The Role of Theoretical Justification: Dilution and Unfair Competition Law
[missed the first part of the talk] By 1995, TM owners were able to claim that TRIPs required dilution protection. This rests on TRIPs art. 16(3), use on dissimilar goods. But 16(3) explicitly stated as an extension of art. 6bis of the Paris Convention, which just extends rights to confusing uses on noncompeting goods & services. Why did Congress make this mistake in assimilation? Because it helped TM owners, and because the word “famous” had been used in state cases supposedly implementing 6bis.
The lack of a real theoretical justification means that courts have no help from the statute when they need interpretive tools in ambiguous cases. Despite the worship of Schechter in legislative history and cases, his theory only accidentally overlaps with the law; Moseley veered in his direction when it suggested that dilution could perhaps be inferred from identicality of marks. But the TDRA added marks with acquired distinctiveness, which is anti-Schechter.
Search costs theories might help, but they jump over the question whether the benefits of such a remedy are worth the costs. Worse, search costs theories suggest that dilution is more harmful for less famous marks, while the TDRA excludes such marks and protects marks that, search cost-wise, really don’t seem to need it.
The lack of connection between statute and any theory makes it easy for courts to act on their normative impulses, whether anti-free-riding or hostile to speech regulation.
Where was §43(c) well received after 1995? Cases of dishonest commercial practices, where courts really wanted to grant relief. In cybersquatting, courts dispensed with hostility to dilution (and indeed with many statutory requirements) to find that cybersquatting was dilutive. A confusion-based rationale might not have caught those instances, but dilution did. The EU TM directive is more honest about this by identifying separate harms – either an adverse effect on distinctiveness, or on a “taking unfair advantage” of the distinctiveness of the mark. The ECJ has accepted that this second part is about free riding.
In the US, many lawyers are nervous about anti-free-riding rules as uncontrolled and uncontrollable; unfair competition’s defenders use the word “flexible” instead. The inartful “trademark use” requirement in the TDRA may hamper an anti-free-riding rule, but maybe not. The newer cases also have a certain “smell” to them – as when the defendant’s explanation of how he came up with NIKEPAL was really hard to believe. Or Cliff Ledge and Rustic Stone, where the other party used Rustic Ledge and Cliff Stone. That’s unfair competition.
But where are the limits of the cause of action? Unfair competition has no obvious limits in itself, though the enumerated exceptions can be applied – it’s easier to identify things we do find acceptable than things we don’t. (The obvious consequence is to suppress new forms of behavior that are actually acceptable, but unanticipated; it’s the Type 1/Type 2 error problem embedded in law.)
Mark Lemley, Stanford Law School
Trademark Use Requirement in Dilution
Primarily a descriptive argument: (1) We’ve had a form of TM use requirement in the dilution statute for the past 10 years; (2) it worked pretty well; (3) the requirement is strengthened in the TDRA. The commercial use in commerce requirement in the FTDA was a pretty significant limit, and Lemley suggested was constitutionally required. It has the effect of requiring trademark use – the defendant had to be using the term in a source-identifying way. (Question: why isn’t a song title a source identifier? It can be registered with secondary meaning.)
Some courts just ignored this requirement early on, particularly in cases where they were motivated by perceived bad actors, such as Planned Parenthood v. Bucci, where an anti-abortion activist created a confusing website at the domain name. But courts began to figure out that dilution didn’t apply to gripe sites, T-shirts, etc. because such uses weren’t branding of defendant’s product but uses to make some statement.
Now: statute requires defendant’s use “of a mark or trade name.” It must be use of its own mark or trade name; you can see this in, among other things, the provisions for injunctive relief. The defendant must have goods or services; merely using the mark in commentary isn’t use of a mark or trade name. Moreover, the use must be source identifying. This is a narrower TM use component than “commercial use in commerce” than “use on or in connection with” goods or services, as in infringement. INTA wrote this bill; AIPLA objected to proposed language “designation of source” in order to get TM use out of the statute. Congress didn’t go with AIPLA, but did change the language to counter AIPLA’s expressed objection, which was that the term was not sufficiently well known in TM law. INTA took the position that dilution only exists when a defendant uses the mark as a mark or trade name for its own goods or services.
The exclusions take a belt-and-suspenders approach, exempting “any fair use other than as a designation of source,” and any noncommercial use, adding to the initial use as a mark requirement.
This is admittedly a morass. One might try to create a world of three nonoverlapping sets (fair use, noncommercial use, use not as a mark), but that would be a mistake, since Congress was trying to make extra sure that various activities would be protected.
TM use is a more important requirement in dilution than infringement, because dilution’s boundaries are so much more unclear and because dilution potentially affects much more speech than infringement. Coupled with well-recognized difficulties in defining and proving dilution, the importance of exclusions is clear.
If anything, the TM use requirement in the statute is too restrictive. There is an admittedly amorphous line between things that ID source and things that don’t. A defendant’s conduct that suggests affiliation or sponsorship might not be dilution because that doesn’t identify source, about which the statute is specific. That buys us some clarity – it’s easier to identify what’s a mark than what identifies affiliation. But it means that dilution doesn’t cover some things that those who believe in the dilution project might want to cover.
Xuan-Thao Nguyen, SMU Dedman School of Law
Searching for Fame: The Challenge of Proving Property in Trademark Dilution Law
Outside the US, most countries require registration; art. 6bis was a major step forward for them in not requiring registration for a well-known foreign mark. How do you determine whether a mark is well-known? In Taiwan, they look at many of the same factors as the US does. The degree of recognition, the duration and extent of use, registration in other jurisdictions to record the rights in the mark, record of successful enforcement, value associated with the TM. China also looks at similar factors, including records of protection of the mark as a well-known mark. Brazil allows recordation of Well-Known marks, good for 5 years. Australian debates pointed out: There is inconsistency in how well-known status is determined and enforced worldwide. What is it that we’re trying to do with such protections? That question must be answered before we can achieve consistency.
