2004 Volume 7 Issue 2

The Uncertain World of Trademark Dilution

The Uncertain World of Trademark Dilution

The Supreme Court speaks, but questions still remain

The decision in Victor’s Little Secret v. Victoria’s Secret requires that the holder of the trademark prove that a competitor’s similar trademark causes actual dilution in order to obtain an injunction against its use. However, significant questions remain.

In February of 1998, Victor and Cathy Moseley opened a retail store named “Victor’s Secret”[1] in a strip mall in Elizabethtown, Kentucky. To publicize the opening of their store, the Moseleys placed an advertisement in a weekly publication distributed to residents of the nearby military installation at Fort Knox, Kentucky. The ad featured “intimate lingerie for every woman, romantic lighting, lycra dresses, pagers, and adult novelties/gifts.”[2]

An Army Colonel at the base saw the ad and was offended by what he perceived to be an attempt to use a reputable company’s trademark to promote the sale of “unwholesome, tawdry merchandise.” He sent a copy of the publication to the parent corporation of Victoria’s Secret stores and catalogues (hereafter simply called Victoria’s Secret).[3] Counsel for Victoria’s Secret then wrote to the Moseleys stating that their choice of the name “Victor’s Secret” was likely to cause customers to confuse their store with the well-known Victoria’s Secret stores and merchandise, and that all of this was likely to “dilute the distinctiveness” of the trademark.[4] The Moseleys were requested to immediately discontinue the use of the name “and any variations thereof.”[5]

In response, the Moseleys changed the name of their store to “Victor’s Little Secret” (with the word “Little” in smaller letters).[6] After being advised of the name change, counsel for Victoria’s Secret requested detailed information about the store in order to consider whether the change “would be acceptable.”[7] Victoria’s Secret decided it was not, and two months after its initial request, the company filed suit against the Moseleys.

What Is the Context?

The Moseleys are not the first people, nor are they likely to be the last, to run afoul of the laws that protect trademarks. Most holders of famous trademarks do not take lightly to having the value of their trademarks potentially diluted by others. Ringling Bros.- Barnum and Bailey Circus sued no less an entity than the state of Utah over Utah’s advertising slogan that it had “The Greatest Snow on Earth.” To the circus this slogan was an obvious play on the long time identification of the circus as “The Greatest Show on Earth.” Microsoft sued to prevent use of the term “Lindows” for the Linux operating system software and website produced by Lindows, Inc., arguing that it was clearly an attempt to play on the Windows designation of its own operating system. Lindows changed the name of the product and website to “Linspire” after losing court cases in three European countries.[8] Applebee’s restaurant chain sued Stouffer Corporation over the use of the term “Skillet Sensations.”[9] Best Western International (the hotel/motel chain) appears to be trying to claim sole right to the word “Best” when it comes to using the word in names of hotels or motels. It has sued both Best Inns and Best Value Inns, contending that those names infringe on its trademark.[10]

The company that makes Kirby vacuum cleaners even sued an independent repair shop because it placed the Kirby trademark (along with some others) in its Yellow Pages ad to indicate that the shop could repair their vacuum cleaners. Kirby sued on the grounds that this repair shop was not an authorized dealer.[11]

In a reversal of the usual pattern, a small company in the United Kingdom is suing Google, the very large search engine company, over its use of the term “Gmail” for Google’s new email product. The Market Age, an investment research firm based in London, says that “Gmail” has been a core product of its Web-based research application service for more than a year, although it had not bothered to register the name until it heard of Google’s plans.[12]

Even Microsoft, which vigorously defends its own trademark, is not immune from being sued. “Mythic Entertainment, a maker of online video games, recently sued Microsoft for trademark infringement, alleging that the software giant was illegally using Mythic’s corporate name to promote an upcoming game called Mythica.”[13] Microsoft and Mythic settled the suit without any admission of fault or liability, and Microsoft stopped developing the game, although it said that it was doing so for reasons unrelated to the suit.[14]

What is the Basis for These Suits?

The basic U.S. law is the Trademark Act of 1946 (the Lanham Act). The intent of the act was to prohibit trademark infringement and to protect consumers from being confused or fooled into thinking they were buying a well-known branded product when they were purchasing an inferior one. The Lanham Act was then amended by Congress in 1995 also to grant a remedy for the “dilution of famous marks.”[15] This amendment, commonly identified as the Federal Trademark Dilution Act (FTDA), provides for injunctive relief “against another person’s commercial use …of a mark or trade name, if such use . . . causes dilution of the distinctive quality of the mark,” [16] where “dilution” is defined as the “lessening of the capacity of a famous mark to identify and distinguish goods or services.”[17]

The goal of the FTDA is to enable businesses to protect the investment that companies have made in branding their products. Consumer confusion is not required to establish “dilution.” Not surprisingly, private lawsuits jumped from 2,405 in 1990 to 4,187 in 2000.[18]

The Victoria’s Secret Court Case

The Victoria’s Secret case is of particular importance because it reached the Supreme Court, and the ruling therefore impacts other decisions. As is true of most of the other cases mentioned, Victoria’s Secret filed its suit claiming that the defendant’s use of the name, “Victor’s Little Secret,” was “likely to cause confusion and/or mistake” with the Victoria’s Secret’s trademark.[19] Victoria’s Secret claimed unfair competition and dilution of the trademark. The unfair competition claim alleged misrepresentation, and the dilution claim alleged that the defendant’s conduct was “likely to blur and erode the distinctiveness” and “tarnish the reputation” of the Victoria’s Secret trademark.[20] However, no evidence was presented to show that there was any actual impact on the value of the Victoria’s Secret mark.[21]

The District Court concluded that “no likelihood of confusion” existed and therefore granted a judgment to the Moseleys on the trademark infringement and unfair competition claims.[22] However, on the claim of dilution, the court enjoined the Moseleys from using the designation “Victor’s Secret” or “Victor’s Little Secret” or any similar mark.[23] The court concluded that dilution was present because “Defendant’s mark… [has a] tarnishing effect” upon the “distinctive quality of Victoria’s Secret mark.”[24] The court further noted that “Courts have frequently enjoined the ‘tarnishment’ of a mark through the association with unsavory goods, person, or services.”[25]

Hoping to overturn the injunction requiring them to change the name of the shop, the Moseleys appealed to the Sixth Circuit Court of Appeals.[26] At the time of the Moseleys’ appeal, there was a disagreement among the circuit courts regarding the standards for determining dilution and whether or not a remedy could be granted before dilution had actually occurred. In the Ringling Bros. case noted above, the Fourth Circuit determined that there must be “actual economic harm to the famous mark’s economic value by lessening its former selling power as an advertising agent for its goods or services” for dilution to have occurred.[27] The judge ruled in favor of the state of Utah.

However, in a case in the Second Circuit, Nabisco, Inc. v. PF Brands, Inc., the Court agreed with a district court which had found that Nabisco, Inc.’s use of an orange, bite-sized, cheddar-cheese flavored, goldfish-shaped cracker diluted the distinctive quality of Pepperidge Farm’s goldfish cracker.[28] The Second Circuit concluded that actual dilution was not necessary to establish a claim.[29]

In the case of Victoria’s Secret and the Moseleys, the Sixth Circuit agreed with the Second Circuit that actual damage need not have occurred for there to have been dilution of a trademark and so ruled for Victoria’s Secret. The Moseleys appealed.

The Supreme Court Decision

On appeal to the United States Supreme Court the issue that needed to be resolved was whether or not the holder of the famous mark (Victoria’s Secret) would be entitled to injunctive relief on the basis of the likelihood (possibility) of dilution versus actual (in fact) dilution.[30] Stated a little differently, the issue is whether or not it is sufficient for the senior mark holder to establish that use by the junior user “can” cause dilution as contrasted to “does” cause dilution.

Referring to the relevant text of the FTDA, the Court stated “that ‘the owner of a famous mark’ is entitled to injunctive relief against another person’s commercial use of a mark or trade name if that use ‘causes dilution of the distinctive quality’ of the famous mark.”[31] Thus, in light of the obvious meaning of the word “causes,” the Court unanimously held that before an injunction could be granted, the holder of the mark is required to show “actual dilution, rather than a likelihood of dilution.”[32]

Although the Court concluded that the owner of a famous mark must show actual injury in order to obtain injunctive relief, the question remained regarding how the senior mark holder would establish that injury. The Court indicated that the senior mark holder need not show actual loss of sales or profits.[33] However, the Court did state that where the marks are not identical, it is insufficient merely to establish “that consumers mentally associate the junior user’s mark with a famous mark.”[34] The Court expressed the view that the existence of a mental association does not necessarily lead to “blurring” or “tarnishing” of a trademark.[35]

Counsel for Victoria’s Secret argued that consumer surveys and other methods of proving actual dilution are expensive, difficult to obtain, and in many instances are unreliable.[36] Although recognizing that such difficulties may in fact exist, the Court stated that the existence of such difficulties is “not an acceptable reason for dispensing with proof of an essential element” required by the FTDA.[37]

Since Victoria’s Secret had not provided the requisite evidence of actual dilution at the trial, the Court reversed the trial court’s judgment in favor of Victoria’s Secret and remanded the case for further proceedings.[38]

Although the Court answered one question, its decision raised many more. For example, how does the senior holder prove actual dilution? What type of evidence is required? Is circumstantial evidence acceptable in place of direct evidence?

