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Analysis of dilution doctrine under trademark law

November 10, 2021
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This article has been written by Hinal Khona pursuing the Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho. This article has been edited by Zigishu Singh (Associate, Lawsikho) and Smriti Katiyar (Associate, Lawsikho). 

What is a trademark?

Words, symbols, designs, or combinations of these can be used as trademarks to differentiate between different products and services. Consumers associate such distinctive logos with a particular product or service. For example, when we see a bitten apple design, we immediately think of Apple.

What is dilution of a trademark?

Unauthorized use of and/or application for a trademark that is likely to undermine the unique quality of or harm a well-known mark is referred to as trademark dilution. The question of whether a well-known trademark has been diluted is distinct from the question of whether the mark has been violated, that is, whether the unlawful use is likely to lead to consumer confusion. The most prevalent sort of dilution is blurring, whereas the other is tarnishing.

When a trademark gets diluted, it loses its ability to be identified by a single source due to the usage of similar or identical trademarks in non-competing areas. Dilution protection, unlike regular trademark law, extends to trademark uses that do not cause consumers to be confused about who manufactured a product. Dilution protection law, on the other hand, prevents sufficiently strong trademarks from losing their unique identification with a certain product in the public mind, as might be envisaged if the trademark were to be encountered independently of any product.

Consider the following scenario: The ‘BMW’ trademark  is recognized for its automobiles, but what if a third party started selling cigars with that trademark the next day? Because the public associates the BMW mark with automobiles, having BMW on a cigar would be unacceptably damaging to the company’s reputation. Furthermore, BMW also prefers to be linked solely with automobiles, that’s when Doctrine of Dilution comes into the picture.

The first instance of trademark dilution was in 1927. Frank I. Schechter first proposed the trademark dilution idea in his paper “The Rational Basis of Trademark Protection,” which was first published in the Harvard Law Review. In his article, Schechter stated that trademark protection should not be limited to addressing concerns of public deceit, but should also include stopping offenders. Due to his work Frank Schechter is hailed as the “Father of Dilution.”

Evolution and acceptance of dilution doctrine in India

With the passage of the Trade Marks Act of 1999, which went into effect in 2003, statutory measures relating to trademark dilution were first brought into Indian law. The notion of dilution has been primarily expressed in Indian trademark law through Section 29 (4), however, there are additional important sections that connect to Section 29. (4).

It is important to highlight that, while statutory recognition was implemented in India in 2003, it should not be assumed that the well-known mark was not protected against misuse in respect of distinct goods prior to the Act’s implementation. Even before TRIPS became effective in January 1996, Indian courts had implemented the dilution theory under the passing off remedy. It may not have been in its current form, but the uniqueness of the mark was protected in some cases. In the majority of cases, the claimant has sought relief under the tort of “passing off.”

In Sunder Parmanand Lalwani and others v Caltex (India) Ltd, the High Court of Bombay decided that using the Caltex mark for watches would mislead and cause consumer confusion because the mark was connected by customers and the general public with petrol and different oil goods.

Since the early 1990s, Indian courts have recognized trademark dilution, although without providing any analysis of the theory in their decisions. One of the questions before the single judge bench in Daimler Benz Daimler Benz Aktiegesellschaft versus Hybo Hindustan was whether the defendant could use the brand ‘BENZ’ on underwear. The Hon’ble Judge used the notion of dilution without even mentioning the word “dilution” once in the entire judgment, which was less than 1,700 words long. The Hon’ble Judge did, however, use the word ‘dilute’ once, at the end of the sentence, while noting ‘In my view, the defendant cannot dilute, that by a user of the name “Benz” with respect to a product like under-wears.’ The court’s decision was solely concerned with the significant injustice that would result if the defendant were allowed to continue to use the mark, with no consideration of dilution or any other legal concept.

As a result, without any statutory requirement, Indian courts efficiently protected well-known trademarks, which were eventually acknowledged and accepted by the government in the form of TMA, 1999.

