V Secret Catalogue Inc v. Moseley

• Decision Date: 19 May 2010
• Docket Number: No. 08-5793.,08-5793.
• Parties: V SECRET CATALOGUE, INC., Plaintiff-Appellee,andVictoria's Secret Stores, Inc., Plaintiff,v.Victor MOSELEY, dba Victor's Little Secret, fka Victor's Secret; Cathy Moseley, dba Victor's Little Secret, fka Victor's Secret, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

605 F.3d 382

V SECRET CATALOGUE, INC., Plaintiff-Appellee,andVictoria's Secret Stores, Inc., Plaintiff,v.Victor MOSELEY, dba Victor's Little Secret, fka Victor's Secret; Cathy Moseley, dba Victor's Little Secret, fka Victor's Secret, Defendants-Appellants.

No. 08-5793.

United States Court of Appeals Sixth Circuit.

Argued: Jan. 21, 2010.

Decided and Filed: May 19, 2010.

Rehearing and Rehearing En Banc Denied Aug. 5, 2010.^*

COPYRIGHT MATERIAL OMITTED

ARGUED: John E. Spainhour, Givhan & Spainhour, Shepherdsville, Kentucky, for Appellants. Frank J. Colucci, Colucci & Umans, New York, New York, for Appellees. ON BRIEF: John E. Spainhour, Givhan & Spainhour, Shepherdsville, Kentucky, for Appellants. Frank J. Colucci, Colucci & Umans, New York, New York, for Appellees.

Before: MERRITT, MOORE, and GIBBONS, Circuit Judges.

MERRITT, J., delivered the opinion of the court. GIBBONS, J. (p. 390), delivered a separate concurring opinion. MOORE, J. (pp. 391-95), delivered a separate dissenting opinion.

OPINION

MERRITT, Circuit Judge.

In this trademark “dilution by tarnishment” case, brought under the Trademark Dilution Revision Act of 2006,¹ the question is whether the plaintiff, an international lingerie company that uses the trade name designation “Victoria's Secret” has a valid suit for injunctive relief against the use of the name “Victor's Little Secret” or “Victor's Secret” by the defendants, a small retail store in a mall in Elizabethtown, Kentucky, that sells assorted merchandise, including “sex toys” and other sexually oriented products. The District Court issued the injunction. Since then the shop has been operating under the name of “Cathy's Little Secret.” The District Court concluded that even though the two parties do not compete in the same market, the “Victor's Little Secret” mark-because it is sex related-disparages and tends to reduce the positive associations and the “selling power” of the “Victoria's Secret” mark. The question is whether the plaintiff's case meets the definitions and standards for “dilution by tarnishment” set out in the new Act which amended the old Act i.e., the Federal Trademark Dilution Act of 1995.²

The new Act was expressly intended to overrule the Supreme Court interpretation of the old Act in this very same case Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 123 S.Ct. 1115, 155 L.Ed.2d 1 (2003) rev'g 259 F.3d 464 (6th Cir.2001), aff'g 54 U.S.P.Q.2d 1092 (W.D.Ky.2000). The Supreme Court reversed a panel of this Court that had affirmed an injunction against “Victor's Little Secret” issued by the District Court. On remand to the District Court from the Supreme Court after the 2003 reversal, no new evidence was introduced, and the District Court reconsidered the case based on the same evidence but used the new language in the new Act which overrules the Supreme Court in this case. We will first brief the Supreme Court opinion and the reasons Congress overruled the Supreme Court in this case. We will then outline our understanding of the new standards for measuring trademark “dilution by tarnishment” and apply them to this case. We conclude that the new Act creates a kind of rebuttable presumption, or at least a very strong inference, that a new mark used to sell sex related products is likely to tarnish a famous mark if there is a clear semantic association between the two. That presumption has not been rebutted in this case.

I. The Supreme Court Opinion and the New Act

The Supreme Court explained that this case started when an Army Colonel at Fort Knox saw an ad for “Victor's Secret” in a weekly publication. It advertised that the small store in Elizabethtown sold adult videos and novelties and lingerie.³ There was no likelihood of confusion between the two businesses or the two marks, but the Army Colonel was offended because the sexually-oriented business was semantically associating itself with “Victoria's Secret.” The Court explained that the concepts of “dilution by blurring” and “dilution by tarnishment” originated with an article in the Harvard Law Review, Frank Schechter, “ Rational Basis of Trademark Protection,” 40 Harv. L.Rev.. 813 (1927), and that the history and meaning of the concepts were further well explained in Restatement (Third) of Unfair Competition, Section 25 (1995). The Restatement section referred to by the Supreme Court explains this new intellectual property tort and contains in § 25 a comprehensive statement of “Liability Without Proof of Confusion: Dilution and Tarnishment.” “Tarnishment,” as distinguished from “dilution by blurring” was the only claim before the Supreme Court and is the only claim before us in this new appeal. We quote at length the relevant Restatement explanation of “tarnishment” in the footnote below.⁴

