Ty Inc. v. Ruth Perryman
306 F.3d 509, 2002 U.S. App. LEXIS 20870, 64 U.S.P.Q. 2d (BNA) 1689 (2002)
Rule of Law:
The truthful use of a famous trademark by a reseller to identify genuine trademarked products in the aftermarket generally does not constitute trademark dilution under the Federal Antidilution Statute, as such use does not typically cause blurring or tarnishment, nor is the statute intended to prevent the potential genericide of a mark.
Facts:
- Ty Inc. manufactures Beanie Babies, which are well-known beanbag stuffed animals.
- Ty's trademarks, 'Beanie Babies' and 'Beanies,' are famous and widely recognized.
- Ty employs a marketing strategy involving the deliberate production of limited quantities of each Beanie Baby, which creates a secondary market where prices for scarce items are bid up.
- Ruth Perryman sells second-hand beanbag stuffed animals, primarily Ty's Beanie Babies, over the Internet.
- Perryman uses the domain name 'bargainbeanies.com' and a corresponding website to advertise her merchandise.
- Perryman's website also listed non-Ty products under the caption 'Other Beanies' alongside genuine Ty products.
Procedural Posture:
- Ty Inc. initiated a lawsuit against Ruth Perryman in federal district court for trademark infringement under the federal antidilution statute.
- The district court granted summary judgment in favor of Ty Inc.
- The district court issued a broad injunction, forbidding Perryman from using 'BEANIE or BEANIES or any colorable imitation thereof (whether alone or in connection with other terms) within any business name, Internet domain name, or trademark, or in connection with any non-Ty products.'
- Perryman appealed the district court's decision, arguing that 'beanies' had become a generic term and that the injunction was overbroad.
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Issue:
Does the use of a famous trademark by a reseller in the aftermarket to truthfully identify the genuine trademarked products they sell constitute trademark dilution under the Federal Antidilution Statute, 15 U.S.C. § 1125(c)?
Opinions:
Majority - Posner, Circuit Judge
No, the truthful use of a famous trademark by a reseller in the aftermarket to identify the genuine trademarked products they sell generally does not constitute trademark dilution. The fundamental purpose of a trademark is to reduce consumer search costs by providing a concise identifier of the particular source of goods; it is not to allow producers to control their aftermarkets. Dilution typically refers to 'blurring' (when a mark becomes associated with various unrelated products, diminishing its distinctiveness) or 'tarnishment' (when a mark is associated with unsavory or inferior products, damaging its image). Selling the very product to which a trademark is attached does not blur or tarnish the mark, nor does it confuse consumers about the source, as the seller is simply identifying the goods truthfully. The court analogized this to a used car dealer truthfully advertising the sale of Toyotas; such use is necessary for efficient aftermarket operation. Ty's own marketing strategy, which deliberately creates a secondary market for Beanie Babies, further weakens its claim. The court rejected the argument that antidilution law should be extended to forbid commercial uses that accelerate a trademark's transition to a generic name, citing the social benefit of adding words to ordinary language and the staggering litigation such a theory would invite. However, Perryman's use of 'Other Beanies' to describe non-Ty products was a 'plain misdescription' or false advertising and supported the injunction's prohibition against using 'Beanie' or 'Beanies' in connection with non-Ty products. The court vacated the district court's broader injunction and remanded the case with instructions to reformulate it, limiting its scope to only prohibit the use of 'Beanie' or 'Beanies' in connection with non-Ty products.
Analysis:
This case significantly clarifies the limits of federal antidilution law, particularly concerning aftermarket sales and the potential genericide of a mark. The ruling reinforces that trademark protection focuses on source identification and preventing consumer confusion, not on granting trademark owners absolute control over the resale or generic evolution of their marks. It provides a strong precedent for resellers to truthfully use brand names when dealing in genuine products, ensuring the efficient operation of secondary markets. The rejection of the 'genericide prevention' theory as a basis for dilution claims also limits potential future litigation by trademark holders seeking to prevent their marks from entering common parlance.
