Deere & Co. v. MTD Products, Inc.

• Decision Date: 21 November 1994
• Docket Number: D,No. 858,858
• Court: U.S. Court of Appeals — Second Circuit
• Parties: , 32 U.S.P.Q.2d 1936 DEERE & COMPANY, Plaintiff-Appellee, Cross-Appellant, v. MTD PRODUCTS, INC., Defendant-Appellant, Cross-Appellee. ockets 94-7799, 94-7863.

Page 39

41 F.3d 39

63 USLW 2349, 32 U.S.P.Q.2d 1936

DEERE & COMPANY, Plaintiff-Appellee, Cross-Appellant, v. MTD PRODUCTS, INC., Defendant-Appellant, Cross-Appellee.

No. 858, Dockets 94-7799, 94-7863.

United States Court of Appeals Second Circuit.

Argued Oct. 11, 1994.

Decided Nov. 21, 1994.

Patricia Hatry, New York City (Jeffrey C. Katz, Neal H. Klausner, Davis & Gilbert, on the brief), for defendant-appellant.

Richard Kurnit, New York City (Arthur J. Ginsburg, Edward H. Rosenthal, David Y. Atlas, Kyran Cassidy, Frankfurt, Garbus, Klein & Selz, on the brief), for plaintiff-appellee.

Before: NEWMAN, Chief Judge, WALKER and CALABRESI, Circuit Judges.

JON O. NEWMAN, Chief Judge:

This appeal in a trademark case presents a rarely litigated issue likely to recur with increasing frequency in this era of head-to-head comparative advertising. The precise issue, arising under the New York anti-dilution statute, N.Y.Gen.Bus.Law Sec. 368-d (McKinney 1984), is whether an advertiser may depict an altered form of a competitor's trademark to identify the competitor's product in a comparative ad. The issue arises on an appeal by defendant-appellant MTD Products, Inc. ("MTD") from the August 9, 1994, order of the United States District Court for the Southern District of New York (Lawrence M. McKenna, Judge) granting a preliminary injunction to plaintiff-appellee Deere & Company ("Deere") and Deere's cross-appeal to broaden the scope of the injunction beyond New York State, 860 F.Supp. 113. The injunction prevents MTD from airing a television commercial that shows an animated version of the leaping deer that has become appellee's well-known logo.

Although a number of dilution cases in this Circuit have involved use of a trademark by a competitor to identify a competitor's products in comparative advertising, ¹ as well as use by a noncompetitor in a humorous variation of a trademark, ² we have not yet considered whether the use of an altered version of a distinctive trademark to identify a competitor's product and achieve a humorous effect can constitute trademark dilution. Though we find MTD's animated version of Deere's deer amusing, we agree with Judge McKenna that the television commercial is a likely violation of the anti-dilution statute. We therefore affirm the preliminary injunction.

Background

Deere, a Delaware corporation with its principal place of business in Illinois, is the world's largest supplier of agricultural equipment. For over one hundred years, Deere has used a deer design ("Deere Logo") as a trademark for identifying its products and services. Deere owns numerous trademark registrations for different versions of the Deere Logo. Although these versions vary slightly, all depict a static, two-dimensional silhouette of a leaping male deer in profile. The Deere Logo is widely recognizable and a valuable business asset. ³

MTD, an Ohio company with its principal place of business in Ohio, manufactures and sells lawn tractors. In 1993, W.B. Doner & Company ("Doner"), MTD's advertising agency, decided to create and produce a commercial--the subject of this litigation--that would use the Deere Logo, without Deere's authorization, for the purpose of comparing Deere's line of lawn tractors to MTD's "Yard-Man" tractor. The intent was to identify Deere as the market leader and convey the message that Yard-Man was of comparable quality but less costly than a Deere lawn tractor.

Doner altered the Deere Logo in several respects. For example, as Judge McKenna found, the deer in the MTD version of the logo ("Commercial Logo") is "somewhat differently proportioned, particularly with respect to its width, than the deer in the Deere Logo." Doner also removed the name "John Deere" from the version of the logo used by Deere on the front of its lawn tractors, and made the logo frame more sharply rectangular.

