District Court Cases of Note: District Court Finds Dilution by Tarnishment and Retroactive Effect of the Trademark Dilution Revision Act

In V Secret Catalogue Inc. v. Moseley, 87 USPQ2d 1240 (W.D. KY. 2008), the District Court for the Western District of Kentucky addresses trademark dilution under the recently amended Trademark Dilution Act.  The owners of the “Victoria’s Secret” mark sought to enjoin the use of their mark by a small adult shop called “Victor’s Secret.”  Victoria’s Secret is a famous trademark used on a variety of women’s products, most notably undergarments.  For many in the U.S., the name is the first brand to come to mind in regards to women’s underwear.  The Moseleys opened their own store in Kentucky, selling “intimate lingerie” and “adult novelties/gifts” under the mark “Victor’s Secret.”  A retired army colonel saw an ad for Victor’s Secret and was offended by what he saw as an attempt to use the Victoria’s Secret mark to sell “unwholesome, tawdry merchandise.”  He wrote to V Secret to inform them of the Moseleys’ use of their mark.  V Secret then brought suit against the Moseleys alleging trademark infringement, unfair competition, and trademark dilution under the Federal Trademark Dilution Act.

In the initial trial during February 2000, the Western District of Kentucky ruled in favor of the Moseleys on the issues of infringement and unfair competition, but granted summary judgment in favor of V Secret on the dilution claim.  V Secret Catalogue Inc. v. Moseley, 54 USPQ2d 1092 (W.D. KY. 2000).  The District Court pointed out that “[c]ourts have frequently enjoined the ‘tarnishment’ of a mark through association with unsavory goods, persons, or services.”  V Secret, 87 USPQ2d at 1243.  The court saw the sale of adult videos and sex toys under a similar mark as tarnishing the Victoria’s Secret mark.  The Moseleys appealed to the Sixth Circuit, who affirmed the grant of summary judgment.  V Secret Catalogue Inc. v. Moseley, 59 USPQ2d 1650 (6th Cir. 2001).  The Sixth Circuit discussed two issues unaddressed by the District Court: distinctiveness and the requirement that dilution had actually occurred.  The Sixth Circuit held that Victoria’s Secret was indeed a distinctive mark and that there was only a requirement of likelihood of dilution.  In light of a split of authority on the question of actual dilution, the Moseleys sought and the United States Supreme Court granted certiorari to consider this issue.

In its ruling on March 4, 2003 in Moseley d/b/a Victor’s Little Secret v. V Secret Catalogue, Inc., 537 US 418, 65 USPQ2d 1801 (2003), the Supreme Court held that actual dilution was required to bring a claim under the Federal Trademark Dilution Act as it then existed.  The case was remanded to the Sixth Circuit where it sat for four years before it was remanded back to the District Court in July 2007.

In 2006, Congress reacted to the Supreme Court’s decision in Moseley by passing the Trademark Dilution Revision Act of 2006 (“TDRA”).  Pub. L. No. 109-312, 120 Stat. 1730 (2006) (codified at 15 U.S.C. § 1125(c)).  This amendment had two major effects.  First, it changed the language to reflect that dilution was only available for marks famous to the “general consuming public.”  Second, Congress broadened the actual dilution requirement, stating that an alleged diluting use must only be likely to cause dilution, thereby negating the Supreme Court’s interpretation that only actual dilution was actionable under 15 U.S.C. § 1125(c).

Faced with this changed law and the case on remand, the District Court held:

In light of this provision, we are faced with an order of the Court of Appeals remanding the case to us to apply law which has been superseded. The Sixth Circuit has held that the law of the case doctrine is inapplicable where a subsequent contrary view of the law by controlling authority occurs. United States v. Moored, 38 F.3d 1419, 1421 (6th Cir. 1994). We find that the Moseley “actual dilution” standard is thus no longer the law of the case.

V Secret, 87 USPQ2d at 1244 (W.D. Ky. 2008).   Thus, the District Court held the case would be decided under the amended language which removed the actual dilution standard.  The court noted that “‘relief by injunction operates in futuro and the right to it must be determined as of the time of the hearing.’ See, Louis Vuitton Malletier v. Haute Diggity Dog, LLC, 464 F.Supp.2d 495, 81 USPQ2d 1064 (E.D.Va. 2006).”  V Secret, 87 USPQ2d at 1244.  Noting approval of the underlying rationale by the Sixth Circuit, the court determined that it would use the TDRA to determine whether or not V Secret should be granted injunctive relief.

As the sole issue appealed to the Supreme Court was the issue of actual dilution, the factual findings of the original District Court proceedings remained viable, such as that Victoria’s Secret is a “famous” and “distinctive” mark.  Moseley attempted to argue that the Supreme Court had found that there was no evidence of any dilution at all, but the District Court quickly rejected this argument.  Specifically, the District Court found that the Supreme Court had merely found that actual dilution did not exist and had made no findings as to likelihood of dilution.  V Secret, 87 USPQ2d at 1245-46.

