U.S. trademark law took another significant step forward in 2006 with the enactment of the long-awaited, much-debated amendments to the Federal Trademark Dilution Act (FTDA). On October 6, 2006, President Bush signed the Trademark Dilution Revision Act (the Act) into law, effective immediately (Lanham Act § 43(c); 15 U.S.C.

§ 1125(c)). The Act clarifies and more carefully defines the scope of U.S. federal anti-dilution law than the FTDA had, speaking to virtually every substantive dilution issue the courts had wrestled with during the FTDA’s relatively short life. A bit of history sets the stage.

The FTDA, effective January 16, 1996, and consistent with traditional notions of dilution protection, afforded owners of famous marks a remedy for the dilution of those marks occurring after the mark in question became famous, even in the absence of a likelihood of confusion between the owner’s use of the mark and another’s use of the same or similar mark or name. While this approach was consistent with the language of the Model State Trademark Law, adopted by approximately half of the states since 1965, the language of the FTDA departed from the Model State language in several telling respects, including defining dilution as “the lessening of the capacity of a famous mark to identify and distinguish” and in requiring that the trademark use challenged must “cause dilution of the distinctive quality of the mark.”

The definition of dilution contained in the FTDA, and its departure from the Model State language, caused much consternation within several federal courts of appeals. Ringling Brothers-Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Development, 170 F.3d 449 (4th Cir. 1999), is a prime example of that phenomenon. In Ringling Brothers the Fourth Circuit Court of Appeals had the unenviable task of interpreting the fairly new FTDA in a difficult context: the State of Utah had been using “GREATEST SNOW ON EARTH” as its state motto, including emblazoning it on every vehicle license plate in the state, for more than 30 years before the FTDA became law and Ringling Brothers brought suit claiming that the slogan violated its well-known “GREATEST SHOW ON EARTH” mark. Not surprisingly, the Fourth Circuit ruled in favor of Utah, going out of its way to interpret the statutory language as requiring “actual dilution,” while at the same time acknowledging that “[t]he difficulties of proving actual dilution by practically available means is evident.”

Subsequently, in Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208 (2d Cir. 1999), the Second Circuit upheld the lower court’s grant of a preliminary injunction against Nabisco’s distribution of a fish-shaped cheddar-flavored cracker. The Second Circuit took issue with the Ringling Brothers court’s statutory interpretation, accusing the Fourth Circuit of engaging in “excessive literalism to defeat the intent of the statute.” As time went on, other courts chimed in on one side or the other, and the issue was ripe for the Supreme Court’s decision in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003).

The Moseley Court sided with the Fourth Circuit, holding that the plain language of the statute required proof of actual injury to the economic value of a famous mark, rather than the mere “likelihood of dilution” that would be required under most state dilution laws. However, the Supreme Court parted company with the Fourth Circuit on whether actual economic loss need be established, opining that proof of such loss was not required. The decision also was noteworthy for the Court’s comment, arguably in dicta, that dilution by tarnishment, long understood as one of the two bases of a state law dilution claim, might not even be covered by the FTDA.

The Act is a direct response to the Moseley decision; the arguably vague, open-ended language of the FTDA is no more. The Act effectively overturns Moseley, establishing an explicit “likelihood of dilution” standard, applicable both in cases of blurring and tarnishment: the owner of a famous mark is entitled to an injunction against a use in commerce occurring after the mark became famous (not a change from the FTDA) “that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.”

To underscore its intent, and to provide greater guidance to the courts than had been proffered in the earlier statutory language, Congress went on to further define the two categories of dilution. Dilution by blurring now is defined as “[a]ssociation arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” Tarnishment, by contrast, is defined as “[a]ssociation arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” The statute contains a list of nonexclusive factors by which a court may assess whether dilution by blurring is present, but contains no similar list for dilution by tarnishment. Perhaps the standard for what constitutes tarnishment, like the standard for identifying pornography, defies precise definition, and the “I’ll know it when I see it” approach applies.

In another nod to trademark owners, the Act also clarifies that dilution protection is available to all famous marks that are distinctive, whether “inherently or through acquired distinctiveness.” One would have thought that such elucidation was unnecessary, as a truly famous “mark,” by definition, necessarily would be distinctive as that concept has been understood and embraced for years in trademark jurisprudence. However, the amendment was necessitated by the Second Circuit’s rather tortured interpretation of the FTDA in TCPIP Holding Co. v. Haar Communs., 244 F.3d 88 (2nd Cir. 2001), in which the Second Circuit held that the FTDA applied only to inherently distinctive marks.

Both the reformulation of the definition of dilution and the language defining distinctiveness suggest that Congress intended to broaden the scope of available dilution protection. But, in fact, Congress imposed other restrictions appropriately calculated to balance trademark owners’ rights with other commercial interests and free-speech considerations. For example, in addition to arguably making it easier for the owner of a famous mark to establish dilution, the Act also makes it harder for a trademark owner to prove that its mark is indeed famous. The Act clarifies an open question under the FTDA: niche fame is not sufficient to establish fame under the Act. To establish that a mark is famous, the trademark owner must prove that the mark is “widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” This requirement will significantly limit the number of marks entitled to relief under the Act.

In addition, the Act expressly cordons off certain behavior as “not actionable.” This includes all non-commercial use of a mark and news reporting. Likewise, the exclusion extends to “any fair use…by another person other than as a designation of source for the person’s own goods or services.” Such fair use extends to “nominative or descriptive fair use,” comparative advertising, and “identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.”

As with any new law, there will be disputes requiring interpretation of the Act. Such litigation may well focus on the breadth of the exemptions under the law. For example, as indicated, the Act specifies that it extends to dilution by either blurring or tarnishment, defining the latter as use “that harms the reputation of the famous mark.” Under the Act, tarnishment is actionable, parody expressly is not. However, what is tarnishment in the eyes of an offended trademark owner may in fact be parody in the eyes of the challenged user. Where, and in what procedural context, courts will draw the line remains to be seen. We do know that noncommercial use of a mark also is exempt from liability under the Act, so unquestionably noncommercial parody is immune. Parody is generally understood to be poking fun at someone else’s trademark in a way that simultaneously conveys conflicting messages: that the use is of the parodied mark and, at the same time, that it is not.

Questions of whether particular uses fall within one category or another—tarnishment or parody, commercial or non-commercial use—will continue to find their way to the courts in dilution cases, as they continue to do in the more traditional infringement and unfair competition contexts. However, the balance Congress struck with the Act between trademarks and free speech appears to be a sound one, limiting dilution protection to truly famous marks with national renown, and then only in limited contexts not impeding legitimate free speech.