The 2006 Trademark Dilution Revision Act Rolls Out a Luxury Claim and a Parody Exemption

When the 2006 Trademark Dilution Revision Act (“TDRA”) became law, it marked a rare event in modern intellectual property legal history. For the first time in a while, we can point to a moment when the balance of power tilted decisively against intellectual property owners. This Article explains how the TDRA narrowed the availability of federal dilution as a claim-leaving it open only to owners whose marks are so famous that they are “widely recognized”1 in the United States. Famous trademark owners did get something in return. Once the requisite level of fame is achieved, the burden of proving dilution is lower. However, because the dilution remedy is now available to a much smaller set of marks, most trademarks will no longer qualify for federal dilution protection. Tipping the balance even further, the TDRA clarified the availability of defenses that favor consumers and the use of marks in competitive advertising. By specifically identifying parody as a defense, the TDRA delineated a wide exception for the expressive use of marks on products with a humorous twist.

Section I of this Article gives a brief summary of trademark dilution law history. Set against this background, the changes enacted with the TDRA will take meaningful shape. Section II highlights the most important new provisions in the TDRA and explains their practical implications.  The TDRA expanded trademark owners' rights in three important ways. First, it lowered the burden of proof for dilution claims to a likelihood of confusion standard, freeing trademark owners from the difficult task of proving actual dilution.2 Second, the TDRA clarified that dilution by tarnishment is actionable.3 And third, the TDRA stated that all distinctive marks-both inherently distinctive marks and those that become distinctive over time-may be the subject of dilution claims.4 Section II next examines how, on balance, the TDRA narrowed dilution protection by heightening the definition of fame and clarifying exclusions in which First Amendment concerns are given broader protection.5

When two conflicting constituencies are both given new rights and powers, the stage is set for dramatic conflict. The TDRA was designed to narrow dilution as a claim,6 and it may succeed in accomplishing this goal to a greater extent than its drafters predicted. Section III concludes with a case study of Louis Vuitton Malletier S.A. v. Haute Diggity Dog,7 the first decision to analyze the TDRA. The case illustrates how the TDRA's parody exclusion may provide dilution immunity even for parodies incorporated into commercial products. Its reasoning foreshadows a new dilution exemption for a specific type of parody: the wholesome pun.

I. A Brief Summary of Trademark Dilution History

All histories of the trademark dilution doctrine in the United States8 begin with Frank Schechter.9 As in-house counsel for the company that sold BVD underwear,10 Schechter believed that trademarks deserved more protection than trademark law provided at the time. In 1926, Schechter gave us a new paradigm for understanding trademark law in his groundbreaking article, the Rational Basis of Trademark Protection published in the Harvard Law Review.11 In this article, Schechter created the blueprint we use today for the trademark dilution doctrine.

The brilliance of Schechter's vision is easier to understand if it is viewed in the context of trademark law at the time he was writing. Trademarks were once considered brands in the narrow literal sense of a Circle K burned into a cow-pure identifiers showing the source of a product or service.12 Early twentieth century legal doctrine reinforced this principle by limiting the scope of trademarks according to the general rule that “there is no property in a trade-mark [sic] apart from the business or trade in connection with which it is employed.”13 Common law trademark law provided a remedy if a man sold a product disguised to look as if it came from someone else.14 If a new business copied the goods and the mark from an older business, the older business could enjoin the new use as unfair palming off. If the new business sold different goods using the same mark, there was no harm to the trade of the older business, and, generally, a court would not enjoin the use.15

Traditionally, trademark law protected a mark owner from a pirate who used the mark on a competitive good, but provided no protection against such use on a non-competitive good.16 At the beginning of the twentieth century, courts began expanding the scope of trademark rights to protect closely related goods.17 But generally, trademark infringement was thought to occur only when a new mark was used on goods that competed directly with those used in connection with the older mark.18 Even today, trademark infringement claims require proof that the unauthorized use would cause consumer confusion.19

