THE SENSE AND SENSIBILITY IN THE ANTI-DILUTION RIGHT

Date01 December 2012
Published date01 December 2012

Modern trade mark law is no longer just about preventing confusion in the marketplace. It is also about preventing the “dilution” of the distinctiveness or reputation of a trade mark. Critics of this anti-dilution right has slammed it for its lack of juridical basis and for its very amorphous scope, raising the concern that this uncertainty can have a chilling effect on fair and free competition in business. For better or worse, the anti-dilution right is now part of the trade mark landscape in Singapore. The aim of this article is to inject some certainty into the dilution analysis.

I. Introduction

1 Once upon a time, trade mark law was a relatively uncomplicated area. There was one and only one aim in trade mark law, namely, to prevent confusion and deception in the marketplace. Today, this aim remains as valid as ever, and just two years ago, the Court of Appeal reminded us of this when it said:1

We ought not to lose sight of the fact that a trade mark law is aimed at preventing confusion and deception, [that is], to ensure that consumers do not confuse the trade mark source of one product with another.

2 In the common law action for passing off, this aim manifests itself in the second element of “misrepresentation” in the cause of action.2 In the statutory or registration system, this aim is considered so fundamental that the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS Agreement”) gave expression to it in Article 16(1), which requires all World Trade Organization (“WTO”) member countries to protect a registered trade mark against unauthorised use of the mark which is likely to cause confusion.3

Confusion as a notion is something familiar to even a layperson, and within the legal circle we all know that the confusion inquiry is largely a factual one,4 one that is governed by well-established factors such as the degree of similarity between the plaintiff's mark (“senior mark”) and the defendant's mark (“junior mark”) and the proximity of the goods or services in question.5 Further, the justification of the law preventing confusion is uncontroversial. There is the element of consumer protection, as well as the need to ensure fair play amongst traders. When the junior mark is mistaken by the consumer for the senior mark, and as a result, sales intended for the plaintiff are diverted to the defendant, this must qualify as unfair competition, something to be stopped. Indeed, this argument is supported by international law. Article 10bis of the Paris Convention for the Protection of Industrial Property (“Paris Convention”), which obliges members of the Paris Union to give effective protection against unfair competition, deems any act of “such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor” to be an act of unfair competition.6 Another justification comes from an economic analysis. William Landes and Richard Posner explained the economic value of a trade mark:7

The value of a trademark to the firm that uses it to designate its brand is the saving in consumers' search costs made possible by the information that the trademark conveys or embodies about the quality of the firm's brand. The brand's reputation for quality and thus the trademark's value depend on the firm's expenditures on product quality, service, advertising, and so on. Once the reputation is created, the firm will obtain greater profits because repeat purchases and word-of-mouth references will add to sales and because consumers are willing to pay a higher price in exchange for a savings in search costs and an assurance of consistent quality.

3 In other words, a trade mark, in its role as badge of origin or quality, provides the consumer with an efficient way of locating the goods or services he wants and at the same time provides the firm with the incentive to invest in building, maintaining or improving the quality of its goods or services. The presence in the marketplace of a junior mark that is confusingly similar to the senior mark destroys the badge-of-origin and badge-of-quality functions of the senior mark, and hence the use of this junior mark must be disallowed.

