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Starbucks v. Charbucks: New Standard for Trademark Dilution (NY)


December 7, 2009 at 3:29:23 PM

The defendant is a small, New Hampshire based coffee company that developed a dark roast they decided to call Charbucks blend. Starbucks didn’t like the name and sued, and its primary claim was for "dilution" due to "blurring." Generally, dilution by blurring occurs when a mark or trade name is so similar to a famous mark that it impairs the distinctiveness of the famous mark. Hypothetical examples of blurring cited by other courts include Dupont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, and Bulova gowns.
During a bench trial in federal court of <i>Starbucks Corp. v. Wolfe’s Borough Coffee</i>, a consumer research scientist testified that a study he performed revealed -- not surprisingly -- that most people think of Starbucks when they hear the name Charbucks. The Court, however, dismissed the Complaint.
While the appeal was pending, Congress passed the Trademark Dilution Revision Act of 2005 (TDRA), which provided that the owner of a famous, distinctive mark is entitled to an injunction when the use of the offending mark is “likely to cause dilution." The TDRW was passed in response to a Supreme Court ruling that held “actual dilution” must occur in order to establish a claim. The Starbucks case was remanded back to the trial court but the outcome was the same, and the Complaint again dismissed.
However, on appeal, the Second Circuit held the trial court incorrectly used the pre-TDRA standard that required a “substantial similarity” between the marks for a plaintiff to prevail on a dilution claim, as opposed to the “likely” standard in the new statute. The district court also erred by disregarding the defendant’s intention to associate with Starbucks because there was no “bad faith” – an unnecessary element. Further, the district court should have credited the Starbucks study that showed more than 30% of consumers associated Charbucks with Starbucks, even though very few confused the two names. The appellate court rejected any claims that the Starbucks name was “tarnished” however.
The case was sent back to the district court to consider the appropriate standard. We expect the outcome will be the same. But the appellate court made clear that TDRA has diluted the standard for dilution claims.
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