The US isn’t all that clear on fame either. You can spend $130 million a year advertising (Advantage Rent-a-Car v. Enterprise Rent-a-Car) and still not be famous; the ultimate test is consumer recognition. It’s not about TM owner’s spending; the property is in the mind of the consumer. Best brands in Harris Poll 2006: Sony; Dell; Coca-Cola; etc. – GM & Microsoft dropped off the list. This is significant because of debates over whether we should have a registered list of famous marks; we shouldn’t because consumers change their minds over time.
Lisa P. Ramsey, University of San Diego School of Law
Increasing First Amendment Scrutiny of Trademark Law
This was an application of Ramsey’s First Amendment work to dilution, where she suggested recognizing an independent First Amendment defense over and above the exemptions in the law. Actionable uses of a mark are communicative acts – that’s why they blur, or do whatever it is that they do. Thus, even if regulation is constitutional, First Amendment analysis is at least required.
Dilution laws are content-based speech regulations; not all uses of terms lead to liability, such as noncommercial uses and commercial uses in comparative advertising. Dilution is designed to control the communicative impact of the mark: what words third parties can use when they talk about their marks. This is word-based discrimination, like bans on profanity, as well as speaker-based discrimination favoring TM owners. But regulating commercial speech is less problematic than regulating other types of speech, so that’s not necessarily fatal.
There might be a compelling government interest in protecting producers by banning dilution, but she doubts it. Some people suggest that dilution protection reduces consumer search costs. That might justify upholding the law, if it could be empirically established. But then there’s a tailoring requirement; Ramsey argues that the law is not properly tailored to survive heightened scrutiny. Marks with only acquired distinctiveness and unregistered marks, she argued, should not be protected.
Tyler Ochoa, Santa Clara University School of Law: does a well-known mark under the Paris Convention mean the same thing as a famous mark under TDRA?
Dinwoodie: No. Grupo Gigante thinks it’s somewhere between secondary meaning and federal fame, and, without committing to a fame standard, that makes sense to him. The basic purposes of the confusion-based 6bis right are implemented by protecting any mark with secondary meaning. But the problem with extrapolating to that logical conclusion is that territoriality is also an important consideration and there is value in having different rights in different countries. Give a tip of the hat to territoriality concerns by requiring secondary meaning-plus. Dinwoodie still doesn’t know why we have the fame standard, but it’s not motivated by the same concerns.
Nguyen: Federal fame is a much higher standard than “well-known” – in fact, maybe dilution protection doesn’t implement 6bis at all since it won’t protect most marks against uses on noncompeting goods.
Dinwoodie: Yes, for example, niche fame could be well-known.
McKenna: Not persuaded by Lemley (no surprise), but given the empirical work and the relatively little work dilution does above infringement, does it matter if the dilution standard is tougher?
Lemley: That’s part of the larger question of whether dilution matters. Maybe it’s not worth being here, and there’s some truth to that. But the verdict is still out, because nonrepresentative cases have been litigated in the past year. Also, even if it’s true infringement and dilution stand or fall together, they influence each other. So how often do courts distinguish between the two requirements? That’s a key question. Courts might take up the requirement from dilution and apply it to infringement. He’s not saying they should do that, but they might.
Q: Is the fair use section applicable to dilution, and does it address the First Amendment concerns?
Lemley: §1114 doesn’t by its terms apply to dilution, but the FTDA does have an exception for “any fair use,” including descriptive fair use, “other than as a designation of source.” He doesn’t know if there’s a universe of things that designate source that would otherwise fall within §1114.
Dinwoodie: INTA briefed this in Chewy Vuiton: INTA argues that the trademark use requirement constrains the parody defense, such that parodies aren’t allowed if they are uses as marks.
Ramsey: As Dinwoodie expects, she thinks the First Amendment requires more leeway for parody. That’s one of her concerns with the exceptions – use in a slogan or domain name has been held to be use as a mark. So an independent First Amendment defense would be advisable, though she thinks courts can work within the statute to achieve similarly limited results.
Bone: How much do we trust judges? If dilution is really unfair competition, and we don’t know what unfair competition is, we are relying on judges’ intuition, and the track record in trademark is bad (e.g., trade dress).
Dinwoodie: TDRA was inartful, as Lemley said, but it does include a TM use requirement (he thinks Lemley pulled the wool over INTA’s eyes). But he’s not too sure about source identification – if you read that in a 2006 sense instead of a 1947 sense, you get a much broader scope of source identification. Lemley says non-source ID uses are those that don’t increase search costs; how does that apply to dilution? South Africa has a case about showing a BMW in advertising, where the court said there is a TM use requirement for infringement, but dilution is not about source-identifying capacity and so there’s no such limitation, the reverse of the situation Lemley argues here.
Lemley: Bone’s question: I trust courts when we give them a coherent principle. There are lots of people who think “unfair competition” is a redundant phrase, and it’s far too easy for courts to agree with that. The more confidence you have in the coherence of unfair competition, the more tolerance you have for a general statement of principle v. statements of limitations. As to Dinwoodie’s question, Lemley believes dilution can be justified, if at all, only on the same search costs rationale that justifies TM infringement. Thus the TM use requirement should apply to all.