The U.S. Court of Appeals (7th Circuit) recently vacated an injunction against Ruth Perryman, which prohibited her from using the term "BEANIE" or "BEANIES" or any colorable imitation. Ty Inc., the manufacturer of Beanie Babies brought the suit for trademark infringement against Perryman who sells second-hand beanbag stuffed animals - including Ty's Beanie Babies – on her Web site (http://www.bargainbeanies.com). The suit was based on the U.S. federal anti-dilution statute, 15 U.S.C. § 1125(c) which protects "famous" marks in providing, in part, that "[t]he owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark ..." Posner J. opined that, with respect to this case, the term "dilution" included three possible interpretations, namely:
  • 1. a concern of rising consumer search costs as a result of a trademark becoming associated with a variety of products;
  • 2. trademark "tarnishment"; and
  • 3. a concern of someone "taking a free ride on the investment of the trademark owner in the trademark".
The Court of Appeals ruled that neither possibility of dilution applied in this case. In the Court's view, Perryman was "not producing a product, or a service, ... that [was] distinct from any specific product; rather she [was] selling the very product to which the trademark sought to be defended against her 'infringement' [was] attached." The reasoning was influenced by the fact that Ty's marketing strategy resulted in the creation of a secondary market, which was the market Perryman participated in. The Court held that trademark law does not permit producers to impede sellers in the aftermarket from marketing the trademarked product. The Court was also of the view that Ty was seeking "an extension of the anti-dilution law to forbid commercial uses that accelerate the transition from trademarks (brand names) to generic names (product names)." This extension of the law was rejected. For a copy of the decision, visit: http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=02-1771.PDF

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