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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-374
_______________________________________________________________________


 
                 FEDERAL TRADEMARK DILUTION ACT OF 1995

                                _______


 November 30, 1995.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______


   Mr. Moorhead, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1295]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 1295) to amend the Trademark Act of 1946 to make certain 
revisions relating to the protection of famous marks, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     1
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Oversight Findings.....................................     5
Committee on Government Reform and Oversight.....................     5
New Budget Authority and Tax Expenditures........................     5
Congressional Budget Office Estimate.............................     6
Inflationary Impact Statement....................................     6
Section-by-Section Analysis and Discussion.......................     7
Agency Views.....................................................     8
Changes in Existing Law Made by the Bill, as Reported............     8

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Federal Trademark Dilution Act of 
1995''.

SEC. 2. REFERENCE TO THE TRADEMARK ACT OF 1946.

  For purposes of this Act, the Act entitled ``An Act to provide for 
the registration and protection of trade-marks used in commerce, to 
carry out the provisions of certain international conventions, and for 
other purposes'', approved July 5, 1946 (15 U.S.C. 1051 and following), 
shall be referred to as the ``Trademark Act of 1946''.

SEC. 3. REMEDIES FOR DILUTION OF FAMOUS MARKS.

  (a) Remedies.--Section 43 of the Trademark Act of 1946 (15 U.S.C. 
1125) is amended by adding at the end the following new subsection:
  ``(c)(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, and 
to obtain such other relief as is provided in this subsection. In 
determining whether a mark is distinctive and famous, a court may 
consider factors such as, but not limited to--
          ``(A) the degree of inherent or acquired distinctiveness of 
        the mark;
          ``(B) the duration and extent of use of the mark in 
        connection with the goods or services with which the mark is 
        used;
          ``(C) the duration and extent of advertising and publicity of 
        the mark;
          ``(D) the geographical extent of the trading area in which 
        the mark is used;
          ``(E) the channels of trade for the goods or services with 
        which the mark is used;
          ``(F) the degree of recognition of the mark in the trading 
        areas and channels of trade used by the marks' owner and the 
        person against whom the injunction is sought;
          ``(G) the nature and extent of use of the same or similar 
        marks by third parties; and
          ``(H) whether the mark was registered under the Act of March 
        3, 1881, or the Act of February 20, 1905, or on the principal 
        register.
  ``(2) In an action brought under this subsection, the owner of the 
famous mark shall be entitled only to injunctive relief unless the 
person against whom the injunction is sought willfully intended to 
trade on the owner's reputation or to cause dilution of the famous 
mark. If such willful intent is proven, the owner of the famous mark 
shall also be entitled to the remedies set forth in sections 35(a) and 
36, subject to the discretion of the court and the principles of 
equity.
  ``(3) The ownership by a person of a valid registration under the Act 
of March 3, 1881, or the Act of February 20, 1905, or on the principal 
register 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, label, or form of advertisement.
  ``(4) The following shall not be actionable under this section:
          ``(A) Fair use of a famous mark by another person in 
        comparative commercial advertising or promotion to identify the 
        competing goods or services of the owner of the famous mark.
          ``(B) Noncommercial use of a mark.
          ``(C) All forms of news reporting and news commentary.''.
  (b) Conforming Amendment.--The heading for title VIII of the 
Trademark Act of 1946 is amended by striking ``AND FALSE DESCRIPTIONS'' 
and inserting ``, FALSE DESCRIPTIONS, AND DILUTION''.

SEC. 4. DEFINITION.

  Section 45 of the Trademark Act of 1946 (15 U.S.C. 1127) is amended 
by inserting after the paragraph defining when a mark shall be deemed 
to be ``abandoned'' the following:
  ``The term `dilution' means 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.''.

SEC. 5. EFFECTIVE DATE.

  This Act and the amendments made by this Act shall take effect on the 
date of the enactment of this Act.

