United States Court of Appeals,

Fifth Circuit.

Nos. 96-20398, 96-20520.

EXXON CORPORATION, Plaintiff-Appellee,

v.

OXXFORD CLOTHES, INC. and Oxxford Clothes XX, Inc., Defendants-Appellants.

April 10, 1997.

Appeals from the United States District Court for the Southern District of Texas.

Before KING, GARWOOD and PARKER, Circuit Judges.

GARWOOD, Circuit Judge:

Defendants-appellants Oxxford Clothes, I nc., and Oxxford Clothes XX, Inc. (Oxxford),

appeal the district court's judgment dismissing Oxxford's affirmative defense of naked licensing and

Oxxford's state law dilution counterclaim in this trademark dispute with plaintiff-appelle e Exxon

Corporation (Exxon). We affirm.

Facts and Proceedings Below

Both the "Exxon" mark and the complementary stylized interlocking "XX" symbol have been

used by Exxon since the early 1970's, both marks receiving federal registration in 1972. In 1949,

Oxxford federally registered as a trademark the name "Oxxford," written in the romanized alphabet

but not including any stylized or interlocking "XX" design.

For more than two decades Exxon has aggressively protected its mark fro m infringement

and/or dilution by seeking out and negotiating with other companies using marks similar to its own.

In lieu of conclusive litigation, many of these companies opted to enter "phase out" agreements with

Exxon in which the other company agreed that after existing stores of stationary, advertising

materials, and products bearing the offending mark were exhausted, use of that mark would be

discontinued. These phase out periods afforded the potentially infringing or diluting companies time

to develop and implement a new mark. The phase out agreements did not contain any quality control

mechanisms ensuring the quality of goods or services offered under the offending mark during the1 Phase out agreements orchestrated by Exxon during the 1970s did give Exxon quality control

rights over the alleged infringer or diluter's products. Later phase out agreements, however, did

not give Exxon such rights. It is these later agreements on which Oxxford's naked licensing

defense is based. There are some fourteen of these later agreements. One of these has a

three-year phase out period. All the rest are shorter, the next longest period being one year,

which is provided for in four of these agreements; one has a ten-month period; two have six

months; the remainder are three months or less. Five of these agreements settle litigation then

actually pending.

2 Exxon initially filed suit against Oxxford Clothes, Inc. In December of 1994, two months after

this suit was filed, the assets of Oxxford Clothes, Inc., were purchased through a foreclosure sale

by another corporation, John F. McDonough, Inc., a wholly-owned subsidiary of Tom James

Company. John F. McDonough, Inc., subsequently changed its name to Oxxford Clothes XX,

Inc. Oxxford Clothes XX, Inc., was added to this lawsuit in its capacity as successor-in-interest to

Oxxford Clothes, Inc., pursuant to Fed. R. Civ. Pro. 25(c).

3 Jurisdiction over Exxon's final complaint was founded on diversity. phase out period. 1

In 1993, Oxxford began using a t rademark featuring an interlocking "XX" design virtually

identical to that long previously registered by Exxon. Exxon filed suit against Oxxford 2 in October

of 1994, complaining that Oxxford's use of the interlocking "XX" design infringed its

federally-registered trademark, diluted Exxon's mark, and otherwise constituted an unfair business

practice. Exxon amended its complaint twice, ultimately dropping all but its Texas law dilution

claim. 3

In response to Exxon's second amendment of its complaint, Oxxford filed an amended answer

raising a bevy of affirmative defenses, prime among these being an assertion that Exxon's phase out

agreements with other allegedly infringing and diluting companies constituted "naked licenses." The

gist of Oxxford's argument was that these agreements, insofar as they authorized thi rd parti es to

continue to use infringing or diluting marks with Exxon's knowledge and approval, were "licenses";

and, because t hese "licenses" contained no quality control provision, they were "naked licenses"

which, under prevailing law, could lead to forfeiture of Exxon's rights in its licensed marks.

On May 31, 1995, Oxxford filed a counterclaim alleging that, under Texas law, Exxon's use

of its trade name, "Exxon" (without regard to the interlocking "XX" design), had diluted or tarnished

its name and registered mark, "Oxxford." The basis of Oxxford's claim was a purported ease of

association between "Exxon" and "Oxxford" which might lead aspects of Exxon's alleged corporatereputati on for general greed and environmental destructiveness to be negativel y attri buted to

Oxxford. The requested relief was that Exxon be enjoined from using its registered marks.

Both parties filed a plethora of motions, the pertinent ones for purposes of this appeal being

cross-motions for summary judgment on Oxxford's affirmative defenses, motions by Exxon to dismiss

Oxxford's dilution counterclaim and to strike portions of that counterclaim, and a motion for partial

summary judgment by Oxxford challenging Exxon's laches defense to its counterclaim.

On March 18, 1996, the district court entered a memorandum opinion and order in which,

inter alia, it granted Exxon summary judgment on Oxxford's affirmative defense of naked licensing.

The district court concluded that Exxon's phase out agreements were not licenses because, contrary

to Oxxford's assertion that the agreements permitted third parties to continue mi sleading uses of

Exxon's mark, the phase out agreements were in fact an appro priat e mechanism for halting such

activities, i.e.

, legal settlements which ultimately secured Exxon's rights in its marks while avoiding

the time and expense associated with trademark litigat ion. The distri ct court al so opi ned that the

allegedly infringing and/or diluting companies which were party to these phase out agreements would

have had no interest in being associated with Exxon and thus no reason to consent to the quality

control provisions; therefore, imposing such a condition would have led these third parties to balk

at entering the phase out ag reement s, limiting the utility of these devices in the resolution of

trademark disputes. Finally, noting that the failure to prosecute or pursue infringers or diluters does

not necessarily result in forfeiture of the trademark holder's exclusive rights in the mark, the district

court posited that "[i]t would be anomalous for the Court to find facts supporting abandonment

because Exxon has a strong enforcement program."

The district court also rendered summary judgment in Exxon's favor on Oxxford's

tarnishment-dilution counterclaim. The district co urt rested its ruling on three separate

determinations: 1) "Oxxford" is not a distinctive mark; 2) Oxxford failed to show that its mark had

been used in an "unwholesome context" by Exxon; and 3) because Oxxford knew of the similarity

between the marks for over twenty years and failed to act, the c o unt erclaim is barred by laches.

Based on the dismissal of Oxxford's counterclaim, the district court also granted Exxon's motion to4 The district court initially certified the order dismissing Oxxford's affirmative defenses as a

partial final judgment under Rule 54(b). Oxxford noticed an appeal from that judgment, which

was docketed in this Court under No. 96-20397 and has been dismissed for lack of appellate

jurisdiction in a separate opinion issued this date. Nonetheless, we consider here all issues fairly

presented by the district court's order of dismissal pursuant to section 1292(b). Yamaha Motor

Corp. v. Calhoun, --- U.S. ----, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996).

5 The district court's memorandum opinion and order embrace a large number of issues;

Oxxford has chosen to brief only two, the dismissal of its affirmative defense of naked licensing

and its dilution counterclaim. All other issues, not raised or briefed on appeal, are waived.

Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 260 n. 9 (5th Cir.1995). strike those allegations in Oxxford's counterclaim impugning Exxon's reputation.

The dist rict co urt entered an order certifying the dismissal of Oxxford's counterclaim as a

partial final judgment under Federal Rule of Civil Procedure 54(b). The district court also certified

the order dismissing Oxxford's affirmative defenses for interlocutory appeal pursuant to 28 U.S.C.

§ 1292(b). 4 Oxxford timely noticed an appeal from the Rule 54(b) judgment, and also petitioned this

Court for interlocutory appeal under section 1292(b). Permission to pursue an interlocutory appeal

was granted, and both appeals were docketed and later consolidated for purposes of oral argument

and final disposition.

Discussion

Oxxford appeals the district court's gra nt o f summary judgment rejecting its affirmative

defense of naked licensing and its tarnishment-dilution counterclaim. 5 Accordingly, the admissible

evidence proffered by Exxon "must demonstrate the absence of a genuine issue of material fact, but

need not negate the elements of [Oxxford's claim and defense]." L ittle v. Liquid Air Corp., 37 F.3d

1069, 1075 (5th Cir.1994) (en banc) (citations omitted) (internal quotati on marks omitted). If Exxon

meets this burden, then Oxxford is compelled to go beyond its pleadings and designate, by competent

summary judgment evidence, specific facts which demonstrate genuine triable issues. C elotex Corp.

v. Catrett, 477 U.S. 317, 324-325, 106 S.Ct. 2548, 2553-2554, 91 L.Ed.2d 265 (1986). This formula

does not vary where Exxon is the plaint iff challenging Oxxford's affirmative def ense; because

Oxxford bears the ultimate burden of persuasio n at trial on its naked licensing defense, it must

(provided Exxon has met its summary judgment burden) present admissible evidence legally sufficient

to sustain a finding favorable t o Oxxford on each element of that defense. C rescent Towing &6 Both parties in briefing this issue have relied exclusively upon jurisprudence articulating the

parameters of the naked licensing defense in the context of a federal trademark infringement

claim, forgetting, apparently, that the only claim alleged by Exxon which remains extant is its state

law dilution claim. No court construing Texas law has ever discussed, much less applied, the

naked licensing defense in a trademark dispute. Furthermore, we have been unable to locate any

cases construing federal trademark law which recognize naked licensing as a defense against a

dilution (as opposed to an infringement) claim, perhaps because a federal cause of action for

trademark dilution was apparently not available until the Lanham Act was amended to include one

in 1996. See 15 U.S.C. § 1125(c), added by Pub.L. 104-98, § 3(a) (1996); Community Federal

Savings &

Loan Assoc. v. Orondorff, 678 F.2d 1034, 1036 n. 7 (11th Cir.1982) (no independent

cause of action for dilution under federal trademark law); R.G. Barry Corp. v. Mushroom

Makers, Inc., 612 F.2d 651, 658 (2d Cir.1979) (same). This situation is complicated further by

the fact that Texas common law does not recognize a cause of action for dilution and the

statutory cause of action, upon which both parties rely, has not been decisively interpreted by any

Texas court. Tex. Com. & Bus.Code § 16.29, added by Acts 1989, 71st Leg., ch. 932, § 1;

Suniland Furniture Co. v. Sunnyland Wholesale Furniture Co., 235 S.W.2d 674, 676-677

(Tex.Civ.App.—Dallas 1950, error refused) (Texas common law does not recognize cause of

action for trademark dilution). We also observe that there exists some incongruity between the

naked licensing defense, which like much of federal trademark law is intended to protect the

consumer from confusion by ensuring the licensed mark's continuing role as an indicator of origin,

and dilution, which is concerned with preserving the integrity and vitality of the mark irrespective

of consumer confusion.

Despite these difficulties, our review of the record and briefs convinces us that by

addressing the issue as framed by the parties we may fairly adjudicate this case.

Furthermore, we have previously found that, in considering a res nova issue under Texas

trademark law, Erie requires this Court to decide the issue as a Texas court would,

namely by adhering "to the general common law principles that other courts have

uniformly applied." Association of Co-Operative Members, Inc. v. Farmland Industries,

Inc., 684 F.2d 1134, 1140 (5th Cir.1982), cert. denied, 460 U.S. 1038, 103 S.Ct. 1428,

75 L.Ed.2d 788 (1983), citing Blue Bell, Inc. v. Farah Manufacturing Co., 508 F.2d

1260, 1264 (5th Cir.1975). In thus construing Texas trademark law, both this Court and

Texas courts have relied upon relevant jurisprudence from other, primarily federal,

jurisdictions and relevant treatises. See, e.g., Blue Bell, 508 F.2d at 1264-1267; Texas A

& M University System v. University Book Store, Inc., 683 S.W.2d 140, 144

(Tex.App.—Waco 1984). Thus, given the lacunae in Texas trademark law regarding the

points raised in this appeal, we consider the question presented in light of general federal

trademark law, with recourse to the abundant federal jurisprudence and treatise materials

available on the issue. In doing so, we assume arguendo, for purposes of this appeal only,

the debatable proposition that the naked licensing defense may be raised against a dilution

claim brought under the Texas statute. Salvage Co. v. M/V Anax, 40 F.3d 741, 744 (5th Cir.1994). In reviewing the district co urt 's

judgment, we consi der the record d e novo. Wittorf v. Shell Oil Co., 37 F.3d 1151, 1154 (5th

Cir.1994).

I. Naked Licensing Defense

We consider first Oxxford's claim that the di s trict court erred in granting Exxon summary

judgment o n Oxxford's affirmative defense of naked licensing. 6 A naked license is a trademark7 There is an exception to this proposition. The licensee in a purported naked license may also

invoke the naked licensing defense as a form of estoppel. See, e.g., Sheila's Shine Products, Inc.

v. Sheila Shine, Inc., 486 F.2d 114, 123-124 (5th Cir.1973) ("[f]ailure to exercise such control

and supervision for a significant period of time may estop the trademark owner from challenging

the use of the mark and business which the licensee has developed during the period of such

unsupervised use") (citations omitted); Health Industries v. European Health Spas, 489 F.Supp.

860, 868 (D.S.D.1980) (discussing claim that reciprocity agreement with trademark owner's

employee is sufficient to estop trademark owner from contesting defendant's use of that mark).

Oxxford, however, was not a party to (and does not hold under any party to) the phase out

agreements at issue in this case; thus, its defense is not a personal defense of acquiescence or

estoppel, but is rather a claim that Exxon has abandoned its mark and thereby forfeited all its

rights in that mark. 4 Thomas J. McCarthy, Trademarks and Unfair Competition, § 31:41-46 (4th

ed.1996); Sw eetheart Plastics, Inc. v. Detroit Forming, Inc., 743 F.2d 1039, 1046 (4th Cir.1984)

("[w]hile abandonment results in a loss of rights as against the whole world, ... acquiescence is a

personal defense which merely results in a loss of rights as against one defendant") (citation

omitted).

