Amicus Curiae Brief — Ty Inc. v. Perryman

MOTION FILED

I

MAR 6 = 2005 | / ou)

Y

No. 02-1142

IN THE

Supreme Court of the Anited States

TY INC.,

Petitioner,

V.

RUTH PERRYMAN,

Respondent.

On Petition For a Writ of Certiorari

to the United States Court of Appeals

for the Seventh Circuit

MOTION FOR LEAVE TO FILE AND BRIEF OF

AT&T CORP. AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

LAURA A. KASTER CARTER G. PHILLIPS

FRANK L. POLITANO ALAN CHARLES RAUL*

MICHELE A. FARBER JOSEPH V. JEST

AT&T Corp. EDWARD R. MCNICHOLAS

One AT&T Way SIDLEY AUSTIN BROWN &

Bedminster, N.J. 07921 WOOD LLP

(908) 532-1860 1501 K Street, N.W.

Washington, D.C. 20005

(202) 736-8000

Counsel for Amicus Curiae

March 6, 2003 * Counsel of Record

EET AT CT TTT TENT TAAL ERE EDERAL NREL

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

IN THE

Supreme Court of the Anited States

No. 02-1142

TY INC.,

Petitioner,

V.

RUTH PERRYMAN,

Respondent.

On Petition For a Writ of Certiorari

- to the United States Court of Appeals

for the Seventh Circuit

MOTION OF AT&T CORP. FOR LEAVE

TO FILE BRIEF AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

Pursuant to Rule 37.3 of the Rules of this Court, AT&T

Corp. (“AT&T”) hereby requests leave to file this brief as an

amicus curiae in support of the Petitioner. Petitioner Ty, Inc.

has consented to this brief as well as all other briefs offered

by potential amici. Respondent Ruth Perryman has, however,

withheld her consent from the filing of this brief in support of

the Petition.

AT&T offers this brief because it believes that the decision

below seriously threatens to erode the existing antidilution

protections for famous marks. AT&T has spent more than a

century and hundreds of millions of dollars building one of

the world’s most recognized and trusted brands for

telecommunications. The decision below threatens to erode

the value of this massive investment and to deprive

consumers of confidence in the meaning of all famous marks

AT&T offers this brief to explain the violence that the

decision does to the rights Congress accorded owners of

famous trademarks and to identify several of the well-settled

principles that the Seventh Circuit’s decision upsets. By

placing this case into its broader context, AT&T desires to

assist the Court’s resolution of this Petition and thus

respectfully requests leave to file this brief.

For the foregoing reasons, the motion of AT&T for leave to

file this motion as an amicus curiae in support of the

Petitioner should be granted.

Respectfully submitted,

LAURA A. KASTER CARTER G. PHILLIPS”

FRANK L. POLITANO ALAN CHARLES RAUL*

MICHELE A. FARBER JOSEPH V. JEST

AT&T CORP. EDWARD R. MCNICHOLAS

One AT&T Way SIDLEY AUSTIN BROWN &

Bedminster, N.J. 07921 WOOD LLP

(908) 532-1860 1501 K Street, N.W.

Washington, D.C. 20005

(202) 736-8000

Counsel for Amicus Curiae

March 6, 2003 * Counsel of Record

TABLE OF CONTENTS

TA ee FFG e Ie ven vinnie ensceseenvsvensserenreeseenetenss

INTEREST OF THE AMICUS CURIAE ................0.-+

SUMMARY OF THE ARGUMENT ....................65

I.

Il.

THE SEVENTH CIRCUIT’S WEAKENING OF

PROTECTION FOR FAMOUS MARKS CON-

FLICTS WITH THE CONGRESSIONAL MAN-

DATE AND UNDERMINES THE VALUE OF

SE ons cenivinscunsvderoasateincanesteveedens coven

A. Antidilution Law Protects The “Uniqueness”

TS octed cerca savcaieatysecatbaseses

B. Congress Sought To Preclude “Free Riding”

On Famous Marks, Including On The

rcs cc suawepsaesunbeneneree

C. The Seventh Circuit Decision Undermines

Investment In Famous Marks Contrary To The

IIR i fs0iSyesnsssncciserssivenensinesensons

THE SEVENTH CIRCUIT TREATS TRADE-

MARK RIGHTS AS IF THEY WERE MONOP-

OLY RIGHTS OF THE KIND ACCORDED

COPYRIGHTS AND EXTENDS “FAIR USE”

SAFEGUARDS BEYOND WHAT CONGRESS

iia. ca teanth boidecsbon endinehsidstnessaetescesre

Famous Marks Can Lose Their Protection

After Abandonment Or Upon Becoming

se .deagancdilbniwecosstteckess

B. Congress Stipulated A Narrow Range Of “Fair

Use” Rights Allowing Limited Third Party Use

Be I TN ss scrncasssnncenssncessesmestosesssrevss

12

13

14

ii

TABLE OF CONTENTS - continued

Page

Ili. “PERCOLATION” IN THIS AREA IS PAR-

TICULARLY DESTRUCTIVE .........................0 17

IIIT hxc sssisoscrsansievumnnsraretens SAORI 18

TABLE OF AUTHORITIES

CASES Page

Amstar Corp. v. Domino’s Pizza, Inc., 615 F.2d

I aN I peccicctadvcdbekncicibinscccncsesiverts 15

AT&T Corp. v. Direct Wired Domains, LLC, No.