                          Purpose and Summary

    The purpose of H.R. 1295 is to protect famous trademarks 
from subsequent uses that blur the distinctiveness of the mark 
or tarnish or disparage it, even in the absence of a likelihood 
of confusion. H.R. 1295 does this by amending Section 43 of the 
Trademark Act of 1946 to add a new subsection (c) to provide 
protection against another's commercial use of a famous mark 
which results in dilution of such mark. Presently, the nature 
and extent of the remedies against trademark dilution varies 
from state to state and, therefore, can provide unpredictable 
and inadequate results for the trademark owner. The federal 
remedy provided in H.R. 1295 against trademark dilution will 
bring uniformity and consistency to the protection of famous 
marks and is also consistent with our international obligations 
in the trademark area.

                Background and Need for the Legislation

    H.R. 1295 would add a new section 43(c) to the Lanham Act, 
15 U.S.C. et. seq., to create a federal cause of action to 
protect famous marks from unauthorized users that attempt to 
trade upon the goodwill and established renown of such marks 
and, thereby, dilute their distinctive quality. The provision 
is intended to protect famous marks where the subsequent, 
unauthorized commercial use of such marks by others dilutes the 
distinctiveness of the mark. The bill defines the term 
``dilution'' to mean ``the lessening of the capacity of a 
famous mark to identify and distinguish goods or services 
regardless of the presence or absence of (a) competition 
between the parties, or (b) likelihood of confusion, mistakes, 
or deception.'' Thus, for example, the use of DUPONT shoes, 
BUICK aspirin, and KODAK pianos would be actionable under this 
legislation.
    The protection of marks from dilution differs from the 
protection accorded marks from trademark infringement. Dilution 
does not rely upon the standard test of infringement, that is, 
likelihood of confusion, deception or mistake. Rather, it 
applies when the unauthorized use of a famous mark reduces the 
public's perception that the mark signifies something unique, 
singular, or particular. As summarized in one decision:

          Dilution is an injury that differs materially from 
        that arising out of the orthodox confusion. Even in the 
        absence of confusion, the potency of a mark may be 
        debilitated by another's use. This is the essence of 
        dilution. Confusion leads to immediate injury, while 
        dilution is an infection, which if allowed to spread, 
        will inevitably destroy the advertising value of the 
        mark.\1\
    \1\ Mortellito v. Nina of California, Inc., 335 F. Supp. 1288, 
1296, 173 U.S. P.Q. 346, 351 (S.D.N.Y. 1972).

    The concept of dilution recognizes the substantial 
investment the owner has made in the mark and the commercial 
value and aura of the mark itself, protecting both from those 
who would appropriate the mark for their own gain.
    A federal dilution statute is necessary because famous 
marks ordinarily are used on a nationwide basis and dilution 
protection is currently only available on a patch-quilt system 
of protection, in that only approximately 25 states have laws 
that prohibit trademark dilution. Further, court decisions have 
been inconsistent and some courts are reluctant to grant 
nationwide injuctions for violation of state law where half of 
the states have no dilution law.\2\ Protection for famous marks 
should not depend on whether the forum where suit is filed has 
a dilution statute. This simply encourages forum-shopping and 
increases the amount of litigation.
    \2\ Blue Ribbon Feed Co., Inc. v. Farmers Union Central Exchange, 
Inc., 731 F. 2d 415, 422 (7th Cir. 1984) and Deere & Co. v. MTD 
Products Inc., 34 U.S.P.Q. 2d 1706 (S.D.N.Y. 1995).
---------------------------------------------------------------------------
    Moreover, the recently concluded Agreement on Trade-Related 
Aspects of Intellectual Property Rights, including Trade in 
Counterfeit Goods (``TRIPS'') which was part of the Uruguay 
Round of the GATT agreement includes a provision designed to 
provide dilution protection to famous marks. Thus, enactment of 
this bill will be consistent with the terms of the agreement, 
as well as the Paris Convention, of which the U.S. also a 
member. Passage of a federal dilution statute would also assist 
the executive branch in its bilateral and multilateral 
negotiations with other countries to secure greater protection 
for the famous marks owned by U.S. companies. Foreign countries 
are reluctant to change their laws to protect famous U.S. marks 
if the U.S. itself does not afford special protection for such 
marks.
    It should be noted that as originally introduced, H.R. 1295 
only applied to famous registered marks. However, based on 
testimony by the Patent and Trademark Office, Congresswoman 
Patricia Schroeder offered an amendment in the nature of a 
substitute to H.R. 1295, that was adopted by the Subcommittee, 
to include all famous marks within the scope of the bill. The 
Patent and Trademark Office made a compelling case that 
limiting the federal remedy against trademark dilution to those 
famous marks that are registered is not within the spirit of 
the United States' position as a leader setting the standards 
for strong worldwide protection of intellectual property. Such 
a limitation would undercut the United States position with our 
trading partners, which is that famous marks should be 
protected regardless of whether the marks are registered in the 
country where protection is sought.
    The proposal adequately addresses legitimate First 
Amendment concerns espoused by the broadcasting industry and 
the media. The bill will not prohibit or threaten 
``noncommercial'' expression, as that term has been defined by 
the courts. Nothing in this bill is intended to alter existing 
case law on the subject of what constitutes ``commercial'' 
speech. The bill includes specific language exempting from 
liability the ``fair use'' of a mark in the context of 
comparative commercial advertising or promotion as well as all 
forms of news reporting and news commentary. The latter 
provision which was added to H.R. 1295 as a result of an 
amendment offered by Congressman Moorhead that was adopted by 
the Committee, recognizes the heightened First Amendment 
protection afforded the news industry.
    It is important to note that H.R. 1295 would not pre-empt 
existing state dilution statutes. State laws could continue to 
be applied in cases involving locally famous or distinctive 
marks.\3\ Unlike patent and copyright laws, federal trademark 
law presently coexists with state trademark law, and it is to 
be expected that a federal dilution statute should similarly 
coexist with state dilution law. The ownership of valid federal 
registration would act as a complete bar to a dilution action 
brought under state law.
    \3\ See, e.q., Wedgewood Homes, Inc. v. Lund, 659 P.2d 377, 222 
U.S.P.Q. 446 (Or. 1983).
---------------------------------------------------------------------------
    With respect to remedies, the bill limits the relief a 
court could award to an injunction unless the wrongdoer 
willfully intended to trade on the trademark owner's reputation 
or to cause dilution of the famous mark, in which case the 
remedies under sections 35(a) and 36 of the Trademark Act 
become available.

