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May 2006
Intellectual Property Bulletin
The Intellectual Property Bulletin is published by the Intellectual Property Practice Group at Arthur, Chapman, Kettering, Smetak & Pikala, P.A. to keep our clients informed of the ever-changing complexities of intellectual property and business law.
Trademark dilution occurs when one person’s use of another’s trademark lessens or dilutes the uniqueness or strength of the trademark. The Federal Trademark Dilution Act (FTDA) partially states: "The owner of a famous mark shall be entitled...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 mark..."
Dilution weakens and reduces the ability of a trademark to classify and unmistakably distinguish one source from another source. There are four elements that must be established to prove dilution: (1) famousness of the mark; (2) use of the mark in commerce; (3) use of the mark after it became famous; and (4) dilution of the quality of the mark by diminishing the capacity of the mark to identify goods and services. Am. Dairy Queen Corp. v. New Line Prod., Inc., 35 F.Supp.2d 727, 732 (D. Minn. 1998).
Famousness
Most courts require plaintiffs asserting trademark dilution to present strong evidence that their trademarks are truly famous. "The judicial consensus is that ‘famous’ is a rigorous standard. Dilution is a cause of action invented and reserved for a select class of marks - those marks with such powerful consumer associations that even non-competing uses can impinge their value." Everest Capital Ltd., v. Everest Funds Management, LLC., 393 F.3d 755, 763 (8th Cir. 2005). The plaintiff Everest Capital was an investment advice company who sued to protect its unregistered trademark "Everest Capital" which it used with a stylized mountain peak displayed between the two words. The defendant, a small investment company, used "Everest" plus a drawing of Mount Everest in its name and marketing materials. The court found that defendant’s use of the trademark was not dilution because the trademark was not famous. Although plaintiff managed nearly one billion dollars, it did not market or advertise in the United States and had only two hundred wealthy clients. It attracted new investors solely through word of mouth. The court found the jury’s determination that the trademark was not famous reasonable. Without famousness, there can be no lessening or diluting of a famous mark’s ability to identify and distinguish goods and services.
Actual Dilution and Blurring
The FTDA and courts require a showing of actual dilution rather than a likelihood of dilution. Savin Corp. v. The Savin Group, 391 F.3d 439, 449 (2d Cir. 2004). Actual dilution can occur by "blurring" which is when a subsequent trademark user (or often users) gradually dilute the value of a famous trademark. The injury to the famous trademark owner comes from a cumulative effect similar to a person stung by a hundred bees. This is what happened in Savin where the defendant and several hundred other businesses in various industries all used the name "Savin" which happened to be plaintiff’s trademark. The plaintiff was the well known business equipment company while the defendant was a small engineering firm based in Syracuse, New York. It is circumstantial and per se evidence of actual dilution when one party commercially uses an identical famous mark that is more senior. Savin Corporation here had the more "senior" mark because it has used "Savin" since its inception in 1959 while The Savin Group did not commercially use its "Savin" trademark until 1987 thereby making its mark "junior." The court also emphasized that the marks at issue must be identical, "a mere similarity in the marks - even a close similarity - will not suffice to establish per se evidence of actual dilution." Id. at 454.
Commercial Use and Remedies
One of the defenses to a dilution claim is non-commercial use. As stated above, there can be no dilution unless the trademark was used in commerce. Trademark uses therefore in nonprofit parodies or news reports for example are exempt. Monetary damages are generally not available to those whose trademarks have been diluted. The sole remedy in dilution cases is usually an injunction. If the dilution of the famous mark was willful however, than the trademark owner can recover monetary damages including lost profits and the cost of the lawsuit. 15 U.S.C. §1125(c)(2).
The revised edition of our Intellectual Property Law Reference Guide will be available in May 2006. If you would like a complementary copy, answers to any of your intellectual property questions, or to schedule an intellectual property law seminar at your business, please contact Thomas Forker or Christopher Newkirk of our Intellectual Property Practice Group .
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