Use of CHARBUCKS marks does not dilute STARBUCKS trademark

In Starbucks Corp v Wolfe’s Borough Coffee Inc (Case 01-5981, June 5 2008), the US District Court for the Southern District of New York has held that Wolfe’s Borough Coffee Inc’s use of the marks MR CHARBUCKS and MISTER CHARBUCKS does not dilute the trademark STARBUCKS under the new Federal Trademark Dilution Act
The district court had previously held for Wolfe’s on all counts, denying Starbucks Corp's motion for a permanent injunction against use of the CHARBUCKS marks. Following a bench trial in 2005, the court found that Starbucks had failed to show that it was entitled to relief under the Lanham Act, state trademark dilution claims and common law unfair competition. Starbucks appealed. The US Court of Appeals for the Second Circuit vacated the decision and remanded the case to the district court for reconsideration in light of the Trademark Dilution Revision Act 2006.
At issue on remand was whether Starbucks could demonstrate that use of the CHARBUCKS marks for coffee blend products created associations arising from similarity to the STARBUCKS marks that were "likely to impair the distinctiveness of the STARBUCKS mark or tarnish that mark by harming its reputation". 
The Revision Act made three significant changes that are relevant in the present case:
  • A plaintiff need only show a likelihood of dilution (rather than actual dilution), a lower standard than previously set forth;
  • Two types of 'dilution' were explicitly defined: dilution by blurring and dilution by tarnishment; and
  • Congress delineated six non-exclusive factors for courts to consider in assessing the likelihood of dilution by blurring: 

    • similarity of the marks;
    • distinctiveness of the famous mark;
    • substantially exclusive use of the famous mark by its owner;
    • degree of recognition of the famous mark;
    • intent to create association with the famous mark; and
    • actual association with the famous mark.
Applying the lowered standard, the district court again found for Wolfe’s. Using the six non-exclusive factors for dilution by blurring, the court found that although the second, third and fourth factors favoured Starbucks, two factors weighed against it and the last factor had insufficient evidence to weigh in its favour. 
The court determined that the first factor weighed strongly against Starbucks because of Wolfe’s distinctive packaging and the lack of use of the term 'Charbucks' on its own. Interestingly, the court highlighted a subtle distinction with regard to the fifth factor (intent). Upon a cursory glance, Wolfe’s openly admitted to intending to associate the CHARBUCKS marks with Starbucks to evoke "the dark roasted characteristic of the Starbucks product". However, the court maintained that the true question was "whether the intended association [was] likely to impair the distinctiveness of [Starbucks's] mark". The court concluded that because the intended association was not indicative of bad faith and not likely to impair the distinctiveness of the mark, this factor weighed against Starbucks. With regard to the final factor, the evidence was determined to be insufficient to show actual association with the STARBUCKS mark, as the only evidence proffered by Starbucks was that there was some consumer association between the spoken, single term 'Charbucks' and the STARBUCKS mark.
'Dilution by tarnishment' is defined under the amended Trademark Dilution Act as "an association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark". The district court considered Starbucks’s phone survey evidence and expert conclusions. It concluded that the survey comments were not necessarily negative despite a showing that of the 30.5% of respondents who made an immediate association between the two marks, 62% said that they would have a negative impression of a coffee called Charbucks. The court declared that this evidence missed the point, because the only issue was whether those respondents’ negative impressions would detrimentally affect their perception of Starbucks. Rather, the fact that Wolfe’s product is of high quality further demonstrated that any association with the STARBUCKS mark would not be damaging. Therefore, Wolfe’s use of the CHARBUCKS marks did not dilute the STARBUCKS mark, either by blurring or tarnishment.
Howard J Shire, Kenyon & Kenyon LLP, New York

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