4 Where then does the complication in trade mark law lie today, and why? In some countries, a special category of trade mark proprietors – those whose marks enjoy a certain level of reputation – now have a right to prevent “dilution” of their trade mark, and dilution can occur in the absence of confusion. What the anti-dilution law protects is the “selling power” of the trade mark. This was the thesis of Frank Schechter, the American lawyer who is often credited as the father of the anti-dilution right. In 1927, he published an article in the Harvard Law Review, advocating that trade mark law should stop unauthorised use of iconic marks on non-competing goods or services – for example, if KODAK was used for bath tubs and cakes – even when the purchasing public would not be misled into thinking that these goods originated from the proprietor of the iconic mark. Schechter argued that, even in the absence of confusion, something else belonging to the proprietor of the iconic mark was harmed. This was the “selling power”8 of the iconic mark, that is, the mark's “psychological hold upon the public, not merely upon the merit of the goods upon which it is used, but equally upon its own uniqueness and singularity”.9 If it is unclear what exactly it is that the anti-dilution right seeks to protect, perhaps the explanations from the European Court of Justice (“ECJ”) will help. According to this court, the anti-dilution right protects the “advertising” and “investment” functions of a trade mark.10 The trade mark performs the advertising function when it is used by its proprietor “for advertising purposes designed to inform and persuade consumers”,11 and the investment function when it is used by its proprietor to “acquire or preserve a reputation capable of attracting consumers and retaining their loyalty”.12 If the reader is still grappling with the aim of the anti-dilution right, it should be obvious by now where the complication in modern trade mark law lies.

5 The only certainty about the anti-dilution right is that the absence or presence of confusion is an irrelevant consideration in the dilution inquiry. Therefore the court can find that the defendant's mark causes both confusion and dilution, or that the defendant's mark causes no confusion but dilution, or that the defendant's mark causes neither confusion nor dilution. Aside from the established principle that dilution is not confusion, there is complaint that not much else is clear about the concept of dilution.13 Elusiveness cannot be ideal in a law that regulates business activities. In particular, from the competition point of view, too much uncertainty makes it more difficult for the small—and medium-sized entities (“SMEs”) to break into a sector that is dominated by a very well-known name. SMEs are more likely to back down in the face of dilution claims: if their trade mark lawyer cannot advise with a reasonable degree of certainty whether the dilution claim is valid or not, why would they take the risk and battle in court with the “big boys” who have far deeper pockets? The ambiguity in the scope of anti-dilution right and the potential chilling effect it has on free competition are the reasons why it has many critics.14

6 For better or worse, the anti-dilution right was introduced into the Singapore Trade Marks Act15 in 2004. This article attempts to delineate the boundaries of this right, and in this way, to inject some certainty into the dilution inquiry. The structure of this article is as follows. Part II sets out the background information to the anti-dilution right. It traces the origins of this right, its emergence in the civil law countries and the two major common law countries, the US and the UK, as well as the reasons for its adoption in Singapore. There are three prohibited acts in the anti-dilution right in Singapore: causing dilution by “blurring” in an unfair manner; causing dilution by “tarnishing” in

an unfair manner; and “taking unfair advantage”. Part III looks at the first two prohibited acts, while Part IV looks at the third prohibited act.
II. Background to the anti-dilution right

A. The origins of the anti-dilution right

7 It has been mentioned that Frank Schechter is the father of the anti-dilution right. Other than authoring that influential article in 1927,16 Schechter even appeared in 1932 before a US congressional committee to urge the enactment of an anti-dilution law that he had drafted. He explained the purpose of the anti-dilution right:17

I think there is not only the question of deception of the public, but I believe from the reasoning of this German court I have quoted, the person who has the trade-mark should be able to prevent other people from vitiating the originality, the uniqueness of that mark. If you take Rolls Royce – for instance, if you allow Rolls Royce restaurants and Rolls Royce cafeterias, and Rolls Royce pants, and Rolls Royce candy, in ten years you will not have the Rolls Royce mark any more. That is the point.

8 The US Congress, however, did not grant Schechter his wish at that time. It was only much later that the Federal Trademark Dilution Act of 1995 was enacted, introducing the anti-dilution provision into the US trade mark legislation, the Lanham Act.18

9 There are three points to note about Schechter's testimony quoted above. First, the harm to the ROLLS-ROYCE mark that was envisaged by Schechter in his illustration has acquired a more specific label, namely, dilution by “blurring”. Second, the ROLLS-ROYCE mark typified the special category of trade marks that Schechter had in mind when devising this new right. ROLLS-ROYCE is an iconic mark in the sense that its reputation has reached a level where one...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT