Jack Daniels won because the maker of the dog toys were selling them, and wanted a trademark themselves.
Here we're talking about activists making non-commercial parody usage; the EFF's letter already mentions the Lanham Act, and let us add to that the Trademark Dilution Revision Act of 2006 (https://en.wikipedia.org/wiki/Trademark_Dilution_Revision_Ac...) which adds an express fair-use defense for noncommercial use.