Monday, November 20, 2006

INTA and the new dilution law

Paul Reidl, INTA’s president and associate general counsel for E&J Gallo, gave an entertaining presentation at George Washington on the new dilution law.

Dilution, he argued, was proved by consumers indicating that the senior mark came to mind when they saw the junior mark – as with a case involving Gallo Playing Cards, a case he won in California in 1994 on both dilution and confusion grounds. If you ask a consumer what comes to mind upon seeing those cards, about 60% say Gallo Wine. (Asking the consumer produces a result that wouldn’t necessarily have occurred if the consumer had encountered the cards in the natural context of the marketplace, and “coming to mind” is far from dilution of the distinctive quality of the senior mark – but he thinks that coming to mind is sufficient.)

Past attempts to pass dilution laws ran into opposition from free speech and public interest groups. Even some trademark owners weren’t certain about dilution. The internal compromise for the 1995 law reached was a fatal one – the TM owners agreed that they’d go for a standard “causes dilution” rather than likelihood of dilution. Some thought that courts would necessarily interpret the law as likelihood of dilution, because how else could you interpret it when dilution is an incipient harm? (Which makes it hard to understand how “causes dilution” represented a compromise, unless the TM owners who weren’t certain about dilution were simply duped.)

Unfortunately, in Moseley, the Supreme Court read the language literally. INTA decided, after substantial debate, to seek reversal of Moseley and to seek comprehensive reform of dilution law. Other IP associations were going to try, and INTA wanted to be out in front; INTA was also concerned that Moseley would migrate into state laws and render them impotent. Also, lower court decisions had caused other problems with the FTDA.

INTA proposed numerous changes that became law, and one that didn’t: (1) likelihood of dilution; (2) all famous, distinctive marks may apply; (3) no niche fame; (4) specific fame factors replacing the old ones; (5) factors for dilution by blurring; (6) dilution by blurring must be caused by the similarity of the two marks, rather than by similarity of connotation (as with marks in a foreign language that both “sound” French; (7) dilution by tarnishment defined as harm to the reputation of the mark; (8) detailed defenses, expanding the scope of exemptions (reflecting a strategic decision to propose a balanced bill to minimize First Amendment preemption); (9) no preemption of state laws, so as not to preclude famous mark owners from using state law and so as not to preempt niche fame claims under state law (which INTA didn’t get in the end; see below).

Again, the opposition came from free speech and public interest groups. Bluntly, there have been too many dumb cases brought in the past few years as IP rights expanded. Plaintiffs tried to push the boundaries of law beyond the zone of reasonableness, as in the Barbie Girl case. Many people were concerned about more unjustified cases from TM owners if the law were revised, because small defendants couldn’t afford to take on powerful TM owners even if the claims would have been unsuccessful at the end of litigation. Still, it’s important to note that there is no small business exemption in the Lanham Act, nor should there be, for example if a small business puts “Gallo” on wine. Every powerful brand started out small.

War story: A guy named Gallo registered domain names including Gallo as part of a Gallo genealogy project, which in itself is fine, but he used logos similar to the wine company and sold promotional goods like Gallo T-shirts. Gallo (TM owner) had to sue, and the website was altered.

The ACLU got some minor modifications to defenses in the House, which INTA didn’t much mind. And then the bill got stuck in the Senate for a while.

Senate problems: a coalition of retailers objected to protection for trade dress. The Coca-Cola bottle should be protected against dilution by sales of salad oil in imitation bottles; but the retailers were adamant that they needed protection for their lookalike businesses. INTA compromised. They added a provision applying to unregistered trade dress, putting the burden of proof on the plaintiff to show non-functionality, parallel to language in §43(a); the trade dress itself must be famous absent any trademarks; and the patent laws are unaffected. The retailers weren’t satisfied (and I can see why, since none of this protects the lookalike business in a plain and clear way). Ultimately, however, the Senate staff accepted the compromise.

Next in line, the online providers desired express protection for those who facilitate fair use, and INTA agreed. The free speech interests took a second bite then. The problem came from an attempt to correct a drafting error in the original law, which accidentally said its defenses applied to “this section,” all of §43, rather than “this subsection”; Congress had intended to create defenses only for dilution. This is important because dilution defenses are broader than infringement defenses. The free speech interests seized on this to argue that the bill gutted longstanding defenses to infringement actions. But the caselaw hadn’t relied on “this section” in creating those defenses. “Subsection” stayed in the bill.

Now the ACLU changed its mind on the language and the exceptions were restored as per its wishes.

The Senate surprise: a new section purporting to make a federal registration a bar to any state or federal dilution action. The language doesn’t track the rest of the bill and it’s strangely worded. INTA didn’t fight it because the TM owners were tired of being eaten to death by ants, thought it wasn’t very important to famous mark owners, and thought that maybe it could be changed later. (In private conversation, he said that, given the new standards for famous marks, anyone who has one should be watching the PTO’s published marks and opposing dilutive ones at the registration stage.)

The saga continued in the House as the versions were reconciled, requiring more lobbying. But finally it passed, just like the Bill in Schoolhouse Rock.

The $64,000 question (can anyone try a case for that amount?) is what practitioners should do with the new law. (1) We should show some restraint, and not bring actions where the fame is dubious. Don’t overreach as with the first law. (2) Respect the defenses, which are in there for a reason. (3) Remember the special rules for unregistered trade dress. Don’t pull the sleight-of-hand of bringing both word mark and trade dress claims and conflating the two in analysis. (4) Educate the judge if you have a solid dilution claim. Don’t make it an afterthought. Explain the harm. Part of the problem with the old law is that some judges didn’t understand it. (5) You now need to prove blurring. It won’t be presumed. The FTDA contains specific factors that you must address. Proof of actual association, such as survey evidence, will be important.

Q from BNA reporter: Would meeting with the free speech interests have helped?

A: No. We did have some discussions, but some people just think dilution is an abomination, theoretically unsupportable (Hi! [waves hand]). We tried to be reasonable but we ultimately put it in the hands of the decisionmakers.

1 comment:

Greg said...

Assertion: "Part of the problem with the old law is that some judges didn’t understand it."

I'd agree.

Assertion 2 "some people just think dilution is an abomination, theoretically unsupportable"

And those people include members of the judiciary -- I think the real $64,000 question is: will they understand it now?