACT OF 1995

   Fifty years after the enactment of the first state anti-dilution statute, the 1996 Federal Trademark Dilution Act went into effect.(18) The Act amended the existing federal Trademark Act of 1946, commonly known as the Lanham Act.(19) The new Act provided the owner of a famous trademark injunctive relief against unauthorized use of a mark that dilutes the distinctive quality of the famous mark.(20) The Act, signed into law by President Clinton on January 16, 1996, specifically amended section 43 of the Lanham Act, by adding the following subsection:

   The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the [famous] mark.... (21) Not all marks should be entitled to anti-dilution protection. As a threshold matter, the Dilution Act requires the mark to be "famous."(22) The Act provides eight non-exclusive factors for courts to consider in determining whether a mark is distinctive and famous:

   (A) the degree of inherent or acquired distinctiveness of the mark;

   (B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;

   (C) the duration and extent of advertising and publicity of the mark;

   (D) the geographical extent of the trading area in which the mark is used;

   (E) the channels of trade for the goods or services with which the mark is used;

   (F) the degree of recognition of the mark in the trading areas and channels of trade used by the marks' owner and the person against whom the injunction is sought;

   (G) the nature and extent of use of the same or similar marks by third parties; and

   (H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.(23)

   A famous mark, however, is not protected under the Dilution Act if it has not been diluted. Pursuant to the Act, dilution is defined as "the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception."(24) This definition was formulated recognizing that famous trademarks deserve national protection from "subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it, even in the absence of a likelihood of confusion," and that the then existing protection was "a patch-quilt system of protection, in that only approximately twenty-five states have laws that prohibit trademark dilution."(25) Moreover, the prior enactment of section 43 of the Lanham Act was thought inadequate to protect an owner of a famous trademark against unauthorized diluting use.(26)

   Under the Lanham Act's previous enactment, the owner of a famous trademark was required to establish a likelihood of confusion between the famous trademark and the diluter's mark, otherwise known as a junior mark.(27) The likelihood of confusion was an unnecessary required element of proof of dilution since dilution occurs when consumers who come into contact with the junior mark are not confused as to the source of the product or service denoted by that mark.(28) For example, consumers who see BUICK shoes will not think that the shoes come from the same source as BUICK cars. Although the consumers are not confused as to the source of the products, the use of the BUICK mark on shoes will still weaken the power of the BUICK mark to identify and distinguish its cars. Accordingly, recognizing how dilution of a famous mark occurs, the Dilution Act does not require the owner of a famous mark to establish likelihood of confusion in proving dilution.(29)

   Furthermore, the Dilution Act is intended to encompass "all forms of dilution recognized by the courts, including dilution by blurring, by tarnishment and disparagement, and by diminishment."(30) Nevertheless, the Dilution Act is often seen as being primarily rooted in two traditional theories of dilution: tarnishment and blurring.(31)

   1. Tarnishment

      Dilution through tarnishment occurs when a famous mark is improperly associated with an inferior, unwholesome or offensive product or service.(32) Tarnishment diminishes the goodwill and reputation of the famous mark, particularly when the unauthorized use of the mark involves illegal drugs, pornography or sexual crudity.(33)

      A claim of dilution through tarnishment, however, has a limited scope. Tarnishment may not cover a defendant's unauthorized use of a mark for products or services that do not involve "obscenity or sexual or illegal activity."(34) One court has held an unauthorized use of a mark for cheap imitation of the trademark owner's products does not amount to tarnishment of the mark because such use is not unwholesome and the trademark owner will not suffer negative association through defendant's use of the mark for cheap imitation products.(35)

   2. Blurring

      Blurring occurs when "[c]ustomers or prospective customers ... see the plaintiff's mark used by other persons to identify different sources on a plethora of different goods and services."(36) As a result, the power of the mark to identify and distinguish one source may be weakened.(37) In other words, blurring occurs when consumers incorrectly associate the famous mark with the junior mark.(38) This association or confusion is not `source confusion' as in a trademark infringement action, where consumers seeing the junior mark believe that the goods or services bearing that mark come from, or are in some way associated with, the owner of the senior mark.(39) In the blurring context, consumers who come in contact with the junior mark make a mental association between the famous mark and the junior mark.(40) Though the consumers intuitively know that there is no affiliation between the owners of the famous mark and the junior mark, they nevertheless now associate the famous mark with a new and different source because of the context in which the junior mark is used.(41) Thus, the capacity of the famous mark to be a strong identifier of goods or services is weakened.(42) Over time, blurring will cause the senior mark to lose its ability to serve as a source identifier of the plaintiff's products or services.(43) Examples of blurring are MIK/MOTO microwave ovens, BMW computers, DUPONT cookies, BUICK...