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					COMMITTEE NO. 205              Jordan S. Weinstein, Chair

UNFAIR COMPETITION--TRADE IDENTITY

Scope of Committee: Problems of law and practice, both federal and state but not foreign, in all
areas of unfair competition other than trade secrets, interference with contracts, and related areas,
including:
(l)     conflicts between trademarks, trade names and corporate names;
(2)     dress of goods and other means of designating source or sponsorship;
(3)     product simulation law not involving patents, copyrights or trade secrets;
(4)     protection of characters, formats and titles of literary works and the like;
(5)     trade libel, disparagement and false advertising and comparative advertising; and
(6)     protection against commercial exploitation of an individual‘s identity; and
(7)     problems pertaining to interpretations of Sections 43(a) and 43(c) of the Lanham Act, 15
        U.S.C. §1125 (a), (c).

In coordination with the Committee on Cooperation with Other Bar Groups, this committee
cooperates with the National Conference of Commissioners on Uniform State Laws in trade
name, deceptive trade practices, and other trade identity areas.

SUBCOMMITTEE A Stephen W. Feingold, Subcommittee Chair

Subject 1. TRADE DRESS.

PROPOSED RESOLUTION 205-1.

RESOLVED, that the Section of Intellectual Property Law opposes in principle the rule set forth

in the decision Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000), that the design

of a product can never be inherently distinctive as a matter of law.


PROPOSED RESOLUTION 205-2.


RESOLVED, that the Section of Intellectual Property Law favors in principle the rule that the

design of a product may be inherently distinctive according to the combined Seabrook-Duraco

standard consisting of the following five elements: 1) the trade dress is unusual and memorable,

2) it is conceptually separable from the product, 3) it is likely to serve primarily as a designator

of origin of the product, 4) it is not a mere refinement of a commonly adopted and well-known

form of dress for a particular class of goods, and 5) it is capable of creating a commercial


NY1 5318534v2
impression distinct from any accompanying words on the trade dress. Seabrook Foods, Inc. v.

Bar-Well Foods, Ltd., 568 F.2d 1342 (C.C.P.A. 1977); Duraco Prods., Inc. v. Joy Plastic

Enters., Ltd., 40 F.3d 1431, 1449; 32 U.S.P.Q.2d 1724, 1738 (3d Cir. 1994).


Past Action.

430 (Passed 2001 AR553-R412-1)
Section favors, in principle, revision of the Lanham Act, 15 U. S. C. § § 1051 - 1127, to state that
there can be inherent distinctiveness of a non-functional product configuration when the general
requirements for inherent distinctiveness applied to trade dress are met.

430 (Passed by Council Conference Call 2/98; AR67-R201-3)
Section opposes in principle the passage of federal trademark legislation to codify a single and
authoritative definition of "inherent distinctiveness" (or "inherently distinctive") as applied to
trade dress.

430 (Recommitted 1992 AR174-R205-1)
Section favors, in principle, encouraging the protection of the trade dress of products and
services and discouraging unfair competition by providing the same protection for trade dress
under Section 43(a) of the Lanham Act as that accorded to unregistered trademarks and trade
names by recognizing that (1) trade dress which is arbitrary, fanciful, coined or suggestive is
protectable as inherently distinctive and (2) proof of secondary meaning is only required for the
protection of trade dress, trademarks and service marks which are descriptive.

425 (Rest as Committee Report 1990 CR107, SP79-R-205-2)
Section favors in principle the concept that inherently distinctive or arbitrary trade dress be
entitled to protection under Section 43(a) of the Lanham Act without the necessity of proving
secondary meaning.

        Discussion. In 2000, the Trade Dress Subcommittee was new. In 1998 and 1999, this
Subcommittee‘s predecessor, the Trade Dress/Patent Interplay Subcommittee, proposed
resolutions that the Section take a position on the issues of trade dress protection for those items
that are the subject of an expired utility patent. Those resolutions were not considered by the
Section for procedural reasons.

        In the 2000-2001 report, the Trade Dress Subcommittee focused on an issue previously
dealt with by its predecessor in its proposed resolutions, specifically, the availability of trade
dress protection for a product configuration that is the subject of an expired utility patent. Last
year, the Subcommittee decided to review the cases decided in each federal circuit and by the
Trademark Trial and Appeal Board to determine whether Wal-Mart v. Samara Bros. and TrafFix
Devices Inc. v. Marketing Displays Inc., 532 U.S. 23, 121 S.Ct. 1255 (2001) have had a
significant impact.




                                                 2
        This year our Subcommittee concluded, building on the work of our predecessors, that
Walmart was too limiting, and has produced the following report in support of our proposed
resolution.

      Acknowledgment: The contributions of Bridget A. Cooney, Steven Hartman, D. Peter
Harvey, Nishan Kottahachchi, Jennifer Van Kirk, Jack A. Wheat, and Jeff Wilson are
acknowledged.

       Introduction by Stephen W. Feingold and Bridget A. Cooney

        Section 43(a) of the Lanham Act provides trademark protection for any ―word, term,
name, symbol, or device or any combination thereof‖ that is ―likely to cause confusion.‖ In Two
Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992), the U.S. Supreme Court held that
inherently distinctive trade dress was protectable without proof of secondary meaning. The trade
dress at issue in Two Pesos was the look of a Mexican restaurant described as a particular layout
and festive color scheme.
        Unfortunately, Two Pesos did little to define when trade dress was inherently distinctive.
As a result, trade dress claims proliferated. For instance, in Duraco Prods., Inc. v. Joy Plastic
Enters., Ltd., 40 F.3d 1431 (3d Cir. 1999), the plaintiff sought protection of a plastic container
designed to look like a Grecian urn. In Mana Prods., Inc. v. Colombia Cosmetics Mfg., Inc., 65
F.3d 1063 (2d Cir. 1995), the plaintiff sought protection of a black compact make-up case.
These and other cases compelled the lower courts to develop different standards for typical trade
dress claims involving packaging or the like as opposed to product configuration cases where the
claimed trade dress was the actual shape of the product.
        Much of the difficulty with protecting trade dress traces back to applying the analysis in
Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F2d 4 (2nd Cir. 1976537 F2d 4) dividing
trademarks into the well-known four categories of arbitrary, suggestive, descriptive, and generic
marks. When is trade dress arbitrary or descriptive? Another equally troubling issue is how one
integrates the concept of functionality with the Abercrombie analysis.
        The floodgate of claims filed in light of Two Pesos no doubt prompted the Supreme
Court to accept certiorari in Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000).
In that case, the claimed trade dress was the graphic designs appearing on certain articles of
clothing. The jury found both copyright and trade dress infringement. The trade dress
infringement was based on a finding that the designs on the clothing were inherently distinctive.
        The Supreme Court unanimously held that product configuration trade dress is never
protectable absent secondary meaning. As Justice Scalia explained: ―Consumers are aware of
the reality that, almost invariably, even the most unusual product designs – such as a penguin – is
intended not to identify the source, but render the product itself more useful or more appealing.‖
529 U.S. at 212-213.
        The Wal-Mart court avoided overruling Two Pesos by stating that restaurant décor is
―some tertium quid that is akin to product packaging.‖ 505 U.S. at 215.
        Moreover, the treatment of restaurant décor was contradictory to the Court‘s own holding
that in close cases a court should assume the trade dress at issue is a product configuration that
requires secondary meaning.




                                                3
         Wal-Mart has been the target of much criticism. See, e.g., G. Mitchell, S. Wadyka, H.
Jacob, and M. Case, U.S. Trade Dress Law at 71-78. This subcommittee agrees that the Wal-
Mart decision unduly limits trademark rights.
         At the same time we concur with the underlying assumption of Wal-Mart, namely that
Two Pesos opened the gates of trade dress protection too wide and required some limitation.
         As a result of this consensus, the Subcommittee decided to refrain from producing a
report consisting of a review of the most recent cases in this arena. Instead, we have engaged in
an analysis of various tests that would avoid the vagueness of Two Pesos, but still provide a more
rational rule than Wal-Mart that will not virtually eliminate trademark protection for product
configuration.
         Our hope is that this discussion and analysis, as well as our proposed resolution, will help
clarify this complex area of law and encourage others in this effort to overturn Wal-Mart.
         The first section of this report, prepared by D. Peter Harvey and Nishan Kottahachchi of
Harvey Siskind Jacobs LLP, sets forth the Duraco and Seabrook tests developed by the Third
Circuit and the former Court of Customs and Patent Appeals. Jack Wheat of Stites & Harbison
has summarized some of the district court cases applying these tests, which we believe show that
these standards work and need not have been abolished. Finally, Jennifer A. Van Kirk of Lewis
and Roca LLP briefly analyzes recent developments in the E.U. with respect to design patents.
We do not believe that the E.U. design law--which is tied to innovation—is an appropriate basis
for trade dress protection, though we fully support innovation as an extension of existing patent
law.

       The Seabrook/Duraco Standard by D. Peter Harvey and Nishan Kottahachchi

        As noted above, there is ample confusion in the state of the law with respect to trade
dress. Although Judge Posner‘s ―I know it when I see it‖ test [Publications Int’l, Ltd. v. Landoll,
Inc., 164 F.3d 337, 339 (7th Cir. 1998)] has some appeal in its own right, we have concluded that
the Duraco and Seabrook tests for inherent distinctiveness provide two good alternatives to the
Chevron/Abercrombie ―spectrum of distinctiveness‖ test. In suggesting alternatives that would
avoid the vagueness of Two Pesos and at the same time not virtually eliminate trademark
protection, a la Wal-Mart, for product configuration, we therefore recommend a test combining
these standards set forth in these two cases.

        We discuss Duraco and Seabrook briefly below and summarize their tests before
proposing a third ―combination‖ formulation. A discussion of how Duraco and Seabrook have
been applied at the district and circuit court levels in the First, Fourth, Seventh, and Eleventh
Circuits has also been included. Finally, we mention and reject the Fifth Circuit‘s formulation of
the ―spectrum of distinctiveness‖ evaluation in Chevron.

           Duraco Prods., Inc. v. Joy Plastic Enters., Ltd., 40 F.3d 1431, 1449; 32
   U.S.P.Q.2d 1724, 1738 (3d Cir. 1994).

       In a detailed discussion, the Duraco court concluded, ―the trademark taxonomy [generic,
suggestive, descriptive, arbitrary, fanciful], carefully and precisely crafted through a long




                                                 4
succession of cases to accommodate the particularities of trademarks, does not fit the quite
different considerations applicable to product configurations.‖1
        In Duraco, the Third Circuit articulated a three-part test. Product configuration should be
deemed inherently distinctive, the Court stated, if it 1) is unusual and memorable, 2 2) is
conceptually separable from the product, and 3) is likely to serve primarily as a designator of
origin of the product. The court stated that a particular configuration is unusual if it ―partake[s]
of unique, individualized appearance so that a consumer informed of all the options available in
the market could reasonable rely on it to identify a source.‖3 It is memorable if it is ―striking or
unusual in appearance, or prominently displayed on the product packaging, or otherwise
somehow apt to be impressed upon the minds of consumers, so that it is likely to be actually and
distinctly remembered . . . .‖4 To be conceptually separable, the product configuration must
―appear to the consumer to act as an independent signifier of origin rather than as a component
of the good.‖5 Finally, a product configuration serves primarily as a designator of origin of the
product if ―it set[s] it[self] apart from other sources‘ products in consumers‘ minds . . . .‖
        In Duraco, the court held that the product configuration at issue, Grecian planters, was
not inherently distinctive and did not possess secondary meaning. Although the Duraco test was
created with product configuration in mind, we believe it is equally applicable to product
packaging.

       Application of Duraco Standard by Jack Wheat

         Although the Third Circuit‘s Duraco case has often been cited, there appears to be little
case law from the courts within that circuit discussing the inherent distinctiveness test set forth
therein. See, e.g., Tyco Indus., Inc. v. Tiny Love, Ltd., 914 F. Supp. 1068, 1082 (D.N.J. 1996)
(Duraco cited, without discussion, in support of a holding that a children‘s blanket with
decorative features ―is deficient with respect to . . . stringent tests for inherent distinctiveness‖).
         A bankruptcy court within the Third Circuit discussed the Duraco factors in some detail
in In Re Polk’s Model Craft Hobbies, Inc., 40 U.S.P.Q.2d 1711 (Bankr. D.N.J. 1995). In Polk’s,
the bankruptcy debtor requested a judicial estimation of its potential trade dress infringement
liability. The product configuration there in issue involved large-scale model railroad track
systems. Applying each of the Duraco inherent distinctiveness factors, the court found the
adverse party did not have a viable trade dress claim against the bankruptcy debtor because the
product was not ―unusual and memorable,‖ rather was similar in appearance to various large-
gauge model railroad train systems; the appearance was not ―conceptually separable from the
product,‖ but rather appeared as it did because it was intended to replicate the appearance of
authentic train tracks, and for the same reason, failed to ―primarily serve as a designator of the
source of the product.‖ Polk’s, 40 U.S.P.Q.2d at 1725-26.


1
  Duraco, 40 F.3d at 1441.
2
  See also Permatex Co. v. California Tube Prods., Inc., 175 U.S.P.Q. 764 (T.T.A.B. 1972) (holding a
design is inherently distinctive if it is “not commonplace, but is unique or unusual in a particular
field of endeavor”).
3
  Duraco, 40 F.3d at 1449.
4
  Id.
5
  Id. at 1450.



