Friday, December 30, 2011

Charbucks prevails over Starbucks on remand

Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 2011 WL 6747431 (S.D.N.Y.)

Starbucks sued Wolfe’s over its Mr. Charbucks coffee.  After the district court rejected all the Lanham Act and coordinate state claims, the court of appeals reversed only on the federal dilution claim, holding that the district court had wrongly applied a substantial similarity requirement to the marks and that the absence of bad faith doesn’t matter to intent to associate under the TDRA.

On remand, the court reached the same conclusion: Mr. Charbucks did not diminish the selling power of the Starbucks mark by harming its ability to clearly identify one source. 

The TDRA offers six factors for courts to consider in a blurring analysis: “(i) [t]he degree of similarity between the mark or trade name and the famous mark; (ii)[t]he degree of inherent or acquired distinctiveness of the famous mark; (iii)[t]he extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv)[t]he degree of recognition of the famous mark; (v)[w]hether the user of the mark or trade name intended to create an association with the famous mark; [and] (vi) [a]ny actual association between the mark or trade name and the famous mark.” But in the end, a court “must ultimately focus on whether an association, arising from the similarity between the subject marks, ‘impairs the distinctiveness of the famous mark’” (quoting the court of appeals).

There was no dispute that four of the six factors weighed in Starbucks’s favor: the distinctiveness of its mark, the exclusivity of its use, the high degree of recognition of its marks, and Wolfe’s intent to associate its mark with the Starbucks mark.  The court thus turned to the degree of similarity of the marks and the evidence of actual association.

Similarity: the court gave the most weight to the way the marks were presented in commerce. There was no evidence that Charbucks was ever used as a standalone term, and it was unlikely that Charbucks would appear to consumers outside the context of its normal use” (again quoting the court of appeals).  Instead, Charbucks always preceded or followed by the terms “Mister,” “Mr.” or “Blend,” and was used in connection with Wolfe’s Black Bear mark, a large black bear, or the figure of a walking man above the words “Black Bear Micro Roastery.”  These weren’t similar to the highly recognizable Starbucks siren mark.  The packaging used an entirely different color scheme from that of Starbucks, and identified Black Bear as a New Hampshire “Micro Roastery.”  On the webiste, they were accompanied by the domain name  “Thus, although the term ‘Ch’arbucks is similar to ‘St’arbucks ‘in sound and spelling’ when compared out of context, the marks are only minimally similar as they are presented in commerce.”  The cases cited by Starbucks involved junior marks used on their own, without contextual features distinguishing them from the senior mark.  The “minimal degree” of similarity weighed in Wolfe’s favor.

Actual association: the court was unimpressed with Starbucks’s telephone survey asking consumers about the terms “Charbucks” and “Starbucks.”  Of 600 respondents, 30.5% said that they associated the term “Charbucks” with “Starbucks,” and 9% said they associated “Charbucks” with coffee. Asked to name a company or store that they thought might “offer a product called ‘Charbucks,’” 3.1% of respondents said Starbucks.

This survey showed “some association” between the two terms, but didn’t measure how consumers would react to the Charbucks marks as actually used in commerce.  Moreover, this percentage was relatively small for a dilution survey.  The court noted that other percentages have been much higher for successful plaintiffs: VISA/EVISA (73%), NIKE/NIKEPAL (87%), STARBUCKS/SAMBUCK’s COFFEEHOUSE (85%).  “Here, even stand-alone use of the core term “Charbucks” drew only a 30.5% association response.”  In the 9th Circuit’s HOT WHEELS/HOT RIGZ case, the court found 28% to be “significant evidence of actual association.”  But that number was the percentage who thought that HOT RIGZ was made by Mattel/Hot Wheels or with that company’s permission.  When asked a similar question, however, only 3.1% of the respondents in this case gave a similar answer.  Thus, the case “does little to bolster Starbucks' argument that a single-digit source confusion indicator produced by a survey that did not present the relevant terms in context is probative of a likelihood of dilution by blurring.”  Thus, actual association weighed no more than minimally in Starbucks’s favor.

The court then turned to an overall assessment.  The ultimate question was not simply whether there was an association between the marks, but whether the association arising from the similarity of the marks is likely to impair the distinctiveness of the famous mark.  The court noted that trademarks aren’t supposed to create an unlimited right at large, and that dilution law shouldn’t prohibit all uses of a distinctive mark the owner prefers not be made. 

Starbucks’s evidence on distinctiveness, recognition, and exclusivity of use was strong. As the court pointed out, however, these are really indicators of fame, not indicators of likely dilution from any particular defendant’s use: “None of the three, however, is dependent on any consideration of the nature of the challenged marks or any defendant's use of any challenged mark. Thus, although these factors are significant insofar as they establish clearly Plaintiff's right to protection of its marks against dilution, they are not informative as to whether any association arising from similarity of the marks used by Defendant to Plaintiff's marks is likely to impair the distinctiveness of Plaintiff's marks.”

Intent to associate also weighed in Starbucks’s favor, since Wolfe’s principal testified that he meant to evoke an image of dark-roasted coffee of the type offered by Starbucks.  However, similarity of the marks and association between them are important factors, as emphasized by the statutory language defining dilution as “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.”  Thus, the court looked carefully at the relationship between similarity and association as the marks were presented in commerce.

Given the contextual dissimilarity, the survey’s weakness, and the use of other house marks with Charbucks, the court concluded that “the 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.

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