Trademark Dilution: Protecting the distinctiveness of brands in a Global Market

INTRODUCTION

Establishing distinctiveness is an important aspect of being seen as a trustworthy brand.

Trademark dilution occurs when there is an unauthorized use of the mark or another mark which is distinctively similar to an existing mark. This diminishes the existing mark’s uniqueness and can also tarnish its reputation. Dilution differs from traditional trademark infringement in the sense that the use of the same or a similar mark may sometimes reduce a mark’s perceived association with a single source of products and/or services, even in situations where there is no similarity between the goods, services, and/or industries of enterprises. There are two main types of dilution as defined by the Trademark Dilution Revision Act (TDRA) of 2006[1]:

1. Dilution by Blurring: described as “a blurring of the mental associations evoked by the mark, a phenomenon not easily sampled by consumer surveys and not normally manifested by unambiguous consumer behaviour.”[2]
2. Dilution by Tarnishment: described as “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.”[3]

When a trademark is diluted, the brand loses its edge. Customers no longer see it as unique or trustworthy and the loyalty fades. This is the silent threat of trademark dilution. At the core of this issue is the ambiguity of what intellectual property law protects, coupled with global safeguards for protection of distinctiveness of brands. Protecting intellectual property is a legal mechanism designed to encourage innovation and creativity so that owners of the rights can profit financially from their creative innovations.

In this article, we firstly discuss laws pertaining to anti-dilution mechanisms of various jurisdictions ranging from United States of America, United Kingdom to India and Singapore to derive valuable lessons. These laws are analysed to assess the scope and extent of protection offered to trademark holders under each legal framework. Lastly, the article turns to the recent phenomena of Ghibli trend and its legal implications on trademark laws.  

LEGAL FRAMEWORKS ACROSS VARYING JURISDICTIONS

Laws to protect brands from trademark dilution vary across jurisdictions. Some evolved markets like the U.S. and the EU have well-established anti-dilution laws, while others do not necessarily have a mechanism as robust as the mature markets.

• UNITED STATES

The Federal Trademark Dilution Act (FTDA) of 1955 [4] introduced federal protection against dilution, allowing owners of well-known marks to sue for dilution even when there is no competition or likelihood of confusion. The FTDA was revised by the Trademark Dilution Revision Act (TDRA) of 2006.[5] The revised law emphasises that famous marks are rare and elite. The phrase “a mark is famous if it is widely recognised by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner” [6] is added to the TDRA to clarify the criteria to be recognised as famous. TDRA mandates that fame be widespread throughout the country. Instead of only being acknowledged in the relevant business or trade, it also needs to be acknowledged by the American public at large. The TDRA also broadens the class of protected activities to include “identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.”[7]

According to the U.S. Supreme Court’s ruling in Moseley v. Victoria Secret Catalogue, Inc [8]., trademark owners have to show actual dilution and not just the likelihood of dilution, in order to succeed in a dilution action. The method by which real dilution would be established was not clarified by the Court. The Court only suggested that direct and circumstantial evidence may be sufficient for establishing actual dilution in the case of similar marks. The TDRA expressly modifies the standard from “actual dilution” to “likelihood of dilution” in response to Moseley. For trademark holders, this modification simplifies the process of establishing dilution and widens the scope of protection to them.

The latest ruling in the case of Jack Daniels Properties Inc. v. VIP Products LLC [9], held that the whiskey brand’s marks were not infringed but diluted by the dog toy parody. This decision emphasised the difference between infringement and dilution, highlighting that while parodies may not mislead consumers, they can nevertheless damage a brand’s reputation. Additionally, it implies that businesses should exercise caution when parodying well-known trademarks since, even in cases where there is no infringement, courts may still establish dilution.

• INDIA

The Trademarks Act of 1999 does not provide a clear definition for the phrase “trademark dilution.” However, the implication of dilution of trademarks has been specifically addressed by Section 29(4) of the Trade Marks Act, 1999,[10] which protects well-known marks from unauthorised use and specifies the circumstances that constitute dilution, such as the use of a mark that is identical or similar to the registered trademark for dissimilar goods or services in a way that “takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trade mark.”

