Opinion ID: 774295
Heading Depth: 3
Heading Rank: 1

Heading: The Actual Harm Requirement: Ringling Bros.-Barnum & Bailey v. Utah Division of Travel Development.

Text: 39 In Ringling Brothers, the circus moguls contended that the State of Utah's use of the slogan the greatest snow on earth diluted their famous mark, the greatest show on earth. See Ringling Bros., 170 F.3d at 451. Analyzing Ringling Brothers' claims under the FTDA, the Fourth Circuit found that 'dilution' under the federal Act consists of (1) a sufficient similarity of marks to evoke in consumers a mental association of the two that (2) causes (3) actual harm to the senior marks' economic value as a product-identifying and advertising agent. Id. at 453. 40 The Fourth Circuit in Ringling Brothers conceded that an actual harm requirement does not leap fully and immediately from the statutory text, but nevertheless found it to lie in the statute's legislative history. Id. The court traced the origin of modern dilution law to Frank Schechter's seminal article, The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813 (1927), in which Schechter argued that the true harm of diluting junior marks was not consumer confusion but the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark or name by its use upon non-competing goods. Id. at 825. The court termed this theory radical and extreme, and stated that there was no legislative adoption of the concept in any form until 1947 when Massachusetts enacted the first state 'antidilution' statute.Ringling Bros., 170 F.3d at 454. However, as the court notes, 25 states followed the lead of Massachusetts in the years preceding adoption of the FTDA, and adopted modified versions of Schechter's proposal as state antidilution law. See id. The court found that: 41 Though they of course varied in detail, the state statutes typically had four features of relevance for our interpretive purposes: (1) they defined the category of marks protected against dilution solely by reference to their distinctive quality; (2) they proscribed not just actual, consummated dilution, but the likelihood of dilution; (3) by containing no express reference to harm to the senior mark's economic value, they defined dilution in terms susceptible to the interpretation that it consisted solely of a loss of the mark's distinctiveness; and (4) they provided only injunctive relief. 42 Id. 43 The court then looked to the Restatement (Third) of Unfair Competition for a summary of how these various statutes were applied by the state courts. The court noted the sheer difficulty that courts have had in getting a firm handle on the basic concept of 'dilution' as cryptically expressed in the typical state statute by an unelaborated reference to 'dilution of the distinctive quality of a mark.' Id. at 455. Attempting to synthesize the state court decisions, the Fourth Circuit found:[Al]though the typical state statute formulation is susceptible to an in-gross-property-right interpretation-by reading distinctive quality as essentially synonymous with uniqueness in the Schechter model[,] no court seems to have taken that blunt approach. Instead, frequently alluding to Schechter's identification of the senior mark's selling power, and the whittling away of that power as the ultimate concerns of dilution's special protective function, the courts seem generally to have assumed that loss of that power, and the economic value it represents, was the end harm at which the antidilution statutes were aimed. 44 Id. at 456. 45 The Fourth Circuit recognized that the true interpretive problem with the state court decisions had been how that loss of power and economic value could be proved. See id. at 457. The court found three general approaches. First, during the period of general judicial hostility to the whole statutory dilution concept . . . some courts, seeming to assume that the requisite harm could only be shown by evidence of some form of product-diverting consumer confusion (presumably other than source confusion), invariably found such proof lacking. Id. A second approach, delineated by Judge Sweet in his concurring opinion in Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026 (2nd Cir. 1989), assumed both that likelihood of harm to selling power must be proved, and that such harm could occur despite the absence of any consumer confusion . . . Though not expressed in those exact procedural terms, the suggestion was effectively that proof must and could be sought through the normal judicial process of fact-finding by inference from a set of contextual factors (degree of mark and product similarity, etc.) that he proposed as relevant for the purpose. 5 Ringling Bros., 170 F.3d at 457. Finally, the court found that some courts have taken the position, in part at least for the very reason that they consider likelihood of harm to a mark's selling power to be incapable of direct or inferential proof, that it may simply be presumed from the identity or sufficient similarity of the marks. Id. 46 The Fourth Circuit then cast the FTDA against this history of state statute interpretation, finding two aspects of its construction to be particularly relevant. Most critically, the federal Act proscribes and provides remedy only for actual, consummated dilution and not for the mere 'likelihood of dilution' proscribed by the state statutes. And, by specifically defining dilution as 'the lessening of the capacity of a famous mark to identify and distinguish goods or services,' the federal Act makes plain what the state statutes arguably may not: that the end harm at which it is aimed is a mark's selling power, not its 'distinctiveness' as such. Id. at 458. The court found its concededly . . . stringent definition of dilution, requiring an actual lessening of the senior mark's selling power, expressed as 'its capacity to identify and distinguish goods or services' to follow from these points. Id. To hold otherwise, the court asserted, would be to find a property right in gross in a mark's distinctiveness, and to rely upon judicial presumption where actual proof should be required. Id. at 459-60. 47 The Ringling Brothers court then faced the question of how a plaintiff might prove a lessening of the capacity of a famous mark to identify and distinguish goods or services. The court conceded that the difficulties of proving actual dilution by practically available means is [sic] evident, but found that proof of actual dilution cannot be considered impossible and therefore not possibly what Congress could have intended. Proof will be difficult, because actual, consummated dilutive harm and its cause are difficult concepts. But the concept is a substantively viable one, and the means of proof are available. Id. at 464. The court then established three forms of proof it would find acceptable: 48 Most obviously, but most rarely, there might be proof of an actual loss of revenues, and proof of replicating use as cause by disproving other possible causes. Most obviously relevant, and readily available, is the skillfully constructed consumer survey designed not just to demonstrate mental association of the marks in isolation, but further consumer impressions from which actual harm and cause might rationally be inferred . . . Finally, relevant contextual factors such as the extent of the junior mark's exposure, the similarity of the marks, the firmness of the senior mark's hold, are of obvious relevance as indirect evidence that might complement other proof. 49 Id. at 465. Finding that Ringling Brothers had not produced evidence to meet any of these standards, the court held that it had not sufficiently proved dilution. 50 The Fourth Circuit's actual harm standard was subsequently adopted by the Fifth Circuit in Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658 (5th Cir. 2000). In that case, the Fifth Circuit held: 51 As an issue of first impression in this Circuit, we endorse the Fourth Circuit's holding that the FTDA requires proof of actual harm since this standard best accords with the plain meaning of the statute. There is a key difference between the state antidilution statutes that formed the backdrop for passage of the FTDA and the FTDA itself. Whereas state antidilution statutes incorporate, often expressly, the likelihood of dilution standard, the federal statute does not . . . . Instead, it prohibits any commercial use of a famous mark that causes dilution. 15 U.S.C. § 1125(c)(1). Both the present tense of the verb and the lack of any modification of dilution support an actual harm standard. 52 Id. at 670. 53