                                Hearings

    The Committee's Subcommittee on Courts and Intellectual 
Property held a hearing on H.R. 1295 on July 19, 1995 in Room 
2237 Rayburn House Office Building. Testimony was received from 
the following seven witnesses: Mr. Philip G. Hampton II, 
Assistant Commissioner for Trademarks, Patent and Trademark 
Office, United States Department of Commerce; Ms. Mary Ann 
Alford, Vice President and Assistant General Counsel, 
Intellectual Property, Reebok International, Ltd. and Executive 
Vice President, International Trademark Association; Mr. James 
K. Baughman, Assistant General Counsel, Campbell Soup Company; 
Mr. Nils Victor Montan, Vice President and Senior Intellectual 
Property Counsel, Warner Brothers; Mr. Thomas E. Smith, Chair, 
Section of Intellectual Property Law, American Bar Association; 
Mr. Jonathan E. Moskin, Attorney at Law, Pennie & Edmonds; and 
Mr. Gregory W. O'Connor, General Patent Counsel & Assistant 
Secretary, Samsonite Corporation.

                        Committee Consideration

    On July 27, 1995, the Subcommittee on Courts and 
Intellectual Property met in open session and ordered reported 
the bill H.R. 1295, as amended, by a voice vote, a quorum being 
present. On October 17, 1995, the Committee met in open session 
and ordered reported the bill H.R. 1295, as amended, by a voice 
vote, a quorum being present.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 1295, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 8, 1995.
Hon. Henry J. Hyde,
Chairman, Committee on Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 1295, the Federal Trademark Dilution Act of 1995, 
as ordered reported by the House Committee on the Judiciary on 
October 17, 1995. CBO estimates that enacting H.R. 1295 would 
not result in any significant cost to the federal government. 
Because enactment of H.R. 1295 would not affect direct spending 
or receipts, pay-as-you-go procedures would not apply to the 
bill.
    H.R. 1295 would protect famous trademarks by prohibiting 
subsequent commercial uses that blur the distinctiveness of the 
mark or tarnish or disparage it. The bill would establish 
criteria that federal courts would use to determine whether the 
mark has acquired the level of distinctiveness to be considered 
famous. The bill would not prohibit or threaten noncommercial 
uses of a famous trademark, including uses by the news media 
and comparative advertisements. Current federal law permits a 
company to use a likeness of a famous trademark if the 
companies are in different industries and are not likely to be 
confused by consumers. About one-half of the states have laws 
similar to H.R. 1295 to prohibit dilution. This bill would not 
preempt existing state dilution statutes.
    Based on information from the Administrative Office of the 
United States Courts, CBO does not expect any significant 
change in caseload or court costs from enacting H.R. 1295. Any 
increase in costs to the federal courts would be subject to 
appropriations of the necessary funds. We also expect that 
enacting H.R. 1295 would not significantly affect the 
proceedings of state courts, and thus the bill would not have 
any significant impact on the budgets of state or local 
governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are, for 
federal costs, Rachel Forward and Susanne S. Mehlman, and for 
state and local costs, Karen McVey.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 
1295 will have no significant inflationary impact on prices and 
costs in the national economy.

