On Wednesday, May 5, 1999, the Subcommittee on Courts and Intellectual Property will hold a legislative hearing on H.R. 1565, the "Trademark Amendments Act of 1999." The hearing will take place in Room 2226 of the Rayburn House Office Building at 2:00 p.m.

H.R.1565, the "Trademark Amendments Act of 1999"

I.  Title 1: Trademark Dilution

In 1996, the "Federal Trademark Dilution Act of 1995" became effective.¹ This Act ("Dilution Act") gave a federal cause of action to holders of famous trademarks for dilution. The Dilution Act states:

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 any 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 famous mark, and to obtain such other relief as is provided in this subsection.²

The Dilution Act only applies to the holders of famous trademarks. It provides a list of eight factors that courts may consider in determining if a mark is famous and distinctive. These factors focus on the degree of distinctiveness, both inherent and acquired, of the mark and the scope of the use of the mark by the holder. If a mark is found to be famous, then the holder is entitled to bring a federal cause of action against the holder of a identical or similar mark on a dissimilar product.

Since the enactment of the Dilution Act, federal courts have grappled with how to apply the statute. Tarnishment and blurring have emerged as the two main ways by which federal [begin page 2] courts have found dilution. Tarnishment occurs when the identical or similar mark is used on products that are of poor quality or are portrayed in an unwholesome manner so that the use evokes negative thoughts about the products bearing the famous mark. Blurring occurs when one or more identical or similar marks are used on dissimilar products without authorization so that the distinctiveness of the famous mark is eroded.

While the Dilution Act was welcomed by the intellectual property community, a recent decision by the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office illuminated the need for further legislation. The Dilution Act provides for injunctive relief after the identical or similar mark has been in use and has caused actual dilution of a famous mark but provides no means to oppose an application for a mark or to cancel a registered mark that will result in dilution of the holder's famous mark. In Babson Bros. Co. v. Surge Power Corp., 39 USPQ2d 1953 (TTAB 1996), the Board held, "Based on the provisions of the Federal Dilution Act itself, the lack of legislative history on the point, and a published report relating to a previously proposed federal dilution law..., we hold that the framers of the law did not intend to provide a new statutory ground for opposition or cancellation."

Title I of this bill would provide holders of famous marks with a right to oppose or seek cancellation of a mark that would cause dilution as provided in the Dilution Act. The amendments in title I are necessary for several reasons. Resolution of the dilution issue before the Board, as opposed to Federal District Court, would result in more timely, economical, and expeditious decisions. Resolving the issue at the Board would provide certainty to competing trademark interests, before the applicant has invested significant resources in its proposed mark, and before dilution-type damage has been suffered in the marketplace by the owner of the famous mark. Also, the Board would give guidance to litigants and the Trademark Bar, through precedent, with respect to such issues as what qualifies as a "famous" mark, and what constitutes dilution, whether by blurring or tarnishment.

Enactment of Title I would meet the important policy objectives of a more timely and inexpensive resolution of the dilution issue, and result in greater certainty in the application of this body of trademark law.

II.   Title II: Remedies in Cases of Dilution of Famous Marks

Title II of this bill seeks to clarify that in passing the Dilution Act, Congress did intend to allow for injunctive relief and/or damages against a defendant found to have wilfully intended to engage in commercial activity that would cause dilution of a famous trademark. The Dilution Act provided:

In an action brought under the subsection, the owner of a famous mark shall be entitled only to injunctive relief unless the person against whom the injunction is sought wilfully 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 a 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

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The language of the Dilution Act presented to the President for signing did not include the necessary changes to sections 35(a) and 36 of the Lanham Act as referred to in the Dilution Act. Therefore, in an attempt to clarify Congress' intent and to avoid any confusion by courts trying to interpret the statute this title makes the appropriate changes to sections 35(a) and 36 to allow for injunctive relief and damages.

III.   Title III: Federal Immunity for Trademark Infringement/Dilution

The Federal Government can not be sued for trademark infringement by a private citizen or corporate entity. The Federal Government can, and does, enter into the market place, competing with the private sector. It enters into contracts, promotes the sale of goods and services, and registers trademarks. In fact, the Federal Government owns a large amount of trademarks. And, it is in a position to sue private citizens and corporate entities for infringement of its trademarks. However, the same recourse is not available to those whose trademarks have been infringed by the Federal Government.

Title III of the bill seeks to level the playing field by amending the trademark law to allow for private citizens and corporate entities to sue the Federal Government for trademark infringement.

IV.  Title IV: Civil Actions for Trade Dress Infringement

Title IV of the bill amends section 43(a) of the Lanham Act to provide that in an action for trade dress infringement, where the matter sought to be protected is not registered with the U.S. Patent and Trademark Office, the plaintiff has the burden of proving that the trade dress is not functional. Attorney Robert Butts described the doctrine of functionality as follows:

"Functional features of trade dress are those that are essential in order for businesses to effectively compete in a particular market. A functional feature is one that many businesses have in common as compared to features that distinguish businesses. The principal inquiry in determining functionality is whether protection of a feature would hinder competition."⁴

If a mark is registered, there is a presumption that it is not functional. However, for plaintiffs of unregistered marks to be given the same presumption would not promote fair competition or registration. For example, the owner of a patent that is about to expire may try to register it as a trademark, which receives protection as long as the owner uses it in commerce. This amendment seeks to ensure that marks that are functional are not registered. Functional marks should be dealt with under patent law. Therefore, it should be incumbent on the plaintiff suing for infringement of an unregistered mark to prove that the mark is not functional.

V.  Title V: Housekeeping Amendment

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Title V makes a technical correction to section 10(a) of the Lanham Act. It amends section 10(a) of the Lanham Act (15 U.S.C. § 1060(a)) by striking out the words "subsequent purchase" as they appear in the second to last sentence and replacing them with the word "assignment." This sentence deals with assignments and so the use of the words "subsequent purchase" are incorrect. It was a technical oversight that this was not part of the legislation as it was presented to the President for signing.

Section 10(a) was part of the "Trademark Law Treaty Implementation Act" which passed in the 105th Congress and was signed into law on October 30, 1998.⁵ Because the "Trademark Law Treaty Implementation Act" will not go into effect until October 30, 1999, it is important that this technical correction be made to go into effect when the law does or on the date that this bill is signed into law.

If you have questions about the bill, or the hearing, please contact Sam Stratman or Michael Connolly at 225-2492.