The landmark judgement of ITC v. Philip Morris Products SA and Ors [11] has additionally outlined the prerequisites for establishing trademark dilution. The Indian courts held that trademark dilution happens when a well-known mark has a reputation in India; the diluting mark is identical or deceptively similar to the well-known mark; the diluting mark is being used by a third party without permission or due cause; the diluting mark is being used to take unfair advantage of the registered trademark, and it is compromising its distinctiveness or reputation. The Act requires strict proof for every element and codified protection against dilution.

• EUROPEAN UNION

According to Article 5(3) of the EU Trademark Directive (2015/2436, formerly Article 5(2) of Directive 89/104/EEC)[12] and Article 8(5) of the EU Trademark Regulation,[13] well-known marks in the EU are granted a special and broadened degree of protection.  A well-known trademark owner has the right to prevent third parties from using any sign that is similar to or identical to their mark, regardless of whether the use is related to goods or services that are identical or similar, or even entirely different from those for which the well-known mark is registered, if doing so without a valid reason would unfairly exploit the earlier mark or detract from its distinctive qualities.

The European Court of Justice (hereinafter referred to as “ECJ”) held in Intel Corporation v. CPM United Kingdom Ltd[14] that the well-known mark will be diluted if a later mark is used to establish an immediate association with the goods and services for which the well-known mark is registered. The court affirmed that the risk of dilution increases with the strength of the earlier mark’s distinctive character, which increases the likelihood that the relevant public will recognise it. A well-known mark’s owner must demonstrate the use of the later mark “would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark“. The owner of the earlier mark must establish that there is a significant possibility that an injury of this kind will occur in the future, even though they are not required to demonstrate an actual and present injury. Thus, providing protection even in a case where there is no actual injury but a reasonable likelihood of such injury.

The ECJ expanded the protection afforded to well-known marks in the L’Oréal v. Bellur[15], ruling that an unfair advantage might be established without proving a possibility of confusion, a risk of harm to the mark’s unique character or repute, or even any general harm. It held that an advantage is unjust when a third party “seeks by that use to ride on the coat-tails of the mark with a reputation” to capitalise on the mark’s prestige, reputation and to take advantage of the well-known mark’s owner’s marketing efforts without paying compensation, eventually causing harm to the mark.

• UNITED KINGDOM

Since dilution protection laws were included under European Union trademark laws, the United Kingdom also implemented anti-dilution protection in the form of the Trade Mark Act 1994.[16] Sections 5(2) and 10(3) of the TMA 1994 recognise dilution remedy.[17] The Trade-Mark Regulations of 2004 amended sections 5(2) and 10(3) to broaden the protection to include identical, similar, and non-similar goods and services. In the case of General Motors Corp. v. Yplon, S.A.[18], Advocate General Jacobs pointed out that, unlike Article 5(1)(b),[19] Article 5(2) does not allude to a simple risk or likelihood that its requirements will be met. The language is more affirmative: “takes unfair advantage of or is detrimental to“. The national court must be satisfied by proof of actual harm or unfair advantage. Section 10(3) of the Act gives trademarks substantial safeguards against trademark dilution. It specifically protects registered trademarks and forbids using the mark in connection with goods or services that are not similar to those for which the mark is registered, provided that the mark has a reputation in the UK and its use unfairly exploits or harms its distinctive character or reputation.

• SINGAPORE

By the Trade Marks (Amendment) Act 2004,[20] the comparatively simple definition of a well-known mark in Singapore given by Section 2 of the Trade Marks Act 1998 has been replaced by a much more comprehensive provision that establishes new standards for determining whether a mark is well-known in Singapore.[21] Both registered and unregistered trademarks that are well-known in Singapore are considered well-known marks according to Clause 2(f) of the Trade Marks (Amendment) Act 2004.[22] Following the 2004 Amendments, Singapore’s well-known trademarks fall into two main categories: (a) trademarks that are well-known to any relevant segment of the Singaporean public, and (b) trademarks that are well-known to the public at large in the country. The law presently grants trademark holders in the latter group an extra degree of protection for their trademarks in the form of anti-dilution rights.

