The Honorable Arlen Specter
Chairman, Senate Judiciary Committee
711 Hart Senate Office Building
Washington, DC 20510-3802

The Honorable Patrick J. Leahy
Ranking Member, Senate Judiciary Committee
433 Russell Senate Office Building
Washington, DC 20510-4502

Re: H.R. 683, the Trademark Dilution Improvement Act of 2005

Dear Chairman Specter and Ranking Member Leahy:

On behalf of the ACLU and its nearly 600,000 members, we write to express our concern with several provisions contained in H. R. 683, the Trademark Dilution Improvement Act of 2005. These provisions could result in reducing the freedom of speech we all enjoy, and we, therefore, oppose the bill in its current form. By making some small changes in the language of the bill, protections for free speech would be strengthened, and the ACLU would withdraw its opposition to the bill.

Specifically, we recommend:

(1)   Protecting criticism by restoring the exception for “noncommercial use” of a mark.

(2)   Maintaining protection for freedom of speech beyond trademark dilution by making a technical change in Section 2(c)(3) of the bill.

These modest changes would strengthen the protection for freedom of speech, while allowing the expansion of trademark dilution law sought by the bill’s sponsors.

Background

Trademark law provides an important tool for preventing confusion or deceptive marketing, but trademark laws should not be used as a pretext to stifle criticism, parody or legitimate competition when there is no reasonable likelihood of confusion and no actual dilution caused by use of the trademark.

H.R. 683 is a significant expansion of the current dilution statute, and allows injunctions of speech in more instances. Dilution causes of action are problematic under the First Amendment because they allow commercial entities to secure injunctions prohibiting speech that is truthful and neither misleading or confusing. The basis of the injunction is that someone else other than the trademark holder used a word that is identical or similar to a trademark, and that the use might lessen the consuming public’s association of the term with the trademark. Congress initially drafted the Federal Trademark Dilution Act (“FTDA”) somewhat narrowly, requiring proof of actual dilution. This lessened the statute’s impact on First Amendment activity. The proposed revision, however, adopts a “likelihood of dilution” standard, significantly easing the burden of proving “dilution,” and increasing the danger to First Amendment activity.

Trademark law developed primarily to protect the interests of consumers to receive reliable information about goods and services. To accomplish this objective, the suppliers of these goods and services were granted limited rights to regulate the misleading use of their brands and associated symbols. The grant of these rights, however, has the potential to impinge upon the ability of the public to communicate and receive information. To avoid this problem, limitations were purposely placed on the rights of the trademark holder. One of those limitations was the doctrine of “confusion”: trademark rights were only enforceable where another’s use is likely to cause confusion.[1] This standard alleviates the tension between the interests of consumers and the broader free speech interest of the public in general.

Courts and commentators have long recognized that trademark liability implicates the First Amendment. “Because the trademark law regulates the use of words, pictures, and other symbols, it can conflict with values protected by the First Amendment. The grant to one person of the exclusive right to use a set of words or symbols in trade can collide with the free speech of others.”[2] The Restatement (Third) of Unfair Competition noted in a comment that the “use of another’s trademark, not as a means of identifying the user’s own goods or services, but as in incident of speech directed at the trademark owner, . . . raises serious free speech concerns.”[3]

Noting the conflict between trademark law and free speech, the Fourth Circuit Court of Appeals stated in CPC International, Inc. v. Skippy Incorporated: [4]

It is important that trademarks not be “transformed from rights against unfair competition to rights to control language.” . . . Such a transformation would diminish our ability to discuss the products or criticize the conduct of companies that may be of widespread public concern and importance. . . . ”Much useful social and commercial discourse would be all but impossible if speakers were under threat of an infringement lawsuit every time they made reference to a person, company or product by using its trademark.”[5]

Despite free speech concerns, Congress passed the FTDA in 1995 to provide protection from trademark dilution. “Dilution” is defined as the “lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of  -- (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception.”[6]

The FTDA provides, in part, that the owner of a famous mark is entitled to relief against another’s commercial use in commerce of a mark, “if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark.” [Emphasis added.] The Supreme Court held in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003), that the statute required actual proof of dilution.[7] H.R. 683 seeks to overturn Moseley by amending the statute to require only “likelihood of dilution.” While this makes it much easier for trademark holders to bring dilution actions, it also significantly decreases protection for activities protected under the First Amendment.

