[*PG207]INTERPRETING THE FEDERAL TRADEMARK DILUTION ACT OF 1995: THE LOGIC OF THE ACTUAL DILUTION REQUIREMENT
Abstract: The Federal Trademark Dilution Act of 1995 creates a cause of action for trademark dilution. In contrast to trademark infringement law, which requires a showing of consumer confusion about the source or affiliation of goods and services, dilution law protects the distinctive quality and selling power of the trademark itself, even if consumers are not confused. The Fourth Circuit Court of Appeals, emphasizing the statute’s requirement that the defendant’s trademark “causes dilution” of the distinctive quality of an established trademark, has required evidence of an actual diminution of the established trademark’s selling power. The Second Circuit Court of Appeals has read the statute to require just a likelihood of dilution, and has held that circumstantial evidence of probable dilution is enough to prove a violation. This Note argues that the Fourth Circuit’s interpretation is more consistent with the text of the statute and with the public interest in trademark law.
Trademarks are essential tools of the consumer in a mass society.1 The existence of trademark law enables the consumer to take for granted that a restaurant bearing the MCDONALD’S trademark is affiliated with previous MCDONALD’S restaurants she has eaten at, which makes it possible to predict the quality of the food with great accuracy.2 If competitors could use trademarks confusingly similar to MCDONALD’S, the consumer would not be sure what to expect.3
Trademarks also work to the advantage of their owners, for the selling power of established trademarks functions as a partial barrier against the entry of new products into the market.4 If consumers prefer products bearing established trademarks to products of equal quality selling at a lower price (or higher quality at the same price), [*PG208]new products could be forced out of the market because of the often non-rational appeal of established trademarks.5 If consumers prefer for such reasons to eat at MCDONALD’S rather than JOE’S, despite the fact that JOE’S offers a better deal, the power of the MCDONALD’S trademark could force JOE’S out of business.6 This would not be in the interest of consumers.7
The prevention of consumer confusion has been the traditional basis of trademark protection in the United States.8 Under federal law, a trademark infringement claim requires a showing that the defendant’s mark is likely to confuse consumers about the source or affiliation of its goods or services.9 In 1995, however, Congress enacted the Federal Trademark Dilution Act (the “FTDA”), creating a federal cause of action for trademark dilution.10 Dilution is defined as “the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of . . . [a] likelihood of confusion, mistake, or deception.”11 In contrast to infringement law, which is based on a theory of consumer protection, dilution law is concerned with protecting the “distinctive quality” of the trademark itself, even if consumers have not been deceived or misled.12 The FTDA therefore has the potential to disconnect trademark law from its foundation in consumer protection and to reconfigure it on the model of a property right in gross.13
Proponents of dilution law argue that trademark owners are entitled to protect their investment in the selling power of their mark even if there is no consumer confusion to combat.14 Critics, however, believe dilution law grants established trademark owners too great a zone of exclusivity and a property right that has no clear boundaries.15
[*PG209] With this dispute over the merits of dilution theory in the background, the courts have advanced conflicting readings of the FTDA.16 The Fourth Circuit Court of Appeals has held that the statutory text, which requires proof that the defendant’s mark “causes dilution” of the distinctive quality of an established trademark, demands evidence of actual dilution of the senior mark’s selling power.17 The Second Circuit Court of Appeals, however, has read the FTDA to require just a likelihood of dilution, and has held that circumstantial evidence of probable dilution is enough to prove a violation.18 This Note argues that the Fourth Circuit is correct in reading the statute to require proof of actual dilution.19 The Second Circuit’s contrary interpretation is inconsistent with the statutory text, is unpredictable in its application, and does not advance the public interest in trademark protection.20
Section I of this Note outlines the scope and the limits of the public interest in trademark protection. Section II examines the origins and the evolution of dilution law in the United States. Section III describes the FTDA and summarizes early interpretations of the statute in the courts. Sections IV and V discuss the Fourth Circuit’s decision in Ringling and the Second Circuit’s decision in Nabisco. Section VI argues that the Fourth Circuit’s interpretation of the FTDA is more consistent with the text of the statute and with the public interest.