Section 2 of the amended Trade Marks Act 1998 must be interpreted in conjunction with the anti-dilution provisions found in Section 55(3A).[23] This provision grants the owner of a widely recognised mark the right to seek an injunction to prevent the use of a third party’s conflicting mark. This applies when such use would unfairly dilute or exploit the distinctiveness of proprietor’s mark. The meaning of dilution must be interpreted so that the owner of the well-known mark must show that the third-party’s use of the conflicting mark is unfair and has the effect of diminishing the distinctive character of the well-known mark in order for the owner to be able to rely on the antidilution provisions.

• AUSTRALIA

Australia does not explicitly address “trademark dilution” under their Trade Marks Act, 1995.[24] However, there is a debate amongst legal scholars as to whether Section 120(3) of the Act would constitute anti-dilution laws or not.[25] Section 120(3) states that a person infringes a registered trademark if:

1. The trade mark is well-known in Australia;
2. The person uses a substantially identical or deceptively similar sign as a trade mark in relation to unrelated goods or services;
3. The use of the sign would likely be taken as indicating a connection between the unrelated goods or services and the registered owner of the trade mark;
4. The interests of the registered owner are likely to be adversely affected.

Maurice Gonsalves and Patrick Flynnes have argued in their article that S.120(3) is an explicit anti-dilution provision since the provision aligns with TRIPS Article 16.3,[26] which mandates dilution protections for well-known marks.[27] They argue that the “connection” requirement does not require any need of “confusion” amongst consumers. It is implied that the requirements of paragraph (c) are met if a customer of the defendant’s goods or services just consciously recalls the well-known registered mark upon seeing the defendant’s mark. S.120(3) is considered an anti-dilution provision when it is paired with the fact that it applies in situations where the defendant’s goods or services are unrelated to those of the owner of the well-known registered mark and that the owner must demonstrate that the defendant’s actions are likely to adversely affect his interests. However, Michael Handler contends in his article that the section has a much narrower scope, and the provision was introduced to prevent misleading connections between unrelated goods or services and not to combat dilution.[28] It focused on economic harm rather than distinctiveness. He also argues that the requirement to establish a “connection” is more in line with infringement principles rather than dilution. Hence, while Section 120(3) offers dilution-like protections, its application remains contentious.

Existing trademark laws are largely rooted in the traditional understanding of infringement, where a new entrant in the market uses a mark similar to that of a well-known registered trademark, potentially causing harm to the established brand’s business. However, these laws often fail to address emerging challenges, such as those posed by recent trends like the ‘Ghibli trend,’ where AI-generated content may infringe upon trademarks. The following section explores this trend and examines its legal implications.

THE STUDIO GHIBLI ART STYLE TREND – WHY IT SHOULD BE RIGHTFULLY

CALLED OUT FOR THE CREATIVITY THEFT

The very recent trend of generating pictures in the style of Studio Ghibli using Generative AI has raised deep concerns about the state of intellectual property laws and how they apply to the rapidly evolving world in the age of artificial intelligence. This situation presents a challenge to the current IP laws but also threatens the very foundation of creative ownership. Intellectual property laws have been made to protect artistic works from unauthorized reproduction and distribution and ensure that the creators preserve their control over their intellectual output. Original works of authorship, including films, drawings, and designs, are protected from the moment they are created and do not need to be formally registered under the Berne Convention for the Protection of Literary and Artistic Works, which was enacted in the form of the Paris Act in 1971.[29] And it is precisely this legislation that prevents unauthorised reproduction of Studio Ghibli’s hand-drawn artwork.

The problem is that although certain pieces of AI-generated art are protected by copyright, the style itself is not. This creates a loophole for AI companies to exploit the work of artists who have painstakingly hand-drawn and painted each frame to innovate that distinct signature Ghibli style, without any compensation or credit despite Studio Ghibli founder’s Hayao Miyazaki’s previous condemnation of AI. It also has a direct financial impact on Studio Ghibli and its artists since it undermines and tarnishes the value of the brand and threatens the livelihoods of the creators. AI-generated Ghibli-style graphics shouldn’t be protected under fair use laws if they disrupt the market for official Ghibli artwork and associated licensed products. Brand identities, including distinctive visual styles linked to a certain company, are protected by trademarks Studio Ghibli may claim that AI-generated art violates its trademark rights under the Lanham Act,[30] which forbids the unlawful use of trademarks in a way that misleads consumers if it confuses consumers to believe it is associated with the Studio.