Trademark dilution in US

Both federal and state laws protect trademarks in the United States. The Lanham Act of 1946 is the fundamental federal act that controls the law. The Federal Trademark Dilution Act of 1995 (FTDA) forbids trademark dilution if it is well-known. The courts will consider the following factors in determining whether a mark is famous: (1) whether the mark is innate or acquired distinctive; (2) the duration and scope of its use; (3) the amount and type of promotion; (4) the geographical scope of the market; (5) the channels of trade; (6) the degree of recognition in the marketplace; (7) whether similar marks have been used by others; (8) whether a mark has been registered.

The cause of action against this use might be brought via blurring or tarnishment if the claim for dilution has been satisfied. Blurring happens when the distinctiveness of a well-known brand is diminished as a result of its association with unrelated goods, whereas tarnishment occurs when the mark is connected with poor or unfavorable goods or services. In the matter of Toys “R” Us v. Akkaoui, the plaintiffs own the trademarks “R Us,” which the defendant utilized to launch an adult website named “Adults ‘R’ US”. The court had concluded that the defendant’s mark tarnishes the plaintiff’s line of items by associating it with a line of sexual merchandise that is unrelated to Toys ‘R’ Us. The court ordered the website, as well as any products affiliated with it, to be shut down immediately, as well as any further use of the above-mentioned mark that might dilute and tarnish the plaintiff’s mark’s reputation.

Previously, establishing that there had been an actual dilution of the mark was required to gain any action under this legislation. However, the Trademark Dilution Revision Act of 2006 (TDRA), the most recent addition to the FTDA, emphasizes that even the possibility of dilution is sufficient to acquire appropriate remedies under this statute. The introduction of TDRA overturned the US Supreme Court’s decision in  Moseley v V Secret Catalogue, Inc., where the respondent’s mark, ‘Victor’s Little Secret,’ was very similar to the petitioner’s mark, ‘Victoria Secret,’ and the court had held that the petitioner’s claim for dilution would not hold because no actual dilution had been proven.

The TDRA also brought about an amendment that requires demonstrating how well a mark has been recognized by the public in the United States in order to establish it as famous and to acquire protection against dilution. In trademark dilution cases, damages are only attainable if the defendant knowingly traded on the plaintiff’s goodwill. Plaintiffs in a dilution case are confined to injunctive relief otherwise. Injunctive relief, recovery of damages in some situations, lost profits, and destruction of infringing items are among the remedies available for trademark dilution, and a similar remedy was also available in the Toys R Us case.

Some acts are expressly excluded from the scope of dilution under the TDRA. It exempts simply nominative or descriptive uses of another’s mark, such as in advertising or promotion that allows customers to compare goods or services, and in parodying, criticising, or commenting on the famous mark’s owner or its goods and services, among other things.

The Act contains a significant flaw. There is a multifactor test for measuring dilution by blurring, i.e. elements are provided under the Act for establishing blurring, but no factors are offered under the Act for proving dilution by tarnishment. Because no yardstick is provided, the court has the ability to assess it at its discretion. As a result, we must expect conflicting judgments from different courts when it comes to measuring dilution by tarnishment. Again, the parties to the dispute may be victims of judicial arbitrariness. As a result, the Act should be modified, and those precise elements for evaluating dilution by tarnishment be included in the Act, and that the court be required to base its measurement solely on those factors.

Conclusion

As previously said, trademarks are incredibly important for identifying goods and services because consumers rely on them to determine their needs. Due to the ongoing infringement or dilution of trademarks as a result of new competitors entering the market, organizations must have diligent systems in place to ensure that their marks are protected. Such vigilance would ensure that illegal marks are reported to the courts, highlighting small issues that the legislature may need to consider and include into current legislation. If and when such adjustments are required, the legislation must ensure that the necessary amendments are included, reducing the scope of infractions.


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