We reject Oxxford's argument that, this single, here-inapplicable exception aside,

naked licensing has any presently relevant ultimate significance apart from its relevance in

showing unintentional abandonment. licensor's grant of permission to use its mark without attendant provisions to protect the quality of

the goods or services provided under the licensed mark. M oore Business Forms, Inc. v. Ryu, 960

F.2d 486, 489 (5th Cir.1992); T aco Cabana Intern., Inc. v. Tw o Pesos, Inc., 932 F.2d 1113, 1121

(5th Cir.1991), aff'd, 505 U.S. 763, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). A trademark owner's

failure to exercise appropriate control and supervision over its licensees may result in an abandonment

of trademark protecti on for the licensed mark. I d. See Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena,

293 F.Supp. 892, 918 (S.D.N.Y.1968) ("a "naked' license m ay be the basis for an inference of

a bandonment where the licensor maintains no control over the quality of goods made by the

licensee") (emphasis added; citation omitted), a ff'd as modified, 433 F.2d 686 (2nd Cir.1970), cert.

denied, 403 U.S. 905, 91 S.Ct. 2205, 29 L.Ed.2d 680 (1971). Because naked licensing is generally

ultimately relevant only to establish an unintentional trademark abandonment which results in a loss

of trademark rights against the world, 7 the burden of proof faced by third parties attempting to show

abandonment through naked licensing is stringent. Moore Business Forms, 960 F.2d at 489; T aco

Cabana Intern., Inc., 932 F.2d at 1113, 1121; A merican Foods, Inc. v. Golden Flake, Inc., 312 F.2d

619 (5th Cir.1963).

Oxxford's appeal raises two central questions in relation to its naked licensing defense: 1)were the phase out agreements between Exxon and the third parties "licen s es," and 2) did these

agreements result in an abandonment of Exxon's mark? We address these questions in turn.

"[A] license to use a mark

... is a transfer of limit ed rights, less than the whole interest which

might have been transferred." A cme Valve & Fi ttings Co. v. Wayne, 386 F.Supp. 1162, 1165

(S.D.Tex., Houston Div., 1974) (citations omitted). Even if the parties intend no formal licensing

agreement, "[i]n some circumstances

... the entire course of conduct between a

... trademark owner

and an accused infringer may create an implied license." M cCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d

917, 920 (Fed.Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1268, 134 L.Ed.2d 215 (1996). See

also Colt In dustries, Inc. v. Fidelco Pump & Compressor Corp., 844 F.2d 117, 119-120 (3rd

Cir.1988). The essential inquiry is whether, under cover of the agreement claimed to be a license,

"the licensee is engaging in acts which would infringe the licensor's mark but for t he permission

granted in the license." 2 McCarthy, § 18:79, P. 18-128.

However, not all agreements a ut horizing use of a protected mark may be categorized as

"licenses." As noted above, the essential inquiry is whether the right granted by the subject agreement

permits an infringing use of the license. For example, some agreements which allow another party

use of the subject mark constitute "consent-to-use" agreements and not licenses. S ee, e.g., Moore,

960 F.2d at 489; A merican Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619, 623-624 (5th Cir.1963).

Such a consensual agreement "[i]s not an attempt to transfer or license the use of a trademark

... but

fixes and defines the existing trade mark o f each ... [so] that confusion and infringement may be

prevented." W

aukesha Hygeia Mineral Springs Co. v. Hygeia Sparkling Distilled Water Co., 63 F.

438, 441 (7th Cir.1894). Thus, we will not find the existence of a trademark license when an

authorizat io n o f t rademark use is structured in such a way as to avoid misleading or confusing

consumers as to the origin and/or nature of the respective parties' goods. 2 McCarthy, § 18:79-81

(4th ed.1996); I

n re Mastic Inc., 829 F.2d 1114, 1116-1118 (Fed.Cir.1987); A .T. Cross Co. v.

Jonathan Bradley Pens, Inc., 470 F.2d 689, 692-693 (2d Cir.1972); C roton Watch Co. v. Laughlin,

208 F.2d 93, 96-97 (2 d Cir.1953); O reck Corp. v. Thomson Consumer Electronics, Inc., 796

F.Supp. 1152, 1157 n. 8 (S.D.Ind.1992).8 This emphasis on the likelihood of consumer confusion dovetails with the policy

considerations giving rise to the naked licensing defense. See Taco Cabana, 932 F.2d at 1121

("[t]he purpose of the quality-control requirement is to prevent the public deception that would

ensue from variant quality standards under the same mark or dress") (citation omitted); United

States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 140 (3d Cir.1981) (finding fact that

licensees did not offer "a lower quality of service" dispositive of naked licensing claim);

Schieffelin & Co. v. Jack Co. of Boca, Inc., 1992 WL 156560, *6 (S.D.N.Y.1992) ("[i]n the

context of uncontrolled licensing, the concern is not with the quality of the goods in the abstract;

rather, the concern is that when one or more licensees produce and distribute goods under the

licensor's trademark ... they may produce and distribute goods of differing qualities, thereby

confusing or deceiving consumers"); Engineered Mechanical Services, Inc. v. Applied

Mechanical Technology, Inc., 584 F.Supp. 1149, 1159 (M.D.La.1984) (naked licensing claim

cannot stand when "[d]efendants have offered no evidence that complaints have been made about

the quality of the work performed" by the licensee).

9 Courts have construed a variety of agreements and relationships entered into for a range of

reasons, including the cessation or forbearance of litigation, to be trademark licenses subject to

the naked licensing defense. E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1289-

1290 (9th Cir.1992) (settlement agreement); Stock Pot Restaurant, Inc. v. Stockpot, Inc., 737

F.2d 1576, 1579-1580 (Fed.Cir.1984) (lease); United States Jaycees, 639 F.2d at 139 n. 7

(affiliated organizations); Professional Golfers Ass'n v. Bankers L. & C. Co., 514 F.2d 665, 668-

669 (5th Cir.1975) (settlement and lease); Sheila's Shine Products, Inc. v. Sheila Shine, Inc., 486

F.2d 114, 123 (5th Cir.1973) (purchase agreement); Express, Inc. v. Sears, Roebuck & Co., 840 Determining whether or not a particular agreement risks the possibility of allowing an

infringing use of the mark, i .e., a use t hat creates a likelihood of consumer confusion, is, like the

entirety of Oxxford's abandonment claim, ordinarily a factual inquiry. M oore Business Forms, 960

F.2d a t 489; A rtcraft Novelties Corp. v. Baxter Lane Co. of Amarillo, 685 F.2d 988, 992 (5th

Cir.1982). As the Federal Circuit has put it,

"One must look at all of the surrounding circumstances

... to determine if the consent reflects

the reality of no likelihood of confusion in the marketplace.... For example, the parties may

prefer the simplicit

y of a consent to the encumbrances of a valid trademark license. However,

if the goods of the parties are likely to be attributed to the same source because of the use of

the same or a similar mark, a license (not merely a consent) is necessary to cure the conflict.

See 1 J. McCarthy, Trademarks and Unfair Competition § 18:25, at 866 (2d ed.1984)." I n

re Mastic, 829 F.2d at 1116-1117.

Accordingly, if the goods or services of the concerned third parties were not ones which it is likely

the public would confuse with those offered by Exxon, the phase out agreements are not licenses but

rather some other, perhaps innominate, genre of trademark agreement. 8

The dist rict court did not make any determination regarding the likelihood of consumer

confusion presented by Exxon's phase out agreements. Accordingly, we elect to assume, a rguendo

only, that these agreements constituted "licenses" in a technical sense. 9 This does not give us pause,F.Supp. 502, 509-510 (S.D.Ohio 1993) (settlement agreements); Engineered Mechanical

Services, Inc., 584 F.Supp. at 1158-1159; Universal City Studios, Inc. v. Nintendo Co., 578

F.Supp. 911, 929 (S.D.N.Y.1983) (covenant not to sue), aff'd, 746 F.2d 112 (2d Cir.1984);

Hodge Chile Co. v. KNA Food Distributors, Inc., 575 F.Supp. 210, 213 (E.D.Mo.1983)

(settlement agreement), aff'd, 741 F.2d 1086 (8th Cir.1984); Acme Valve & Fittings, 386

F.Supp. at 1165-1166 (purchase order form); Naclox, Inc. v. Lee, 231 U.S.P.Q. 395, 399

(T.T.A.B.1986) (release on promissory note). We find these cases distinguishable from that now

before us on two grounds. First, the agreements in these cases expressly granted use of the

protected mark, while Exxon's phase out agreements concern marks that are merely (allegedly)

similar to its registered marks and do not involve an attempt by Exxon to exploit its mark for

purposes of pecuniary gain. Second, none of these cases discuss agreements entered into for the

purpose of permanently terminating the putative licensee's offending use of the subject mark, and

coordinately none of the agreements discussed in these cases fix a termination date for the

licensee's use of the mark. This first point of distinguishment addresses the existence vel non of a

license, while the second point is perhaps more appropriately considered in resolving the ultimate

question of whether Exxon's actions, however denominated, led to an abandonment of its rights in

its mark(s).

Oxxford also suggests that Exxon, by virtue of allegations made in the course of

the abortive litigation which preceded a number of the phase out agreements, is judicially

estopped from denying that the parties to those phase out agreements were engaged in an

"infringing use" of Exxon's mark. Assuming, arguendo only, the potential viability of such

a contention in an appropriate case, the record here does not reveal that any of these

allegations were accepted as true by the respective courts; accordingly, the doctrine of

judicial estoppel is inapplicable. U.S. for Use of American Bank v. CIT Constr., Inc. of

Texas, 944 F.2d 253, 259 (5th Cir.1991). however, since the question whether the third-party phase out agreements are "licenses" is merely,

given the current posture of this case, a prelude to the ult imat e question presented by Oxxford's

appeal, i.e., whether the summary judgment evidence adduced would be adequate to support a finding

that Exxon's course of action resulted in abandonment of its trademarks.

The naked licensing defense has traditionally been used in the context of infringement claims

brought by the trademark owner; and, this case began in such a mode. S ee, however, note 6, supra.

Federal law statutorily limits the defenses which may be invoked against a claim brought under the

Lanham Act by the owner of an incontestable mark, as Exxon is, to the eight categories of affirmative

defenses set out in subsections (1)-(8) of 15 U.S.C. § 1115(b). P ark 'N Fly, Inc. v. Dollar Park and

Fly, Inc., 469 U.S. 189, 195-196, 105 S.Ct. 658, 662, 83 L.Ed.2d 582; S oweco, Inc. v. Shell Oil Co.,

617 F.2d 1178, 1184 (5th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1516, 67 L.Ed.2d 816

(1981). Accordingly, we turn our attention to the Lanham Act, the font of federal trademark law,10 Unlike patents and copyrights, there is no specific constitutional provision making the

regulation of trademarks a federal concern, and the first constitutional federal trademark act,

passed pursuant to the Commerce Clause, was not enacted until 1905. 1 McCarthy, § 5.3. See

also Trade-Mark Cases, 100 U.S. 82, 25 L.Ed. 550 (1879). The doctrine of "naked licensing"

predated the passage of the Lanham Act, which took effect in 1947, and evolved in the pre- Erie

world where federal common law provided the rule of decision in diversity cases. See E.I.

DuPont De Nemours & Co. v. Celanese Corp., 35 C.C.P.A. 1061, 167 F.2d 484, 489 (1948)

(listing cases). See also Daw n Donut v. Hart's Food Stores, 267 F.2d 358, 366-367 (2d

Cir.1959) (discussing divergent strains of naked licensing jurisprudence antedating passage of

Lanham Act). Be that as it may, we are concerned with the applicability of the naked licensing

defense as it is defined under current federal law. Given the absence of a specific federal

constitutional concern with the law of trademarks, that law is indisputably statutory. See

generally O'Melveny & Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994).

Accordingly, it is the language of the Lanham Act which under the circumstances of this appeal

(see note 6, supra ) decides the questions presented.

11 Both Oxxford and Exxon point to subsection 1115(b)(3) as the or a basis for Oxxford's

naked licensing defense. This subsection provides a defense to an infringement claim if "the

registered mark is being used ... so as to misrepresent the source of the goods or services on or in

connection with which the mark is used." A review of the jurisprudence construing this defense

reveals that it is a defense of "unclean hands," only applicable when the origin or source of goods

distributed under the subject mark is misrepresented. See General Motors Corp. v. Gibson

Chemical & Oil, 786 F.2d 105, 110 (2d Cir.1986); Induct-O-Matic Corp. v. Inductotherm Corp.,

747 F.2d 358, 366 (6th Cir.1984); Adjusters International, Inc. v. Public Adjusters Intern., Inc.,

1996 WL 492905, *14 (N.D.N.Y.1996); Dial-A-Mattress Operating Corp. v. Mattress Madness,

Inc., 841 F.Supp. 1339, 1355 (E.D.N.Y.1994). Further, acquiescence, estoppel, and the other

equitable defenses listed in subsection (b)(8) are personal defenses, based upon the trademark

owner's conduct vis-a-vis the defendant, and thus also do not speak to the wholesale loss of rights

in the mark remarked upon by naked licensing jurisprudence. See note 7, supra. Oxxford has not

made any showing which would sustain a subsection 1115(b)(3) defense to Exxon's action against

it. to ascertain the scope and limits of Oxxford's naked licensing defense. 10

Oxxford's naked licensing defense, which as we have noted has ultimate relevance only to

"abandonment," is authorized by 15 U.S.C. § 1115(b)(2). 11 See Stanfield v. Osborne Indus., Inc.,

52 F.3d 867, 871 (10th Cir.), cert. denied,

--- U.S.

----, 116 S.Ct. 314, 133 L.Ed.2d 217 (1995);

Ditri v. Coldwell Banker, 954 F.2d 869, 873 (3d Cir.1992); G eneral Motors Corp., 786 F.2d at 110;

Oberlin v. Marlin American Corp., 596 F.2d 1322, 1327 (7th Cir.1979); H aymaker Sports, Inc. v.

Turian, 581 F.2d 257, 261 (C.C.P.A.1978); D awn Donut, 267 F.2d at 366-367; S chieffelin & Co.,

1992 WL 156560, *5; E .I. DuPont De Nemours, 167 F.2d at 489-490; B onda's Veevoederfabriek,

Provimi, B.V. v. Provimi, Inc., 425 F.Supp. 1034, 1037-1038 (E.D.Wis.1977). 15 U.S.C. § 1127,

the definitional section of the Lanham Act, defines "abandonment" as follows:

A mark shall be deemed to be "abandoned" if either of the following occurs:12 A number of courts have also cited to section 1055, often in tandem with section 1127, as

statutory authority for the naked licensing defense. Visa, U.S.A., Inc. v. Birmingham Trust Nat.

Bank, 696 F.2d 1371, 1377 n. 4 (Fed.Cir.1982), cert. denied, 464 U.S. 826, 104 S.Ct. 98, 78

L.Ed.2d 104 (1983); Oberlin v. Marlin American Corp., 596 F.2d at 1327 n. 4; Sterling Drug,

Inc. v. Lincoln Laboratories, Inc., 322 F.2d 968, 972 (7th Cir.1963); Daw n Donut, 267 F.2d at

366-367; Georgia Carpet Sales, Inc. v. SLS Corp., 789 F.Supp. 244, 246 (N.D.Ill.1992); Ungar

v. Dunkin' Donuts of America, Inc., 68 F.R.D. 65, 116 (E.D.Pa.1975), rev'd on other grounds,

531 F.2d 1211 (3rd Cir.), cert. denied, 429 U.S. 823, 97 S.Ct. 74, 50 L.Ed.2d 84 (1976). This

provision reads in pertinent part as follows:

§ 1055. Use by related companies affecting validity and registration

Where a registered mark ... is or may be used legitimately by related

companies, such use shall inure to the benefit of the registrant ... and such use shall

not affect the validity of such mark or of its registration, provided such mark is not

used to deceive the public. (Emphasis added).

The term "related companies" is defined in section 1127 as follows:

The term "related company" means any person whose use of a mark is

controlled by the owner of the mark with respect to the nature and quality of the

goods or services on or in connection with which the mark is used.

See also Health Industries, 489 F.Supp. at 868 (equating quality control and mandate that

public not be deceived). Section 1055 authorizes a trademark owner to license its mark

"but only where the licensees of the service mark are related companies, i.e. where the

owner of the service mark controls the licensees as to the nature and quality of the goods

or services in connection with which the mark is used." Reddy Communications v.

Environmental Action, 477 F.Supp. 936, 944 (D.D.C.1979) (citations omitted) (internal

quotation marks omitted).

Section 1055 does not of itself establish a naked licensing defense. So far as here

relevant, its effect is merely to reflect conditions under which certain conduct is not per se precluded from consideration, as supportive, to the extent that it may logically do so in a

given setting, of a determination that there has been abandonment as defined in section

1127(2). (1) When its use has been discontinued with intent not to resume such use. Intent not

to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima

facie evidence of abandonment. "Use" of a mark means the bona fide use of such mark made

in the ordinary course of trade, and not made merely to reserve a right in the mark.

(2) When any course of conduct of the owner, including acts of omission as well as

commission, causes the mark to become the generic name for the goods or services on or in

connection with which it is used or otherwise to lose its significance as a mark. Purchaser

motivation shall not be a test for determining abandonment under this paragraph.

The definition of "abandonment" set forth in subpart (2) (formerly subpart (b)) is the specific statutory

explication of unintentional abandonment, including abandonment due to naked li censing. 1 2

Sweetheart Plastics, 743 F.2d at 1047-48; United States Jaycees, 639 F.2d at 139; A .T. Cross Co.,470 F.2d at 693; H eaton Distributing Co. v. Union Tank Car Co., 387 F.2d 477, 484 (8th Cir.1967);

Schieffelin & Co., 1992 WL 156560, *5; Engineered Mechanical Services, 584 F.Supp. at 1158.

The language of subsection 1127(2) reflects that to prove "abandonment" the alleged

infringer must show that, due to acts or omissions of the trademark owner, the incontestable mark

has lost "its significance as a mark." S ee Defiance Button Mach. Co. v. C & C Metal Products, 759

F.2d 1053, 1061-1062 (2d Cir.) (concluding that section 1127(2) was intended to apply only when

the subject mark ceased to be an indicator of origin), cert. denied, 474 U.S. 844, 106 S.Ct. 131, 88

L.Ed.2d 108 (1985); Wallpaper Mfrs., Ltd. v. Crow n Wallcovering Corp., 680 F.2d 755, 766 n. 13

(C.C.P.A.1982) ("[f]rom the legislative h ist o ry it is evident that abandonment under part (b)

[subsection 1127(2) ] was principally intended to encompass acts of omission or commission by the

registrant which resulted in the mark becoming a generic term") (citation omitted). This statutory

directive reflects the policy considerations which underlie the naked licensing defense : "[i]f a

trademark owner allows licensees to depart from his quality standards, the public will be misled, and

the trademark will cease to have utility as an informational device

... [a] trademark owner who allows

this to occu r loses his ri ght to use the m ark." K entucky Fried Chicken Corp. v. Diversified

Packaging Corp., 549 F.2d 368, 387 (5th Cir.1977). Conversely, if a trademark has not ceased to

function as an indicator of origin there is no reason to believe that the public will be misled; under

these circumstances, neither the express declaration of Congress's intent in subsection 1127(2) nor

the corollary policy considerations which underlie the doctrine of naked licensing warrant a finding

that the trademark owner has forfeited his rights in the mark.

Oxxford, pointing to recent precedent in this Circuit indicating that naked licensing results

in an "involuntary trademark abandonment," posits that when a defendant proves that the trademark

owner has licensed its mark without any quality control provisions the courts should presume a loss

of significance. S ee Moore Business Forms, 960 F.2d at 489; T aco Cabana International, 932 F.2d

at 1121. We disagree. Abandonment due t o naked licensing is "involuntary" because, unlike

abandonment through non-use, referred to in subsection 1127(1), an intent to abandon the mark is

expressly not required to prove abandonment under subsection 1127(2). S ee 2 McCarthy, § 18:48;13 The alternative to the phase out agreements latent in Oxxford's argument is that Exxon either

ignore or immediately and relentlessly litigate with all perceived infringers. Unless Exxon were

able to perfunctorily obtain preliminary injunctions against these parties, one must wonder

whether, given the delays which are part of conventional civil litigation between entrenched

corporate opponents, any resultant consumer confusion might well be abated more rapidly than

under the phase out agreements. We further observe that a number of treatises and cases either

explicitly or implicitly recognize that such agreements are often an appropriate manner in which to

resolve trademark disputes. See, e.g., Siegrun D. Kane, Trademark Law 200 (2d ed.1991);

Minnesota Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1244 (8th Cir.1994);

Home Shopping Netw

ork, Inc. v. Happy Mind, Inc., 931 F.2d 886, 1991 WL 68834 (4th

Cir.1991) (unpublished disposition); Oreck Corp. v. U.S. Floor Systems, Inc., 803 F.2d 166, 168

(5th Cir.1986), cert. denied, 481 U.S. 1069, 107 S.Ct. 2462, 95 L.Ed.2d 871 (1987). Conagra, Inc. v. Singleton, 743 F.2d 1508 (11th Cir.1984); E ngineered Mechanical Services, 584

F.Supp. at 1158. In addition, a trademark owner's failure to pursue potential infringers does not in

and of itself establish that the mark has lost its significance as an indicator of origin. B abbit Elecs.,

Inc. v. Dynascan Corp., 38 F.3d 1161, 1180 (11th Cir.1994) (per curiam affirmance incorporating

district court's memorandum opinion via appendix); S weetheart Plastics, Inc., 743 F.2d at 1047-

1048; W allpaper Mfrs., Ltd., 680 F.2d at 761-766; U nited States Jaycees v. Philadelphia Jaycees,

6 3 9 F.2d at 139-140. Instead, such a dereliction on the part of the trademark owner is largely

relevant only in regard to the "strength" of the mark; absent an ultimate showing of loss of trade

significance, subsection 1127(b)(2) (and the incorporated doctrine of naked licensing) is not available

as a defense against an infringement suit brought by that trademark owner. S ee 2 McCarthy, § 17:17.

We, like the dis t rict court , would find it wholly anomalous to p resume a loss of trademark

signific a nce merely because Exxon, in the course of diligently protecting its mark, entered into

agreements designed to preserve the distinctiveness and strength of that mark. We decline Oxxford's

invitation to judicially manufacture a presumption of loss of trademark significance under the facts

of this case given that had Exxon simply ignored the prior threats to i ts marks no such presumption

would obtain. 13

With the applicable legal standard clarified, we turn to the record before us. Exxon,

commensurate with its burden und er Rule 56, directed the district court's attention to Oxxford's

failure to meaningfully address what is an essential component of its third-party naked licensing

defense, i.e., a loss of trademark significance in Exxon's mark(s). Even were we to construe14 "It is clear that anti-dilution statutes ... are designed to protect only strong, well-recognized

marks." Accuride International, Inc. v. Accuride Corp., 871 F.2d 1531, 1539 (9th Cir.1989)

(citations omitted). See also Deere & Co. v. MTD Products, Inc., 41 F.3d 39, 42 (2d Cir.1994)

(to prevail on dilution claim under New York law "a plaintiff must prove, first, that its trademark

either is of truly distinctive quality or has acquired secondary meaning") (citation omitted). Our

disposition of this case renders unnecessary a consideration of Oxxford's contention that the Oxxford's pleadings to allege the unlikely proposition that Exxon's registered marks, due to these

third-party phase out agreements, have lost their distinctiveness as indicators of origin, Oxxford has

offered absolutely no evidence to substantiate such a claim. Acco rdingly, we affirm the district

court' s ruling because Oxxford has failed to adduce evidence sufficient to allow a reasonable

factfinder to conclude that Exxon has abandoned its marks.

II. Tarnishment-Dilution Counterclaim

We turn next to the district court's dismissal of Oxxford's tarnishment-dilution counterclaim.

Oxxford's counterclaim, like Exxon's remaining claim, seeks relief under section 16.29 of the Texas

Business and Commerce Code:

§ 16.29. Injury to Business Reputation or Trade Name or Mark

A person may bring an action to enjoin an act likely to injure a business reputati on or

to dilute the distinctive quality of a mark registered under

... Title 15, U.S.C

.... regardless of

whether there is competition between the parties or confusion as to the source of goods or

services.

The Texas statute, like that of twenty-five other states, including California, Illinois, and New York,

is based upon language contained in Section 12 of the 1964 United States Trademark Association

Model State Trademark Bill. 3 McCarthy, § 24:80, P. 24-125. As one court has already noted, the

Texas statute tracks in pa rt icular t he language of the New York dilution statute, New York

Gen.Bus.L. § 368-d. S ee Pebble Beac h Co. v. Tour 18 I, Ltd., 942 F.Supp. 1513, 1563 n. 46

(S.D.Tex.1996). Accordingly, owing to the dearth of case law interpreting section 16.29, we remain

mindful of the general law of dilution, that body of common principles which has evolved in those

jurisdictions possessing statutes derived from the USTA's model bill, in construing the Texas statute.

Under section 16.29, a plaint iff may seek an injunction to remedy ongoing dilution of a

protected trademark even if it is not in business competition with the defendant(s) and irrespective

of the existence vel non of any likelihood of consumer confusion. The owner of a distinctive mark 1 4district court erred in finding that "Oxxford" was not a distinctive mark. See, how ever, Service

Merchandise Co. v. Service Jew elry Stores, Inc., 737 F.Supp. 983 (S.D.Tex.1990) (applying

Texas dilution statute court finds that existence of 226 registered service marks beginning with

"service" and fact that 37 jewelers nationwide use "service" in their trade name does not render

mark "Service Merchandise" weak). Nor do we have cause to discuss the district court's finding

that Oxxford failed to make a "threshold showing of some mental association between the

protected mark and the alleged diluter." Fruit of the Loom, Inc. v. Girouard, 994 F.2d 1359,

1363 (9th Cir.1993). See also 3 McCarthy, § 24:70; L.L. Bean, Inc. v. Drake Publishers, Inc.,

811 F.2d 26, 31 (1st Cir.) (association between L.L.Bean catalogue and "L.L. Beam's Back-toSchool Sex Catalogue" tarnished former's business reputation), cert. denied, 483 U.S. 1013, 107

S.Ct. 3254, 97 L.Ed.2d 753 (1987); Dallas Cow boys Cheerleaders, Inc. v. Pussycat Cinema,

Ltd., 604 F.2d 200, 205 (2d Cir.1979) (movie "Debbie Does Dallas" found to tarnish business

reputation of Dallas Cowboy Cheerleaders). Both L.L. Bean and Dallas Cow boys Cheerleaders,

Inc. involved a situation in which the complaining party's "trademark is used without

authorization in a context which diminishes the positive association of the mark." L.L. Bean, 811

F.2d at 31. There is no claim here that Exxon makes any use of Oxxford's trademark. Moreover,

in these cases the offending party was attempting to benefit----albeit by way of parody----from the

plaintiff's mark and its public recognition. Nothing of the kind is asserted here.

15 Some courts have found a third manner in which "likelihood of dilution" may be proven

under certain state statutes, namely an injury to the value of the mark caused by actual or

potential consumer confusion. See Jordache Enterprises, Inc. v. Hogg Wyld, Ltd., 828 F.2d

1482, 1489 (10th Cir.1987); L.L. Bean, Inc. v. Drake Publishers, Inc., 811 F.2d 26, 30 (1st

Cir.), cert. denied, 483 U.S. 1013, 107 S.Ct. 3254, 97 L.Ed.2d 753 (1987). See also Deere &

Co., 41 F.3d at 44 ("[b]ut the blurring/tarnishment dichotomy does not necessarily represent the

full range of uses that can dilute a mark under New York law") (citations omitted). The Texas

statute we consider, while it expressly declares that consumer confusion is not a prerequisite to

the cause of action it creates, does not clearly indicate whether a cause of action premised upon

actual or potential consumer confusion alone falls under its aegis. See 3 McCarthy, § 24:70

(discussing differences between dilution and likelihood of confusion standard). Our resolution of

this case does not require us to answer this question, and thus we merely note it in passing. may obtain relief under an anti-dilution statute if th ere is a "likelihood of dilution" due to 1)

"blurring," a diminution in the uniqueness and individuality of the mark, or 2) "tarnishment," an injury

resulting from another's use of the mark in a manner that tarnishes or appropriates the goodwill and

reputati on associated with the plaintiff's mark. 15 3 McCarthy, §§ 24:67-69; The Sports Authority,

Inc. v. Prime Hospitality Corp., 89 F.3d 955, 965-966 (2d Cir.1996). Oxxford does not claim that

Exxon's activities have "blurred" its "Oxxford" mark; rather, the only issue raised by Oxxford's

p l eadings and brief is a claim of dilution by tarnishment due to the purported link between the

"Oxxford" mark and Exxon 's alleged corporate reputation of greed and environmental

destructiveness. Pebble Beach Co., 942 F.Supp. at 1565-1567.

We consider first Oxxford's contention that the district court erred by finding its claim barred16 Exxon claims that the material facts relevant to laches are undisputed and therefore review is

more properly conducted under an abuse of discretion standard. National Ass'n of Gov't

Employees v. City Pub. Serv. Bd., 40 F.3d 698, 707 (5th Cir.1994). Given the summary

judgment context below, we review the record de novo to determine what facts material to the

laches issue are not subject to genuine dispute; based on those facts, we review the district court's

lache's ruling under an abuse of discretion standard. Id.

17 Some Texas courts have also noted, albeit usually in the context of laches asserted within the

statutory limitations period, that as a general rule laches is inappropriate when the controversy is

one governed by a statute of limitations. See, e.g., Stevens v. State Farm Fire & Cas. Co., 929

S.W.2d 665, 672 (Tex.App.—Texarkana 1996). Although not briefed by the parties, it seems

probable that Texas' four year statute of limitations could apply in this case. Tex. Civ. Prac. &

Rem.Code § 16.004; First Nat. Bank of Eagle Pass v. Levine, 721 S.W.2d 287 (Tex.1986).

Texas courts have also held, however, that in actions like that Oxxford asserts here, seeking

injunctive relief for ongoing harm to a trademark, the continuous tort doctrine halts the running of

the statute of limitations. Thompson v. Thompson Air Conditioning & Heating, Inc., 884 S.W.2d

555, 560-561 (Tex.App.—Texarkana 1994) (common law trade name infringement action not

barred by statute of limitations). In such a circumstance, consideration of the equitable laches of

doctrine is appropriate. Id. by laches. 16 Under Texas law the two elements of laches are "(1) unreasonable delay by one having

legal or equitable rights in asserting them; and (2) a good faith change of position by another to his

detriment because of the delay." R ogers v. Ricane En terprises, Inc., 772 S.W.2d 76, 80

(Tex.1989). 17 S ee also Gulf, Colorado & Santa Fe Ry. Co. v. McBride, 159 Tex. 442, 322 S.W.2d

492, 500 (1958) (laches results from "an unreasonable delay which has worked injury to another

person") (citations omitted). Because laches is an equitable doctrine, courts typically look at the

interval between the time plaint iff obtained actual or constructive knowledge of the asserted invasion

of its rights and the time suit was filed in determining whether a plaint iff's delay in bringing suit was

unreasonable

. A rmco, Inc. v. Armco Burglar Alarm Co., 693 F.2d 1155, 1161 (5th Cir.1982)

(construing Texas law); City of Houston v. Muse, 788 S.W.2d 419, 422 (Tex.App.—Houston [1st

Dist.] 1990).

Oxxford claims that its cause of action did not accrue until it suffered "reputational injury,"

in this case "at the moment that Exxon's reputatio n became unsavory enough to affect Oxxford."

Oxxford, relying upon the affidavit of one of its corporate officers, contends that its cause of action

did not accrue until the Exxon Valdez verdict and attendant public outcry in late 1994. Noting that

it could not have sued Exxon under section 16.29 prior to 1989, when the Texas statute was enacted,

Oxxford concludes that Exxon's laches defense should fail because it cannot fix a date certain upon18 Exxon contends, and Oxxford does not dispute, that Oxxford Clothes XX, Inc., is bound by

the knowledge of its predecessor-in-interest, Oxford Clothes, Inc. See note 2, supra; Vincent

Murphy Chevrolet Co., Inc. v. United States, 766 F.2d 449, 451 (10th Cir.1985); Charvet S.A. v.

Dominique France, Inc., 568 F.Supp. 470, 474 (S.D.N.Y.1983), aff'd, 736 F.2d 846 (2d

Cir.1984).

19 It is well-established that this Court may affirm a summary judgment on any grounds

supporting such a ruling which are manifest in the record. Rizzo v. Children's World Learning

Centers, Inc., 84 F.3d 758, 762 (5th Cir.1996). This includes grounds which have been rejected

or not addressed by the district court. Kiser v. Garrett, 67 F.3d 1166 (5th Cir.1995). Although

Exxon did not file a motion to dismiss Oxxford's counterclaim under Fed. R. Civ. Proc. 12(b)(6),

the insufficiency of the anti-dilution claim was broached in Exxon's summary judgment pleadings,

was explicitly renewed in its brief to this Court, and involves only a question of law. which Oxxford became aware of the existence of an actionable dilution claim.

The record reflects, without dispute, assertions by Oxxford executives as early as 1972 that

t he mark "Exxon" could possibly influence the distinctiveness and corollary goodwill of their

"Oxxford" mark. 18 In addition, Oxxford's final pleadings relate actions of Exxon stretching back to

1973 in an attempt to establish its tarnishment cause of action, declaring that "[a]s early as 1973, the

Exxon name stood for greed and dishonesty." The bulk of Oxxford's allegations dwell upon Exxon's

activities in the late 1970s through the Exxon Valdez incident in 1989, only reaching the 1994 Valdez

verdict by way of conclusion. Oxxford failed to bring its claim in the six years preceding this lawsuit,

after the Texas cause of action became available. Moreover, Illinois, where Oxxford was

headquartered in 1972 and still has its principal place of business, has had an anti-dilution statute since

1956. Ill. Stat. ch. 765, § 1035/15.

Under these uncontroverted facts, the district court did not abuse its discretion in concluding

there had been an unreasonable delay in bringing suit, thus sat isfying the first prong of Texas' laches

inquiry. Regarding the second prong of this test, the record is undisputed that Exxon, relying upon

the federal registration of its marks and its strict policing of similar mar ks, accrued tremendous

investment costs and resultant goodwill in the challenged marks while Oxxford remained quiescent.

Given this record, we affirm the ruling of the district court that Oxxford's claim is barred by laches.

We further observe that even were Oxxford's claim not barred by laches, it would plainly be

an exercise in futility to remand the counterclaim, because Oxxford's pleadings do not state a cause

of action under Texas' dilution statute. 19 Oxxford observes in its brief to this Court that it has long20 The Texas statute, like the model bill, states that in addition to enjoining trademark dilution a

plaintiff may enjoin acts likely to injure business reputation. It is unclear whether this language

creates a separate cause of action or merely expresses the "tarnishment" prong of the typical

dilution cause of action. "While the statute speaks in terms of protecting against two distinct

harms—injury to business reputation and dilution of a mark's distinctive quality—the first harm

has consistently been deemed subsumed into the second." Plasticolor Molded Products v. Ford

Motor Co., 713 F.Supp. 1329, 1342 (C.D.Cal.1989) (citation omitted), vacated on other

grounds, 767 F.Supp. 1036 (C.D.Cal.1991). See Allied Maintenance Corp. v. Allied Mechanical

Trades, Inc., 42 N.Y.2d 538, 399 N.Y.S.2d 628, 369 N.E.2d 1162 (1977). Texas already

recognizes a common law cause of action for business disparagement, the elements of which are

publication of disparaging words, falsity, malice, lack of privilege, and special damages. Hurlbut

v. Gulf Atlantic Life Ins. Co., 749 S.W.2d 762, 766 (Tex.1987) (citations omitted). Obviously,

no such cause of action is asserted, or even sought to be asserted, here. "enjoyed an outstanding reputation as a hand-made men's suit manufacturer" and "in the American

apparel market , Oxxford has remained ... the epitome of quality in U.S.-made men's business

clothing." Oxxford's brief goes on to state that "[t]he essence of Oxxford's counterclaim is that ...

Exxon's destruction of the environment and other corrupt business practices have lowered its esteem

in the public's eye to the point that its repu t at io n, coupled with the association of its mark with

Oxxford's, is tarnishing the reputati on of Oxxford." The Texas statute, however, affords a plaintiff

a remedy only for those "acts" which threaten dilution of a valid trademark. 2 0 We m ust perforce

consider which "acts" give rise to a colorable dilution by tarnishment claim under the Texas statute.

See 3 McCarthy, §§ 24:104- 107 (discussing different modes of tarnishment, including parody and

competitive advertising, and listing cases); Hormel Foods Corp. v. Jim Henson Productions, Inc.,

73 F.3d 497, 507 (2d Cir.1996) (same); Anheuser-Busch, Inc. v. Balducci Publications, 28 F.3d

769, 777 (8th Cir.1994) (same); Jordache Enterprises, Inc., 828 F.2d at 1490 (same).

Oxxford seeks, through the vehicle of section 16.29 and a flimsy, attenuated assertion that

there is an ease of association between the marks "Oxxford" and "Exxon," to hold Exxon responsible

for all activiti es and events within the last twenty-five years falling under its corporate aegis and

resulting in general negative publicity for the corporati on. Such an approach ignores the distinction

between the use of the appellation "Exxon" as a device of corporate identity and its use as a trade

name or trademark, i.e., as an indicator of origin and/or quality of particular goods and services. The

"acts" which comprise the basis of Oxxford's claim, such as the Exxon Valdez spill and resulting jury

verdict, bear no relationship to the qualit y or reputation of the products sold or services provided21 Oxxford relies upon several cases in which courts have found that uses of a similar mark

which undermine the quality assurance of the plaintiff's mark can result in tarnishment. See

Tiffany & Co. v. Boston Club, Inc., 231 F.Supp. 836, 844 (D.Mass.1964); Steinway & Sons v.

Robert Demars & Friends, 210 U.S.P.Q. 954, 964 (C.D.Cal.1981). In Tiffany & Co., a New

York retail store of that name brought an infringement and dilution claim against a Boston

Corporation which was using "Tiffany" in the name of its restaurant and lounge. In Steinw ay &

Sons, the owners of the prestigious Steinway (piano) mark claimed that the maker of the

"Stein-way clip-on beer handles" was diluting their mark. Both of these cases concern the

negative associations which developed out of the defendant's use of trademarks similar to those of

the plaintiff on products which were markedly less ornate, sophisticated, or elegant than the

plaintiff's products. These cases, which involve the defendant's use of an allegedly similar mark

on its products in commerce, merely reiterate the proposition we propound above. under cover of Exxon's marks (or to the quality or reputation of products sold or services provided

under Oxxford's marks).

What Oxxford seeks by its counterclaim is to enjoin E xxon from using Exxon's registered

marks. Section 16.29 is, at least in most respect s, a garden variety dilution statute, and we have

uncovered no authority even suggesting that a dilution by tarnishment claim brought under such a

statute which seeks to enjoin the defendant's use of its mark can be premised upon matters wholly

unrelated to the defendant's use of the allegedl y diluting mark a s a trademark (or to any use of or

attempt to benefit from plaint iff's trademark). 21 Under Oxxford's theory, right s in an otherwise

established, valid, and registered trademark which continue to nonconfusingly reflect to the public

the origin and quality of the goods in connection with which it is used, may be lost merely because

the mark's owner has incurred a bad public reputation in respect to matters unrelated to the quality

of its products. In fine, the trademark owner has a property right in his mark, but only so long as he

personally is not unpopular with the general publi c. We reject this highly unorthodox view of

trademark law. Therefore, even if we assume a rguendo that Oxxford is a sufficiently strong mark

to warrant protecti on under the Texas statute and that "Exxon" and "Oxxford" are similar enough to

allow the public to make some attenuated subliminal association between the products and services

offered under the two marks, we nonetheless conclude that Oxxford's allegations, because they do

not asse rt t hat some manner of deficiency or unsavoriness inures to the products or services sold

under Exxon's registered marks or that Exxon has infringed or attempted to benefit from Oxxford's

marks, do not state a cause of action under Tex.Bus. & Comm.Code § 16.29.22 We need not reach Exxon's contentions that Oxxford's asserted cause of action necessitates a

retroactive application of the anti-dilution statute contrary to the legislature's intent and is in any

case forbidden by the Texas and federal constitutions. The district court did not err in dismissing Oxxford's counterclaim. 22

Conclusion

The district court did not err by r eject ing Oxxford's defenses or by dismissing Oxxford's

counterclaim, and those rulings are AFFIRMED.