More significantly, the deer in the Commercial Logo is animated and assumes various poses. Specifically, the MTD deer looks over its shoulder, jumps through the logo frame (which breaks into pieces and tumbles to the ground), hops to a pinging noise, and, as a two-dimensional cartoon, runs, in apparent fear, as it is pursued by the Yard-Man lawn tractor and a barking dog. Judge McKenna described the dog as "recognizable as a breed that is short in stature," and in the commercial the fleeing deer appears to be even smaller than the dog. Doner's interoffice documents reflect that the animated deer in the commercial was intended to appear "more playful and/or confused than distressed."

MTD submitted the commercial to ABC, NBC, and CBS for clearance prior to airing, together with substantiation of the various claims made regarding the Yard-Man lawn tractor's quality and cost relative to the corresponding Deere model. Each network ultimately approved the commercial, though ABC reserved the right to re-evaluate it "should there be [a] responsible complaint," and CBS demanded and received a letter of indemnity from Doner. The commercial ran from the week of March 7, 1994, through the week of May 23, 1994.

Deere filed a complaint, along with an order to show cause seeking a preliminary injunction and a temporary restraining order, alleging violations of the New York anti-dilution statute and section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a) (1988), as well as common law claims of unfair competition and unjust enrichment. Following a hearing, the District Court denied Deere's application for a temporary restraining order, but subsequently found that Deere had demonstrated a likelihood of prevailing on its dilution claim and granted preliminary injunctive relief limited to activities within New York State. In its August 11, 1994, Supplemental Findings of Fact, Conclusions of Law, and Order ("Supplemental Order"), the Court concluded that Deere had not shown a likelihood of success on the merits of its Lanham Act claim. ⁴

On appeal, MTD argues that the anti-dilution statute does not prohibit commercial uses of a trademark that do not confuse consumers or result in a loss of the trademark's ability to identify a single manufacturer, or tarnish the trademark's positive connotations. Deere cross-appeals, contending that injunctive relief should not have been limited to New York State. We affirm both the finding of likely dilution and the scope of the injunction. ⁵

Discussion

Section 368-d, which has counterparts in more than twenty states, reads as follows:

Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark registered or not registered or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.

N.Y.Gen.Bus.Law Sec. 368-d (McKinney 1984). The anti-dilution statute applies to competitors as well as noncompetitors, see Nikon Inc. v. Ikon Corp., 987 F.2d 91, 96 (2d Cir.1993), and explicitly does not require a plaintiff to demonstrate a likelihood of consumer confusion, see Sally Gee, Inc. v. Myra Hogan, Inc., 699 F.2d 621, 624 (2d Cir.1983).

In order to prevail on a section 368-d dilution claim, a plaintiff must prove, first, that its trademark either is of truly distinctive quality or has acquired secondary meaning, and, second, that there is a "likelihood of dilution." Sally Gee, 699 F.2d at 625. A third consideration, the predatory intent of the defendant, may not be precisely an element of the violation, but, as we discuss below, is of significance, especially in a case such as this, which involves poking fun at a competitor's trademark.

MTD does not dispute that the Deere Logo is a distinctive trademark that is capable of dilution and has acquired the requisite secondary meaning in the marketplace. See Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., 42 N.Y.2d 538, 545, 399 N.Y.S.2d 628, 632, 369 N.E.2d 1162, 1166 (1977). Therefore, the primary question on appeal is whether Deere can establish a likelihood of dilution of this distinctive mark under section 368-d.

Likelihood of Dilution. Traditionally, this Court has defined dilution under section 368-d "as either the blurring of a mark's product identification or the tarnishment of the affirmative associations a mark has come to convey." See Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026, 1031 (2d Cir.1989) (citing Sally Gee, 699 F.2d at 625 (quoting 3 R. Callman, The Law of Unfair Competition, Trademarks and Monopolies Sec. 84.2, at 954-55)).

In previous cases, "blurring" has typically involved "the whittling away of an established trademark's selling power through its unauthorized use by others upon dissimilar products." Mead Data, 875 F.2d at 1031 (describing such " 'hypothetical anomalies' as 'DuPont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, Bulova gowns, and so forth' ") (quoting legislative history of section 368-d) (citation omitted). Thus, dilution by "blurring" may occur where the defendant uses or modifies the plaintiff's trademark to identify the defendant's goods and services, raising the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product. ⁶

"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. ⁷ In such situations, the trademark's reputation and commercial value might be diminished because the public will associate the lack of quality or lack of prestige in the defendant's goods with the plaintiff's unrelated goods, or because the defendant's use reduces the trademark's reputation and standing in the eyes of consumers as a wholesome identifier of the owner's products or services.

At the hearing on Deere's application for a...