Schechter's fundamental insight was that the law should provide a remedy for the unauthorized use of famous marks on non-competing products, even when there is no consumer confusion, because such uses diminish the famous marks' value.20 For example, if I use the mark “COCA-COLA” to sell loft apartment homes to students, consumers will probably not be confused at to whether The Coca-Cola Company is the source of my residential properties. Consumers in the United States think of “COCA-COLA” as a beverage, not fancy student housing. If I am able to use “COCA-COLA” on luxury lofts, then my trainer may be more likely to use the term for her pilates classes, and someone else may feel free to use the mark for ice cream. Still, consumers would probably not be confused, and none of these uses would interfere with sales of the “COCA-COLA” soft drink.  But Schechter believed that real economic harm occurred to the mark's “selling power”21 and should be remedied.22 The injury was not consumer confusion, but “the whittling away or dispersion of the identity and hold upon the public mind of the mark or name by its use upon non-competing goods.”23

This weakening of a trademark is now known as dilution. Any one of these small cuts may not kill the mark, but if all are permitted to occur, the cumulative effect will cause the mark to lose its distinctive quality and, therefore, its value.24 For the trademark owner, each of these uses poses real danger.25 If luxury homes, exercise equipment, ice cream, and other goods from various sources are labeled “COCA-COLA,” the mark will lose its source identifying meaning and become a synonym for something that is cool, American-made, and youth-oriented.

In this context, it makes sense for trademark law to recognize a remedy to protect owners who have invested resources in building unique, famous brand names. Schechter observed that the economic power of a mark depends on its “uniqueness and singularity.”26 The preservation of these qualities, he concluded, is “the only rational basis” for trademark protection.27 In 1926, this view of protection created a new paradigm for assessing trademark value.

Schechter's theory also marked a profound shift in trademark legal policy.28 The primary justification for trademark legislation had always been to protect consumers from misrepresentations that result in deception.29 Historically, trademark law applied to limited situations in which goods were produced in a way that made them look as if they came from the trademark holder, when in fact, they came from someone else.30 When dilution occurs, consumers are generally not confused or deceived; rather, the primary harm is damage to the trademark owner. Therefore, dilution is predicated on a policy of protecting31 the mark as if it were real property being protected from trespass.32 Dilution doctrine is quite different because it offers a justification for protecting a mark itself, specifically its distinctive quality or reputation.

The necessity of dilution protection seemed more pressing in the 1920's because of the strict approach courts used to evaluate trademark infringement and the absence of alternative remedies. In the early twentieth century, courts began to recognize that consumers could be confused by the unauthorized use of marks on closely related products,33 and by the last half of the twentieth century, the likelihood of confusion analysis became so flexible that it was often applied to non-competitive goods that were not closely related.34 Section 1125(a) of the Lanham Act, enacted in 1946, provided an alternative path into federal court for a “false designation of origin, or any false description or representation.”35 Like a dilution claim, this federal unfair competition claim required no proof that the products at issue were related or that consumers were confused. State dilution laws provided another potential source of protection. In 1947, the Massachusetts legislature enacted the first state anti-dilution statute, and similar state laws were enacted in Illinois (1953) and New York (1955).36 In 2004, approximately two-thirds of state legislatures had enacted dilution laws.37 By the 1960's, state dilution doctrine began to recognize two specific types of dilution: dilution by blurring (injury to a mark's distinctive quality) and dilution by tarnishment (injury to a mark's reputation).38 In the wake of these changes in state and federal law, a federal cause of action for dilution seemed less urgent than it did when Schechter introduced the idea in 1926.39 Yet, compelling reasons justified the pursuit of federal dilution legislation. Trademark owners could not predict the breadth of protection trademark infringement claims would afford.40 Apparent state law protection often turned out to be illusory. The state dilution statutes, in particular, were “seldom invoked and rarely resulted in findings of liability.”41

