Jacob Jacoby on dilution

Jacob Jacoby, NYU Stern Business School: His topic was the use of dilution research in court, and its potential applications to the new federal law.

Things that can be measured: fame, dilution by blurring, dilution by tarnishment, and (the opposite of blurring) free riding, possibly. He’s included free riding in his measures after Posner’s explanation in Ty v. Perryman.

Surveys can measure fame: “In your opinion, what are the most famous golf courses located within the US?” Used to establish fame in the Pebble Beach case, which was about both dilution and confusion. The question specifies fame and mentions the product category, but not the brand name. It relies on unaided recall and permits several answers.

With 13,000 regulation 18-hole golf courses, 87% of respondents mentioned Pebble Beach (1^st most mentioned), 25% mentioned Pinehurst (4^th most mentioned).

TM owners need to benchmark fame before dilution starts, since the statute says fame needs to preexist the diluter's actions.

Measuring blurring: Intel Corp. v. Intell Management & Investment Co. (2004; settled out of court). Defendant is developing major high-rises in NYC right now and does development nationwide. Intel has a very high brand value; Business Week ranked it as the 5^th most valuable brand in the world.

Universes to test: real estate brokers/agents, tenants and prospective tenants of Class A commercial properties.

A typical survey approach uses one interview to expose respondents to the mark then measure dilution. His objective: better simulate real-world events. First part: expose the Intell name as universe members would come across it in promotional materials, showing respondents 3 sets of materials about developers, in person, for a study ostensibly about developers. Intell was changed to Ibell in the control group.

4-7 days later, a different firm called the respondents for an ostensibly different telephone survey. Initial questions used “Chevrolet” to ask whether consumers knew whether only one company used the mark “Chevrolet.” Then they were asked about the name “Allied” and whether it was associated with only one company. Then they were asked about “Intel.”

If exposed to Intell, 11.4% said that they knew of two companies, whereas the Ibell respondents were unanimous that they knew of only one company. That seems like evidence of blurring.

Now, Intell operates under the name Extell pursuant to settlement.

Wal-Mart case: a guy who sells promotional goods like T-shirts and has a website using the term “WAL*OCAUST,” with a blue background. The shirts were enjoined, and the guy is now using WAL*QAEDA. One Wal*ocaust shirt uses the term above a German eagle with its talons on a smiley face like Wal-Mart uses. Test shirt: Zal*ocaust with eagle over yellow ball.

So how does this fare under the new statute? Blurring allows the court to consider “actual association between the mark or trade name and the famous mark,” or the mental/associative link in psychological terms.

Question Jacoby asked in the survey: If anything, what does this shirt make you think of? What it is about the shirt that makes you think that?

93.2% thought of Wal-Mart (based on the Wal- and the star)

21.5% shown the control, which was a pretty minimal change, thought of Wal-Mart

71.7% net association

What about tarnishment? Actual harm or economic injury need not be shown. So, in this survey, respondents were asked whether the shirt made them more/less likely to shop at Wal-Mart (and given multiple options including neither more nor less likely, and options were rotated). 20.5% (test) v. 2.5% (control) said they were less likely to shop at Wal-Mart as a result of seeing the shirt.

What not to do: Hershey v. Mars trade dress case. The case required two surveys, first for secondary meaning of Reese’s trade dress, and second for blurring. Test protocols for the first used just the colors and layout, not any actual words. 94% of respondents associated the trade dress with Reese’s even without words (and without font!). Only 2% thought that the altered trade dress of the Peanut M&M’s was M&M’s, while 49% thought it was Reese’s. The court rejected this survey even though it accepted that the trade dress has secondary meaning, reasoning that no one goes out to buy the altered products without the word marks. He should have tested the product as it was sold in the marketplace.

Conclusion: The foundations of TM law are essentially psychological in nature. He’s written extensively about this.