On May 19, 2010, the United States Court of Appeals for the Sixth Circuit held that the Trademark Dilution Revision Act (TDRA), which is codified in Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c) (2006), establishes a presumption-like inference of likely dilution by tarnishment where a defendant is using a mark similar to that of a plaintiff to sell sex-related products. See V Secret Catalogue, Inc. v. Moseley, No. 08-5793, 2010 WL 1979429 (6th Cir. May 19, 2010). Under the Sixth Circuit’s new rule, the defendant in such a case bears the burden of producing evidence that no likelihood of dilution exists; if it does not, the plaintiff’s burden is discharged and finding of liability will lie. This holding represents the first apparent recognition of a presumption in favor of liability under the revised Section 43(c).

Background

In 1998, Victor and Kathy Moseley opened a store under the VICTOR’S LITTLE SECRET service mark which led to the owners of the VICTORIA’S SECRET mark filing suit against the Kentucky couple for, inter alia, trademark infringement and dilution. The Moseleys’ store sold not only lingerie—the stock-in-trade of the plaintiffs—but also various adult products such as videos, sex toys and other novelties. Traditionally, the only surefire way for a plaintiff to secure a finding of either actual or likely dilution has been to establish that the defendant is using a similar mark in a prurient context. In fact, the Sixth Circuit found “no exceptions in the case law that allow such a new mark associated with sex to stand.” Moseley, 2010 WL 1979429, at *3. So, although the ultimate fate of the VICTOR’S SECRET mark was likely sealed from the outset as far as that court was concerned, the case nevertheless has spawned several opinions addressing the parties’ respective burdens under the TRDA. See V Secret Catalogue Inc. v. Moseley, 54 U.S.P.Q.2d 1092 (W.D. Ky. 2000) (Moseley I), aff’d, 259 F.3d 464 (6th Cir. 2001) (Moseley II), rev’d, 537 U.S. 418 (2003) (Moseley III), on remand, 558 F. Supp. 2d 734 (W.D. Ky. 2008) (Moseley IV), aff’d No. 08-5793, 2010 WL 1979429 (6th Cir. May 19, 2010) (Moseley V).

The Moseleys, Victoria’s Secret, the Supreme Court and Congress

The Moseley litigation is perhaps best-known for having produced the Supreme Court’s holding in Moseley III that the then-extant version of Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c) (2000), required plaintiffs proceeding under it to make a showing of actual, rather than likely, dilution. In response, Congress eventually amended Section 43(c) in 2006, which now provides for liability upon a showing that dilution is merely likely. The revised Section 43(c) also expressly recognizes two theories under which a likelihood of dilution can exist. First, the owner of a famous mark can establish liability under Section 43(c) by demonstrating that a defendant’s use is likely to tarnish the favorable connotations of the plaintiff’s mark. Second, the owner of such a mark can prevail if it can prove “[an] association arising from the similarity between [the defendant’s] mark or trade name and [the] famous mark that impairs the distinctiveness of the famous mark.” 15 U.S.C. § 1125(c) (2006). Only the first of these theories was at issue in the appeal before the Sixth Circuit in Moseley V.

The District Court Reconsiders

On remand from the Supreme Court’s opinion in Moseley III, the plaintiffs had little trouble proving as a matter of law in Moseley IV that the Moseleys’ operation of a low-rent sex shop under the VICTOR’S SECRET and VICTOR’S LITTLE SECRET marks violated the revised Section 43(c) because it created a likelihood of dilution by tarnishment. Referring to correspondence received by the plaintiffs from a military officer objecting to the nature of the Moseleys’ store, the court therefore granted the plaintiffs’ tarnishment-based motion for summary judgment, explaining that:

The evidence in this case supports a finding of a likelihood of dilution by tarnishment. The Army colonel’s offended reaction to the use of “Victor’s Secret,” what he clearly believed to be a bastardization of the VICTORIA’S SECRET mark, for the promotion of “unwholesome, tawdry merchandise,” suggests the likelihood that the reputation and standing of the VICTORIA’S SECRET mark would be tarnished. . . . [The lead plaintiff] has stated that it scrupulously avoids sexually explicit goods while cultivating a “sexy and playful” image. . . . The use of the remarkably similar “Victor’s Secret” or “Victor’s Little Secret” in connection with the sale of intimate lingerie along with sex toys and adult videos tarnishes the reputation of the VICTORIA’S SECRET mark. Thus we find a likelihood of dilution of the mark. . . .

Moseley IV , 558 F. Supp. 2d at 750. The Moseleys appealed.