While using some of the previous findings of fact, the court considered the case under the TDRA anew as the FTDA was old law.  “However, the findings from both courts under the FTDA are so much flotsam and jetsam, having been jettisoned from the ship of the FTDA now sunk in the sea of new dilution law. Summary judgment was reversed. On remand, we have a dilution claim under the TDRA which must be analyzed without regard to the former findings.”  Id.

Dilution under the Trademark Dilution Revision Act

The TDRA provides, in pertinent part:

Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, or of actual economic injury.

… For purposes of paragraph (1), “dilution by blurring” is association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark. In determining whether a mark or trade name is likely to cause dilution by blurring, the court may consider all relevant factors, including the following:

(I) The degree of similarity between the mark or trade name and the famous mark.

(ii) The degree of inherent or acquired distinctiveness of the famous mark.

(iii) The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark.

(iv) The degree of recognition of the famous mark.

(v) Whether the user of the mark or trade name intended to create an association with the famous mark.

(vi) Any actual association between the mark or trade name and the famous mark.

… For purposes of paragraph (1), “dilution by tarnishment” is association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.

15 U.S.C. § 1125(c).

Thus, in order to establish entitlement to injunctive relief, the District Court found that a plaintiff must show that (1) its mark is famous; (2) its mark is distinctive; (3) Defendant began using the mark after Plaintiff’s mark became famous; and (4) Defendant’s use of the mark is likely to cause dilution of Plaintiff’s mark by blurring or by tarnishment of the mark.  V Secret at 1247.

Analysis of Fame for TDRA

Trademark dilution exists to protect marks so famous that even non-infringing uses cause them to lose value.  Typical trademark infringement actions are limited to the industry within which the mark is used.  Trademark dilution, on the other hand, is a powerful form of protection because it allows one to reach outside of one’s industry to enjoin the use of a mark by another.  Due to its powerful nature, claims of trademark dilution require that the asserted mark be famous to the “general consuming public of the United States.”  15 USC § 1125(c)(2)(A).

In order to provide additional guidance, the TDRA states that in determining whether a mark possesses the requisite degree of recognition to be considered famous, the court may consider (1) the duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties; (2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; (3) the extent of actual recognition of the mark; and (4) whether the mark was registered.  15 U.S.C. § 1125(c)(2)(A).  V Secret, 87 USPQ2d at 1248.  Though the Moseleys did not challenge the fame of the Victoria’s Secret mark, the court discussed briefly how V Secret clearly possessed a famous mark.

One piece of evidence cited by the court to distinguish Victoria’s Secret as a famous mark was the existence of over 1,000 retail stores throughout the United States selling a wide range of products.  Another fact used by the court to establish the mark’s fame was the success of its online store.  The court further cited Victoria’s Secret was also ranked one of the top brands for women’s apparel in a study.  Further evidence of fame relied upon by the court was supported by sales numbers and advertising expenditures.  V Secret, 87 USPQ2d at 1248.

Distinctiveness and Use for Purposes of the TDRA

The court noted that “the Act defines dilution by blurring as an association arising from the similarity between a mark and a famous mark which impairs the distinctiveness of the famous mark. ‘There can be no dilution of a mark’s distinctive quality unless the mark is distinctive.’”  Id. (citing Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 216).  However, the Moseleys did not contest the distinctiveness of the mark, so the issue was not carried further.  There also was no question as to the use of the mark by plaintiffs prior to the Moseleys’ use.

Dilution by Blurring under the TDRA Not Found Where Complaint Letter Did Not Evidence Confusion or Attribution

The TRDA defines two ways a mark can be diluted: blurring and tarnishment.  The TDRA defines “dilution by blurring” as an association arising from the similarity between a mark and a famous mark that impairs the distinctiveness of the famous mark. 15 U.S.C. § 1125(a)(2)(B).  “Dilution by blurring occurs when consumers mistakenly associate a famous mark with goods and services of a junior mark, thereby diluting the power of the senior mark to identify and distinguish associated goods and services.” Ringling Bros. – Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Dev., 955 F. Supp. 605, 615, 42 USPQ2d 1161 (E.D.Va. 1997), citing, Mead Data Cent., Inc. v. Toyota Motor Sales U.S.A., Inc., 875 F.2d 1026, 1031, 10 USPQ2d 1961 (2d Cir. 1989)).

The court recognized five factors relevant in determining the likelihood of dilution by blurring under the TDRA, and each is discussed below. V Secret, 87 USPQ2d 1249.