1:02-CV-1835-ODE (N.D. Ga. July 23, 2002)... 11

Ashley Furniture Indus., Inc. v. SanGiacomo N.A.

Lid., 187 F.3d 363 (4th Cir. 1999) 00... 15

Brookfield Communications, Inc. v. West Coast

Entm't Corp., 174 F.3d 1036 (9th Cir. 1999)..... 1]

Car-Freshener Corp. v. S.C. Johnson & Son, Inc.,

FOO Oe Ce TO Gitainveide neues jetnannsdisncess 16

Clorox Co. v. Sterling Winthrop, Inc., 117 F.3d

FO RG nS nth. Woe. 14

E.I. Du Pont de Nemours & Co. v. Yoshida Int'l,

Inc., 393 F. Supp. 502 (E.D.N.Y. 1975)............. 15

Eldred v. Ashcroft, 123 S. Ct. 769 (2003).............. 13

General Motors Corp. v. E-Publications LLC,

No. CIV.A. 01-72819, 2001 WL 1798648,

(E.D. Mich. Nov. 26, 2001).........0...0..cceeeeees 1]

Moseley v. V Secret Catalogue, Inc., No. 01-1015

186 & ES: Raper earecay yan mnee >, 6, 7, 13

Mishawaka Rubber & Woolen Mfg. Co. v. S.S.

Kresge Co., 316 U.S. 203 (1942)... 7

PACCAR, Inc. v. TeleScan Techs., L.L.C., 319

F.3d 243 (6th Cir. 2003), available at 2003 WL

PR iiscciisnissotiepedruuetcar vet nkdsodepdccas. ae a Oe

Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316

PE Sate, I Bh chiro lake rosteevebeb batidteseod totes 10, 11

Pegram v. Herdrich, 530 U.S. 211 (2000)............. 17

People for the Ethical Treatment of Animals v.

Doughney, 263 F.3d 359 (4th Cir. 2001)........... 10, 11

Petro Stopping Ctrs., L.P. v. James River

Petroleum, Inc., 130 F.3d 88 (4th Cir. 1997) ..... 14

Pharmaceutical Research & Mfrs. of Am. v.

Concannon, No. 01-188 (U.S. June 28, 2002)... 17

Ee NES SAE Dene Ee SE ae ee Ee NT ee RTE

iv

TABLE OF AUTHORITIES -— continued

Page

Playboy Enters., Inc. v. Welles, 279 F.3d 796 (9th

ee Sn ciccectistthdcdisidiaeisliniadieeiiitadaliwenbis: 16

Sony Corp. of Am. v. Universal City Studios, Inc.,

OE Be 0 Fe tivtgter enh eusidtntineinrns 13

In re Trade-Mark Cases, 100 U.S. 82 (1879) ........ 18

U.S. Search, LLC v. U.S. Search.com Inc., 300

FO Fe Se eres, ie isiciemsnneneetitemahareteneee 15

United Drug Co. v. Theodore Rectanus Co., 248

ee I secdcindeieilecesdvnnbictieecenhciieiaidtis as 13

CONSTITUTION AND STATUTES

a. GE, G0: SE BE Bikssdicdicledisd tindiiin. 4

Federal Trademark Dilution Act of 1995, Pub. L.

104-98, 109 Stat. 985 (codified at 15 U.S.C.

$6 1125, 1227)............: Ma sbiiishvoubastatediteaces Dies venl 3

BS TG Paks vc owsctddecavsaccodbecbacendbeccacess 14

RS SE. FH ROIITD snitvevsevs vsucsssccevidecbutidensesadeds 16

1S UBS. 5 FR asi ean ines 6, 9, 14, 16

1S UA BAIR a ai UR 14

COURT RULE

TIN, Se Pe Saidasisdases aus: enktenesveciarouiag enna |

LEGISLATIVE HISTORY

H.R. Rep. No. 104-374 (1995) ..........0..ccee 3, 9, 18

S. Rep. No. 100-515 (1988), reprinted in 1988

U.S.C.O.Ai SRIF. 655.500. ORR. BR 8,9

134 Cong. Rec. $5868 (daily ed. May 13, 1988)... 8

141 Cong. Rec. $19312 (daily ed. Dec. 29,

RODE). csieiisicnrsssinvesecbsnbuns usdRitondes s MUA Macs dtNN 8, 10

145 Cong. Rec. S15019 (daily ed. Nov. 19,

RODD... ia. .: sédi Rakes inns eaieachadach eee alae 2

Vv

TABLE OF AUTHORITIES - continued

OTHER AUTHORITIES

The Top 100 Brands, Bus. Wk., Aug. 5, 2002 .......

Thomas L. Friedman, 7he Lexus and the Olive

REE EN SCT em apne ce NE

USTA Trademark Review Comm’n, Report and

Kecommendations on the United States

Trademark System and the Lanham Act, 77

Trademark Rep. 375 (1987), reprinted in

Trademark Law Revision Act of 1987: Hearing

on S. 1883 Before the Subcomm. on Patents,

Copyrights, and Trademarks of the Senate

Comm. of the Judiciary, 96th Cong. (1988).......

SCHOLARLY AUTHORITIES :

Colossus: How the Corporation Changed Amer-

ica (Jack Beatty ed., 2001)...

2 J. Thomas McCarthy, McCarthy on Trademarks

and Unfair Competition (4th ed. 2001)..............

