The Supreme Court and Victoria's Secret

THE SUPREME COURT AND VICTORIA'S SECRET

The Federal Trademark Dilution Act (FTDA), an amendment to the Lanham trademark act, became effective in January 1996. In light of a growing number of state trademark dilution statutes, Congress enacted the FTDA to bring national uniformity to dilution law and to allow famous trademark owners to seek protection for their marks consistently in every state.

Many state dilution statutes (Alabama, California, Delaware, Florida, Georgia, Louisiana, Maine, Massachusetts, Missouri, Montana, New Hampshire, New York, Oregon, Rhode Island, and Texas) apply a “likelihood of dilution” standard of proof, meaning that a plaintiff need only show to the satisfaction of the court that dilution of its famous mark will result from another party’s use of that mark.

Other state dilution statutes (Arkansas, Alaska, Arizona, Connecticut, Idaho, Illinois, Iowa, Kansas, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, Nebraska, Pennsylvania, South Carolina, Tennessee, Utah, Washington, West Virgina, Wyoming) require that a plaintiff prove that dilution of its famous mark has already been caused by the defendant’s actions. As used in the FTDA, the word “dilution” means the “lessening of the capacity” of a trademark or service mark to identify and distinguish the owner’s goods and/or services.

After the enactment of the FTDA, the federal courts took contrasting positions on how dilution might be proven. One federal court of appeals held that an FTDA claim could be based on a finding of a likelihood of dilution, while another required evidence of actual dilution by strictly construing the language of the Act. In 2003, however, the U.S. Supreme Court decided a case involving the FTDA entitled Moseley v. V Secret Catalogue, Inc.

The facts in the Moseley case were that Mr. and Mrs. Victor Moseley opened a store in Kentucky that sold adult novelties and movies, women’s lingerie and other related goods. They called their store ‘VICTOR’S SECRET.” After the companies that own the VICTORIA’S SECRET trademark complained, the Moseleys changed the name of their store to “VICTOR’S LITTLE SECRET.” Unsatisfied by this change, Victoria’s Secret sued the Moseleys, claiming a violation of the FTDA.

Victoria’s Secret won its dilution claim in the lower federal court. It won again when the Moseleys appealed the court’s decision. In its ruling on the appeal, the Sixth Circuit court of appeals expressly rejected the notion that proof of actual economic harm was required to prove dilution. The U.S. Supreme Court, however, ruled in favor of the Moseleys. The Supreme Court said that the FTDA “unambiguously requires a showing of actual dilution, rather than a likelihood of dilution.” It did so because it found that although many state dilution statutes and various provisions of the Lanham Act refer to a “likelihood” of harm, the FTDA provides that relief is available if another’s use of the plaintiff’s mark ‘”causes dilution to the distinctive quality’ of the famous mark.”

Since the Supreme Court’s decision in Moseley, a number of courts have addressed the requirement that in order to prevail on a dilution claim, the plaintiff must provide proof of actual dilution – that is, a lessening of the capacity of its mark to identify and distinguish its goods and services. To date, however, the decisions have provided little further guidance on the type or sufficiency of the evidence needed to prove dilution. The courts generally appear to be as uncertain as many practitioners about how to prove actual dilution.

Trademark owners should be aware that, for the time being at least, a different, lower standard of proof—“likelihood of dilution”—is applied by the U.S. Patent and Trademark Office (USPTO) when it decides whether a trademark should be registered. In a decision that it rendered after the Supreme Court issued its decision in the Moseley case, the Trademark Trial and Appeal Board (TTAB), an administrative court within the USPTO, ruled that a party opposing the registration of another party’s mark need only show that the other mark is likely to cause dilution of its own famous mark. In a decision involving the famous NASDAQ service mark, the TTAB examined the FTDA and reached the “inescapable conclusion” that Congress intended for the TTAB to hear cases involving “prospective dilution”. In that case, the TTAB refused registration of a nearly identical mark because it concluded that “likelihood of dilution” was present.