In 1995, seventy years after publication of Schechter's prophetic article, Congress passed the Federal Trademark Dilution Act (“FTDA”) providing a remedy for dilution of famous marks.42 The FTDA of 1995 was not a model of clarity. It provided that the owner of a famous mark was entitled to an injunction against someone who “causes dilution of the distinctive quality of the mark . . . .”43 This language was so ambiguous that it caused splits among the federal circuits on basic issues such as the burden of proof,44 the type of mark that could be protected45 and the meaning of dilution.46 Before the FTDA had been around for a decade, “virtually everyone-courts litigants, commentators alike-agree[d] that the law [was] a mess.”47

The Supreme Court interpreted the statute in a way that attracted additional attention to its flaws. In Moseley v. Victoria's Secret,48 the Supreme Court interpreted the FTDA to require proof of “actual dilution, rather than a likelihood of dilution.”49 This interpretation gutted the force of the statute. The high standard of proof was criticized as “so ethereal and evanescent that it may be incapable of proof in ordinary cases.”50 This criticism was valid.

Claims for dilution make sense only if a remedy is available to rescue the mark before actual dilution occurs. Once a mark is actually diluted and loses its source identifying meaning, recovery may be impossible as a practical matter and legally barred. The practical impossibility may be illustrated by the difference in distinctive meaning between the marks “RAY'S” and “WENDY'S.” Because Wendy's International, Inc. has protected its fast food mark against use by others, “WENDY'S” has remained distinct and evokes a specific vision about the restaurant's décor, menu items, cost, quality, and speed of service. The original Ray's Pizzeria in Manhattan did not protect “RAY'S” against use by others. Now that dozens of independent “Ray's Pizza” establishments have mushroomed and coexisted for years in Manhattan,51 neither the original establishment nor any others can assert exclusive rights in the mark as a practical matter because they are not factually distinctive. Unlike “WENDY'S,” the ubiquitous Ray's marks convey nothing more than the most general impression that would be evoked using descriptive words like “pizza” or “Italian food.” Now that “RAY'S” has become so diluted by use on establishments that adhere to different standards, no one can recapture its distinctiveness because the mark cannot communicate a distinctive meaningful message about source or quality.

A mark that was once distinctive but that later loses its source identifying meaning may be barred as a matter of law from trademark protection. A trademark registration may be cancelled if the mark becomes a generic term.52 Distinctiveness may be lost if the mark loses its meaning as a source identifier by becoming the generic name for a product. For example, aspirin,53 yo-yo,54 and thermos,55 each lost distinctive meaning as a trademark and became known to consumers as the thing itself. Once a term becomes generic, it is free for any consumer or competitor to use in any way.56 The burden is on the trademark owner to protect its marks from dilution and genericide.57 Owners of marks such as “ROLLERBLADE,” “CHAPSTICK,” “KLEENEX” and “BAND-AID” must protect their marks vigilantly so that they do not become generic terms for the goods with which they are associated.58 Once the distinctive meaning of such a mark is lost, it cannot be regained. Therefore, dilution must be stopped at its inception, before actual dilution has occurred.

In the FTDA, Congress did not use Schechter's precise language in identifying the type of mark that could be diluted (and still has not used it).59 Instead of protecting marks that were unique60 and singular,61 the FTDA extended protection more broadly to all “famous” marks.62 Remedies were available against one who “causes dilution of the distinctive quality of the mark.”63 The Second Circuit read this language to mean that a mark must be inherently distinctive before it could be protected under the FTDA.64 In the Second Circuit, marks that had acquired distinctiveness65 after they were first adopted did not qualify for federal dilution protection.66

By failing to specify the types of dilution that could be the subject of an 1125(c) claim, the FTDA created additional confusion. Dilution by blurring, a claim for impairment to the distinctiveness of a mark, clearly appeared within the bounds of the FTDA. Blurring by tarnishment impairs a mark's reputation, and not necessarily its distinctive quality. The language of the FTDA arguably did not extend that far. In Moseley, the Supreme Court indicated in dicta that the FTDA may not recognize dilution by tarnishment.67 After 2003, some courts and commentators interpreted the FTDA to cover only dilution by blurring.68 Congress set out to clean up all of these ambiguities a decade later in a revised dilution statute.