The first factor discussed by the court was the similarity between the marks in question.  While not specified in the statute, courts have determined this requirement to mean that the marks must be identical or substantially similar.  Nike, Inc. v. Nikepal International, Inc., 2007 WL 2782030, *6 (E.D.Cal. 2007).  “Victor’s Secret” and “Victoria’s Secret” were found to be substantially similar.

The second factor is the distinctiveness of the famous mark.  Protecting a non-descript mark from dilution would likely be against the public interest.  The law does not seek to grant users of generic marks exclusive rights to the term.  “Victoria’s Secret” was found distinctive at the appellate court, and the District Court here deferred to the higher court’s decision.

The third factor is substantially exclusive use of the mark.  As noted in Nikepal, “the law does not require that use of a famous mark be absolutely exclusive, but merely ‘substantially exclusive.’” Nikepal, 2007 WL 2782030 at *7.  V Secret aggressively policed use of its mark, and the Moseleys did not dispute plaintiff’s substantially exclusive use of the mark.

The fourth factor is consumer recognition of the mark.  The court offered the commercial success of the retail stores, catalogs, and internet store as a measure of recognition of the brand.  V Secret, 87 USPQ2d at 1251.  The court also laid out some other examples of national recognition, including advertisements in national magazines, a televised fashion show, and television program appearances.  Id.  The court found that the mark had a high degree of recognition.

The fifth factor is an intent to associate with the famous mark.  While the Moseleys denied ever having heard of “Victoria’s Secret,” claiming that the name came from the fact that Victor Moseley started the shop as a side job (a ‘secret’ from his employer), the court was not convinced.  The similarity of the marks created a presumption of the Moseleys’ knowledge of the senior mark.  In addition, Victoria’s Secret branded shops and advertising were pervasive in the Louisville region where the Moseleys conducted business.  Further, it was revealed that Mr. Moseley was actually unemployed prior to opening the store.  The court concluded that the Moseleys intended to associate with the famous mark.

While Victor’s Secret impinged on all the blurring factors noted above, likelihood of blurring was not found to exist.  This is because the only evidence of blurring introduced by V Secret was the army colonel’s letter.  The court found that the army colonel’s report was not evidence of blurring as the colonel was writing to inform plaintiff of use of a similar mark on tawdry goods.  The colonel did not think that Victor’s Secret was a Victoria’s Secret shop, he was just offended by the association he saw defendants trying to create.  This, to the court, actually was evidence of a lack of blurring.  V Secret, 87 USPQ2d at 1252.

The evidence of the colonel’s reaction does not establish that defendant’s use of the mark served to hamper the distinctiveness of the famous mark.  Victor’s Secret did not lessen the distinctive value of the Victoria’s Secret mark.  “The offended colonel wrote to V Secret not to say ‘stop selling sex toys,’ but rather to alert them that their mark was being associated with an establishment selling such items in derogation of their name. Thus we have evidence not of blurring, but of tarnishment.”  Id.

Dilution by Tarnishment using Single Complaint Letter

The TDRA defines “dilution by tarnishment” as an “association arising from the similarity between a mark … and a famous mark that harms the reputation of the famous mark.” 15 U.S.C. § 1125(c)(2)(C).  Dilution by tarnishment “generally arises when the plaintiff’s trademark is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner’s product.”  Diane Von Furstenberg Studio v. Snyder, 2007 WL 2688184 (E.D.Va. Sept. 10, 2007) at *4, quoting, Deere & Co. v. MTD Prods., 41 F.3d 39, 43 [32 USPQ2d 1936] (2d Cir. 1994).

“The army colonel’s offended reaction to the use of ‘Victor’s Secret,’ what he clearly believed to be a bastardization of the VICTORIA’S SECRET mark, for the promotion of ‘unwholesome, tawdry merchandise,’ suggests the likelihood that the reputation and standing of the VICTORIA’S SECRET mark would be tarnished.”  V Secret, 87 USPQ2d at 1253.  The evidence that defendant used the mark on generally unsavory products which plaintiff sought to avoid was clear evidence of tarnishment.

Having met the factors laid out in the statute as to fame and time of use, the court’s finding of dilution by tarnishment entitled V Secret to injunctive relief.  The District Court therefore granted summary judgment to V Secret and issued a permanent injunction barring the Moseleys from using the mark.

Significance to Trademark Owners

As one of the few decisions finding dilution under the TDRA, V Secret Catalogue provides a road map on what types of evidence are needed in order to demonstrate the numerous factors outlined by Congress to show dilution.  Of special interest is the fact that, while dilution by blurring requires evidence of widespread confusion, dilution by tarnishment requires less evidence of true confusion and can be supported by minimal evidence of brand disparagement.  As such, when crafting a complaint for dilution, special consideration should be given as to whether the infringing conduct could be said to cast aspersions on the infringed mark and whether non-confused consumer complaints exist to support such a charge.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s