The Sixth Circuit Decision in Moseley V

The Moseleys argued to the Sixth Circuit that the semantic association between the parties’ mark, standing alone without any additional survey or comparable evidence, was insufficient to establish a likelihood of dilution, much less one as a matter of law, even under the revised statute. The court of appeals was unconvinced, focusing as an initial matter on language in the legislative history of the revised Section 43(c) that “‘[t]he Moseley standard creates an undue burden for trademark holders who contest diluting uses and should be revised.’” Moseley V, 2010 WL 1979429, at *2 (quoting H.R. Rep. No. 109-23, at 5 (2006), reprinted in 2006 U.S.C.C.A.N. 1091, 1092). Referring to the examples of potentially actionable tarnishing uses set forth in the Restatement, as well as the unfavorable track record of defendants such as the Moseleys in dilution litigation, the court then held:

The phrase “likely to cause dilution” used in the new statute significantly changes the meaning of the law from “causes actual harm” under the preexisting law. . . . It is important to note . . . that the Committee Report . . . seeks to reduce the “burden” of evidentiary production on the trademark holder. The burden-of-proof problem, the developing case law and the Restatement (Third) of Trademarks in § 25 (particularly subsection g) should now be interpreted, we think, to create a kind of rebuttable presumption, or at least a very strong inference, that a new mark used to sell sex-related products is likely to tarnish a famous mark if there is a clear semantic association between the two. This res ipsa loquitur-like effect is not conclusive but places on the owner of the new mark the burden of coming forward with evidence that there is no likelihood or probability of tarnishment. The evidence could be in the form of expert testimony or surveys or polls or customer testimony.

Moseley V , 2010 WL 1979429, at *4 (footnote reference omitted). The court further explained that:

[T]he new law seems designed to protect trademarks from any unfavorable sexual associations. Thus, any new mark with a lewd or offensive-to-some sexual association raises a strong inference of tarnishment. The inference must be overcome by evidence that rebuts the probability that some consumers will find the new mark both offensive and harmful to the reputation and favorable symbolism of the famous mark.

Id.

Applying this new standard to the record evidence and testimony before it, the court declined to disturb the district court’s entry of summary judgment in the plaintiffs’ favor:

In the present case, the Moseleys have had two opportunities in the District Court [Moseley I and Moseley IV] to offer evidence that there is no real probability of tarnishment and have not done so. They did not offer at oral argument any suggestion that they could make such a showing or wanted the case remanded for that purpose. The fact that Congress was dissatisfied with the Moseley result and the Moseley standard of liability, as well as apparently the Moseley burden of proof, supports the view of Victoria’s Secret that the present record—in the eyes of the legislative branch—shows a likelihood of tarnishment. Without evidence to the contrary or a persuasive defensive theory that rebuts the presumption, the defendants have given us no basis to reverse the judgment of the District Court. . . . We agree that the tarnishing effect of the Moseley’s mark on the senior mark is somewhat speculative, but we have no evidence to overcome the strong inference created by the case law, the Restatement and Congressional dissatisfaction with the burden of proof used in this case in the Supreme Court.

Id.

The Dissenting Opinion

A dissenting opinion suggested that there still may be room for debate as to the significance of the TDRA and its effect on the parties’ respective burdens in federal dilution litigation. Id. at *5-9 (Moore, J., dissenting). According to the dissent,

the House Judiciary Committee Report highlights Congress’s concern with the pre-TDRA actual-dilution standard, but I do not read its concern that the previous standard created “an undue burden” to mean that Congress envisioned a modification of the party that bears the burden of proof as opposed to simply a lightening of the evidentiary showing. The burden to show tarnishment remains with [the plaintiffs].

Id. at *7 n.2. (Moore, J., dissenting) (internal citation omitted). And that burden, the dissent would have held, the plaintiffs failed to carry. Because the plaintiffs’ showing was limited to a single contact by a consumer who directed his distaste for the Moseleys’ store toward the Moseleys, rather than toward the plaintiffs, “there is no evidence connecting Victor’s Little Secret’s ‘unwholesome’ or ‘tawdry’ sexual character to the senior mark’s reputation.” Id. at *9 (Moore, J., dissenting). Rather,

With its conclusion that there is sufficient evidence of harm to the reputation of the VICTORIA’S SECRET mark based solely on the sexual nature of the junior mark, the majority sanctions an almost non-existent evidentiary standard and, in the process, essentially eliminates the requirement that a plaintiff provide some semblance of proof of likelihood of reputational harm in order to prevail on a tarnishment claim. . . .

Id. (Moore, J., dissenting).

Conclusion

Federal trademark infringement doctrine historically has recognized a number of extrastatutory presumptions, including some, such as those created by intentional copying, that can shift either the burden of proof or production to defendants. Prior to the Sixth Circuit’s opinion in Moseley V, however, no similar presumptions had been recognized under Section 43(c). On the one hand, the holding in Moseley V may represent nothing more than the pragmatic recognition that defendants such as the Moseleys inevitably lose in dilution-by-tarnishment actions; on the other hand, however, it may open the door to other extrastatutory burden-shifting mechanisms, the effects of which may be both unexpected and far-reaching.