Trade Mark Dilution in the UK and EU Law： A Critical Analysis of Its Social and Legal Effects on the Protection of Famous Brand

鄭悅迪

Introduction：The doctrine of trade mark dilution can be explained as a special form of protection for the well-known trade mark when the circumstance is eligible for certain conditions. The exception is that its relative ground for refusing registration and infringement does not require the likelihood of confusion. In the European Union （EU）， to protect the distinctiveness and reputation for a trade mark is deemed as the object and purpose of anti-dilution law. And the UK Trade Mark Act continues and inherits the EU trade mark legal system. Furthermore， the rationale of the concept of dilution is derived form the function of trade mark in the light of Schechters theory， where the uniqueness or singularity of the trade mark was highlighted via introducing the advertising or communication function.

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Despite Schechter holds that such protection for the uniqueness or singularity should be extended to both related and non-related goods， the wording of EU Directive seems only to provide protection on the dissimilar goods or services. While the interpretation of the European Court of Justice （ECJ） expands its literal meaning to incorporate the identical or similar goods or services， however， which constantly suffers from criticisms.

Moreover， there are nearly four significant factors to judge the use of similar marks as dilution： the earlier trade mark with a reputation， three types of injury， establishing a link， as well as without due cause. The injury is made up with tarnishment， blurring and ‘taking unfair advantage， among which the last one is the main distinction from the United States legislation. It is of danger that excessive loose standards of unfair advantage would cause monopoly and unfair competition. On account of the puzzling theoretical foundation and judicial interpretations， it inevitably gives rise to profound effects on the society and the law， which brings not only the positive side， but also the negative side to the famous brand.

In this paper， the rationale of the notion of trade mark dilution will be illustrated in the first section with a historical and social perspective. Then the constructive elements of dilution would be critically analyzed in the second section. In particular， key issues in dispute also will be presented and discussed that whether the understanding and interpretation is effective； what are the challenges for parities， and the court to apply correlative provisions. In the last section， the social and legal effects on the protection of renowned brand will be respectively assessed， in which the social influences will focus on the consumers trust， the quality of products and market competition； the legal effects will consist of enforcement， burden of proof， and the well-known Community trade mark.

The Rationale of Trade Mark Dilution

The trademark dilution that the strength and ability of a well-known mark to distinguish goods or services is weakened involves similar or even dissimilar products by market subjects. Evidently， dilution emerges from business activities as to famous marks， which now are widely acknowledged as a mark with a certain degree of reputation or recognition. Historically， despite trademark proprietors are able to directly control over the application of their trademarks， they have fairly less control over the usage by other firms. Since ‘earlier trade marks and ‘earlier rights arose， the demand of anti-dilution that the protection of famous marks covers not only their ‘origin function， but also other abstract assets has grown.

The academic writing ‘The Rational Basis of Trademark Protection by Frank Schechter seems to be the first publication attracting public attention to the dilution. Transcending traditional views on the function of marks， he holds that they play a role in the promotion of consumption by virtue of consumers past experiences and their distinctiveness. Therefore， such marks deserve being protected within a broader realm containing related and non-related goods and services.

However， a criticism to Schechters theory is that the quality-indicating function of a trade mark sometimes only can be achieved by the enforcement of law. In other words， without the strict protection by law， such function of the mark would disappear. Here its standard ought to be factual rather than the function a trade mark should possess. Hence， it is imperative for law makers to take the reasonable extent of protection into account in terms of anti-dilution， particularly an interest balance， between the owners of famous marks and other market participants， needs to be maintained for fair competition.

Although trademark dilution has been recognized by most jurisdictions， its specific definition， elements and legal effects vary from jurisdiction to jurisdiction. The two major representatives among them are the EU and the US. In general， the dilution could be divided into three forms， namely blurring， tarnishment as well as free-riding， whereas the last one is the peculiar provision in the EU that the use taking unfair advantage of the mark is prohibited. Currently， the main legislation concerned with trademark dilution in the EU includes the Trade Marks Directive and the Community Trade Mark Regulation. Moreover， the UK Trade Marks Act 1994 provides the rules of anti-dilution， which transposes from the EU legislation to a large extent. Of course， the EU Directive also leaves a room for national authority to select the form and methods of regulation， such as the domestic procedural rules in relation to the test of likelihood of confusion.

