Defenses to a Dilution Claim Under the FTDA

October 2004

Members of the Defenses Subcommittee Francine Hanson, Chair Abi Adeleke Stephen Bigger Walter Scott Brown Annabelle Danielvarda Marilyn Tiki Dare Nicholas de la Torre Pamela Kirby Lisa Peller London James F. McKeown Harold Milstein John Posthumus Stephanie Sandler Arthur Schwartz Arthur A. Silverstein With contribution by Eugene Pak Notice: All information provided by the International Trademark Association in this document is provided to the public as a source of general information on trademark and related intellectual property issues. In legal matters, no publication whether in written or electronic form can take the place of professional advice given with full knowledge of the specific circumstances of each case and proficiency in the laws of the relevant country. While efforts have been made to ensure the accuracy of the information in this document, it should not be treated as the basis for formulating business decisions without professional advice. We emphasize that trademark and related intellectual property laws vary from country to country, and between jurisdictions within some countries. The information included in this document will not be relevant or accurate for all countries or states.

TABLE OF CONTENTS

Page

I. INTRODUCTION/OVERVIEW ...........................................................................1

II. DEFENSES UNDER SECTION 43(C) OF THE LANHAM ACT.......................1

A. Federal Trademark Dilution Act Defenses.................................................2

B. Fair Use ......................................................................................................5

1. Statutory Language and Policy ......................................................5

2. Descriptive Fair Use.......................................................................5

3. Nominative Fair Use ......................................................................6

4. Comparative Advertising ...............................................................8

C. Noncommercial Use...................................................................................9

1. Statutory Language and Interpretation...........................................9

2. The Commercial Speech Doctrine ...............................................10

3. Parody and Satire .........................................................................13

4. Internet Domain Names/Product Reviews ...................................16

D. News Commentary and Reporting ...........................................................20 III. OTHER DEFENSES TO A CLAIM OF DILUTION .........................................20

A. The Patent and Copyright Clause as a Constitutional Defense................20

B. Defenses Based on Delay and Inaction ....................................................23

1. Laches and Acquiescence.............................................................23

2. Statute of Limitations ...................................................................28

C. Claim and Issue Preclusion (Res Judicata and Collateral Estoppel)........28

1. In General .....................................................................................28

2. Claim Preclusion ..........................................................................29

3. Issue Preclusion............................................................................31

D. Retroactivity .............................................................................................31

1. The U.S. Supreme Court and Retroactivity .................................32

2. Courts Finding Application of the FTDA Impermissibly Retroactive ...................................................................................33

3. Courts Finding Application of the FTDA Prospective and Permissible ...................................................................................35

896817 v3/SF j7zl03!.DOC

1

I. INTRODUCTION AND OVERVIEW.

A review of court decisions concerning the application of defenses to a federal dilution cause of action, indicates that courts are still trying to define the contours of dilution law and generally providing a wide deference to the public policies underpinning defenses to federal dilution claims. Although there may be competing policy interests in providing protection from dilution to famous marks, such policies are not as readily discernable as the policy of protecting consumers in the infringement context. Indeed, the Supreme Court appeared to struggle with this issue during oral argument in Moseley.1 Our case review suggests that absent well-articulated policy considerations supporting dilution claims, especially given the sensitivity of courts to free speech concerns underlying the statutory defenses to dilution, courts may provide greater deference to First Amendment and related policy concerns in the dilution context than the infringement context.

The Supreme Court’s decision in Moseley,2 although not directly addressing the defenses to dilution discussed in this paper, will impact such defenses. The requirement of proving actual dilution raises questions about the accrual of a dilution cause of action and the applicability of laches and statute of limitations defenses. On a broader scale, by raising the bar for proving dilution claims, courts may not even reach the affirmative defenses raised to dilution.

II. DEFENSES UNDER SECTION 43(C) OF THE LANHAM ACT.

This paper discusses defenses to a dilution claim under Section 43(c) of the Lanham Act.3 The defenses discussed include the three provided under Section 43(c), and others which are based on the U.S. Constitution, principles of equity, and retroactivity. Before a discussion of the defenses can take place, however, consideration of the origin and public policy issues, underlying dilution claims is warranted, because many of the defenses are grounded in policies that compete with policy arguments offered to support dilution claims.

The concept of dilution finds its origins in property law.4 A dilution claim was originated to protect the property value arising from a famous trademark’s ability to

1 Moseley v. V. Secret Catalogue Inc., Case No. 01-1015 from November 12, 2002, Tr. at 17-19 (The

Court asked the defense why there was no public policy interest in not having a third party copy another’s name. When the defense struggled and tried to discuss infringement, the Court questioned that “maybe Congress shouldn’t have done it, maybe it hasn’t done it, but to say there’s no public interest at all on that side doesn’t make much sense to me.”).

2 Moseley v. V. Secret Catalogue, Inc., 537 U.S. 418 (2003).

3 See Appendix A for the relevant text of 15 U.S.C. § 1125(c).

4 See Frank I. Schechter, The Rational Basis of Trademark Protection, 40 HARV. L. REV. 813, 831 (1927); Jason R. Edgecombe, Comment, Off the Mark: Bringing the Federal Trademark Dilution Act in Line With Established Trademark Law, 51 EMORY L.J. 1247, 1250 (2002).

2

distinguish itself to consumers.5 A trademark infringement claim is well grounded in the policy that consumer confusion is strongly disfavored.6 Consequently, trademark laws empower a trademark owner with the right to prevent consumer confusion arising from another party’s use of a similar or identical mark.7 It can be argued that a dilution claim under the Lanham Act: (i) prohibits the reduction of the public’s perception that a famous mark signifies something unique, singular or particular;8 and (ii) protects consumers in the long run because it prevents famous marks from losing their ability to distinguish in the consumer market place.9

The Supreme Court and some commentators have suggested that the public policy underlying a dilution claim is not as strong as that underlying an infringement claim.10 The relative strength of the policy underlying each claim is an important consideration because, based on our survey of case law, courts have not consistently articulated the differences between a dilution claim and an infringement claim, particularly when applying infringement defenses to a dilution claim.

A. Federal Trademark Dilution Act Defenses.11

While the purpose of the Federal Trademark Dilution Act (the “FTDA” or the “Act”) is to “protect famous trademarks from subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it,”12 Congress did not want the statute to extend so far as to hinder legitimate First Amendment activity. Thus, Section 43(c)(4) of the Lanham Act was added to address such First Amendment concerns. Section 43(c)(4) expressly lists specific activity that shall not be actionable as a claim for dilution: (A) fair use of a famous mark by another person in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark; (B) noncommercial use of a mark; and (C) all forms of news reporting and news commentary.13

5 Id. at 825, 831.

6 Moseley v. V. Secret Catalogue, 537 U.S. 418, 428, 123 S.Ct. 1115, 1122 (2003).

7 Id.

8 H.R. Rep. 104-374, 104th Cong., 1st Session (Nov. 30, 1995).

9 David Sven Villwock, Legislative Update: The Federal Trademark Dilution Act of 1995, DEPAUL-LCA J. ART & ENT. L. & POL’Y, 213, 222-23 (1996).

10 Moseley, 537 U.S. at 429; Edgecombe, supra note 2, at 1249-50; JEROME GILSON, 2 TRADEMARK PROTECTION & PRACTICE § 5.12[1][e], 5-272 to 5-273 (1999).

11 This paper focuses on federal trademark dilution claims and thus does not address another defense found in the statute, namely that a valid federal registration on the principal register constitutes a complete bar to state or common law dilution claims. See Section 43 (c)(3) of the Lanham Act.

12 H.R. Rep. 104-374, at 2, 104th Cong., 1st Session (Nov. 30, 1995).

13 The legislative history states: “The bill will not prohibit or threaten ‘noncommercial’ expression, as that term has been defined by the courts. Nothing in this bill is intended to alter existing case law on

3

It appears that the courts have not treated this list as exhaustive; some have used a First Amendment defense to protect defendants from a broad application of the dilution laws where the defendant’s actions are arguably (i.e., not purely) noncommercial. The leading case supporting this trend is the Ninth Circuit’s decision in Mattel, Inc. v. MCA Records, Inc.14 (involving the BARBIE mark), although the relevant discussion was not essential to the ultimate holding in the case.15 Other courts have also briefly discussed First Amendment and/or parody as defenses to a dilution claim.16

_________________________ the subject of what constitutes ‘commercial’ speech. The bill includes specific language exempting from liability the ‘fair use’ of a mark in the context of comparative commercial advertising or promotion as well as all forms of news reporting and news commentary. The latter provision . . . recognizes the heightened First Amendment protection afforded the news industry.” H.R. Rep. 104-374, at 4, 104th Cong., 1st Session (Nov. 30, 1995).

14 28 F. Supp. 2d 1120 (C.D. Cal. 1998), aff’d, 296 F.3d 894 (9th Cir. 2002).

15 Mattel, Inc. v. MCA Records, Inc., 28 F. Supp. 2d 1120 (C.D. Cal. 1998), aff’d, 296 F.3d 894 (9th Cir. 2002). The Mattel case dealt primarily with parody issues. The defendant’s song “Barbie Girl” was intended to satirize the famous doll. The court found the use to fall outside commercial use and noted in dicta that “the fact that defendants' product makes a profit or is successful . . . does not affect the protections afforded to it by the First Amendment.” Id. at 1154 n.54. Since the use was noncommercial, the defendant had a First Amendment defense to any claim of dilution by tarnishment. This result is notable since the song at issue was indisputably part of a commercial effort, namely, an attempt to sell records. The court nonetheless found the use to be not purely commercial. This reasoning has been followed in subsequent decisions dealing with First Amendment defenses to dilution.

16 A First Amendment defense was briefly referred to in Lyons P’ship, L.P. v. Giannoulas, 14 F. Supp. 2d 947 (N.D. Tex. 1998), aff’d, 179 F.3d 384 (5th Cir. 1999), a case involving not trademarks per se but trademark rights as expressed through entertainment performance characters. The action pitted Barney, the famous purple dinosaur children’s character against the San Diego Chicken, a notorious but equally well-known performer at sporting events. After the defendant’s character developed and performed a skit mocking the plaintiff’s well-known dance style, plaintiff sued for, inter alia, dilution. Although both the district court and the Fifth Circuit focused on parody defenses, both courts rejected plaintiff’s theory of strict liability for dilution, as such an approach failed to take into account the defendant’s right to free expression under the First Amendment.

In Charles Atlas, Ltd. v. DC Comics, 112 F. Supp. 2d 330 (S.D.N.Y. 2000), the defendant created a comic vignette in one of its regular series of comics similar to that used for years by plaintiff in its advertisements. Although the dilution claim was dismissed because the statute of limitations had run out, the court noted that the claim would have failed anyway because the defendant’s comic strip was protected under the First Amendment, as the use was not to advance a competing product, but instead as part of a storyline used to convey an idea through an artistic work. The Court also noted that the defendant’s strip included parody-like elements.

In another New York case, World Wrestling Fed’n Entm’t, Inc. v. Bozell, 142 F. Supp. 2d 514 (S.D.N.Y. 2001), the defendant, who had publicly attacked plaintiff’s use of the word SMACKDOWN as responsible for violent acts by children, failed in its effort to dismiss a dilution claim on the pleadings. The court rejected the First Amendment defense, finding the defendant’s statements bordered on defamation, placing the availability of a constitutional defense in question. The court also held that plaintiff sufficiently alleged in its complaint that the speech in question could be classified as commercial, and thus queried whether it would be entitled to the heightened constitutional protection of noncommercial speech.

4

The First Amendment concern was also addressed during the oral argument in Moseley v. V. Secret Catalogue Inc.17 Justice Breyer asked the attorney for Moseley, the proprietor of a store called “Victor’s Little Secret,” whether he was relying on what Breyer deemed was “a pretty significant speech interest – on your side of the case.”18 Breyer makes the basic point that if the dilution statute was stretched too far, and plaintiffs were awarded injunctions without proving actual harm, there is a risk that “you’re going to cut off what people can say in commercial contexts.”19 Counsel for Moseley first tried to distance himself from the concept, but then admitted that there was a free speech interest that should limit a broad application of the dilution statute.20 The line of inquiry ended at that point. Counsel for Victoria’s Secret referred to First Amendment limits on the dilution statute later on in the proceedings,21 but this point related to parody only.

In short, relatively few dilution cases deal with pure First Amendment defenses (as opposed to a parody defense).22 Nonetheless, courts appear to take steps to ensure that First Amendment concerns are addressed before applying the dilution laws against speech, so long as such speech has sufficient noncommercial elements.23

_________________________ In Am. Family Life Ins. Co. v. Hagan, 266 F. Supp. 2d 682 (N.D. Ohio 2002), the insurance company that sponsored the well-known AFLAC “quacking duck” commercials sued a politician, who had used an intentionally similar character in internet commercials supporting his campaign. The court refused to adopt plaintiff’s argument that First Amendment defenses to dilution should be viewed narrowly, and held that the political speech of the defendant was not “purely” commercial and thus at the core of what should be protected under the First Amendment.

