The federal Lanham Act provides trademark owners various legal causes of action, including trademark infringement and dilution. While trademark infringement requires proof of consumer confusion, dilution protects famous marks from uses that weaken their distinctiveness or harm their reputation – even when there is no likelihood of confusion present as to the source of goods or services.
Under Section 43(c) of the Lanham Act,1 trademark dilution comes in two forms:
- Dilution by blurring occurs when another party’s use of a similar mark weakens the association between the famous mark and its owner. This happens when the mark’s uniqueness and distinctiveness in the marketplace are gradually eroded by unauthorized uses.
- Dilution by tarnishment happens when a similar mark is used in a way that harms the reputation of the famous mark, often by associating it with inferior quality products or unsavory contexts.
To succeed on a dilution claim, a trademark owner must prove that: (1) the mark is famous and distinctive; (2) the defendant is using a mark in commerce that allegedly dilutes the famous mark; (3) the similarity between the marks gives rise to an association; and (4) the association is likely to impair the distinctiveness or harm the reputation of the famous mark.
Significantly, dilution claims do not require proof of actual or likely confusion, competition between the parties, or actual economic injury. This makes dilution a particularly valuable tool for protecting well-known brands against unauthorized uses that might not constitute traditional infringement.
The Trader Joe’s Case
The Ninth Circuit’s recent decision in Trader Joe’s Co. v. Trader Joe’s United2 illustrates the issues of dilution claims.
Trader Joe’s, the national grocery chain, owns federal trademark registrations for its distinctive name and logo, which features red typeface and a concentric circle design. Trader Joe’s United (TJU), a labor union formed in 2022 to represent certain Trader Joe’s employees, operates a website where it sells various merchandise for profit, including t-shirts, buttons, mugs, and reusable tote bags. The union’s website header displays a logo using the same distinctive red typeface and concentric circle design as Trader Joe’s trademark.
After TJU began selling merchandise using marks similar to Trader Joe’s trademarks, the company sent a cease-and-desist letter specifically targeting the commercial sale of merchandise, not the union’s use of the name to identify itself or discuss labor issues. When the union refused to comply, Trader Joe’s filed suit alleging trademark infringement, dilution, and related claims.
The U.S. District Court granted TJU’s motion to dismiss the complaint with prejudice. The district court found no plausible likelihood of consumer confusion under the Sleekcraft factors,3 concluding that reasonable consumers would not be confused because TJU’s website clearly identified itself as a labor union and was openly critical of Trader Joe’s labor practices. The court also dismissed the dilution claim under the nominative fair use doctrine. Earlier this year, a unanimous panel of the Ninth Circuit reversed and remanded. The panel held the district court had erred in analyzing the Sleekcraft factors.
The Ninth Circuit found that three key Sleekcraft factors weighed in Trader Joe’s favor:
- Strength of the mark: the parties agreed that Trader Joe’s marks were strong and well-known;
- Similarity of the marks: the marks were “strikingly similar,” noting both used the name “Trader Joe’s” in capitalized red lettering with similarly stylized fonts within concentric circles; and
- Relatedness of goods: the district court focused too narrowly on reusable tote bags rather than considering a broader category of similar non-grocery goods. The appellate court noted that while Trader Joe’s might not currently sell t-shirts or mugs, such items are sufficiently complementary to tote bags that consumers might be confused about the source or sponsorship of these products when labeled with similar marks. The court emphasized that in non-competitive goods cases, the core question is “whether customers are likely to be confused about the source or sponsorship of the products.”
The panel concluded this was not “one of the rare trademark infringement cases in which there is no plausible likelihood that a reasonably prudent consumer would be confused about the origin of the goods.”
As to the dilution claim, the panel held that the district court erred in dismissing the trademark dilution claim under the nominative fair use doctrine without giving Trader Joe’s an opportunity to respond or properly applying the requisite three-factor test for nominative fair use.
Takeaways
This decision highlights several important principles:
- District courts must apply the Sleekcraft factors (within the Ninth Circuit’s jurisdiction) carefully at the motion to dismiss stage, considering all reasonable inferences in favor of the plaintiff;
- The relatedness of goods should be analyzed broadly, considering complementary products and the potential for sponsorship confusion, not just direct competition;
- Dilution claims cannot be dismissed without proper application of relevant defenses and giving plaintiffs an opportunity to respond;
- The intersection of labor law and trademark law requires careful analysis to determine whether labor dispute exceptions apply to commercial trademark claims.
The case now returns to the district court for further proceedings, where these issues will be developed more fully. The outcome may have significant implications for how unions can use employer trademarks in their organizing and fundraising activities, and where the line is drawn between legitimate labor speech and commercial trademark infringement.
This posting is purely informational only and should not be deemed legal advice. For more information on this case or trademark law, please contact Yonaxis I.P. Law Group.