The government interest in protection of trademarks arises when the use of a trademark diminishes its distinctiveness. Trademarks are valuable as identifiers of the source of goods. To the degree this effect is hindered, the public is harmed. The use of a mark to identify the source of a product is central to dilution actions. Consider the example used in the original article in 1927 to justify dilution statutes, and the example used during debates on the FTDA in 1995: the use of the name Kodak on pianos. Where the use of a trademark leads to confusion as to the source of the product, the government may have a “substantial interest” in preventing dilution. After all, slapping the brand name “Kodak” on a piano has little expressive purpose and could lead to consumer confusion.

Where, however, a trademark is used for parody, commentary, or criticism of a product or service, confusion is far less likely, and the government’s interest in protecting a trademark over free speech is minimal. As noted above, empowering trademark owners to quash criticism merely because it involves the use of a trademark transforms the trademark owner into a monitor of the spoken and written English language.

Because H.R. 683 requires only a “likelihood of dilution,” instead of actual dilution, trademark holders will be able to stifle speech that is critical of their trademark.

To allow actions for “likelihood of dilution” would broaden dilution to permit injunctive relief against speech that is not confusing or deceptive and has not yet caused harm.

The idea that trademark owners would use the FTDA to stifle criticism is far from a fanciful notion. It occurred in the Second Circuit, which, prior to Moseley had interpreted the FTDA to require only a “likelihood of dilution.”

In WWF v. Bozell,[8] the World Wrestling Federation (WWF) sued individuals for defamation and dilution of the WWF mark. The defendants had embarked on a public relations campaign claiming that the WWF was in part responsible for the deaths of several children killed by teenage wrestling fans who claimed to be mimicking WWF wrestling moves. This speech clearly should have been protected speech under the First Amendment. The court, however, held that the public relations campaign qualified as “commercial use in commerce” as required by section 43(c) of the Lanham Act because defendants attempted to raise money for their cause (“commercial use”) and posted their statements on the Internet (“in commerce”). Thus, Bozell’s actions did not fit within the exemption for noncommercial use of a mark, and therefore received no protection under the First Amendment. The court rejected defendants' motion to dismiss. The court also rejected defendants’ claims that the First Amendment required dismissal.

It is important to note that, unlike defamation claims, a dilution claim permits the court to order preliminary injunctive relief. The anti-violence/anti-WWF campaign could be enjoined pending trial in order to protect WWF from the “likelihood” that the campaign would tarnish its mark.

In another case from the Second Circuit, Scholastic Inc. v. Stouffer,[9] the author and publisher of the hugely popular Harry Potter books sought a declaratory judgment that it had not infringed on Stouffer’s copyrights or trademarks. Stouffer counterclaimed, alleging, among other things, dilution and defamation. The defamation claim was based on plaintiffs’ alleged portrayal of Stouffer as a “golddigger” whose claims were “absurd,” “ridiculous” and “meritless.”[10] The court dismissed the claim “to the extent it asserts a claim for defamation, but declines to dismiss this claim to the extent it asserted a claim for dilution under federal or state law.”[11] Therefore, a dilution action was allowed to proceed even though the comments should have been protected as free speech.

Numerous other instances of using dilution claims to stifle speech have arisen, including Farmers Group, Inc. v. Guerrero, a case filed in 2005 in the Federal District Court for the Eastern District of Washington. Here, Farmers Group is suing Guerrero for a gripe site he administers which is critical of Farmers. Because he used the Farmers logo and name on the site, Farmers is claiming, among other things, dilution of its trademark and service mark. Yet, if Guerrero did not use the Farmers name or logo, visitors to his site would be unlikely to determine that Farmers was the target of his ire, a fact probably not lost on Farmers.

The number of cases actually filed in which trademark dilution is used to stifle speech is, however, not a good indicator of the harm inflicted. Some operators of gripe sites, and other targets of trademark holders, simply give up after receiving a notice to cease and desist, rather than go to the expense of hiring an attorney and fighting.

By requiring only a “likelihood of dilution” instead of “actual dilution,” trademark holders will now have a more potent weapon to stifle speech that is critical or a parody of their trademark. Furthermore, unlike defamation law, under the FTDA a preliminary injunction may be granted, silencing the speaker until after a trial. Thus, on the speculation that a trademark may be diluted a speaker can be muzzled. In essence, trademark holders could be given a monopoly on certain words, expressions and images.

Because H.R. 683 specifically makes dilution by tarnishment actionable, the bill could be used to stifle free speech.

