U.S. Supreme Court Requires Trademark Owners to Show Actual Dilution

Article by Robert Zelnick and Jennifer Mikulina

By a unanimous vote, the U.S. Supreme Court has now ruled that plaintiffs in trademark dilution lawsuits must prove their famous trademarks have actually been diluted, not just a likelihood of harm. Moseley v. V Secret Catalogue, Inc., Case No. 01-1015 (March 4, 2003).

In this case, the U.S. Supreme Court reversed the lower court decision and ruled in favor of the owners of Victor’s Little Secret, an Elizabethtown, Kentucky store selling adult videos, novelties and lingerie. Victoria’s Secret had filed suit against the store’s owners, alleging trademark infringement, unfair competition and trademark dilution in violation of the U.S. Federal Trademark Dilution Act (FTDA). Victoria’s Secret argued under the FTDA that the store’s name was likely to "blur and erode the distinctiveness" of its famous trademark VICTORIA’S SECRET, which is widely recognized from its U.S. stores, catalogs and advertising.

Dilution of a trademark under the FTDA occurs when the use of a mark lessens the capacity of a famous mark to identify and distinguish goods or services. In particular, the FTDA protects famous marks from third-party uses that blur, tarnish or disparage the distinctiveness of the famous mark.

The U.S. District Court granted summary judgment in favor of Victoria’s Secret on its trademark dilution claim, finding that the defendants’ use of the "Victor’s Little Secret" store name had a tarnishing effect on the VICTORIA’S SECRET trademark. The district court’s decision was affirmed by the Sixth Circuit. The defendants then appealed the decision to the Supreme Court. The defendants did not challenge Victoria’s Secret’s allegation of fame, and the Supreme Court agreed that the trademark VICTORIA’S SECRET is "unquestionably valuable."

Justice John Paul Stevens, writing for the Court, reversed the lower court and held that the FTDA required Victoria’s Secret to show "actual dilution," not mere likelihood of harm. In its interpretation of the statute, the Supreme Court reviewed state dilution statutes upon which the FTDA was modeled. The Supreme Court found that while many state statutes only require a "likelihood of harm," in its interpretation, the FTDA requires a completed harm. Particularly, the Supreme Court held that the FTDA provides relief to the owner of a famous mark where a third party’s use of the mark "causes dilution of the distinctive quality of the famous mark." According to the Supreme Court, "[T]his text unambiguously requires a showing of actual dilution, rather than a likelihood of dilution."

Reasoning that mental association "will not necessarily reduce the capacity of the famous mark to identify the goods of its owner," the Supreme Court also held that mere "mental association" in the mind of consumers between two marks does not constitute dilution. On the other hand, the Supreme Court indicated that is not necessary to prove the actual loss of sales or profits or provide survey evidence to show actual dilution, especially where actual dilution could be reliably proven through circumstantial evidence. Accordingly, the Supreme Court reversed and remanded for further proceedings, finding that there was insufficient evidence of record for the lower court to grant summary judgment to Victoria’s Secret on the dilution count.