Authored by Naresh Kilaru
Nearly a decade after Victoria's Secret filed suit to enjoin the use of the name VICTOR'S LITTLE SECRET for an adult novelty store, on May 21, 2008 the U.S. District Court in Kentucky finally resolved the case in Victoria's Secret's favour.1 Hardly anyone could have predicted when the case was originally filed in 1998 that it would provide the catalyst for overhauling federal dilution law. Now, after a controversial Supreme Court decision and the passage of a revised dilution statute, it remains to be seen whether US. dilution law has become any clearer. Preliminary indications are that most plaintiffs asserting dilution claims will continue to face an uphill battle for the foreseeable future.
On June 22, 1998, Victoria's Secret filed suit against Victor and Cathy Moseley in the United States District for the Western District of Kentucky to enjoin their use of the name VICTOR'S LITTLE SECRET for an adult novelty store. Victoria's Secret had learned of the Moseleys' store from an army colonel who saw an ad for the store's opening and was apparently offended by what he perceived to be an attempt to use Victoria's Secret's trademark in connection with "unwholesome" merchandise. Victoria's Secret's complaint alleged trademark infringement, unfair competition, and dilution under the Federal Trademark Dilution Act ("FTDA"). The district court granted the Moseleys' motion for summary judgment on the trademark infringement and unfair competition claims, holding that no likelihood of confusion existed due to differences in the marks, the relatively high degree of care exercised by purchasers of lingerie, and the absence of any actual confusion. The court, however, granted Victoria's Secret's motion for summary judgment on its FTDA claim, finding that the Moseleys' use of the name VICTOR'S LITTLE SECRET was likely to tarnish the distinctive quality of Victoria's Secret's famous trademark.
The Moseleys appealed the decision on the FTDA claim to the United States Court of Appeals for the Sixth Circuit, arguing that Victoria's Secret had to show actual dilution of its trademark (rather than a mere likelihood of dilution) to prevail on its FTDA claim. Agreeing with the district court that a showing of actual dilution was not necessary, the Sixth Circuit affirmed. The Moseleys appealed the Sixth Circuit's decision to the US. Supreme Court, which granted review due to a split of authority on this question.
On March 4, 2003, in a ruling that surprised many, the Supreme Court held that the FTDA "unambiguously requires a showing of actual dilution, rather than a likelihood of dilution."2 Because the record was insufficient regarding whether actual dilution had occurred, the Supreme Court reversed the judgment of the Court of Appeals and remanded the case to the Sixth Circuit for further proceedings. On April 9, 2003, the Moseleys filed a motion in the Court of Appeals to vacate the injunction granted by the district court. The case subsequently sat pending at the Court of Appeals for over four years without any action.
Efforts to legislatively overrule the Supreme Court's decision in Moseley began almost immediately after the decision issued. Three years later, on October 6, 2006, Congress passed the Trademark Dilution Revision Act ("TDRA") which, among other things, eliminated the requirement of actual dilution enunciated by the Supreme Court. With the TDRA in effect, on July 26, 2007, the Sixth Circuit Court of Appeals at last remanded the case to the district court for further proceedings.
Because the Moseleys' claim had been pending prior to the effective date of the TDRA, one of the threshold issues before the court was whether to apply the TDRA retroactively. The Moseleys argued that retroactive application would be improper and that the FTDA (as interpreted by the Supreme Court) should still govern their claims. The court, however, pointed to case law holding that where a party seeks only prospective injunctive relief (as did Victoria's Secret),3 the right to an injunction must be determined by the law in effect at the time. Accordingly, the district court proceeded to evaluate Victoria's Secret's dilution claim in light of the new "likelihood of dilution" standard of the TDRA.4
Application of the TDRA to Victoria's Secrets Claims
To establish it was entitled to injunctive relief under the TDRA, Victoria's Secret had to show that:
• Its VICTORIA'S SECRET mark was famous and distinctive;
• The Moseleys began using their VICTOR'S LITTLE SECRET mark after Victoria's Secret's mark had become famous; and
• (The Moseleys' use of VICTOR'S LITTLE SECRET was likely to dilute the distinctiveness of the VICTORIA'S SECRET mark by blurring or tarnishment. As there were no material issues regarding the first two factors, the court focused its analysis on whether there was a likelihood of dilution.
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(c)(2)(B). The TDRA also lists six factors a court "may" consider in determining whether there is a likelihood of dilution by blurring:
• The degree of similarity between the marks;
• The degree of distinctiveness of the famous mark;
• Whether the owner of the famous mark is making substantially exclusive use of the mark;
• The degree of recognition of the famous mark;
• Whether the defendant intended to create an association with the famous mark; and
• Any actual association between the plaintiff's and defendant's marks.