There are two commonly recognized forms of dilution: blurring and tarnishment.[12] “Blurring involves the gradual whittling away or dispersion of the identity and hold upon public mind of the mark or name by its use upon noncompeting goods.”[13] “Tarnishment results when one party uses another’s mark in a manner that tarnishes or appropriates the goodwill and reputation associated with the mark.”[14] The current FTDA applies to dilution by blurring, but does not make dilution by tarnishment actionable (although some courts have read it to include tarnishment). H.R. 683 would explicitly make tarnishment actionable as well.

“Tarnishment generally arises when the plaintiff’s trademark is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner’s product.”[15] Unfortunately, it also provides trademark holders with another cause of action to silence critics. Additionally, a broad application of tarnishment acts to chill commercial speech.[16] For example, in Deere v. MTD, the court found dilution by tarnishment where a competitor showed Deere’s trademark, a running deer, fleeing from the competitor’s tractor.

What H.R. 683 fails to recognize is that trademarks have a huge impact on our shared culture. Trademarks have become essential to the communication about particular goods or services, often representing the most effective means by which to state one’s position.[17]

By coupling the “likelihood of dilution” standard along with tarnishment, trademark holders can now argue their trademark is “likely to be tarnished” and possibly prevail, even though no tarnishment has actually occurred. Furthermore, the trademark holder can obtain an injunction against the speech long before a trial is even held.

Since “likelihood of dilution” and “tarnishment” both seem to be essential thrusts of the bill, it is imperative that the exceptions be crafted to provide the necessary protection for First Amendment activity. Fair use and free speech should be fully protected, even if used in commercial speech.

RECOMMENDATIONS

Restore the exception for “noncommercial use” of a mark.

The FTDA provided an exception for “noncommercial use,” but the House removed that exception, believing that that would provide protection to commercial as well as noncommercial speech. The removal of that exception, however, raises other practical and procedural problems.

Consider the following example: During the presidential campaign in 2000, Ralph Nader ran campaign advertisements critiquing the corporate interests behind the Bush and Gore campaigns. To illustrate his point, he used the style and some of the ideas behind MasterCard’s “Priceless” ad campaign -- specifically naming dollar amounts that corporate interests allegedly paid to candidates to secure their positions on the issues.[18] MasterCard sued Nader for, among other things, dilution of its trademark under the FTDA.

The trial court dismissed the action on a motion for summary judgment, concluding that, as to the dilution claims, the speech was “noncommercial” and therefore protected, and MasterCard had failed to show any actual dilution.[19] If H.R. 683 passes as it currently stands, both of these defenses would be removed. The only exception that may apply is “(B) Fair use of a famous mark by another person, other than as a designation of source for the person’s goods or services, including for purposes of identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.” Fair use, however, is a particularly fact-intensive inquiry, and far less amenable to summary judgment. Thus, where the trial court concluded that Nader’s use was noncommercial and therefore protected, it would now have to undertake a far more extensive and expensive inquiry.

In speaking with practitioners who litigate such claims on behalf of defendants, the “noncommercial use” exception has proven to be invaluable. If the use is truly noncommercial, summary judgment is relatively easy and inexpensive. However, if the defense must prove a multi-pronged fair use defense, the cost of defending such claims rise, making it less likely a defendant would persist in her free speech claims.

We therefore recommend that the Senate Judiciary Committee restore the “noncommercial use” exception contained in the current FTDA to Section 2, proposed subsection (c)(3).

By preserving the language of the current FTDA for Section 2(c)(3), protection for free speech would be expanded beyond trademark dilution, enhancing freedom of expression.

The current version of the FTDA states: “The following shall not be actionable under this section:” and then proceeds to list the exceptions. H.R. 683 states: “The following shall not be actionable as dilution by blurring or dilution by tarnishment under this subsection.”  We urge you to keep the current language of the FTDA in this area by slightly editing Section 2, proposed subsection (c)(3).  

Courts have ruled that “this section” in current law goes beyond claims for dilution to encompass claims under Section 43(a) (common law infringement and comparative advertising). Under H.R. 683, however, the exceptions would be expressly limited to dilution claims “under this subsection.” The effect is that the exceptions for fair use, news reporting and noncommercial use (if that language is restored), would no longer apply to suits for infringement of unregistered trademarks.[20]  

If a defendant is engaged in activity protected by the First Amendment, it should make little difference how the claim is characterized. Whether the plaintiff claims infringement of an unregistered trademark or dilution of a famous mark, the speech should be protected.  

Some may argue that the First Amendment trumps a statutory provision, and we should therefore not worry. Unfortunately, courts, in construing trademark law have often undertaken a parsimonious parsing of the statutory language instead of applying broader constitutional principles. The change in statutory language is likely to leave some speech unprotected.  