Legal Provisions regarding with Trade Mark Dilution in the EU and UK regime

The anti-dilution laws in the EU mainly refer to Articles 4 （4）（a） and 5 （2） of Trade Mark Directive， however， in which the word ‘dilution dose not arise at all. To be specific， the Article 4 （4）（a） provides that ‘if the use of the later trade mark without due cause would take unfair advantage or be detrimental to， the distinctive character or the repute of the earlier trade mark， it will not be registered， or be liable to be declared invalid， notwithstanding the goods or services it symbolizes are not similar to those for the registered earlier trade mark with a reputation. Here the relationship between the conducts of taking unfair advantage and detriment is alternative so that it is unnecessary for the proprietor of well-known trade mark to prove the coexistence.

Besides， Article 5 （2） stipulates that the right is entitled to the proprietor of the trade mark with a reputation to prevent any third party using identical or similar sign without consent， where the language is as same as the Article 4 （4）（a） mentioned above to define infringement action. While， in practice， is appears that the ECJ rarely applies the word ‘dilution， and even its theoretical， historical and logical foundations， but in the Adidas case. In that case， the essence of ‘dilution was recognized as ‘detriment to the distinctive character of a trade mark. Probably owing to the absence of a uniformed definition and comprehensive understanding， there may be some qualifications to the pronounced provisions， and case law.

a. The Coverage of Protection for Registered Trade Marks with a Reputation

The case Davidoff & Cie SA v Gofkid has brought a fierce debate on the scope of protection for the well-known trade marks. In other words， whether the Article 4 （4）（a） and 5 （2） of the Directive is able to encompass cases that the later mark or sign is to be used， or has been used to the similar or identical goods as those for the registered trade mark. The answer given by the ECJ was positive， which means Articles 4 （4） （a） and 5 （2） are available to the circumstances， including not only dissimilar， but also similar or identical goods and services.

Its reasoning was that the scope of protection provided by Article 5 （2） for a well-known trade mark should be stronger than that under Article 5 （1） highlighting the likelihood of confusion. Adversely， if the range of subject is narrowed， then the extent of protection will become weaker in essence. Following that， the Sections 5 （3） and 10 （3） in UK Trade Marks Act 1994 have been amended to eliminate the ambiguity on wording， whereas nor has the EU Directive， even without a consolidated guidance.

The literal interpretation of Article 5 （2） seems not to include applications on the identical or similar goods or services， however， whose intrinsic characteristic broadly accepted is no requirement on a confusing level of similarity. In this circumstance， if the proprietor at issue only could recourse to 5 （1） （b）， then there is no room to reflect such superiority， since it is not impossible for the public to confuse an identical or similar sign used on similar goods with the trade mark with a reputation. From this perspective， the ruling of ECJ is solid.

Whist the foundation of trade mark dilution， which also plays a key role in this reasoning， is still controversial. The doctrine of trade mark dilution which is almost amount to confirming the monopoly status of well-known trade marks， ought to be imposed a reasonable restriction， otherwise the fair market competition is likely to be jeopardized. As Cornish states， ‘What matters is that “dilution” . . . should be prevented only in cases where there really is sufficient cause for interfering with the freedom of all traders to promote their goods and services as best they can.

b. Trade Mark with a Reputation

One of the conditions stipulated in the EU Directive and the UK Act is that the trade mark must have a reputation， which has been explained in General Motors Crop v Yplon SA that ‘it was known by a significant part of the public concerned by the product or services covered by that mark. Yet， it is tough to make sure what is the extent satisfying ‘a(chǎn) significant part of the public， in particular taking a series of factors into account， such as the market share， the intensity， geographical extent， duration of its use， and the magnitude of investment for promotion.

