McDonald's Corp. v. Arche Technologies, Inc.:
The primary purpose of the dilution doctrine is
protection of a trademark owner's property right and goodwill in
his mark, through prohibition of a junior user's "whittling away"
of the value of the mark. Trademark infringement, on the other
hand, seeks primarily to protect consumers against confusion and
secondarily to protect the trademark owner's interest in
preserving the integrity of his trademark. In both cases, some
kind of mental association must exist in the buyer's mind between
the two uses of a mark. Such a mental association (or secondary
meaning) clearly exists where plaintiff's mark is very famous.
The court found that McDonald's did not prove by a
preponderance of the evidence that any likelihood of confusion
existed regarding the source, sponsorship, affiliation or
endorsement of Arche's products, and so found for Arche on the
trademark infringement and unfair competition claims.
The court analyzed eight factors used in the Ninth
Circuit for deciding whether likelihood of confusion exists, and
found that McDonald's mark has its greatest strength when double
arches are used (and Arche uses a single arch); there is no
crossover in the type of goods involved (McDonald's is a fast-
food chain and Arche manufactures and sells computers) or in
marketing channels used (Arche advertises mainly in small trade
publications and does no television or radio advertising); no
evidence of actual confusion was presented despite both sides'
use of consumer surveys; and that the targeted customers are
different and unlikely to be confused (Arche's customers are
specialized professionals or small businesses, whereas the
majority of McDonald's customers are unsophisticated children).
At least one California court has interpreted the
statute to protect against: (1) association with something
unsavory or degrading; (2) tarnishment by association with a
poorly manufactured product; (3) genericide (the tendency of a
widely used product name to become the generic name for the
product); and (4) diffusion of the public's immediate association
of the mark with the source. Plasticolor Molded Products, Inc.
v. Ford Motor Co., 713 F.Supp. 1329, 11 USPQ2d 1023 (C.D. Cal.
1989).
The McDonald's court based its finding of dilution not
on the prong of the 14330 test requiring likelihood of injury
to business reputation, i.e. tarnishment, but on the prong
providing a remedy for dilution of the distinctive quality of a
mark. The court stated that while there is no evidence of
tarnishment since defendants' products are well made and highly
regarded, the "distinctive quality" of McDonald's mark can still
be protected under the second prong of the anti-dilution statute.
"That prong is directed at protecting an owner's right to strong,
well recognized marks and requires neither evil intent on the
part of the defendant nor proof of likelihood of confusion. Good
faith is no defense and actual confusion is not required."
McDonald's Corp. at 1560.
The court then stated that "distinctive" marks are
protected against dilution, i.e. those "which have acquired
sufficient secondary meaning to become distinctive." As examples
it lists "Tiffany" and "Polaroid." The court found the "Golden
Arch," whether single or double, to be a distinctive mark under
B & PC 14330, and to "have acquired sufficient secondary
meaning to be entitled to a broad scope of protection under
California law," (emphasis added) and so permanently enjoined all
use by Arche of an arch design, but only in the colors of gold
and yellow.
Another previous case finding dilution of a design mark
(as opposed to a word mark) based on a finding of tarnishment was
Coca-Cola Co. v. Alma-Leo U.S.A., Inc., 719 F.Supp. 725, 12
USPQ2d 1487 (N.D. Ill. 1989). In the Coca-Cola case, the court
granted a temporary restraining order against sale of white
bubble gum power resembling cocaine in a Coca-Cola look-alike
bottle, based upon dilution by tarnishment of plaintiff's
reputation and corporate goodwill.
It should be noted that this case might have had a
different outcome if tried in a different circuit. The Second
Circuit recently stated that a finding of dilution requires
either "blurring of a mark's product identification or the
tarnishment of the affirmative associations a mark has come to
convey." Mead Data Central v. Toyota Motor Sales, 10 USPQ2d 1961
(2nd Cir. 1989). (This is the famous Lexis v. Lexus case that
received so much publicity with the district court's issuance of
an injunction against Toyota and the Second Circuit's reversal of
that order.) However, the McDonald's case involves neither
blurring nor tarnishment.
California's anti-dilution statute was amended in 1985;
the amendment has been criticized as being poorly drafted and
adding nothing to the original statute. The State Bar of
California's Intellectual Property Law section was opposed to the
amendment and is working to repeal it.