4 J. Thomas McCarthy, McCarthy on Trademarks

and Unfair Competition (4th ed, 2001)..............

Frank Schechter, Zhe Rational Basis of Trade-

mark Protection, 40 Harv. L. Rev. 813 (1927)...

Page

2,12

10

8, 10

7

IN THE

Supreme Court of the Gnited States

No. 02-1142

TY INC.,

Petitioner,

Vv. a

RUTH PERRYMAN,

Respondent.

On Petition For a Writ of Certiorari

to the United States Court of Appeals

for the Seventh Circuit

BRIEF OF AT&T CORP. AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

INTEREST OF THE AMICUS CURIAE

AT&T Corp. (“AT&T”) is one of the world’s premier voice

and data communications companies, serving more than 50

million customers, including consumers, businesses and

governments.’ AT&T runs one of the largest and most

sophisticated communications networks, providing data,

Internet and managed services for the public and private

sectors. AT&T also offers local, long distance and Internet

services, as well as transaction-based services like prepaid

cards, collect calling and directory assistance. With

' Pursuant to Rule 37.6 of the Rules of this Court, amicus states that no

counsel for a party has authored this brief in whole or in part, and that no

person or entity, other than the amicus or its counsel, has made a monetary

contribution to the preparation or submission of this brief

iia i tial |

2

approximately $37 billion in revenues, AT&T has

relationships with about 50 million consumers and 4 million

business customers, who depend on AT&T communications

and technologies.

AT&T has built its reputation by ensuring that the

telecommunication services associated with its name

consistently reflect quality and reliability. The AT&T brand

signifies the source of the services and connotes a

commitment to quality and earned trust. To publicize and

build the value of this brand, AT&T engaged in what one

commentator notes was “the first, most persistent, and most

celebrated of the large-scale institutional advertising

campaigns of the early twentieth century.” See Colossus:

How the Corporation Changed America 180 (Jack Beatty ed.,

2001). This campaign was one of the first organized efforts

to create a public image of a corporation that extended

beyond its products or services and created a reputation

embodied in the company brand.

As reported annually in Business Week, AT&T has

consistently been ranked among the most valuable brands in

the world by Interbrand, a leading independent brand

consultancy. AT&T has been ranked the most valuable

telecommunications brand, and the 2002 survey values the

AT&T brand at more than $16 billion dollars. See The Top

100 Brands, Bus. Wk., Aug. 5, 2002, at 95, 96. It is no

exaggeration to say that AT&T’s brand remains one of its

most valuable corporate assets.

AT&T has brought numerous actions under the Lanham

Act, Federal Trademark Dilution Act, Anticybersquatting

Consumer Protection Act, and under the Uniform Domain

Name Dispute Resolution Policy issued by the Internet

Corporation for Assigned Names and Numbers to police and

protect its trademarks against misuse in domain names or

website content. See, e.g., 145 Cong. Rec. $15019 (daily ed.

Nov. 19, 1999) (statement of Sen. Hatch documenting cyber-

squatters’ unlawful use of AT&T’s marks). Therefore,

3

AT&T has a direct and tangible stake in the development of

the proper legal standards under the FTDA, as well as in the

efficacy of the remedies available to defend the company’s

trademarks.

SUMMARY OF THE ARGUMENT

The ruling of the Seventh Circuit substantially undermines

the expansive antidilution protections provided for famous

marks by the Federal Trademark Dilution Act of 1995, Pub.

L. 104-98, 109 Stat. 985 (codified at 15 U.S.C. §§ 1125,

1127) (“FTDA”). The court below formulated a radical

approach to trademark dilution that favors ready conversion

of famous marks into generic terms in conflict with the true

purpose of the antidilution law. Congress designed the FTDA

to preclude “the unauthorized use of a famous mark [when it]

reduces the public’s perception that the mark signifies

something unique, singular, or particular.” H.R. Rep. No.

104-374, at 3 (1995). The FTDA thus protects famous marks

from the attempts of free riders “to trade upon the goodwill

and established renown of [famous] marks.” /d

The Seventh Circuit decision adopts the opposite policy,

favoring widespread use of famous marks to permit them to

become generic words. The opinion below states: “arming

trademark owners to enjoin uses of their mark that, while not

confusing, threaten to render the mark generic may therefore

not be in the public interest.” Pet. App. 10a. The court

actually extols the “social benefit” gained when a mark

becomes generic -— “namely an addition to ordinary

language.” Jd. at 9a. Based on this analysis, the Seventh

Circuit endorses the use of Petitioner Ty, Inc.’s famous mark

by a reseller who has no connection to Ty, and it permits such

use not merely on the branded products the reseller offers for

sale, but in the name of the business itself. This dramatic

narrowing of the rights of those who own famous trademarks

is in direct conflict with the extensive antidilution protection

that Congress provided.

Sn ee a ee

4

The decision below also departs from mainstream analysis

of the “fair use” doctrine — the statutory doctrine that permits

marks to be used without license from the trademark owner

only under limited circumstances. Under the opinion below,

the limited fair use exception swallows the rule itself. The

opinion’s fundamental error is to treat trademarks as

analogous to copyrights, which (like patents) reward

creativity (and with patents, invention) by providing exclusive

rights, but only for a finite period before committing the

works to the public domain for the common good. Indeed,

whereas the temporal limitations of copyright (and patent)

protection are constitutionally mandated, U.S. Const. art. I,

§ 8, cl. 8, trademarks are not so limited by either the

Constitution or Congress. Trademarks may be maintained so

long as they identify a unique source. The public does not

gain by the release of trademarks for general use because their

entire purpose is to signify the unique, proprietary origin or

sponsorship of private goods. The present case is a strong

candidate for review because it posits an approach to

trademark rights that is in stark conflict with the wishes of

Congress. Review is also warranted to assure national

uniformity in the protection of nation-wide marks.

