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".