The following article appears in the journal JOM, 51 (4) (1999), p. 48. JOM is a publication of The Minerals, Metals & Materials Society

Federal Trademark Anti-Dilution Law—A Powerful New Tool for Owners of Famous Trademarks

On January 16, 1996, U.S. President Bill Clinton signed into law the 1996 Federal Anti-Dilution Act. The existence of this act has given holders of famous trademarks another weapon in policing noncompetitive uses of their marks; although there were more than 30 states that had statutes concerning the dilution of trademarks previous to 1996, until the new federal act there was no federal statute providing owners of famous trademarks the ability to bring a lawsuit in a federal court under federal law. The act has also been used extensively in internet domain name disputes.

In order to understand dilution, one must understand basic trademark law. A trademark is a word, name, symbol, or device that is used to distinguish a person's goods or services from another's. Famous trademarks include "Coca-Cola" for use on a soft drink; "Kodak" for film; and "McDonald's" for restaurant services. These marks differentiate their owners' goods and services from other vendors' goods and services so that consumers can make informed choices as to which goods and services they will purchase.

Trademark infringement occurs when a consumer is likely to be confused by the use of a similar or identical trademark by a third party of a trademark previously owned by another. For example, if my company manufactures film and I use the trademark "Kodiak," consumers may be confused into thinking that my film is made by the same company making the Kodak film.

Trademark dilution under the new federal law can occur even when a famous trademark is used by another on noncompeting goods or can occur when there is no likelihood of confusion between the two uses of the mark. For example, if a company that makes motorcycles started using the mark Kodak to identify its motorcycles, consumers would probably not be confused into believing that the Kodak film people are now in the motorcycle business. Thus, trademark dilution under the new law is a powerful weapon where there is noncompeting goods or services or no likelihood of confusion between the uses of the marks.

As can be imagined, the use of someone else's mark on noncompetitive goods can cause injury to the original owner of the mark. Dilution of the trademark is that injury. Broadly speaking, dilution is a weakening or reduction in the ability of a mark to clearly and unmistakably distinguish one source of a product/service from another. This weakening can occur in two ways. The first is dilution by blurring. Consumers will see the original mark being used by others to identify other sources of noncompetitive goods and services; thus, the unique and distinctive significance of the mark to identify the original owner's product may be diluted and weakened. The Kodak motorcycles example is a classic case of blurring. Should the Kodak mark be allowed to be used on several different noncompeting products, the distinctive character of the mark will be reduced and weakened.

The second type of dilution is tarnishment. This is when the use of the mark tarnishes, degrades, or brings ridicule to the distinctive quality of the mark. An example of tarnishment would be the unauthorized use of a famous mark to identify a pornographic magazine. Obviously, the original owner of the mark wants to stop this kind of usage of the mark and can use dilution statutes to do so.

One of the requirements for proving dilution under the new federal act is that the mark must be famous. In order to determine whether a mark is famous, the new law lists eight factors, none of which are determinative, to guide the inquiry. These factors include the duration and extent of use of the mark; the duration and extent of advertising and publicity of the mark; the geographical extent of the trading area in which the mark is used; and whether the mark is federally registered or not. It is clear that well-known marks such as Coca-Cola, Kodak, and McDonald's are famous. What is not so clear is whether well-known marks in narrow fields of use, which are known only to a small amount of people, are famous, too. This determination must be made on a case-by-case basis, and there are no hard and fast rules to apply, just statutory guidelines.

The other interesting requirement for proving dilution is that the defendant must make commercial use of the mark. The area where this commercial-use requirement has been hotly contested is in Internet domain name adoption and use. A previous JOM article ("Understanding Some Ground Rules in Internet Domain Name Disputes" January 1998) discussed several lawsuits involving cybersquatting (i.e., the registration with Network Services of famous marks for use as Internet domain names, such as panavision.com and candyland.com by "entrepreneurs" who then attempt to sell the domain name back to the owner of the famous trademark). Owners of these famous marks are now using the federal act to force these cybersquatters to relinquish domain names including famous marks. The cyber-squatters have argued that the domain name registrations are not commercial uses of the mark, since, typically, the web sites put up by the cyber-squatters do not advertise or sell a product. However, courts have found that someone whose business is registering domain names including famous marks and who then attempts to sell these names back to the rightful owner is making commercial use of the mark, thus meeting the commercial use requirement for showing trademark dilution.

There are several statutorily recognized defenses to trademark dilution. First, ownership of a valid federal trademark registration is a complete bar to a dilution action brought under common law and state dilution statutes. Also exempt from liability under the new law is so-called "fair use" of the famous mark in comparative advertising or promotion to identify the competing goods of the owner of the famous mark. Finally, use of the famous mark in news reporting and news commentary is allowed.

The federal trademark anti-dilution act provides the owners of famous trademarks with another weapon in protecting and enforcing valuable trademark rights. Thus, any third party use of your mark or your company's mark for a commercial purpose, even if the third party's goods are non-competing with your goods, can potentially be stopped.

David V. Radack is a member of Eckert Seamans Cherin & Mellott, LLC, in Pittsburgh, Pennsylvania.

For more information, contact A.B. Silverman at Eckert Seamans Cherin & Mellott, LLC, 600 Grant Street, 44th Floor, Pittsburgh, Pennsylvania 15219; (412) 566-2077; fax (412) 566-6099; e-mail ARNIE@TELERAMA.LM.COM.