Finally, the court rejected the defendant’s noncommercial use, parody and First Amendment defenses in Kraft Foods Holdings, Inc. v. Stuart Helm a/k/a “King VelVeeda,” 205 F. Supp. 2d 942 (N.D. Ill. 2002), a case involving Kraft’s VELVEETA mark. Defendant operated a web site containing explicit adult content on which he displayed and used KING VELVEEDA, his self-designated moniker. Defendant also offered artwork, comic books and other materials and services under the KING VELVEEDA mark. With respect to the First Amendment defense, the court found the commercial and noncommercial aspects of Defendant’s site not so inextricably intertwined that a prohibition on use of his VELVEEDA mark would prevent him from engaging in other protected forms of free speech.

17 Moseley v. V. Secret Catalogue Inc., Case No. 01-1015 from November 12, 2002 (the so-called VICTORIA’S SECRET case wherein the Court held that plaintiffs are required to prove actual dilution). The transcript of the oral argument, available at the Supreme Court website (www.supremecourtus.gov) does not, unfortunately, indicate which Supreme Court Justice is asking questions of the arguing attorney. With an understanding that Justice Breyer was in fact the one who raised the First Amendment issue, we have identified the relevant comments from the transcript.

18 Tr. at 17-18.

19 Id. at 18.

20 Id. at 19.

21 Id. at 46.

22 See supra footnotes 14 and 15.

23 Indeed, the Lanham Act seems to mandate a narrow construction “when unauthorized use of trademark is made not for identification of product origin but rather for expressive purposes of comedy, parody,

5

B. Fair Use.

1. Statutory Language and Policy.

Section 43(c)(4)(A) contains a limited fair use defense against a dilution claim. It defines a narrow group of activities not actionable under the fair use doctrine: “[f]air use of a famous mark by another person in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark.” The legislative history confirms the narrow reading of the statute. The legislative history views the “specific language” of the statute as “exempting from liability the ‘fair use’ of a mark in the context of comparative commercial advertising or promotion.”24 Thus, on its face, the FTDA provision on “fair use” covers any direct comparison of goods. It may also be applicable in the context of Internet advertising, such as pop-up ads, or potentially search engine advertising where the advertisement suggests “if you are interested in X’s goods, you may be interested in ours.”25

The defense is much more broadly applied by the courts, however, than the plain language of the Section 43(c)(4)(A) and legislative history would suggest. Indeed, courts often look to other provisions of the Lanham Act, and in particular Section 33(b)(4)’s defense of fair use to a claim for trademark infringement, when considering whether a use is “fair” in the context of a dilution claim. Thus, “nominative”26 and “descriptive”27 fair use, traditionally applied in the context of trademark infringement cases, have made their way into the dilution lexicon as well. The courts have resoundingly affirmed such defenses in the dilution context despite the absence of express statutory authority under Section 43(c)(4)(A).

2. Descriptive Fair Use.

Descriptive fair use, both in the trademark infringement and dilution context, arises in situations where a mark is used descriptively and other than as a trademark. Section 33(b)(4) states, in pertinent part, that a party’s use of a mark constitutes a “fair

_________________________ allusion, criticism, news reporting and commentary.” See Lanham Act, § 1 et seq., 15 U.S.C.A. § 1051 et seq.

24 H.R. Rep. 104-374 at 4 (emphasis added).

25 See Wells Fargo & Co. v. WhenU.com, Inc. 293 F. Supp.2d 734 (E.D. Mich. 2003) (suggesting that there is no use in commerce when trademarked terms were incorporated into directory used to assign “pop-up” advertisements to appropriate web sites).

26 See e.g., Clark v. Am. Online, Inc., No. 98-5650, 2000 WL 33535712 (C.D. Cal. Nov. 30, 2000); World Impression, Inc. v. McDonald’s Corp. and Disney Enter., 235 F. Supp. 2d 831 (N.D. Ill. 2002).

27 See e.g., Playboy Enter. v. Welles, 7 F. Supp. 2d 1098 (S.D. Cal. 1998).

6

use” if it “is a use, otherwise than as a mark, or of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party.”28

Although the descriptive fair use defense is not specifically set forth in the FTDA, the application of Section 33(b)(4) to claims under the FTDA does not appear to disrupt the purpose underlying the FTDA. In fact, in some instances the application of the defense may further the purposes underlying the FTDA. If a mark can be used descriptively, there is a good chance that it is not famous in the first instance. Thus, determining whether a use may be descriptive relates to the issue of whether the mark owner is able to establish that the mark is distinctive enough to be considered “famous.” However, courts have also found the use of famous marks to be descriptive fair use.29

3. Nominative Fair Use.

The issue of nominative fair use arises in situations in which marks are used in a trademark sense to refer to the mark owner, or the goods or services for which the mark is used, as opposed to describing the defendant’s own goods or services. The defense was initially announced in the Ninth Circuit’s decision in New Kids on the Block v. News America Publishing, Inc., 30 involving a claim for trademark infringement. Under New Kids, the use of another party’s trademark is “fair” if one reasonably needs to use the mark to identify the mark owner’s goods or services, if the use is no more than needed to identify the mark owner’s goods or services, and if there is no implication of endorsement by the trademark owner.31

Although nominative fair use is not expressly included as a defense under the FTDA, courts have applied the defense in the dilution context.32 The most common form

28 See Restatement (Third) of Unfair Competition, § 25(2), comment I (1995) (“Nontrademark uses,

because they do not create an association with a different user’s goods, services or business, are unlikely to dilute the distinctiveness of the mark”).

29 See, e.g., TCPIP Holding Co. v. Haar Communications Inc., 244 F.3d 88, 98 (2d Cir. 2001) (“weak, non-distinctive, descriptive marks do not qualify for the Act’s protection, even if famous”).

30 New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992).

31 Judge Kozinski, for the Ninth Circuit, wrote in New Kids: “But, where the defendant uses a trademark to describe the plaintiff’s product, rather than its own, we hold that a commercial user is entitled to a nominative fair use defense provided he meets the following three requirements: First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.” 971 F.2d at 308. See also, Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350 (9th Cir. 1969) (finding use of the VOLKSWAGEN mark “fair use” by an auto repair shop, even without authorization by the car manufacturer, because there was no other reasonable way to identify the type of cars the repair shop could service).

32 In some cases, the outcome hinges on whether the defendant has used the marks only as reasonably necessary so that the use may be viewed as descriptive, or not trademark use at all. See Playboy Enter. v. Welles, 7 F. Supp. 2d 1098 (S.D. Cal. 1998); aff’d in part and rev’d in part, 279 F.3d 796 (9th Cir. 2002); Clark v. Am. Online, Inc., No. 98-5650, 2000 WL 33535712 (C.D. Cal. Nov. 30, 2000). In others, the outcome hinges on whether the defendant has made more use of the mark than necessary.

7

of nominative fair use occurs in the context of comparative advertising and, in this sense, it is clearly contemplated by Section 43(c)(4)(A). In such situation the defendant uses the mark in commercial advertising to actually identify and compare the trademark owner or the trademark owner’s goods or services.33 Comparative advertising as a defense to a dilution claim is discussed more fully below.

The defense is also available where one uses a mark to evidence a relationship or affiliation between the user and the mark owner. In order to prevail on the nominative fair use defense in this context, the defendant’s use must accurately depict the relationship between the parties.34

The question of use of a noncompetitor’s trademark arose in Liquid Glass.35 The court found no fair use where the defendant featured its car care products in association _________________________

See World Impression, Inc. v. McDonald’s Corp. and Disney Enter., 235 F. Supp. 2d 831 (N.D. Ill. 2002).; see also Liquid Glass Enter. Inc. v. Dr. Ing. H.c.F. Porsche AG, 8 F. Supp. 2d 398 (D.N.J. 1998).

33 In this context, however, some courts have limited the defendant to using no more of the mark than is necessary to achieve this purpose. See, e.g., Playboy Enterprise v. Welles, 78 F. Supp. 2d 1066 (S.D. Cal. 1999), aff’d in part and rev’d in part, 279 F.3d 796 (9th Cir. 2002) (the additional use of a trademark in the wallpaper of a website was not nominative use because defendant had used more of the PLAYBOY mark than necessary to identify herself). No such limitation is present, expressly or impliedly, in the statutory language of Section 43(c)(4).

34 Thus, citing New Kids, the district court in Playboy Enterprise v. Welles found nominative fair use despite the defendant’s use of the plaintiff’s famous marks on her Internet website. Specifically, the court noted that Welles did not create a Playboy-related website or attempt to trick people into thinking it was a Playboy-related website; she did not use Playboy or Playmate in her domain name; she did not use the Playboy bunny logo; she inserted disclaimers that clearly stated the website was not endorsed by Playboy; and the font for the “Playmate of the Year 1981” title was not recognizable as a Playboy magazine font. On appeal to the Ninth Circuit, the circuit court stated that trademark uses that “do not create an improper association between a mark and a new product but merely identify the trademark holder’s Products” should be excepted from action under the FTDA. Playboy Enterprise v. Welles, 279 F.3d at 806. The court reasoned that in the context of titles such as Playmate, awards are not diminished or diluted when past recipients truthfully identify themselves as such, and Welles had simply identified herself accurately as the 1981 Playmate of the Year. However, the Ninth Circuit disagreed with the district court regarding Welles’ use of “PMOY ‘81” as background wallpaper on her webpage. The appellate court determined that the use of the mark in the wallpaper was not nominative use because Welles had used more of the Playboy mark than necessary to identify herself and reversed and remanded. Id.

In Clark v. Am. Online, No. 98-5650, 2000 WL 33535712 (C.D. Cal. Nov. 30, 2000), Dick Clark sued for both infringement and dilution when an AOL mailer offered a promotion to customers who “danced to the Beatles, cruised in a Thunderbird, or tuned into Dick Clark.” The court granted AOL’s motion for summary judgment as to Clark’s dilution and infringement claims after finding that AOL’s use of the Dick Clark name was protected under the nominative fair use doctrine. The court noted that the context and circumstances surrounding AOL’s use of the name “Dick Clark” showed that the mark was being used to describe Dick Clark, the television personality, and not to describe an AOL product. The court concluded that AOL’s use of the Dick Clark name was not a trademark use and therefore could not dilute Clark’s mark, either by blurring or tarnishment.

35 Liquid Glass Enter., Inc. v. Dr. Ing. h.c.F. Porsche AG, 8 F. Supp. 2d 398 (D.N.J. 1998).

8

with a Porsche 911, the PORSCHE trademark, and the Porsche crest prominently displayed in print advertisements and promotional videos. The court considered the fair use defense applicable to infringement claims in the context of the dilution claim, noting that this notion of fair use would be a defense under the three enumerated FTDA statutory defenses. With little discussion, however, the court stated that defendant’s use did not fall into any of the three categories, and found the defense inapplicable. The court rejected the fair use defense in the infringement context, noting that use of plaintiff’s marks was not necessary (another brand of automobile could have been used) and that defendant had displayed more of plaintiff’s marks than necessary.36

4. Comparative Advertising.

Section 43(c)(4)(A) defines the fair use defense to specifically include comparative advertising and promotion.37 However, there have been very few cases which have interpreted this section. Because of the lack of Section 43(c) precedent, New York’s antidilution statute38 is often cited, and particularly its application in Deere & Co. v. MTD Prods, Inc.39

In Deere, Deere used a deer design for over 100 years to identify its products. The defendant, MTD Products, created a commercial for the purpose of comparing Deere’s line of lawn tractors to its own and significantly altered the Deere logo to appear “more playful and/or confused than distressed.”40 The court noted that the Second Circuit had decided a number of comparative advertising cases; however, “we have not yet considered whether the use of an altered version of a distinctive trademark to identify a competitor’s trademark and achieve a humorous effect can constitute dilution.”41 The court stated that the alterations of the Deere logo, making it appear smaller than a dog and scampering away from the dog and a lawn tractor, were made “for the sole purpose of promoting a competitive product, [and] are properly within New York’s concept of dilution because they risk the possibility that customers will come to attribute

36 Id. at 405.

37 “The following shall not be actionable under this section: (A) Fair use of a famous mark of another person in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark.” Lanham Act Section 43 (c)(4).

38 NY Gen. Bus. § 368-d.

39 Deere & Co. v. MTD Prods., Inc., 41 F.3d 39 (2d Cir. 1994).

40 Id. at 45 (“Whether the use of the mark is to identify a competing product in an informative comparative ad, to make a comment, or to spoof the mark to enliven the advertisement for a non-competing or a competing product, the scope of protection under a dilution statute must be taken into account the degree to which the mark is altered and the nature of the alteration. . . . But some alterations have the potential to so lessen the selling power of a distinctive mark that they are appropriately proscribed by a dilution statute. Dilution of this sort is more likely to be found when the alterations are made by a competitor with both an incentive to diminish the favorable attributes of the mark and an ample opportunity to promote its products in ways that make no significant alteration.”).