Why does American law protect trademarks? To supporters of the federal dilution statute, trademark owners have a right to enjoin replicating or near-replicating uses of their marks that is analogous to the right of landowners to enjoin trespass.21 In hearings on the FTDA, a Warner Brothers executive explained to a House committee: “[t]he basic principle is that the trademark owner, who has spent the time and investment needed to create and maintain the property, should be the sole determinant of how that property is to be used in a com[*PG210]mercial manner.”22 This is the property-right-in-gross view of trademark ownership.23
Such a formulation is in tension with the traditional justification for trademark protection in the United States, which is based not on the interests of the trademark owner, but on the interests of consumers in the marketplace.24 While copyright and patent law are concerned with setting up incentives to create, trademark infringement law aims to prevent sellers from misleading consumers about the source and affiliation of goods and services.25 This helps consumers make decisions based on their past experience with specific brands.26 The concern of infringement law is not with the owner of the trademark itself, but with the consumer who is “duped into dealing with an imposter.”27 Indeed, the trademark infringement plaintiff has been described as the “‘vicarious avenger’ of consumer interests.”28
The benefit of trademark protection for consumers, however, comes at a potential cost.29 Trademarks create barriers to the entry of new products into the market, to the extent that established trademarks succeed in luring consumers away from new products bearing unfamiliar marks.30 Trademarks have this effect by virtue of their role “as vessels through which all forms of advertising, . . . must pass.”31 To the extent that the lure of an advertised trademark is based not on the tangible qualities of the goods or services it identifies, but on an intangible “brand personality . . . aimed at the consumer’s heart rather than his [or her] mind,”32 new and perhaps better and/or cheaper products could be forced out of the market by the non-rational persuasive power of established trademarks.33
In 1942, in Mishawaka Rubber & Woolen Manufacturing Co. v. S.S. Kresge Co., the Supreme Court noted the non-rational aspect of trademark-driven consumer behavior:
[*PG211]If it is true that we live by symbols, it is no less true that we purchase goods by them. A trademark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol . . . .34
Product differentiation based on non-rational appeals to artificial desires “not only enables a company to charge a premium for its goods relative to the identical goods of another producer, it enables the company to keep other producers out of the market.”35 This cannot be good for the consumer.36
The consumer confusion test aims to strike a balance between the socially desirable function of trademarks in facilitating market competition and informed consumer decision making, and the social costs of trademarks just described, protecting trademarks to the extent required to prevent consumer confusion and encourage competition, but not beyond that point.37 The Ninth Circuit Court of Appeals has stated that “[a] trademark owner has a property right [in the trademark] only insofar as is necessary to prevent consumer confusion as to who produced the goods and to facilitate differentiation of the . . . goods.”38 It was out of dissatisfaction with this assumption about the interests trademark law protects that dilution theory emerged.39
Dilution theory originated in Frank I. Schechter’s 1927 Harvard Law Review article The Rational Basis of Trademark Protection.40 Schechter criticized the consumer protection model of trademark law, arguing instead that “the preservation of the uniqueness of a trademark . . . constitute[s] the only rational basis for its protection.”41 The “real injury” that concerned Schechter was not the confusion of the con[*PG212]sumer who might be misled, but an injury to the value of the trademark itself, which he described as “the gradual 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.”42 Schechter offered an illustrative example:
[I]f “Kodak” may be used for bath tubs and cakes, “Mazda” for cameras and shoes, or “Ritz-Carlton” for coffee, these marks must inevitably be lost in the commonplace words of the language, despite the originality and ingenuity in their contrivance, and the vast expenditures in advertising them which should be protected to the same extent as plant and machinery.43
Schechter suggested that the real power of a trademark rested not on its source signification function, but rather on its pure “selling power,” which depended in turn on its “uniqueness and singularity.”44 Schechter’s insight, in sum, was that the selling power of a trademark could be injured even in the absence of consumer confusion, via “whittling away” or “dispersion” of its distinctive quality and its hold on the public.45
For an infringement claim to succeed, the 1905 Trademark Act required that the goods in question have the “same descriptive properties.”46 Under the 1905 Act, the Kodak bathtubs Schechter hypothesized could not be enjoined with an infringement action, even if consumers held the mistaken belief that the camera company was associated with the bathtubs, because cameras and bathtubs do not have the same descriptive properties.47 Although the 1946 Lanham Act (revising federal trademark law) did not include the dilution cause of action Schechter had advocated, it eliminated the “same descriptive properties” requirement.48
[*PG213] With the elimination of the “same descriptive properties” requirement, much of what had concerned Schechter was addressed: it was now possible to sue for trademark infringement against uses on non-competing products.49 For example, the use of PEPSI on shovels could be enjoined if some consumers would mistakenly believe the junior use was connected with the senior use, despite the absence of competition between soda and shovels.50 In the leading treatise on American trademark law, J. Thomas McCarthy writes, “The modern rule of [infringement] law gives the trademark owner protection against use of its mark on any product or service which would reasonably be thought by the buying public to come from the same source, or thought to be affiliated with, connected with, or sponsored by, the trademark owner.”51
Despite the Lanham Act’s elimination of the requirement that goods be in competition with each other for a trademark infringement action to succeed, Massachusetts enacted the first state dilution statute the next year in 1947, which provided that “[l]ikelihood of injury to business reputation or of dilution of the distinctive quality of a trade name or trade-mark shall be a ground for injunctive relief . . . notwithstanding the absence of competition between the parties or of confusion as to the source of goods or services.”52 Between 1947 and 1964, Illinois, New York, Georgia and Connecticut enacted dilution statutes.53 In 1964 the United States Trademark Association put a dilution clause into its Model State Trademark Bill, and in subsequent years “state after state incorporated the language of the Model Bill [*PG214]into its trademark law.”54 The Model State Trademark Bill reads: “Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark registered under this Act, or a mark valid at common law, or a trade name valid at common law, shall be a ground for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.”55
The courts, however, were unenthusiastic about the dilution statutes.56 Some courts, notwithstanding statutory declarations that consumer confusion was not required, rejected dilution claims because consumer confusion had not been demonstrated.57 Other courts held dilution statutes inapplicable in cases of direct competition between the parties.58 Still others were concerned about the potential impact of the dilution statutes on the overall balance of trademark law.59 In 1969, in Coffee Dan’s, Inc. v. Coffee Don’s Charcoal Broiler, the United States District Court for the Northern District of California rejected a claim under California’s dilution statute that COFFEE DON’S CHARCOAL BROILER, used in connection with a restaurant, diluted COFFEE DAN’S, also used in connection with eating establishments.60 The court wrote: “Until [the California dilution] statute is interpreted more fully by a California court, we feel constrained not to give it overly broad application lest it swallow up all competition in the claim of protection against trade name infringement.”61 The court was hesitant, in other words, to create a property right in trademarks extending beyond what was required to prevent consumer confusion.62
A 1976 commentary concluded that the dilution cause of action “largely has been ignored by the courts despite the plain dictates of [*PG215]the statutes . . . .”63 The Restatement (Third) on Unfair Competition explains the reluctance of courts to venture beyond the premises of infringement theory to sanction dilution claims:
Some courts, and numerous commentators, expressed fear that the uncertain limits of the antidilution cause of action would unduly expand the ability of trademark owners to monopolize language and inhibit free competition. A broad antidilution theory also has the potential to render superfluous the traditional likelihood of confusion standard of liability.64
McCarthy writes that the “subtlety of the injury caused by dilution” contributed to judicial reluctance to enforce the state statutes, and that judges have found dilution “not an easy concept to understand or explain.”65 Because of this, state dilution statutes fell into disuse.66
In the late 1970s, however, some courts began to reconsider their reluctance to enforce dilution statutes.67 In 1977, in Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., the New York Court of Appeals criticized the general trend of non-enforcement.68 In an influential dictum, the court described dilution as “a cancer-like growth of dissimilar products or services which feeds upon the business reputation of an established distinctive trademark or name.”69 Although the court concluded on the facts of the case that the plaintiff’s mark lacked the requisite distinctiveness to qualify for dilution protection, it painted the dilution cause of action in broad strokes.70
[*PG216]In subsequent years some courts heeded the advice of the New York court and stepped up their enforcement of state dilution laws.71 But the magnitude of the trend should not be overstated; one study concluded that as of 1996 courts had granted relief on state dilution-law grounds alone in just sixteen cases.72
Against this background of ineffective state dilution legislation, it is easy to understand why proponents of enhanced trademark protection—with the International Trademark Association leading the charge—pursued a federal dilution statute.73 An effort to insert a dilution clause into the Lanham Act passed the Senate in 1988, but failed in the House.74 Seven years later, however, very similar legislation “passed rapidly through Congress with minimal hearings in the House and none in the Senate.”75 The Federal Trademark Dilution Act was signed into law and went into effect on January 16, 1996.76
The purpose of the FTDA was “to protect famous trademarks from subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it, even in the absence of a likelihood of confusion.”77 The House Report offered DUPONT shoes, BUICK aspirin and KODAK pianos to illustrate the concept of trademark dilution.78 A federal cause of action was said to be needed, despite the existence of the state statutes, to reduce the incentives for forum-shopping that reliance on state law created and to ensure that injunctions would have nationwide effect.79 Congress also asserted that federal dilution [*PG217]protection for famous marks was required under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), an element of the Uruguay Round of the General Agreement on Trade and Tariffs (GATT), to which the United States was a signatory.80
The FTDA protects “famous” trademarks against dilution of their “distinctive quality”:
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 . . . .81
Dilution is defined as “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.”82 The statute also lists eight non-exclusive factors for courts to weigh in deciding if a trademark is “distinctive and famous.”83
In sum, the elements of a federal dilution claim are (1) the plaintiff owns a famous trademark; (2) the defendant’s use is commercial and in interstate commerce; (3) the defendant’s use commenced after the plaintiff’s mark had achieved its fame; and (4) the defendant’s use lessens the capacity of the plaintiff’s mark to identify and distinguish goods and services.84
One major difference between the federal and state dilution statutes is the FTDA’s requirement that the mark be famous.85 Courts have had some difficulties interpreting the famousness requirement, [*PG218]because “famous” is a term that “lacks any technical meaning in United States trademark law.”86 Several courts have held trademarks to be famous without explanation of their reasoning or analysis of the statutory fame factors.87 Other courts have applied at least some of the fame factors in deciding that a mark was famous.88 Trademarks that have been found to be famous include NBA,89 FEDERAL EXPRESS,90 TOYS ‘R’ US,91 THE SPORTING NEWS,92 JEWS FOR JESUS,93 EBONY,94 HOTMAIL,95 WAWA,96 PANAVISION,97 ARTHUR,98 BARBIE,99 PLAYBOY,100 ERA,101 COACH,102 PORSCHE,103 and POST-IT.104
Several courts have rejected claims under the FTDA on the ground that the plaintiff’s trademark was not famous.105 Trademarks [*PG219]held not to be famous under the federal dilution statute include LANE (financial services),106 CIT GROUP,107 WASHINGTON SPEAKERS BUREAU,108 AUTHORITY (“The Sports Authority”),109 WEATHER GUARD,110 STEALTH (computer equipment),111 KING OF THE MOUNTAIN SPORTS,112 ALLTEL,113 BONGO (junior women’s apparel),114 APPLESEED (“The Appleseed Foundation”),115 WE’LL TAKE GOOD CARE OF YOU (drug store slogan),116 STAR MARKETS (grocery stores),117 a “squat, rectangular, glass [perfume] bottle with straight edges,”118 and certain “humanized skeleton characters.”119
Two federal appeals courts have read the famousness requirement as limiting the FTDA to a narrow, elite category of trademarks.120 In 1999, in Avery Dennison Corp. v. Sumpton, the Ninth Circuit Court of Appeals held that the trademarks AVERY and DENNISON (for office products) were not famous, and therefore were ineligible for FTDA protection.121 The court read the fame requirement as limiting the dilution cause of action to “a select class of marks” that have “such powerful consumer associations that even non-competing uses can impinge on their value.”122 The court explained that if dilution protection were available “on a showing of inherent or acquired distinctiveness” that fell short of genuine fame, “we would upset the balance [of American trademark law] in favor of over-protecting trademarks, at the expense of potential non-infringing uses.”123
[*PG220] In 1998, in I.P. Lund Trading ApS, Kronin Inc. v. Kohler Co., the First Circuit Court of Appeals held that the plaintiff’s VOLA faucet design was not famous.124 The court set a “heightened fame standard,” reading the legislative history to indicate that Congress understood the FTDA to be an “extraordinary remedy” for “very unique marks.”125 The First Circuit cited the House Report’s examples of DUPONT, BUICK and KODAK as evidence of the magnitude of the fame Congress had in mind.126 Although the court concluded that the language of the FTDA is not limited to these “archetypal problems” in which a “world-famous brand name” has been diluted, it required evidence that the heightened fame standard has been met.127 Other courts, however, have held marks such as EBONY,128 HOTMAIL,129 WAWA,130 PANAVISION,131 and ARTHUR132 to be famous, with no indication that a heightened standard has been applied.
Under state and federal dilution law, courts have recognized two kinds of dilution: blurring and tarnishment.133 The FTDA’s definition [*PG221]of dilution—”the lessening of the capacity of a famous mark to identify and distinguish goods or services”—describes blurring, but the legislative history indicates a congressional intent for the FTDA to encompass both of the forms of trademark dilution that had been recognized under state law.134 The Second Circuit has explained that “[t]arnishment generally arises when the plaintiff’s trademark . . . is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner’s product. In such situations, the trademark’s reputation and commercial value might be diminished . . . .”135 For example, in Archdiocese of St. Louis v. Internet Entertainment Group, Inc., the United States District Court for the Eastern District of Missouri held that the plaintiff’s PAPAL VISIT 1999 mark had been tarnished by the defendant’s placement of pornographic materials at the PAPALVISIT.COM address on the World Wide Web.136 Tarnishment is a relatively straightforward tort, and courts have not found it difficult to apply the FTDA in tarnishment cases.137
Blurring, however, is a more obscure phenomenon. The Restatement notes the nebulous character of blurring: “Direct evidence of a dilution of distinctiveness is seldom available because the harm at issue is a blurring of the mental associations evoked by the mark, a phenomenon not easily sampled by consumer surveys and not normally manifested by unambiguous consumer behavior.”138 Other commentators have described dilution by blurring as “a theory that no one understands”139 and as “bewilderingly intangible.”140 The [*PG222]Fourth Circuit Court of Appeals has characterized it as a “dauntingly elusive concept.”141
Despite these concerns, many courts have accepted circumstantial proof of dilution under the FTDA.142 The test most often used has been the six-factor test Judge Sweet set out in his concurring opinion in Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., a 1989 case decided under the New York dilution statute.143 Judge Sweet’s factors are: (1) similarity of the marks; (2) similarity of the products covered by the marks; (3) sophistication of consumers; (4) predatory intent; (5) renown of the senior mark; and (6) renown of the junior mark.144 The first, second, fourth, fifth and sixth factors are positively correlated with dilution, while the third is negatively correlated with dilution.145 Several courts have used the Mead Data test to analyze diluting by blurring, some finding dilution,146 others rejecting dilution claims.147 Other courts have upheld148 or rejected149 claims of dilution by blurring without using the Mead Data test.
Despite its widespread use, the Mead Data test has come under fire in recent decisions.150 In Lund, the First Circuit criticized Mead [*PG223]Data “for introducing factors that are the offspring of classical likelihood of confusion analysis and are not particularly relevant or helpful in resolving the issues of dilution by blurring.”151 The court pointed out that weighing the similarity of the products (factor two) in the blurring analysis “may work directly contrary to the intent of a law whose primary purpose was to apply in cases of widely differing goods, i.e. Kodak pianos and Kodak film.”152 The First Circuit also found predatory intent (factor four) irrelevant, reasoning that “blurring occurs in the minds of potential customers. Predatory intent [of the junior user] tells little about how customers in fact perceive products.”153
Judge Sweet assumed that the greater the renown of the senior mark (factor five), the greater the likelihood that the junior mark would cause blurring in the minds of consumers.154 But the court was analyzing dilution under the New York dilution statute, which does not include the FTDA’s requirement that the senior mark be famous.155 Because the FTDA requires fame, factor five of the Mead Data test is superfluous.156
The trend in the cases has been toward the rejection of the Mead Data test.157 Of those courts that have not used the Mead Data test, some have simply made conclusory statements that the plaintiff’s mark has been diluted based on the identity or near-identity of the two marks, with standard dilution boilerplate tossed in for empha[*PG224]sis.158 The Second Circuit has outlined its own multi-factor test for trademark dilution.159 The Fourth Circuit, however, has rejected the circumstantial approach to proving dilution altogether, and has required evidence of an actual reduction in the selling power of the senior mark before granting FTDA relief.160 The Second and Fourth Circuits have thus framed the essential question for courts deciding cases under the FTDA. Does the statute require evidence of actual dilution, an actual lessening of the senior mark’s capacity to identify and distinguish goods and services?161 Or is circumstantial evidence of a lessening of that capacity enough to prove a violation?162
In 1998, in Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Development, the Fourth Circuit rejected Ringling’s claim that its THE GREATEST SHOW ON EARTH mark had been diluted by the State of Utah’s THE GREATEST SNOW ON EARTH mark.163 The court reasoned that Ringling had failed to offer evidence that the State of Utah had caused actual dilution of the selling power of its mark.164 In explaining its decision to require proof of actual dilution, going beyond the circumstantial evidence other courts have found convincing, the Fourth Circuit pointed out that while state dilution statutes require just a “likelihood of dilution,”165 the text of the FTDA—which requires that the defendant’s mark [*PG225]causes dilution of the distinctive quality of the plaintiff’s mark—limits the FTDA to “actual, consummated dilution.”166
The Ringling court begins its analysis with Schechter’s original proposition—out of which dilution law emerged—that the “uniqueness” of a trademark deserves legal protection.167 This would mean that dilution could be proved with “any junior use of an identical or sufficiently similar mark, without regard to whether the junior use had any other harmful effect [on the senior mark] than its necessary destruction of the senior mark’s former absolute ‘uniqueness.’”168 The court criticized this “radical” proposal on the ground that its effect would be to create property rights in gross in trademarks, rights that would be similar to those copyright and patent law protect, but superior because they would be unlimited in time.169 Under such a scheme, “no proof would be required to prove dilution except the fact that a junior mark replicated the protected mark.”170
The Fourth Circuit identified the diminution of the senior mark’s selling power—as opposed to the mere loss of its uniqueness—as the injury dilution law aims to prevent.171 The court explained that “by specifically defining dilution as ‘the lessening of the capacity of a famous mark to identify and distinguish goods or services,’ the [FTDA] makes plain what the state statutes arguably may not: that the end harm at which it is aimed is a mark’s selling power, not its ‘distinctiveness’ as such.”172 The court then observed that “[t]he real interpretive problem has been with how harm to the senior mark’s selling power resulting from the junior mark’s use could be proved.”173 It rejected the method of simply presuming such harm from the identity or near-identity of the marks, the effect of which would be to create property rights in gross, reasoning that actual economic harm cannot [*PG226]be presumed based solely on a replicating or near-replicating junior use: “[i]ndeed, common sense suggests that an occasional replicating use might even enhance a senior mark’s ‘magnetism’—by drawing renewed attention to it as a mark of unshakable eminence worthy of emulation by an unthreatening non-competitor.”174 The mere replication or near-replication of an established mark, therefore, should not be grounds for a presumption of dilution.175
The Ringling court also rejected the Mead Data test and its premise that dilution could be proved via “the normal judicial process of fact-finding by inference from a set of contextual factors,” but the court’s reasoning differs from that of the First Circuit Court of Appeals and other courts that have criticized Mead Data.176 Although the Ringling court noted that the Mead Data test “has obvious utility in making the long leaps of inference that can be used to find a mere ‘likelihood of dilution,’” it declared that “inferring actual harm and effective causation from such factors as ‘consumer sophistication,’ and ‘predatory intent’ is a chancy process at best.”177 In contrast to the suggestion of other courts that some of the Mead Data factors are simply not relevant to the concept of trademark dilution,178 the Ringling court argued that whatever their relevance to a showing of a likelihood of dilution, the “long leaps of inference” the test requires courts to make are not enough to establish actual dilution.179
What the Ringling court settled upon is a requirement of proof of “an actual lessening of the senior mark’s selling power.”180 It interpreted the FTDA as requiring: “(1) a sufficient similarity between the junior and senior marks to evoke an instinctive mental association of the two by a relevant universe of consumers which (2) is the effective cause of (3) an actual lessening of the senior mark’s selling power.”181
While granting that “[t]his . . . is a stringent interpretation” of the statute, the Ringling court noted that “given the critical provisions that essentially differentiate the [FTDA] on key points from the state statutes, we must assume that this was exactly what was intended by Con[*PG227]gress.”182 In rejecting the plaintiff’s argument that the FTDA just requires proof that the junior and senior marks are similar, the court declared its disbelief that “Congress could have intended, without making its intention to do so perfectly clear, to create property rights in gross, unlimited in time (via injunction), even in “famous” trademarks. Had that been the intention, it is one easily and simply expressed by merely proscribing use of any substantially replicating junior mark.”183 On the contrary, the FTDA requires “specific harm to the senior mark’s economic value in the form of a ‘lessening of [its] capacity . . . to identify and distinguish goods and services.’”184
The court acknowledged the difficulties entailed in proving actual dilution, and suggested that this “may have led a few federal courts early on simply to assume, without facing up to the interpretive difficulty of doing so, that the [FTDA] only requires proof of a ‘likelihood of dilution.’”185 The court rejected, however, the notion that proof of actual dilution is “impossible and therefore not . . . what Congress could have intended.”186 It concluded that “[p]roof will be difficult, because actual, consummated dilutive harm and its cause are difficult concepts. But the concept is a substantively viable one, and the means of proof are available.”187 The court suggested three potential methods of proving actual dilution under the FTDA: (1) “proof of an actual loss of revenues, and proof of [the junior mark] as cause by disproving other possible causes”; (2) “the skillfully constructed consumer survey designed not just to demonstrate ‘mental association’ of the marks in isolation, but further consumer impressions from which actual harm and cause might rationally be inferred”; and (3) “relevant contextual factors such as the extent of the junior mark’s exposure, the similarity of the marks, [and] the firmness of the senior mark’s hold,” which the court indicates are relevant “as indirect evidence that might complement other proof.”188
On the facts before it, the court held that the survey evidence the plaintiff had introduced failed to show that “Utah’s junior mark had caused any actual harm to Ringling’s mark in the form of a lessening of [its] former capacity to identify and distinguish Ringling’s circus as [*PG228]its subject.”189 On the contrary, the evidence included “survey results indicating that consumer familiarity with Ringling’s mark was greater in Utah (46%), where Utah’s mark was well-known, than in the rest of the country (41%), where Utah’s mark was virtually unknown,” and that “virtually every” respondent associated Ringling’s mark with the circus and not with Utah’s winter sports.190
In 1999, in Nabisco, Inc. v. PF Brands, Inc., the Second Circuit expressly rejected the Fourth Circuit’s approach.191 At issue in this case were “orange, bite-sized, cheddar cheese-flavored, goldfish-shaped cracker[s].”192 Pepperidge Farm, which had sold such crackers since 1962, claimed that Nabisco’s CatDog snack—made up of small orange crackers in three shapes, based on the CatDog cartoon program, one of which “closely resembles Pepperidge Farm’s Goldfish cracker in color, shape, . . . size, and taste”—would dilute the distinctive quality of its GOLDFISH mark.193 Pepperidge Farm prevailed on its dilution claim, but without the showing of actual dilution the Fourth Circuit requires.194
In rejecting the Fourth Circuit’s approach, the Nabisco court described the requirement that actual loss of revenues be demonstrated as “inappropriate,” reasoning that “[i]f the famous senior mark were being exploited with continually growing success, the senior user might never be able to show diminished revenues, no matter how obvious it was that the junior use diluted the distinctiveness of the senior.”195 The court argued further that “[e]ven if diminished revenue could be shown, it would be extraordinarily speculative and difficult to prove that the loss was due to the dilution of the mark.”196 The court dismissed consumer surveys as “expensive, time-consuming, and [*PG229]not immune to manipulation.”197 In contrast to the Fourth Circuit’s requirement that actual dilution be established, the court concluded that plaintiffs should be “free to make their case through circumstantial evidence that will justify an ultimate inference of injury.”198
In that spirit, the Nabisco court adopted what it called “a cautious and gradual approach,” which entails the selective use of factors found in its infringement jurisprudence that seem helpful in the dilution context on the facts of the specific case.199 The factors the court deemed relevant to the facts before it were (a) distinctiveness; (b) similarity of the marks; (c) proximity of the products and likelihood of bridging the gap; (d) interrelationship among (a), (b) and (c); (e) shared consumers and geographic limitations; (f) sophistication of consumers; (g) actual confusion; (h) adjectival or referential quality of the junior use; (i) harm to the junior user and delay by the senior user; and (j) effect of the plaintiff’s prior laxity in protecting the mark.200
Based on a weighing of these contextual factors—the court emphasized the reasonable distinctiveness of the GOLDFISH mark,201 the close proximity of the products in the market, the similarity between the two goldfish crackers,202 the low level of consumer sophistication, and the punctuality of the litigation—the court sustained the district court’s decision to grant a preliminary injunction.203 In declining to read an actual dilution requirement into the FTDA, as the Fourth Circuit had done, the Second Circuit joined other courts that have read the FTDA to require just a likelihood of dilution established with circumstantial evidence.204
Judicial uncertainty about the FTDA should be resolved, as it has been in the Fourth Circuit, in favor of a narrow interpretation of the statute. The natural reading of the statutory text—which speaks of a junior trademark that causes dilution of the distinctive quality of an established one—is that it requires proof of actual dilution.205 If Congress intended to require a mere likelihood of dilution, it had the state dilution statutes before it as a model for writing such a law; the failure of the drafters to include the same language in the FTDA suggests that it was not the likelihood of dilution, but actual dilution itself, that Congress intended to proscribe.206
In other regards, the text of the FTDA is nearly identical to the Model State Trademark Bill, the language of which was imported into many state dilution statutes.207 Each creates a cause of action for “dilution of the distinctive quality of [the] mark.”208 The Model Bill applies “notwithstanding the absence of competition between the parties or the absence of confusion;” the FTDA applies “regardless of the . . . absence of . . . competition between the . . . parties, or . . . likelihood of confusion.”209 These similarities are evidence that Congress used state dilution legislation as a model for the FTDA.210 In the Model Bill, however, the phrase “likelihood of” precedes and modifies the word “dilution.”211 Unless courts are to assume that Congress made an error in drafting, the natural inference is that it intended not to create a vague, open-ended “likelihood of dilution” cause of action and omitted the phrase “likelihood of” for that reason.212
Moreover, when Congress defined the term “dilution” in the FTDA, it used the phrase “likelihood of” to indicate what a dilution cause of action does not require.213 Dilution is defined as the lessening of a famous mark’s capacity to distinguish goods and services, “regardless of the presence or absence of . . . [a] likelihood of confusion, mis[*PG231]take, or deception.”214 The appearance of a “likelihood of” formulation in the text of the FTDA itself further undermines the argument that Congress intended to establish a “likelihood of dilution” standard by implication.215 In drafting the FTDA, when Congress intended to say “likelihood of X,” it said just that; “causes dilution” should therefore not be read to mean “likelihood of dilution.”216
If the Second Circuit’s “likelihood of dilution” reading were to prevail, dilution would inevitably replace infringement as the basic trademark cause of action.217 This is because dilution, which does not require evidence of consumer confusion, would be much easier to prove.218 The infringement cause of action would be unnecessary, as it is difficult to imagine a junior mark likely to confuse consumers about source and affiliation that would not also be held likely to dilute the distinctive quality of the senior mark.219
If the protection of established trademarks were an unmitigated benefit to the public, such an expansion in federal trademark protection might not be a cause for concern.220 But trademark protection beyond what is required to prevent consumer confusion does not advance the public interest, and in fact has potential harmful effects.221 Established trademarks encourage consumers to purchase familiar products and to reject new products bearing new marks.222 Established trademarks therefore constitute barriers to the entry of new products into the market, and the greater the protection established trademarks receive, the higher these barriers are set.223 Because consumer preferences for products bearing established trademarks are often a function of advertising aimed at emotion rather than reason, trademarks have the effect of keeping new products out of the market on non-rational grounds.224
Some market-barrier effect is inevitable if trademarks are to receive legal protection. But the infringement standard focuses on preventing consumer confusion and strikes a balance between the need [*PG232]to protect consumers against confusing or deceptive trademarks, and the public interest in market competition based on the objective qualities of products, as opposed to their non-rational psychological associations and brand personalities.225 A trademark regime without a consumer confusion standard—what the expansive reading of the FTDA would create—threatens to upset the balance the consumer confusion standard creates, thus giving established trademark holders the power to enjoin the symbols of new enterprises for no discernible public purpose.226 If Congress intended such a momentous change in American trademark law as the replacement of infringement as the basic cause of action for trademark plaintiffs, one would expect it to have been clear about what it was doing. But neither the text nor the legislative history of the FTDA offer any indication that Congress intended to displace the consumer confusion standard at the heart of American trademark law.227
The Nabisco court questioned the Ringling court’s assertion that a likelihood of dilution standard would have the effect of creating a property right in gross, or a right to enjoin any substantially replicating mark.228 It argued that “there are many instances in which a junior use of a famous mark might not reduce the capacity of that mark to identify and distinguish products” under the FTDA.229 But the test the Nabisco court used—a 10-factor test so convoluted that one of the factors is the “interrelationship among” three other factors—does not seem well designed to distinguish which junior uses have a diluting effect and which do not.230 Such an unwieldy 10-factor test could be used in practice to justify whatever outcome the court prefers; it is [*PG233]doubtful that it could draw consistent and reliable distinctions between diluting and non-diluting uses.231
It is true that a likelihood of dilution standard would not necessarily result in a regime of property rights in gross. But absent the actual dilution requirement the Ringling court sees in the plain language of the statute, courts would be free to enjoin substantially replicating marks based on their own intuitive sense of what might cause dilution.232 Perhaps not all substantially replicating marks would be prohibited, but the rights of established trademark holders would be eligible for a significant and unpredictable expansion.233 As one commentator has put it, “[w]hen a right is vague and impossible to articulate, courts will always be inconsistent in their application of that right.”234 Such would be the fate of the federal right against dilution under the Second Circuit’s interpretation.235
The Nabisco court’s acceptance of the likelihood of consumer confusion as evidence of trademark dilution underscores the pervasive uncertainty about what exactly dilution statutes proscribe. The Second Circuit wrote that “[a] junior use that confuses consumers as to which mark is which surely dilutes the distinctiveness of the senior mark.”236 The court noted that consumer confusion is “unnecessary” to the success of a dilution claim, but suggested that it would nevertheless be evidence of dilution.237 McCarthy’s treatise, however, indicates that dilution requires that the consumer recognize—free of confusion—that one trademark is being used to identify two products: “[t]he assumption [of the dilution cause of action] is that the relevant public sees the junior user’s use, and intuitively knows, because of the context . . . , that there is no connection between the owners of the respective marks.”238 A junior use of an established mark “can cause confusion in some people’s minds and in other people’s minds cause [*PG234]dilution by blurring. But in no people’s minds can both perceptions occur at the same time. Either a person thinks that the similarly branded goods or services come from a common source (or are connected or affiliated), or not.”239 Consumer confusion, in other words, is not evidence of dilution.240
The FTDA, moreover, defines dilution as “the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of . . . likelihood of confusion, mistake, or deception.”241 If Congress had intended consumer confusion to be a factor that pointed toward a finding of dilution, it would have made no sense to include in the definition of dilution an express declaration of its irrelevance.242 The Nabisco court’s use of likelihood of confusion evidence in its dilution analysis points to the uncertainty and confusion that would result if courts were to follow the Second Circuit’s expansive reading.243 Because the harm the FTDA proscribes is a vague and nebulous phenomenon, courts should avoid an expansive reading of the statute that would open the door to such seemingly erroneous interpretations.