At the same time， the public is bound to ‘relevant public who is related with the product or services. So questions arise that what groups are qualified to ‘relevant public， namely whether the potential consumers should be incorporated， or for the global famous brands， like Coco-cola， Adidas， whether the public refers to the world. These still lack an explicit norm to have an impact on the burden of proof.

c. Establishing a Link

Turing to a link between the well-known trade mark and the defendant sign， the reputation and distinctive character of the trade mark are the crucial elements to assess it. That is to say， a link has been constituted if the sign calls the relevant public to mind the trade mark with a reputation. However， this criterion more relies on subjective mental activities of consumers， which challenges to the forms of evidence.

Normally， a survey would be adopted， whereas it is quite expensive as well as unreliable， or even worse than useless to result in unrecoverable costs. According to the rational basis of the doctrine of anti-dilution， to preserve the uniqueness of a trademark， it cannot be denied that the existence of a link by itself is not sufficient. Plus， either an actual injury or a serious likelihood of potential future injury must be proved.

d. Types of Injury Required

（1） Taking Unfair Advantage of the Earlier Trade Mark

The notion of ‘unfair advantage is usually connected with ‘free-riding， by which the owner of the later mark attempts to utilize the goodwill of earlier trade mark to save investment in promotion and publicity for himself. Indeed， for a trade mark with reputation， the risk of ‘free-riding by rising marks is more serious. Nonetheless， the definitions of ‘unfair advantage and ‘free-riding have long been suspected and debated， which seems to be constantly in the endless loop that a factor without detailed interpretation would be introduced into a new definition.

For instance， in LOreal v Bellure， the Court of Appeal held that the content of ‘unfair advantage must cover some additional element which gives rise to an actual harm to the earlier trade mark， or its reputation. Conversely， the ECJ was opposed to the necessity of the further element， who argued the significant factor to constitute ‘taking unfair advantage is the advantage acquired by the unauthorized user. Thus， the understanding of ‘unfair advantage depends upon the attitude towards the conduct of ‘free-riding to a large extent. It is true that conferring property rights to one group signifies limitations on others freedom， where if that is justified.

Some scholars who consent to the argument of the ECJ， as it is beneficial to social welfare. However， as Andrew Griffiths states， the presence of this type of injury is likely to make tribunals prefer a sense of fairness on the basis of private interests of well-known trade mark proprietors， instead of social welfare. In this vein， the radical target of modern intellectual property law to maintain the equilibrium of interests between the proprietor and the public is to be ruined.

Besides， within Articles 4 （4）（a） and 5 （2） of the EU Directive， and Sections 5 （3） and 10 （3） of the UK Act， the relationship of the three types of injury should be paralleling in line with the expression structures of these provisions， not the action of ‘taking unfair advantage overmatch the other two. Hence， the requirements of ‘unfair advantage is not capable of differentiating form others where the fact or risk of damage is obligatory. Similarly， the Court of Appeal doubted that the unfair advantage test implemented by the court in Mango Sport v Diknak solely focused on ‘a(chǎn)dvantage， but ignored the qualifier ‘unfair.

（2） Tarnishment

The nature of tarnishment is detriment to the reputation of a trade mark， which subjects to the provisions mentioned above ‘…the use of the later mark without due cause would...or be detrimental to…or the repute of the earlier trade mark. The consequence of tarnishment as the ECJ interpreted is the reduction of its power of attraction. In this regard， the goods or services covered by the later mark ‘ possess a characteristic or a quality which is liable to have a negative impact on the image of the mark. However， it is devoid of a clear reference in respect with the issue that ‘what is a negative impact， and ‘to what extent it impacts upon the well-known trade mark.

Concluded from a variety of case law in the UK， the judgment that whether the third partys use leads to a negative impact might vary form product to product. The type of goods manufactured by the defendant， their qualities， and other factors like that would be considered by the court. Logically， if the goods or service are closely related with life health of the public， there will be a worse detriment to the reputation of the renowned trade mark. Likewise， the more inferior the quality of goods is， the larger impact it has. For example， it would be refused to register or banned that a sign which is identical or similar to a mark with a reputation is employed in association with alcohol， condoms， or poor quality， ineffective， or inferior goods.