41 Id. at 41.

9

unfavorable characteristics to a mark and ultimately associate the mark with inferior goods and services.”42 The court noted that MTD remained free to deliver its message of alleged product superiority without altering and thereby diluting Deere’s trademarks. Some courts have followed this reasoning when the defense is asserted under the FTDA.43

The defense applies only in the context of the comparison between competing goods. Where the relevant goods are non-competing, the comparative advertising fair use defense is inapplicable, as in Liquid Glass, discussed supra.44 With little discussion, the court found, inter alia, that defendant’s use of a non-competitor’s mark was not “comparative advertising.”

C. Noncommercial Use.

1. Statutory Language and Interpretation.

The second enumerated defense, the “noncommercial use of a mark,” was left undefined by the statute.45 This has led to questions regarding its meaning, especially considering that, as a threshold matter, the FTDA applies only when there is “commercial use in commerce of a mark.” The legislative history of the Act helps in understanding the meaning of the “noncommercial use” defense. First, the House Judiciary Committee Report on the FTDA states that the statute “adequately addresses legitimate First

42 Id. at 45.

43 For example, Cumberland Packing Corp. v. Monsanto Co., 32 F. Supp. 2d 561 (E.D.N.Y. 1999) involved, inter alia, plaintiff’s SWEET’N LOW and defendant’s EQUAL sweeteners. The allegedly offending use appeared on the box of defendant’s goods. The district court, citing Deere & Co., stated:

Plaintiff does not claim that defendant has distorted plaintiff’s mark. It says only that the ‘physical association’ of the Sweet’N Low trademark with the Sweetmate trademark will cause blurring. ‘Physical association’ in a comparative advertisement is hardly likely to cause dilution. ‘As long as the mark is not altered, such use serves the beneficial purpose of imparting factual information about the relative merits of competing products and poses no risk of diluting the selling power of the competitor’s mark.’

Cumberland Packing, 32 F. Supp. 2d at 581 (citing Deere & Co., 41 F.3d at 44.).

Also, in Avery Dennison Corp. v. Acco Brands, Inc., No. 99-1877, 1999 WL 33117262 (C.D. Cal. Oct. 12, 1999), the court considered the use by Acco of the statement that its product was “comparable to Avery #____.” The court held that Acco’s use was “fair use” under Section 43(c)(4)(A) of the Lanham Act, saying that the use was in comparative commercial advertising or promotion; that it identified the competing goods or services of the owner of the famous mark; and that it was “fair use.” The court said that if the statement was false advertising, it was an issue that should be dealt with under Section 43(a). (It is difficult to see how it could simultaneously be fair use and false advertising.)

44 Liquid Glass Enter., Inc. v. Dr. Ing. h.c.F. Porsche AG, 8 F. Supp. 2d 398 (D.N.J. 1998).

45 In a proposed amendment to the FTDA, this defense would be defined as “[n]oncommercial use of a designation of source.”

10

Amendment concerns espoused by the broadcasting industry and the media” and “will not prohibit or threaten ‘noncommercial’ expression, as that term has been defined by the courts.”46 Second, and in perhaps the most telling passage, the report states:

[Section 43(c)(4)] is designed to preclude the courts from enjoining speech that courts have recognized to be constitutionally protected. . . . Section (4)(B) of the bill expressly incorporates the concept of “commercial” speech from the “commercial speech” doctrine, and proscribes dilution actions that seek to enjoin use of famous marks in “non-commercial” uses (such as consumer product reviews). . . . Nothing in this section of the bill is intended to alter existing case law on the subject of what constitutes “commercial” speech.47

Therefore, what constitutes “commercial” and “noncommercial” use under Section 43(c)(4) is related to what constitutes “commercial” and “noncommercial” speech under the commercial speech doctrine.48

This interpretation is consistent with the underlying purpose behind the defenses – the First Amendment provides. If what constitutes “commercial use” under the non-commercial use defense is identical to what constitutes commercial use under the “commercial use in commerce” requirement, the non-commercial use defense would be meaningless. Moreover, it would leave only two narrow defenses to protect First Amendment speech under the FTDA: the comparative advertising and news reporting defenses.49 Such a narrow interpretation of “commercial use” would be inconsistent with the FTDA’s legislative history which evidences an intent to protect a much broader range of speech, including parody and satire.50

2. The Commercial Speech Doctrine.

As explained above, it is helpful to understand what constitutes commercial and noncommercial speech under the commercial speech doctrine to understand what constitutes commercial and noncommercial use under Section (4)(B) of the FTDA. Unfortunately, the dividing line under the commercial speech doctrine is less than clear.

46 H.R. Rep. No. 104-374, at 4.

47 Id. at 8 (emphasis added).

48 See, Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 906 (9th Cir. 2002), cert. denied, 537 U.S. 1171.

49 Id. at 904.

50 Id. at 905 (quoting a statement of Sen. Hatch and Rep. Moorhead when introducing the counterpart bills). Arguably, Sen. Hatch and Rep. Moorhead’s statement makes clear where the division between commercial and noncommercial speech lies. Their statement explained that the FTDA “will not prohibit or threaten noncommercial expression, such as parody, satire, editorial and other forms of expression that are not a part of a commercial transaction.” 141 Cong. Rec. S19306-10, S19310 (daily ed. Dec. 29, 1995); 141 Cong. Rec. H14317-01, H14318 (daily ed. Dec. 12, 1995).

11

The commercial speech doctrine generally provides that commercial speech is accorded a lesser degree of First Amendment protection than other forms of speech, and so receives qualified First Amendment protection.51 The Supreme Court has held that the First Amendment is available to protect purely commercial speech, or speech that does “no more than propose a commercial transaction” and that is “removed from any ‘exposition of ideas’”52 because the public needs accurate commercial information to make “intelligent and well informed” economic decisions.53 Similarly, the government may regulate commercial speech that is false, deceptive, or has the “potential to exert ‘undue influence’” over consumers.54

The Supreme Court, however, has not been consistent about what makes speech commercial and therefore subject to such qualified protection. Cases at the extreme are easy to analyze. Purely expressive speech, such as a novel or poem, is clearly noncommercial speech. On the other hand, speech that does “no more than propose a commercial transaction” is the core notion of commercial speech.55 In Bolger v. Youngs Drug Prod.,56 the Supreme Court distinguished mailings exclusively devoted to promoting prophylactics from informational mailings discussing the desirability of prophylactics in addition to promoting the defendant’s prophylactics. The Court noted that the former was commercial speech that did “no more than propose a commercial transaction,” while the latter presented a closer question in that they included discussions relevant to public issues in addition to the advertisements.57

Speech that has mixed expressive and commercial components is more difficult to characterize. In Va. State Bd. of Pharm. v. Va. Citizens Consumer Council, the Supreme Court appeared to have drawn the line between speech that does “no more than propose a

51 Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 68-69 (1983). This qualified protection entails a

four-part analysis to determine if government restrictions on commercial speech are valid. “First, we determine whether the expression is constitutionally protected. For commercial speech to receive such protection, ‘it at least must concern lawful activity and not be misleading.’ Second, we ask whether the governmental interest is substantial. If so, we must then determine whether the regulation directly advances the government interest asserted, and whether it is not more extensive than necessary to serve that interest.” Id. (citations omitted).

52 Va. State Bd. of Pharm. v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 762 (1976).

53 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 497 (1996) (quoting Va. State Bd., 425 U.S. at 765).

54 Id. at 498. The Court went on to comment that “[i]t is the State’s interest in protecting consumers from ‘commercial harms’ that provides ‘the typical reason why commercial speech can be subject to greater governmental regulation than noncommercial speech.’” Id. at 502 (citations omitted).

55 Bolger, 463 U.S. at 66.

56 463 U.S. at 60, 66 (1983).

57 Id. (“The mere fact that these pamphlets are conceded to be advertisements clearly does not compel the conclusion that they are commercial speech.”).

12

commercial transaction” and everything else.58 Under this analysis, speech that incorporates any protected expression would constitute “noncommercial speech” and would be afforded full First Amendment protection.59

On the other hand, in Bolger v. Youngs Drug Prods. Corp., the Supreme Court invoked a multifactor balancing test when it held that advertisements for contraceptives which included discussions of important public issues, such as venereal disease and family planning, constituted commercial speech.60 The factors included whether the speech was an advertisement, whether reference was made to a specific product, and whether an economic motivation existed.61 The Supreme Court also recognized that a different holding may result if the advertised activity was itself protected by the First Amendment, such as an advertisement of a religious book.62

The Supreme Court applied yet another analysis to define commercial speech in Bd. of Trustees of the State Univ. of N.Y. v. Fox.63 The Court reasoned that the level of First Amendment protection must depend upon “the nature of the speech taken as a whole,”64 and therefore considered whether the expressive speech and the commercial speech were “inextricably intertwined.”65 If the two types of speech are not inextricably intertwined, then the speech is considered commercial speech.66 While the Supreme Court did not espouse a test for determining when the types of speech are so intertwined, 58 Va. State Bd. of Pharm., 425 U.S. at 771 n.24 (“There are commonsense differences between speech

that does ‘no more than propose a commercial transaction’ and other varieties. Even if the differences do not justify the conclusion that commercial speech is valueless, and thus subject to complete suppression by the State, they nonetheless suggest that a different degree of protection is necessary to insure that the flow of truthful and legitimate commercial information is unimpaired”).

59 See 44 Liquormart, 517 U.S. at 501 (“The mere fact that messages propose commercial transactions does not in and of itself dictate the constitutional analysis that should apply to decisions to suppress them.”).

60 Bolger, 463 U.S. at 66-68.

61 Id; see also, 44 Liquormart, 517 U.S. at 499 (characterizing the “hardiness” of commercial speech as being inspired by its profit motive). The Court later stated that it did not “suggest that each of the characteristics present . . . must necessarily be present in order for speech to be commercial. For example, [it] express[ed] no opinion as to whether reference to any particular product or service is a necessary element of commercial speech.” Bolger, 463 U.S. at 67 n.14.

62 Id. (citing Murdock v. Pennsylvania, 319 U.S. 105 (1943)).

63 Bd. of Trustees of the State Univ. of N.Y. v. Fox, 492 U.S. 469, 473-75 (1989). Initially the Court stated that the test for identifying commercial speech is whether the speech “propose[s] a commercial transaction” citing to Va. State Bd. of Pharm., 425 U.S. at 762. Id. at 473-74. However, the language in Virginia Board actually concerned whether the speech does “no more than propose a commercial transaction.” Va. State Bd. of Pharm., 425 U.S. at 762 (emphasis added).

64 Id. at 474, citing Riley v. Nat’l Fed. of Blind of N.C., Inc., 487 U.S. 781, 796 (1988).

65 Id. at 474-75.

66 Id.

13

it deemed the speech at issue in the case commercial because it was possible to convey the expressive speech in absence of the commercial speech, and because the commercial activity did not require the expressive speech.67 This “inextricably intertwined” test has a very broad reach. Because satires do not necessarily comment on the works they are mimicking, satarists will have other avenues of expression available to comment on their targets, other than through the use of a trademark, potentially leaving many satiric works unprotected under the test.68 This is a result contrary to the intent of Congress evidenced by the legislative history.69

Irrespective of what analysis is used to define speech as commercial, it is arguable that the categorization of a use as “commercial” is not and should not necessarily be dispositive of whether the use is protected by the First Amendment. In other words, if the use of a mark is deemed commercial use under Section (4)(B), further analysis is warranted to determine whether the use is still protected by the First Amendment pursuant to the balancing test of the qualified protection, as is done in the commercial speech context.

3. Parody and Satire.

Parodies and satires have been treated differently throughout the courts. The only thing consistent in the case law is that a successful defense of parody or satire70 to a claim of dilution seems to require obvious humor,71 commentary, or criticism.72 Courts have 67 Id.

68 See, Am. Dairy Queen Corp. v. New Line Prod., Inc., 35 F. Supp. 2d 727, 734 (D. Minn. 1998) (noting that defendant’s denial of any reference to the plaintiff’s company weakened the defendant’s argument “that there are no alternative means to express its artistic impressions or ideas”); Dr. Seuss Enter., L.P. v. Penguin Books USA, Inc., 924 F. Supp. 1559, 1567-70 (S.D. Cal. 1996).

69 The legislative history stated that the proposed FTDA “[would] not prohibit or threaten noncommercial expression, such as parody, satire, editorial and other forms of expression that are not a part of a commercial transaction.” 141 Cong. Rec. S19306-10, S19310 (daily ed. Dec. 29, 1995); 141 Cong. Rec. H14317-01, H14318 (daily ed. Dec. 12, 1995).