The Nabisco court expressed concern that to require evidence of actual dilution would leave the owners of established trademarks defenseless against serious harms.244 Yet on the specific facts of the Nabisco case, there would seem to be ample evidence to support a trademark infringement claim.245 Although the District Court had denied Pepperidge Farm’s infringement claim, for reasons the Court of Appeals questioned,246 the Court of Appeals made repeated references to consumer confusion in its discussion of dilution.247 It noted that many consumers of the Nabisco cracker would come upon the snack independent of its packaging (for instance, served in a dish at a social occasion), and might well confuse it with the Pepperidge Farm cracker.248 The Court of Appeals criticized the District Court for counting the absence of evidence of actual consumer confusion [*PG235]against Pepperidge Farm,249 and made clear its own view that consumers would likely be confused.250 It is therefore hard to understand the court’s concern that an actual dilution requirement “would subject the senior user to uncompensable injury,” for as the Court of Appeals describes the facts and the law, an injunction could have been issued on an infringement theory.251
It is true that the Fourth Circuit’s interpretation of the statute greatly limits its application, but it does not render the statute moot.252 The Ringling court acknowledged that it would be a rare case in which a junior mark could be proved to have been the cause of an actual loss of revenues for an established mark.253 But the court suggested a more promising avenue of proof: a plaintiff could demonstrate an actual change in relevant consumer perceptions of its trademark that would have the effect of reducing its selling power.254
Although the concept of trademark dilution is extraordinarily vague, if it has tangible meaning it must have something to do with a reduction in an established trademark’s brand equity or its typicality.255 “Brand equity” is the set of impressions consumers associate with a brand: “[f]or example, the brand ‘Black & Decker’ immediately triggers the image of rugged, loud, built-to-last power tools. . . . On the other hand, the brand ‘Gerber’ conjures images of baby food and [*PG236]the wholesome, quiet, nurturing environment that surrounds newborns.”256 “Typicality” is a brand’s capacity to evoke a specific category of product: BLACK & DECKER should call to mind power tools, and GERBER should call to mind baby food.257
A reduction in brand equity could be used as evidence of dilution: “[i]f a junior party began to market Black & Decker baby foods . . . , the Black & Decker mark’s equity would begin to blur from tough to tender and from durable to delicate.”258 So could a reduction in typicality, if, for example, the LEXIS mark caused consumers to “think of both the computerized research service (LEXIS) and the luxury automobile (LEXUS).”259 Surveys could be used to identify and measure changes in these aspects of consumer perception.260
Three potential comparisons could be made.261 First, there could be a comparison between consumer perceptions before and after the introduction of the defendant’s mark.262 Second, if the defendant operates in a limited geographical area, the comparison could be between users inside and outside of the defendant’s market.263 Third, a comparison could be made between consumers who are acquainted with the defendant’s mark and those who are not.264 Evidence of a reduction in the senior mark’s typicality or its brand equity would constitute tangible evidence that its capacity to identify and distinguish goods or services had been diluted.265 Notwithstanding the nebulous quality of the concept, if dilution has meaning—as courts [*PG256][*PG255][*PG254][*PG253][*PG252][*PG251][*PG250][*PG249][*PG248][*PG247][*PG246][*PG245][*PG244][*PG243][*PG242][*PG241][*PG240][*PG239][*PG238][*PG237]must assume it does—this is what it must be.266 There is no reason, in sum, why actual dilution could not be measured and proved in court.
Although it is possible to construct an empirical measure of trademark dilution that is consistent with the statutory text, in the end the vagueness of the concept is inescapable. Is dilution a theory that overlaps with infringement theory but expands its boundaries, as the Second Circuit has held?267 Or is dilution a theoretically distinct phenomenon that cannot coexist with confusion in the mind of the consumer, as the leading academic authorities assert?268 Or is it just not possible to say what dilution is?269 If there are no definite answers to these questions, and the statutory text points to a narrow reading that minimizes the uncertainty and disruption the FTDA has the potential to create, the narrow reading should prevail, absent a clear indication—which we do not have—that Congress intended otherwise.
To return to the introductory example, if a new trademark on the market is confusingly similar to MCDONALD’S, and is likely to mislead consumers about the source and affiliation of the goods and services it identifies, the goal of consumer protection justifies enjoining its use.270 If there is proof that the new mark has caused an actual reduction in the selling power of the MCDONALD’S mark, the FTDA requires that it be enjoined. But absent evidence of a tangible injury that goes beyond a mere diminution of uniqueness, neither the text of the FTDA, the interest of the legal system in clear and predictable rules, nor the scope and limits of the public interest in trademark law support the granting of an injunction.