The Myth and Reality of Dilution

Sandra L. Rierson, Thomas Jefferson School of Law

Abstract

Statutory dilution claims are traditionally justified on the theory that even non-confusing uses of a famous trademark (or similar mark) can nonetheless minutely dilute the source-identifying power of the targeted trademark. The assumption of both the original federal dilution statute enacted in 1995 as well as its substantial enlargement in 2006 is that the source-identifying capacity of a trademark is akin to a glass of water: spill a drop here, spill a drop there and eventually your glass is empty.

This Article advances three claims. First, statutory dilution erroneously assumes that the source-identifying function of a trademark is a rivalrous good and one that is dissipated by use. Second, even were particular marks indeed rivalrous to some degree, the social and transaction costs imposed by the federal dilution statute would still outweigh the harm to trademark holders that it aims to prevent. Dilution claims inflict anticompetitive burdens and prohibit protected speech without justification. For these reasons and others, the federal dilution statute imposes substantially more harm than it (allegedly) prevents.

Finally, the true foundation for the federal dilution statute lies not in alleged economic harms, but rather results from the misplaced fiction of corporate personality. We do not require trademark holders to prove actual economic injury in the context of a dilution claim because, in truth, there is none. Instead, we have granted the holders of famous trademarks the equivalent of a “moral” right to these marks: an extension of the rights granted to a creator of an expressive work in the copyright context. By granting monopoly protection to famous marks notwithstanding the absence of actual economic injury, the federal dilution statute turns competition on its head, and serves only to entrench and further concentrate economic power in the hands of dominant corporate firms at the expense of consumers and competitors alike.