ARGUMENT

This case arises on appeal from the district court’s grant of

summary judgment in favor of Petitioner Ty, Inc. on the

ground that Respondent Perryman’s use of Ty’s famous

“Beanies” mark in the name of her business and in her

domain name diluted Ty’s mark in violation of the FTDA.

The Seventh Circuit reversed. The court recognized that the

FTDA protects against “blurring” and “tarnishment” of

famous marks, but then characterized this case as falling in a

distinct, third category of “free ride[r]” cases involving a

supposed extension of antidilution law. Pet. App. 4a-S5a. The

court below analyzed the question before it- as whether the

FTDA precludes unauthorized resellers of genuine articles

5

from using the famous marks associated with those goods,

even in the name or domain of the reseller’s business. See id.

at 3a. The court held that the FTDA does not “forbid [such]

commercial uses” even if they “accelerate the transition from

trademarks (brand names) to generic names (product names).”

Id. at 8a. Indeed, there is a “social benefit, namely an

addition to ordinary language” which occurs when marks are

made generic. /d. at 9a.

This Court’s recent decision in Moseley v. V Secret

Catalogue, Inc., No. 01-1015 (U.S. Mar. 4, 2003), does not

resolve or address the issue in this case. In Moseley, the

Court held that the FTDA requires proof of actual dilution,

rather than a mere “likelihood.” Jd at 14. The question

presented in the Petition at_issue here does not involve the

standard of proof for dilution; it concerns whether unlicensed

resellers of goods bearing famous trademarks have the right,

as a matter of law, to incorporate the famous marks into the

reseller’s business name and Internet domain name. See Pet.

i. Moreover, the district court below found actual injury,

awarding summary judgment to Petitioner on its dilution

claim based on a “clear{] lessen[{ing of] the capacity of the

plaintiff [Ty, Inc.] to distinguish its goods from competitors.”

Pet. App. 55a. Thus, this is not a “mere mental association”

case like Moseley. See Moseley, No. 01-1015, slip op. at 15

(“the mere fact that consumers mentally associate the junior

user’s mark with a famous mark is not sufficient to establish

actionable dilution”).

If the Seventh Circuit’s decision is not reversed, resellers

will have acquired a new legal right in famous marks that the

FTDA does not allow, and the owners of famous marks will

be denied their express statutory right to enjoin resellers from

“lessening . . . the capacity of [the] famous mark to identify

and distinguish goods or services.” fd at 15 (requiring

evidence of any such lessening) (quoting 15 U.S.C. § 1127).

Although the FTDA clearly is designed to expand the

protection of famous marks, the Seventh Circuit's

—_

eel ——_ —s

6

interpretation of that statute will make it more, not less,

difficult to protect famous marks in the future.

I. THE SEVENTH CIRCUIT’S WEAKENING OF

PROTECTION FOR FAMOUS MARKS CON-

FLICTS WITH THE CONGRESSIONAL MAN-

DATE AND UNDERMINES THE VALUE OF

SUCH MARKS.

In the FTDA, Congress empowered the owners of famous

marks to enjoin the commercial use of a mark where such use

causes dilution of the mark’s distinctive quality.? 15 U.S.C.

§ 1125(c)(1). The Seventh Circuit construed Petitioner’s

claim as seeking to extend “antidilution law to forbid

commercial uses that accelerate the transition from

trademarks . . . to generic names”; and it concluded that doing

so would be inconsistent with “the public interest.” Pet. App.

8a-10a. The Seventh Circuit elaborated its unusual thesis that

the FTDA does not permit trademark owners to police their

marks to prevent their trademarks from becoming generic. /d

at 8a-9a. Instead, the court was of the view that there would

be a “social benefit” derived from adding famous marks “to

ordinary language.” Jd. at 9a-10a. The proposition that a

“social benefit” is gained when a famous brand is rendered

generic, however, conflicts with the law enacted by Congress,

and denies the owners of famous marks — as well as

consumers — the protections and benefits Congress intended.

As this Court recently noted, “[nJeither the absence of any

likelihood of confusion nor the absence of competition”

provides a defense to dilution, and the prohibitions against

dilution “are not motivated by an interest in protecting

consumers.” Moseley, No. 01-1015, slip op. at 10. Thus, the

Seventh Circuit mistakenly elevates a nebulous “public

interest,” Pet. App. at 10a, above the express rights Congress

? Damages are available for trademark dilution only to the extent the

unauthorized user “willfully” intends to trade on the owner’s reputation or

cause dilution to the famous mark. 15 U.S.C. § 1125(c)(2).

J

7

granted famous trademark owners. This conflicts with the

ee

teaching of Moseley that “‘the preservation of the uniqueness

of a trademark should constitute the only rational basis for its

protection.” Moseley, No. 01-1015, slip op. at 10 (quoting

Schechter, 7he Rational Basis of Trademark Protection, 40

Harv. L. Rev. 813, 831 (1927)).