Based on the viewpoint of Katya Assaf， the outcome that whether or not the tarnishement occurs is determined by the following factors： ‘（i） the role of the trade mark in the conveyed message； （ii） the nature of the conveyed message； （iii） the likelihood of consumer confusion. Evidently， the conveyed message belongs to the scope of social culture， which exists realistically， but is too abstract to evaluate. Moreover， the consumer who is likely to be confused refers to the ‘a(chǎn)verage consumer who is ‘reasonably well informed and reasonably observant and circumspect， not ‘the careless or stupid.

（3） Blurring

It is submitted that blurring is ‘the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark or name by its use on non-competing good， which has been described as ‘detriment to the distinctive character of the mark. While this concept is unequipped to resolve some fundamental issues in the fields of both theory and practice. Initially， Bently and Sherman suggest that if there is no tarnishment or confusion， the factual or verifiable damage will not emerge.

Yet， in accordance with corresponding clauses of the EU Directives and UK Act， the likelihood of confusion is not required， on the contrary， the present injury， or the risk of future injury is indispensable. Here the legal provisions conflict with the academic argument， or even the practice. Only if the earlier trade mark has a reputation covering a limited category of goods， the detriment to distinctiveness may occur.

Secondly， in the case Julius Samann Ltd， H Young （Operations） Ltd v Tetrosyl Ltd， another question that whether the sign of tree mark used by the Tetrosyl for the similar products as Samann would be detrimental to the distinctive character of the registered mark. Under such context， the confusion for the consumer is not the distinctiveness， but the origin. While as Barton Beebe illustrates， the distinctiveness of a trade mark can be divided into two forms， namely the source distinctiveness and differential distinctiveness. Their relation could be defined as： ‘A mark's differential distinctiveness from other trademarks facilitates its distinctiveness of source. Even though a third party use a similar sign as a prestige mark in connection with similar goods， the extent of distinctiveness， or the differential distinctiveness also can be assumed from the quality of products and other traditional features， and then the source distinctiveness will be reinforced.

E. Without Due Cause

The lase element of trade mark dilution formulated in the EU and UK regimes is that those three types of illegal conducts discussed above are without due cause. When the court proceeds a test that if a due cause exists， they should commence on the purpose of anti-dilution law which is to protect the value and goodwill of the trade mark with a reputation from being unfairly taken advantage of， or detriment. Nevertheless， the purpose of anti-dilution is concerned with the function of trade mark， on which scholars still cannot reach a consensus. This factor seems like the final defense to protect a well-known trade mark， where it serves to demarcate the boundaries between fair and unfair competition.

Social Effects on the Protection of Famous Brand

The ruling of L'Ore?al v. Bellure has shown that the brands image is becoming increasingly pivotal in the EU trade mark law， which now is even protected without any damage to the well-known mark. In order to make sense of the effects of anti-dilution law on the protection of famous brand， firstly the relationship between the trade mark and the brand must be clarified. As Luke McDonagh points out， the concept of brand， including the trade mark， as well as a number of signified meanings and associations， is wider than that of trade mark. Furthermore， the English law dose not protect all elements of the brand， which currently just concentrates on the trade mark， the goodwill， the use of certain words， sounds， and images， and industrial designs and so forth.

（1） Positive Influences

The anti-dilution law in the EU and UK seems to grant the proprietor of a trade mark with reputation privilege to competitors and consumers. It can be seen from the case law that the interpretations of some vital factors constituting trade mark dilution obviously deflect to the owner of renowned trade mark. For example， in L'Ore?al v. Bellure， the notion of ‘unfair advantage has been treated as no requirement of factual detriments or the likelihood of detriments within it.

On one hand， this shift would absolutely bring convenience for the proprietor of a trade mark with reputation， since they no longer assume the burden to prove the damage or the risk of damage. On the whole， such evidences are costly and difficultly gained. On the other hand， by this way， the leading status of famous brand will be entrenched. For the reason that why the owner of famed trade mark is willing of a broad protection is they are impelled by economic interests. To be clear， the more distinctiveness of the trade mark means mounting consumer groups and market share. Under present case law， the competitors of famous brand have been cracked down via the stringent interpretation of legal provisions.