70 The Seventh Circuit has defined “parody” broadly to seemingly include a satire: a “humorous or satirical imitation of a work of art that creates a new art work that makes ridiculous the style and expression of the original.” Kraft Foods Holdings, 205 F. Supp. 2d at 952. The Second Circuit has defined it more narrowly: a “literary or artistic work that imitates the characteristic style of an author or a work for comic effect or ridicule,” and an “imitation of a work more or less closely modeled on the original, but turned so as to produce a ridiculous effect.” Charles Atlas, 112 F. Supp. 2d at 337-38 (citations omitted).

71 The clear humor in the defendants’ portrayals of famous marks in the following cases exempted the defendants from dilution liability: Tommy Hilfiger Licensing, Inc . v. Nature Labs, LLC, 221 F. Supp. 2d 410 (S.D.N.Y. 2002) (line of dog perfumes poked fun at famous maker perfumes); World Wrestling Fed’n Entm’t, Inc. v. Dog Holdings, Inc., 280 F. Supp. 2d 413 (W.D. Penn. 2003) (merchandise poked fun at WWE stars); Lyons P’ship, L.P. v. Giannoulas, 14 F. Supp. 2d 947 (N.D. Tx. 1998) (sporting event entertainer poked fun at fake Barney the dinosaur character in skits with a Big Chicken character); and Lucasfilm Ltd. v. Media Market Group, Ltd., 182 F. Supp. 2d 897 (N.D. Cal. 2002) (pornographic movie mocked Star Wars films and message of good versus evil).

14

approached the issue of whether parodies and satires constitute noncommercial use in a variety of, and sometimes inconsistent, ways.

Two courts have simply presumed the accused use constituted a parody or satire and summarily held that it therefore was a form of noncommercial speech not affected by the FTDA.73 These courts relied on the legislative history of the Act: “The bill will not prohibit or threaten noncommercial expression, such as parody, satire, editorial and other forms of expression that are not part of a commercial transaction.”74

Other courts either employ some version of one or more of the analyses used by the Supreme Court under the commercial speech doctrine, or equate the noncommercial use defense with the “commercial use in commerce” requirement. For instance, in Kraft Foods Holdings, Inc. v. Helm,75 discussed in Section II. A. at footnote 16, the court held that the expressive and commercial components of speech were not “inextricably intertwined” because the use of the mark served the purpose of selling artwork and services and providing political or social commentary as prohibiting defendant’s use of the mark at issue would not prevent him from engaging in other forms of protected speech.76 The court concluded that “no law of man or nature makes it impossible for [the defendant] to exercise his free speech rights.”77

_________________________ 72 The clear social commentary in the defendants’ portrayals of famous marks in the following cases

exempted the defendants from dilution liability: Mattel, Inc. v. Walking Mountain Prod., 353 F.3d 792 (9th Cir. 2003) (artist’s photographs depicting Barbie dolls being attacked by vintage kitchen appliances were social commentary on the Barbie image of beauty); Mattel, Inc. v. MCA Records, Inc., 28 F. Supp. 2d 1120 (1998) (song mocking the Barbie doll image and the plastic values she purportedly represented); and Dr. Seuss Enter. L.P. v. Penguin Book USA, Inc., 924 F. Supp. 1559 (S.D. Cal. 1996) (rhyming style of Dr. Seuss books used to convey author’s criticism of the murder trial of O.J. Simpson).

73 Lucasfilm, 182 F. Supp. 2d at 900 (citing Mattel, 28 F. Supp. 2d at 1155) (“Parody is a form of non-commercial, protected speech which is not affected by the Federal Trademark Dilution Act”); Dr. Seuss Enter., LP v. Penguin Books USA, Inc., 924 F. Supp. 1559, 1574 (S.D. Cal. 1996) (holding satire is outside the reach of the FTDA). What makes the Dr. Seuss case convoluted is that the court addressed which of the various approaches to defining commercial and noncommercial speech under the commercial speech doctrine was the correct one to apply to the Lanham Act. Dr. Seuss, 924 F. Supp. at 1571-72. After determining that the “alternative avenues” inquiry (discussed infra) is the most appropriate, it applied the analysis only to the infringement claim rather than both the infringement and dilution claims. Moreover, the court completely failed to address the commercial speech doctrine when discussing the noncommercial use defense of Section (4)(B). Id. at 1573-74 (“When alternative means of achieving the satiric or parodic ends exist that would not entail consumer confusion, the First Amendment will not protect the parodist from being held to infringe”).

74 See supra note 6.

75 Kraft Foods, 205 F. Supp. 2d 942.

76 Id. at 955.

77 Id.

15

In Am. Dairy Queen v. New Line Prod.,78 the defendant had produced and was preparing to release a film described as a mock documentary, satirizing beauty contests in rural Minnesota entitled “Dairy Queens.” The plaintiff owned the DAIRY QUEEN mark and objected to the defendant’s use on grounds of trademark infringement and dilution. The District Court of Minnesota found the use to be commercial because the mark was not “being used primarily as part of an expressive work, but instead [was] used to market, advertise or identify.”79 However, when addressing the First Amendment defense directly, the court looked to see whether “alternative avenues” were available for expressing the ideas.80 This alternative avenues inquiry echoes the “inextricably intertwined” analysis espoused by the Supreme Court in Fox81 – if alternative avenues exist for conveying the expression, then the reference to the famous mark is not essential or inextricably entwined with the expression. The court concluded that “the balance between the public’s interest in free expression and its interest in avoiding consumer confusion and trademark dilution tilts in favor of avoiding confusion and dilution.”82

The Ninth Circuit in Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894 (9th Cir. 2002)83 was more protective of expressive speech. In this case, the court distinguished between the “noncommercial use” defense and the “commercial use in commerce” requirement. The court also conducted an in-depth analysis of the legislative history. When it came to actually defining what is and is not commercial speech, the Ninth Circuit recognized that the boundary between the two types of speech “has yet to be clearly delineated.” However, it then stated that “[i]f speech is not ‘purely commercial’ – that is, if it does more than propose a commercial transaction – then it is entitled to full First Amendment protection.”84

78 Am. Dairy Queen v. New Line Prod., Inc., 35 F. Supp. 2d 727 (D. Minn. 1998).

79 Id. at 732 (citation omitted).

80 Id. at 734; see also, Kraft Foods, 205 F. Supp. 2d at 954 (“Trademark rights need not ‘yield to the exercise of First Amendment rights under circumstances where adequate alternative avenues of communication exist.’”) (citing Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 206 (2d Cir. 1979)). But see, Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989) (“In the context of titles, this ‘no alternative’ standard provides insufficient leeway for literary expression”).

81 Bd. of Trustees of the State of N.Y. v. Fox, 492 U.S. 469 (1989).

82 Dairy Queen, 35 F. Supp. 2d at 735. The result of this balance is contrary to that of Charles Atlas, 112 F. Supp. 2d at 337, discussed infra. Interestingly, the court seemed to ignore that the nature of the work was a satire rather than a parody. The court recognized that the defendant described its film as “satirizing beauty contests in rural Minnesota,” Dairy Queen, 35 F. Supp. 2d at 728, yet it noted that the defendant’s denial that its satire referenced the plaintiff’s company weakened the defendant’s argument “that there are no alternative means to express its artistic impressions or ideas,” id. at 734.

83 Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894 (9th Cir. 2002).

84 Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 906 (9th Cir. 2002), citing, Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180, 1184 (9th Cir. 2001). But see, Bolger, 463 U.S. at 67 (“The mailings constitute commercial speech notwithstanding the fact that they contain discussions of important public issues.”). Hoffman relied on the Supreme Court’s Virginia Board case for drawing this line.

16

While the Southern District of New York in Charles Atlas85 failed to address the commercial speech doctrine entirely, its reasoning is probably the most consistent with the policies behind both the Lanham Act and the First Amendment, which focused on the protection of both the public interest in free expression and the public interest in avoiding confusion In this regard, only when the defendant uses the expressive speech primarily for the commercial exploitation of a product does the mark holder prevail in preventing the use of its famous trademark.86

4. Internet Domain Names/Product Reviews.

The use of trademarks on the Internet, and particularly in domain names, has posed new interpretative challenges to the courts with respect to commercial versus noncommercial use. Product reviews were also identified by the legislative history as a use that is protected as noncommercial use.87 Often such product reviews are posted on websites whose domain names contain protected marks.88

The mere act of registering a domain name that contains a protected mark is not a commercial use under the FTDA, because the defendant is not necessarily trading on the

_________________________ Va. State Bd. of Pharm., 425 U.S. at 771 n.24 (1976) (discussed supra in Section C.2). Hoffman also supported its holding that the use in question was not commercial on the “inextricably intertwined” analysis. Hoffman, 255 F.3d at 1185 (“Viewed in context, the article as a whole is a combination of fashion, photography, humor, and visual and verbal editorial comment on classic films and famous actors. Any commercial aspects are ‘inextricably entwined’ with expressive elements, and so they cannot be separated out ‘from the fully protected whole.’”) (citations omitted). Mattel ignored this inextricably intertwined element and instead simply relied on Hoffman’s holding, possibly recognizing the analysis’ potential to lead to troublesome results.

85 Charles Atlas, Ltd. v. DC Comics, Inc., 112 F. Supp. 2d 330 (S.D.N.Y. 2000).

86 Id. at 337 (“Courts must . . . balance the public interest in free expression against the public interest in avoiding consumer confusion. . . . [This approach] allows greater latitude for works such as parodies, in which expression, and not commercial exploitation of another’s trademark, is the primary intent.”); see also Rogers, 875 F.2d at 999 (“[T]he ‘no alternative avenues’ test does not sufficiently accommodate the public’s interest in free expression. . . . We believe that in general the [Lanham] Act should be construed to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression.”); Cf, Dairy Queen, 35 F. Supp. 2d at 732 (holding the use to be commercial because the mark was not “being used primarily as part of an expressive work, but instead [was] used to market, advertise or identify.”). However, some parodies are not likely to fare well under the defense under this analysis. See Tommy Hilfiger Licensing, Inc. v. Nature Labs, LLC, 221 F. Supp. 2d 410 (S.D.N.Y. 2002) (selling a line of dog perfumes but the court found that the use was not likely to dilute the marks through blurring or tarnishment).

87 H.R. Rep. No 104-374, at 8, 104th Cong., 1st Session (Nov. 30, 1995).

88 See, e.g., Ford Motor Company v. 2600 Enterprises, 177 F. Supp. 2d 661 (E.D. Mich. 2001) (defendant registered domain name “fuckgeneralmotors.com,” and website also provided hyperlink to “ford.com”); Bally Total Fitness Holding Corp. v Faber, 29 F. Supp. 2d 1161 (C.D. Cal. 1998) (defendant posted critical commentary on “Bally Sucks” website located at www.compupix.com/ballysucks).

17

value of domain names as trademarks.89 For example, in Lockheed Martin Corp. v. Network Solutions, the domain names served a technical function on the Internet to designate computer addresses and were not being used in reference to goods and services. The fact that the defendant made a profit did not convert the activity to trademark use.90

Selling domain names that contain protected trademarks does not necessarily constitute commercial use. If a party seeks to sell a domain name in order to capitalize on the trademark’s status as a famous mark, such use is likely to be deemed a commercial use and will not be exempted under the FTDA.91 On the other hand, if a party is selling domain names that consist of words that happen to be trademarks, but the party is not seeking to profit from the value of the marks as marks, then such use is less likely to be deemed a commercial use.92

The seminal case addressing the sale of domain names is Panavision International, L.P. v. Toeppen.93 In Panavision, the Ninth Circuit affirmed the trial court’s conclusion that registration of a protected mark as a domain name was a commercial use—and a violation of the FTDA—where the defendant registered the domain name for the purpose of selling the registrations to the trademark holders. The lower court rejected the noncommercial use defense, finding that the defendant was trading on the value of the marks as marks in seeking to sell the domain names.94

On the other hand, in Avery Dennison Corp. v. Sumpton, the Ninth Circuit reversed a lower court’s grant of summary judgment after concluding the defendant’s sale of domain names containing trademarks was noncommercial use.95 The court reasoned

89 See e.g. Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp 949 (C.D. Cal. 1997), aff’d

194 F.3d 980 (9th Cir. 1999).

90 Similarly, in Academy of Motion Picture Arts & Sciences v. Network Solutions, Inc., 989 F. Supp. 1276 (C.D. Cal. 1997), the district court refused to grant a preliminary injunction against defendant’s registration of domain names containing the plaintiff’s mark. As in Lockheed, the court held that for purposes of obtaining a preliminary injunction, the registration of domain names consisting of protected marks did not constitute a commercial use, and there was no evidence that the defendant attached the plaintiff’s marks to any goods or services that it sold or marketed its services by displaying or exploiting the plaintiff’s mark.

