United States: After Victoria’s Secret: Looming Questions About Trademark Dilution

Enacted in 1995, the Federal Trademark Dilution Act (FTDA) seeks to protect famous trademarks from uses that reduce their distinctiveness. Yet, the FTDA has generated controversy over whether, when, and how its protections should be applied.

In March 2003, the U.S. Supreme Court entered the debate with its decision in Moseley et al., DBA Victor’s Little Secret v. V SECRET Catalogue, Inc., et al. Moseley settled the pivotal question of whether a plaintiff could sue before dilution of a famous mark began by holding that anything less than "actual dilution" would rarely be actionable. However, it left unanswered many important questions such as:

• What must proof of actual dilution look like?

• Is actual dilution always a prerequisite to relief under the FTDA?

Recent decisions from federal courts and the Trademark Trial and Appeal Board (TTAB) offer clues as to how these issues may eventually be resolved.

In The NASDAQ Stock Market, Inc. v. Antarctica, Srl, the TTAB announced its refusal to apply Moseley’s "actual dilution" standard to opposition and cancellation proceedings against applications for trademark registration. Had proof of existing dilution been required instead, the stock market could not challenge the applicant’s "intent to use" application to register the NASDAQ mark for clothing until sales of the offending goods had begun. Thus, under the NASDAQ decision, owners of famous trademarks may be able to prevail before the TTAB on the basis that dilution is merely likely to occur.

In court, however, evidence of actual dilution should remain a prerequisite to relief except, perhaps, where the competing marks are identical. For example, the court in Pinehurst, Inc. v. Wick (D.NC) relied on a passage from the Moseley decision for its holding that unauthorized use of the plaintiff’s trademark as part of a domain name itself suffices as proof of actual dilution. Similarly, the court in GMC v. Autovation Techs. (E.D.Mi.) found dilution in use of trademarks identical to those of General Motors. In Nike, Inc. v. Variety Wholesalers, Inc. d/b/a Rose’s Stores, Inc, the district court (S.D.Ga.) went farther by deciding that proof of actual dilution is not required at all when the accused and famous marks are identical.

Yet not all courts agree that dilution cases involving identical marks merit a less stringent burden of proof. In Savin Corp. v. Savin Group, the court (S.D.N.Y) found the Moseley dicta — suggesting that direct evidence of dilution might not be required between identical marks — too ambiguous to justify excusing a dilution plaintiff from providing such evidence.

The Moseley case dealt with alleged blurring of the VICTORIA’S SECRET mark, and the Supreme Court declined to state whether actual dilution was required for dilution by tarnishment. In Four Seasons Hotels and Resorts B.V., et al., v. Consorcio Barr, S.A., the court (S.D.Fla) set the bar fairly low for a tarnishment case, finding proof of dilution in evidence that some consumers formed a bad impression of the FOUR SEASONS mark after encountering it on a junior user’s hotels. The court (C.D.Ill.) in Caterpillar, Inc. v. The Walt Disney Company was not as lenient, finding depictions of Caterpillar bulldozers as evil tools of animated movie villains did not qualify for relief under the FTDA.

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