Opinion ID: 774295
Heading Depth: 3
Heading Rank: 2

Heading: Inference of Likely Harm: Nabisco, Inc. v. PF Brands, Inc.

Text: 54 The Second Circuit explicitly rejected the Fourth Circuit's actual harm test in Nabisco, Inc. v. PF Brands, Inc., finding that a different interpretation of the FTDA's language must prevail. In so doing, the Second Circuit found two possible readings of the Ringling Brothers opinion. The narrower position would be that courts may not infer dilution from 'contextual factors (degree of mark and product similarity, etc.),' but must instead rely on evidence of 'actual loss of revenues' or the 'skillfully constructed consumer survey. Nabisco, 191 F.3d at 223. The broader reading of the Fourth Circuit's 'actual, consummated' dilution element would require not only that dilution be proved by a showing of lost revenues or surveys but also that the junior be already established in the marketplace before the senior could seek an injunction. Id. at 224. This view finds footing in the fact that the statute provides a remedy for a junior mark that causes dilution, as opposed to state statutes which had prevented likelihood of dilution. See id. 55 The court ultimately rejected both readings of the Fourth Circuit's opinion. It found the narrow reading to be an arbitrary and unwarranted limitation on the methods of proof and reasoned: 56 If the famous senior mark were being exploited with continually growing success, the senior user might never be able to show diminished revenues, no matter how obvious it was that the junior use diluted the distinctiveness of the senior. Even if diminished revenue could be shown, it would be extraordinarily speculative and difficult to prove that the loss was due to the dilution of the mark. And as to consumer surveys, they are expensive, time-consuming and not immune to manipulation. 57 Id. at 224. The court further observed that [p]laintiffs ordinarily agree to make their case through circumstantial evidence that will justify an ultimate inference of injury. [C]ontextual factors have long been used to establish infringement. . . . We see no reason why they should not be used to prove dilution. Id. 58 The Second Circuit in Nabisco found that the broader reading of the Fourth Circuit's opinion, requiring both actual proof and that the junior mark be established in the marketplace, depends on excessive literalism to defeat the intent of the statute. The court held that [t]o read the statute as suggested by the Ringling opinion would subject the senior user to uncompensable injury. The statute could not be invoked until injury had occurred. And, because the statute provides only for an injunction and no damages (absent willfulness), such injury would never be compensated. Id. The court also remarked that such a reading would be disastrous for a junior mark's owner who wanted to test the propriety of a new mark before launching it in the marketplace. Under this reading of the FTDA, the junior mark's owner would not be able to know that her mark was improper until she had already spent the resources involved in establishing a trademark in consumers' minds. See id. The Nabisco court concluded, We are not at all sure that the Ringling opinion intends to limit the application of the statute to dilution that has already occurred, as opposed to the narrower reading discussed above. . . . In any event, we read the statute to permit adjudication granting or denying an injunction . . . before the dilution has actually occurred. Id. at 224-25. 59 Despite the Fourth Circuit's somewhat persuasive arguments, we conclude that the Nabisco test both tracks the language of the statute and follows more closely Congress's intent in enacting the FTDA. Legislative history surrounding the statute's enactment demonstrates that the legislators were attempting to ensure that plaintiffs could find a nationwide remedy for dilution claims, as distinct from the Lanham Act's established protection for trademark infringement. As the Congressional Record indicates, dilution is an injury that differs materially from that arising out of the orthodox confusion. Even in the absence of confusion, the potency of a mark may be debilitated by another's use. This is the essence of dilution. Confusion leads to immediate injury, while dilution is an infection, which if allowed to spread, will inevitably destroy the advertising value of the mark. H.R. Rep. No. 104-374 (1995), reprinted in 1996 U.S.C.C.A.N. 1029, 1032. 60 This passage is important in two respects. First, it evinces an intent to provide a broad remedy for the lesser trademark violation of dilution and recognizes that the essence of the dilution claim is a property right in the potency of a mark. While this does not reach the property right in gross proportions of Schechter's early dilution analysis, it does demonstrate an understanding that the right to be protected is in a mark's distinctiveness. Second, the passage's latter half - confusion leads to immediate injury, while dilution is an infection, which if allowed to spread, will inevitably destroy the advertising value of the mark - evinces an intent to allow a remedy before dilution has actually caused economic harm to the senior mark. In such a case, proving actual harm would be extremely difficult, as no such harm would have taken place when the remedy became available, and proof would be limited to the sorts of consumer surveys that the Fourth Circuit itself admits are unwieldy at best. We think that both these factors weigh in favor of adopting the Second Circuit's test. Most importantly, as the Fourth Circuit again concedes, requiring proof of actual economic harm will make bringing a successful claim under the FTDA unreasonably difficult. With such a broad remedy considered in the Act's legislative history, we find it highly unlikely that Congress would have intended to create such a statute but then make its proof effectively unavailable. 61 Having determined to follow the Nabisco decision, and thus to allow inference of likely harm to the senior mark instead of requiring actual proof, we must now look to the other elements of the Nabisco test's definition of dilution. As discussed above, under Nabisco a plaintiff must prove that the senior mark is famous and distinctive, that the junior mark is in commercial use, beginning after the senior mark has become famous, and that the junior mark cause[s] dilution of the distinctive quality of the senior mark. Nabisco, 191 F.3d at 215. The Second Circuit has developed a list of ten factors used to determine if dilution has, in fact, occurred, while describing them as a nonexclusive list to develop gradually over time and with the particular facts of each case. Id. at 217. Those factors are: distinctiveness; similarity of the marks; proximity of the products and the likelihood of bridging the gap; interrelationship among the distinctiveness of the senior mark, the similarity of the junior mark, and the proximity of the products; shared consumers and geographic limitations; sophistication of consumers; actual confusion; adjectival or referential quality of the junior use; harm to the junior user and delay by the senior user; and the effect of [the] senior's prior laxity in protecting the mark. Id. at 217-22. These factors are given extensive analysis in the Nabisco opinion, which we need not replicate here. We find that these factors effectively span the breadth of considerations a court must weigh in assessing a claim under the FTDA, from the inherent qualities of the marks themselves, to the behavior of the corporate entities in introducing a mark into commerce, to the highly practical and subjective considerations of the effect of the marks on the actual consumers who will consider them, and find them persuasive to our analysis. 62