91 See Panavision Int’l, L.P. v. Toeppen, 945 F. Supp. 1296, 1303 (C.D. Cal. 1996), aff’d 141 F.3d 1316 (9th Cir. 1998); Intermatic Inc. v. Toeppen, 947 F. Supp. 1227, 1239 (N.D. Ill. 1996).

92 Intermatic, 947 F. Supp. at 1239.

93 Panavision Int’l, L.P. v. Toeppen, 945 F. Supp. 1296 (C.D. Cal. 1996), aff’d 141 F.3d 1316 (9th Cir. 1998).

94 Another court reached the same conclusion in Intermatic, where the court found commercial use based on the defendant’s intention to sell a domain name consisting of a protected mark to the trademark holder or others. Intermatic Inc. v. Toeppen, 947 F. Supp. 1227 (N.D. Ill. 1996).

95 Avery Dennison Corp. v. Sumpton, 189 F.3d 868 (9th Cir. 1999).

18

that the Sumpton defendant registered domain names based on their incidence as common surnames, not for their trademark value.96

Another common domain name scenario arises when a third party uses a domain name consisting of a protected trademark for purposes of posting commentary about the trademark holder, such as critical reviews of the holder’s products or policies. Courts have generally found that this practice is a noncommercial use of protected marks. For example, in Bally Total Fitness Holding Corp. v Faber, the court granted summary judgment to the defendant after finding that his “Bally Sucks” website criticizing the plaintiff was a noncommercial use.97 The “Bally Sucks” website was found under “compupix.com/ballysucks” and not a “ballysucks.com” domain name. The court rejected plaintiff’s claim that the defendant’s use of its mark to demonstrate defendant’s skills as a website designer and to advertise his services was commercial use. Instead, the court reasoned that the mark had been used in connection with a site devoted to consumer reviews of plaintiff’s services, which was noncommercial use. Other decisions have reached similar outcomes.98

Where the domain name is actually the trademark and not merely a variation of the mark, as in “thiscompanysucks.com,” it is less clear whether the use is commercial. Courts seem to perceive the defendant’s intention to injure the plaintiff, (as opposed to pure commentary) as an important factor. In Nissan Motor Co., Ltd. v. Nissan Computer Corp., the district court found that the posting of negative commentary about the plaintiff on defendant’s “nissan.com” and “nissan.net” websites was commercial speech and therefore actionable.99 Unlike Bally Total Fitness, where the domain name merely incorporated the trademark, the Nissan domain name was the mark itself, and the posting of criticism on the websites was intended to exploit plaintiff’s goodwill in order to injure the plaintiff. On the other hand, in Northland Insurance Cos. v. Blaylock,100 the court denied an injunction after concluding that a domain name consisting of plaintiff’s protected mark was not commercial use. In Northland Ins. the defendant detailed his dissatisfaction with the company’s policies and practices on his “northlandinsurance.com” website. The court found that the plaintiff was unlikely to succeed on its dilution claim because defendant used the mark for noncommercial commentary purposes.101 These cases may be distinguished in that the Northland court 96 Id. at 880.

97 Bally Total Fitness Holding Corp. v Faber, 29 F. Supp. 2d 1161 (C.D. Cal. 1998).

98 See, e.g., Ford Motor Company v. 2600 Enterprises, 177 F. Supp.2d 661 (E.D. Mich. 2001) (denying preliminary injunction to enjoin defendant from providing a hyperlink to “ford.com” on his “fuckgeneralmotors.com” website). The hyperlink was a noncommercial use because it did not interfere with plaintiff’s commercial success in an unlawful manner and because the FTDA “cannot be interpreted so broadly as to include any use that might disparage or otherwise commercially harm the mark owner.” Id. at 665.

99 Nissan Motor Co., Ltd. v. Nissan Computer Corp., 231 F. Supp. 2d 977 (C.D. Cal. 2002).

100 Northland Insurance Cos. v. Blaylock, 115 F. Supp. 2d 1108 (D. Minn. 2000).

101 Id. at 1123.

19

found there was insufficient evidence to support plaintiff’s claim that defendant intended to harm plaintiff’s business whereas the Nissan court found the defendant sought to injure the plaintiff by exploiting its goodwill.

In addition, use of a protected mark in a domain name is more likely to be commercial use when commercial activity, such as soliciting money or promoting goods or services, occurs on the corresponding website. In Planned Parenthood Federation of America v. Bucci, the defendant registered the domain name “plannedparenthood.com” and set up an anti-abortion website at that address.102 The website, which stated “Welcome to the Planned Parenthood Home Page,” also included images of and links to an anti-abortion book. The court found that defendant’s conduct constituted commercial use for three reasons: (1) the defendant was engaged in the promotion of a book; (2) the defendant was a non-profit political activist who was soliciting funds for his activities; and (3) the defendant’s actions were designed to and did harm plaintiff commercially.103 Similarly, in Toys “R” Us Inc. v. Abir, the defendant registered the domain name “toysareus.com” and then offered to sell the domain name to the plaintiff, indicating that he intended to operate a worldwide toy catalog and toy store registry through the domain name.104 The court granted a preliminary injunction on its dilution claim after finding, inter alia, that the defendant’s use constituted commercial use because defendant attempted to sell the registration and intended to solicit business through the domain name. Other courts have reached similar outcomes.105

102 Planned Parenthood Federation of America, Inc. v. Bucci, 1997 WL 133313 (S.D.N.Y., 1997).

103 Id. at *5. See also OBH, Inc. v. Spotlight Magazine, Inc., 86 F. Supp. 2d 176 (W.D.N.Y. 2000), where the defendant set up a website at “thebuffalonews.com” to parody and provide a public forum for criticism of “The Buffalo News.” The court concluded that the website use was a commercial use because the site connected users to defendant’s commercial ventures and was designed to harm plaintiff commercially.

104 Toys “R” Us Inc. v. Abir, 45 U.S.P.Q.2d 1944 (S.D.N.Y. 1997).

105 Cable News Network, L.P. v. cnnews.com, 177 F. Supp. 2d 506 (E.D. Va. 2001) (Defendant registered the domain name “cnnews.com,” used the brands “cnnews” and “cnnews.com,” and included references to plaintiff’s marks on its news site aimed primarily at Chinese speaking viewers. (Defendant claimed that the “cnn” was an acronym for China News as .cn is an abbreviation for China and the “n” represented news.) The court rejected defendant’s noncommercial use arguments, finding that use of CNN on the cnnews.com site was part of the overall commercial effort to provide news and information.); Purco Fleet Servs., Inc. v. Towers, 38 F. Supp. 2d 1320 (D. Utah 1999) (Plaintiff’s competitor registered a domain name containing plaintiff’s mark. The court denied the motion to dismiss after finding (1) defendant registered the domain name and developed a website using that name to injure plaintiff and to extort money from plaintiff, and (2) the website was used in a commercial way in communications which linked the name with Fleet’s web page); Jews for Jesus v. Brodsky, 993 F. Supp. 282 (D.N.J.), aff’d mem., 159 F.3d 1351 (3d Cir. 1998) (Defendant registered “jewsforjesus.org” domain name and used it to “intercept, through the use of deceit and trickery” plaintiff’s intended audience. As in Planned Parenthood, the site promoted a book and therefore included a connection to commercial activity.).

20

D. News Commentary and Reporting.

The third enumerated activity that is not actionable under the FTDA is news reporting and news commentary.106 Such activity includes editorials, news and the like, and potentially product reviews. The defense is clearly grounded in First Amendment concerns as media commentary is at the heart of expressive content. In fact, the Act’s legislative history reflects that this defense was included in the statute at the request of the National Association of Broadcasters, who feared that the noncommercial use exception might not be sufficient to cover media broadcasts.107

To date there has been scant, if any, case law specifically on this defense, most likely because the basis of the exemption is generally understood and non-controversial.108

III. Other Defenses to a Claim of Dilution.

A. The Patent and Copyright Clause as a Constitutional Defense.

When a dilution claim centers on a product configuration as trade dress subject to protection, the Patent and Copyright Clause of the Constitution may come into play. Nonfunctional features of a product design can be the subject matter of a design patent, copyright or trademark law. Both patent and copyright protections are limited in duration, as required under the Patent and Copyright Clause.109 Trademark protection, however, is potentially unlimited in time. The FTDA permits a court to enter a permanent injunction, which could potentially bar a party forever from using a product design that could be in the public domain under patent or copyright law. The FTDA may therefore collide with the Constitutional requirement that authors and inventors be given protection only for “limited times.”

106 Lanham Act Section 43(c)(4)(C) (providing that “[a]ll forms of news reporting and news commentary”

are not actionable under the FTDA).

107 See J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 24:97, 24-204 (West 2003) citing 50 P.T.C.J. 711 (Oct. 19, 1995).

108 One lower court appeared to apply this exemption in refusing to issue a preliminary injunction on a dilution cause of action, finding an exemption for “noncommercial commentary purposes.” Northland Ins. Cos. v. Blaylock, 115 F. Supp. 2d 1108 (D. Minn. 2000). However, the case does not implicate any media entity, but rather a disgruntled litigant’s domain name use and website posting, and thus more likely falls under the broader noncommercial use exception in the domain name context.

109 The Patent and Copyright Clause of the Constitution gives Congress the power “To promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const. art. I, §8, cl. 8 (emphasis added).

21

This is not a question of federal preemption by patent and copyright law, because the FTDA is a federal statute.110 As a federal statute, however, the FTDA cannot overstep the Constitutional limitations imposed by the Patent and Copyright Clause.

Courts have generally acknowledged that trade dress protection under the Lanham Act does not impinge on the constitutional limitations on design patent or copyright protection in the trademark infringement context.111 It is well established that trademark law derives from different sources and serves different purposes than patent and copyright law. Trademark law stems from Congress’s power under the Commerce Clause, which does not include any temporal limitations like the Patent and Copyright Clause.112 The primary aim of traditional trademark law is to protect consumers from confusion. Insofar as trademark protection serves the public good, the potentially unlimited protection afforded to product designs in the trademark infringement context is justified and therefore does not conflict with the “limited times” requirement of the Patent and Copyright clause. The primary purpose of the FTDA, on the other hand, is to prevent non-competitors from free riding on the goodwill of a famous mark, even if there is no likelihood of confusion. Accordingly, the consumer protection rationale that separates traditional trade dress protection from the patent and copyright laws is not present when applying the dilution statute to a competitor’s product design.

The question of whether the FTDA conflicts with the Patent and Copyright Clause when applied to product designs has been discussed in only one case so far. I.P. Lund Trading ApS v. Kohler Co.113 involved the design of a water faucet. Designed by a Danish inventor over thirty years ago, Lund’s sleek, wall-mounted “Vola” faucet had been selected for the design collection of the Museum of Modern Art. Kohler’s “Falling Water” faucet was similar, but not identical, to Lund’s. Plaintiff sought to enjoin the 110 Cf. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 109 S.Ct. 971 (1989). Bonito Boats involved a

state statute that gave unlimited protection to the design of boat hulls, which are functional designs that would be the subject matter of patent law. The Supreme Court had no trouble concluding that federal patent law preempts state statutes that cover the same subject matter under the Supremacy Clause of the Constitution. Id. at 986.

111 I.P. Lund Trading ApS v. Kohler Co., 11 F. Supp. 2d 112, 118 (D. Mass. 1998), citing Kohler Co. v. Moen, Inc., 12 F.3d 632, 642-43 (7th Cir. 1993) (“It is apparent, however, that perpetual trademark protection under the Lanham Act for a product configuration or design is not the equivalent of impermissible perpetual patent protection.”); Esercizio v. Roberts, 944 F.2d 1235, 1245-47 (6th Cir. 1991); Dorr-Oliver, Inc. v. Fluid-Quip, Inc., 94 F.3d 376, 384 (7th Cir. 1996) (noting “the delicate interplay of the patent and trademark laws in the context of product configurations.”). See also, Bonito Boats at 154 (“States may place limited regulations on the circumstances in which such designs are used in order to prevent consumer confusion as to source.”)

112 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 5:3, 5-7 (West 2003) (“The life of the trademark is theoretically indefinite upon the discharge of procedural obligations by the owner. While we acknowledge that there is no temporal limitation on trademarks, they constitute a sui generis property dependent upon consumer perception, and for consumer protection.”)

113 I.P. Lund Trading ApS v. Kohler Co., 11 F. Supp. 2d 112 (D. Mass.), vacated, 163 F.3d 27 (1st Cir. 1998).

22

defendant from diluting (and infringing) its “Vola” faucet design. The district court granted a preliminary injunction on the dilution count, but not on the basis of infringement, finding no likelihood of confusion. The First Circuit Court of Appeals vacated the preliminary injunction and remanded.