The dilution theory is broadened by the now explicit
ruling that dilution without tarnishment will support an
injunction. It is narrowed by judicial shaping of this remedy
which extends it only to strong or famous marks. It remains an
open question whether less famous marks could secure dilution
relief without a showing of tarnishment.
Trademark Dilution without Tarnishment
by
Sheldon Mak Rose & Anderson
A recent case, McDonald's Corp. v. Arche Technologies,
Inc., 17 USPQ2d 1557 (N.D. Cal, October 29, 1990), advances
trademark dilution law to a new threshold. Prof. J. Thomas
McCarthy, author of the leading treatise on trademark law,
believes that this case marks the first time that a U.S. court
found dilution of a design mark without also finding tarnishment.
(Prof. McCarthy has served as an expert for McDonald's Corp. in
various cases.) Dilution Doctrine Defined.
The dilution doctrine provides protection for marks
even when the traditional "likelihood of confusion" test for
infringement is not met. If defendant's use will tarnish,
degrade or dilute the distinctive quality of plaintiff's mark, an
injunction may issue as relief against dilution. For example,
use of the mark "Tiffany" on a Boston restaurant was found not to
cause confusion with Tiffany Jewelers of New York among the
consuming public, and so it was not trademark infringement. Yet
such use was held to be dilution of Tiffany Jeweler's famous
mark, entitling Tiffany Jeweler's to an injunction prohibiting
use of its mark on the restaurant. Tiffany & Co. v. Boston Club,
Inc., 231 F.Supp. 836, 143 USPQ 2 (D.C. Mass. 1964). McDonald's v. Arche.
The McDonald's case involved a design mark, McDonald's
Golden Arches. KunNan Enterprise, Ltd., a Taiwanese corporation,
adopted a single arch design, used in various colors, as a mark
for its computer hardware and software, and obtained its own
federal trademark registration in 1989 for its single arch.
KunNan transferred ownership of its registration to Arche, its
U.S. distributor, which then used the mark in connection with its
sale of computers and computer components. McDonald's sued
KunNan and Arche for a permanent injunction under trademark
infringement, unfair competition and dilution theories. Relief Granted Under Anti-Dilution Theory.
The court did however grant relief to McDonald's under
the California anti-dilution statute, California Business &
Professions Code 14330. This statute provides for injunction
when either of two conditions are met: there is likelihood of
injury to business reputation (tarnishment) or dilution of the
distinctive quality of a mark (no tarnishment required). The
statute requires no competition or confusion between goods. The
courts have imposed a limitation (which is not grounded in the
statute) that only the most distinctive marks are eligible for
protection, in order to prevent trademark dilution doctrine from
swallowing up unfair competition and trademark law. Other Dilution Cases.
Previous 9th Circuit cases finding dilution have
generally found tarnishment, in addition to finding a strong
mark. For example, in Grey v. Campbell Soup Co., 650 F.Supp.
1166, 231 USPQ 562 (C.D. Cal. 1986), the court found dilution of
the mark "Godiva" for chocolate by defendant's use of the mark
"Dogiva" for dog biscuits. The court stated that "Godiva" was
wholly arbitrary and fanciful, and inherently distinctive, and
therefore a strong mark entitled to protection against dilution.
But the court went on to use tarnishment as a basis for granting
relief, stating that defendant's use of "Dogiva" injured
plaintiff's business reputation because plaintiff's product was
premium quality chocolate whereas defendant's product was dog
biscuits. Need for a Famous Mark?
A great deal of the McDonald's decision can be
explained by the strength of plaintiff's mark. It can be argued
that the court was result-oriented and desired to protect
McDonald's strong mark. In its decision, the court cites two
other very strong marks, "Tiffany" and "Polaroid." But the
statute itself contains no requirement that a mark must be strong
to be protected under dilution theory, although this requirement
has been read in by the judiciary to prevent the dilution
doctrine from "swallow[ing] up all competition in the claim of
protection against trade name infringement." Coffee Dan's Inc.
v. Coffee Don's Charcoal Broiler, 305 F.Supp. 1210, 163 USPQ 602
(N.D. Cal. 1969).