                                                  5
        Prior to the Supreme Court‘s pronouncement in Wal-Mart that product configurations
cannot be deemed to be inherently distinctive as a matter of law, Duraco had begun to spawn
progeny in courts outside the Third Circuit. See, e.g., Libbey Glass, Inc. v. Oneida Ltd., 61 F.
Supp. 2d 700 (N.D. Ohio 1999); and Sassafras Enter., Inc. v. Roscho, Inc., 915 F. Supp. 1 (N.D.
Ill. 1996). In Libbey, the Plaintiff asserted trade dress claims relating to configurations of
beverage glassware. As directed by the Supreme Court in Two Pesos, Inc. v. Taco Cabana, Inc.,
505 U.S. 763 (1992), the court in Libbey correctly noted that it need not find that the dress had
obtained secondary meaning if the dress were inherently distinctive.
        The court proceeded to engage in a fairly instructive survey of the then-emerging case
law relating to when a trade dress is inherently distinctive. Commencing its analysis with
reference to the well-known Abercrombie ―generic, descriptive, suggestive, arbitrary or fanciful‖
spectrum of distinctiveness, it acknowledged the difficulty of applying that test to product
configurations, specifically noting that ―the Second Circuit, which had delineated the
Abercrombie categories, for product configuration cases, created a test which ‗simply ask[s]
whether the design [is] likely to be understood as an indicator of the product‘s source.‘‖ Libbey,
61 F. Supp.2d at 705 quoting Landscape Forms, Inc. v. Columbia Cascade Co., 113 F.3d 373,
378 (2d Cir. 1997).
        The plaintiff in Libbey advocated application of the Abercrombie spectrum of
distinctiveness analysis arguing that the glassware in question ―incorporated ornamental
features‖ which Libbey argued, rendered the trade dress ―arbitrary or fanciful.‖ Libbey, 61 F.
Supp. 2d at 706. Notwithstanding, the court opined, ―I disagree with Libbey‘s fundamental
premise that the Abercrombie categories apply in a product configuration case. Rather, I agree
with the view of the First, Second, and Third Circuits that, at a minimum, a protectable product
configuration must be likely to serve primarily as a designator of origin.‖ Citing I.P. Lund
Trading v. Kohler Co., 163 F.3d 27 (1st Cir. 1998); Landscape Forms, supra; Duraco, supra.
        The Northern District of Illinois found the Duraco test ―illuminating‖ in Sassafras Enter,
Inc. v. Roshco, Inc., 915 F. Supp. 1, 6 (N.D. Ill. 1996). In Sassafras, the plaintiff claimed trade
dress protection in ―a home pizza making set comprising a pizza stone, a wooden-handled pizza
cutter, a metal rack for the pizza stone and a recipe, use and care booklet.‖ Sassafras, 915 F.
Supp. at 4. Paraphrasing the Duraco test, the court in Sassafras described the test as simply
focusing on ―whether the design, shape or combination of elements is so unique, unusual or
unexpected in this market that one can assume without proof that it will automatically be
perceived by customers as an indicia of origin – a trade mark.‖ Sassafras, 915 F. Supp. at 10.
Applying that test, the court held that the trade dress consisting of ―nothing out of the ordinary
about the shape or color‖ and containing a ―general pattern [that] appears to be common in the
industry‖ is not inherently distinctive, as a matter of law.

       Remaining Section of Report by D. Peter Harvey and Nishan Kottahachchi

               Seabrook Foods, Inc. v. Bar-Well Foods, Ltd., 568 F.2d 1342, 1344 (C.C.P.A.
   1977).

        In Seabrook, the United States Court of Customs and Patent Appeals created a test that
has been widely cited as an alternate test to Chevron/Abercrombie. The Seabrook test asks
―whether [a design] [is] a ‗common‘ basic shape or design, whether it [is] unique or unusual in a
particular field, whether it [is] a mere refinement of a commonly-adopted and well-known form
of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation


                                                6
for the goods, or whether it [is] capable of creating a commercial impression distinct from the
accompanying words [on the packaging].‖
        Congress attempted to codify this test in 1998, stating, ―[t]his bill is intended to clarify
the law with respect to the applicable legal standards for the protection of trade dress, which
includes product designs and packaging.‖ Introductory Remarks on Measure CR E117. See H.R.
3163, §2(g).6
        The Seabrook court held that the design in question (an oval design for frozen vegetables
packaging) was not inherently distinctive and did not possess secondary meaning, so a
substantive likelihood of confusion analysis applying the elements of the test was not done.
        Courts across the country, including those in the First, Fourth, Seventh, and Eleventh
Circuits, have endorsed and applied Seabrook as the proper test for inherent distinctiveness.
Typical is the 1999 Sangiacomo opinion in the Fourth Circuit:

                       [D]ifficulties in applying Abercrombie to product configuration
               can often be mitigated by considering the principles stated in Seabrook . . .
               In essence, Seabrook clarifies when a trade dress should be considered
               arbitrary or fanciful, on the one hand, or generic, on the other. This
               elaboration of Abercrombie is particularly useful in product configuration
               cases because the nonverbal character of the product features at issue in
               such cases makes them less likely to turn--as word mark cases frequently
               do--on whether the alleged trade dress is descriptive . . . we think it likely
               that, by and large, the crucial question in product configuration cases will
               be the question that Seabrook helps answer: whether an alleged trade dress
               can be considered arbitrary or fanciful or whether it must be ruled
               generic.7

         The district court in the same case found that ―[t]he columns, arches, and entablatures
used by Ashley [in its bedroom suites] are clearly common basic shape[s] and [are] hardly
unique in the furniture industry. Such commonplace shapes carry no distinctive message of
origin, and could not carry such a message (absent secondary meaning) given their widespread
use as ‗commonly-adopted . . . form[s] of ornamentation‘ in the furniture industry.‖ 8 Although
the Fourth Circuit subsequently reversed this decision, its application of the Seabrook factors is
still informative.
         The First Circuit is in accord. In the 1998 Lund case, the court stated:

                      In analyzing inherent distinctiveness in the context of product
               design, we hold that while the well-known Abercrombie test provides a
               useful analogy, strict application of the test is not required; we reiterate



6
  The bill never reached a vote.
7
  Ashley Furniture Inds., Inc. v. Sangiacomo N. A. Ltd., 187 F.3d 363, 371 (4th Cir. 1999)(evaluating
bedroom suites’ trade dress).
8
  Ashley Furniture Inds., Inc. v. Sangiacomo N. A. Ltd., 11 F. Supp. 2d 773, 782 (M.D.N.C. 1998),
rev’d, Ashley Furniture Inds., Inc. v. Sangiacomo N. A. Ltd., 187 F.3d 363 (4th Cir. 1999).



                                                  7
               this court's adherence to the Seabrook Foods test9. . . We also agree with
               one commentator's analysis that "in reality, all three [Seabrook Foods]
               questions are merely different ways to ask whether the design, shape or
               combination of elements is so unique, unusual or unexpected in this
               market that one can assume without proof that it will automatically be
               perceived by customers as an indicator of origin--a trademark. . .10

         District courts in the First Circuit have also followed Seabrook. In determining the
inherent distinctiveness of a ―dial indicator set,‖ the District of Rhode Island applied the
Seabrook factors and stated that ―Central Tools' trade dress is incapable of conveying an
immediate knowledge of its origin to the viewer; rather, it is a refinement of a common type of
packaging . . . each element of Central Tools' trade dress is unremarkable. Dial indicators find
uses in many industries . . . and thus cannot point to Central Tools as the manufacturer of origin.
Therefore, the Court does not find Central Tools' trade dress to be inherently distinctive.‖11
         In the Seventh Circuit, Seabrook is one of the tests used to evaluate inherent
distinctiveness.12 ―There are two legal tests for determining inherent distinctiveness: the Second
Circuit's test as enunciated in Seabrook . . . and the Fifth Circuit's alternate test announced in
Chevron . . . the Seventh Circuit has not adopted either test, prompting some courts in this
district to apply both.‖13
         One district court in Illinois carefully applied the Seabrook factors and then conducted a
brief Chevron analysis to arrive at the conclusion that certain waterslide product packaging trade
dress was not inherently distinctive.14 The court first determined that the waterslide belonged to a
broader children‘s outdoor water products category rather than a narrower waterslides products
category because the product did not command its own shelf space and was grouped with other
seasonal outdoor water products. The court then analyzed the elements of the trade dress in
comparison to other products in its class to determine if they constituted a unique or unusual
design within the field, by comparing the type of packaging the product came in, the manner in
which product marks were displayed on the packaging, the lettering and color combinations of
the marks, and the image of a boy on the cover of a package showing how to use the slide. None
of these elements was deemed distinctive or unusual in the field; therefore, the trade dress was
held not inherently distinctive.
         Another Illinois district court applied both Chevron and Seabrook in determining the
distinctiveness of product packaging for cookies.15 Applying a similar Seabrook analysis to that
articulated in the Empire case, the court found that the trade dress was not inherently distinctive.
The court found that the products were in the same class of goods because the cookies were
found in the same supermarket aisle among other cookies and crackers. The court noted at the

9
  I.P. Lund Trading Aps. v. Kohler Co., 163 F.3d 27, 33 (1st Cir. 1998)(evaluating water faucet trade
dress).
10
   Id. at 40 (citing 1 McCarthy § 8:13).
11
   Central Tools v. Products Eng'g Corp., 936 F. Supp. 58, 67 (D.R.I. 1996).
12
   Nelson/Weather-Rite, Inc. v. Leatherman Tool Group, 1995 U.S. Dist. LEXIS 16575, *22 (N.D.
Ill. 1995)(evaluating compact multi-purpose tool trade dress).
13
   Id. at *22-23.
14
   Empire Indus. v. Tony (U.S.A.), Inc., 1998 U.S. Dist. LEXIS 10904, *18-26 (N.D. Ill. 1998).
15
   Keebler Co. v. Nabisco Brands, Inc., 1992 U.S. Dist. LEXIS 6826, *40-47 (N.D. Ill. 1992).



                                                  8
outset that ―although the exact combination of elements it contains is undoubtedly unique, the
overall visual impression of the package is neither unique nor unusual in the field of goods with
which it competes.‖ The court also found that the rectangular packaging had been in existence
for a long time and was used by a large number of different manufacturers for different cookie
products, that the color combination of yellow or yellow orange, or golden yellow with white or
brown lettering, was no more than a refinement of common elements found in packaging of
many different types of cookies, and that a substantial number of manufacturers had their
trademarks stacked rather than stretched out along the lengths of the packaging in a similar
fashion to the trade dress at issue.
        Courts in the Eleventh Circuit have also approved of the Seabrook test.16 In determining
that the trade dress of certain bistro tables was not inherently distinctive, the Northern District of
Georgia found that ―[a]lthough Meadowcraft may have manufactured the first wrought iron
bistro table that was sold in the mass retail market, the design it brought into the market was an
emulation of the ‗traditional‘ style of furniture that existed in other markets previously. The
bistro table that Meadowcraft introduced was merely a refinement of this commonly adopted
style. When looking at the design of the table as a whole, this court finds that the design is not
unique as to all of the other bistro tables that manufacturers had previously designed and is not
unique in a way that consumers would identify with the source of the goods.‖17
        Another district court in the Eleventh Circuit, citing Seabrook, held that the trade dress of
Stolichnaya Cristall Vodka created an overall impression that was inherently distinctive. The
court reached this conclusion because unlike the intricately shaped bottles of competing vodkas,
the Stolichnaya Cristall employed a conventionally shaped, clear glass wine bottle with a black
plastic neck wrapping and a narrow black label including decorative touches such as prominent
white and gold lettering, gold scrollwork around the product's name, and small red lettering
below the name that touted the product's characteristics.18 The district court stated that although
use of some of these individual components in the marketing of alcoholic beverages was
commonplace, the overall impression these elements created was a unique and distinctive
addition to the vodka market.
        The TTAB has also endorsed Seabrook, stating that its ―primary reviewing court [uses
Seabrook] . . . in determining whether a design is inherently distinctive.‖19 Finally, INTA‘s
Supreme Court amicus brief in Wal-Mart argued in favor of Seabrook as an alternate test to
Abercrombie and cited wide support in the courts. Several of the cases cited in the INTA brief
are discussed above.20


16
   Brooks Shoe Mfg. Co. v. Suave Shoe Corp., 716 F.2d 854, 857-858 (11th Cir. 1983)(evaluating
shoes with a “V” design on the sides).
17
   Meadowcraft Inc. v. Compex Int'l Co., 1998 U.S. Dist. LEXIS 14396, *22 (N.D. Ga. 1998).
18
   Carillon Importers v. Frank Pesce Group, 913 F. Supp. 1559, 1563-64 (S.D. Fla. 1996).
19
   In re Pacer Technology, 2002 TTAB LEXIS 358, *3-4 (evaluating epoxy glue trade dress).
However, [t]his disposition is not citable as precedent of the TTAB”.
20 Brief of Amicus Curiae - INTA - In Support of Neither Party in Walmart, Inc. v. Samara Bros., Inc., at 19 (n.23)
available at http://www.inta.org/downloads/brief_WalMartSamara.pdf . “To the extent that a consensus exists on the
proper test for inherent distinctiveness, the Seabrook framework has already met with widespread acceptance in the
product appearance context and constitutes the apparent majority rule. See, e.g., I.P. Lund Trading ApS v. Kohler Co.,
163 F.3d 27, 33 (1st Cir. 1998); Brooks Shoe Mfg. Co. v. Suave Shoe Corp., 716 F.2d 854, 857-58 (11th Cir. 1983); see
also Swisher Mower & Mach. Co. v. Haban Mfg., Inc., 931 F. Supp. 645, 649-50 (W.D. Mo. 1996); Krueger Int'l, Inc. v.



                                                           9
                 A Seabrook-Duraco Synthesis Test

        A third test combining elements of Seabrook and Duraco could also be used. In this test,
a trade dress would be deemed inherently distinctive if it is 1) unusual and memorable, 2)
conceptually separable from the product, 3) likely to serve primarily as a designator of origin of
the product, 4) not a mere refinement of a commonly adopted and well-known form of dress for
a particular class of goods, and 5) capable of creating a commercial impression distinct from any
accompanying words on the trade dress.
        The additional elements would serve to make it exceedingly difficult for a court to make
a finding of inherent distinctiveness for a particular trade dress. Given the Supreme Court‘s
holding in Wal-Mart, where product configuration, like product color in Qualitex, is deemed
never to be inherently distinctive, a stringent test would seem to be appropriate.

             Chevron Chem. Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695 (5th Cir.
    1981), cert denied, 547 U.S. 1126 (1982) (citing Abercrombie & Fitch Co. v. Hunting World,
    Inc., 537 F.2d 4, 9 (2d Cir. 1976).

       Another possible test is that recited by the Fifth Circuit in this case. The court concluded
that whether trade dress was inherently distinctive should be analyzed according to the
―spectrum of distinctiveness‖: fanciful, arbitrary, suggestive, descriptive, and generic. As
described above, we do not believe the traditional spectrum of distinctiveness for trademarks is
appropriate or practical in the trade dress context and should therefore be abandoned in favor of
Duraco, Seabrook, or a combination of the two.

         The European Design Innovation by Jennifer A. Van Kirk

        On April 1, 2003 the European Union will launch a new intellectual property right called
the Community Design. This right is similar to Industrial Designs traditionally protected by
national laws. A Community Design can include the appearance of the whole or a part of a
product, its trade dress, graphic symbols or typefaces. Thus it includes materials such as three-
dimensional trade dress that were difficult, if not impossible, to register as a Community Trade
Mark.
        The requirements for a Community Design are these: (1) the design must be new, and (2)
the design must have ―individual character‖ in that it must create a different overall impression
than any other design previously disclosed to the public. Importantly, this standard differs from
U.S. trademark law, which often requires a showing of distinctiveness in the form of consumer
recognition of the design. As in U.S. trademark law, designs that are solely dictated by technical
function are not protectable as Community Designs.



Nightingale Inc., 915 F. Supp. 595, 603 (S.D.N.Y. 1996); Ergotron, Inc. v. Hergo Ergonomic Support Sys., Inc., No. 94
CIV 2732, 1996 U.S. Dist. LEXIS 3822, at *14-15 (S.D.N.Y. March 29, 1996); National Presto Indus. v. Hamilton
Beach, Inc., 18 U.S.P.Q.2d 1993, 1999 (N.D. Ill. 1990); Bloomfield Indus. v. Stewart Sandwiches, Inc., 716 F. Supp. 380,
385 (N.D. Ind. 1989). Indeed, even courts that have continued to apply Abercrombie to product appearance have
recognized the value of reliance on Seabrook as well. See, e.g., Ashley Furniture Indus. v. Sangiacomo
N.A., 187 F.3d 363, 370-71 (4th Cir. 1999).”



                                                          10
        The most significant limitation on the Community Design is that the design must not
have been first disclosed more than twelve months before the application is filed. In addition,
the design must not have been made before March 6, 2002.
        The Community Design scheme gives a broader scope of protection than does U.S.
trademark law. One need not show confusion or copying for infringement. Instead, to prove
infringement, one need only show that the design is identical to or creates the same overall
impression as the registered design. In this way, the protection granted is a monopoly. The
protection has a limited duration, however, of a maximum of 25 years.
        Another new right is the Unregistered Community Design. The Unregistered Community
Design is similar to a copyright: it exists automatically once the design is publicly disclosed and
lasts for a period of three years. Like the Registered Community Design, the unregistered right
requires novelty and uniqueness (―individual character‖). It protects only against copying of the
design by a third party, but not independent creation.
Because both of these rights are premised on either innovation or origination we do not believe
they are appropriate for determining when a patent configuration serves as a designation of
origin.

SUBCOMMITTEE B Michael Dunne, Subcommittee Chair
Subject 2.     INTERNET/DOMAIN REGISTRATION.
NO PROPOSED RESOLUTIONS
Past Action. None.
Discussion. The subcommittee has reported on various issues concerning trademarks and the
Internet involving a review of legislative and administrative developments. The subcommittee
will continue to report on recent developments concerning the Internet, especially as to new
developments in domain name registration, dispute resolution, privacy issues, and the anticipated
introduction of new top-level domains (―TLDs‖).

I. The Creation of New Top-Level Domain Names by ICANN, by Russell Smith, Esq.

        In July of 2002, the Internet Corporation for Assigned Names and Numbers (―ICANN‖)
released the ―Final Report of the New TLD Evaluation Process Planning Task Force‖ (the
―NTEPPTF Report‖), which addressed issues such as the effect that new generic top level
domains (―TLDs‖) may have on the scope and competitiveness of the domain name market.21
ICANN is the technical coordination body for the Internet, which was created in October of 1998
by a broad coalition of the Internet‘s business, technical, academic and user communities.22
ICANN coordinates the assignment of domain names, IP address numbers, and other identifiers
to ensure that the Internet properly functions.23 Although the NTEPPTF Report did not
specifically state that new TLDs would be introduced, Stuart Lynn, President and CEO of


21
   Three New Top Level Domains, Demys (November 1, 2002).
22
   ICANN.org
23
   ICANN.org



                                                11
ICANN, in public statements alluded to the fact that ICANN may introduce three new TLDs. 24
These new TLDs would be in addition to the seven TLDs (.info, .museum, .biz, .pro, .name,
.aero, and .coop) introduced in 2000 and implemented in 2001.
        In early November, the speculation surrounding the new TLDs was confirmed when
Stuart Lynn published A Plan for Action Regarding New gTLDS (the ―Lynn Report‖), which
proposed preparations for an expansion of the domain name system.25 The Lynn Report was in
response to the NTEPPTF Report, the request of the Board of Directors of ICANN, and critics
who claim that the current TLDs, specifically .org and .com, are overcrowded. 26 The new
domain names are expected to make it easier for web users to narrow down searches for
information.27 However, the Lynn Report did not specify which new TLDs would be added to
the domain name system.28
        The proposal for new TLDs specified in the Lynn Report provided the board of ICANN
with the option to solicit three more TLDs, subject to certain conditions, following a short
bidding process for sponsorship of the TLDs.29 A sponsor of a TLD is an organization, which is
delegated some defined ongoing policy-formulation authority regarding the manner in which a
particular sponsored TLD is operated.30 Not all TLDs are sponsored, for example, .biz, .info.
name, and .pro are unsponsored and .aero, .coop, and .museum are sponsored.31 The Lynn
Report suggests that the TLDs be sponsored TLDs because sponsored TLDs can be more
efficiently launched as a result of the fewer business concerns associated with sponsored TLDs.
In connection with the new TLDs, previous applicants for sponsored TLDs will have a chance to
update their materials and new applications for sponsorship will be accepted.32
        On Sunday, December 15, 2002, the board of ICANN unanimously approved a proposal
to add ―a limited number‖ of sponsored TLDs to the seven new domains selected as a ―proof of
concept‖ two years ago.33 The program developed in 2000 and implemented in 2001 was to
serve as a ―proof of concept‖ for the ways in which the domain name system might evolve in the
longer term, i.e. a system which will allow the evaluation of possible additions and
enhancements to the domain name system and possible methods of implementing the new
TLDs.34 The initial target of three sponsored TLDs has been abandoned because of the

24
   Three New Top Level Domains, Demys (November 1, 2002).
25
   Evan Hansen, ICANN may expand into new domains, eBusiness (November 12, 2002). Stuart
Lynn, A Plan for Action Regarding New gTLDs (October 18, 2002).
26
   Lisa Kelly, New domain names on way, Webuser (December 24, 2002). Stuart Lynn, A Plan
for Action Regarding New gTLDs (October 18, 2002).
27
    Id.
28
   Evan Hansen, ICANN may expand into new domains, eBusiness (November 12, 2002). Stuart
Lynn, A Plan for Action Regarding New gTLDs (October 18, 2002).
29
    Id.
30
   ICANN.org
31
    Id.
32
   Evan Hansen, ICANN may expand into new domains, eBusiness (November 12, 2002).
33
   Joris Evers, ICANN makes plans for new domains – New top-level domain names will be
available, but many of the details are still to be determined, PC World New Zealand (December
17, 2002).
34
   Stuart Lynn, A Plan for Action Regarding New gTLDs (October 18, 2002).



                                              12
numerous demands made at ICANN‘s annual meeting.35 According to Stuart Lynn, the initial
number of three served only to indicate that a limited number of new TLDs would be approved
and implemented.36 During the 2000 process, ICANN only approved seven of the 191 proposed
names (ICANN only received 44 complete proposals).37
        The possible new domains include .health, .travel, and .mobile.38 These new domains
have been proposed and espoused by such interested parties as the World Health Organization,
the International Air Transport Association, and Nokia, respectively.39 In order to establish a
system to evaluate new domain name proposals, Stuart Lynn will draft a document that will
specify the qualities and the factors that ICANN should consider when evaluating applications
from organizations that want to sponsor and run a TLD.40
        The decision to add new TLDs has not been met with unanimous support.41 Opponents,
mostly large corporations, have opposed adding new TLDs because of concerns that the result
will be more intellectual property cases over domain names.42 They have argued there is no need
to add TLDs now that the domain name registrations boom of 2000 has ended.43 The call for
new domains has now waned as thousands of names have returned unrenewed to the pool of
available domains.44 Furthermore, the opponents to the proposal want ICANN to complete the
evaluation of the seven TLDs approved in 2000 and implemented in 2001 before adding any
more domain names.45
        The timetable for the completion of the criteria document by Stuart Lynn, as well as the
approval and implementation of the new TLDs, have not been announced by ICANN.46
However, Stuart Lynn has indicated that it is ―very high on the priority list.‖47 To further
complicate matters, ICANN has approved a plan to overhaul its organizational framework as
well as the manner in which ICANN will take action in the future.48 The implementation of this
re-organization plan will require a great amount of time and effort on the part of the employees

35
   Joris Evers, ICANN makes plans for new domains – New top-level domain names will be
available, but many of the details are still to be determined, PC World New Zealand (December
17, 2002).
36
    Id.
37
    Id.
38
   Lisa Kelly, New domain names on way, Webuser (December 24, 2002).
39
   Joris Evers, ICANN makes plans for new domains – New top-level domain names will be
available, but many of the details are still to be determined, PC World New Zealand (December
17, 2002).
40
    Id.
41
    Id.
42
    Id.
43
   Evan Hansen, ICANN may expand into new domains, eBusiness (November 12, 2002).
44
    Id.
45
   Joris Evers, ICANN makes plans for new domains – New top-level domain names will be
available, but many of the details are still to be determined, PC World New Zealand (December
17, 2002).
46
    Id.
47
    Id.
48
    Id.



                                              13
and officers of ICANN.49 Additionally, Stuart Lynn is leaving ICANN in March of 2003 and a
successor has yet to be found.50
        As detailed above, the process of determining the new TLDs, finding sponsors, and
implementing the new TLDs will be difficult. Even though the evaluation process of the seven
TLDs has not been completed by ICANN, the experience of the launch of the last seven TLDs
has shown that the new TLDs will prove to be controversial.51 ICANN‘s final decision will
undoubtedly be marked by increased criticism of ICANN.52 Arbitration panelists will also most
assuredly be kept busy as speculators, cybersquatters and business users fight for influence and
control over the TLDs.53
                                           Sources

Evan Hansen, ICANN may expand into new domains, eBusiness (November 12, 2002).

Joris Evers, ICANN makes plans for new domains – New top-level domain names will be
available, but many of the details are still to be determined, PC World New Zealand (December
17, 2002).

Lisa Kelly, New domain names on way, Webuser (December 24, 2002)

Three New Top Level Domains, Demys (November 1, 2002).

ICANN.org


II: 2002 Federal Legislation Concerning Domain Names, by Joshua Tropper, Esq., Gambrell &
Stolz, L.L.P.

        On December 4, 2002, the President signed The Dot Kids Implementation and Efficiency
Act of 2002, (P.L. 107-449), authorizing the Commerce Department's National
Telecommunications and Information Administration (NTIA) to launch a new second-level
Internet domain, within the United States country code domain, to be a haven for material that
promotes positive experiences for children and families using the Internet, provides a safe online
environment for children, and helps to prevent children from being exposed to harmful material
on the Internet.

      This legislation had originally been introduced in 2001 as authorization for the Internet
Corporation for Assigned Names and Numbers (ICANN) to create a "kids-friendly" top-level
domain, but ICANN was not cooperative.


49
   Id.
50
   Id.
51
   Three New Top Level Domains, Demys (November 1, 2002).
52
   Id.. In the past, ICANN has been criticized for the usefulness of such restricted TLDs such as
.coop and .aero because they are too specific and need to be more generic.
53
   Id..



                                               14
        The law amends The National Telecommunications and Information Administration
Organization Act (47 U.S.C. §§ 901 et seq.) to require the registrar responsible for maintenance
of the .us TLD to ―establish, operate, and maintain a second-level domain within the United
States country code domain that provides access only to material that is suitable for minors and
not harmful to minors.‖ To accomplish this, the registrar is required to establish:

                           Rules and procedures for enforcement and oversight that
                  minimize the possibility that the new domain provides access to
                  content that is not in accordance with the standards and requirements
                  of the registry;
                           A process for removing from the new domain any content
                  that is not in accordance with the standards and requirements of the
                  registry; and
                           A process to provide registrants to the new domain with an
                  opportunity for a prompt, expeditious, and impartial dispute resolution
                  process regarding any material of the registrant excluded from the new
                  domain.

         The NTIA is also required to carry out a program to publicize the availability of the new
domain and to educate the parents of minors regarding the process for utilizing the new domain
in combination and coordination with hardware and software technologies that provide for
filtering or blocking.


SUBCOMMITTEE C James D. Arden, Chair

Subject 4. DILUTION OF FAMOUS MARKS – LANHAM ACT.

NO PROPOSED RESOLUTION.

        Past Action. In 1979, the section approved a resolution favoring in principle the concept
of a federal dilution statute that would be available to owners of federal registrations. 1979 AR-
201-3. In 1991, the section rejected the suggestion that a federal dilution statute should preempt
state law. 1991 AR 124-R 204-1. In 1992, the section passed a resolution favoring the ability of
the owner of a famous mark that is registered with the PTO to enjoin the uses of a mark that
cause dilution of the distinctive quality of the registrant‘s mark, regardless of the absence of
confusion. 1992 AR 136-R 201-1. In 1993, the section passed a resolution favoring, in a federal
dilution statute, the listing of certain factors for determining whether a mark is famous. 1993
AR-R-201-1. In 1994, the section passed a resolution favoring a federal dilution statute that
protects against dilution and enumerates the factors for determining the fame of the mark. 1994
AR-R 205-1(a). In 1994, the section also passed a resolution opposing inclusion of anti-
tarnishment theory in a federal dilution statute. AR-R 205-1(b). In July 1995, Thomas E. Smith,
chairman of the ABA‘s Intellectual Property Law Section, testified before the House Judiciary
Subcommittee on Courts and Intellectual Property to express the ABA‘s support for the Federal
Trademark Dilution Act of 1995, H.R. 1295, 104th Cong. (1st Sess. 1995). The House and Senate
subsequently approved the Act, and on January 16, 1996, President Clinton signed the Act into
law, adding Section 43(c) to the Lanham Act. Pub. L. No. 104-98, 109 Stat. 985 (codified at 15


                                               15
U.S.C. §§ 1125, 1127) (hereinafter the ―Act,‖ ―Dilution Act‖ or ―FTDA‖). Over the last several
years the subcommittee has provided reports surveying the developments under the Act.
        Overview. The FTDA protects the owner of a ―famous mark‖ against ―another person‘s
commercial use . . . of a mark or trade name, if such use begins after the mark has become
famous and causes dilution of the distinctive quality of the mark.‖ 15 U.S.C. §1125(c)(7). The
meaning of the key terms of the Act has been heavily litigated, leaving courts split in their
conclusions. Among the most important issues have been (1) whether a claimant may sue to
prevent dilution or must wait until dilution has already occurred and (2) the nature and extent of
fame a mark must have in order to qualify for protection.
        The issue of whether the dilution plaintiff must show actual dilution or merely the
likelihood of dilution may be resolved by the United States Supreme Court‘s review of V. Secret
Catalogue, Inc. v. Moseley, 259 F.3d 464 (6th Cir. 2001), cert. granted, 535 U.S. 985 (2002), in
which the Sixth Circuit joined the Second and Seventh Circuit (and rejected the analysis of other
courts) in holding that the FTDA plaintiff need only show a likelihood of dilution. In choosing
not to follow the literal language of the Act, which refers to a mark‘s use that ―causes dilution,‖
the Sixth Circuit had reasoned that an ―actual dilution‖ requirement would frustrate the Act‘s
purpose and ignore relevant legislative history. The Supreme Court heard oral argument on
November 12, 2002, and had not issued an opinion at the time of this report.
        In 2002 there were legislative efforts to resolve at least the issue of whether the FTDA
plaintiff must establish ―actual dilution‖ or simply a ―likelihood of dilution.‖ The House
Subcommittee on Courts, the Internet, and Intellectual Property held oversight hearings on the
FTDA on February 14, 2002, focusing on a proposed bill that would have explicitly adopted a
likelihood of dilution standard, but no legislation resulted.
        A survey of recent dilution decisions by federal courts and the Trademark Trial and
Appeal Board follows.

       First Circuit - Ira Jay Levy, Goodwin Procter, LLP

        The courts in the First Circuit still have not been faced with a case in which the FTDA
issues were central. In Carroll Shelby Licensing, Inc. v. Superformance Int'l, Inc., 2002 U.S.
Dist LEXIS 15501 (D. Mass Aug. 21, 2002), the district court disposed of the dilution claim in
four sentences. This case involves claims that defendant‘s sale of an automobile chassis
identical in shape to that of the Carroll Shelby-designed Ford Cobra constitutes trademark and
trade dress infringement, trademark counterfeiting, unfair competition, and trademark dilution.
Cross-motions for summary judgment were filed on most of the counts. The district court denied
all of plaintiff's motions, finding disputed issues of material fact. On the other hand, the district
court granted summary judgment to defendant on the issues of trade dress infringement,
trademark counterfeiting, and dilution.
        The analysis by the district court focused on the protectibility of the Cobra design. The
court found that the design was used in commerce and was nonfunctional. The court had more
trouble with the last element, distinctiveness. The district court acknowledged that under Wal-
Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 212 (2000), product design trade dress, as
opposed to product packaging, can never be inherently distinctive and thus requires proof of
secondary meaning. The court found that Shelby failed to prove that consumers associate the
Cobra design exclusively with Shelby. Accordingly, Shelby's trade dress claim was dismissed.
When the court finally turned to the dilution issue, it simply held that "[b]ecause Shelby is
unable to establish that the Cobra shape is distinctive, his dilution claims also fail as a matter of


                                                 16
law." The court noted that a mark that is not distinctive cannot achieve the status of a ―famous
mark‖ under the dilution statute.

       Second Circuit - Gregory S. Shatan and Elisabeth Stewart Bradley, Morgan, Lewis &
       Bockius LLP

        The Second Circuit decided several FTDA cases in 2002, and there were many decisions
at the district court level as well. Two themes were prevalent among the 2002 decisions. First,
many opinions acknowledged and followed the Second Circuit‘s holding in TCPIP Holding Co.
v. Haar Communications Inc., 244 F.3d 88 (2d Cir. 2001), that a mark must possess both
acquired distinctiveness (fame) and inherent distinctiveness in order to qualify for protection
under the FTDA. Second, several courts attempted to clarify what degree of fame was necessary
to be considered a ―famous‖ mark under the FTDA. Additionally, we note that the issues raised
in V Secret Catalogue, Inc. are currently under review by the U.S. Supreme Court. The Supreme
Court‘s opinion will of course impact many of the decisions noted below, in particular Welch
Allyn, Inc. v. Tyco Int’l Servs. AG, 200 F. Supp. 2d 130 (N.D.N.Y. 2002), which stated that an
injunction may issue under the FTDA before actual dilution occurs.
        A leading Second Circuit decision in 2002 was New York Stock Exchange, Inc. v. New
York, New York Hotel, LLC, 293 F.3d 550 (2d Cir. 2002). This case involved claims by the New
York Stock Exchange (―NYSE‖) asserting trademark infringement and dilution due to the
defendant casino‘s use of physical structures and promotional materials based on modified
versions of NYSE‘s trademarks, including a replica of NYSE‘s architectural façade used near the
casino‘s gambling floor and the casino‘s ―New York $lot Exchange‖ club. In addition to the
logo embodying the NYSE‘s architectural facade, NYSE‘s marks included the names ―New
York Stock Exchange,‖ the abbreviation ―NYSE,‖ and a logo spelling out ―NYSE‖ in a stylized
form. The casino moved for summary judgment on all of NYSE‘s claims. With respect to
NYSE‘s FTDA claims, the court held that a trademark owner must show that its mark is ―both
famous and distinctive‖ to obtain relief. The court quoted Nabisco, Inc. v. PF Brands, Inc., 191
F.3d 208, 215 (2d Cir. 1999), in noting that ―a mark that, notwithstanding its fame, has no
distinctiveness is lacking the very attribute that the antidilution statute seeks to protect.‖ The
court followed its recent TCPIP decision, which held that marks that lack inherent
distinctiveness cannot qualify for protection under the FTDA. Furthermore, it quoted the TCPIP
court‘s holding that a ―mark‘s deficiency in inherent distinctiveness is not compensated by the
fact that [the] mark has achieved a significant degree of consumer recognition.‖ The New York
Stock Exchange court agreed that as a matter of law only one of NYSE‘s marks, the mark
consisting of its architectural façade, was inherently distinctive, or may be so found by a trier of
fact. Thus, the court affirmed the dismissal of all of NYSE‘s FTDA claims as to all but that one
mark, which claim was remanded to the district court.
        The New York Stock Exchange court contrasted New York dilution law with the FTDA,
noting that New York law accords protection against dilution of marks that are distinctive due to
acquired secondary meaning as well as those that are inherently distinctive. Finding that a trier
of fact might find a likelihood of dilution of all of NYSE‘s marks, the Second Circuit determined
that summary judgment on plaintiff‘s tarnishment claim was not appropriate.
        In October 2002, in an unpublished decision, the Second Circuit again confirmed that
federal trademark dilution claims are barred where the mark lacks inherent distinctiveness. In
Solow Bldg. Co., LLC v. Nine West Group, Inc., No. 01-7878, 2002 WL 31303237, at *1 (2d Cir.
Oct. 11, 2002), the court affirmed the dismissal of plaintiff‘s complaint, finding that Plaintiff‘s


                                                17
―9 West‖ mark for its headquarters located at 9 W. 57th Street in Manhattan was descriptive,
which the Plaintiff conceded. The court held that descriptive marks lack sufficient
distinctiveness to warrant protection under the FTDA.
        The Second Circuit also established certain threshold requirements for application of the
FTDA in two unpublished decisions. First, in Beverage Mktg. USA, Inc. v. South Beach
Beverage Corp., No. 00-9578, 2002 WL 1162789, at *3 (2d Cir. June 3, 2002), plaintiffs
appealed from a judgment dismissing their claims for trade dress infringement with respect to the
shape of the bottle used for defendant‘s ―Arizona‖ beverages. The court affirmed the district
court‘s dismissal of plaintiffs‘ FTDA claims, holding that to establish dilution, ―the marks must
be of sufficient similarity so that, in the mind of the consumer, the junior mark will conjure an
association with the senior‖ (internal quotations and citations omitted). As ―the overall trade
dresses in this case are dissimilar, no rational juror could conclude that defendants‘ bottle causes
dilution.‖
        Second, in Momentum Luggage and Leisure Bags v. Jansport, Inc., Nos. 01-9014L, 01-
9438, 2002 WL 31002496, at *1-*2 (2d Cir. Sept. 6, 2002), the Second Circuit agreed with the
district court‘s conclusion that plaintiff‘s sporadic and informal activity did not constitute
sufficient use of the ―Momentum‖ trademark in commerce to qualify for protection under the
Lanham Act. Thus, it affirmed summary judgment for the defendant, holding that where no
trademark exists, plaintiff‘s claim for dilution fails as a matter of law.

       There were also several noteworthy decisions by district courts within the Second Circuit:

         In Friesland Brands, B.V. v. Vietnam Nat’l Milk Co., 228 F. Supp. 2d 399, 412-13
(S.D.N.Y. 2002), the court granted summary judgment in favor of defendants with respect to
plaintiff‘s federal dilution claim, holding that ―only marks approaching household names may
qualify as ‗famous.‘ ‖ (Citations omitted.) The court noted that plaintiff‘s LONGEVITY design
mark, used in connection with condensed milk, was hardly a household name. The court also
noted that defendants had stated without contradiction that plaintiff‘s sales of the LONGEVITY
brand condensed milk in the U.S. never exceeded $5 million annually and that ―numerous‖
courts have found marks to fall short of being famous despite sales far greater than those relating
to the LONGEVITY mark. In addition, plaintiff only pointed to one piece of evidence in support
of its claim that its LONGEVITY design mark was famous. The court stated that this evidence,
a newspaper review of products that noted the plaintiff‘s LONGEVITY brand, was ―hardly
enough‖ to meet plaintiff‘s burden of establishing fame, and gave no weight to plaintiff‘s
assertions that it had other evidence that would be offered at trial.
         In contrast, plaintiff‘s state dilution claim survived defendant‘s summary judgment
motion. Citing the New York Stock Exchange decision, the court noted that New York law
accords protection against dilution to marks that are distinctive as a result of acquired secondary
meaning and to those that are inherently distinctive. The court noted that New York‘s dilution
statute applies to both trademarks and trade dress, and found that plaintiff‘s trade dress, because
it had numerous non-functional and arbitrary elements, including its white label with blue
lettering and the positioning, size, color and contents of the English, Vietnamese, and Chinese
phrases, had enough suggestive elements that it qualified as distinctive.
         Several district court decisions held that marks qualify as famous under the FTDA only if
they carry a degree of fame approaching the level enjoyed by ―household names‖ such as
DuPont, Buick, or Kodak. See Waddington N. Am. Bus. Trust v. EMI Plastics, Inc., No. 02-CV-
3781, 2002 WL 2031372, at *9 (E.D.N.Y. Sept. 5, 2002) (denying plaintiff‘s motion for a


                                                18
preliminary injunction as its spoked and ―S-shape‖ lip design serving trays ―clearly‖ do not meet
the ―household‖ name standard); GTFM, Inc. v. Solid Clothing, Inc., 215 F. Supp. 2d 273, 300
(S.D.N.Y. 2002) (plaintiff‘s ―05‖ mark for clothing is not famous, nor is it inherently distinctive;
however, plaintiff prevailed on federal infringement claims and established dilution under New
York State law, resulting in an award of $6,723,846); and A.B.C. Carpet Co. v. Naeini, No. 00-
CV-4884, 2002 WL 100604, at *5 (E.D.N.Y. Jan. 22, 2002) (denying plaintiff‘s motion for
summary judgment on its FTDA claim; plaintiff has not established ―household‖ name
recognition for its ―ABC‖ and ―A.B.C. Carpet‖ marks, and its sales and advertising expenditures
were lower than those of other companies whose marks were not found to be sufficiently
famous).
        A Southern District of New York court considered a claim of dilution of trademarks
through the use of web sites and domain names in Twentieth Century Fox Film Corp. v. Marvel
Enters., Inc., 220 F. Supp. 2d 289, 297-98 (S.D.N.Y. 2002). Twentieth Century Fox Film
Corporation (―Fox‖), both plaintiff and counterclaim defendant, registered several domain names
containing Marvel‘s X-MEN trademarks, based on an agreement between the parties that
provided, in part, for Fox to market its X-MEN films on the Internet. Marvel alleged that Fox‘s
use of the domain names diluted the X-MEN trademark by connecting Internet users to Fox‘s
main web site, and by connecting users to inactive web sites. Fox‘s main web site contained a
link for the X-MEN films, and thus was clearly related to Fox‘s promotion of those films, which
actions were expressly permitted by the agreement between the parties. The court held that ―the
mere fact that the site also contains material about Fox‘s other film properties does not render
Fox‘s use of the X-men domain names dilutive. . . . Likewise, Marvel cannot base a dilution
claim on the fact that several of Fox‘s X-men related sites do not connect to active web sites. . . .
[T]he Court does not see how the mere presence of inactive X-men related web sites on the
Internet would . . . ‗reduce the public‘s perception that the [X-men] mark signifies something
unique, singular, or particular.‘ ‖ Thus, the court granted Fox‘s motion to dismiss Marvel‘s
federal dilution counterclaim.
        Two district courts addressed the concept of niche fame in 2002. In Welch Allyn, Inc.,
supra, the plaintiff alleged that defendants had infringed and diluted its federal trademark
TYCOS, used since 1908 in connection with high quality medical products, such as stethoscopes.
Defendants filed Intent-to-Use applications to use the mark TYCO with respect to products in the
medical industry. The court denied plaintiff‘s motion for a preliminary injunction in connection
with its claims of trademark dilution under both federal and state law.
        The court noted that a ―risk of dilution is enough to warrant relief; the FTDA permits
injunctions to prevent dilution before the dilution has actually occurred‖ (quoting Nabisco, 191
F.3d at 225; internal quotations omitted). However, while the Court found that the TYCOS mark
was inherently distinctive, with respect to fame, the court found that TYCOS was far from being
a ―household word.‖ At best, the plaintiff demonstrated that its mark is famous in only a small
segment of the medical products market. This ―falls far short of a showing that the TYCOS
mark possesses a substantial degree of fame such as would support a finding of dilution under
the FTDA.‖ (Internal quotations omitted.) After analyzing the five Nabisco factors – used by
many courts in the Second Circuit to determine whether a dilution cause of action has been
established – in the context of the FTDA‘s ―overall goal‖ to protect the owner of a famous mark
against dilution, the court concluded that plaintiff failed to carry its burden to demonstrate its
entitlement to the drastic relief of a preliminary injunction.




                                                 19
        In addressing plaintiff‘s state law dilution claim, the court agreed that, unlike the FTDA,
New York law does not require that a mark be famous to be entitled to protection from dilution.
The court also stated, however, that the plaintiff had not submitted enough evidence to support a
finding of a likelihood of dilution, the second element under New York dilution law.
        Similarly, several months later, a Southern District of New York court agreed that niche
fame was insufficient to warrant protection under the FTDA. In WE Media Inc. v. General Elec.
Co., 218 F. Supp. 2d 463 (S.D.N.Y. 2002), plaintiff WE Media Inc. (―WEM‖) owned several
trademarks, including WE and WEMEDIA, for products and services directed towards people
with disabilities. Defendants selected the name ―WE: WOMEN‘S ENTERTAINMENT‖ for its
cable television channel. Defendant moved for summary judgment against WEM‘s trademark
dilution claim, arguing that WEM‘s marks were not famous. WEM argued that its marks are
famous within ―its channels of trade, i.e., the not-for-profit industry.‖ The court dissagreed,
finding that under the Act ―fame‖ could not rest on such a limited foundation. First, the case the
plaintiff relied upon for the proposition that a senior mark need not be famous in all fields, New
York State Soc’y of Certified Public Accountants v. Eric Louis Assocs., Inc., 79 F. Supp. 2d 331
(S.D.N.Y. 1999) was decided prior to the TCPIP decision, discussed above. The Eric Louis
court found that the plaintiff‘s mark was famous in a ―particular trade and geographic area.‖ The
WE Media court noted, however, that in TCPIP, the Second Circuit concluded that it was
unlikely that Congress intended to give marks that ―enjoyed only brief fame in a small part of the
country . . . the power to enjoin all other users throughout the nation in all realms of commerce.‖
Second, plaintiff‘s proposed channel of trade addresses only a trade limit, whereas the Eric Louis
analysis relied on both the trade and geographic limits of the plaintiff‘s mark in assessing fame.
        Moreover, plaintiff introduced no evidence of acquired distinctiveness. While it did
introduce evidence of awards that its magazine and web site had won, the court found these
awards did not tend to show that the public associated plaintiff‘s marks with its goods and
services, but rather that the plaintiff‘s business served a laudable goal and its product was well
respected. Plaintiff‘s survey evidence also failed to support its claim of acquired distinctiveness.
For these reasons, the court held that it could not find that plaintiff‘s trademarks were sufficiently
famous to support a FTDA claim for trademark dilution and did not address the remaining
elements required to establish a cause of action under the FTDA.
        The issue of whether color combinations can be protected under the FTDA was addressed
in Deere & Co. v. MTD Prods., Inc., No. 00 Civ. 5936, 2002 WL 1837402, at *2 (S.D.N.Y. Aug.
12, 2002). Plaintiff manufactured agricultural vehicles, all of which produced since the 1900s
had green bodies and yellow wheels. Defendant, a competitor of plaintiff, also manufactured
agricultural equipment using green and yellow colors. Plaintiff asserted claims alleging that
defendant‘s use of these green and yellow colors violated the FTDA and the New York anti-
dilution statute, and the defendant moved for judgment on the pleadings under Federal Rule of
Civil Procedure 12(c). The court granted defendant‘s motion as to both claims. First, the court
held that a mark must be both famous and inherently distinctive to receive protection under the
FTDA. Since the Supreme Court ruled in Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159,
162-63 (1995), that color can only be protected as a trademark upon attaining secondary
meaning, plaintiff‘s green and yellow color combination used on its agricultural vehicles cannot
be inherently distinctive as a matter of law and thus its federal dilution law claim must be
dismissed. Second, with respect to Plaintiff‘s state dilution claims, the court conducted a choice
of law analysis and determined that Illinois rather than New York law would apply; because




                                                 20
Illinois‘s anti-dilution statute does not permit recovery against competitors, the claim was
dismissed.
         On plaintiff‘s motion for reconsideration, the court noted that plaintiff‘s claims assert
dilution through copying of its use of green and yellow in the abstract, and not plaintiff‘s trade
dress as applied to its products in their entirety. The court stated that if plaintiff were able to
succeed on dilution claims against users of those colors together, it would ―no doubt‖ be able to
extend such monopoly on a color combination to even non-competitive products. The court held
that no party should be able to do that, any more so than it should be able to do so in the case of a
single color. See Deere & Co. v. MTD Prods., Inc., No. 00 Civ. 5936, 2002 WL 31357692, at *1
(S.D.N.Y. Oct. 17, 2002).
         A Southern District of New York court addressed the blurring and tarnishment aspects of
dilution claims in a parody context in Tommy Hilfiger Licensing, Inc. v . Nature Labs, LLC, 221
F. Supp. 2d 410 (S.D.N.Y. 2002). Plaintiff, the owner of the ―world-famous‖ TOMMY
HILFIGER and flag design trademarks used in connection with the sale of several products,
including fragrances, sued defendant Nature Labs, LLC, which manufacturers and sells a line of
pet perfumes, one of which was named ―Timmy Holedigger.‖ The court dismissed plaintiff‘s
claims of trademark dilution under the FTDA and NewYork State law. The court noted that it
was ―undisputed‖ that plaintiff‘s marks have the requisite fame and distinction to warrant
protection under federal and state dilution statutes. The remaining issue was whether
defendant‘s use was likely to dilute the marks. The court did not distinguish between plaintiff‘s
federal and state law dilution claims with respect to this issue, stating ―[t]raditionally, dilution
under state law has involved either the blurring of a mark‘s product identification or the
tarnishment of the affirmative associations a mark has come to convey. These same claims have
been held to be actionable under the newer federal provision as well.‖ (Internal quotations and
citations omitted.) The court found that defendant‘s spoof tended to increase public
identification of the plaintiff‘s mark with the plaintiff, since the success of a parody depends
upon the continued association of the mark with the plaintiff. Thus, the court rejected plaintiff‘s
blurring claim.
         Turning to tarnishment, the court stated that ―the sina qua non of tarnishment is a finding
that plaintiff‘s mark will suffer negative associations through defendant‘s use.‖ (Internal
quotations omitted.) The court noted that plaintiff had not submitted any evidence supporting
this conclusion, and that it did not expect to find any. Finding that a designer label did not have
anything to lose from a mere association with pets, ―particularly where the entire association is a
light-hearted if somewhat heavy-handed parody,‖ the court agreed with the Tenth Circuit‘s
conclusion in Jordache Enters., Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1486 (10th Cir. 1987)
that ―[w]hen the association is essentially a harmless, clean pun, which merely parodies or pokes
fun at the plaintiff‘s mark, tarnishment is not likely.‖ The court added, ―[n]ot every alteration
will constitute dilution, and more leeway for alterations is appropriate in the context of satiric
expression and humorous ads for noncompeting products‖ (quoting Deere & Co. v. MTD Prods.,
Inc., 41 F.3d 39, 45 (2d Cir. 1994)). Thus, the court granted summary judgment for defendant on
plaintiff‘s dilution claims.
         A court held that when a plaintiff pursues a dilution claim where it was, or should have
been, aware that its mark is not famous, this pursuit can be described as ―vexatious and evidence
of bad faith,‖ supporting an award of fees and costs. In National Distillers Prods. Co., LLC v.
Refreshment Brands, Inc., 198 F. Supp. 2d 474 (S.D.N.Y. 2002), the distiller of ―Teton Glacier‖
vodka brought an action based on defendants‘ marketing and sale of a vodka cooler called



                                                 21
―Glacier Bay.‖ The court found for defendants on all counts, noting that the Second Circuit had
recently made clear that the FTDA was intended to protect only ―truly famous‖ marks, and that
Plaintiff‘s weak marks do not qualify as famous under TCPIP’s ―stringent‖ test. In National
Distillers Prods. Co., LLC v. Refreshment Brands, Inc., No. 00 Civ. 8418, 2002 WL 1766548
(S.D.N.Y. July 30, 2002), defendants moved to recover a portion of the attorney fees and costs it
incurred in defending the earlier action. The court agreed with defendants that plaintiff‘s
dilution claims were baseless and unfounded, and noted that the question of the fame of ―Teton
Glacier‖ was not a close one. Plaintiff‘s counsel even admitted during trial that he did not
believe the dilution count was likely to succeed based on the case law addressing ―fame.‖ Based
on these facts, the court awarded defendants $2,300.00 in fees and costs.
        A court indicated that a ―contributory dilution‖ claim, though novel, may be plausible in
Steinway, Inc. v. Ashley, No. 01 CIV 9703, 2002 WL 122929 (S.D.N.Y. Jan. 29, 2002).
Plaintiffs alleged that defendants were selling piano decals bearing plaintiffs‘ STEINWAY
trademarks to people who applied such decals to pianos that were either not STEINWAY pianos,
or were reconditioned or rebuilt without Steinway‘s approval. Defendants moved to dismiss
plaintiffs‘ claims for failure to state a claim and lack of supplemental jurisdiction. With respect
to plaintiffs‘ dilution claim, the court held that plaintiffs‘ allegations that its marks were famous
were more than adequate to survive defendants‘ motion to dismiss. The court noted that a
number of courts – all of which were outside of the Second Circuit – have discussed the notion
of contributory dilution, and at least one court has recognized such a cause of action, apparently
by analogy to an action for contributory infringement. Given the early stage of the litigation, the
court concluded that the dilution claim was sufficiently supported by plaintiffs‘ factual
allegations to survive defendants‘ motion to dismiss.
        Whether a trademark dilution claim may be asserted against an officer of a defendant in
his individual capacity was addressed in Campers’ World Int’l, Inc. v. Perry Ellis Int’l, Inc., No.
02 CIV. 453, 2002 WL 1870243 (S.D.N.Y. Aug. 13, 2002). Perry Ellis International (―PEI‖)
entered into a sublicensing arrangement with Europe Craft Imports, Inc. (―ECI‖), a subsidiary of
Aris Industries, Inc. for use of the PERRY ELLIS trademark in connection with the manufacture
and sale of garments. ECI entered into an arrangement with CWI, the plaintiff, for the sale of
jeans bearing the PERRY ELLIS trademark. After PEI discovered the unauthorized sale of jeans
bearing its mark, CWI filed suit for declaratory judgment against PEI. PEI answered and
asserted several claims, including federal trademark dilution, against Aris, CWI, and ECI, as well
as against Arnold Simon, Aris‘s CEO. Simon moved to dismiss each of the claims asserted
against him in his individual capacity.
        The court noted that while a corporate officer is not personally liable for torts committed
by others on behalf of the corporation solely by virtue of his status as an officer, a corporate
officer may be held personally liable for trademark infringement or unfair competition if the
officer is a ―moving, active conscious force behind the infringement‖ (internal quotations and
citations omitted). The court found that PEI‘s complaint stating that Simon attempted to conceal
ongoing misconduct and alleging other facts pleaded sufficient allegations to withstand a motion
to dismiss. While the opinion did not specifically address PEI‘s trademark dilution claim in
connection with the above analysis, the court did include the dilution count when noting which
counts survived Simon‘s motion to dismiss.
        Finally, we note two additional 2002 district court decisions addressing FTDA claims:
Emmpresa Cubana del Tabaco v. Culbro Corp., 213 F. Supp. 2d 247, 285 (S.D.N.Y. 2002)
(federal registration is no defense to a charge of dilution under the FTDA; non-U.S. entity may



                                                 22
have prior rights under the common law ―well-known mark doctrine‖ if its mark was ―well-
known‖ in the U.S. prior to a third party‘s first use); and Elements/Jill Schwartz, Inc. v. Gloriosa
Co., No. 01 Civ. 904, 2002 WL 1492197, at *7 (S.D.N.Y. July 15, 2002) (plaintiff‘s claim of
trade dress dilution under the FTDA must fail as it did not describe the elements of its trade dress
with sufficient specificity for a jury to find a protectible trade dress).

       Third Circuit - Diane Siegel Danoff, F. Gregory Lastowka Dechert LLP

         No Third Circuit opinions addressed FTDA issues in 2002. However, three decisions by
district courts within the Third Circuit did. In Pharmacia Corp. v. Alcon Labs., Inc., 201 F.
Supp. 2d 335 (D.N.J. 2002), Pharmacia sought a preliminary injunction, alleging that its
―Xalatan‖ trademark for a glaucoma drug was infringed and diluted by Alcon‘s ―Travatan‖ mark
used for the same type of drug. The court found that Pharmacia had failed to demonstrate a
likelihood of success on either claim. Addressing the dilution claim, the court noted that Alcon
did not dispute that the ―Xalatan mark is famous among opthalmologists…‖ and therefore was
famous under the FTDA. Id. at 379 n.12. The court thus applied the ―niche market‖ approach to
fame under the FTDA which was adopted by the Third Circuit in Times Mirror Magazines, Inc.
v. Las Vegas Sports News, LLC, 212 F.3d 157, 163 (3d Cir. 2000), cert denied, 531 U.S. 1071
(2001).
         The court further stated that ―[c]ourts have repeatedly rejected dilution claims unless the
marks are essentially the same.‖ Id. at 379. In addition, the court noted that ―differences such as
the use of house marks ‗alone‘ can defeat dilution claims.‖ Id. Because the suffix ―ATAN‖ was
the only identical portion of the marks, the court concluded that the dilution claim was weak.
The court further found that the ―ATAN‖ suffix was not unusual and that customary practices of
marketing pharmaceuticals (such as displaying house marks and generic names) made it unlikely
that consumers would associate the two marks with each other.
         Moreover, the court noted that because opthalmologists and optometrists were discerning
purchasers of drugs, they were less likely to associate the ―Travatan‖ mark with ―Xalatan.‖ Id.
(citing Times Mirror, 212 F.3d at 168). The court also noted that as a general matter in cases
where the trademarked products compete directly, ―court should be wary of applying a dilution
claim.‖ Id. at 380 (citing, among other sources, 4 McCarthy § 24:72). The court discounted
survey evidence which purported to demonstrate that the mark ―Travatan‖ called ―Xalatan‖ to
mind for 14% of opthalmologists surveyed. The court suggested that this percentage was not
high enough and implied that survey evidence demonstrating at least 20% or 30% association is
required for a viable dilution claim.
         In Louis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F. Supp. 2d 567 (E.D. Pa. 2002),
the plaintiffs Louis Vuitton and Oakley alleged trademark infringement and dilution by
defendants who operated several websites through which they sold merchandise affixed with the
plaintiffs‘ trademarks. The court found trademark infringement was clear and, applying the
Times Mirror test, concluded with little discussion that trademark dilution was also established.
Id. at 581. Additionally, the court stated that ―Defendants‘ registration and/or use of the
louisvuitton–replicas.com domain name constitutes trademark dilution.‖ Id. at 582.
         In Pep Boys Manny, Moe & Jack of Ca. v. Goodyear Tire & Rubber Co., 2002 U.S. Dist.
LEXIS 5925 (E.D. Pa. April 5, 2002), the plaintiff automotive store sold ―Cornell Futura‖ tires
and alleged trademark infringement and dilution against Goodyear for the sale of ―Fortera‖ tires.
The court conducted a standard trademark analysis pursuant to the Third Circuit‘s ―Lapp‖ factors
and concluded that although certain factors weighed in favor of the plaintiff, there was no


                                                23
likelihood of infringement. Id. at *40; Interpace Corp. v. Lapp, Inc., 721 F.2d 460 (3d Cir.
1983). The court‘s dilution analysis was cursory. After citing the controlling tests for dilution,
the court simply stated that because there was no showing of actual or likely confusion, there
was accordingly no dilution by blurring. Additionally, the claim of tarnishment -- based on a
subjective fear that Goodyear might suffer a fall from grace similar to Firestone-Bridgestone --
was considered too speculative by the court.

       Fourth Circuit - Terrence J. O‘Toole, Bryan Cave LLP

        The Fourth Circuit has emerged as an important arena for defining federal dilution law,
particularly in conflicts over the use of internet domain names. Because the Fourth Circuit
includes the Eastern District of Virginia, the domicile of one of the primary domain names
registrars, and, therefore, the venue for in rem actions against off-shore cybersquatters, it is likely
to continue to make significant law.
        In Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214 (4th Cir. 2002), the
famous London department store brought an action against a former affiliate, Harrods of Buenos
Aires, which had registered 60 domain names incorporating variants of the Harrods name. Using
the recently-enacted Anticybersquatting Consumer Protection Act (―ACPA‖)(codified in 15
U.S.C. § 1125(d)), Harrods invoked in rem jurisdiction over the 60 domain names based on the
fact that they had been registered with one of the official Internet registries, VeriSign, Inc., in
Herndon, Virginia. In addition to bad faith registration in violation of §1125(d), plaintiff joined
a claim for dilution in violation of §1125(c). The lower court dismissed the dilution claim,
holding that the in rem jurisdiction created by the anticybersquatting provision did not extend
beyond bad faith registration.
        The Court of Appeals reversed. While admitting that respectable precedent supported the
lower court‘s reading of the ACPA, the Fourth Circuit concluded that Congress intended the
grant of in rem jurisdiction to reach claims for dilution under §1125(c) along with bad faith
registration. This ruling may prove significant to efforts by domain name owners to ward off
squatters who do not meet the bad faith test of §1125(d). In rem jurisdiction for dilution claims
gives businesses the ability to protect the identifying power of their marks in cyber-world even
against a competitor that is not a stereotypical squatter.
        Porsche Cars N. Am., Inc. v. Porsche.net, 302 F.3d 248 (4th Cir. 2002), another
anticybersquatting action under §1125(d) joined with a dilution claim under §1125(c), was
decided the same day as Harrods by a different panel of the Fourth Circuit. The Porsche court
held that in rem jurisdiction over a dilution claim against a domain name poacher could not be
asserted under 28 U.S.C. §1655 as an alternative to jurisdiction under §1125(d). Thus, §1125(d)
was the sole basis for in rem jurisdiction over domain names.
        In Porsche, the high-status automobile company sued several registrants who had
incorporated the Porsche name in more than 120 Web addresses. Because the case was filed
before the enactment of the ACPA, Porche framed its case as §1125(c) dilution and alleged that
28 U.S.C. §1655 gave the Eastern District of Virginia in rem jurisdiction over foreign and non-
resident registrants. Section 1655 is a general grant of in rem jurisdiction to the district courts
authorizing jurisdiction to enforce a lien or claim against property situated in the district. The
lower court rejected jurisdiction and Porche appealed. While the appeal was pending, the ACPA
was enacted, creating specific in rem jurisdiction over domain names. Plaintiff recast its
complaint to allege jurisdiction under §1125(d), but continued to press for recognition of general
in rem jurisdiction under §1655 for its dilution claim.


                                                  24
         Whether §1655 creates a parallel basis for in rem jurisdiction to support a federal dilution
claim was dispositive because the district court had dismissed Porsche‘s dilution claims against a
Georgia registrant who was suable in the United States. Section 1125(d)(2)(A) limits in rem
jurisdiction to those cases where the owner is unable to obtain personal jurisdiction over a
poacher or is unable to find him. Because the Georgia cyberpirate in Porsche was clearly
locatable and amendable to process, the condition precedent for in rem jurisdiction pursuant to
§1125(d)(2)(a) was not met. Although Porche argued that §1655 created an alternative basis for
in rem jurisdiction, the Fourth Circuit disagreed. It held that dilution remedies do not include
authorization to possess the dilutive goods. If the dilution plaintiff has no right to possession of
the goods, he therefore can assert no ―lien upon or claim to‖ property, which is what §1655 is
aimed at enforcing in rem. The enactment of §1125(d) eliminated the need to stretch dilution to
provide a remedy for domain name piracy. The Fourth Circuit agreed with the Second Circuit in
Sporty’s Farm L.L.C. v. Sportsman’s Mkt., Inc., 202 F.3d 489 (2d Cir. 2000) cert. denied, 530
U.S. 1262 (2002) that §1125(d) was designed as a specific solution to the alternative of
improvising an anticybersquatting remedy under federal dilution law.
         There were two recent decisions of note by district courts in the Fourth Circuit. In Rhee
Bros., Inc v. Han Ah Reum Corp., 178 F. Supp. 2d 525 (D. Md. 2001), a long-time marketer of
Asian foods under well-known Korean brand names sued rivals marketing the same consumables
under similar brand names, alleging trademark infringement and dilution. The defendants moved
to dismiss the dilution claim arguing that: (a) dilution did not lie where plaintiff‘s and
defendant‘s goods are competitive with each other; and (b) federal dilution was limited to
traditional concepts of blurring and tarnishment. The Maryland district court disagreed on both
points.
         First, the court found it clear from the language of §1125(c) that a cause of action for
federal dilution is not limited to non-competing goods or services. Section 1125(c) applies to
products which compete in the same market. Second, the court held that dilution was not
restricted to the whittling away of the selling power of the mark (blurring) or the association of
plaintiff‘s mark with inferior goods or services (tarnishment), but included any use by the junior
user which diminishes the ability and effectiveness of the plaintiff‘s senior mark to identify and
distinguish the plaintiff‘s goods or services.
         In Intern. Bancorp, L.L.C. v. Societe des Baines, 192 F. Supp. 2d 467 (E.D. Va. 2002),
another anticybersquatting action, the owner of the Casino de Monte Carlo casino pursued
registrants engaged in on-line gambling who had used ―Monte Carlo‖ in 43 web site addresses.
The online gaming services brought a pre-emptive declaratory judgment action to legitimize their
Monte Carlo registrations.         The Monaco casino counterclaimed alleging, along with
cybersquatting and infringement, federal dilution. The district court granted summary judgment
to the squatters on the dilution claims, holding that Fourth Circuit precedent required actual
economic harm to the claimant, not just the threat of it (the view of other circuits). Economic
harm was proven by: (1) actual revenue loss; (2) consumer survey evidence showing that
customers associate the two marks and showing that the association will have a deleterious
effect; or (3) complementing 1 and 2, the junior mark‘s exposure to the public.

       Fifth Circuit - David G. Swenson, Baylor University

There were no significant cases at any level within the Fifth Circuit during 2002 that involved a
substantive analysis of federal dilution law. The only case including a claim based on federal
dilution law to reach the Fifth Circuit Court of Appeals was actually decided based on a violation


                                                 25
of state dilution law and the Anti-Cybersquatting Consumer Protection Act. E. & J. Gallo
Winery v. Spider Webs Ltd., 286 F.3d 270 (5th Cir. 2002). In that case the Fifth Circuit affirmed
a grant of summary judgment in favor of the E. & J. Gallo Winery against the defendant for its
registration of the domain name 'ERNESTANDJULIOGALLO.COM' and its brief subsequent
use during the litigation, noting on the dilution issue that the state dilution law only required a
showing of a likelihood of dilution and not an actual injury.


       Sixth Circuit - James D. Arden, Sidley Austin Brown & Wood LLP

        The Sixth Ciruit addressed substantive and jurisdictional issues concerning the FTDA in
three decisions in 2002. In Nartron Corp. v. STMicroelectronics, Inc., 305 F.3d 397 (2002), the
court affirmed the dismissal of trademark infringement and dilution claims with respect to the
plaintiff‘s mark ―smart power,‖ which defendant had long used ―in its generic sense‖ in the
semiconductor industry ―to describe an integrated circuit that combines power and logic on a
single chip.‖ The court also found that plaintiff was guilty of laches by reason of its delay in
waiting 11 years after first learning of defendant‘s use before bringing the action. The court
rejected plaintiff‘s claim of ―progressive encroachment‖ (a doctrine that allows the plaintiff to
demonstrate that changing circumstances justified its bringing suit at a later date) because
defendant‘s use of the term at issue never changed over the years.
        In Bird v. Parsons, 289 F.3d 865 (6th Cir. 2002) the Sixth Circuit addressed the FTDA‘s
requirement that the alleged diluter engage in the ―commercial use in commerce‖ of the diluting
mark. A defendant, an Internet domain name registrar, registered another defendant‘s domain
name <efinance.com>, which plaintiff claimed diluted its mark ―Finance‖ and its domain name
<financia.com>. The court held that plaintiff failed to state a claim against the registrar because
acceptance of domain name registrations is not a ―commercial use.‖ While the registrar profits
from the names it registers, it ―does not trade on the value of domain names as trademarks.‖ 289
F.3d 879 (citation and internal quotation omitted). The court also dismissed a trademark dilution
claim against the operation of a web site that auctions domain names. ―Simply posting a domain
name on an internet web site … is sufficient to establish a commercial use of a trademark.‖ Id.
at 880.
        In Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883 (6th Cir. 2002), the court held
that long-arm jurisdiction in Michigan existed over a foreign defendant in an action for
trademark infringement and dilution. Defendant‘s contacts with Michigan residents through its
web site were significant, but whether the web site alone would have supported personal
jurisdiction was ―a close question‖ the court did not decide, because defendant had other contacts
with the state, by telephone and by mail.
        There were also noteworthy decisions by district courts in 2002. Following the Sixth
Circuit‘s decision in V. Secret, now before the Supreme Court (which heard argument on
November 12, 2002), a district court held that a defendant was liable under the FTDA for using
marks virtually identical to the VICTORIA‘S SECRET mark in its domain name, web site text,
hyperlinks, and metatags. Victoria’s Secret Stores v. Artco Equip. Co., 194 F. Supp. 2d 704, 731
(S.D. Ohio 2002). The defendant sought to distinguish its case from V. Secret, which was
brought against the operator of "Victor's Little Secret," a retail store featuring lingerie, "adult
videos as well as sex toys and other 'adult novelties.' " V. Secret, 259 F. 3d at 467. According to
defendants in Artco, their Internet use of the mark ―simply does not rise to the level of selling
products from a proprietorship actually incorporating Plaintiff‘s mark in its store name.‖ 194 F.


                                                26
Supp. 2d at 731. The court was ―flabbergasted‖ by the argument and saw ―no difference
between using plaintiffs‘ mark on the sign attached to a bricks and mortar sex toy store and using
plaintiffs‘ mark on cybersigns – such as domain name, hyperlinks, and metatags – attached to an
online sex toy store.‖ Id. at 732.
        In a case decided shortly before the November elections, political commercials that
compared the Ohio governor to the ―AFLAC Duck‖ were protected from claims of trademark
and service mark dilution in American Family Life Ins. Co. v. Hagan, 2002 U.S. Dist. LEXIS
23908 (N.D. Ohio 2002). The insurance company moved for a preliminary injunction against
the Democratic gubernatorial candidate‘s using a quacking cartoon character (quacking
―TaftQuack‖ several times during each commercial) that brought to mind the company‘s famous
duck. Although the court found that ―it is entirely understandable that AFLAC would object to
[candidate] Hagan‘s trading off of its own hard work and expense,‖ id. at *51, the court denied
its motion, finding that the noncommercial use exemption in 15 U.S.C. §1125(c)(4)(B) applied to
the candidate‘s political message, which was also protected under the First Amendment.
        The court cited with approval Judge Kosinsky‘s reasoning in Mattel, Inc. v. MCA
Records, Inc., 296 F.3d 894 (9th Cir. 2002), cert. denied, 2003 WL 167680 (U.S. Jan. 27, 2003)
and found that ―expressive speech that results in trademark dilution is different and less worthy
of First Amendment protection than expressive speech that results in trademark infringement,‖ in
large part because the latter requires a finding of consumer confusion and therefore an injunction
protects against what is essentially consumer fraud. 2002 U.S Dist. LEXIS 23908, at *39-40.
While the court found that the politician‘s use of the AFLAC Duck was a ―non-commercial‖ use,
it was not protected as a parody, as in Mattel, because the commercials did not make any
mention of AFLAC, its business practices, or the insurance products it sells. Id. at *11.
        In Carrier Great Lakes v. Cooper Heating Supply, Inc., 2002 U.S. Dist. LEXIS 10417
(W.D. Mich. June 5, 2002), a court denied defendant‘s motion to dismiss that argued that the
plaintiff, as a mere licensee, was not ―the owner of a famous mark‖ entitled to bring suit under
the FTDA. The court rejected defendant‘s claim that only a registrant of a mark may be deemed
the ―owner.‖ Rather, ―[a] sub-licensee or licensee has a property right in a mark, in that it has
obtained by contract the right to use the mark‖ and therefore could be considered an ―owner‖ for
purposes of 15 U.S.C. §1125(c). Id. at *11.
        In separate lawsuits, a court in the Eastern District of Michigan granted Ford Motor
Company protection against trademark infringement and dilution. See Ford Motor Co. v. Lloyd
Design Corp., 184 F. Supp. 2d 665 (E.D. Mich. 2002) (finding Ford‘s model names and its
marks famous and distinctive and granting it summary judgment against manufacturer of
automobile floor mats bearing such marks); Ford Motor Co. v. A.C. Car Group Ltd., 2002 U.S.
Dist. LEXIS 7188 (E.D. Mich. Mar. 4, 2002) (granting preliminary injunction against ex-
licensee‘s continued use of marks).

       Seventh Circuit - Richard W. Young, Gardner, Carton & Douglas

        The Seventh Circuit issued two decisions under the FTDA during 2002, in both cases
rejecting plaintiffs‘ claims of dilution under the Act. In AM Gen. Corp. v. DaimlerChrysler
Corp., 311 F.3d 796 (7th Cir. 2002), the Seventh Circuit held that DaimlerChrysler‘s jeep grille
was not sufficiently famous to be protectable under the FTDA. AM General brought the action
to obtain a declaratory judgment that the front grille of its new Hummer H2 sport utility vehicle
did not dilute or infringe DaimlerChrysler‘s similar-looking Jeep grille trade dress.
DaimlerChrysler asserted counterclaims for dilution and infringement of its trade dress ―family,‖


                                               27
consisting of ―seven to ten vertical slots that appear to be stamped through a planar surface‖ on
many of its Jeep grilles. DaimlerChrysler sought a preliminary injunction. On appeal from the
denial of the preliminary injunction, the Seventh Circuit affirmed, adopting the unpublished
decision of the district court as its own and incorporating the decision in its entirety.
         The Seventh Circuit held that DaimlerChrysler had failed to show that its family of marks
was famous prior to the adoption of the allegedly diluting mark, or that DaimlerChrysler
possessed a family of marks in the first place. Id. at 818. It also refused to apply the doctrine of
progressive encroachment to forgive DaimlerChrysler‘s delay in challenging the Hummer H2
grille. DaimlerChrysler argued that it was not required to act until AM General sold more than a
de minimis number of vehicles in the consumer market, because that is when the dilution actually
began. The Court found that the progressive encroachment doctrine ―affords DaimlerChrysler‘s
dilution claim no shelter in this case,‖ because dilution analysis looks to similarity of the marks
and the fame of the senior mark, not the timing of the commencement of competition between
the parties. Id. at 823-24.
         In Ty Inc. v. Perryman, 306 F.3d 509 (7th Cir. 2002), the Seventh Circuit held that a
merchant of a product bearing a famous trademark may use the mark in her business and domain
name without causing dilution under the FTDA. Ty manufactured bean bag plush toys under its
famous BEANIES mark. Operating under the business name ―Bargain Beanies,‖ Perryman sold
Ty and non-Ty plush toys at her secondary-market BARGAINBEANIES.COM web site. The
district court entered summary judgment for Ty on its trademark dilution claim and Perryman
appealed. The Seventh Circuit reversed in part.
         Based on the overwhelming evidence of public association of the BEANIES trademark
with Ty and its products, the court concurred with the district court‘s finding that Ty‘s BEANIES
mark was famous. However, it essentially found that Perryman‘s use of the mark in her business
name and web site where she resold Ty‘s own goods was a fair use: ―You can‘t sell a branded
product without using its brand name, that is, its trademark. . . We do not think that by virtue of
trademark law, producers own their aftermarkets and can impede sellers in the aftermarket from
marketing the trademarked product.‖ Id. at 512-13. The Court failed to differentiate between
use of a mark to advertise and sell the trademarked product, and the use of a mark to identify a
retail outlet or business engaged in the sale of the trademarked goods.
         In dicta, the Seventh Circuit went on to imply that a trademark holder should not be
allowed to use anti-dilution law to prevent its famous mark from becoming generic: ―An
interpretation of antidilution law as arming trademark owners to enjoin uses of their mark that,
while not confusing, threaten to render the mark generic may therefore not be in the public
interest.‖ Id. at 514. Finally, the Court found that while Perryman was free to use Ty‘s
BEANIES mark in connection with the resale of Ty‘s products, ―the last prohibition of the
injunction, the prohibition against using ―Beanie‖ or ―Beanies‖ in connection with any non-Ty
products . . . should stand.‖ Id.
         District Courts within the Seventh Circuit issued four notable decisions under the FTDA
in 2002. In Kraft Food Holdings, Inc. v. Helm, 205 F. Supp. 2d 942 (N.D. Ill. 2002), the
Northern District of Illinois entered a preliminary injunction under the FTDA against the
defendant‘s unsavory use of Kraft‘s famous VELVEETA mark. The defendant called himself
―King Velveeda‖ throughout his sexually-explicit and drug-oriented web sites. Kraft sued for
trademark dilution and moved for a preliminary injunction. The court found that VELVEETA
was a famous mark by virtue of its 80 years of use, millions of dollars in advertising, and billions
of dollars in sales of the trademarked products. Id. at 946. The court found further support for



                                                28
the fame of Kraft‘s mark in that ―VELVEETA, like POLAROID, COCA-COLA and KODAK
are coined words in the English language that conjure up nothing less than images of the
respective products associated with each mark.‖ Id. at 947. The court reiterated the holding in
Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456 (7th Cir. 2000) that a trademark holder is
only required to establish a likelihood of dilution, not evidence of actual harm. Id. at 948.
Finding that the parties‘ marks were ―strikingly similar‖ and that the defendant‘s ―arguably
offensive‖ acts were likely to tarnish Kraft‘s ―wholesome, family oriented‖ reputation, the court
granted Kraft‘s motion for a preliminary injunction. Id. at 949-950.
         In another Northern District of Illinois case, Sullivan v. CBS Corp., No. 00 C 5060, 2002
WL 554506 (N.D. Ill. April 15, 2002), the court entered summary judgment for defendant,
finding that the plaintiff could not prove fame or sufficient similarity of the marks for dilution.
Plaintiff was a member of the rock band ―Survivor.‖ CBS and the other defendants produced
and distributed merchandise related to the ―Survivor‖ television series, including cd‘s and t-
shirts. Plaintiff sued for trademark dilution and infringement, and the parties filed cross-motions
for summary judgment. The court entered summary judgment for the defendants on the dilution
count, because the parties‘ marks were used in a visually dissimilar fashion and because the
Plaintiff failed to prove the fame of his mark: ―Unlike the plaintiff in Eli Lilly, Sullivan has not
proven that his mark has achieved extraordinary fame in American culture . . . . [R]ather, the
renown of his mark, if any, is limited to the fairly narrow rock music scene, and thus no dilution
is likely to occur.‖ Id. at *11.
         In Caterpillar Inc. v. TeleScan Tech., L.L.C., No. Civ. A 00-1111, 2002 WL 1301304
(C.D. Ill. Feb. 13, 2002), the Central District of Illinois entered a default judgment of trademark
dilution. Caterpillar manufactures and sells large construction equipment. The defendant
registered 50 domain names containing famous trademarks, including six that included
Caterpillar‘s marks. At the web sites connected to the domain names, the defendant advertised
Caterpillar equipment and included links to the defendant‘s own web site. The court held that
the fair use defense had no application, because the defendant did more than merely advertise
that it resold Caterpillar goods. Id. at *5.
         In another case for dilution of Ty‘s BEANIES trademarks, Ty Inc. v. Agnes M. Ltd., No.
00 C 358, 2001 WL 1414210 (N.D. Ill. Nov. 9, 2001), the Northern District of Illinois entered
summary judgment for Ty under the FTDA and enjoined the defendant‘s use of Ty‘s famous
trademark in the URL for a web site at which the defendant sold both the trademarked product as
well as other products. Ty manufactures bean bag plush toys under a variety of trademarks,
including the registered BEANIE BABIES mark. Defendant sold Ty and non-Ty products at its
BEANIEBABES.COM web site and linked that site to its other commercial web sites.
Defendant also branded non-Ty products with Ty‘s trademarks. The district court entered
summary judgment of trademark dilution for Ty. The court, noting that ―there is no arbitrary
minimum time‖ for proving fame, found Ty‘s BEANIES and BEANIE BABIES trademarks
famous based on the popularity of the marks over the preceding 8 years. Id. at *13-14. The
court rejected defendant‘s fair use and first-sale doctrine defenses, because the defendant did
more than merely use Ty‘s mark to advertise that it was reselling Ty‘s products. Id. at 14.
Citing the Seventh Circuit‘s decision in Eli Lilly, the court noted that ―Ty need only demonstrate
a likelihood of dilution based on the renown of its trademarks and the similarity between those
marks and the allegedly diluting uses‖ of the defendant. Id. at *14. Given the defendant‘s near
duplication of Ty‘s mark and its use of that mark with non-Ty products, the court found that
defendant was liable for trademark dilution. Id. at *15.



                                                29
       Eighth Circuit - Allen Hinderaker , Merchant & Gould

         There were no Eighth Circuit decisions in 2002 of note dealing with the FTDA. At the
district court level, Kemp v. Bumble Bee Seafoods, Inc., 2002 U.S. Dist. LEXIS 19316 (D. Minn.
Sept. 30, 2002), addressed the elements of proof necessary to sustain a dilution claim under 15
U.S.C. § 1125(c). In doing so, it adopted the Second Circuit's reasoning in Nabisco, Inc., 191 F.
3d at 217-22, including what it called the court‘s eight-factor test (the Second Circuit panel in
Nabisco actually enumerated 10 factors it stated were ―pertinent‖ to the facts in that case). There
was no discussion, however, of the relative merits of this standard of proof to others, such as the
three factor test applied by the Seventh Circuit in Eli Lilly & Co. v. Natural Answers, Inc., 233 F.
3d 456 (7th Cir. 2000).
         The remaining cases decided in 2002 in the Eighth Circuit applied settled FTDA
principles to the fact of each case, with the dilution claim secondary to the claims of
infringement.

       Ninth Circuit - Alison P. Howard, Davis Wright Tremaine LLP

        Issues of trademark dilution were actively litigated in 2002 in the Ninth Circuit and
district courts within the Ninth Circuit. In significant decisions, courts found parodies and
nominative uses to be protected from dilution claims and elaborated on the concept of niche
fame.
        In a case highlighting the tension between trademark rights and free speech, the Ninth
Circuit held that a song that parodied Barbie was dilutive but protected under the noncommercial
use exemption of the Federal Trademark Dilution Act. Mattel, Inc. v. MCA Records, Inc., 296
F.3d 894 (9th Cir. 2002), cert. denied, 2003 WL 167680 (U.S. Jan. 27, 2003). Toy maker Mattel
sued MCA and other music companies for trademark infringement and dilution based on the
Danish band Aqua‘s song Barbie Girl. The song ―pokes fun at Barbie and the values that Aqua
contends she represents‖ with such lyrics as ―Barbie girl, in [her] Barbie world. … Life in
plastic, it‘s fantastic. You can brush my hair, undress me everywhere/Imagination, life is your
creation.‖ 296 F.3d at 901. Affirming summary judgment in favor of MCA on Mattel‘s
trademark claims, the court first found that the use of the Barbie mark in the song is a
―commercial use in commerce‖ since MCA sold Aqua‘s Barbie Girl single and the album it was
on. It then found the use of the mark to be dilutive since the mark would now bring to mind both
the doll and the song – ―a classic blurring injury.‖ However, because the song ―lampoons the
Barbie image and comments humorously on the cultural values Aqua claims she represents‖ and
is not commercial speech, it falls within the noncommercial use exemption under the Act. Id. at
906-07.
        The court emphasized that tensions between trademark law and the First Amendment
were heightened in the dilution context. Because dilution law is not pegged to likelihood of
confusion, an injunction to prevent dilution would not be limited to one or several related
industries and would instead apply broadly across the economy. In addition, balancing First
Amendment interests against the dual purposes of protecting trademark holders and preventing
harm to consumers does not appear in the dilution context; there the ―law protects only the
distinctiveness of the mark, which is inherently less weighty than the dual interest of protecting
trademark owners and avoiding harm to consumers that is at the heart of every trademark claim.‖
Id. at 904-05.



                                                30
        Earlier in 2002, a court in the Northern District of California also found a parody to be
protected from a dilution claim. Lucasfilm Ltd. v. Media Market Group, Ltd., 182 F. Supp. 2d
897 (N.D. Cal., 2002). Lucasfilm, which holds trademark and copyright rights to the Star Wars
films and related properties, unsuccessfully sought a preliminary injunction to block the
defendant from making and distributing Starballz, an animated porn film described as a parody
of the Star Wars films. The court held that the Star Wars mark was famous before the 2001
release of Starballz and that the porn film tarnishes the Star Wars marks. Nonetheless, it noted
that trademark dilution does not apply to noncommercial uses of a mark and that parody is just
such a noncommercial, protected use. The court thus held that Lucasfilm did not establish a
likelihood that it would prevail on a dilution claim.
        In Playboy Enter., Inc. v. Welles, 279 F.3d 796 (9th Cir. 2002), the Ninth Circuit held that
just as uses in comparative advertising are exempt under the Act, nominative uses of a mark do
not dilute the mark. Terri Welles, a former Playmate of the Year, had a website that contained
the marks and phrases Playboy, Playmate, Playboy, Playmate of the Year 1981 and Playboy
Playmate Of The Year 1981 and the abbreviation PMOY ‘81 in metatags, ads, wallpaper and
otherwise on the site. Playboy brought claims of trademark infringement, unfair competition and
breach of contract. For all but one use the court affirmed summary judgment for Welles on the
basis that her use of Playboy‘s marks was nominative and thus could not dilute the marks. The
court found that Welles‘ use of the marks satisfied the test for nominative uses that the court
adopted in New Kids on the Block v. News Am. Publ’g, Inc.:

                       First, the product or service in question must be one not
               readily identifiable without use of the trademark; second, only so
               much of the mark or marks may be used as is reasonably necessary
               to identify the product or service; and third, the user must do
               nothing that would, in conjunction with the mark, suggest
               sponsorship or endorsement by the trademark holder.

        971 F.2d 302, 308 (9th Cir. 1992). The court found that when Welles referred to her
Playmate title she was referring to the plaintiff‘s product and merely truthfully identifying
herself as the recipient of the title. The exception to that was her use of PMOY ‘81 in the
wallpaper. The court found that repeating the abbreviation to create a pattern was not necessary
to identify Welles and thus was not a nominative use. It remanded for the trial court to address
whether the PMOY mark is entitled to trademark protection. In the process, the court noted that
because PMOY and PLAYMATE OF THE YEAR were not identical or nearly identical, the
former could not dilute the latter.
        In Thane Int’l, Inc. v. Trek Bicycle Corp., 305 F.3d 894 (9th Cir. 2002), the Ninth Circuit
applied the niche fame concept to affirm summary judgment in favor of the maker of a stationary
exercise machine. The dispute involved the maker of OrbiTrek stationary exercise machine and
bike maker Trek Bicycle Corporation, which provides bicycles for the U.S. Postal Service Pro
Cycling Team and Tour de France winner Lance Armstrong. Trek had some experience in the
stationary bike market, selling or licensing stationary bikes from 1993-1997 and was intending to
enter the market for bicycle trainers. Thane began marketing a ―dual directional elliptical glider
stationary exercise machine for indoor use‖ in 1997. After Trek opposed registration of the
ORBITREK mark, Thane sought a declaration that it had not violated trademark laws; Trek
responded with counterclaims for, among other things, trademark infringement and dilution
under federal and state laws. The Ninth Circuit first noted that ―for a dilution claim to succeed,


                                                31
the mark used by the alleged diluter must be identical, or nearly identical, to the protected mark.‖
305 F.3d at 905 (citing Playboy, 279 F.3d at 805). It concluded that while the marks were not
identical, a reasonable factfinder could find that the marks were nearly identical.
        Trek‘s claim failed, however, because the court found its mark was not famous in any
relevant market segment or among members of the general public. Applying the niche fame
concept, the court said it was bound by what it described as the holding in Avery Dennison Corp.
v. Sumpton, 189 F.3d 868, 875 (9th Cir. 1999) – that ―marks famous in only a limited geographic
area or a specialized market segment can be ‗famous‘ for the purposes of the federal anti-dilution
statute‖ – ―despite its apparent tension with Avery Dennison’s overall message cautioning
restraint in applying dilution protections.‖ 305 F.3d at 908 (quoting Avery Dennison, 189 F.3d at
877). While a factfinder could find the companies share the same market segment, it could not
find that the companies operated in the same narrow market segment for purposes of determining
niche fame. The court held,

                       To maintain coherence, the niche fame concept must focus
               on highly specialized market segments with an identifiable
               customer base. Where those conditions obtain, participants are
               likely to make associations between marks that the general public
               will not make. As the market segments … become less specialized
               and less unitary, the notion that participants in those diverse
               markets will necessarily recognize and form mental associations
               with an established mark becomes increasingly questionable.

        Id. at 909. While Trek may be famous in the cycling market, the court held it was not
famous in the broader sporting goods market that it shared with OrbiTrek. Because Trek did not
achieve fame in the niche market and did not produce evidence to show fame among the general
public, Trek‘s dilution claim failed.
        District courts reached contrary conclusions on the issue of whether competitors may be
liable for trademark dilution, with the Central District of California holding that dilution claims
are inappropriate between competitors and the Eastern District of California granting a
preliminary injunction to prevent one company from diluting the mark of its competitor.
        In YKK Corp. v. Jungwoo Zipper Co., 213 F. Supp. 2d 1195 (C.D. Cal. 2002), zipper
maker YKK, which holds several incontestable marks with stylized representations of ―YKK,‖
filed infringement and dilution claims against competitor Jungwoo and its California division,
YPP. The Central District of California found for YKK on its infringement claims but denied
summary judgment of its dilution claims. Quoting McCarthy, the court asked, ―Why the need to
invoke the ‗super weapon‘ of the anti-dilution law to resolve what appears to be a garden variety
infringement case?‖ and held that dilution claims are inappropriate where the plaintiff and
defendant are competitors. 213 F. Supp. 2d at 1207-08. In CSC Brands LP v. Herdez Corp., 191
F. Supp. 2d 1145 (E.D. Cal., 2001), the Eastern District of California recognized that
competition is not necessary in dilution claims, yet it granted a preliminary injunction that the
plaintiff food companies sought against their competitor on grounds of trademark dilution.
Makers of V8 and V8 Splash vegetable and fruit juices filed infringement and dilution claims
against a competitor who marketed Verduras 8, Verduras 8 Picante-Limon and Frutas 8
vegetable and fruit juices. The court accepted evidence of actual confusion that the defendant‘s
use of the Spanish-language marks was blurring the ability of the V8 marks to identify co-
plaintiff Campbell Soup Company as the source of V8 products.


                                                32
        Elsewhere in the Ninth Circuit, the retail store Target unsuccessfully sought summary
judgment in the athletic company Adidas‘ lawsuit against it on grounds of trademark and trade
dress infringement and dilution. Adidas-Salomon AG v. Target Corp., 228 F. Supp. 2d 1192 (D.
Or. 2002). The court found sufficient evidence of fame of Adidas‘ ―Three Stripe Mark,‖
consisting of three parallel diagonal bands on its athletic shoes, for the company to defeat
summary judgment. As to dilution of Adidas‘ trade dress, the court first noted that Target raised
but did not fully address whether dilution applies to trade dress at all. It then held that to the
extent Target sought summary judgment that the trade dress was not sufficiently famous, its
motion would be denied.
        In General Motors Corp. v. Let’s Make a Deal, 223 F. Supp. 2d 1183 (D. Nev. 2002),
GM obtained a preliminary injunction against the seller of Hummer car kits. GM has
registrations for HUMMER and a design mark comprised of the nose and grill of the vehicle.
The defendant makes car kits that include the unique look of the Hummer. The court found that
it appeared the defendant‘s use of marks similar to GM‘s HUMMER and design marks would
blur the public‘s identification of the marks.
        In Nissan Motor Co. v. Nissan Computer Corp., 231 F. Supp. 2d 977 (C.D. Cal. 2002),
the court permanently enjoined the defendant computer sellers from using the domain names
<nissan.com> and <nissan.net> for commercial purposes. The court had previously found
dilution, holding that the defendant‘s ―use of the ‗Nissan‘ mark as a domain name ‗whittles
away‘ the distinctiveness of the ‗Nissan‘ mark and the ability of the mark to serve as a unique
identifier of Nissan‘s products.‖ In this decision, the court rejected the argument that a
permanent injunction of domain names obtained before enactment of the Act constituted an
impermissible retroactive application of the Act. The court found that critical commentary on
the defendant‘s <nissan.com> and <nissan.net> sites is commercial and impermissibly exploits
Nissan‘s good will. But it permitted noncommercial use to continue on those sites and critical
commentary to continue on other sites.

       Tenth Circuit - James D. Arden, Sidley Austin Brown & Wood LLP

        The Tenth Circuit did not issue a decision addressing the FTDA in 2002, and case law at
the district court level was also scant. In Ticket Solutions, Inc. v. Banks, 2002 U.S. Dist. LEXIS
8314 (D. Kan. May 6, 2002), the court granted a contested motion for a default judgment on a
claim of trademark dilution, holding in conclusory fashion that ―[t]he evidence establishes all the
prima facie elements‖ required for its claim. The court did not suggest that the plaintiff‘s mark,
―Ticket Solutions,‖ was famous or needed fame in order to warrant protection under the FTDA.
The court granted the injunction sought against defendant (and its web site
<ticketsolution.com>), but denied plaintiff attorneys‘ fees. In another case asserting trademark
dilution and other claims based on a defendant‘s domain name, a Colorado district court held that
the operation of the web site – which it found to be ―essentially passive‖ – was insufficient to
confer jurisdiction in Colorado over the Michigan defendant. SCC Communications Corp. v.
Anderson, 195 F. Supp. 2d 1257 (D. Colo. 2002). The court transferred the case to the Western
District of Michigan.

       Eleventh Circuit - Eugene A. Marconi, Connecticut Association of Realtors, Inc.

        Although there were no circuit court decisions, federal district courts within the Eleventh
Circuit decided several cases asserting FTDA claims in 2002. In PortionPac Chem. Corp. v.


                                                33
Sanitech Sys., 210 F. Supp. 2d 1302 (M.D. Fla. 2002), the plaintiff, which sold a food service
sanitation package of products and methodologies for school systems, sued a former distributor
that began marketing a similar package after the distributorship was terminated. The court
denied defendant‘s motion to dismiss claims for copyright and trade dress infringements and
federal trademark dilution. The court concluded that plaintiff had alleged sufficient facts
showing that defendants had used the plaintiff‘s trade dress and trademarks after both had
become famous ―throughout the school sanitation business.‖ The court, however, dismissed the
plaintiff‘s Florida anti-dilution statute claims because Florida‘s law applied only to the use of
similar trademarks on dissimilar products and not to situations where, as here, the trademarks
were used on similar products.
        In Corbitt Mfg. Com. v. GSO Am. Inc., 197 F. Supp. 2d 1368 (S.D. Ga. 2002), the
plaintitff manufacturer of cypress mulch under a ―NO FLOAT‖ trademark (plaintiff claimed its
mulch would not float away when exposed to water as a result of its exclusive manufacturing
process) asserted federal and state dilution claims. The court found that the plaintiff sold its
product in 28 states and through over 400 retailers, including retail titans Wal-Mart and Home
Depot. The court further found that the plaintiff sold 23 million bags of mulch, spent $300,000
to promote its mark, and generated $37 million in revenues in the three years prior to the lawsuit.
Defendant, which also sells a 100% cypress mulch that it claims would not float away, in 1999
changed the packaging on its product to add the words ―won‘t wash away, blow away or float
away!‖ along with the words ―NON-FLOATING.‖ The plaintiff claimed that these words
infringed upon and diluted its ―NO FLOAT‖ trademark.
        The court refused to enter a preliminary injunction, finding that the plaintiff had not
produced evidence of the requisite level of ―fame‖ to sustain a Lanham Act dilution claim. ―NO
FLOAT‖ was a descriptive mark with little evidence of acquired distinctiveness. The plaintiff
did not provide any evidence of the mark‘s degree of recognition other than its sales figures.
There was also conflicting evidence as to whether the defendant‘s mulch actually floated away
when exposed to water and whether it was composed of 100% cypress. Faced with this
conflicting evidence, the court could not conclude that the defendant‘s use of ―NON-
FLOATING‖ caused dilution of the distinctive quality of the plaintiff‘s mark. The court also
refused to grant a preliminary injunction on the state law dilution claim. While Georgia law does
not require a mark to be famous to receive protection, it does require a likelihood of dilution of
the distinctive quality of the mark. Here, the mark was descriptive. Its presumption of secondary
meaning due to the mark‘s incontestability was irrelevant under Georgia law. Since the Plaintiff
failed to provide any evidence that the public associated a trademark with its goods, it failed to
prove that the mark had acquired a secondary meaning for Georgia law purposes.
        In Porsche Cars N. Am. Inc. v. Lloyd Design Corp., 2002 U.S. Dist. LEXIS 9612 (N.D.
Ga. Mar. 26, 2002), plaintiff brought suit against a former licensee of its trademarks for dilution
and infringement. The defendant, a manufacturer of automobile floor mats, weaved certain
model numbers of plaintiff‗s automobiles into its mats after its license expired. Both parties filed
motions for summary judgment in part, though only defendant sought summary judgment on the
trademark dilution claim, arguing that the model numbers had not achieved the requisite level of
fame. Summary judgment was granted when plaintiff failed to oppose defendant‘s argument and
indeed stated that it agreed to dismiss its dilution claim.
        In Monsanto Co. v. Campuzano, 206 F. Supp. 2d 1271 (S.D. Fla. 2002), summary
judgment under the Florida anti-dilution statute was granted to a food distributor that sold the
sweetener Equal to additional defendants who repackaged product originally manufactured for



                                                34
the institutional market for sale to the retail market. The court held that Florida statute applied
only to the use of similar trademarks on dissimilar products and therefore did not apply to
counterfeited trademarks on boxes containing genuine Equal product. In Monsanto Co. v.
Campuzano, 206 F. Supp. 2d 1252 (S.D. Fla. 2002), the court refused plaintiff‘s motion for
summary judgment as to liability against those defendants who actually performed the
repackaging, on the same grounds on which summary judgment was granted to the defendant
distributor. Although the plaintiff had made a claim specifically under the FTDA, the court
lumped together the trademark infringement and dilution claims and made no independent
analysis of the federal dilution claim.
        Florida‘s anti-dilution law was further explored in Sakura Japanese Steakhouse Inc. v.
Lin Yan, Inc., 827 So. 2d 1105 (FLa. 2d Dist Ct. App. 2002), where the court held that trademark
dilution under the state statute does not depend on competition or the likelihood of confusion.
Likelihood of injury to business reputation or dilution of the distinctive quality of trade name
could also form the basis for a dilution claim under Florida law. The court therefore reversed a
trial court decision that had denied a motion for a temporary injunction against the defendant,
which had used the plaintiff‘s name on its restaurant.

       Trademark Trial and Appeal Board - James D. Arden, Sidley Austin Brown & Wood LLP

        Dilution first became available as a ground for opposition to an application for trademark
registration with the enactment of the Trademark Amendments Act of 1999, which permits
retroactive application so as to allow oppositions brought against applications filed on or after
January 16, 1996 to be amended to include dilution claims, absent prejudice to the defendant. In
December 2001, the Trademark Trial and Appeal Board (TTAB) issued its first decision
addressing a trademark opposition under the FTDA. The TTAB rejected the opposer‘s claim
that an applicant‘s ―TOROmr‖ mark for a computer disk drive component was ―likely to dilute
the distinctive quality of Opposer‘s famous TORO mark.‖ Toro Co. v. ToroHead, Inc., 61
U.S.P.Q.2d 1164 (Dec.12, 2001).
        The TTAB in Toro addressed key dilution issues that have split the courts. First, relying
on the FTDA‘s legislative history, the TTAB held that a dilution claim can be raised against an
application based merely on an intent to use the mark in commerce; actual use -- or actual
dilution -- is not necessary. Second, the TTAB decided that under the FTDA a mark‘s fame and
distinctiveness are separate elements that must be shown. Fame is particularly difficult to prove
for dilution purposes: ―A mark may have acquired sufficient public recognition and renown to
demonstrate that it is a strong mark for likelihood of confusion purposes without meeting the
stringent requirements to establish that it is a famous mark for dilution purposes.‖ According to
the TTAB, the opposer did not establish that its TORO mark was famous to the general public.
The TTAB also found that the opposer could not rely on ―niche market‖ fame because the
parties‘ trading fields did not overlap.
        In numerous unpublished opinions in 2002, the TTAB found oppositions based on
dilution claims deficient under the stringent standard of fame it announced in Toro. It also
rejected oppositions that failed to allege that the opposer‘s mark had become famous prior to the
filing date of the opposed trademark application. In its only substantial decision under the FTDA
in 2002 that is citable precedent, Enterprise Rent-A-Car Co. v. Advantage Rent-A-Car Inc., 2002
TTAB LEXIS 8 (Trademark Trial & App. Bd. Mar. 26, 2002), the TTAB rejected an opposer‘s
claim that the issue of fame may be judged on a region-by-region basis. The opposer argued that
―a dilution plaintiff need only prove that its mark became famous in a particular geographical


                                                35
region prior to the defendant‘s use in that region‖ (emphasis in original). The Board refused to
consider geographical limitations, observing: ―Federal registration generally affords the owner
rights which are national in scope.‖
        Similarly, in a case that is not citable precedent, the TTAB found that the fame of U S
WEST, a regional telephone company, lacked sufficient geographical scope for protection under
the FTDA. See U S West, Inc. v. Hatten Communications Holding Co., 2002 TTAB LEXIS 620
(Trademark Trial & App. Bd. Sept. 25, 2002) (―While a mark may be famous for dilution
purposes even if it is not famous in every part of the United States, we find that a mark which is
famous in only one area of the United States which contains but 13% of the overall United States
population does not qualify as being included in that ‗select class of marks‘ for which the FTDA
is intended to apply.‖).



                                      For     Against     Abstain    Not Heard From     Info Only
             Resolution 205-1         23        1           0              5                1
             Resolution 205-2         23        1           0              5                1




                                               36
Members Approving Report:


         Jordan S. Weinstein                           Allen Hinderaker
         Stephen W. Feingold                           Ira J. Levy
         Ira Sacks                                     Terrence J. O'Toole
         Jack A. Wheat                                 David G. Swenson
         Philip H. Gottfried                           Diane Siegel Danoff
         D. Peter Harvey                               Alison P. Howard
         Jennifer A. Van Kirk                          Eugene A. Marconi
         Stephen C. Werner, Jr.                        Gregory Samuel Shatan
         Jeff Wilson                                   Richard W. Young
         Nishan Kottahachchi                           Michael J. Dunne
         Bridget Cooney                                Howard S. Fredman
         James D. Arden, Chair                         Ranjitsinh Mahida


Members Disapproving Report:

               ......                                 ......

Members Approving Report in Part:

         Steven Hartman

Members Abstaining:

               ......                                 ......

Members not heard from:

         Jacob Schwarz
         Joshua Tropper
         Patricia C. DeRamus
         John A. Scillieri
         Catherine Van Horn

Information Only Participants:

         Bruce Vosberg



{H:\ABA\ABA COMMITTEE 205 REPORT-2002-2003-FINAL-041603.DOC}




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