The Seventh Circuit’s decision warrants review and

reversal because it undermines the very ability of the owner

of a famous mark to preserve the uniqueness of that mark by

enjoining an unauthorized, unrelated reseller from using the

famous mark as the reseller’s own business and domain name.

See Pet. App. at 10a. The ruling thereby materially weakens

the FTDA and precludes its intended use when there is a

“clear[] lessen[ing of] the capacity of the [trademark owner]

to distinguish its goods.” /d. at 55a.

A. Antidilution Law Protects The “Uniqueness” Of

Famous Marks.

Efforts to protect the investments of trademark holders

against dilution date back as far as 1927, as brand advertising

was beginning. Professor Frank Schechter argued then that

coined or unique trademarks should be protected from the

“gradual whittling away or dispersion of the identity and hold

upon the public mind.” Frank Schechter, The Rational Basis

of Trademark Protection, 40 Harv. L. Rev. 813, 825 (1927).

As this Court recognized in Moseley, adopting Schechter’s

seminal theory, was that the true injury against which

antidilution law protects is an attack upon ““the uniqueness of

a trademark.”” Moseley, No. 01-1015, slip op. at 10.

Famous marks are powerful tools to identify and inspire

confidence in products, both old and new, from the same

identifiable source. As Justice Frankfurter noted, “(t]he

protection of trade-marks is the law’s recognition of the

psychological function of symbols.” Mishawaka Rubber &

Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205

(1942). They achieve a “psychological grip” on consumers

8

that generates “loyalty and good will.” USTA Trademark

Review Comm’n, Report and Recommendations on the

United States Trademark System and the Lanham Act, 77

Trademark Rep. 375, 455 (1987) (“USTA Trademark

Review”), reprinted in Trademark Law Revision Act of 1987:

Hearing on S. 1883 Before the Subcomm. on Patents,

Copyrights, and Trademarks of the Senate Comm. on the

Judiciary, 96th Cong. 177 (1988) (“Trademark Hearing’).

As the USTA study recognized, while famous marks are

“enormously valuable” they are also “fragile assets,

susceptible to irreversible injury from promiscuous use.” See

id. at 455, reprinted in Trademark Hearing 177. This study

formed the modern scholarly basis for the FTDA and

synthesized the views of hundreds of trademark practitioners,

numerous eminent scholars and more than 50 organizations,

which included the United States and foreign governments.

See 134 Cong. Rec. $5868 (daily ed. May 13, 1988)

(statement of Sen. DeConcini); S. Rep. No. 100-515, at 2-3

(1988), reprinted in 1988 U.S.C.C.A.N. 5577, 5578-79.

The FTDA, adopted in 1996, is the direct descendent of the

1987 proposal of the USTA’s Trademark Review

Commission. After years of debate, the antidilution

recommendations of the Commission were embodied in the

FTDA, which enjoyed the support of the U.S. Patent and

Trademark Office, the Department of Commerce, and the

International Trademark Association. See 141 Cong. Rec.

$19312 (daily ed. Dec. 29, 1995) (statement of Sen. Leahy).

* Professor McCarthy has noted the usefulness of the legislative history

from the 1987 USTA Commission Report and the 1988 Senate Judiciary

Committee report in understanding the FTDA. See 4 J. Thomas

McCarthy, McCarthy on Trademarks and Unfair Competition § 24:87, at

24-142 (4th ed. 2001). The United States Trademark Association (USTA)

is now known as the International Trademark Association (INTA).

9

B. Congress Sought To Preclude “Free Riding” On

Famous Marks, Including On The Internet.

In adopting the FTDA, Congress did not seek-to equate

dilution with infringement, but rather to recognize an

independent protection that “applies when the unauthorized

use of a famous mark reduces the public’s perception that the

mark signifies something unique, singular, or particular.”

H.R. Rep. No. 104-374, at 3. The FTDA thus protects

famous marks from attempts of free riders “to trade upon the

goodwill and established renown of [the famous] marks.” /d.

the FTDA’s detailed criteria.‘

The FTDA’s criteria for distinguishing whether a mark is

sufficiently “distinctive and famous” to warrant antidilution

protection expressly envision that the value of a brand varies

directly with the amount of effort put into generating

awareness and recognition of the brand. The Seventh Circuit,

however, took the opposite approach: the more well known

the mark, the less it is entitled to protection from being

absorbed into common language.

The USTA Review Committee specifically considered and

rejected the policy concerns regarding _ potential

“monopolization of language” that are at the heart of the

“The FTDA requires consideration of the distinctiveness of the mark.

the extent of its use, the extent of the advertising of the mark, the

geographical coverage of the mark, the channels of trade in which it is

used, the nature of similar marks, and whether it is a registered mark. See

15 U.S.C. § 1125(c)(1).

SES eR oy ETE ae a

10

Seventh Circuit’s decision. USTA Trademark Review, supra,

at 457, reprinted in Trademark Hearing 179. As the

Committee noted, “[t]hird parties have an infinite number of

trademark choices available. Confining dilution protection to

famous trademarks will have little or no impact on other

businesses. All new entrants need to do is compete fairly

using marks which cause neither likelihood of confusion nor

dilution.” Jd.

Moreover, the FTDA was passed with a view to the precise

Internet free-riding that the Seventh Circuit did not find

worthy of meaningful protection. As Senator Leahy stated,

“this antidilution statute [the FTDA] can help stem the use of

deceptive Internet addresses taken by those who are choosing

marks that are associated with the products and reputations of

others.” 141 Cong. Rec. $19312 (daily ed. Dec. 29,1995)

(statement of Sen. Leahy). Indeed, globalization and the

Internet have heightened the value of a strong brand

identification to enable consumers around the world to

discern the source of products and services offered for sale.

As consumers now seek products from well beyond their

local markets, “having a strong brand that conjures up a

strong image with customers is essential.” See Thomas L.

Friedman, 7he Lexus and the Olive Tree 243 (2000).

The Seventh Circuit particularly failed to recognize the new

realities of the Internet. As was clear to the Sixth Circuit in

PACCAR, Inc. v. TeleScan Technologies, L.L.C., domain

names essentially function as trademarks and “can and do

communicate information as to the source or sponsor of the

web site.” 319 F.3d 243 (6th Cir. 2003), available at 2003

WL 244803, at *4; see also People for the Ethical Treatment

of Animcls v. Doughney, 263 F.3d 359, 366 (4th Cir. 2001).

As a result of the vast popularity of the Internet, consumers

expect to find a company on the Internet at a domain name

address comprised of the company’s name or mark. See

Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1327 (9th

Cir. 1998) (“We reject [the] premise that a domain name is

1]

nothing more than an address. A significant purpose of a

domain name is to identify the entity that owns the web

site.”).” In short, “domain names communicate information

as to source.” Brookfield Communications, Inc. v. West

Coast Entm’t Corp., 174 F.3d 1036, 1055, 1066 (9th Cir.

1999).

Thus, a company’s use of another party’s marks in her own

domain name creates uncertainty about who is affiliated with

whom, and undermines the actual value of the mark by

diverting the initial interest of the consumer away from the

trademarked goods and services of the owner of the famous

mark. This risk is not hypothetical. There is a significant, and

highly pernicious, phenomenon on the Internet where domain

names are registered in bad faith for the purpose of exploiting

famous trademarks and their associated goodwill in order to

divert Internet traffic to the registrants’ own websites. See

People for the Ethical Treatment of Animals, 263 F.3d at 367-

69.

Although the Seventh Circuit below acknowledges this

danger, Pet. App. 8a, its decision diminishes the ability of

mark holders to protect against it. Indeed, the Seventh

Circuit's approach could complicate what district courts have

viewed as a straightforward application of law. For example,

in General Motors Corp. v. E-Publications LLC, No. Civ. A.

01-72819, 2001 WL 1798648, at *3 (E.D. Mich. Nov. 26,

2001), the court prohibited the use of “Restore GM” and

“Restore GM Muscle” in the business name and domain

names of an unauthorized third party specializing in GM

parts, including on dilution grounds under the’ FTDA.

Similarly, in AT&T Corp. v. Direct Wired Domains, LLC, No.

* In Panavision, the Ninth Circuit stated: “A customer who is unsure

about a company’s domain name will often guess that the domain name is

also the company’s name. [A] domain name mirroring a corporate name

may be a valuable corporate asset, as it facilitates communication with a

customer base.” 141 F.3d at 1327 (alteration in original) (citation and

internal quotation marks omitted).

12

1:02-CV-1835-ODE (N.D. Ga. July 23, 2002), amicus AT&T

challenged, on FTDA and other grounds, the right of an

unauthorized reseller to use the Internet domain name <ATT-

card.com> to market prepaid AT&T phone cards. That case

resulted in the entry of a permanent injunction by consent.

The Seventh Circuit’s decision, however, runs counter to

these and many other examples, and it will make future

protection of famous marks on the Internet more difficult.

The law simply does not support such undercutting of the

rights of famous mark holders.

C. The Seventh Circuit Decision Undermines

Investment In Famous Marks Contrary To The

Intent Of Congress.

- The powerful statutory protection Congress provided for

famous marks is entirely commensurate with the staggering

size of the investment that business makes in such marks.

According to the August 2002, Business Week survey of the

Top 100 Brands, the top 10 brands alone were valued at a

total of more than $350 billion dollars. See 7he 1/00 Top

Brands, Bus. Wk., Aug. 5, 2002, at 95, 95-96.

The Seventh Circuit’s decision, however, would produce a

legal regime in which a trademark owner — unable to control

the operations of third partes — is powerless to prevent the

public from coming to associate the third party with the

famous mark. This approach attacks the source-identifying

power of famous marks, foments greater marketplace

uncertainty, imposes higher information transaction costs, and

renders advertising expenditures less effective. While the

opinion below contends that forbidding the respondent from

using “Beanies” in her “business name and advertising” is

like “forbidding a used car dealer who specializes in selling

Chevrolets to mention the name in his advertising,” Pet. App.

7a (emphasis added), the analogy fails. The Respondent here

has used Ty’s marks not just to identify products, but in the

very business name and Internet domain name by which she

holds herself out to the public.

13

Il. THE SEVENTH CIRCUIT TREATS TRADE-

MARK RIGHTS AS IF THEY WERE MONOPOLY

RIGHTS OF THE KIND ACCORDED COPY-

RIGHTS AND EXTENDS “FAIR USE” SAFE-

GUARDS BEYOND WHAT CONGRESS SPECI-

FIED.

