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US President Signs Trademark Dilution Law Welcomed by Businesses
Author: Douglas J. Wood, Reed Smith LLP

Trademark holders received a pre-election gift—United States President Bush has signed a new law that makes it easier to prove trademark dilution.

The new US law means that trademark holders will no longer have to show that actual dilution—i.e., weakened value—of their brand has occurred, but only need to prove a party’s actions are likely to cause dilution.

The US Trademark Dilution Revision Act of 2006 entitles an owner of a famous mark that is distinctive to an injunction against a party using a mark in a manner that is likely to cause dilution by blurring or tarnishment—regardless of the presence or absence of actual or likely confusion.

The act was passed by Congress, and signed by President Bush on Oct. 6, in response to a holding by the U.S. Supreme Court in Moseley v. Victoria Secret Catalogue. In that case, the high court interpreted the 1996 US Federal Trademark Dilution Act (FTDA) narrowly, holding that to prevent another’s use of a mark, a trademark holder had to show that actual dilution had occurred.

Further, the court determined that because the FTDA only referred to “dilution of the distinctive quality of a trade name or trademark,” and did not cover “injury to business reputation,” trademark holders could only bring dilution claims for actual blurring of a mark, as opposed to instances involving brand tarnishment.

The International Trademark Association had pushed for the new legislation, which the industry group says “is designed to protect famous marks from uses that blur their distinctiveness or tarnish their reputation.”

The US Act of 2006 also seeks to clarify a number of terms. US Congressman Lamar Smith (R-Texas), who sponsored the bill, stated it was passed to address a split among a number of U.S. Circuit Courts of Appeal concerning the meanings of terms such as “famous mark,” “distinctiveness,” “blurring,” and “tarnishment.”

For example, the law clarifies the definition of a “famous” mark, allowing courts to consider all relevant factors, such as: 1) the geographic reach of advertising and publicity of the mark; 2) the amount of sales of goods or services offered under the mark; 3) the recognition of the mark; and 4) whether the mark has been registered.

The law recognizes the right to use trademarks for fair uses such as competitive advertising, parody, news reporting and noncommercial uses.

Those seeking relief under the act normally are only able to obtain an injunction to prevent further objectionable behavior. To obtain damages as well, they must prove the party in question willfully intended to trade on the complaining party’s famous mark, or willfully intended to harm the reputation of the famous mark.

Lawmakers who voted against the law and others who opposed the law complained that it would stifle small businesses and unnecessarily expand trademark rights.

Why This Matters:  By the time actual trademark dilution has occurred, it can be too late to stop a party from its offending actions, because the damage to the brand has occurred. This law gives parties the right to enjoin objectionable behavior earlier in the process.