Trademark Dilution and Film

Trademarks are one of the most important elements in intellectual property law. They identify something, such as a brand or logo, which is distinguished in the marketplace. No one except the trademark holder is allowed to use that mark because it defines the good, and vouches for its value. It is no surprise then that there has been a history of dispute between trademark holders and those who use the marks in a way that "dilutes" them. Merriam-Webster's Dictionary of Law defines "dilution" as "a lessening of the value of a trademark that is caused by use of the mark by another and that creates potential confusion on the part of the consumer." The holder registers the mark with one intention: to make money. If the mark is then used in a way that will supposedly lessen its value in the consumer's mind, the holder is losing out on profits and benefits that are due. This is the very antithesis of the American value of profiting from ideas.

Trademark dilution had long been recognized by state law in some form or another, but it wasn't until 1995 that the Federal Trademark Dilution Act (FTDA) was enacted as an amendment to the Trademark Act of 1946, and "provides that the owner of a famous mark shall be entitled to certain relief including an injunction against another person's commercial use of a mark or tradename if that use causes dilution of the distinctive quality of the mark" (LexisNexis). Its definition of dilution is "The lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception." Therefore, damage to the actual trademark must be proven, while actual losses of things such as profits do not have to be because they are consequences of dilution.

The statutory requirement for dilution is the reduction of "the capacity of the famous mark to identify the goods of its owner" (LexisNexis). Thus, while it seems as though consumer confusion is at stake here, it is important to realize that the associations between two marks are merely constructed in the mind. Trademark dilution must fall under the categories of "blurring" or "tarnishing" a mark, which entails damage to the mark, not customer confusion. Tarnishing refers to injury to business reputation, while blurring is "dilution of the distinctive quality of a trademark or trade name" (LexisNexis). According to the act, actual dilution must be proven, because it is impossible to try to prove the "likelihood" of it. However, several problems have arisen due to the fact that the act never defines just how to prove actual dilution.
It is quite possible that many acts of trademark dilution go unnoticed. It is interesting to wonder then if actual dilution is taking place. For example, is it really dilution if some small restaurant owner happens to have the same name as a giant chain of corporate restaurants? Is the smaller business tarnishing the reputation of the big one, or blurring the quality that people associate with its mark? In many cases the answer turns out to be no. Regardless, trademarks are sacred to companies because they speak for them, so many are eager to stop any separate use if at all possible. It seems as though larger companies are always able to sniff out any possible dilution.

Sometimes, however, companies do not even have to look very far. Dilution pops up everywhere, and one of the easiest ways to find it is to have it presented on the big screen. Many instances exist in which trademarks are used in the films produced by companies that do not own them. The trademark owners in these cases usually try to seek relief through the courts because they feel the movies are taking advantage of the trademark or diluting it, causing confusion among consumers and tarnishing of their label. In rare cases this may be true, but usually it is found that no dilution is occurring. If nothing else, the movie is only promoting the product, and it is hard to prove consumer confusion. Below are some cases that illustrate the point that trademark dilution in films is not as easy to prove as it may seem.

In the 1995 case of Hormel Foods Corp. v. Jim Henson Prods., Hormel sought a permanent injunction against Henson alleging trademark infringement and dilution of their "SPAM" product for intended use of the character "Spa'am" on merchandise related to Henson's film Muppet Treasure Island. Hormel expressed concern over the character, which was supposed to be an evil tribal leader, because they did not want their product to be associated with "evil in porcine form" (Hormel, LexisNexis). They also did not want a "grotesque" boar to be called to mind that would "question the purity and high quality of its meat product" (Hormel, LexisNexis). However, as Henson's lawyers argued, the character was merely a humorous parody of the lunchmeat. Both the district and appeals courts also found that there was no likelihood of confusion between the character and the lunchmeat because of the different intentions of the two.

Hormel's product was first produced in 1937 and millions of cans of it had been sold at the time of the trial. Henson was planning a massive merchandising campaign and had to shelve any items with the name "Spa'am" while the case was still pending, but had also agreed that he would not use the word "Spa'am" alone on any product, but that it would always appear with a likeness of the character. Hormel was then concerned that Henson's campaign was utilizing some of the same products – like watches – that they were using in their marketing campaigns. Once again, the court agreed with Henson in that purchasers of secondary SPAM products were also already consumers of the lunchmeat. The audiences attending his films, the court believed, were already aware of Henson's propensity for parody of well-known names and products. Furthermore, they found that "children who enjoy the Muppets are familiar with the Muppet brand of humor and are unlikely to think that the Muppets are sponsored by the products and celebrities who are the subject of their jokes" (Hormel, LexisNexis).

In the end, the court denied Hormel's motion for a permanent injunction because they found no reason why consumers would confuse Henson's character "Spa'am" with their lunchmeat. It was duly noted that SPAM was a household name and a particularly strong trademark. They also found that there was no substantial similarity between the two marks. Henson's character's name was dependent on the SPAM brand, but different enough that no tarnishing connection could reasonably be drawn. Henson's use was strictly intended to parody the famous brand. Each of the products, they also noted, occupied two distinct places in the marketplace, equally high in quality, meaning that Henson sough no monetary gain from his use of the SPAM name. The court found SPAM to be a "unique product identifier" (Hormel, LexisNexis), and that Henson's character was not blurring or tarnishing it do to the fact that the products were not substantially similar enough.

In the 2004 case of Wham-O, Inc. v. Paramount Pictures Corporation and Happy Madison Productions, Inc., Wham-O sought a temporary restraining order to show cause regarding a preliminary injunction. This was due to the fact that in Paramount's film Dickie Roberts: Former Child Star, a waterslide produced by Wham-O appears in an approximately 70 second scene. According to the district court's opinion, "As a matter of custom, defendants do not seek the permission of manufacturers of name-brand products to use those products in its films" (Wham-O, LexisNexis). Therefore, when Wham-O's petition to have a disclaimer placed in the film's credits was rejected by Paramount, they sought out the temporary restraining order because the slide appeared in an extended scene in the film as well as many of its promotional materials.

The court examined the claims of trademark dilution using a four part test to establish blurring and tarnishment: "(1) the mark is famous; (2) defendant puts the mark to commercial use in commerce; (3) defendant puts the mark to use after the plaintiff's mark became famous; and (4) there exists a likelihood of dilution of the distinctive value of the mark" (Wham-O, LexisNexis). They found that Paramount fulfilled every part of the test except the fourth, which is perhaps the most important one. The film portrayed the slide in a silly light in which it was misused by characters in the film. According to the court, the use, or misuse, of the slide did not cause the mark to become any less identifiable, and they found that it also did not present "a danger that consumers [would] form unfavorable associations with the mark" (Wham-O, LexisNexis). As the court put it,

plaintiff attempts to have it both ways: On the one hand, plaintiff presents the slide as so recognizable that defendants are diluting the value of the mark (and product) by portraying it as a dangerous, if humorous, toy; on the other hand, plaintiff presents the slide as so insufficiently recognized and so poorly labeled in the film that consumers will misperceive the slide's origins. (Wham-O, LexisNexis).

Wham-O failed to prove any immediate irreparable injury due to the portrayal of its slide in Paramount's film. The court found that their claims had no merit, and that they were on the opposite end of the balance of hardships than they wanted to be. Their plan to claim any hardships they might experience due to Paramount's actions would generate more hardships than it would alleviate.

An interesting 2002 case involved Star Wars movies that became the basis for pornographic films. Lucasfilm Ltd. v. Media Market Group, Ltd., et al., was also a case in which injunctive relief was sought but not obtained due to dilution. Lucasfilm argued that the film Starballz tarnished "the Star Wars family of marks by associating them with a pornographic film that is inconsistent with the image Star Wars has striven to maintain for itself" (Lucasfilm, LexisNexis). However, it was found that trademark dilution does not apply to non-commercial use of a mark. Starballz was considered a parody, and therefore non-commercial, and was therefore not affected by the Federal Trademark Dilution Act. The court decided that Lucasfilm would not succeed on any of its claims, including trademark dilution. They did consider the "serious questions regarding the merits" (Lucasfilm, LexisNexis), but decided that the balance of hardships did not tip in Lucasfilm's favor.

The 2004 case of Davis v. Walt Disney Co. involved several claims against Disney Co., one of them being trademark dilution. Leslie Davis's companies Earth Protector Licensing Corp. and Earth Protector, Inc. were real-life environmentally based entities that utilized the trademark "Earth Protector" on a variety of goods and services. They claimed that the mark was famous and that Disney's movie Up, Up, and Away created a likelihood of confusion and diluted their mark because it contained a corporation turned evil under the name of Earth Protectors. Their argument for trademark dilution fell into the federally recognized categories of tarnishment and blurring, as well as Minnesota's laws for dilution where it was heard. Disney countered by saying that "Earth Protectors" was not used in promotional materials, was not part of the movie title, and was not used in a commercial transaction, and "therefore was outside of the reach of anti-dilution statutes" (Davis, LexisNexis). Disney also argued that Davis had to show actual dilution, as opposed to "a likelihood of dilution" (Davis, LexisNexis). Disney's motion to dismiss Davis's accusations of dilution was granted without prejudice by the court.

In the 2002 case Twentieth Century Fox Film Corporation v. Marvel Enterprises Inc., the film company sued Marvel for breach of contract, copyright infringement, and trademark infringement. Marvel countersued on those accounts, as well as others, including trademark dilution. However, that claim was dismissed due to the fact that Fox was using Marvel's trademark on website for its film X-Men 2, which they had licensed. Marvel tried to claim that the website diluted their famous mark because it was "connecting Internet users to Fox's main web site -- which, according to Marvel, [had] 'nothing to do with the X-Men property'" (Twentieth, LexisNexis). However, it was found that the website was strictly related to promotion of Fox's licensed film. Fox and Marvel had previously signed an agreement in which such use of Marvel's trademarks was permitted. Also, Marvel claimed that it was dilution on Fox's part to provide links to inactive sites based on their properties. The court disagreed, and accordingly stated that, "[the] Court [did] not see how the mere presence of inactive X-Men related web sites on the Internet would cause consumer confusion or 'reduce the public's perception that the [X-Men] mark signifies something unique, singular or particular'" (Twentieth, LexisNexis). Fox's motion to dismiss Marvel's counterclaim was granted.

As these court cases demonstrate, dilution is a fairly ambiguous concept that contains no real rigid structure for provided judgments for or against it. Julie Zando-Dennis argues that unlike trademark infringement claims, under the Federal Trademark Dilution Act, "it is not necessary for plaintiffs to allege consumer confusion as an element of their cause of action." It merely has to be established that the trademark is being "whittled away" by acts of tarnishment and blurring. "The focus… is on damage to the mark's inherent value as a symbol rather than on whether consumers have been misled as to origin or sponsorship" (Zando-Davis). She argues that most trademark law attempts to investigate any "confusion" that a consumer might experience as to the origin of a product. However, "the theory of dilution is not aimed at avoiding confusion" (Zando-Davis). She then provides examples in the way in which dilution has been used, including paraphrasing of the Lucasfilm and Henson cases.

Zando-Dennis believes that the dilution claims present many concerns. The concept of tarnishment, she says, "does not even appear in the FTDA, but is judicially-made law" (Zando-Davis), borrowed from states statutes and common law. Federal courts, however, include the term in their findings due to the FTDA's legislative history. She also argues that dilution is only reserved for "famous" marks, which is unfortunately ironic because it vests more power in the hands of corporations and steals it from the consumer, who is supposed to be protected by trademark law. It is her view that it creates property law in trademark, and that courts are too quick in issuing injunctions to large corporation that have a complaint. Perhaps most importantly, she believes the FTDA undermines the First Amendment because the courts are "giving greater weight to property rights than freedom of expression" (Zando-Davis). To sum up, she believes that, "the FTDA is a dangerous and powerful tool to chill speech and stifle criticism" (Zando-Davis).

While Zando-Dennis is in disagreement with the broadness of trademark dilution, Layne T. Smith argues that, "Trademark dilution law supplements infringement law, providing broader protection to famous trademarks" (Smith). This is because of the important fact that dilution exists even when there is no consumer confusion or competition between good and services, the ideas of which form the basis of trademark law. He advocates the need for a federal law prohibiting tarnishment since it is not encompassed within the FTDA, and also notes that state statutes and trademark infringement law "do not provide adequate protection against dilution by tarnishment" (Smith). He agrees that the FTDA is broadly defined, but puts on a positive spin on that interpretation when she says, "the presence of ambiguity in the definition of tarnishment - as it relates to tarnishment - opens the door for courts to look to the legislative history of the FTDA to interpret the scope of the Act" (Smith). He advocates that tarnishment is a valid claim under the FTDA, and more importantly, that the Act becomes more narrowly defined as it is put to use in court cases.

As the several cases above have shown (which include a smattering of both state and federal law standards), as well as the law reviews, dilution laws (the FTDA in particular) have been a contentious subject over the years because of the somewhat ambiguous nature of those laws. The very basis of trademark law is the protection of the consumer. What seems to be the case under the FTDA is that more often than not, big businesses with "famous" trademarks and the financial means to pursue restraining orders and injunctions have been the real winners under the law. It is hard to judge at just what point this becomes a bad thing; after all, usually one big company is seeking relief from one equally as large. Keeping film companies in mind, it could also even be considered good when they are brought to court and win on dilution claims because it should make sense that they are allowed to utilize products available on the market, either in a comedic or non-threatening light because of their capacity to do so on such a wide scale. Despite Smith's claims, dilution does seem to be a bit ambiguous, and no matter what it does not encompass, still seems contrary to the purpose of trademark law.

Most recently, in 2006, the Trademark Dilution Revision Act was signed into law, which amended the FTDA. Mainly, it was meant to correct the assumption that plaintiffs had to demonstrate actual dilution in favor of likelihood of dilution. As law professor Eric Goldman explains, there are some good and bad elements to the revision. Among the good, he states that there is no possibility for a third basis of dilution, even though "Some courts had suggested that there might be activities other than blurring and tarnishment that would constitute dilution" (Goldman). Also, there is no possibility for many marks qualifying for protection because of "niche fame," which upholds and further defines the "famous mark" qualifications. Also, "fair use defenses were clarified a bit, including express protections for comparative advertising, parodies, criticism and comments" (Goldman). On the bad side, he notes a "likelihood of a dilution standard … broad definitions of blurring and tarnishment … and huge rewards in favor of defendants to significance of the marks" (Goldman). He believes it is yet to be decided how courts begin to rule in the cases involving the new dilution standards.

It appears as though trademark dilution law still has a long way to go before it is perfect.  It has mainly been viewed as ambiguous in the past, though the new revisions in federal dilution law have started to clear some of that up. Regardless, it is really the courts that will define just where dilution stands in American law in the coming years. If it is proven to be contrary to the principles of trademark law, perhaps more revisions will be necessary. Or it could become evident that without dilution laws, trademarks seriously would suffer at the hands of blurring and tarnishing, gradually fading from the public's view. But specifically, in the world of film, dilution will probably never have a serious claim.


Works Cited

Davis v. Walt Disney Co., 2004 U.S. Dist. LEXIS 16806.

Goldman, Eric. "Trademark Dilution Revision Act of 2006." Technology & Marketing
Law Blog. 10 Oct. 2006. 1 Dec. 2007.
<http://blog.ericgoldman.org/archives/2006/10/trademark_dilut_3.htm>

Hormel Foods Corp. v. Jim Henson Prods., 1996 U.S. App. LEXIS 338.

Lucasfilm Ltd. v. Media Market Group Ltd., 2002 U.S. Dist. LEXIS 5369.

Merriam Webster's Dictionary of Law. 2 Dec. 2007. <http://dictionary.lp.findlaw.com/>

Smith, Layne T. "Tarnishment and the FTDA: Lessening the Capacity To Identify and
Distinguish." Brigham Young University Law Review, 2004: 2004 B.Y.U.L. Rev. 825.

Twentieth Century Fox v. Marvel Entertainment Group, 2002 U.S. Dist. LEXIS 18425.

Wham-O Inc. v. Paramount Pictures Corp., 2003 U.S. Dist. LEXIS 21762.

Zando-Dennis, Julie. "NOT PLAYING AROUND: THE CHILLING POWER OF THE FEDERAL TRADEMARK DILUTION ACT OF 1995." Yeshiva University Cardozo Women's Law Journal, 2005: 11 Cardozo Women's L.J. 599.