Rob Rosenberg, an AI specialist and former general counsel of the TV network Showtime, claims that Ghibli might be able to sue OpenAI for the issue at hand. According to him, the Studio may be able to claim that OpenAI has violated the Lanham Act, which serves as the foundation for lawsuits pertaining to unfair competition, trademark infringement, and deceptive advertising.[31] Ghibli may contend that by altering users photographs to “Ghibli-style”, OpenAI is misusing Ghibli’s trademarks and creating the risk that customers might assume incorrectly that Studio Ghibli has approved or licensed this feature.

CONCLUSION

To address these gaps and ensure that studios and artists have sovereignty over their creations in the era of artificial intelligence, we require legislative reforms. These include clear guidelines for the commercial use of AI-generated art, new types of intellectual property protection that are tailored to artistic styles and requiring AI companies to get express consent before exploiting a brand’s repute or tarnishing its brand value and distinctiveness.

The protection of well-known and recognisable trademarks has become even more crucial in light of these declining trade barriers and growing globalisation. Globally lack of hard coded anti-dilution laws, which are still in the early stages of development, lack the necessary components to address the rapid evolution of the internet and the misuse of trademarks and so international treaties come as a rescue and safeguard. Trademark dilution laws need reforms on a global scale to ensure uniformity in definitions and standards as to what exactly constitutes “dilution” as these vary widely across jurisdictions and need to sync in international treaties in a robust and strict manner.

[1] Trademark Dilution Revision Act of 2006, Pub. L. No. 109-312, 120 Stat. 1723 (2006).

[2] 15 U.S.C. §1125(c)(2)(B)(i)-(vi).

[3] 15 U.S.C. §1125(c)(2)(C).

[4] Federal Trademark Dilution Act of 1995, Pub L No 104-98, 109 Stat 985 (1996).

[5] Trademark Dilution Revision Act of 2006, Pub. L. No. 109-312, 120 Stat. 1723 (2006).

[6] 15 U.S.C. §1125(c)(2).

[7] 15 U.S.C. §1125(c)(3)(A)(ii).

[8] Moseley v Victoria Secret Catalog, Inc., 537 U.S. 418 (2003).

[9] Jack Daniels Properties Inc. v VIP Products LLC, 599 U.S. 140 (2023).

[10] The Trade Marks Act, 1999 (47 of 1999) s 29 (4).

[11]ITC v Philip Morris Products SA and Ors, 2010 (42) PTC 572 (Del.).

[12] The EU Trade Mark Directive (EU) 2015/2436, art 5(3).

[13] The EU Trademark Regulation, (EU) 2017/1001, art 8(5).

[14] Intel Corporation v CPM United Kingdom Ltd, 252/07, [2009] E.T.M.R. 13.

[15] L’Oréal v Bellur, [2007] EWCA Civ 968.

[16] The Trade Marks Act 1994.

[17] The Trade Marks Act 1994, s 5(2); 10(3).

[18] General Motors Corp. v Yplon, S.A., Case C-375/97.

[19] The Trade Marks Act 1994, s 5(1)(b).

[20] The Trade Marks (Amendment) Act, 2004.

[21] The Trade Marks Act, 1998 s 2.

[22] The Trade Marks (Amendment) Act, 2004 Clause 2(f).

[23] The Trade Marks Act, 1998 s 2; 55(3A).

[24] The Trade Marks Act, 1995.

[25] The Trade Marks Act, 1995 s 120(3).

[26] Agreement on Trade-Related Aspects of Intellectual Property Rights (adopted 15 April 1994, entered into force 1 January 1995) 1869 UNTS 299, art 16.3.

[27] Maurice Gonsalves and Patrick Flynn, “Dilution Down Under: The Protection of Well-Known Trade Marks in Australia” [2006] European Intellectual Property Review 174.

[28] Handler, Michael. (2008). Trade Mark Dilution in Australia?.

[29] Berne Convention for the Protection of Literary and Artistic Works (adopted 9 September 1886, last revised at Paris on 24 July 1971, and amended in 1979) 828 UNTS 221.

[30] Lanham Act, 15 USC §§ 1051–1141n (1946).

[31] Tangermann, V. (2025, March 28). Lawyer says Studio Ghibli could take legal action against OpenAI. Futurism. https://futurism.com/lawyer-studio-ghibli-legal-action-openai.