STARBUCKS Loses “CHARBUCKS” Claim
In good news for those who like to root for the small family business over the big corporate monolith, Starbucks recently lost a claim in the 2nd U.S. Circuit Court of Appeals against a Tuftonboro, New Hampshire company who sold their coffee under the brand name “Mr. Charbucks.” The case illustrates the challenges in asserting a case of trademark dilution – but were there any real winners, after 12 years of legal battling?
The full opinion in Starbucks Corp et al v. Wolfe’s Borough Coffee Inc d/b/a Black Bear Micro Roastery can be read here. Black Bear began selling its “Charbucks Blend” coffee in 1997, and now uses the brand name variations “Mister Charbucks” and “Mr. Charbucks.” It was undisputed that the name was chosen as a play on “Starbucks.” In 2001, Starbucks sued Black Bear, claiming, among other violations (all of which were dismissed), trademark dilution by blurring. The case had a long history, most of which we can ignore for the purpose of this blog post.
Trademark Dilution is a claim by a trademark owner that the use of the mark by the defendant would diminish the goodwill embodied in the trademark – even if the defendant is not using the mark in connection with similar goods or services. What does that all mean?
First of all, a claim of trademark dilution can only be asserted by the owner of a famous trademark. The mark must be nationally well known. Ford, Disney, Coca-Cola, and, yes, Ben & Jerry’s, are the types of marks that would clearly qualify…There are two forms of trademark dilution: Dilution by Blurring and Dilution by Tarnishment.
Dilution by Blurring applies where the defendant’s use of the mark would diminish the uniqueness of the mark. This is probably the most common type of trademark dilution. Let’s say you open up a computer repair shop and name it Coca-Cola Computer Repair. Even though Coke isn’t in the business of fixing your PC, the law recognizes that if there are a number of other businesses with the same name as a famous mark, the commercial impact of the mark will be impacted. As a result, Coca-Cola would have the right to bring a trademark dilution claim against your shop, even though you are not competing directly with their products.
So the Starbucks v. Charbucks case came down to an application of the Trademark Dilution Revision Act of 2006 (“TDRA”) – yes, the act was passed by Congress in the middle of this litigation, and it still applied – which amended the Federal Trademark Dilution Act of 1995 (“FTDA”)(the following is a quote from the Charbucks opinion)…
…to clarify that the owner of a famous mark seeking an injunction need prove only that the defendant’s mark “is likely to cause dilution . . . of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.” 15 U.S.C. § 1125(c)(1). The TDRA further redefined “dilution by blurring” as “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” Id. § 1125(c)(2)(B). The statute provides the following direction to courts:
In determining whether a mark or trade name is likely to cause dilution by blurring, the court may consider all relevant factors, including the following:
(i) The degree of similarity between the mark or trade name and the famous mark.
(ii) The degree of inherent or acquired distinctiveness of the famous mark.
(iii) The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark.
(iv) The degree of recognition of the famous mark.
(v) Whether the user of the mark or trade name intended to create an association with the famous mark.
(vi) Any actual association between the mark or trade name and the famous mark.
To summarize: the 2006 TDRA amended the 1995 FTDA to clarify that the owner of a famous trademark can claim dilution by blurring by showing the defendant’s use is likely to cause dilution; they do not have to prove actual dilution. The 2006 version of the law was applied to this case. From the 2nd Circuit opinion:
After balancing all six factors, the District Court held that Starbucks had failed to meet its burden of showing that it was entitled to injunctive relief:
[T]he Charbucks marks are only weakly associated with the minimally similar Starbucks marks and, thus, are not likely to impair the distinctiveness of the famous Starbucks marks. In other words, [Starbucks] has failed to carry its burden of proving that [Black Bear’s] use of its marks, as evidenced on the record before the Court, is likely to cause dilution by blurring.
The 2nd Circuit Court of Appeals upheld this finding.
Oddly, Starbucks’ case had relied principally on the results of a survey that it had commissioned, the results of which were not necessarily the strongest evidence on their behalf. Why they didn’t just commission another, better-designed survey, or take another approach, I don’t know. From a Reuters story on the outcome of the case:
A centerpiece of Starbucks’ case had been a phone survey of 600 people by the pollster Warren Mitofsky, which found that “the number one association of the name ‘Charbucks’ in the minds of consumers is with the brand ‘Starbucks.'”
But the 2nd Circuit said the survey was “fundamentally flawed” and drew its conclusions from how consumers thought of “Charbucks” in isolation, not its real-world context.
It said that while 39.5 percent of participants thought of “Starbucks” or “coffee” when asked what came to mind upon hearing “Charbucks,” just 4.4 percent said “Starbucks” or “coffee house” when asked who might sell a “Charbucks” product. “Grocery store” was the most popular answer to that question.
“Viewed in light of Starbucks’ fame,” Lohier [author of the 2nd Circuit opinion] wrote, “the fact that more survey participants did not think of ‘Starbucks’ upon hearing ‘Charbucks’ reinforces the district court’s finding that the marks are only minimally similar.”
The legal upshot here? Well, this could be read to show that courts are still taking a skeptical approach to claims of trademark dilution by blurring, even in light of Congress’ relatively recent (2006) broadening of that cause of action.
The practical lesson? Black Bear may have “won” the case, but they spent twelve years and who knows how much money (I’m guessing well into the six figures) litigating this matter. I applaud them for fighting this out until the end, but most small businesses will not have the desire or funding to carry on this kind of prolonged legal battle. Don’t assume this ruling means you can go ahead and start selling your coffee under another “Starbucks” variation (Starsucks?) unless you want to spend a decade or so in court defending that position.