                      Section-by-Section Analysis

    Section 1 of the bill sets forth its short title, the 
``Federal Trademark Dilution Act of 1995.''
    Section 2 of the bill provides that the bill refers to the 
``Trademark Act of 1946,'' 15 U.S.C. 1051 et. seq.\4\
    \4\ In this report, the Trademark Act of 1946 is referred to by its 
more commonly used name, the Lanham Act.
---------------------------------------------------------------------------
    Section 3 of the bill would create a new Section 43(c) of 
the Lanham Act to provide a cause of action for dilution of 
``famous'' marks. A new Section 43(c)(1) would provide 
protection to the owners of famous marks against another 
person's commercial use in commerce of the mark which dilutes 
the distinctive quality of the mark. The ``use in commerce'' 
requirement reflects the fact that the bill, like the Lanham 
Act itself, requires some aspect of interstate commerce to be 
present before the dilution provision can be triggered. The 
section would provide protection to famous marks, whether or 
not the mark is the subject of a federal trademark 
registration.
    Section 3 identifies a list of nonexclusive factors that a 
court may consider in determining whether a mark qualifies for 
protection. These factors include: (1) the degree of 
distinctiveness of the mark; (2) the duration and extent of use 
of the mark; (3) the geographical extent of the trading area in 
which the mark is used; and (4) whether the mark is federally 
registered.
    The first factor makes it clear that a mark may be deemed 
``famous'' even if not inherently distinctive, that is, even if 
the mark is not arbitrary, fanciful, or coined. With respect to 
the duration and extent of use, generally a famous mark will 
have been in use for some time. The geographic fame of the mark 
must extend throughout a substantial portion of the U.S. 
Finally, although a mark need not be federally registered in 
order to be eligible for dilution protection, the fact that the 
mark is registered with the U.S. Patent and Trademark Office 
may be considered by a court in determining whether a mark is 
distinctive. This factor recognizes that a mark may not be 
federally registered unless it is found by the PTO to be 
distinctive.
    With respect to relief, a new Section 43(c)(2) of the 
Lanham Act would provide that, normally, the owner of a famous 
mark will only be entitled to injunctive relief upon a finding 
of liability. An award of damages, including the possibility of 
treble damages, may be assessed against a defendant found to 
have willfully intended to trade on the trademark owner's 
reputation or to cause dilution of the famous mark.
    Under section 3 of the bill, a new Section 43(c)(3) of the 
Lanham Act would provide that ownership of a valid federal 
trademark registration is a complete bar to an action brought 
against the registrant under state dilution law. This section 
provides a further incentive for the federal registration of 
marks and recognizes that to permit a state to regulate the use 
of federally registered marks is inconsistent with the intent 
of the Lanham Act ``to protect registered marks used in such 
commerce from interference by state, or territorial 
legislation.''
    It is important to note that the proposed federal dilution 
statute would not preempt state dilution laws. Unlike patent 
and copyright laws, federal trademark law coexits with state 
trademark law, and it is to be expected that the federal 
dilution stature should similarly coexist with state dilution 
statutes.
    A new Section 43(c)(4) sets forth various activities that 
would not be actionable. This section is designed to preclude 
the courts from enjoining speech that courts have recognized to 
be constitutionally protected. Section (4)(A) of the bill 
provides that the ``fair use'' of a famous mark for purposes of 
comparative advertising, for example, is not actionable. 
Section (4)(B) of the bill expressly incorporates the concept 
of ``commercial'' speech from the ``commercial speech'' 
doctrine, and proscribes dilution actions that seek to enjoin 
use of famous marks in ``non-commercial'' uses (such as 
consumer product reviews). Section (4)(C) expressly recognizes 
that the use of ``famous'' marks in the context of all forms of 
news reporting and news commentary is not actionable. Nothing 
in this section of the bill is intended to alter existing case 
law on the subject of what constitutes ``commercial'' speech.
    Section 4 of the bill defines the term ``dilution'' to mean 
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. The definition is designed to encompass all forms of 
dilution recognized by the courts, including dilution by 
blurring, by tarnishment and disparagement, and by 
diminishment. In an effort to clarify the law on the subject, 
the definition also recognizes that a cause of action for 
dilution may exist whether or not the parties market the same 
or related goods or whether or not a likelihood of confusion 
exists. Thus, a mark protected against dilution can have 
acquired its fame in connection with one type of good or 
service and, as a result, be so famous as to be entitled to 
protection against dilution when used on or in connection with 
an unrelated good or service.