For the user of a sign which is similar to a trade mark with reputation， it is also a method to promote innovation to achieve themselves distinctiveness and profits， other than riding on the coat-tails of the mark. Moreover， the relatively extensive protection for the proprietor of well-known trade mark will strength consumers confidence through prohibiting free riding， and passing off with poor quality of products. Only then the economic theory that the output and sales are in proportion to input could be realized.

（2） Negative Consequences

As Fabio Angelini alleges， ‘the possession of a reputation is not， per se， a passport to enforcement. If there is no confusion for consumers and proof showing damage and risk， why consumers can not enjoy the product or services whose quality is equivalent， while price is much cheaper to those with a famous trade mark. Starting form this point， the excessive protection for well-known trade mark is an inappropriate measure to deprive consumers choices. Meanwhile， this legal mechanism possibly makes the corporation with a famous brand lose the awareness of competition， even be short of impetus to improve their products. Form the long-term development， it is harmful to the image and value of famous brand.

Additionally， the ‘economic change that the economic behavious of the average consumers of the goods or services with well-known trade mark has been negatively influenced， is frequently requested as the objective evidence to establish dilution， even if it cannot be tracked in the EU Directive， or the UK Act. Many legal advisers as the potential owner of a trade mark in dilution cases even would complain the difficulties to undertake this burden of proof， let alone to businessmen and enterprises who are not good at legal issues at all. In the course， it may reduce the investment capacity of proprietor of the earlier trade mark to enhance brand image， and products or services themselves， plus absents a consideration for consumers.

Theoretically， the realm of protection for well-known trade marks is confined to registered trade marks， which differs from the Paris Convention and TRIPS agreement that a particular protection is provided for a well-known mark in countries where it is not registered. The EU and UK anti-dilution law omits the possibility that a famous mark has not been registered due to various reasons， such as the history of the brand， despite it might take up the quite tinny minority.

It is noted that the value of famous brand predominantly embodies in its advertising function， by which the origin of relative goods or services will be demonstrated. In the EU and UK， the state that the court tends to adopt the poles of restricted or extended protection is so vague that the claimant may be confused how to collect evidences to protect themselves. For instance， the decisions of ECJ in Intel and LOreal are totally opposite. However， Cornish proposes that the the function of investment or advertising is also worth protecting， even under the circumstances without misappropriation resulting form misrepresentations of origin or quality. Therefore， this matter remains unresolved， as it is formidable to bridge the gap between thoughts of individuals about market and promotion.

Legal Effects on the Protection of Famous Brand

（1） The Enforcement of the EU Trade Mark Directive

Turing to the legal effect of anti-dilution law on famous brand protection， in the first place， it is contested by Member States that whether the broaden the protection for the trade mark with a reputation to identical or similar goods or services is optional， or mandatory. Actually， it concerns the enforcement of the EU Trade Mark Directive. However， in the case Adidas Salomon v FitnessWorld， the ECJ has made it clear that once a Member State decided to turn the optional provisions of the Trade Mark Directive into domestic laws， it is obligatory for the Member State to expand the protection scope including identical or similar goods or services. Surely， in respite of the contrary of the wording， this measure is conducive to boost the compulsory force of law to protect famous brand by the unified right of judicial interpretation within the region of EU.

In contrast， the ruling is still criticized by virtue of two causes. To begin with， regardless of the literal meaning of the Directive， it has striped the independent right of Member States to decide the protection scope in specific cases， however， where the extent of the reputation for a trade mark， in particular for the national trade mark， is most precisely grasped by individual nations. Next， as Thomas McCarthy argues， this decision by the ECJ appears to confuse the doctrine of dilution with that of confusion. The anti-dilution law is designed to the specialized and extraordinary situations that the traditional confusion test， even an expansive version， is not available. Within the rules as to the likely confusion， the protection for a prestigious trade mark in cases of the use of similar mark for competitive goods or services would not weaken.

（2） The Burden of Proof

In the second place， the burden of proof challenges both the plaintiff who possesses a famous brand and the defendant during the process of ligation as to dilution. For the owner of the trade mark with a reputation， he must provide sufficient evidences as the composition elements listed above to prove that the defendant has committed a trade mark dilution. In fact， the difficulties for the plaintiff mostly manifest in the assignments to prove the trade mark with a reputation， and one of the three types of injuries. Unfortunately， the interpretations and standards of these concepts are still not unanimous such that the proprietor of famous mark is unlikely to be directed and guided by an authoritative response in their preparatory works.