The defendant raised an affirmative defense on constitutional grounds, arguing that the application of the FTDA to a competing product essentially gives a perpetual monopoly to product designs in a manner prohibited by the Patent Clause. Neither the district court nor the First Circuit reached a decision with respect to the constitutional question. The First Circuit, however, took great care to express its view that using the FTDA to prevent competitors from using similar product designs raises constitutional concerns and that it doubted Congress intended the FTDA to reach that far.114 The FTDA, the court explained, was intended to provide redress to trademark owners who had no other means to prevent the use of famous marks on non-competitive goods.115 In the case of product designs, patent and copyright laws provide an alternative means of protection – but only for limited times as required by the Constitution. The court found, however, that the language of the FTDA does not exclude trade dress protection categorically, and it is possible to imagine rare cases in which the design of a product functions primarily as an indicator of source. Nevertheless, the court expressed concern that a broad application of the FTDA to product designs would “bring us close to the constitutional edge.”116 It therefore adopted a high standard for proving dilution (whether target customers would perceive the products as essentially the same) and insisted on a “rigorous review.” 117 In a concurring opinion, Judge Boudin went further in asserting that application of the FTDA to product designs for competitive goods is fundamentally at odds with the policies of the Patent Clause, because it could result in a perpetual monopoly on product designs without any benefit to consumers insofar as the FTDA is not intended to prevent confusion.118

The Supreme Court’s recent jurisprudence in the area of trade dress protection suggests that it would find the FTDA inapplicable to product configuration cases. Since 1992, the Court has decided no fewer than four trade dress cases.119 Two Pesos and Qualitex decidedly expanded protection for non-traditional marks, holding that inherently distinctive trade dress can be protected without a showing of secondary meaning and that

114 Kohler, 163 F.3d 27 at 36.

115 Id. at 45.

116 Id. at 50.

117 Id.

118 Id. at 51-53.

119 Two Pesos Inc. v. Taco Cabana, Inc., 505 U.S. 763, 112 S. Ct. 2753 (1992); Qualitex Co. v. Jacobson Prods.. Co., Inc., 514 U.S. 159, 115 S. Ct. 1300 (1995); Wal-Mart Stores, Inc. v. Samara Bros, Inc., 529 U.S. 205, 120 S. Ct. 1339 (2000); Traffix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 121 S. Ct. 1255 (2001).

23

color alone can function as a trademark (albeit only with a showing of secondary meaning). In Wal-Mart, however, the Court signaled a retreat from Two Pesos, holding that product designs (as opposed to packaging) cannot be inherently distinctive and that secondary meaning must always be established.120 The rationale for making this distinction was that product design is generally not intended to identify source, but to make the product itself more useful or appealing. The Court was concerned that giving too much protection to product design would have an anti-competitive effect and noted that patent and copyright protections are available for product designs that do not yet have secondary meaning.121 Similarly, in Traffix the Court emphasized the general rule that copying a product is permitted unless the item is protected by a patent or copyright, noting the often “salutary effects” of allowing competitors to copy.122 In holding that an expired utility patent is strong evidence of functionality, the Court noted that the Lanham Act was not intended to reward manufacturers for their innovation or investment; that is the purpose of the patent law.123 Thus, the Court continues to express its concern about the interplay between trademark, patent and copyright law, and its recent trade dress cases suggest that the Court would take a hard look at the potential anti-competitive effects of applying the FTDA to product designs.

B. Defenses Based on Delay and Inaction.

1. Laches and Acquiescence.

(a) In General

The doctrines of laches and acquiescence are similar.124 They are equitable defenses premised on the theory that a defendant may be materially prejudiced due to the plaintiff’s action or lack thereof on which the defendant has relied.

Laches requires an inexcusable delay in asserting a claim that resulted in material prejudice to the defendant.125 Both laches and acquiescence require a finding that the plaintiff’s conduct “amounted to an assurance to the defendant, express or implied, that plaintiff would not assert his trademark rights against the defendant.”126 Acquiescence, however, requires something more than just delay and resulting prejudice to defendant. It

120 Wal-Mart, 529 U.S. at 212.

121 Id. at 213-14.

122 Traffix, 532 U.S. at 29.

123 Id. at 34-35.

124 See H.G. Shopping Ctr., L.P. v. Birney, 59 U.S.P.Q.2d 1109, 1115 (S.D.Tex. 2000) (“[a]lthough separate defenses, estoppel by laches, estoppel by acquiescence, and equitable estoppel are certainly interrelated”).

125 Id. (citations omitted)

126 Kellogg Co. v. Exxon Corp., 209 F.3d 562, 569 (6th Cir. 2000).

24

requires the plaintiff’s active or affirmative consent to defendant’s conduct, or conduct on the part of the plaintiff that amounts to a “virtual abandonment” of plaintiff’s rights or claims.127 As the Sixth Circuit has stated, “[l]aches is a negligent and unintentional failure to protect one’s rights while acquiescence is intentional.”128

As equitable defenses, laches and acquiescence can be defeated with a showing of the defendant’s own inequitable conduct. Because the policy of protecting consumers in the dilution context is not as strong as in the traditional infringement context, courts may be more inclined to excuse delay in infringement proceedings. Thus, laches and acquiescence defenses in dilution cases are stronger than in infringement cases.129

(b) Measurement of “Delay” and the Effect of the Availability of State Law Dilution Remedies.

The laches defense requires inexcusable delay on behalf of the plaintiff in bringing suit and prejudice to the defendant. There is no bright line rule as to what length of time constitutes an inexcusable delay or what constitutes prejudice.130 Plaintiffs were unable to bring federal dilution claims until the enactment of the FTDA in 1996. Because of its short history, few involve marks first used after 1996 where laches has been successfully raised as a bar to an FTDA claim. Nonetheless, at least one court has found that a delay of four years in bringing a dilution claim indicates that the infringer’s mark did not have dilutive effect.131 The situation is complicated by the recent Supreme Court holding in Moseley,132 which requires a plaintiff to prove actual dilution, rather than a 127 Id. (citing Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 366 n.2).

128 Elvis Presley Enterprises, Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir. 1991).

129 See THOMAS J. MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 24:98, 24-227 (West 2003) (“[u]nlike cases of traditional trademark infringement, in dilution cases there is no strong policy of consumer confusion to weigh against dismissal or narrowing of relief due to the equities created by delay or acquiescence.”).

130 There is neither an “absolute statement that delay of less than a given time period cannot constitute laches” (MCCARTHY, supra at § 31:12) nor a bright line rule for how much prejudice is required. An often-quoted rule of thumb for when laches is available is “Laches = Delay x Prejudice.” MCCARTHY, supra at § 31:2; see also Nexxus Prods. Co. v. CVS New York, Inc., 188 F.R.D. 11, 17 n.8 (D.Mass. 1999) (citing McCarthy’s general laches formula). “In this formula, it is the magnitude of the product of delay and prejudice which must be weighed. For example, in one case, a long delay coupled with a small amount of prejudicial reliance may suffice to prove an adequate defense of estoppel by laches. Yet, in another case, a short delay coupled with a great amount of prejudicial reliance by defendant may also suffice for a defense.” MCCARTHY, supra, at § 31:2; Reedco, Inc. v. Hoffman-La Roche, Inc., 667 F. Supp. 1072, 1081-82 (D.N.J. 1987) (holding that fifteen months, and possibly four and one half years, of delay in asserting infringement claim was barred by laches where plaintiff tracked defendant’s activities and circulated related information and articles to employees); see also Hubbard Feeds, Inc. v. Animal Feed Supplement, Inc., 182 F.3d 598, 602 n. 5 (8th Cir. 1999) (stating that “a delay of over four years is sufficient for laches”) (citations omitted).

131 See The Network Network v. CBS, Inc., No. 98-1349, 2000 WL 362016. at *4, (C.D. Cal. Jan 18, 2000), cited by MCCARTHY, supra at § 24:98, 24-227.

132 Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 123 S.Ct. 1115 (2003).

25

likelihood of dilution, to sustain a cause of action under the FTDA. After Moseley, it is arguable that a cause of action for dilution does not arise until there is evidence of actual dilution.133 Thus, the time period for laches would not begin until there is evidence of actual dilution.

A unique issue that arises due to the existence of both federal and state dilution remedies is whether the availability of state law dilution remedies affects the laches defense against an FTDA claim. That is, whether plaintiff’s failure to bring a state law dilution claim (existing prior to the FTDA’s enactment in 1996) can be used to show laches under the FTDA.

McCarthy suggests that an FTDA claim could be barred by laches “if there was a viable claim of dilution available under a state statute if the claim was substantially the equivalent of the 1996 federal law.”134 Similarly, in H.G. Shopping Centers,135 the court found that laches barred plaintiff’s dilution claims under federal and state law because the plaintiff could have brought a state law dilution claim as early as 1989 for injunctive relief. The court felt the “subsequent enactment of the FTDA does not justify Plaintiff’s failure to bring its claim under Texas law for the ten years preceding this lawsuit.”136 The court found that the dilution claims were barred, though it is unclear from the decision whether the court considered the FTDA claim barred (1) because of the existence of the state law dilution remedy or (2) because there was simply undue delay even after 1996.137

(c) Actual Dilution and the Measurement of “Delay.”

One dilemma facing plaintiffs or potential plaintiffs in an infringement or dilution action is determining when the plaintiff has sufficient evidence or damages of infringement or dilution to make suit viable, given that the defense of laches “assumes the existence of an infringement for an extended period prior to the commencement of litigation.”138 As the Sixth Circuit stated in the context of infringement claims:

Potential plaintiffs in trademark infringement cases steer a hazardous course between the Scylla of laches and acquiescence and the Charybdis

133 Id. at 433.

134 MCCARTHY, supra at § 24:98, 24-227 to 228 (also noting that a “more formidable defense” is that the FTDA is not retroactive and does not apply at all to a defendant’s mark first used prior to 1996, but see Section II.D.2, infra.)

135 H.G. Shopping Ctr., L.P. v. Birney, 59 U.S.P.Q.2d 1109, (S.D. Tex. 2000).

136 Id. at 1116.

137 See also Minn. Mining and Mfg. Co. v. Beautone Specialties, Co., 82 F. Supp. 2d 997 (D. Minn. 2000). The court suggests that because state law dilution remedy was available for several years, laches barred both state and federal dilution claims even though FTDA was only enacted in 1996. Id. at 1005 n.6.

138 Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 462 (4th Cir.1996).

26

of premature litigation. . . . If [plaintiff] waits for substantial injury and evidence of actual confusion, it may be faced with a laches defense. If it rushes immediately into litigation, it may have little or no evidence of actual confusion and real commercial damage, may appear at a psychological disadvantage as ‘shooting from the hip’ and may even face a counterclaim for overly aggressive use of litigation.139

This dilemma is perhaps even more confusing in a dilution case since Moseley, which requires a plaintiff to prove actual dilution, rather than a likelihood of dilution, to sustain a cause of action under the FTDA.140 A plaintiff may have to wait years until it can show actual dilution resulting from use of a similar mark on other, non-competitive goods or products, and potentially subject itself to a laches defense.141 On the other hand, a plaintiff may argue that in light of Moseley, its dilution claim did not accrue until “actual dilution” occurred, and therefore the time for measuring any delay under a laches or acquiescence defense does not even begin to run until actual dilution has occurred.

There are no reported decisions yet addressing this issue solely in the context of a dilution claim under the FTDA, but a similar issue was raised in Exxon Corp. v. Oxxford Clothes, Inc. involving a laches defense under Texas state dilution law. 142 In this case, Oxxford Clothes argued that its dilution claim against Exxon was not barred by laches as the claim did not accrue “until it suffered ‘reputational injury,’ in this case “at the moment that Exxon’s reputation became unsavory enough to affect Oxxford.”143 Oxxford argued the Exxon Valdez oil spill of 1989 was the relevant date, and noted that it could not bring a dilution claim under Texas law until 1989 anyway, when the Texas dilution statute was enacted. The Court found, however, that because Oxxford’s allegations suggested that reputational injury could have begun as early as 1972, and that Illinois law (where Oxxford was incorporated) allowed a dilution claim as early as 1956, the laches defense was barred.144

(d) Progressive Encroachment.

A related issue is whether the doctrine of “progressive encroachment” used in infringement cases will help a plaintiff overcome a laches defense. While there is little case law on the issue, the answer appears to be that the progressive encroachment doctrine will not defeat a laches defense to a dilution claim.

139 Kellogg Co., 209 F.3d at 570 (quoting Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 462 (4th

Cir.1996)).

140 Moseley v. V. Secret Catalogue, Inc., 537 U.S. 418, 433 (2003).

141 A related issue is at what point has plaintiff’s mark achieved sufficient “fame” under the FTDA.

142 Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1081 (5th Cir. 1997).