In analyzing these factors, the court readopted many of its earlier findings, holding that:
• The names VICTOR'S LITTLE SECRET and VICTORIA'S SECRET are substantially similar, particularly because the word "Little" appeared much smaller on the Moseleys' signage;
• The VICTORIA'S SECRET mark is inherently distinctive, falling into the category of "arbitrary and fanciful marks" and entitled to a high level of protection;
• Victoria's Secret had made substantially exclusive use of its mark;
• The VICTORIA'S SECRET mark has a high level of consumer recognition; and
• The Moseleys intended to create an association with the VICTORIA'S SECRET mark by adopting the name VICTOR'S LITTLE SECRET for their store. As to actual association, the court noted the Supreme Court had found evidence of actual association in the testimony of the army colonel who had reported the offending name of the Moseleys' store to Victoria's Secret. With little discussion, the court concluded this single instance of actual association was "no less compelling" than the evidence presented in another recent dilution case where the plaintiff had established an association level of 87% through survey evidence.5
Despite finding that all six of the TDRA dilution-by-blurring factors weighed in Victoria's Secret's favor, the court nevertheless concluded there was no likelihood of dilution by blurring. It pointed to the statutory language that the court "may consider all relevant factors," including but not limited to the ones enumerated in 15 U.S.C. § 1125(c)(2)(B). Instead of restricting its analysis to the enumerated factors, the court focused on the statutory definition of dilution by blurring as an association that is likely to "impair" the distinctiveness of the famous mark. The court held that, because Victoria's Secret had produced no evidence indicating that the Moseleys' use of VICTOR'S LITTLE SECRET was likely to diminish the capacity of the VICTORIA'S SECRET mark to identify Victoria's Secret's products, Victoria's Secret had not established a likelihood of dilution by blurring. Indeed, Victoria's Secret's expert never opined on what impact (if any) the use of VICTOR'S LITTLE SECRET had on the distinctiveness of the VICTORIA'S SECRET mark. Although the court's opinion does not discuss what additional evidence Victoria's Secret should have produced in this regard, it is clear the court considered this evidentiary deficiency to be fatal to Victoria's Secret's dilution-by-blurring claim.
The court's holding largely follows the Supreme Court's reasoning that mental association, by itself, "will not necessarily reduce the capacity of the famous mark to identify the goods of its owner."6 In other words, the mere fact that the army colonel had associated the parties' marks did not establish that the VICTORIA'S SECRET mark was somehow less able to identify Victoria's Secret's products. The testimony of the army colonel established only that he was offended by the use of Victoria's Secret's mark in connection with unwholesome merchandise. This evidence, the court held, supported a finding of dilution by tarnishment, not dilution by blurring.
Dilution by Blurring: Still a Viable Cause of Action?
While the TDRA has made it clear that a showing of actual dilution (i.e., actual economic injury) is not necessary to establish dilution, recent decisions applying the TDRA suggest that mental association alone will not be enough for relief.7 Unfortunately, neither the statutory language of the TDRA nor recent cases offer any further clarification regarding the evidentiary burden a plaintiff must satisfy to establish a likelihood of dilution by blurring. In many ways, dilution law appears to be just as murky now as it was before the Supreme Court's decision in Moseley and the passage of the TDRA.
One of the reasons for the lack of clarity is that courts appear to consider parts of the Supreme Court's decision in Moseley to still be good law (or at least persuasive dicta). Indeed, the district court's decision in Moseley and another recent case finding no dilution by blurring8 appear to be largely informed by the Supreme Court's observation that mental association alone is not sufficient for relief. The problem with giving too much weight to the Supreme Court's observation in this regard, however, is that it was made in the context of a decision holding actual dilution, not likelihood of dilution, as the appropriate standard under the law. Under an actual dilution standard, it makes sense that a plaintiff should have to prove more than mere mental association to prevail. But with the TDRA firmly establishing likelihood of dilution as the appropriate standard, the continued relevance of the Supreme Court's observation regarding the insufficiency of mere mental association is, at the very least, questionable.
If the trend of recent decisions continues and association alone is not enough to produce at least an inference that a famous mark's distinctiveness is likely to be impaired, it may be very difficult for owners of famous marks to show a likelihood of dilution by blurring - at least where the marks at issue are not identical.9 Current survey design for dilution, which generally captures only the level of association between two marks in the minds of consumers, will have to somehow be retooled to measure the extent to which a defendant's mark is likely to impair the distinctiveness of a famous mark.
Thus, while actual dilution technically need not be shown under the law, in practice it seems that plaintiffs trying to establish dilution by blurring may have to show something very close to actual dilution or economic injury to prevail. Given the difficulties in making such a showing, the more viable way to establish a likelihood of dilution for the foreseeable future may be to assert tarnishment rather than blurring (assuming a factual basis for a tarnishment claim exists). Likely damage to a famous mark owner's reputation should be comparatively easier to demonstrate than a "blurred association," which, despite all the attempts to clarify it, still remains an elusive concept.
1 V Secret Catalogue, Inc. v. Moseley, No. 3:98CV-395-S, 2008 U.S. Dist. LEXIS 40713 (W.D. Ky. May 19, 2008).
2 Moseley v. V Secret Catalogue, 537 U.S. 418, 433 (U.S. 2003).
3 The parties stipulated in October 2005 to Victoria's Secret's withdrawal of all claims for monetary relief.
4 While the court recognized that the TDRA essentially restored dilution law to the pre-Moseley likelihood-of-dilution standard (and thus the outcome of the case might be the same), it determined it was required to analyze the case employing the methodology of the new statute.
5 Nike, Inc. v. Nikepal Int'l, Inc., 2007 U.S. Dist. LEXIS 66686 (E.D. Cal. Sept. 7, 2007).
6 Moseley, 537 U.S. at 433.
7 See, e.g., Louis Vuitton Malletier v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007); Louis Vuitton Malletier v. Dooney & Bourke, Inc., 2008 U.S. Dist. LEXIS 42787 (S.D.N.Y. May 30, 2008); Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 2008 U.S. Dist. LEXIS 44147 (S.D.N.Y. June 5, 2008).
8 Dooney & Bourke, 2008 U.S. Dist. LEXIS 42787.
9 In Moseley, the Supreme Court observed that the use of an identical mark constitutes circumstantial evidence of dilution. 537 U.S. at 434. See also, American Honda Motor Co. v. Pro-Line Protoform, 325 F. Supp. 2d 1081, 1085 (CD. Cal. 2004); Savin Corp. v. Savin Group, 391 F.3d 439, 452 (2d Cir. 2004).
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