Federal Trademark Dilution Act requires proof of actual harm

The US Supreme Court has issued its first decision concerning the Federal Trademark Dilution Act (FTDA), which took effect in the spring of 1996. The issue presented in Moseley v V Secret Catalogue Inc was "whether objective proof of actual injury to the economic value of a famous mark (as opposed to a presumption of harm arising from a subjective 'likelihood of dilution' standard) is a requisite for relief under the FTDA". In an opinion by Justice Stevens, which was endorsed by seven of the remaining eight justices, the court held that proof of actual injury is required.

The defendant, a small seller of adult-oriented merchandise, used the mark VICTOR'S LITTLE SECRET in connection with its retail business. The plaintiff, owner of the well-known VICTORIA'S SECRET brand, brought an action alleging, among other things, trademark dilution.

Although the Supreme Court held that actual harm and not merely likelihood of dilution is required, the court conspicuously avoided dictating what sort of evidence will be required to demonstrate actual harm. The court acknowledged that proof of actual harm may be difficult, but remarked that difficulties in proof cannot justify ignoring the statutorily mandated requirement of actual harm. It also acknowledged that circumstantial evidence of actual harm, such as the junior user's use of an identical mark, could be sufficient. Consumer survey evidence also might be persuasive.

The court made several other pronouncements not directly related to its holding that likely will influence lower court dilution decisions. For instance, the court suggested that, while the 'blurring' species of dilution unambiguously falls within the scope of the federal statute, the 'tarnishment' form may not. (One might argue, however, that this is merely an academic point, to the extent that all tarnishment by its nature also blurs.) The court also made it clear that actionable dilution does not occur simply because those encountering the junior user's mark are reminded of the senior user's mark, even if the mental association is negative. Rather, the focus is on whether, when the public sees the senior user's mark, the mark creates a different or less powerful impression.

Although Justice Kennedy concurred with the reversal of the Sixth Circuit's decision, he emphasized that actual harm might be shown by a demonstration of the probable consequences of the junior user's activities. The statute defines dilution as "the lessening of the capacity of a famous mark to identify and distinguish goods and services". Because a mark's 'capacity' is its potential to distinguish, actual harm might be demonstrated through a showing of harm to the potential of the mark. Justice Kennedy thus suggested that real harm "can be shown by the probable consequences flowing from use or adoption of the competing mark".

The Supreme Court has provided much-needed guidance to lower courts and brand owners. However, many issues remain unresolved and undeveloped and further judicial or legislative clarification will be required in order to develop a structure that is equitable and on which brand owners can rely.

For background discussion of this case, see US Supreme Court set to end circuit court split.

John Nishi, Wilson Sonsini Goodrich & Rosati, Palo Alto