143 Id. at 1082.

144 Id. at 1082-83.

27

The doctrine of progressive encroachment excuses a delay in filing suit if the defendant’s use of a mark is not “squarely in competition” with the plaintiff, but that the defendant in some way increases or expands its use of the challenged mark.145 “A delay is excusable where an alleged infringer at first sold different product in a different market through different distribution channels later coming in direct competition with the plaintiff.”146 Thus, relying in part on the progressive encroachment doctrine, the Sixth Circuit in Kellogg Company v. Exxon Corporation, found that plaintiff Kellogg Company had not acquiesced in Exxon’s use of a cartoon tiger in connection with its sales of products at mini-marts where Exxon originally used the cartoon tiger mark primarily with sales of gasoline.147

Because the FTDA allows dilution claims regardless of any competition between the parties, one might argue that the “progressive encroachment” is completely inapplicable to a laches defense since it depends upon a showing that the parties are now competing, or at least are now in similar distribution channels. In other words, since the FTDA has no requirement that the parties to a dilution claim be competitors, a delay in bringing suit under the FTDA cannot be excused on the theory that the parties were not competing initially. The Seventh Circuit in AM General Corporation v. DaimlerChrysler Corporation148 declined to make such a “sweeping” statement, but did reject plaintiff’s progressive encroachment argument against a laches defense raised by defendant regarding grilles used on the HUMVEE vehicle.149

(e) Relief.

Generally, a defense of laches will only bar recovery of monetary damages, and will not bar claims for injunctive relief.150 Thus, where plaintiff brings a dilution claim

145 H.G. Shopping Centers, L.P. v. Birney 2000 WL 33538621, *7 (S.D.Tex.) (S.D.Tex. 2000)(citing

Kason Indus. v. Component Hardware Group, Inc., 120 F.3d 1199, 1205 (11th Cir.1997)).

146 Id. (internal citations and quotations omitted).

147 Kellogg Co. v. Exxon Corp., 209 F.3d at 562, 570-74 (6th Cir. 2000) (noting, however, that it found that there was no acquiescence so therefore progressive encroachment was not technically applicable, and district court need not engage in progressive encroachment analysis on remand).

148 A.M. Gen. Corp. v. DaimlerChrysler Corp., 311 F.3d 796 (7th Cir. 2002).

149 The court stated: “in light of the infancy of the federal anti-dilution act, it would be far too sweeping to say, as General Motors asked the court to hold on summary judgment, that the progressive encroachment doctrine never can apply in a dilution case. Nonetheless, . . . the court is persuaded that the doctrine affords DaimlerChrysler’s dilution claim no shelter in this case.” Id. at 823.

150 Kellogg Co., 209 F.3d at 568 (citing TWM Mfg., Co., Inc. v. Dura Corp., 592 F.2d 346, 349-50 (6th Cir. 1979)).

28

seeking only prospective injunctive relief, a defense of laches is inapplicable, and a defendant must show acquiescence by plaintiff instead.151

Similarly, the FTDA has been held to be non-retroactive to marks used prior to its enactment in 1996, preventing damage awards and injunctive relief against owners of such marks; however, many courts have found that the FTDA may be applied to enjoin prospective use of marks, even if the marks were used prior to enactment of the FTDA. This issue is discussed further below. See Section II.D., infra.

2. Statute of Limitations.

The Lanham Act has no express statute of limitations. Therefore, courts have looked to the most analogous state statute of limitations to apply.152 This is typically a state dilution statute, if it exists,153 or the statute of limitations for tortious injury to property.154 However, in light of the Victoria’s Secret decision, the question arises (as with the laches defense), as to when the time period for the statute begins to run.

C. Claim and Issue Preclusion (Res Judicata and Collateral Estoppel).

1. In General.

Claim preclusion (also referred to as res judicata) is “an affirmative defense barring the same parties from litigating a second lawsuit on the same claim.”155 For claim preclusion to apply, there must have been an earlier final judgment on the merits of an identical issue between the same parties or parties in privity with the original parties.156 On the other hand, issue preclusion (also referred to as collateral estoppel) is 151 See id. at 568-69; see also MCCARTHY, supra at § 31:6, 31-22 (doctrine of laches rarely applied to bar

injunction). But see Armco, Inc. v. Armco Burglar Alarm Co., 693 F.2d 1155, 1161 n.14 (5th Cir. 1982) (illustrating that in some situations defense of laches may bar injunctive relief).

152 See Charles Atlas, Ltd. v. DC Comics, Inc., 112 F. Supp. 2d 330, 334 n.7 (S.D.N.Y. 2000) (applying three-year statute of limitations period from New York’s Anti-Dilution Statute, N.Y. Gen. Bus. Law § 360-1 (then § 368-d)). In Bd. of Managers of Soho Int’l Arts Condo. v. City of New York, No. 01-1226, 2003 WL 21403333 (S.D.N.Y. June 17, 2003), the court sua sponte discussed the available of a dilution claim. Since the Lanham Act has no explicit statute of limitation, the court looked to the most analogous state statute of limitations, the New York state statute of limitation for dilution, which has a three year statute. Id. at *18. The court found that the statute barred counterclaimant’s dilution claim since the allegedly diluting use had occurred in 1984. Id.

153 Id.

154 See, e.g., Johnny’s Fine Foods, Inc. v. Johnny’s Inc., 286 F. Supp. 2d 876, 881 (M.D. Tenn. 2003) (“The analogous Tennessee limitations period for trademark violations under 15 U.S.C. §§ 1114 and 1125(c) is the three year period provided for actions for tortious injury to property. Tenn.Code Ann. § 28-3-105”) (citing Tandy Corp. at 366; Federal Express Corp. v. U.S.P.S., 75 F. Supp. 2d 807, 815-16 (W.D.Tenn. 1999)).

155 BLACK’S LAW DICTIONARY 546 (Pocket Ed. 1996).

156 Id.

29

“an affirmative defense barring a party from relitigating an issue determined against that party in an earlier action, even if the second action differs significantly from the earlier one.”157

The general principles underlying claim preclusion and issue preclusion appear to govern FTDA cases, although little case law has developed thus far with regard to either type of preclusion, (particularly the latter). That is, the FTDA does not appear to raise unique issues requiring exceptions to general preclusion principles. Thus, given the difficulty in establishing FTDA claims in the first instance, particularly in light of Moseley, the preclusion doctrines may constitute formidable defenses in any later effort to reassert them.

To the extent doctrinal differences do emerge in future cases, however, those differences may result in the concurrent federal/state original jurisdiction that exists with regard to Lanham Act cases. That is, the “full faith and credit” required under 28 USC §1738 may produce, at least theoretically, inconsistent results in the same federal court being asked to apply claim or issue preclusion, merely because of final judgments from states having different preclusion rules.

2. Claim Preclusion.

As stated above, claim preclusion is “an affirmative defense barring the same parties from litigating a second lawsuit on the same claim,” or cause of action.158 The few courts that have addressed the issue in the FTDA context have applied similar standards for the same “claim” prong of the doctrine.

The district court in Minarik Electric Co. v. Electro Sales Co.159 deemed the claim in the second suit to be the “same” as the claim in the first suit if the two claims arose from a “common nucleus of operative facts.”160 The court used a three-prong test to make its determination, namely:

(1) the existence of a final judgment on the merits in the earlier case;

(2) sufficient identicality between the causes of action in the two suits; and

(3) sufficient identicality between the parties in both cases.

The Minarik court found that the claims in the two lawsuits did not arise from a common nucleus of operative facts because, in the first case, the defendant was an authorized distributor of the trademark owner, whereas at the time of the later lawsuit the

157 BLACK’S LAW DICTIONARY 108 (Pocket Ed. 1996).

158 Id. at 546.

159 Minarik Elec. Co. v. Electro Sales Co., Inc., 223 F. Supp. 2d 334 (D. Mass. 2002).

160 Id. at 337-38.

30

distributorship had been terminated.161 Thus, the registered trademark owner was not barred by the doctrine of claim preclusion from maintaining its second suit against a former distributor using a domain name which incorporated the registered mark.162

In, Enterprise Rent-A-Car Company v. Advantage Rent-A-Car, Inc.,163 the Trademark Trial and Appeal Board (“TTAB”) applied the “same set of transactional facts” test to determine if the second claim asserted was the “same” as the first.164 Prior to filing its application for federal registration of its mark “We’ll Even Pick You Up,” Advantage had filed suit against Enterprise in a Texas federal district court alleging unfair competition under federal and state law. Enterprise counterclaimed on similar grounds as well as for dilution under federal and state law. The parties agreed to entry of a partial consent judgment in the district court action which disposed of all claims asserted by Advantage and all counterclaims asserted by Enterprise except for the dilution claims. After a bench trial, the district court entered judgment against Enterprise on the dilution claims under both federal and state law. On appeal, the Fifth Circuit affirmed the district court’s judgment under federal law as well as under two state dilution laws, but reversed and remanded the case to the district court for a determination of whether a dilution claim was stated under the law of two other states. The TTAB found that res judicata prevented assertion of an FTDA claim arising out of an earlier final decision by the Fifth Circuit against the mark owner on its federal claims.165

It is not clear if and to what extent the “common nucleus of operative facts”/“same set of transactional facts” dichotomy will have a substantive impact in the application of claim preclusion in FTDA cases, but both standards appear to focus on whether the underlying facts of the claims are substantially identical. A substantive impact is more likely to arise from the “same cause of action” standard which focuses on what transactional facts are legally cognizable rather than upon the facts that were or could have been asserted in the earlier action.

161 Id. at 339-42. The court examined only the second factor because the other two factors were clearly

satisfied. It analyzed the facts concerning the second factor pursuant to the Restatement (Second) of Judgments §24(2) and the nature of the injury for which the registered trademark owner was seeking recovery.

162 Although dilution was one of the five theories pleaded in Minarik, the decision was not focused on the FTDA.

163 Enterprise Rent-A-Car Company v. Advantage Rent-A-Car, Inc., 62 USPQ2d 1857 (TTAB 2002) aff’d 330 F.3d 1333 (Fed Cir. 2003) cert. denied, --- U.S. ----, 124 S.Ct. 958 (2003).

164 Id. at 1860. The TTAB employed the three-prong test for application of claim preclusions set forth in Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360 (Fed. Cir. 2000). One of the prongs in this test employs “the same set of transactional facts” standard rather than the “same causes of action” standard applied in Minarik Elec.

165 Id. at 1860-61.

31

3. Issue Preclusion.

In the only case found addressing issue preclusion in the context of the FTDA, the district court dismissed the dilution claim on several grounds, one of which was collateral estoppel, based upon a prior finding in a New York state court that the defendant had an irrevocable license to use the mark.166 However, a defendant could potentially preclude a plaintiff from asserting that its mark is famous or from asserting actual dilution if it had already been determined by another court in a previous action.

D. Retroactivity.

In extending protection to famous marks against non-competing trademark uses, the FTDA established a new federal theory of liability that was not premised on a likelihood of confusion. While at the time of enactment, there were twenty-three state dilution statutes, the statutes varied in their scope.167 Moreover, the FTDA provided for a nationwide injunction in addition to monetary damages and attorneys fees, thus increasing potential penalties as well. Because of the imposition of new obligations and consequences to trademark users, the question arises whether the FTDA should be applied retroactively to acts commenced prior to its January 16, 1996 enactment. The FTDA is silent on the issue, and legislative history does not address whether the Act is retroactive in nature.

As a result, courts have looked to the U.S. Supreme Court’s decision on retroactive application in Landgraf,168 but with differing results. The leading cases considering retroactivity and the FTDA are Circuit City and Viacom.169 While Circuit City held that the FTDA should not be applied retroactively because it would upset “settled expectations” and vested property interests of the defendants, Viacom held that the FTDA can be applied to continuous, ongoing conduct that began before the enactment of the FTDA.

Whether finding that the FTDA should be applied prospectively or finding the application impermissibly retroactive, the courts have expressed concerns regarding fairness and equity. Courts finding the FTDA impermissibly retroactive anchor their decisions on the need for predictability in the consequence of actions undertaken. These

166 Christopher D. Smithers Found., Inc. v. St. Luke’s-Roosevelt Hosp. Ctr., No. 00-5502, 2003 WL

115234 (S.D.N.Y. 2000). The collateral estoppel holding is arguably dicta in this case and certainly an alternative ground inasmuch as the federal district court found that the “Smithers” name was not sufficiently famous to be protected under the FTDA.

167 See DAVID S. WELKOWITZ, TRADEMARK DILUTION 354 (BNA 2002).

168 Landgraf v. USI Film Prod., 511 U.S. 244. 114 S.Ct. 1483 (1994).

169 Circuit City Stores, Inc. v. OfficeMax, Inc., 949 F. Supp. 409 (E.D.Va. 1996); Viacom, Inc. v. Ingram Enter., Inc., 141 F.3d 886 (8th Cir. 1998).

