Trademark dilution occurs when misuse of a mark by an unauthorized party results in the loss of the mark's distinctiveness. As one state statute puts it:
Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark…shall be a ground for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.2
The "counterfeit designer label" wars of the 1980s, involving shoddy knockoff designs with labels that didn't quite literally infringe upon the authorized mark (as shoddy as that stuff often is!), provides an excellent object lesson. The real problem is that this flood perceptibly reduced public perceptions of the value of certain of those marks. That, however, was arguably in competition. The point is that the elimination of the "competition" requirement for dilution theories vastly weakens the frequent excuse of fan-fiction authors that "I'm not selling my stuff, so I'm not in the stream of commerce and I'm not competing!"
From one perspective, this presents some rather significant (and ironic) tension with direct-infringement theories about fiction, and perhaps with other intangibles. Direct infringement theories work best the more closely the unauthorized mark invokes the authorized one; that is, the center of direct infringement is the well-executed counterfeit, either of the mark itself or of the underlying goods. Dilution, however, can do the opposite; the worse-executed the counterfeit, the closer that misuse is to "dilut[ing] the distinctive quality of a mark." This is particularly relevant to fan fiction because so much of it is so bad. (It's frequently so bad that Cthulu et al. would run away screaming.)
More to the point for fiction, thematic inconsistency can create dilution, even when done well. Consider, for example, a set of sexually explicit Harry Potter "Mary Sue" stories. These would reflect poorly upon Joanne Rowling's creations, which (at least thus far, and I have no reason to believe will change) reject that kind of material. Similarly, I suppose that a set of Star Wars stories in which the heroes/heroines actually stop to think about the potential consequences of their actions—at the extreme, imagine The Tragedy of Anakin, Prince of Denmark—would also dilute the Star Wars mark. Note that in this instance, the dilution is thematic, not qualitative. That still weakens the distinctiveness of the mark. After all, some people actually like Star Wars for what it is… and would be terribly disappointed if they had to do anything other than wait for the next exercise in medieval weaponry and poor marksmanship.
- Of course, there are several variations within "direct infringement," too, but we don't need to distinguish between "passing off" and "reverse passing off"; if the theory doesn't have much value for fan fiction in the first place, trying to do so would create just another law review article that nobody will read.
- Cal. Bus. Prof. Code § 14330. Most states have virtually identical language in their respective statutes, including in no particular order New York, Illinois, Tennessee, and Florida. Washington (state) restricts its protection to "famous" marks and requires a "material reduction of the distinctive quality of a famous mark."