PayPal, Inc., has sued Pandora Media, Inc., over its new logo, claiming that Pandora's new logo infringes on PayPal's many trademarks.

Companies like CompuServe, Prodigy, and America Online brought the internet into the mainstream and were once worth insurmountable sums. These trademarks have since become all but a footnote in history. PayPal and Pandora are among the many brands of this generation seeking to make sure they don't become obsolete along with them.

There is extreme competition for the limited space on the screen of your mobile device. Due to these devices being inescapable today, this case presents some interesting issues.

PayPal's complaint filed in U.S. District Court in New York on May 19th, alleges Pandora's new logo has resulted in liability for trademark infringement, trademark dilution, and false designation of origin.

PayPal seeks to enjoin Pandora from using a confusingly similar logo that dilutes PayPal's brand, and according to their legal complaint, impairs "the value of PayPal’s name, reputation, and goodwill".

When reached for comment, PayPal provided the following

For many years, PayPal has consistently utilized a family of trademarks that have helped us earn strong customer recognition and a commanding share of the digital payments marketplace. We have invested significant time, money and energy into ensuring that our distinctive P logo easily identifies PayPal on mobile devices. In the face of this substantial investment and resulting goodwill, Pandora adopted a blatantly infringing logo. The striking similarities were immediately the topic of news articles and social media commentary by confused customers.

They further advised that "since Pandora would not agree to resolve this matter amicably, we had no choice but to file this lawsuit to protect both our brand and the PayPal experience for our over 200 million users."

Trademark infringement lawsuits are quite common these days as companies realize the implications of failing to protect their intellectual property. While claims for trademark dilution are not uncommon by any means, they are extremely complex in nature, due to the high burden that a plaintiff must meet in order to prove that their trademark is considered famous under trademark law.  

This article will focus on the claim of trademark dilution. For a detailed explanation of what is required to prevail on a claim for trademark infringement, you can read my post on Peter Luger Steakhouse's quest to protect its century plus old trademark. (See: Peter Luger Steakhouse dispute over its trademark with Carl Von Luger Steak and Seafood sizzles its way into court.)

Trademark Dilution in a Nutshell...

• Trademark dilution comes in two forms
  • dilution by blurring
  • dilution by tarnishment
• For a plaintiff to successfully prevail in a case for trademark dilution (either form) requires showing:
  1. Plaintiff's trademark reached the status of a famous mark prior to defendant's use of the potentially infringing mark.
     • This can be difficult to do.
  2. A likelihood of dilution of the plaintiff's trademark by the defendant.

It is because a plaintiff must show only a likelihood of dilution, rather than actual dilution, that famous brands choose to file claims for trademark dilution.

A company that can prove the fame of its mark can seek a court's help to protect their mark from becoming diluted. There is no need to wait for actual dilution and potentially irreparable harm to occur to their brand.

Damages in trademark dilution Cases

• Most cases involving dilution seek injunctive relief to stop the damage from occurring or continuing to occur.
  • Plaintiff only needs to show a likelihood of dilution to their famous mark, not actual dilution.
• Monetary damages are available if the defendant's intention to trade on the recognition of the famous mark was willful (in blurring cases) or there was willful intention to harm the famous mark's reputation (in tarnishment cases).
  • This is not an easy take and courts are hesitant to offer monetary damages without a strong showing of actual trademark dilution.

Proving that your trademark meets the level of a 'famous trademark'

• Why is the concept of a 'famous' trademark so complex?

  • The Trademark Dilution Revision Act of 2006 (TDRA) was supposed to help clarify the scope of what constitutes a famous trademark.

    • The written law defines a famous mark as "widely recognized by the general consuming public of the United States".
  • Courts throughout the country have disagreed on the meaning of 'general consuming public'. 
    • some courts argue that a trademark must have achieved nationwide fame, that regional success is not enough. 
  • However, simply put, the internet changed how brands are marketed, as well as how and where they are recognized by the 'general consuming public'.
    • The brands below, though only available in regional markets, have absolutely achieved nationwide fame. 

Under the current trademark dilution law, a "court may consider all relevant factors". This appears to provide courts with the discretion to account for such regional trademarks, or even famous brands within an industry.

The only guidance the law gives to courts in evaluating a trademarks fame, are the following three factors:

(i) The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties.

(ii) The amount, volume, and geographic extent of sales of goods or services offered under the mark.

(iii) The extent of actual recognition of the mark.

There are two different kinds of trademark dilution and both appear to be present in the case between PayPal and Pandora.

trademark dilution by blurring

Blurring is what happens when a famous trademark loses its distinction among consumers. 

PayPal alleges consumers are not only confused by the similarity of the PayPal logo and the new Pandora logo, they also expresses concern that its users will think it has now entered the music streaming business.

Why is this a problem?

• PayPal has long been associated with payments and in 2013, acquired the Venmo brand.
• In their complaint PayPal states that they do not want their "customers to be deceived into believing that PayPal is losing its focus on payments by moving into music streaming services."
• If PayPal, or any owner of a distinct trademark, wants to adjust what products consumers associate with their trademark, they have the sole right to do so.

• PayPal says that their logo encompasses a distinctive blue color palette, sans serif font, and minimalist look and feel across numerous PayPal trademarks.

• They note that Pandora's previously "readily distinguishable logo" long co-existed on device screens with PayPal.

Trademark Dilution by Tarnishment

Tarnishment occurs when the reputation of a famous mark is likely to be harmed.

While the TDRA provides some guidance for courts hearing a case involving dilution by blurring, essentially no guidance is provided for dealing with tarnishment

PayPal's claim for tarnishment focuses on the similar look of both logos on consumers’ mobile devices. PayPal worries that its customers will

1. Have difficulty locating the PayPal app on a mobile device because of Pandora's similar logo.
2. Accidentally open Pandora or Paypal by mistake and then decide to "abandon their plan to utilize PayPal out of annoyance, or
3. "Purposely avoid the PayPal app out of fear that they will inadvertently play music in untimely situations if they attempt to use the app."

The tweets below show the type of situations PayPal is referencing in regards to a customer opening either app when they did not intend to. 

PayPal appears to have a strong case of actual dilution based on clear evidence, and at a minimum a likelihood of dilution.

The more evidence that PayPal can find of similar comments from their customer base as well as Pandora's, the more likely it becomes that Pandora agrees to an amicable settlement. 

When reached for comment on the dispute with PayPal, Pandora stated that "we have no further comment while this suit is pending."

The case is The case is PayPal, Inc., v. Pandora Media, Inc., et al, U.S. District Court, Southern District of New York, No. 17-03816