Trademark dilution and the (S)POTIFY dispute

Music app Spotify has successfully opposed the registration of the trademark ‘Potify’ by marijuana app Potify on the grounds of dilution by blurring and tarnishment. Julia Schefman examines the US Trademark Trial and Appeal Board ruling and asks whether the outcome would have been any different under EU law. 

Back in January 2017, US Software Inc started using the mark ‘Potify’ for an app for “legal marijuana dispensaries to market and sell their products''. Spotify, the well-known music app, opposed the registration of this trademark on the basis of dilution by blurring and tarnishment. In its January 2022 ruling, the US Trademark Trial and Appeal Board (TTAB) agreed with Spotify’s argument that consumers would associate the two marks, thereby diminishing and diluting the distinctiveness of the Spotify brand name.  

Trademark dilution: The US perspective

As TTAB discusses in its ruling, US dilution law intends “to protect a mark’s owner from dilution of the mark’s value and uniqueness”. In order to prove this claim, however, certain requirements must be fulfilled. In particular, Spotify needed to show that:

1. it owns a famous mark that is distinctive;
   To determine whether a mark is sufficiently famous to be protected against dilution, it should be “widely recognised by the general consuming public of the US as a designation of source of the goods or services of the mark’s owner”. Based on four considerations (advertising and publicity, sales of goods and services, actual recognition and their registry on the Principal Register), TTAB decided that “by any and all measures, SPOTIFY is exceedingly famous, and entitled to protection against dilution under 15 U.S.C. § 1125(c).”.
2. the applicant is using a mark in commerce that allegedly dilutes the opposer’s famous mark; 
   In this case, the first element was satisfied on the basis that the applicant is using the mark ‘Potify’ in commerce and seeking to register it as a trademark in the US. As the opposer has based one of its grounds of opposition on the basis of dilution by the mark ‘Potify’, this second element of the requirement was also satisfied. 
3. The applicant’s use of its mark began after the opposer’s became famous; 
   For this element, the applicant claimed that ‘Spotify’ was not a famous trademark before 1 January 2017 (the day of first use of ‘Potify’). The Board decided that even though the mark had become more famous now than it was before 2017, it was already famous in the US at that. This was backed, inter alia, by articles prior to 1 January 2017 referring to Spotify as a “household name”.
4. The applicant’s use of its mark is likely to cause dilution by blurring or tarnishment
   The definition used by TTAB to establish blurring is “an association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark”. Subsequently, TTAB states dilution occurs when “a substantial percentage of consumers, on seeing the junior party’s mark on its goods, are immediately reminded of the famous mark and associate the junior party’s mark with the owner of the famous mark, even if they do not believe that the goods emanate from the famous mark’s owner.” The considerations that TTAB uses to determine whether the applicant’s mark is indeed likely to cause dilution by blurring are (in brief): (1) the degree of similarity between the marks; (2) the degree of inherent or acquired distinctiveness; (3) the extent to which the opposer is engaging in substantially exclusive use of its mark; (4) the degree of recognition of the earlier mark; (5) whether the applicant intended to create an association with the earlier mark; and (6) any actual association between the two marks. Based on these considerations, TTAB ruled that dilution by blurring was indeed likely and that ‘Potify’ would inevitably diminish the distinctiveness of ‘Spotify’. 

Trademark dilution: The EU perspective

This US decision raises the question whether such a dilution by blurring claim could also be used in an EU opposition procedure. Here, the relevant article is Article 8(5) of the EU Trademark Regulations (EUTMR), which states that the owners of an “earlier reputed registered trademark” can prevent the registration of a later EUTM application that, without due cause, would take unfair advantage of, or be detrimental to, the distinctive character or reputation of the earlier trademark. For this article to apply, no likelihood of confusion is necessary. 

However, the protection offered by the above-mentioned article is more directed at the financial investment in creating and promoting trademarks than the extent to which “they become reputed and to facilitate full exploitation of the value of the marks”, as was discussed in Spotify v Potify. In order to prove this element in the EU, evidence of the threat of “dispersion of the reputed mark’s image and identity in the relevant public’s perception” and the threat of potential change in the economic behavior of this public needs to be provided. 

Based on the distinctiveness provision in Article 8(5) EUTMR and its guidance, it seems likely that Spotify would have grounds for an equivalent opposition procedure against Potify, had it registered an EUTM application. In other words, the relevant EU boards or courts would also rule that ‘Potify’ would take unfair advantage of the status of the trademark ‘Spotify’ and/or would be detrimental to the reputation of the earlier trademark.

Of course, actual conclusions could only have been drawn if the opposition procedure had taken place on the basis of an EU trademark. However, the law and guidelines do provide indication of what factors would be taken into consideration.

For more information on this subject or for advice protecting and enforcing your trademarks, please speak to your Novagraaf attorney or contact us below.

Julia Schefman works in Novagraaf’s Knowledge Academy. She is based in Amsterdam.