The Seventh Circuit’s rationale misapprehends the

protections afforded under the FTDA by equating them with

the monopolistic or exclusionary rights provided by copyright

law. See Pet. App. 8a. These fears are unfounded and do

not apply to trademark rights. Trademark law simply does

not create monopoly rights.’ In Moseley, this Court

recognized that the law of trademarks is grounded in an

entirely different concern; it is part of a broader law of unfair

competition. Moseley, No. 01-1015, slip op. at 9. Moreover,

this Court recognized well prior to the Lanham Act’s

enactment in 1946 that: “In truth, a trademark confers no

monopoly whatever in a proper sense, but is merely a

convenient means for facilitating the protection of one’s

good-will in trade by placing a distinguishing mark or

symbol — a commercial signature — upon the merchandise or

the package ... .” United Drug Co. v. Theodore Rectanus

* Copyrights enjoy monopoly privileges that, while not as broad as

under patent law, see Eldred v. Ashcroft, 123 S. Ct. 769, 787 (2003), are

“intended to motivate the creative activity of authors and inventors by the -

provision of a special reward, and to allow the public access to the

products of their genius after the limited period of exclusive control has

expired.” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417,

429 (1984),

” Trademarks, unlike patents and copyrights, are not restricted by the

“limited Times” provision of the Constitution. U.S. Const. art. I, § 8, cl.

8, and are not subject to the same balancing of incentives that is

appropriate “[t]o promote the Progress of Science and useful Arts.” Jd.

See generally Eldred v. Ashcroft, 123 S. Ct. 769 (2003); see also Sony

Corp., 464 U.S. at 439 & n.19 (discussing “historic kinship” between

copyright and patent law and noting that this Court has “consistently

rejected the proposition that a similar kinship exists between copyright

law and trademark law”).

14

Co., 248 U.S. 90, 98 (1918). This remains true today. “As

other courts and commentators have observed, trademarks are

by their nature non-exclusionary. A trademark, unlike other

intellectual property rights, does not confer a legal monopoly

on any good or idea; it confers rights to a name only.” Clorox

Co. v. Sterling Winthrop, Inc., 117 F.3d 50, 56 (2d Cir. 1997).

And thus under trademark law a rose may go by another

name.

The radical regime forged by the court below is neither

consistent with law, nor even necessary to preserve the ability

of competitors and consumers to use language freely.

Trademark law already protects generic words from

acquisition or control; marks also become publicly available

if they are abandoned; and they are always available for fair

use.* To be sure, the FTDA does not permit “producers [to]

own their aftermarkets,” Pet. App. 8a, nonetheless and

contrary to the Seventh Circuit’s ruling, a central purpose of

the Act is to permit trademark owners to prevent the improper

use of their marks by others, including those who seek to

resell their goods or services.

A. Famous Marks Can Lose Their Protection After

Abandonment Or Upon Becoming Generic.

A primary. limitation on trademark protections is that a

mark may be abandoned or lost through non-use, uncontrolled

licensing or insufficient enforcement by the trademark owner,

or through use of the mark as 2 generic term by the public or

by the trademark owner itself.” Thus, for example, the public

-* Non-commercial and journalistic usage of famous marks is also not

actionable under the FTDA. 15 U.S.C. § 1125(c)(4\(B) &(C).

® See, e.g., Petro Stopping Ctrs., L.P. v. James River Petroleum, Inc.,

130 F.3d 88, 93-94 (4th Cir. 1997) (registered, “incontestable” marks

deemed weak in light of third-party use); 15 U.S.C. § 1127 (a mark may

be “abandoned” through the owner’s “acts of omission as well as

commission”), see also 15 U.S.C. §§ 1064(3) (registration may be

cancelled [a}t any time” if it has become the generic name for all or some

of the goods or services for which it is registered) and 1127 (a mark may

15

has an “inherent right to call a product or service by its

generic name,” U.S. Search, LLC v. U.S. Search.com, Inc.,

300 F.3d 517, 523 (4th Cir. 2002).

In contrast to the treatment of negligent trademark owners

who inadequately police the use of a mark, see, e.g., Amstar

Corp. v. Domino's Pizza, Inc:, 615 F.2d 252, 259-60 (Sth Cir.

1980), the law — at least before the decision below — rewards

owners of famous marks who are vigilant in monitoring and

deterring generic and unauthorized use. See, e.g., EJ. Du

Pont de Nemours & Co. v. Yoshida Int'l, Inc., 393 F. Supp.

502, 512 (E.D.N.Y. 1975) (“[S}trength is primarily a question

of degree . . . including an appraisal of the owner’s policing

efforts to ensure that whatever distinctiveness or exclusivity

has been achieved is not lost through neglect, inattention, or

consent to infringing uses.”). This clear mandate for policing

and investing in a mark is completely eviscerated by the

Seventh Circuit’s view that third parties are permitted to

hasten the “genericide” of a famous mark with impunity

while free riding on that very mark to promote their own

business identity. Whereas traditional genericism is deter-

mined by public use, the Seventh Circuit improperly allows

impairment of trademark rights at the hands of competitors

and unauthorized resellers.

B. Congress Stipulated A Narrow Range Of “Fair

Use” Rights Allowing Limited Third Party Use

Of Famous Marks.

The Seventh Circuit’s interest in providing for an expanded

range of words available for public use is already fully

addressed in the statute under the rubric of “fair use.” ”Fair

be “abandoned” when, inter alia, “any course of conduct of the owner,

including acts of omission as well as commission, causes the mark to

become the generic name for the goods or services on or in connection

with which it is used or otherwise to lose its significance as a mark”);

Ashley Furniture Indus., Inc. v. SanGiacomo NA. Ltd., 187 F.3d 363, 376 -

(4th Cir. 1999) (trade dress rights terminate if abandoned or if the trade

dress becomes generic through public usage).

16

use” includes unlicensed use of marks to describe or identify

the goods or services one offers for sale. “Classic fair use”

involves use by a third party of a descriptive “name, term, or

device .. . otherwise than as a mark . . . fairly and in good

faith only to describe the goods or services of [the defendant],

or their geographic origin.” 15 U.S.C. § 1115(b)(4). The

mark that is the subject of “fair use” is not used for its source-

identifying, or secondary meaning, sense, but merely to

describe the attributes or characteristics of a product or

service. See id.'°

“Nominative fair use” is also permitted. This entails use of

a mark in a trademark — source-identifying — sense for

comparative advertising or the bona fide resale of branded

goods or services. See Playboy Enters., Inc. v. Welles, 279

F.3d 796, 801 (9th Cir. 2002). For example, the FTDA

provides that “[flair use of a famous mark by another person

in comparative commercial advertising or promotion to

identify the competing goods or services of the owner of the

famous mark” is not actionable. 15 U.S.C. § 1125(c)(4). But

the parameters of nominative fair use are carefully

circumscribed: No more of the owner’s mark may be used

than is necessary, nor may it be used in any way to suggest

authorization, sponsorship or affiliation. See, e.g., PACCAR,

2003 WL 244803, at *10.

Under the doctrine of “fair use,” federal law provides that

the reseller of a product has the limited right fairly and in

good faith to inform consumers of the product that he or she

is selling, and indicate the brand of the product being re-sold.

10 See, e.g., Car-Freshener Corp. v. S.C. Johnson & Son, Inc., 70 F.3d

267, 269 (2d Cir. 1995) (“although trademark rights may be acquired in a

word or image with descriptive qualities, the acquisition of such rights

will not prevent others from using the word or image in its descriptive

sense, and not as a trademark”), 2 McCarthy, supra, § 11:45, at 11-79 (“A

ee

Seen . in the interest

of free competition.”).

17

See id. If the Seventh Circuit’s opinion were so limited,

Respondent would be able to identify and describe the

products she offers for sale without violating the FTDA. But

fair use rights cannot and do not permit use of the mark by a

third party as its own mark or name. The Seventh Circuit

improperly turned a limited statutory exception into the

controlling rule.

til. “PERCOLATION” IN THIS AREA IS PARTICU-

LARLY DESTRUCTIVE.

This Court often enjoys the luxury of being able to allow

issues to “percolate” among the courts of appeals in order to

ensure that each case heard by the Court properly frames a

particular question and that the issues will be aired fully for

the Court’s consideration. But the Court routinely hears cases

even if the precise issue has not been considered by more than

one court of appeals. See, e.g., Pharmaceutical Research &

Mfrs. of Am. v. Concannon, No. 01-188 (U.S. June 28, 2002)

(order granting petition for a writ of certiorari); Pegram v.

Herdrich, 530 U.S. 211, 217-18 (2000). This is because the

adverse consequences of delay outweigh the marginal role of

“percolation.” This is such a case. The question presented in

the Petition should not remain unresolved. Its rationale is

inconsistent with the rulings of numerous circuit courts, see

Pet. 7-15, and the case is ripe for this Court’s review now.

Famous marks, by the very nature of their fame, operate

without respect to the boundaries of the circuit courts, and the

dilution of a mark in one circuit erodes the distinctiveness of

that same mark in other circuits. This is especially true, of

course, with famous marks conveyed on Internet websites and

domain names.

Congress adopted the FTDA explicitly because it saw state

variance in the protections afforded to trademarks causing

“unpredictable and inadequate results for the trademark

owner,” and thereby impeding productive investment and

creating unfounded danger to multi-billion dollar assets. See

18

H.R. Rep. No. 104-374, at 3. The FTDA thus expressly

promoted “uniformity and consistency” in the protection of

famous marks, because the opposite “simply encourages

forum-shopping and increases the amount of litigation.” Jd.

at 4. Indeed, for more than a century, this Court has recog-

nized that trademarks “not only admit, but in order to [ensure]

their efficiency require, uniformity of regulation.” Jn re

Trade-Mark Cases, 100 U.S. 82, 87 (1879). The unique

theory of the Seventh Circuit, threatens to undo the work of

Congress, which this Court and other circuit courts of appeals

have preserved.

CONCLUSION

The petition for a writ of certiorari to the United States

Seventh Circuit for the Seventh Circuit should be granted.

Respectfully submitted,

LAURA A. KASTER CARTER G. PHILLIPS

FRANK L. POLITANO ALAN CHARLES RAUL*

MICHELE A. FARBER JOSEPH V. JEST

AT&T Corp. EDWARD R. MCNICHOLAS

One AT&T Way ; SIDLEY AUSTIN BROWN &

Bedminster, N.J. 07921 WOOD LLP

(908) 532-1860 1501 K Street, N.W.

- Washington, D.C. 20005

(202) 736-8000

Counsel for Amicus Curiae

March 6, 2003 * Counsel of Record