Related Court Decisions

Satirist Al Franken recently wrote a book entitled “Lies, and the Lying Liars Who Tell Them: A Fair and Balanced Look at the Right,” using the phrase “Fair and Balanced” that Fox News uses as its trademark. When Fox asked for an injunction to keep Franken from using the words “fair and balanced” as part of the title, the District Court said in effect that Fox needed to learn how to take a joke.[39] The judge commented that “A person would have to be ‘completely dense’ not to realize the cover was a joke.”[40] Furthermore, he held that the term “fair and balanced” was so commonly used that trademark protection was unrealistic.[41]

In another First Amendment case, Mattel, Inc., lost its attempt to prevent a Utah artist from using Barbie in a series of photographs entitled “Food Chain Barbie,” which Mattel felt degraded the image of the doll. The judge in that case ruled the photographs were parodies and were protected by the First Amendment of the U.S. Constitution.[42] Another federal judge likewise denied Caterpillar’s request for a restraining order against Disney’s release of “George of the Jungle 2” because Caterpillar’s yellow earthmoving equipment is used by the villains in the Disney DVD.[43]

Where Do Things Stand Now?

There still appears to be confusion over the degree of protection to which trademarks are entitled. More court challenges will undoubtedly be filed to settle ambiguous language and to resolve conflicting court decisions. It is also quite possible that there will be an attempt to amend the FTDA so that the standard becomes the “potential for dilution and tarnishment” rather than “causes economic harm.”

In addition to the straightforward trademark infringement cases, myriad other related issues exist. For instance, Google’s practice of selling terms as keywords for its search engine is being challenged as trademark infringement if the term brings up the website of someone other than the registered trademark holder.[44] A question also exists of when claiming that one’s product is “compatible with” a brand name product (e.g., software that is “compatible with Windows”) might be trademark infringement. The potential list of issues goes on and on.

To add even more confusion, there are also state laws regarding trademarks. All states have statutes related to trademark law, although only 25 have anti-dilution laws.[45] Furthermore, this set of unresolved issues does not even begin to touch on the fact that there are international laws that must be heeded in a global economy.

How, then, should one proceed in the real world? The Supreme Court decision in the Victoria’s Secret case makes it more difficult for trademark owners to gain injunctions against dilution. However, if you do not want to spend a great deal of time and money defending yourself, it may be wise to resist the temptation to parody or make a play on someone else’s trademark, name, slogan, or commercial format (e.g., the MasterCard commercials) unless you are obviously satirizing the company so that you can claim First Amendment rights in doing so. The owners of famous marks often have legal staffs for whom protecting the trademark is a fulltime job. They have deep pockets and a vested right in protecting the millions they have spent on developing their brands.

If you inadvertently infringe on a mark, or are challenged on the use of a term or name that you feel is too generic to be trademarked, then mounting a defense may be worthwhile. It may be difficult to prove that a small local shop has caused actual economic damage to a large corporation’s famous trademark.

On the other hand, if you are the holder of the trademark, clearly you want to protect it. To do so, you need to learn about local and international jurisdictions as well as the federal ones.

In sum, the issue of trademark dilution is not yet settled. The best advice today is that you should tread carefully around another’s trademark if you wish to avoid expensive and time-consuming litigation. However, if you are sued for trademark dilution, the Supreme Court has signaled that the trademark holder may have a difficult time winning a trademark dilution suit without proof of economic damage. Beyond that, we will have to wait for future Supreme Court cases to further outline the parameters of trademark dilution law.

[1] Moseley v. V. Secret Catalogue, 537 U.S. 418, 420 (2003). The Moseley’s explanation for the choosing of the name “Victor’s Secret” is that Victor Moseley wanted to keep the opening of the store quiet while working for his previous employer. Tthus, it was “Victor’s Secret.” V. Secret Catalogue v. Moseley, No. 3:98CV-395-S, 2000 U.S. Dist. LEXIS 5215, at *11 (WD Ky., Feb. 9, 2000).

[2] Id.

[3] Id. at 422-423. The Victoria’s Secret brand is one of moderately priced, high quality, attractively designed lingerie sold in a store setting designed to look like a woman’s bedroom. Victoria’s Secret also distributes each year 400 million copies of the Victoria’s Secret catalog that features this line of lingerie.

[4] Id.

[5] Id.

[6] Id.

[7] Id. at n.2.

[8] “Lindows Changes Name of Operating System to Linspire,” USA Today, April 4, 2004.

[9] “Applebee’s Sues Over ‘Skillet Sensations’ Label,” Nation’s Restaurant News, October 20, 2003:112.

[10] Bruce Adams, “Name Change to Settle One ‘Best’ Dispute,” Hotel and Motel Management, July 21, 2003: 1.

[11] Caroline E. Mayer, “No Bend on Brand Names: Big Corporations’ Litigation is Changing Trademark Philosophy,” The Washington Post, January 29, 2004: E1.

[12] http://www.Reuters.com. April 7, 2004.

[13] Paul Thurott, “Microsoft Faces Trademark Infringement Case,” Windows & .NET Magazine, April 22, 2004.

[14] Mike Musgrove, “Microsoft, Fairfax Firm Settle Suit; Video-Game Maker Mythic Said Trademark Was Infringed Upon,” The Washington Post, May 26, 2004: E05.

[15] Federal Trademark Dilution Act of 1946, 15 U.S.C. § 1125. Section 43 (1995).

[16] Id. SEC. 3. REMEDIES FOR DILUTION OF FAMOUS MARKS. (a) REMEDIES (c)(1) The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, 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, and to obtain such other relief as is provided in this subsection.

[17] Federal Trademark Dilution Act of 1946, 15 U.S.C. § 1127, Section 45 (1995), SEC. 4. DEFINITION. The term “dilution” means the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception.

[18] Mayer, supra note 11.

[19] Moseley, supra note 1, at 423.

[20] Id.

[21] Id. at 425.

[22] Mosley, supra note 1, citing V Secret Catalog, , at *2.

[23] Id.

[24] Id., at *11 (quoting the district court).

[25] V Secret Catalog, Inc., 2000 U.S. Dist. LEXIS 5215, Civ. Action No. 3:98CV-395-S, at *15 (WD Ky., Feb. 9, 2000).

[26] V Secret Catalogue, Inc., et al. v. Victor Moseley, et al., 259 F. 3d 464 (6th Cir. 2001).

[27] Ringling Bros.- Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Development, 170 F. 3d 449 (1999).

[28] Nabisco, Inc. v. PF Brands, Inc., 191 F. 3d 208 (1999).

[29] Moseley supra note 1, at 429, n.6.

[30] Id. at 422.

[31] Id. at 432. The Court referring to 15 U.S.C. § 1125 (c) (1), supra note 15 (emphasis added).

[32] Id. at 433. Note that Justice Stevens delivered the opinion for a unanimous Court with respect to Parts I, II, and IV, and the opinion of the Court with respect to Part III. Justice Kennedy filed a concurring opinion, and Justice Scalia joined all but Part III of the opinion.

[33] Id.

[34] Id.

[35] Id. at 434.

[36] Id.

[37] Id.

[38] Id.

[39] Susan Saulny, “In Courtroom, Laughter at Fox and a Victory for Al Franken,”:The New York Times, August 23, 2003:. B1.

[40] Id.

[41] Id.

[42] Christine Steiner, ” ‘Lawsuit Barbie’ Fails for Mattel,”, The Los Angeles Times, January 7, 2004:, B15.

[43] Jan Dennis, “Judge Refuses Caterpillar Request to Block Disney Release,” The Associated Press, October 20, 2003.

[44] Procter, op. cit.

[45] Callman, Unfair Competition, Trademarks and Monopolies (4th Edition): section 26:58.

Links of interest:

The United States Patent and Trademark Office website[1].

The Trademark Act

An overview of trademark law.

Another overview of trademark law

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Authors of the article
Linnea B. McCord, JD, MBA
Linnea B. McCord, JD, MBA, Associate Professor of Business Law at the Graziadio School of Business and Management, Pepperdine University. Dr. McCord started teaching business law and ethics more than 30 years ago, first as an in-house corporate counsel and later as the General Counsel of a division that was part of a high-tech Fortune 500 multinational corporation, headquartered in New York and Paris. Her area of expertise is the critical role Rule of Law plays in the long-term success of economies and countries and why American Rule of Law is unique in the world.
Carol Docan, JD
Carol Docan, JD
Leonard Rymsza, JD
Leonard Rymsza, JD
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