Federal Trademark Dilution Act of 1995

Citation

Federal Trademark Dilution Act of 1995, Pub. L. No. 104-98, 109 Stat. 985 (Jan. 16, 1996), amending the Trademark Act of 1946, codified at 15 U.S.C. § 1125 et seq.

Overview

To bring nationwide uniformity and consistency to the protection of famous marks from dilution, and to meet the United States’ international obligations under the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), Congress in December 1995 passed the Federal Trademark Dilution Act of 1995 (FTDA), amending Section 43(a) of the Lanham Act to create the first federal cause of action for trademark dilution.

The Act provides a federal cause of action against those who make commercial use of a "famous" trademark in such a manner that it dilutes the distinctive qualities of that mark. While a number of states already had anti-dilution laws on the books, enactment of a federal law provides uniform, nationwide protection for famous marks.

The Act also provides a major weapon for trademark owners in their effort to control the use of their trademarks as a domain name. Prior to enactment, federal law only protected against infringement of federally registered trademarks, false advertising and unfair competition. Unfortunately, none of those rights were a good "fit" when seeking to stop another party from using a famous trademark as a domain name.

Unlike an infringement claim, no likelihood of confusion, mistake or deception needs to be shown under the Act. Nor does the trademark owner need to show that there is direct or indirect competition between the trademark owner and the alleged usurper. Nor does the mark have to be federally registered. The trademark owner only needs to show that a famous mark is being used commercially by another in a manner which "lessens the capacity of a famous mark to distinguish goods or services . . . ."

The Court of Appeals for the Federal Circuit observed that unlike traditional trademark law, which “serves the interests of consumers, as well as sellers, in having trademarks function as source-identifiers,” dilution law “offers no benefit to the consumer public — only to the [trademark] owner.” In other words, traditional trademark infringement law prevents consumers from being misled and purchasing a product that is not what they expected; it also ensures that the owner of the trademark is not deprived of a sale. Dilution law is designed to preserve the capacity of a famous mark to identify and distinguish the goods or services to which it is attached.

Due to perceived problems with the existing law, Congress enacted the Trademark Dilution Revision Act of 2006.

Types of Dilution

There are two types of dilution:

• Dilution by blurring — This occurs when another uses a famous mark on an unrelated product. While there may be no confusion as to the origin of the goods, it weakens the mark because the public comes to associate it with multiple sources of goods or service.
• Dilution by tarnishment — This occurs when a mark is tainted or degraded due to its association with products or services which are inferior, immoral or scandalous, or which reflect negatively on the trademark owners' goods or services.

Criteria for Determining Famousness

The Act does not distinguish between these two types of dilution. The Act also lists eight, non-exclusive criteria a court should consider in determining whether a given mark is "famous." The criteria to be considered in determining whether a mark is “famous” are:

1. The degree of inherent or acquired distinctiveness of the mark;
2. The duration and extent of usage of the mark;
3. The duration and extent of advertising and publicity of the mark;
4. The geographical area in which the mark is used;
5. The channels of trade for the goods or services with which the [[trademark|mark] is used;
6. The fame of the mark in the owner's and the alleged diluter's trading areas;
7. The nature and extent of use of similar marks by third parties; and
8. Whether the mark is federally registered.

Remedies

The FTDA entitles the owner of a famous mark to seek injunctive relief from a court “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 mark.”

Although an injunction is the usual remedy for a violation of the FTDA, monetary relief and destruction of the infringing articles are also available if the infringer “willfully intended to trade on the owner’s reputation or to cause dilution of the famous mark.”

Defenses

Certain "safe harbor" defenses are also specified, including:

• the use of another's mark in comparative advertising ("fair use")
• non-commercial use, and
• news reporting, commentary and other first amendment purposes.

Judicial Interpretations

Since the FTDA was enacted, some trademark owners have attempted to use the law in ways that arguably go beyond the statute’s scope and purpose (e.g., some owners of insufficiently famous marks have tried to establish a federal dilution claim, and others have brought suit under the FTDA to prohibit parody and criticism of their marks). In adjudicating these cases, several federal courts have interpreted the FTDA narrowly, creating what some view as more stringent barriers to obtaining dilution protection than the statute’s drafters would require. In addition, the U.S. Supreme Court in 2003 rendered a decision that narrowly construed the FTDA, to the distress of some experts.

No Protection for Famous Marks that Have Acquired Distinctiveness

In a case concerning the trademark THE CHILDREN’S PLACE, used by a chain of stores that sells children’s clothing and accessories, the U.S. Court of Appeals for the Second Circuit held that the FTDA does not protect descriptive marks, since they possess no inherent distinctive quality. Although the appellate court agreed that THE CHILDREN’S PLACE has acquired secondary meaning, the court stated that the “mark’s deficiency in inherent distinctiveness is not compensated by the fact that [the] mark has achieved a significant degree of consumer recognition.” The impact of this ruling is significant; famous marks that have acquired distinctiveness, such as MCDONALD’S, AMERICAN AIRLINES, and DISNEY, might be deemed ineligible for the protections of the FTDA if a case arose concerning these trademarks within the Second Circuit. Other appellate circuits have not adopted this interpretation of the FTDA.

Noncommercial Use Defense

In 1997, a Danish band called Aqua released a song called “Barbie Girl,” which became a commercial success. The song contains lyrics that poke fun at the iconic Barbie doll manufactured by Mattel, Inc.; among other things, the song refers to Barbie as a “bimbo.” The company sued the record label that published the song, MCA Records, claiming in part that the song dilutes the Barbie trademark by both blurring and by tarnishment. While the Ninth Circuit Court of Appeals found that Barbie qualified for relief under the FTDA as a famous and distinctive mark, and that the song’s use of the mark is dilutive, the appellate court ruled that the FTDA’s statutory exemption for “noncommercial use” of a mark shields MCA from liability because the song contains artistic expression. Despite the song being offered for sale to the public, the use of the Barbie mark fell within the “noncommercial use” exemption because “the song also lampoons the Barbie image and comments humorously on the cultural values Aqua claims she represents.”

The Ninth Circuit court explained, “If speech is not ‘purely commercial’ — that is, if it does more than propose a commercial transaction — then it is entitled to full First Amendment protection.” Thus, Mattel’s dilution claim against MCA failed.

Requirement of Both Fame and Distinctiveness

The FTDA lists several factors that are intended to guide a court in deciding “whether a mark is distinctive and famous.” In interpreting this statutory language, the U.S. Court of Appeals for the Third Circuit rejected the argument that the FTDA requires a mark to be subjected to a test for fame and a separate test for distinctiveness to qualify for federal dilution protection. As noted by one commentator:

In the author’s view there is in [15 U.S.C. § 1125(c)(l)] no separate statutory requirement of “distinctiveness,” apart from a finding that the designation be a “mark” that is “famous.” “Distinctiveness” is used here only as a synonym for “fame.” Even if “distinctiveness” is regarded as a separate requirement, it would, in the author’s view, be redundant. To be a “mark” eligible in the first place for protection under [§ 1125(c)(l)], basic trademark principles dictate that a designation has to be “distinctive” either inherently or through acquisition of secondary meaning.

The U.S. Court of Appeals for the Second Circuit, however, reached a different conclusion about the FTDA: "We think the inclusion of the requirement of distinctiveness was intended, for good reason, to deny the protection of the statute to non-distinctive marks.”52 The court continued: “Many famous marks are of the common or quality-claiming or prominence-claiming type — such as American, National, Federal, Federated, First, United, Acme, Merit or Ace. It seems most unlikely that the statute contemplates allowing the holders of such common, albeit famous, marks to exclude all new entrants.” Thus, “distinctiveness” is a separate statutory element that must be satisfied by an owner of a famous trademark to obtain relief within the Second Circuit.