For the defendant， one opportunity for him to justify the use of the trade mark is that he has a cue cause. For example， the purpose of the use is to advertise lawful business activities， like providing services to repair second-hand cars. Although the use of the trade mark might take unfair advantage， the court did not sustain the importance of this issue that if the defendant acquire any benefit. As the court analyzed， the issue is that the extent to which the defendant is permitted to describe the essence of the service， whereas the consideration of unfair advantage also cannot be ignored to meet the designing motivation of anti-dilution law.

It is advocated by the ECJ that the global assessment embracing all relevant factors should be carried out to judge the existence of a link. The global assessment would exert a heavy pressure on the owner of the famous mark. To match the proof related to the existence of a link， taking unfair advantage， or the detriment needs to be assessed globally too， then an entire chain of evidences would be generated. Otherwise if there is a link ascertained by the global assessment， it is unable to guarantee the existence of the detriment， or unfair advantage.

（3） The Protection for Community Trade Mark

The Articles 8 （5） and 9 （1）（c） of the EU Community Trade Mark Regulation stipulate the anti-dilution provisions as similar as the EU Trade Mark Directive and the UK Trade Mark Act. However， they still slightly differentiate from each other in several facets， among which some are favorable to the protection of famous brand， while others set more barriers.

In positive aspects， under the Community Trade Mark Regulation， each Member State must provide a protection the trade mark with a reputation form diluting where there is no choice for states. These corresponding provisions in the Directive are optional. It follows that the protection of renowned marks could be built up in cross-border trade mark disputes via the legal compulsory force. As the enactment of the Community Trade Mark Regulation， compared with the earlier national trade mark， the earlier Community trade mark with a reputation can release the burden of proof to show that the use of later Community mark would take unfair advantage， or be detrimental to its distinctiveness， or reputation.

In opposite aspects， despite the reference to decide if the famous Community trade mark has been diluted is the Article 9 （1） of the Regulation， the remedies for dilution should have recourse to domestic law in which the action has been triggered. Owing to the optional provisions of the EU Trade Mark Directive， the national laws within Member States are more or less different. For a famous brand in the EU， the application of a Community trade mark serves as a powerful weapon to remain its dominant position， but without harmonious remedies， the function and strength of a Community trade mark will be lessened.

Conclusion

To sum up， form the foregoing analysis， the issue of trade mark dilution is one of the most disputable areas within the domain of intellectual property law. This controversy can be traced back to the function of trade mark， namely whether the advanced function referring to the advertising or communication function should be respected and protected. No matter the extent to which such function is offered protection， for the famous brand， its value and brand effect in particular depend on the high-level function with the diversified types of consuming or transaction methods， such as the rising e-commerce.

Although the EU and UK legal systems do not clearly put forward the concept of trade mark dilution， it is approved in the main that the corresponding provisions has formulated analogous anti-dilution content， like Articles 4 （4）（a） and 5 （2） of the EU Trade Mark Directive. Within the EU and UK trade mark law， the notion of dilution should be comprised of approximately four major elements， including the registered earlier trade mark with a reputation， the establishment of a link， three forms of injury， and without due cause. Insight the relative case law， each of these elements still remains ambiguous， where even the cognition and attitude of the court are not yet consistent. Moreover， taking unfair advantage form the earlier well-known trade mark， as one kind of injury， is both an innovation and a difficulty to measure and assess in the EU.

Notably， the anti-dilution law in the EU and UK has brought an array of social and legal effects on the protection of famous brand， in which there are advantages and also disadvantages. The social effect is closely correlated to the trust of consumers， market competition and passing off. The doctrine of dilution as a special protection for the famed trade mark， is definitely on the condition that provided others interests would be sacrificed， like the competitors of the owner of the trade mark with a reputation. Its legal effect concerns the enforcement in the EU territory， the burden of proof attributed to the proprietor of the famous mark， and the protection for the prestigious Community trade mark.

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