Dilution - What Is Dilution

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Ty Inc. v. Ruth Perryman No. 02-1771 (7th Cir., October 4, 2002)
The 7th Court of Appeals stated:
But what is “dilution”? There are (at least) three possibilities relevant to this case, each defined by a different underlying concern.
First, there is concern that consumer search costs will rise if a trademark becomes associated with a variety of unrelated products. Suppose an upscale restaurant calls itself “Tiffany.” There is little danger that the consuming public will think it’s dealing with a branch of the Tiffany jewelry store if it patronizes this restaurant. But when consumers next see the name “Tiffany” they may think about both the restaurant and the jewelry store, and if so the efficacy of the name as an identifier of the store will be diminished. Consumers will have to think harder— incur as it were a higher imagination cost—to recognize the name as the name of the store. Exxon Corp. v. Exxene Corp., 696 F.2d 544, 549-50 (7th Cir. 1982); cf. Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026, 1031 (2d Cir. 1989) (“The [legislative] history [of New York’s antidilution statute] disclosed a need for legislation to prevent such ‘hypothetical anomalies’ as ‘Dupont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, Bulova gowns’ ”); 4 McCarthy on Trademarks and Unfair Competition, supra, § 24:68, pp. 24-120 to 24-121. So “blurring” is one form of dilution.
Now suppose that the “restaurant” that adopts the name “Tiffany” is actually a striptease joint. Again, and indeed even more certainly than in the previous case, consumers will not think the striptease joint under common ownership with the jewelry store. But because of the inveterate tendency of the human mind to proceed by association, every time they think of the word “Tiffany” their image of the fancy jewelry store will be tarnished by the association of the word with the strip joint. Hormel Foods Corp. v. Jim Henson Productions, Inc., 73 F.3d 497, 507 (2d Cir. 1996); 4 McCarthy on Trademarks and Unfair Competition, supra, § 24:95, pp. 24-195, 24-198. So “tarnishment” is a second form of dilution. Analytically it is a subset of blurring, since it reduces the distinctness of the trademark as a signifier of the trademarked product or service.
Third, and most far-reaching in its implications for the scope of the concept of dilution, there is a possible concern with situations in which, though there is neither blurring nor tarnishment, someone is still taking a free ride on the investment of the trademark owner in the trademark. Suppose the “Tiffany” restaurant in our first hypothetical example is located in Kuala Lumpur and though the people who patronize it (it is upscale) have heard of the Tiffany jewelry store, none of them is ever going to buy anything there, so that the efficacy of the trademark as an identifier will not be impaired. If appropriation of Tiffany’s aura is nevertheless forbidden by an expansive concept of dilution, the benefits of the jewelry store’s investment in creating a famous name will be, as economists say, “internalized”—that is, Tiffany will realize the full benefits of the investment rather than sharing those benefits with others—and as a result the amount of investing in creating a prestigious name will rise.

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