                              Agency Views

    In testimony before the Subcommittee on Courts and 
Intellectual Property on July 19, 1995 the Department of 
Commerce (Patent and Trademark Office) testified in favor in 
H.R. 1295.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     ACT OF JULY 5, 1946 (Ch. 540)

          (Commonly Referred to as the Trademark Act of 1946)

 AN ACT To provide for the registration and protection of trade-marks 
used in commerce, to carry out the provisions of certain international 
                  conventions, and for other purposes

          * * * * * * *

  TITLE VIII--FALSE DESIGNATIONS OF ORIGIN [AND FALSE DESCRIPTIONS], 
               FALSE DESCRIPTIONS, AND DILUTION FORBIDDEN

  Sec. 43. (a) * * *
          * * * * * * *
  (c)(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, and to obtain such other 
relief as is provided in this subsection. In determining 
whether a mark is distinctive and famous, a court may consider 
factors such as, but not limited to--
          (A) the degree of inherent or acquired 
        distinctiveness of the mark;
          (B) the duration and extent of use of the mark in 
        connection with the goods or services with which the 
        mark is used;
          (C) the duration and extent of advertising and 
        publicity of the mark;
          (D) the geographical extent of the trading area in 
        which the mark is used;
          (E) the channels of trade for the goods or services 
        with which the mark is used;
          (F) the degree of recognition of the mark in the 
        trading areas and channels of trade used by the marks' 
        owner and the person against whom the injunction is 
        sought;
          (G) the nature and extent of use of the same or 
        similar marks by third parties; and
          (H) whether the mark was registered under the Act of 
        March 3, 1881, or the Act of February 20, 1905, or on 
        the principal register.
  (2) In an action brought under this subsection, the owner of 
the famous mark shall be entitled only to injunctive relief 
unless the person against whom the injunction is sought 
willfully intended to trade on the owner's reputation or to 
cause dilution of the famous mark. If such willful intent is 
proven, the owner of the famous mark shall also be entitled to 
the remedies set forth in sections 35(a) and 36, subject to the 
discretion of the court and the principles of equity.
  (3) The ownership by a person of a valid registration under 
the Act of March 3, 1881, or the Act of February 20, 1905, or 
on the principal register 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, label, or form of advertisement.
  (4) The following shall not be actionable under this section:
          (A) Fair use of a famous mark by another person in 
        comparative commercial advertising or promotion to 
        identify the competing goods or services of the owner 
        of the famous mark.
          (B) Noncommercial use of a mark.
          (C) All forms of news reporting and news commentary.
          * * * * * * *

                 TITLE X--CONSTRUCTION AND DEFINITIONS

  Sec. 45. In the construction of this Act, unless the contrary 
is plainly apparent from the context--
          * * * * * * *
  A mark shall be deemed to be ``abandoned'' if either of the 
following occurs:
          (1) * * *
          * * * * * * *
  The term ``dilution'' means 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.
          * * * * * * *