GT Alert

Moseley v. V. Secret Catalogue, Inc.

April 2003
By G. Roxanne Elings, Maxine Retsky, and Elise Tenen-Aoki, Greenberg Traurig

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Dilution is a word used in the trademark law arena to identify injury through the gradual whittling away of the identity of the owner in the public’s mind by use of a mark on or in connection with non-competing goods or services. Beginning in January 1996, owners of well-known, strong trademarks, whether registered or not, had the ability to obtain nationwide injunctions to prevent the continued dilution of their trademarks based upon the then- newly enacted Federal Dilution Act of 1995 (the "Dilution Act").

"The Dilution Act amended existing federal trademark law by entitling the owner of a "famous" mark to a nationwide injunction against another person’s "commercial use" of a mark or trade name that causes "dilution" of the distinctive quality of the famous mark."

Prior to the passage of the Dilution Act, trademarks owners were forced to rely upon state law to halt non-competitive uses of marks that diminished their marks’ value. Yet state law was largely ineffective at preventing or stopping dilution. First, as with many other state laws, these laws varied from state to state, with conflicting decisions across the country. Many states did not even have dilution statutes. Secondly, , federal judges were reluctant to apply state dilution laws in cases where they did not find infringement. Finally, even where dilution was found, courts were generally unwilling to order injunctions, especially in states that did not have dilution laws.

Prior to the passage of the Dilution Act, General Motors would not have had a federal cause of action to challenge a person selling CADILLAC brushes or CHEVROLET t-shirts touting illegal substances. Although there is a "blurring" of the distinctive quality of General Motor’s marks in the first example and a "tarnishment" of the reputation of the mark in the second example, this is not actual trademark infringement and, therefore, was not considered trademark infringement under federal trademark law.

The Dilution Act amended existing federal trademark law by entitling the owner of a "famous" mark to a nationwide injunction against another person’s "commercial use" of a mark or trade name that causes "dilution" of the distinctive quality of the famous mark. The law specifically states that "dilution" exists even if the owner of the famous mark and the diluting party are not in competition with each other and even if the conduct of the diluting party does not constitute trademark infringement. Moreover if the dilution is willful or if the diluting party intended to trade on the famous mark owner’s reputation, the owner of the famous mark may seek monetary remedies, including statutory damages.

There have been relatively few court decisions interpreting the Dilution Act; however, the United States Supreme Court in a decision issued on March 4, 2003, in Moseley v. V. Secret Catalogue, Inc., narrowed trademark owners’ abilities to win lawsuits against those who usurp some or all of the works that comprise their trademarks. The Court’s unanimous decision, written by Justice Stevens, held that although Victoria’s Secret had an interest in protecting its famous trademarks, federal trademark law required it to present evidence that the Moseleys, the defendants in the case, actually caused harm to the VICTORIA’S SECRET trademark.

V Secret Catalogue, Inc. v. Moseley

The VICTORIA’S SECRET mark was registered in 1981 for women’s lingerie and is owned by a company that sells women’s lingerie, clothing and various other accessories. At the time this case was filed, there were over 750 Victoria’s Secret stores, including two located in Louisville, Kentucky. In addition, Victoria’s Secret distributed over 400 million copies of its catalogs per year and spent tens of millions of dollars in advertising each year. In 1998, the year the case was originally filed, Victoria’s Secret spent $55 million in advertising and distributed over 39,000 catalogs in Elizabethtown, Kentucky. In fact, one survey indicated that VICTORIA’S SECRET was one of the 10 most famous marks in the country.

In 1988, the Moseleys opened a store called Victor’s Secret in Elizabethtown, Kentucky. The store sells men’s and women’s lingerie, as well as adult videos and sex toys. When Victoria’s Secret sent the Moseleys a letter demanding they cease using the name, the Moseleys changed the name of the store to Victor’s Little Secret. Victoria’s Secret was not satisfied with this solution and filed a lawsuit against the Moseleys claiming trademark infringement and dilution under the Federal Dilution Act. The Moseleys did not dispute the fact that the VICTORIA’S SECRET mark was famous. The District Court found in favor of the Moseleys on the infringement claims; however, it also found that Victor’s Little Secret tarnished the reputation of the VICTORIA’S SECRET mark. The Moseleys appealed the decision; however, the Appellate Court affirmed the decision, finding the Moseleys use of the mark both tarnished and blurred the VICTORIA’S SECRET mark. The Moseleys appealed to the United States Supreme Court.

In March 2003, the Supreme Court, by unanimous vote, ruled in favor of the Moseleys, stating that Victoria’s Secret needed to show "actual dilution," not the mere likelihood of harm, in order to win an injunction. According to the opinion, the mere fact that Victor’s Little Secret causes consumers to mentally associate it with VICTORIA’S SECRET is not sufficient to establish actionable dilution because this does not necessarily reduce the capacity of the VICTORIA’S SECRET mark to identify the goods of its owner.

The Court went on to say that owners of famous trademarks, such as VICTORIA’S SECRET, do not have to show actual lost sales or profits to receive an injunction. Rather, trademark owners must show at least circumstantial evidence of actual dilution of their trademarks, demonstrating lessened capacity to identify and distinguish their goods or services.

The relatively short, 16-page Supreme Court opinion does not set out a clear standard of what constitutes sufficient circumstantial evidence, but did note that Victoria’s Secret’s expert did not testify concerning the impact that Victor’s Little Secret had had or would have on the VICTORIA’S SECRET mark. While this decision raises the evidentiary standard for the trademark owners, the standard may very well be met through expert testimony or a well designed survey. Victoria’s Secret can still obtain and injunction, even under this higher standard, though it may be even harder to do so now. When the case is heard again in the lower court, Victoria’s Secret may very well be able to prove what is necessary to get its injunction. However, only time will tell.

Ways to Maximize Chances of Success Under Dilution Act

Based on the Dilution Act itself and the case law to date, the following remain abundantly clear:

1. In order to maximize protection for your marks under the Dilution Act, register all of your marks and keep your registrations current. Federal registrations will: (a) assist in increasing the "fame" of your marks under the Dilution Act; (b) put would-be users of the same or similar marks on notice of your marks and of the possibility of your bringing dilution claims against them; and (c) prevent others from bringing state dilution claims against you.

2. Any and all third-party uses of marks that are the same or similar marks will undermine the "fame" of your marks and could preclude you from recovering under the Dilution Act. Accordingly, in order to maximize your rights under the Dilution Act, remain vigilant over all third-party uses and develop a formal policing strategy with respect to third-party uses of, and third-party applications to register, marks identical or similar to yours. It may be wise to include a professional trademark watch service as part of your policing plan.

3. Make sure you always use your trademarks properly in print and verbal communications:

a. Always use your trademarks as adjectives, not nouns.

Trademarks are adjectives that identify specific products or services in a way that distinguishes them from other products or services in the same field or business. They are not "generic" words that are simply names for the type of products or services.

b. Always set your trademarks apart from other words.

To distinguish your trademarks from other words in surrounding text, they should be capitalized, italicized, bolded, or put in a different type font. In this way, readers will attach additional visual significance to the trademarks that would not otherwise be apparent.

c. Never combine your trademarks with other marks.

Trademarks serve to identify the sources of products or services. If your trademarks are combined with the trademarks of others, consumers may be confused as to which company is the source of the product or service.

d. Never use your trademarks in the possessive or plural form.

Use of trademarks in the possessive form (i.e., ’s) is an alteration of such trademarks, and dilutes their effectiveness. Use of trademarks in plural form can cause similar dilution, and also confuses readers into believing that the trademark merely identifies the product or service.

e. Always use the appropriate trademark symbol in the proper place and give proper attribution where necessary.

Trademarks should feature an appropriate designator to distinguish them from other words in text. The federal trademark registration symbol "®" should be used for all registered trademarks.

f. Do not use the registration symbol for goods that are not covered by the trademark registration.

The federal trademark registration symbol "®" should only be used for the goods that are actually covered by the registrations. Just because a mark is registered for one item it does not mean that the "®" should be used every time the terms of the mark are used. It is important to check to see what goods and services are covered under a specific mark before using the "®" symbol.

g. Do not use the registration symbol when referring to your company’s trade name.

The federal trademark registration symbol "®" should only be used in conjunction with trademarks, not company or trade names.

The views expressed are solely those of the authors’ and should not be attributed to the authors’ firm or its clients.

© 2003 Greenberg Traurig

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