Trademark Law | Expert Legal Commentary
January 29, 2010
Starbucks v. Wolfe’s Borough Coffee: “Substantial Similarity” Not Required to Prove Dilution by Blurring
Starbucks Corp. v. Wolfe’s Borough Coffee, Inc.
Tom Zuber of Zuber Lawler & Del Duca and Jan Jensen
The Second Circuit U.S. Court of Appeals held that the Trademark Dilution Revision Act of 2005 (“TDRA”) does not require proof of “substantial similarity” between the marks in question for a trademark owner to establish dilution by blurring. In Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97 (2nd Cir. 2009), the Second Circuit vacated a district court ruling, finding that the District Court improperly applied and weighed the six factors that determine a dilution by blurring claim. In particular, the Second Circuit held that the TDRA does not require that the infringing mark be “substantially similar” to the famous mark, nor does it require that the infringer acted in “bad faith” in using his mark.
Starbucks is the world’s largest coffee retailer, with about 8,700 retail stores around the world. The company, founded in 1971, prominently displays its registered “Starbucks” marks on all of its products and throughout its stores. Starbucks has spent over $136 million displaying, promoting, and protecting its products and activities marketed exclusively under its famous marks.
Wolfe’s Borough Coffee, Inc., d/b/a Black Bear Micro Roastery, is a family-run coffee manufacturer and retailer in New Hampshire. It sells its products through mail and Internet orders, and in a handful of New England supermarkets and coffee shops. In 1997, Black Bear began selling a “dark roasted blend” of coffee called “Charbucks Blend,” which was later changed to “Mister Charbucks.” The packaging showed a picture of a black bear with large-font words “BLACK BEAR MICRO ROASTERY” on the front, as well as other Black Bear taglines and logos.
Soon after Black Bear made its first Charbucks sales, Starbucks sent Black Bear a cease-and-desist letter. Black Bear representatives claimed that they felt “wrongly threatened by Starbucks,” and they kept selling the Charbucks coffee. After negotiations between the parties failed, Starbucks filed suit in the U.S. District Court for the Southern District of New York in 2001, alleging trademark infringement and dilution, unfair competition, and other violations of both the Lanham Act and state law. In 2005, after a two-day bench trial, the District Court found in favor of Black Bear on all counts. Starbucks appealed.
While Starbucks’ initial appeal was pending, Congress amended the dilution provisions of the Lanham Act by enacting the TDRA in response to the Supreme Court’s decision in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003), which held that dilution claimants must prove “actual dilution.” In contrast to the holding in Moseley, the TDRA codifies that a cause of action for federal trademark dilution only requires proof of “likelihood of dilution.” In light of the TDRA, the Second Circuit vacated the District Court’s judgment on appeal and remanded for further proceedings. On remand, the District Court determined that, even under the new TDRA standard, Starbucks still could not prove a likelihood of dilution, and the District Court again entered judgment in favor of Black Bear on all counts. Starbucks appealed for the second time. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., 588 F.3d 97 (2nd Cir. 2009).
“Substantial Similiarity” Not Required for Blurring
On the second appeal, the Second Circuit affirmed the District Court’s decision as to all counts except Starbucks’ federal dilution by blurring claim, finding that the District Court errored based upon the TDRA federal dilution statute.
The TDRA created the first federal statutory definition of dilution by blurring: an “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.” 15 U.S.C. §1125(c)(2)(B). The TDRA sets forth six non-exhaustive statutory factors for courts to consider when determining whether a likelihood of dilution exists:
1) The degree of similarity between the allegedly infringing mark and the famous mark;
2) The degree of inherent or acquired distinctiveness of the famous mark;
3) The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark;
4) The degree of recognition of the famous mark;
5) Whether the user of the allegedly infringing mark intended to create an association with the famous mark;
6) Any actual association between the allegedly infringing mark and the famous mark.
15 U.S.C. § 1125(c)(2)(B)(i)–(vi). The District Court found that the 2nd, 3rd, and 4th factors all favored Starbucks, and those findings were not challenged on appeal.
Regarding the first factor, the District Court had held that the marks were not “substantially similar,” and that this fact “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.” Id. at 107. The Second Circuit rejected this analysis, holding that “substantial similarity” is not required under the TDRA. The Second Circuit found “it significant that the federal dilution statute does not use the words ‘very’ or ‘substantial’ in connection with the similarity factor to be considered in examining a federal dilution claim.” Id. at 108. Moreover, “[c]onsideration 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.” Id.
The Second Circuit found that placing undue significance on the similarity factor in a way that would minimize the relevance of the other five statutory factors was “at odds with the federal dilution statute, which lists lists ‘degree of similarity’ as one of several factors . . ..” Id. at 109. The Second Circuit added that the District Court’s error in focusing on “substantial similarity” “likely affected its view of the importance of the other factors in analyzing the blurring claim, which must ultimately focus on whether the association, arising from the similarity between the subject marks, ‘impairs the distinctiveness of the famous mark.’” Id. (emphasis in original, citing the TDRA).
The Second Circuit also took issue with the District Court’s analysis of the fifth factor, which assesses whether the alleged infringer intended to create an association with the famous mark. The District Court had found in favor of Black Bear on this factor, even though Black Bear did intend to associate “Charbucks” with “Starbucks,” because the District Court found that Black Bear did not act with “bad faith” in doing so. But the Second Circuit found that the “intent to associate” does “not require the additional consideration of whether bad faith corresponded with that intent.” Id.
As to the sixth factor regarding actual association, the Second Circuit determined that the District Court misapplied this factor as well. The District Court had found no “actual association” between Charbucks and Starbucks because there was no “actual confusion” between them, but the Second Circuit noted that “actual confusion” has little to do with “actual association.” Id. Starbucks had presented evidence indicating that about 30% of consumers, who were surveyed associated the word “Charbucks” with the brand “Starbucks.” Id. The Second Circuit found that “the absence of actual or even of a likelihood of confusion does not undermine evidence of trademark dilution.” Id.
The Second Circuit vacated the District Court’s ruling on the dilution by blurring claim but affirmed the District Court’s decision on all other claims, including Black Bear’s claim of parody and Starbucks’ state law claims, and remanded the case for further proceedings.
The Starbucks case and the Second Circuit’s analysis of the 1st, 5th, and 6th factors highlight the significance of the TDRA for owners of famous marks. Based upon the Second Circuit’s findings that there are no “substantial similarity” and no showing of bad faith requirements, owners of famous marks may be able to rely on dilution claims to pursue marks in certain cases where they were previously unable to do so.
On the other hand, Starbucks may raise concerns for some smaller businesses owners, who may question whether a big corporation with a famous trademark will be more inclined to pursue them to abandon their brands even when the similarities between the marks are minimal.
If you are concerned about the legality of your brand in light of this case, you should consult with an experienced trademark attorney.
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