United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ Nos. 97-1950 and 97-2330

___________ Viacom Incorporated; Blockbuster * Entertainment, Inc., * * Plaintiffs - Appellees/ * Cross Appellants, * * Appeals from the United States
v. * District Court for the * Western District of Missouri. Ingram Enterprises, Inc.; Blockbuster * Fireworks, Inc.; Fireworks Supermarkets * of America, Inc.; Blockbuster Fireworks * of California, Inc., * * Defendants - Appellants/ * Cross Appellees. *

___________ Submitted: December 8, 1997 Filed: April 14, 1998

___________ Before BOWMAN, LOKEN, and HANSEN, Circuit Judges.

___________ LOKEN, Circuit Judge.
Vi acom Inc. and Blockbuster Entertainment, Inc. (“Viacom”), own man y fe derally registered trademarks centered around the marks BLOCKBUSTER an d BLOCKBUSTER VIDEO. The first mark was registered in 1986, and some are now-2-

incontestable under 15 U.S.C. § 1065. Viacom owns or franchises 4,500 Blockbuster Video and 500 Blockbuster Music stores. The BLOCKBUSTER marks are heavil y advertised a nd promoted and are used on a wide variety of consumer products an d services. Ingram Enterprises, Inc., and three of its affiliates (“Ingram”) own an d operate fireworks stands in Missouri and California. Ingram owns a BLOCKBUSTER mark that was federally registered for fireworks s ales in 1992, and a BLOCKBUSTER FIREWORKS mark for which a federal registration application is pending.

Viacom commenced

this action in May 1994, asserting a variety of federal and state law claims for trademark infringement and dilution. After discovery, both sides moved for sum

mary judgment. In a series of orders, the district court denied Viacom

summa ry judgment on its claims of trademark infringement because the evidence o f likelihood of confusion was not conclusive; granted Viacom summary judgment on its claim under Missouri’s anti-dilution statute, Mo. R ev. Stat. § 417.061(1), and enjoined Ingram from furthe

r use of BLOCKBUSTER marks in Missouri; dismissed Viacom’s cla im under the Federal Trademark Dilution Act of 1995, 15 U.S.C. § 1125(c ) (“FTDA”), because the relief sought would render the statute impermissibly retroactive; and denied all remain ing claims for summary judgment. Ingram appealed the grant of summary judgment and an injunction unde r Missouri anti-dilution law. After the court entered final judgment dism issing the FTDA claim, see Fed. R. Civ. P. 54(b), Viacom cross-appealed that dismissal. Reviewing these summ ary judgment issues de novo , we conclude the district court erred in declining to apply the FTDA, an error whic h requires us to reverse both the grant of su mmary judgment on Viacom’s state law antidiluti on claim, and the dismissal of Viacom’s FTDA claim for prospective relief

. Acco rdingly, we convert the district court’s permanent injunction into a preliminar y injunction, reverse in part, and remand.§ 1125(c)(1) provides in relevant par t: “(1) The owner of a famous mark shall 1 be entitled, subject t o the principles of equity and upon such terms as the court deems reasonabl e, to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after th e mark has become famous and causes dilution of the distinctive quality of the mark . . . .”
-3- I.
For reasons that will become apparent, it is essential to address first the FTDA’s impa cton a lawsuit commenced before enactment that seeks relief against on-goin g conduct. The FTDA protects a “fam ous” trademark from subsequent uses that tarnish

or disparag e or blur the distinctiveness of the mark, regardless of the likelihood o f customer confusion. The Act creates a remedy against non-competing trademark uses such as “DuP ont shoes, Buick aspirin, and Kodak pianos.” 141 C ONG

. R EC

. H14317 (daily ed. Dec. 12, 1995) (statement of Rep. Moorhead). The FT DA entitles the owner of a famous mark to a nationwide injunction if another person’s sub sequent commercial

use of a mark “causes dilution of the distinctive quality of the [famous] mark,” 1 5 U.S.C. § 1 125(c)(1), and to damages for willful dilution, 15 U.S.C. § 1125 (c)(2)

. 1 However, the FTDA also provides a complete defense to state law dilution claims to owners of valid, fed erally registered marks, 15 U.S.C. § 1125(c)(3). We must decide whether in junctive relief authorized by § 1125(c)(1) may be granted against on-going dilutio n that began before the FTDA’s enactment in January 1996, and whether § 1125(c) (3) applies to Viacom’s pre-enactment state law anti-dilution claim agains t Ingram’s registered mark.
A. Viacom’s Claim for Inj unctive Relief under § 1125(c)(1). In Landgraf v. USI Fi lm Products , 511 U.S. 244, 278 (1994), the Supreme Court revived th e “traditional presumption against applying statutes affecting substantive rights , lia bilities, or duties to conduct arising before their enactment,” absent an expres s statutory command to the contrary. However, the Court also noted thatCount VIII of Viacom’s Second Amended Complaint also sought the recovery 2 of willful dilution damages under § 1125(c)(2). However, though Viacom cros s appealed thedismissal of Count VIII, it argues on appeal only that Landgraf does not foreclose its claim for prospective relief under § (c)(1). Therefore, the dismissal o f paragraphs 74 and 76 of the Second Amended Complain t is unchallenged, and Viacom is barred from seeking § (c)(2) monetary relief on remand.
Accord S Indus., Inc. v. Diamond Multimedia Sys ., Inc. , 1998 WL 21661, *8-9 3 (N.D. Ill. 1998); Resorts of Pinehurst, Inc. v. Pinehurst Nat’l Dev. Corp. , 973 F. Supp. 552, 555-59 (M.D.N.C . 1997). Contra Fuente Cigar, Ltd. v. Opus One , 985 F. Supp. 1448, 1451-53 (M.D. Fla. 1997).
-4- applicat ionof new statutes passed after the events in suit i s unques tionably proper in many situations. [For example, w]hen th e intervening statute authorizes or affects the propriety o f prospective relief, application of the new provision is not retroactive.

511 U. S. at 273. The FTDA contains no express language addressing retroactivity

. Theref ore, Ingram argues that Viacom’s claims for FTDA relief are barred by th e traditio nal presumption against retroactivity. Viacom responds that it is entitled t o prospective FTDA relief against continuing dilution of its BLOCKBUSTER marks. 2

I n dismissing Viacom’s claim for prospective FTDA relief, the district court relie d on Circuit City Stores, Inc. v. OfficeMax, Inc. , 949 F. Supp. 409 (E.D. Va

. 1996). The court in Circuit City described the above-quoted language in Landgraf as dicta and held that prospective FTDA relief would have an impermissible retroactive effect. B ecause the diluter’s conduct did not violate federal law when initiated, i t would be “manifestly inequitable” to compel the diluter to surrender good wil l associated with its competing mark. 949 F. Supp. at 419. We disagree. 3

In the fi rst place, we will not brush aside as dicta the Supreme Court’ s pronouncement that an intervening statute may “authorize[] . . . prospective relief”As a noted jurisprudential scholar explained, “If every time a man relied o n 4 existi ng law in arranging his affairs, he were made secure against any change in legal
ru les, the whole body of our law would be ossified forever.” L. Fuller, The Morality of Law 60 (1964), quote d in Landgraf , 511 U.S. at 269 n.24. For a dramatic example of pros pective relief that upset settled expectations, see DIRECTV, Inc. v. FCC , 110 F.3d 816, 825-26 (D.C. Cir. 1997)
-5- without r unning afoul of the traditional presumption against retroactivity. Tha t pronou ncement

was expanded upon in Justice Scalia’s concurring opinion for thre e Justices. See511 U.S. at 293 & n.3. As we read Landgraf , the pronouncement is not “dicta.” It is part of a carefully crafted holding on retroactivity that is binding on this court.
Second, the court in Circuit City analyzed cases cited in Land graf and concluded that the prospective relief pronouncement only applies when th e conduct to be enjoined was illegal prior to the new statute’s enact ment. However, other Supreme Court cases make it clear that the pronouncement h as a broader sweep. For example, in upholding a Sherman Act injunction, the Court many years ago stated:

It is said that to grant the injunction prayed for in this case is to give the stat ute a retroactive effect; that the contract, at the time it was entere d into, was not prohibited or declared illegal by the statute, as it had no t then been passe d, and to now enjoin the doing of an act which was legal at t he time it was done would be improper. We give to the law n o retroactive effect. The agreement in question is a continuing one. . .

. Assuming such action to have been legal at the time the agreement wa s first ent ered into, the continuation of the agreement, after it has bee n declared to be illegal, becomes a violation of the act.

United States v. Trans-Missouri F reight Ass’n , 166 U.S. 290, 342 (1897); to the same effe ct, see Waters-Pierce Oil Co. v. State of Texas , 212 U.S. 86, 107-08 (1909) ; Chicago & Alton R.R. v. Tranbarger , 238 U.S. 67, 73 (1915). Here, the conduct 4As the Court observed in Landgraf , “Th e largest category of cases in which we 5 have app lied the presumption against statutory retroactivity has involved ne w provisions affectin g contractual or property rights, matters in which predictability and stability are of prime importance.” 511 U.S. at 271. To war rant injunctive relief under § 1125(c)(1), Viacom must prove its mar k 6
was “fam ous” at the time Ingram began using the diluting mark. “By definition, al l ‘trademar ks’ are ‘distinctive’ -- very few are ‘famous.’” 3 M C C ARTHY O N T RADEMARKS AND U NFAIR C OMPETITION § 24:91, at 24-149 (4th ed. 1997).
-6- sought to be enjoined under the FTDA is Ingram’s continuing use of it s BLOCKBUSTER marks, not its pre-enactment conduct.

Third, Ingr am argues that applying the FTDA would unfairly deprive it of th e investment in its BLOCKBUSTER marks. We agree that fairness is important i n considering retroactivity issues. There is also a difference between applying a ne w trademar k

infringement statute to enjoin conduct causing public confusion, an d applying a new anti-dilution sta tute to enhance Viacom’s private property rights at the exp ense of Ingram’s pre-existing property rights. However, the answer to this ver y 5 real issue is not to abandon the general rule that new statutes may be enforce d prospecti vely. Section § 1125(c)(1) expressly provides that its injunctive relief i s “subjectto the discretion of the court and the principles of equity.” If Ingram’s noncompeting, non-confusing use of its BLOCKBUSTER mark prior to the FTDA’ s
ena ctment

was lawful and resulted in Ingram acquiring a valuable and legitimat e property interest of its own, Viaco m will presumably not be entitled to an anti-dilution injun ction granting it a nationwide monopoly in the use of this rather common word. 6
For the foregoing reasons, we conclude that the di strict court erred in dismissing the part of Count VIII that seeks prospective relief under § 1125(c)(1).The dis trict court observed there is a paucity of dilution law and a wealth o f 7 trademark

infringement law. This is logical. Trademark infringement relief protect s the public from confusion by enforcing the rights of a prior mark, whereas dilutio n relief, being premised on the ab sence of confusion, merely protects the property rights
-7- B. Ingram’s DefenseBased upon § 1125(c)(3). Section 1125(c)(3) provides that ownership of a “valid federal registration . . . shall be a complete bar to an action against that person, with respect to that mark, that is brought by another person under the common l aw or a statute of a State and that seeks to prevent dilution of th e distinct iveness of a mark.” We must separately consider the retroactive effect of this provision. See Maitland v. University of Minnesot a , 43 F.3d 357, 361 (8th Cir. 1994).

Vi acom seeks (and has been granted) an injunction under the Missouri anti

dilution statute, Mo. Rev. Stat. § 417.061(1). Because “relief by injunction operates in futuro ” and gives Viacom “no ‘vested right’ in the decree e ntered by the trial court,” there is no retroactivity bar to applying a new, more restrictive statute on appeal

. Landgraf , 511 U.S. at 273-74. Indeed, even if an injunction has matured into a final judgment, “when Congress a lters the substantive law on which an injunction is based, the injunction may be enforced only insofar as it conforms to the changed law.” Gavin

v. Branstad , 122 F.3d 1081, 1086 (8th Cir. 1997). Thus, the district court erred i n concluding that § 1125(c)(3) “is inapplicable” to this case. Because Ingram wa s granted federal registration of its BLOCKBUSTER mark in 1992, the court mus t reconsider its grant of summary judgment and a permanent injunction based on th e Missouri anti-dilution statute in light of § 1125(c)(3).

II.

This is an i nterlocutory appeal, so the case must of course be remanded. O n remand , there will presumably be a trial of the main event -- Viacom’s claims o f trademark infringement -- as well as th e subsidiary claims of dilution under FTDA and Missouri law. We have not considered the district court’s lengthy discussion of

7of the prio r mark’s owner. As one treatise commented, “When trademark law leaves

the firm a nd traditional ground of protecting customers from confusion and seek s protect ionfor the trademark ‘property’ itself, a strong rationale is necessary.” 3 M C C ARTHY at § 24:70, p. 24-119.
Alt hough § 1125(c)(3) provides a “complete bar” to state law dilution claims, 8 Viaco m could block this defense, for example, by establishing that Ingram does no t own a “valid registration.”
-8- trademark infringement issues in denying Viacom summary judgment on those claims. Thus, there is no appellate law of the case as to those issues. Like any summar y judgment ruling, the district court is free to reconsider its initial conclusions on th e basis of a fully developed trial record.
There are two aspects of the case that deserv e further comment. First, Viacom’s claim under the Missouri anti-dilution act is not fore closed or superseded by the FTDA, because Viacom may fail to prove its claim for inju nctive relief under § 1125(c)(1), and Ingram may fail to prove that it is entitled to the § 1125(c)(3) defense against this state law claim. Ingram argues the Lanham Act completely preempts state anti-dilution laws

8 such as § 417.061. We implicitly rejected this contention in Anheuser-Busch, Inc. v. Balducci Publications , 28 F.3d 769, 777-78 (8th Cir. 1994), cert. denied , 513 U.S. 1112 (1 995), and it has been explicitly rejected by at least three circuits. See Nikon Inc. v. Ikon Corp. , 987 F.2d 91, 96 (2d Cir. 1993); Ringling Bros.-Barnum & Bai ley Combined Shows, Inc. v. Celozzi-Ettelson Chevrolet, Inc. , 855 F.2d 480, 483 (7th Cir. 1988) ; Go lden Door, Inc. v. Odisho , 646 F.2d 347, 351-52 (9th Cir. 1980). Those decisions are consistent with Supreme Court decisions declining to preempt state legislation in the areas of copyright, see Goldstein v. California , 412 U.S. 546 (1973), and trade secrets,

see Kewanee O il Co. v. Bicron Corp. , 416 U.S. 470 (1974). In addition, we note that Congress in § 1125(c)(3) of the FTDA made federal trademarkTo put the difference between infringement and dilution more concretely, if a 9 parent says to the kids, “Let’s go pick something out at Blockbuster tonight,” and the youngest c hild assumes they will be buying fireworks made by Viacom, that i s evidence of the confusion that is essential to a claim of trademark infringement. But if the old est child answers, “Which Blockbuster,” that evidences dilution by blurring.
-9- registration a defense to claims under state anti-dilution statutes, rather than preempting such statutes altogether.
Ingram nex t argues that the district court erred in granting summary judgmen t because Viacom failed to establish as a matter of law the “likelihood . . . of dilution” that must be prove d to warrant injunctive relief under § 417.061(1). The district court concluded that Vi acom has shown a likelihood of dilution by blurring. As this concept was explained in an early landmark article on dilution:

If “Kodak” may be used for bath tubs and cakes, “Mazda” for camera s and sh oes, or “Ritz-Carlton” for coffee, these marks must inevitably b e lost in the commonplace words of the language, despite the originality and ingenuity in their contrivance, and the vast expenditures in advertisin g them which th e courts concede should be protected to the same extent as plant and machi nery. . . . [An] entirely arbitrary symbol would soon lose its arresting uniqueness and hence its selling po wer if it could also be used on pianos, shaving cream, and fountain pens.

Frank L. Schechter, The Rational Basis of Trademark Protec tion , 40 Harv. L. Rev. 813, 830 (1927). 9

Th e trademarks mentioned in the Schechter article are arbitrary or fancifu l words, long associated in the public’s eye with a parti cular company. Likewise, courts almos t without exception have limited dilution-by-blurring relief to the owners o f “strong” marks. “Without such a requirement, an anti-dilu tion statute becomes a rogue law that turns every trademark, no matter how weak, into an anti -competitive weapon.”-10-

3 M C C ARTHY at § 24:108, p p. 24-195-96. In Cushman v. Mutton Hollow Land Dev., Inc. , 782 S. W.2d 150, 162 (Mo. App. 1990), one of the few state court decision s applying § 417.061, the court upheld the grant of relief because the plaintiff’s strong

ma rk had acquired secondary meaning. Accord Mead Data Central, Inc. v. Toyot a Motor Sales, U.S.A., Inc. , 875 F.2d 1026, 1030-31 (2d Cir. 1989).

In this case, the district court concluded that Viacom need not show secondary

mean ing for its trademark infringement claim because the BLOCKBUSTER mark i s suggestive and therefore “deemed a strong mark” for Lanh am Act purposes. The court then ap plied this analysis to the Missouri anti-dilution claim, without discussin g Missouri authorities. It was error to conclude th at proof of a mark’s strength sufficient for federal trademark infringe ment purposes is necessarily sufficient to sustain a claim of dilution-by- blurring under Missouri law. For example, the district court concluded

as a matter of law that Viacom’s BLOCKBUSTER mark is strong because it i s suggestive of a commonly understood meaning of that word, a hit movie. But a visit to the dictionary confirms that the original meaning of the word was a very large bomb designed to be dropped from an airp lane. Thus, while BLOCKBUSTER is suggestive of some of the movies Blockbuster Video stores sell or rent, it is equally suggestive of some of the fireworks Ingram sells. Of course, there is much more to the questions of trademark infringement and dilution than these simple word associations. But the fact that Viacom is seeking a complete monopoly on the use of a rather common word with multiple meanings would make us hesitate to uphold summary j udgment on its dilutionby-b lurring claim, even if the district court had not erred in disregarding Ingram’ s § 1125(c)(3) defense. As one treatiseconcluded its discussion of dilution-by-blurring, “this is a potent legal tool, which must be carefully used as a scalpel, not a sledgehammer.” 3 McCarthy at § 24:114 , p
. 24-208.
Finally, we must address the important question of the district court’s permanent injunction again st Ingram’s use of BLOCKBUSTER marks in Missouri. Because theViacom argues on appeal that it has also proved dil ution by tarnishment, which 10
occurs “when a defendant uses the same or similar marks in a way that creates a n undesirable, un wholesome, or unsavory mental association with the plaintiff’s mark.” Anheuser-Busch , 28 F.3d at 777 (quotation omitted ). We reject the contention that, as a matter of law , the sale of fireworks tarnishes a business that rents movies.
-11- court erred in granting summary judgment on Viacom’s state law anti-dilution claim, 10 the permanent aspect of thi s injunction must be set aside. However, the district court had discretion to issue a preliminary injunction to this effect, and its analyses of th e trademark infringement and dilution iss ues strongly suggest that it would have done so had it not considered a permanent injunction appropriate. In these unusua l circumstances, we will leave the injunction in place as a prelimin ary injunction, without prejudice to the district court revisiting the issue on remand.

For th e foregoing reasons, we reverse the grant of summary judgment o n Viacom’s state law anti-dilution claim, reverse in part the dismi ssal of Viacom’s FTDA dilution claim, and remand for further proceedings not inconsistent with this opinion. The permanent injunction entered by the district court will remain in effect as a preliminary injunction, subject to that court’s discretion to modify or vacate the decree.
A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.