32

courts are loath to strip an entity of vested rights and interests lawfully established prior to enactment of the statute. When determining whether prospective application should be applied based on continuing conduct, the courts have distinguished between damages, which are backward looking, and injunctions, which are forward looking. Such a distinction is crucial because an injunction only impacts post-FTDA conduct, while damages implicate conduct engaged in prior to the change in law. In addition, prospective application depends on whether the court views the defendant’s activity as incurring a vested property interest.

The Landgraf decision and the Circuit City and Viacom cases and their progeny are discussed below.

1. The U.S. Supreme Court and Retroactivity.

In Landgraf the Supreme Court articulated a strong presumption against retroactivity where it would affect existing contractual or property rights.170 The Supreme Court refused to apply the then newly enacted Civil Rights Act of 1991 to conduct that occurred, and cases that were filed, prior to enactment of that statute.171

Landgraf employs a two-step analysis. First, courts are directed to look to the language of the statute to determine whether Congress has defined a statute’s reach.172 If there is no express provision by Congress, as in the case of the FTDA, courts must consider whether the statute would have “retroactive effect.”173 Such effect is not found merely because a statute is applied to a case arising from conduct that began prior to the statute’s enactment; instead a statute has retroactive effect if it would “impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.”174 If a statute is determined to have such an effect, then the presumption against retroactivity applies. The Court generally noted the inherent difficulties in deciding retroactivity issues, stating that determining whether a statute applies retroactively is “not always a simple or mechanical

170 Landgraf, 511 U.S. at 244.

171 The Landgraf decision recognized the tension between two legal principles: 1) courts are to apply the law in effect at the time of rendering a decision; and 2) retroactivity is not favored in the law, and emphasized that the presumption against retrospective applications is “deeply rooted” in our jurisprudence. Id. at 265. The Court discussed the rationale for a strong presumption against retroactive application: “Elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly; settled expectations should not be lightly disrupted.” Id. at 265-66. The Court rationalized that commercial and artistic creativity are fostered when rules of law provide people confidence about the consequences of their actions. Id.

172 Id. at 280.

173 Id.

174 Id. at 280.

33

task” and that judges are well equipped to make such determinations.175 Employing considerations of fairness, reliance and settled expectations, judges have come to different conclusions, leading to the current split.

2. Courts Finding Application of the FTDA Impermissibly Retroactive.

In the first published district court decision on the issue of retroactive application of the FTDA, the court in Circuit City176 found a federal dilution claim barred by retroactivity and granted partial summary judgment. Based on the lack of direct precedent, the court looked to the Landgraf decision for guidance.

The court discussed the principles in Landgraf enumerated above and noted that the Supreme Court “made clear that the presumption against retrospective application maintains primacy” over the competing canon that courts should apply the law in effect at the time a decision is rendered.177 The Circuit City court found that the FTDA “significantly expanded the reach of the Lanham Act” – providing new rights of federal action against trademark use that did not require a likelihood of confusion and thus imposed new obligations and duties and new liabilities with respect to marks already adopted.178 The court emphasized that where the defendant is subject to either injunctive relief or damages, the effect on defendant would be the same, essentially stripping the company of its identity – an identity based on conduct that was lawful for two and one-half years prior to enactment of the statute and “taken pursuant to, and in furtherance of, settled commercial expectations and vested intellectual property rights.”179

175 Id. at 268. The Court looked askance to judges in making this determination: “Any test of

retroactivity will leave room for disagreement in hard cases, and is unlikely to classify the enormous variety of legal changes with perfect philosophical clarity. However, retroactivity is a matter on which judges tend to have ‘sound instinct[s]’ [citation omitted], and familiar considerations of fair notice, reasonable reliance, and settled expectations offer sound guidance.” Id. at 270.

176 Circuit City Stores, Inc. v. OfficeMax, Inc., 949 F. Supp. 409 (E.D. Va. 1996).

177 Id. at 413.

180 Id. at 415.

179 Id. In Circuit City, CarMax the Auto Superstore (a wholly owned subsidiary of Circuit City Stores) (“CarMax”) began operations in 1993, selling and servicing used cars and trucks. By 1996 CarMax owned and operated five retail stores, held federal registrations for the CARMAX mark and had spent $12 million promoting its mark. OfficeMax, Inc. (“OfficeMax”) began promoting its OFFICEMAX mark in 1988, offering office Products and obtained several federal registrations for OFFICEMAX and MAX variant marks. OfficeMax sent CarMax a demand letter in 1996. CarMax then sought declaratory relief and OfficeMax counterclaimed asserting, among other claims, federal trademark dilution and sought injunctive relief as well as damages for intentional dilution since 1993. CarMax moved for summary judgment on the dilution claim on two grounds: 1) that the FTDA would have an impermissible retroactive effect; and 2) enforcing the FTDA here would be inconsistent with principles of equity and therefore inconsistent with the language of the FTDA. Id. at 413.

34

The court rejected the plaintiff’s argument that it only sought prospective injunctive relief.180 The crux of plaintiff’s argument was that there could be no retroactive application of the FTDA because injunctive relief applies not to complete, past conduct, but rather to ongoing continuous conduct.181 Plaintiff relied on the following passage from Landgraf to support its position:

Even absent specific legislative authorization, application of new statutes passed after the events in suit is unquestionably proper in many situations. When the intervening statute authorizes or affects the propriety of prospective relief, application of the new provision is not retroactive.182

The Circuit City court found this argument went too far, stating that Landgraf did not mean that statutes providing for injunctive relief could never be applied retroactively.183 Indeed, the court noted that the Landgraf language was dicta, and applied only to cases in which the conduct at issue was already illegal prior to enactment of a statute.184 The Circuit City court reasoned that in such situations a new statute merely provides a new remedy and does not interfere with settled expectations.185 Such is not the case with the FTDA, which created a new federal cause of action premised on a new theory of liability.

The court was similarly unpersuaded by the plaintiff’s argument that the defendant was not “truly ‘surprised” by the statute, as at the time the FTDA was enacted twenty-three states had dilution statutes, some akin to the FTDA, and the Act had been extensively discussed and debated. As there was no evidence presented regarding the defendant’s expectations, the court could not make a determination as to defendant’s actual knowledge.186 More importantly, the expectations to be considered are those expectations under controlling law at the time conduct occurred. In considering defendant’s expectations, the court noted the variations in state statutes, the lack of dilution laws in states such as Virginia, the lack of monetary awards at the time defendant’s conduct began, and the lack of any federal cause of action.187

180 The court noted that plaintiff had asserted monetary damages as well and that plaintiff appeared to

concede that its claim for damages would clearly be retrospective. Id. at 416.

181 Id.

182 Id. at 417 (quoting Landgraf, 511 U.S. at 273).

183 As discussed in the following section, another line of cases have applied the Landgraf language as a rationale for finding permissible prospective application of the statute.

184 Id. at 417.

185 Id.

186 Id. at 418.

187 Id.

35

Finally, the court considered principles of equity and fairness specified in the FTDA.188 Applying these principles, the court again found that application of the statute would result in an impermissible retroactive effect, although it also based its reasoning on Landgraf.189 The court determined that it would be “manifestly inequitable” to apply a dilution theory and force defendant to abandon its investment and the good will it had built in its mark and begin anew at great expense, when it was entitled to believe, based on the law at that time, that it could introduce its mark with a non-competing line of services from an office supply store.190

Other district courts in the Fourth and Seventh Circuits have applied Circuit City’s reasoning and reached the same result.191

3. Courts Finding Application of the FTDA Prospective and Permissible.

Viacom192 is the leading case finding prospective application of the FTDA. In Viacom, plaintiff Viacom argued that it was entitled to prospective FTDA relief against the continuing dilution of its BLOCKBUSTER marks. Here, the conduct sought to be enjoined under the FTDA was defendant’s continuing use of its BLOCKBUSTER marks, not its pre-enactment conduct. The Viacom court held that although the conduct began before the FTDA was enacted, it should not necessarily be viewed as retroactive under Landgraf. Landgraf acknowledged that “relief by injunction operates in futuro,” thus seemingly precluding injunctive relief from retroactivity concerns.193 Unlike the court in Circuit City, which found that prospective relief only applied where the conduct in question was illegal or in bad faith prior to the FTDA’s enactment, the court in Viacom had a broader reading of Landgraf’s pronouncement:

188 See Lanham Act Section 43(c)(1) (application of the Dilution Act is “subject to the principles of equity

and upon such terms as the court deems reasonable”).

189 Circuit City, 949 F. Supp. at 418.

190 Id. at 419.

191 See Resorts of Pinehurst, Inc. v. Pinehurst Nat’l Dev. Corp., 973 F. Supp. 552 (M.D.N.C. 1997) (selection and publicizing of trade names was act completed prior to enactment; pertinent inquiry is whether dilutive acts were illegal under federal law prior to enactment); Black & Decker (U.S.), Inc. v. Pro-Tech Power Inc., P & F., 26 F. Supp. 2d 834 (E.D. Va. 1998) (refusing to apply FTDA retroactively to damages, but not reaching a determination as to injunctive relief as injunction granted for infringement); S. Indus., Inc. v. Diamond Multimedia Sys., Inc., 991 F. Supp. 1012 (N.D. Ill. 1998) (application of the statute would be manifestly unfair given that defendant completed its selection of and initial publicizing of its trade name well before the FTDA’s enactment); Nike Inc. v Nike Securities L.P. No. 97-008, 1999 WL 98346 (N.D. Ill. Feb. 19, 1999), (comparing Circuit City and Viacom analysis and rejecting bright line rule and finding relevant inquiry is whether defendant had expectations regarding a federal cause of action as opposed to state cause of action).

192 Viacom, Inc. v. Ingram Enter. Inc., 141 F.3d 886 (8th Cir. 1998).

193 Landgraf, 511 U.S. at 273-74.

36

when the intervening statute authorizes or affects the proprietary of prospective relief, application of the new provision is not retroactive.

Rather than “dicta,” the court in Viacom found the language “part of a carefully crafted holding” and binding.194 Therefore, according to Viacom, at least with respect to claims for injunctions, the statute and remedy are properly viewed as prospective and only affect liability for future conduct.

A finding of prospective relief must still be contingent upon fairness and equity. Here, as in Circuit City, the court looked to the equity clause of the FTDA (the statute is “subject to the discretion of the court and principles of equity”).195 The Viacom court held that claims for injunctions may be granted against continuing dilution but it will be a factual inquiry for the court to determine when appropriate. The court noted that if the defendant’s non-competing and non-confusing use of its BLOCKBUSTER mark prior to the FTDA’s enactment was lawful and resulted in the defendant acquiring a valuable and legitimate property interest of its own, plaintiff presumably would not be entitled to an anti-dilution injunction granting it a nationwide monopoly in the use of that word.196 Other courts have found that while the junior user invested in its mark at the time the conduct was legal and did not expect the law to change, such expectations should not effect prospective application of the FTDA; new statutes routinely impose novel costs on prior legal business decisions, such as in property taxes or zoning regulations.197

Viacom distinguished claims seeking damages for violations of the FTDA that occurred before the statute was enacted, from injunctive relief which is directed towards future violations of the Act. Claims for injunctions under the FTDA should be viewed as prospective in nature only where the court will find that the injunction will not unreasonably burden the defendant. In Kellogg Co. v. Exxon Corp.,198 the court regarded injunctive relief as non-retroactive but focused on whether the defendant had a valid property interest based on investment and goodwill. According to the district court in Kellogg, requiring a defendant to conform its behavior to the congressional mandate of the FTDA is not “manifestly inequitable.”199 However, the court did mention that if the defendant had begun its use of the allegedly diluting mark thirty years before the FTDA was enacted (and even registered a version of the mark), there would be a valid property

194 Viacom, 141 F.3d at 889.

195 Viacom, 141 F.3d at 890.

196 Id. Here the court seems to echo the concerns raised in Circuit City.

197 See Hasbro, Inc. v. Clue Computing, Inc., 66 F. Supp. 2d 117, 129 (D. Mass. 1999), aff’d, 232 F.3d 1 (1st Cir. 2000).

198 Kellogg Co. v. Exxon Corp., 209 F.3d 562.

199 Kellogg Co. v. Exxon Corp., 192 F. Supp. 2d 790, 801 (W.D. Tenn. 2001).

37

interest and the plaintiff could not necessarily enjoin the defendant’s use. Additional courts have come to similar conclusions.200

200 See Medic Alert Foundation v. Corel Corp, 43 F. Supp. 2d 933 (N.D. Ill. 1999) (although no dilution

was found, the court stated that prospective injunctive relief is available under the FTDA, even if the original violation began prior to the effective date of the act, subject to principles of equity); Fuente Cigar, Ltd. v. Opus One, 985 F. Supp. 1448 (M.D. Fla. 1997) (allowing anti-dilution claim against conduct occurring before the FTDA enactment, because awarding prospective relief does not constitute retroactive application).