Dilution by Blurring V Freedom of Competition

The common law action for passing off is based on preventing deception of the public by misrepresenting goods as having a connection with the goods of another trader that they do not in fact possess. Originally, a passing off action required the parties to be competitors, but as the law evolved, it adapted to prevent wrongful misappropriation of goodwill in exceptional cases, even when the parties were not competitors. For example, as early as 1898 Eastman Kodak was able to get an injunction restraining the use of Kodak for bicycles, even though their reputation then was restricted to photographic supplies (Eastman Photographic Materials v Kodak Cycle (1898) 15 RPC 105).

The evolutionary process, though, was not smooth and eventually pressure built up for enactment of statutes intended to enhance protection against erosion of the distinctive character of a trademark, and concomitant damage to the goodwill symbolised by the trademark. Such laws are generally referred to as anti-dilution and anti-free-riding laws, as exemplified by the US Trademark Dilution Revision Act (TDRA), 15 USC section 1125(c) (2006); section 22 of the Canadian Trade-marks Act, and article 5 (2) of the Community Trade Mark Directive, OJ EC No. L 40 of 11.2.1989.

If broadly interpreted, such laws have the potential for significantly increasing the scope of protection of trademarks, with potentially adverse consequences to the public interest in freedom of competition and freedom of expression. That, in a nutshell, is the danger that anti-dilution and anti-free-riding statutes pose unless injunctive relief is restricted to relatively rare cases of famous marks that merit such extended protection, based on cogent evidence that the public associates the respective marks, and evidence that it is likely that the distinctiveness of the plaintiff’s mark is likely to be impaired.

Actions based on “dilution by blurring” brought against a competitor engaged in the sale of similar goods are particularly troubling because of the potential that a motive of the plaintiff is to impede honest competition. If a competitor’s conduct has caused or is likely to cause confusion, the plaintiff is entitled to traditional trademark relief; if the conduct has not caused, and is not likely to cause confusion, dilution by blurring should seldom be found to exist.

The TDRA defines “dilution by blurring” as follows:

“Dilution by blurring” is the association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark. In determining whether a mark or trade name is likely to cause dilution by blurring, the court may consider all relevant factors, including the following:

• the degree of similarity between the mark or trade name and the famous mark;

• the degree of inherent or acquired distinctiveness of the famous mark;

• the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark;

• the degree of recognition of the famous mark; and

• whether the user of the mark or trade name intended to create an association with the famous mark.

A recent case that demonstrates how anti-dilution law can be used in disputes involving similar goods is Levi Strauss & Co v Abercrombie & Fitch Trading Co (No. 09-16322), a decision of the Court of Appeals of the Ninth Circuit. Levi Strauss sued Abercrombie & Fitch for trademark infringement and for dilution under the TDRA. The complaint was based on alleged similarities between the Levi Strauss design (a registered trade mark) applied to jeans pockets (the “Arcuate design”) and the Abercrombie & Fitch Ruehl design, shown below.

Levi Strauss Abercrombie & Fitch

Arcuate Design Ruehl Design

At the trial, the jury found there was no evidence of any likelihood of confusion. The District Court judge found against Levi Strauss on dilution, on the ground that the two designs had to be identical or nearly so for a dilution claim to lie (the same as the previous test under the Federal Trademark Dilution Act (FTDA), the predecessor of the TDRA). Levi Strauss appealed this decision to the Court of Appeals for the Ninth Circuit, who allowed the appeal on this point and remanded the case to the District Court for adjudication of blurring according to the correct standard of “similarity” under the TDRA. It’s a bit hard to imagine that the issue of similarity in this case would need to be adjudicated by a jury. How complicated is it to tell that these two designs are not similar? Interestingly, Levi Strauss has now dismissed the dilution claim with prejudice, and judgment has been entered by the District Court for Abercrombie & Fitch subject to Abercrombie & Fitch bringing a motion for fees and costs.

Had there been a finding of likelihood of confusion in Levi Strauss, it would have followed that there would have been dilution by blurring, because a mark that has caused or is likely to cause confusion must by definition weaken the distinctiveness of the earlier mark. In such event there would be no need for a separate dilution remedy. Conversely, if there is no likelihood of confusion, does that not mean that the overwhelming majority of the public is able to distinguish between the respective designs, and that being the case, how can the Ruehl design diminish the distinctiveness of the Arcuate design? Also, is it even the case that the Ruehl design is regarded by the public as a trademark, as opposed to a decorative element?

Although Canadian anti-dilution trademark case law is not nearly as extensive as that of the USA, a recent Supreme Court of Canada case illustrates that Canadian law has a high threshold of proof required to support a finding of dilution. A case like Levi Strauss would be very unlikely to succeed because of the requirement of evidence to prove that the public in fact associates the two designs, and that the accused mark in fact is likely to depreciate the value of the goodwill symbolised by the plaintiff’s mark.

In Veuve Clicquot Ponsardin, Maison Fondée en 1772 v Boutiques Cliquot Ltée (“Veuve Clicquot”), the Supreme Court of Canada defined the criteria necessary to support a successful action under section 22. Prior to Veuve Clicquot, it was not clear whether:

• the defendant’s mark must be identical to the plaintiff’s registered mark; and

• the plaintiff must show that consumers are likely to associate the defendant’s mark with the plaintiff’s registered mark.

As to the first issue, in an amicus brief filed on behalf of the INTA, it was argued that the respective marks do not need to be identical. The Supreme Court agreed that the respective marks do not have to be identical provided that the public associates the two.

With respect to the second issue, whether an association in the minds of consumers between the respective marks has to be proved, the INTA amicus brief argued that it would be sufficient to show that the use of the Cliquot mark by the respondents “was likely to whittle away or dilute the distinctiveness of the Veuve Cliquot mark and thereby depreciate the value of the goodwill attached to it. The likelihood of dilution arises from the similarity or identity of the junior mark to the famous and distinctive mark.” In other words, according to that position, it is not necessary to prove that the respective marks are associated in the mind of the public.

This view was rejected by the Supreme Court, which laid down a four-part test as follows.

Defendant must have used the registered mark in connection with wares or services.

The first element of the test is that a claimant must prove that the defendant has used the accused mark in connection with wares or services whether or not such wares and services are competitive with those of the claimant. This could be an issue in cases involving parody of registered trademarks on T-shirts, in circumstances such that it would at least be arguable that such use is not a “trademark use”, ie, not a use for the purpose of distinguishing.

The registered mark must have significant goodwill attached to it.

This does not necessarily mean that the trademark must be shown to have become famous or well-known, but it would be the unusual case where the plaintiff’s mark is not famous or well-known, given the next two factors.

Association between the registered mark and the accused mark is essential.

Third, the defendant must have used the trade mark in such a manner as to have affected such goodwill (linkage). The plaintiff has to show that the defendant’s use of a similar mark must evoke in the relevant universe of consumers, a mental association of the two marks that is likely to depreciate the value of the goodwill attaching to the plaintiff’s mark. Without such linkage, connection, or mental association in the consumer’s mind, there can be no depreciation of the goodwill symbolised by the registered mark.

Likelihood of depreciation of the value of the goodwill is essential.

Fourth, such use by the defendant is likely to depreciate the value of the goodwill (damage). The Supreme Court rejected the appellant’s appeal because the appellant had failed to prove the existence of such linkage, connection or association. Doing so requires evidence, which was insufficient in the case to prove the necessary connection. It followed that the use of the mark Cliquot by the defendant was unlikely to depreciate the value of the goodwill associated with the mark Veuve Clicquot.