The MR. CHARBUCKS dilution saga continues. (See previous STL posts on the case here and here.)
In 2005, the Southern District of New York found that defendant Wolfe’s Borough Coffee, Inc.’s MR. CHARBUCKS trademark for coffee did not dilute Starbucks Corp.’s STARBUCKS trademark under the former Federal Trademark Dilution Act (FTDA).
Starbucks appealed. While the appeal was pending, Congress enacted the Trademark Dilution Revision Act (TDRA), which provided a new framework for judging the existence of dilution, including substituting a “likelihood of dilution” standard for the “actual dilution” standard the district court had applied under the FTDA. In response, the Second Circuit vacated the district court’s findings and remanded for further proceedings.
On remand in 2008, the Southern District of New York applied the new standard and found no likelihood of dilution by blurring or dilution by tarnishment — the two forms of dilution expressed in the TDRA. Starbucks again appealed.
On Dec. 3, the Second Circuit affirmed the district court’s finding that Starbucks had failed to establish a likelihood of dilution by tarnishment, in large part because Wolfe’s used MR. CHARBUCKS to promote high quality dark-roasted coffee.
However, the Second Circuit found the district court erred in applying the statutory factors when it determined that Starbucks had failed to establish the existence of a likelihood of dilution by blurring. The court remanded the issue once again to the Southern District of New York for further proceedings consistent with the appellate court’s analysis.
Here’s the analysis in a nutshell:
The Second Circuit found the district court did not clearly err in finding the CHARBUCKS marks were minimally similar to Starbucks’ marks. “Upon its finding that the marks were not substantially similar, however, the District Court concluded that ‘[t]his dissimilarity alone is sufficient to defeat [Starbucks’] blurring claim, and in any event, this factor at a minimum weighs strongly against [Starbucks] in the dilution analysis.’ We conclude that the District Court erred to the extent it required ‘substantial’ similarity between the marks, and, in this connection, we note that the court may also have placed undue significance on the similarity factor in determining the likelihood of dilution in its alternative analysis.”
The Second Circuit found the court’s requirement that the marks be “substantially similar” no longer applies in light of the TDRA. “Indeed, one of the six statutory factors informing the inquiry as to whether the allegedly diluting mark ‘impairs the distinctiveness of the famous mark’ is ‘[t]he degree of similarity between the mark or trade name and the famous mark.’ Consideration of a ‘degree’ of similarity as a factor in determining the likelihood of dilution does not lend itself to a requirement that the similarity between the subject marks must be ‘substantial’ for a dilution claim to succeed. Moreover, were we to adhere to a substantial similarity requirement for all dilution by blurring claims, the significance of the remaining five factors would be materially diminished because they would have no relevance unless the degree of similarity between the marks are initially determined to be ‘substantial.’ Such requirement of substantial similarity is at odds with the federal dilution statute, which lists ‘degree of similarity’ as one of several factors in determining blurring. Accordingly, the District Court erred to the extent it focused on the absence of ‘substantial similarity’ between the Charbucks Marks and the Starbucks Marks to dispose of Starbucks’ dilution claim. We note that the court’s error likely affected its view of the importance of the other factors in analyzing the blurring claim, which must ultimately focus on whether an association, arising from the similarity between the subject marks, “impairs the distinctiveness of the famous mark.’
“Turning to the remaining two disputed factors—(1) whether the user of the mark intended to create an association with the famous mark, and (2) whether there is evidence of any actual association between the mark and the famous mark—we conclude that the District Court also erred in considering these factors.
“The District Court determined that Black Bear [Wolfe’s] possessed the requisite intent to associate Charbucks with Starbucks but that this factor did not weigh in favor of Starbucks because Black Bear did not act in ‘bad faith.’ The determination of an ‘intent to associate,’ however, does not require the additional consideration of whether bad faith corresponded with that intent. The plain language of section 1125(c) requires only the consideration of ‘[w]hether the user of the mark or trade name intended to create an association with the famous mark.’ Thus, where, as here, the allegedly diluting mark was created with an intent to associate with the famous mark, this factor favors a finding of a likelihood of dilution.
“The District Court also determined that there was not an ‘actual association’ favoring Starbucks in the dilution analysis. Starbucks, however, submitted the results of a telephone survey where 3.1% of 600 consumers responded that Starbucks was the possible source of Charbucks. The survey also showed that 30.5% of consumers responded ‘Starbucks’ to the question: ‘[w]hat is the first thing that comes to mind when you hear the name ‘Charbucks.” In rejecting Starbucks’ claim of actual association, the District Court referred to evidence supporting the absence of ‘actual confusion’ to conclude that ‘the evidence is insufficient to make the … factor weigh in [Starbucks’] favor to any significant degree.’ This was error, as the absence of actual or even of a likelihood of confusion does not undermine evidence of trademark dilution.”
The Second Circuit separately found MR. CHARBUCKS was not excepted from the TDRA as a parody; the district court did not err in finding no likelihood of dilution under New York state law; and the district court did not err in finding that MR. CHARBUCKS does not create a likelihood of confusion.
The case cite is Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., __ F.3d. __, 2009 WL 4349537, No. 08-3331 (2nd Cir. Dec. 3, 2009).