After reviewing a number of secondary sources other than the Harvard Law Review article and the Restatement, including state statutes on dilution and a Fourth Circuit case, the Supreme Court held that “actual harm” rather than merely the “likelihood of tarnishment” is necessary and stated its conclusion as follows:

Noting that consumer surveys and other means of demonstrating actual dilution are expensive and often unreliable, respondents [Victoria's Secret] and their amici argue that evidence of an actual “lessening of the capacity of a famous mark to identify and distinguish goods or services,” may be difficult to obtain. It may well be, however, that direct evidence of dilution such as consumer surveys will not be necessary if actual dilution can reliably be proved through circumstantial evidence-the obvious case is one where the junior and senior marks are identical. Whatever difficulties of proof may be entailed, they are not an acceptable reason for dispensing with proof of an essential element of a statutory violation. The evidence in the present record is not sufficient to support the summary judgment on the dilution count. The judgment is therefore reversed, and the case is remanded for further proceedings consistent with this opinion.

537 U.S. at 434, 123 S.Ct. 1115 (emphasis added).

Thus, the Court held that “actual harm” rather than merely a “likelihood” of harm must be shown by Victoria's Secret in order to prevail and that this means that Victoria's Secret carries the burden of proving an actual “lessening of the capacity of the Victoria's Secret mark to identify and distinguish goods or services sold in Victoria's Secret stores or advertised in its catalogs.” Id. In the new law Congress rejected the Court's view that a simple “likelihood” of an association in the consumer's mind of the Victoria's Secret mark with the sexually-oriented videos and toys of “Victor's Secret” is insufficient for liability.

The House Judiciary Committee Report states the purpose of the new 2006 legislation as follows:

The Moseley standard creates an undue burden for trademark holders who contest diluting uses and should be revised.

....

The new language in the legislation [provides] ... specifically that the standard for proving a dilution claim is “likelihood of dilution” and that both dilution by blurring and dilution by tarnishment are actionable.

(Emphasis added.) U.S. Code Cong. & Adm. News, 109th Cong.2d Sess.2006, Vol. 4, pp. 1091, 1092, 1097. The relevant language of the new Act designed to carry out this purpose is recited and underlined in footnote 1, supra. The drafters of the Committee Report also called special attention to the “burden” of proof or persuasion placed on “trademark holders” by the Supreme Court's opinion in Moseley, suggesting a possible modification in the burden of proof. The question for us then is whether “Victor's Little Secret” with its association with lewd sexual toys creates a “likelihood of dilution by tarnishment” of Victoria's Secret mark.

II. Application of Statutory Standard

The specific question in this case is whether, without consumer surveys or polls or other evidence, a semantic “association” is equivalent to a liability-creating mental “association” of a junior mark like “Victor's Little Secret” with a famous mark like “Victoria's Secret” that constitutes dilution by tarnishment when the junior mark is used to sell sexual toys, videos and similar soft-core pornographic products. There appears to be a clearly emerging consensus in the case law, aided by the language of § 25 of the Restatement of Trademarks 3d, quoted in footnote 4 supra, that the creation of an “association” between a famous mark and lewd or bawdy sexual activity disparages and defiles the famous mark and reduces the commercial value of its selling power. This consensus stems from an economic prediction about consumer taste and how the predicted reaction of conventional consumers in our culture will affect the economic value of the famous mark.

There have been at least eight federal cases in six jurisdictions that conclude that a famous mark is tarnished when its mark is semantically associated with a new mark that is used to sell sex-related products. We find no exceptions in the case law that allow such a new mark associated with sex to stand. See Pfizer Inc. v. Sachs, 652 F.Supp.2d 512, 525 (S.D.N.Y.2009) (defendants' display at an adult entertainment exhibition of two models riding a VIAGRA-branded missile and distributing condoms would likely harm the reputation of Pfizer's trademark); Williams-Sonoma, Inc. v. Friendfinder, Inc., No. C 06-6572 JSW (MEJ), 2007 WL 4973848, at *7 (N.D.Cal. Dec. 6, 2007) (defendants' use of POTTERY BARN mark on their sexually-oriented websites likely to tarnish “by associating those marks for children and teenager furnishings”); Kraft Foods Holdings, Inc. v. Helm, 205 F.Supp.2d 942, 949-50 (N.D.Ill.2002) (pornographic website's use of “VelVeeda” tarnishes VELVEETA trademark); Victoria's Cyber Secret Ltd. P'ship v. V Secret Catalogue, Inc., 161 F.Supp.2d 1339, 1355 (S.D.Fla.2001) (defendants' internet trade names likely to tarnish famous mark when websites “will be used for entertainment of...