When someone claims that a trademark has been violated, that person may claim that there has been a dilution of the trademark itself, which could factor in when seeking damages. What is dilution, when used in this sense, and why does it matter?
Dilution is similar to trademark confusion, though a bit different. Essentially, it means that the actions taken by the person who stole the mark made it worth less, diminishing the value of it and the strength that the trademark used to have. The person may even say that the image has been tarnished. This can all have a drastic impact on the trademark going forward, even after the illegal use has been stopped, though the full scope of that impact can be hard to pin down.
For example, if someone has a logo that is connected to a burger restaurant, someone else who is starting a new burger restaurant may be tempted to use it to get instant publicity and brand recognition, all while hoping the first owner does not find out. In this example, Restaurant One has a stellar reputation that drives sales, while Restaurant Two is brand new.
After stealing the trademark, though, there could be an outbreak of disease that is linked to Restaurant Two, all while it is running the stolen logo. People may see it on the news, not realize that the two franchises are different, and stop going to Restaurant One because they only recognize the logo. This could bankrupt Restaurant One, which was never actually connected to unsanitary practices, health code violations or diseases -- but the facts don't necessarily matter if consumers don't see the difference between the two.
As noted, dilution can ruin a brand, so it's important for business owners to know what action they can take in California when trademarked materials are stolen.
Source: USPTO, "About Trademark Infringement," accessed June 03, 2016