Conclusion 

There is a dynamic tension between trademarks and free speech. On the one hand, trademark holders want to control who says what about them using their trademark. On the other hand, the First Amendment gives everyone the right to express his or her views and opinions. Sometimes, that may mean the speech is abrasive and highly critical of the trademark holder.

The First Amendment, however, protects not only the right to speak, but the method and manner of speaking. If the trademark holder can stop criticism through the use of trademark law, it diminishes free speech and impoverishes the marketplace of ideas the First Amendment was intended to nurture.

By carefully crafting the exceptions, both trademarks and free speech can be protected.

Sincerely,

Caroline Fredrickson 
Director                                       

Marvin J. Johnson
Legislative Counsel                                                          

cc: Members of the Committee

[1] See 2 J. Thomas McCarthy,  McCARTHY ON TRADEMARKS AND UNFAIR COMPETITION §2:32 (explaining that the limited, quasi-property right of trademark holders has extended from tort, rather than property law).
[2] 1 Pat. L. Fundamentals §4.04 (2d ed.). Some commentators have opined that anti-dilution statutes are inherently antithetical to the First Amendment. See, e.g., Marla J. Kaplan, “Antidilution Statutes and the First Amendment,” 21 Southwestern University Law Review 1139 (1992) (arguing that antidilution statutes violate the First Amendment because they prohibit commercial speech that does not mislead or deceive and because there is no substantial government interest to support them; also arguing that antidilution laws are not designed to protect the public, as was trademark law’s historical purpose.)
[3] Restatement (Third) of Unfair Competition §25 cmt. i  (1995). See, also, ACLU v. Miller, 977 F.Supp. 1228 (N.D. Ga. 1997) in which the court granted a preliminary injunction against a statute forbidding “any person . . . knowingly to transmit any data through a computer network. . . . if such data uses any. . . . trade name, registered trademark, logo, legal or official seal, or copyrighted symbol . . . . which would falsely state or imply that such person . . . . has permission or is legally authorized to use [it] for such purpose when such permission or authorization has not been obtained.” The court found this provision overbroad, in that it prohibited speech protected by the First Amendment.
[4] CPC International, Inc. v. Skippy Incorporated, 214 F.3d 456 (4th Cir. 2000).
[5] Id. at 462.
[6] 15 U.S.C. 1127.
[7] The Supreme Court did not reach any issue of constitutionality in the case. It was decided purely on the basis of statutory construction.
[8] WWF v. Bozell, 142 F.Supp.2d 514 (SDNY 2001).
[9] Scholastic Inc. v. Stouffer, 124 F.Supp.2d 836 (S.D.N.Y. 2000).[10] Id. at 849.
[11] Id. at 852.
[12] Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658, fn. 12 (5th Cir. 2000).
[13] Id.
[14] Id.
[15] Deere & Company v. MTD Products, Inc., 41 F.3d 39, 43 (2d Cir. 1994).
[16] The Supreme Court has recognized that commercial speech is entitled to First Amendment protection. See Va. State Bd. Of Pharmacy v. Va. Citizen’s Consumer Council, Inc., 425 U.S. 748, 761 (1976).
[17] See Meyer v. Grant, 486 U.S. 414 (1988) (stating that the First Amendment not only protects the right to advocate a cause, but also the right to select the most effective means to do so).
[18] The MasterCard advertisements featured the names and images of several goods and services purchased by individuals which, with voice overs and visual displays, conveyed to the viewer the price of each item. At the end of each of the “Priceless” advertisements, a phrase identifying some priceless intangible that cannot be purchased (such as “a day where all you have to do is breathe”) is followed by the words or voice over: “Priceless. There are some things money can’t buy, for everything else there’s MasterCard.” The Nader advertisements included a sequential display of a series of items showing the price of each (“grilled tenderloin for fund-raiser; $1,000 a plate,” “campaign ads filled with half-truths: $10 million,” “promises to special interest groups: over $100 billion.”).  The advertisement ends with a phrase identifying a priceless intangible that cannot be purchased (“finding out the truth: priceless. There are some things that money can’t buy”).
[19] The decision was post-Moseley. It may be found at: http://lawgeek.typepad.com/lawgeek/LegalDocs/nader_decision.pdf
[20] The Lanham Act has a separate subsection that allows a defense of fair use (section 33(b)(4)), but that section is expressly limited to defenses against claimed infringement of registered trademarks.