US Supreme Court's ruling roils dilution waters.(Mosely v. V Secret Catalogue, Inc)

In an unexpected decision with important ramifications for owners of famous trademarks, the US Supreme Court recently ruled unanimously that the Federal Trademark Dilution Act (FTDA) requires proof of actual dilution. Justice Stevens, writing for the court in Mosely v. V Secret Catalogue, Inc., (1) concluded that the FTDA "unambiguously requires a showing of actual dilution, rather than a likelihood of dilution."

The court's decision resolves a longstanding split among the Circuit courts as to the level of proof necessary to succeed on a claim under the FTDA. A majority of courts that considered the FTDA had held that the statute merely requires a "likelihood of dilution" but the Supreme Court adopted the minority view, held by only the Fourth and Fifth Circuits, that the statute requires "actual dilution."

This article briefly discusses the history of the concept of trademark dilution before examining the Moseley case and explaining the court's reasoning. The article also discusses the ramifications of the decision for trademark owners, including the possible methods of proving dilution under the new Moseley standard.

History of Dilution

The concept of trademark dilution as a separate legal harm from infringement has been around for nearly 80 years, although the federal dilution statute is only eight years old. The origin of the dilution concept is customarily traced to a 1927 article by Frank I. Schechter. (2) in which the author discussed the harm caused by the "gradual whittling away ... of the identity and hold upon the public mind" of highly distinctive marks by virtue of their use by junior users on unrelated goods and services.

Generally, there have been two recognized forms of dilution: blurring and tarnishment. Blurring occurs when consumers see a famous mark used by others to identify different sources for different goods and services. This results in a weakening of the power of the mark to identify and distinguish the senior user's goods and services. Instead of immediately thinking of the senior user and its products when seeing the mark, consumers may come to think of several different possible sources. Examples of uses that would be likely to cause blurring include BUICK aspirin and KODAK pianos. Dilution by blurring is different from a likelihood of confusion, in which consumers viewing the junior mark believe that the goods and services offered under the junior mark are associated with or sponsored by the owner of the senior mark. In contrast, dilution by blurring occurs when consumers realize that the junior mark is identified with a different source but come to associate the famous mark with that source in addition to the owner of the famous mark, thus weakening the ability of the famous mark to identify and distinguish the goods and services of the mark's owner.

The other form of dilution is dilution by tarnishment. Tarnishment occurs when the junior user's mark causes the senior user's famous mark to be improperly associated with inferior, unwholesome, or offensive goods and services. This can occur when the junior user uses the mark in connection with inferior products or with products that may be offensive, such as drug-related products or pornography. Again, there is no confusion because consumers realize that the owner of the famous mark does not sponsor these goods or services. Nevertheless, the senior mark has been tarnished because of its association with the inferior or offensive goods or services.

Courts and legislatures were slow to recognize dilution as a separate legal harm. Although many states adopted dilution statutes in the 1950s and 1960s, some courts read these statues as requiring a likelihood of confusion, despite the absence of any such requirement in the statutory language. However, by the 1980s, dilution was widely recognized as a separate and distinct cause of action, and many of the state dilution statutes (such as New York's) were supported by substantial bodies of case law.

The first attempt to enact a federal dilution statute, in 1987, failed due to First Amendment concerns. After some minor tweaking, a revised statute was enacted in 1995 as the Federal Trademark Dilution Act. The FTDA protected famous marks against dilution, which it defined as "the lessening of the capacity of a famous mark to identify and distinguish goods or services." Notably, while most state statutes protected against uses that created a "likelihood of dilution" the FTDA protected only against a use that "causes dilution."

A circuit split soon arose between the Fourth and Second Circuits as to what was actually necessary to succeed in a dilution claim under the FTDA. In Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel …