Moseley versus V Secret Catalogue Inc [VICTORIA'S SECRET CASE]

Victoria's Secret case sends message - An Advertising Supplement - a discussion of the U.S. Supreme Court's decision in Moseley versus V Secret Catalogue Inc
Los Angeles Business Journal, May 12, 2003 by Christopher C. Larkin
In March, the U.S. Supreme Court for the first time addressed the question of trademark dilution, when it issued its decision in Moseley v. V Secret Catalogue, Inc. popularly known as the Victoria s Secret case. Despite the unanimity of the decision, however, the majority and concurring opinions left open key questions, setting the stage for additional litigation on the uncertain parameters of trademark dilution, or possible legislative action.

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The United States Trademark Act, or Lanham Act, deals primarily with trademark infringement, based on the policy that consumers should be able to use marks to accurately identify the source or sponsorship of goods and services. The use of a junior trademark that is identical or very similar to a famous trademark on very different goods or services often may not cause consumer confusion and therefore not result in infringement. In 1995, the Federal Trademark Dilution Act (FTDA) was added to the Lanham Act to protect owners of famous trademarks against having their marks lose uniqueness due to the use of the same or a very similar mark by others even where there is no likelihood of consumer confusion.

When the FTDA was enacted, about half the states already had their own dilution statutes. The FTDA s biggest difference from those statutes was its requirement that the defendants use of a mark causes dilution of the distinctive quality of the famous mark, rather than the mere likelihood of injury to the famous mark s reputation. But in construing this language in the FTDA, the Fourth and Fifth Circuits held that the owner of a famous mark must show actual dilution, such as measurable economic harm to the mark, while the Second and Seventh Circuits held that a showing that dilution is likely to occur in the future is sufficient. The Moseley case turned on this question.

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The case arose when Victoria s Secret, the famous lingerie retailer, discovered that an adult-themed novelty store was operating as Victor s Secret. When asked to change its name, proprietor Victor Moseley adopted Victor s Little Secret, but Victoria s Secret filed suit, claiming that the new name diluted its mark by blurring its distinctiveness and tarnishing its reputation through association with lewd subject matter. The federal district court in Louisville, Kentucky granted summary judgment on Victoria s Secret dilution claim and the Sixth Circuit affirmed, but the Supreme Court unanimously reversed the Sixth Circuit and sent the case back to the lower courts for trial.

Justice Stevens opinion for the Court addressed whether objective proof of actual injury to the economic value of a famous mark (as opposed to a presumption of harm arising from a subjective likelihood of dilution standard) is a requisite for relief under the FTDA. In his opinion, the Court held that the FTDA does require proof of actual dilution, but not proof of actual lost sales or profits. Justice Stevens wrote that at least where the marks at issue are not identical, the mere fact that consumers mentally associate the junior users mark with a famous mark is not sufficient to establish actionable dilution.

Justice Stevens opinion did not specify what type of direct evidence, such as a consumer survey, might prove actual dilution. But in emphasizing the fact that the marks in Moseley were not identical, he suggested that less proof might suffice to show actual dilution where the marks are identical. He wrote that tilt may well be... that direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proven through circumstantial evidence the obvious case is one where the junior and senior marks are identical. Here again, however, his opinion did not explain what sort of circumstantial evidence (beyond the identity of the marks) might be needed in that fact situation.

A short concurring opinion by Justice Kennedy did not clarify these issues. Although he joined Justice Stevens opinion for the Court, Justice Kennedy wrote that [w]hen a competing mark is first adopted, there will be circumstances when the case can turn on the probable consequences its commercial use will have for the famous mark. In Justice Kennedy s view, [a] holder of a famous mark threatened with diminishment of the marks capacity to serve its purpose should not be forced to wait until the damage is done and the distinctiveness of the mark has been eroded, and should be able to obtain a prompt injunction. Justice Kennedy s views seem inconsistent with the Courts opinion that he joined, particularly with the Courts holding that actual dilution must be shown in all cases.

In Moseley, the Court failed to set clear guidelines for lower courts faced with FTDA claims. Although it is clear that actual dilution is now the standard for relief, the Court did not provide any guidance as to how that standard may be satisfied. Moseley makes it more difficult for owners of famous marks to obtain relief under the FTDA, but leaves open many questions for future resolution in litigation or by amendment to the FTDA.