Court Opinion

ID: 3020538
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:23:03.411408+00
Date Added: 2024-06-11T12:26:43.522839
License: Public Domain

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.

      Viacom Inc. and Blockbuster Entertainment, Inc. (“Viacom”), own many
federally registered trademarks centered around the marks BLOCKBUSTER and
BLOCKBUSTER VIDEO. The first mark was registered in 1986, and some are now
incontestable under 15 U.S.C. § 1065. Viacom owns or franchises 4,500 Blockbuster
Video and 500 Blockbuster Music stores. The BLOCKBUSTER marks are heavily
advertised and promoted and are used on a wide variety of consumer products and
services. Ingram Enterprises, Inc., and three of its affiliates (“Ingram”) own and
operate fireworks stands in Missouri and California. Ingram owns a BLOCKBUSTER
mark that was federally registered for fireworks sales 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 summary judgment. In a series of orders, the district court denied Viacom
summary judgment on its claims of trademark infringement because the evidence of
likelihood of confusion was not conclusive; granted Viacom summary judgment on its
claim under Missouri’s anti-dilution statute, Mo. Rev. Stat. § 417.061(1), and enjoined
Ingram from further use of BLOCKBUSTER marks in Missouri; dismissed Viacom’s
claim 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 remaining claims for summary judgment. Ingram appealed the grant of
summary judgment and an injunction under Missouri anti-dilution law. After the court
entered final judgment dismissing the FTDA claim, see Fed. R. Civ. P. 54(b), Viacom
cross-appealed that dismissal. Reviewing these summary judgment issues de novo, we
conclude the district court erred in declining to apply the FTDA, an error which
requires us to reverse both the grant of summary judgment on Viacom’s state law anti-
dilution claim, and the dismissal of Viacom’s FTDA claim for prospective relief.
Accordingly, we convert the district court’s permanent injunction into a preliminary
injunction, reverse in part, and remand.

                                         -2-
                                           I.

       For reasons that will become apparent, it is essential to address first the FTDA’s
impact on a lawsuit commenced before enactment that seeks relief against on-going
conduct. The FTDA protects a “famous” trademark from subsequent uses that tarnish
or disparage or blur the distinctiveness of the mark, regardless of the likelihood of
customer confusion. The Act creates a remedy against non-competing trademark uses
such as “DuPont shoes, Buick aspirin, and Kodak pianos.” 141 CONG. REC. H14317
(daily ed. Dec. 12, 1995) (statement of Rep. Moorhead). The FTDA entitles the owner
of a famous mark to a nationwide injunction if another person’s subsequent commercial
use of a mark “causes dilution of the distinctive quality of the [famous] mark,” 15
U.S.C. § 1125(c)(1),1 and to damages for willful dilution, 15 U.S.C. § 1125 (c)(2).
However, the FTDA also provides a complete defense to state law dilution claims to
owners of valid, federally registered marks, 15 U.S.C. § 1125(c)(3). We must decide
whether injunctive relief authorized by § 1125(c)(1) may be granted against on-going
dilution 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 against
Ingram’s registered mark.

      A. Viacom’s Claim for Injunctive Relief under § 1125(c)(1). In Landgraf v.
USI Film Products, 511 U.S. 244, 278 (1994), the Supreme Court revived the
“traditional presumption against applying statutes affecting substantive rights,
liabilities, or duties to conduct arising before their enactment,” absent an express
statutory command to the contrary. However, the Court also noted that

      1
        § 1125(c)(1) provides in relevant part: “(1) The owner of a famous mark shall
be entitled, subject to the principles of equity and upon such terms as the court deems
reasonable, to an injunction against another person’s commercial use in commerce of
a mark or trade name, if such use begins after the mark has become famous and causes
dilution of the distinctive quality of the mark . . . .”

                                          -3-
      application of new statutes passed after the events in suit is
      unquestionably proper in many situations. [For example, w]hen the
      intervening statute authorizes or affects the propriety of prospective relief,
      application of the new provision is not retroactive.
511 U.S. at 273. The FTDA contains no express language addressing retroactivity.
Therefore, Ingram argues that Viacom’s claims for FTDA relief are barred by the
traditional presumption against retroactivity. Viacom responds that it is entitled to
prospective FTDA relief against continuing dilution of its BLOCKBUSTER marks.2

        In dismissing Viacom’s claim for prospective FTDA relief, the district court
relied 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. Because the diluter’s conduct did not violate federal law when initiated, it
would be “manifestly inequitable” to compel the diluter to surrender good will
associated with its competing mark. 949 F. Supp. at 419.3 We disagree.

      In the first place, we will not brush aside as dicta the Supreme Court’s
pronouncement that an intervening statute may “authorize[] . . . prospective relief”

      2
        Count VIII of Viacom’s Second Amended Complaint also sought the recovery
of willful dilution damages under § 1125(c)(2). However, though Viacom cross
appealed the dismissal of Count VIII, it argues on appeal only that Landgraf does not
foreclose its claim for prospective relief under § (c)(1). Therefore, the dismissal of
paragraphs 74 and 76 of the Second Amended Complaint is unchallenged, and Viacom
is barred from seeking § (c)(2) monetary relief on remand.
      3
       Accord S Indus., Inc. v. Diamond Multimedia Sys., Inc., 1998 WL 21661, *8-9
(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-
without running afoul of the traditional presumption against retroactivity. That
pronouncement was expanded upon in Justice Scalia’s concurring opinion for three
Justices. See 511 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 Landgraf and concluded
that the prospective relief pronouncement only applies when the conduct to be enjoined
was illegal prior to the new statute’s enactment. However, other Supreme Court cases
make it clear that the pronouncement has 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
      statute a retroactive effect; that the contract, at the time it was entered
      into, was not prohibited or declared illegal by the statute, as it had not
      then been passed, and to now enjoin the doing of an act which was legal
      at the time it was done would be improper. We give to the law no
      retroactive effect. The agreement in question is a continuing one. . . .
      Assuming such action to have been legal at the time the agreement was
      first entered into, the continuation of the agreement, after it has been
      declared to be illegal, becomes a violation of the act.

United States v. Trans-Missouri Freight Ass’n, 166 U.S. 290, 342 (1897); to the same
effect, 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).4 Here, the conduct

      4
        As a noted jurisprudential scholar explained, “If every time a man relied on
existing law in arranging his affairs, he were made secure against any change in legal
rules, the whole body of our law would be ossified forever.” L. Fuller, The Morality
of Law 60 (1964), quoted in Landgraf, 511 U.S. at 269 n.24. For a dramatic example
of prospective relief that upset settled expectations, see DIRECTV, Inc. v. FCC, 110
F.3d 816, 825-26 (D.C. Cir. 1997)

                                           -5-
sought to be enjoined under the FTDA is Ingram’s continuing use of its
BLOCKBUSTER marks, not its pre-enactment conduct.

       Third, Ingram argues that applying the FTDA would unfairly deprive it of the
investment in its BLOCKBUSTER marks. We agree that fairness is important in
considering retroactivity issues. There is also a difference between applying a new
trademark infringement statute to enjoin conduct causing public confusion, and
applying a new anti-dilution statute to enhance Viacom’s private property rights at the
expense of Ingram’s pre-existing property rights.5 However, the answer to this very
real issue is not to abandon the general rule that new statutes may be enforced
prospectively. Section § 1125(c)(1) expressly provides that its injunctive relief is
“subject to the discretion of the court and the principles of equity.” If Ingram’s non-
competing, non-confusing use of its BLOCKBUSTER mark prior to the FTDA’s
enactment was lawful and resulted in Ingram acquiring a valuable and legitimate
property interest of its own, Viacom will presumably not be entitled to an anti-dilution
injunction granting it a nationwide monopoly in the use of this rather common word.6

       For the foregoing reasons, we conclude that the district court erred in dismissing
the part of Count VIII that seeks prospective relief under § 1125(c)(1).

      5
        As the Court observed in Landgraf, “The largest category of cases in which we
have applied the presumption against statutory retroactivity has involved new
provisions affecting contractual or property rights, matters in which predictability and
stability are of prime importance.” 511 U.S. at 271.
      6
       To warrant injunctive relief under § 1125(c)(1), Viacom must prove its mark
was “famous” at the time Ingram began using the diluting mark. “By definition, all
‘trademarks’ are ‘distinctive’ -- very few are ‘famous.’” 3 MCCARTHY ON
TRADEMARKS AND UNFAIR COMPETITION § 24:91, at 24-149 (4th ed. 1997).

                                          -6-
       B. Ingram’s Defense Based 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 law or a statute of a State and that seeks to prevent dilution of the
distinctiveness of a mark.” We must separately consider the retroactive effect of this
provision. See Maitland v. University of Minnesota, 43 F.3d 357, 361 (8th Cir. 1994).

       Viacom 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 entered 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 alters 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 in
concluding that § 1125(c)(3) “is inapplicable” to this case. Because Ingram was
granted federal registration of its BLOCKBUSTER mark in 1992, the court must
reconsider its grant of summary judgment and a permanent injunction based on the
Missouri anti-dilution statute in light of § 1125(c)(3).

                                           II.

      This is an interlocutory appeal, so the case must of course be remanded. On
remand, there will presumably be a trial of the main event -- Viacom’s claims of
trademark infringement -- as well as the subsidiary claims of dilution under FTDA and
Missouri law.7 We have not considered the district court’s lengthy discussion of

      7
         The district court observed there is a paucity of dilution law and a wealth of
trademark infringement law. This is logical. Trademark infringement relief protects
the public from confusion by enforcing the rights of a prior mark, whereas dilution
relief, being premised on the absence of confusion, merely protects the property rights

                                           -7-
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 summary
judgment ruling, the district court is free to reconsider its initial conclusions on the
basis of a fully developed trial record.

       There are two aspects of the case that deserve further comment. First, Viacom’s
claim under the Missouri anti-dilution act is not foreclosed or superseded by the FTDA,
because Viacom may fail to prove its claim for injunctive 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.8 Ingram argues the Lanham Act completely preempts state anti-dilution laws
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
(1995), 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 & Bailey Combined
Shows, Inc. v. Celozzi-Ettelson Chevrolet, Inc., 855 F.2d 480, 483 (7th Cir. 1988);
Golden 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 Oil Co. v. Bicron Corp., 416 U.S. 470 (1974). In addition, we note that
Congress in § 1125(c)(3) of the FTDA made federal trademark

of the prior mark’s owner. As one treatise commented, “When trademark law leaves
the firm and traditional ground of protecting customers from confusion and seeks
protection for the trademark ‘property’ itself, a strong rationale is necessary.” 3
MCCARTHY at § 24:70, p. 24-119.
      8
      Although § 1125(c)(3) provides a “complete bar” to state law dilution claims,
Viacom could block this defense, for example, by establishing that Ingram does not
own a “valid registration.”

                                           -8-
registration a defense to claims under state anti-dilution statutes, rather than preempting
such statutes altogether.

      Ingram next argues that the district court erred in granting summary judgment
because Viacom failed to establish as a matter of law the “likelihood . . . of dilution”
that must be proved to warrant injunctive relief under § 417.061(1). The district court
concluded that Viacom 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 cameras
      and shoes, or “Ritz-Carlton” for coffee, these marks must inevitably be
      lost in the commonplace words of the language, despite the originality and
      ingenuity in their contrivance, and the vast expenditures in advertising
      them which the courts concede should be protected to the same extent as
      plant and machinery. . . . [An] entirely arbitrary symbol would soon lose
      its arresting uniqueness and hence its selling power if it could also be used
      on pianos, shaving cream, and fountain pens.

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

       The trademarks mentioned in the Schechter article are arbitrary or fanciful
words, long associated in the public’s eye with a particular company. Likewise, courts
almost without exception have limited dilution-by-blurring relief to the owners of
“strong” marks. “Without such a requirement, an anti-dilution statute becomes a rogue
law that turns every trademark, no matter how weak, into an anti-competitive weapon.”

      9
         To put the difference between infringement and dilution more concretely, if a
parent says to the kids, “Let’s go pick something out at Blockbuster tonight,” and the
youngest child assumes they will be buying fireworks made by Viacom, that is
evidence of the confusion that is essential to a claim of trademark infringement. But
if the oldest child answers, “Which Blockbuster,” that evidences dilution by blurring.

                                           -9-
3 MCCARTHY at § 24:108, pp. 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 decisions
applying § 417.061, the court upheld the grant of relief because the plaintiff’s strong
mark had acquired secondary meaning. Accord Mead Data Central, Inc. v. Toyota
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
meaning for its trademark infringement claim because the BLOCKBUSTER mark is
suggestive and therefore “deemed a strong mark” for Lanham Act purposes. The court
then applied this analysis to the Missouri anti-dilution claim, without discussing
Missouri authorities. It was error to conclude that proof of a mark’s strength sufficient
for federal trademark infringement 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 is
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 airplane. 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 judgment on its dilution-
by-blurring claim, even if the district court had not erred in disregarding Ingram’s
§ 1125(c)(3) defense. As one treatise concluded 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 against Ingram’s use of BLOCKBUSTER marks in Missouri. Because the

                                          -10-
court erred in granting summary judgment on Viacom’s state law anti-dilution claim,10
the permanent aspect of this injunction must be set aside. However, the district court
had discretion to issue a preliminary injunction to this effect, and its analyses of the
trademark infringement and dilution issues strongly suggest that it would have done so
had it not considered a permanent injunction appropriate. In these unusual
circumstances, we will leave the injunction in place as a preliminary injunction, without
prejudice to the district court revisiting the issue on remand.

       For the foregoing reasons, we reverse the grant of summary judgment on
Viacom’s state law anti-dilution claim, reverse in part the dismissal 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.

      10
        Viacom argues on appeal that it has also proved dilution by tarnishment, which
occurs “when a defendant uses the same or similar marks in a way that creates an
undesirable, unwholesome, 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-