Our last Client Alert discussed the recent federal district court holding that use of the VICTOR'S SECRET trademark by a purveyor of pornographic videos and sex toys is not likely to dilute the famous VICTORIA'S SECRET trademark by blurring, but is likely to dilute the trademark by tarnishment. See Proskauer June 9 Client Alert, discussing V Secret Catalogue, Inc. v. Moseley, No. 3:98 CV-395-S, 2008 U.S. Dist. LEXIS 40713 (W.D. Ky. May 19, 2008). On the heels of this decision, a court in the Southern District of New York has now held that the MISTER CHARBUCKS trademark for roasted coffee beans and other blended coffee products sold over the internet, in retail stores, and via mail order is not likely to dilute by either blurring or tarnishment the STARBUCKS trademark owned by the famous retail coffee chain. Starbucks Corp. v. Wolfe's Borough Coffee, Inc., No. 01 Civ. 5981 (LTS)(THK), 2008 U.S. Dist. LEXIS 44147 (S.D.N.Y. June 5, 2008) (Swain, J.). Taken together, these two decisions indicate that even under the "likelihood of dilution" standard that prevails following the 2006 Trademark Dilution Revision Act (the "TDRA"), courts remain reluctant to find dilution by blurring where there is no likelihood of consumer confusion, even where the plaintiff's trademark is unquestionably famous and distinctive.
The Starbucks case goes back several years. In December 2005, following a two-day hearing, the court held that there was no likelihood of consumer confusion and thus no trademark infringement, and that defendant's trademark was not actually diluting plaintiff's trademark. In October 2006, however, the TDRA was enacted, which made clear that "likelihood of dilution" is the relevant standard, not actual dilution. In the wake of this new statute, the Second Circuit vacated the December 2005 decision and remanded to the district court. Following remand the parties submitted briefs but agreed that no further evidentiary proceeding was required (throughout the entire case, Starbucks has sought only injunctive relief, not damages).
The court began its dilution analysis by quoting the relevant portions of the TDRA, including the statutory definition that dilution by blurring is "an association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark." Id. at *9 (emphasis in original).
The court proceeded to make several factual findings in Starbucks' favor that are notable considering that the court still found no likelihood of dilution, namely, that (1) "defendant's principal intended, in adopting the 'Charbucks' moniker, to evoke associations with the sort of dark-roasted coffee purportedly favored by Starbucks' clientele"; and (2) "survey results do show, as explained in the December 2005 decision, some consumer association between the spoken, standalone term 'Charbucks' and Plaintiff's Starbucks mark." Id. at *10, *15. The court also held that the distinctiveness and degree of recognition of the STARBUCKS trademark and Starbucks' substantially exclusive use of its trademark all weighed in Starbucks' favor in the blurring analysis.
However, the court heavily emphasized the similarity of the trademarks, or in this case (in the court's view), the lack thereof. The court held that "[t]here is no evidence that Defendant uses 'Charbucks' as a standalone term. Rather, it is used with 'Mr.' or 'Mister' on Defendant's distinctive packaging or in product lists. For these reasons, the marks at issue here are not substantially similar. This dissimilarity alone is sufficient to defeat Plaintiff's blurring claim, and in any event, this factor at a minimum weighs strongly against Plaintiff in the dilution analysis." Id. at *11-12 (emphasis added; internal cites omitted).
As for defendant's intent, the court held that defendant's intention "to create an association with dark roasted characteristic of the Starbucks product" – was insufficient to demonstrate a likelihood of blurring. Id. at *14. The court invoked a parody-type argument, writing that
the ultimate question is whether the intended association is likely to impair the distinctiveness of Plaintiff's famous mark. Here, the record makes clear that the distinctiveness of the character of Starbucks coffee products is key to the achievement of Defendant's stated goal, which is to signal to purchasers that "Mr. Charbucks" is a very dark roast and unlike Defendant's other coffee products. Such an intended association, especially where, as here, Defendant's mark is not substantially similar to Plaintiff's, is not indicative of bad faith or of an association likely to cause dilution by blurring.
Id. at *14-15 (emphasis added). Accordingly, the court held that the "intent" factor favored defendant.
As for whether there was an actual association between the parties' trademarks, the court addressed Starbucks' survey evidence referenced above that showed "some consumer association" between the CHARBUCKS and STARBUCKS trademarks. However, the court again noted that defendant's intended evocation in consumers' minds "through its use of a playful dissimilar mark . . . is dependent on an identification of those marks with Starbucks' own products," and thus this factor did not favor Starbucks. Id. at *15-16. For all of the reasons discussed above, the court denied injunctive relief on Starbucks' blurring claim, holding that the record was insufficient to demonstrate that the MISTER CHARBUCKS trademark was "likely to impair the distinctiveness" of the STARBUCKS mark. Id. at *16.
As for dilution by tarnishment, the court first recited the statutory definition, namely, "an association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark." Id. at *19 (emphasis in original). Starbucks pointed to its survey evidence "indicating that of the 30.5% of respondents who had an immediate association between 'Charbucks' and 'Starbucks,' 62% said they would have a negative impression of a coffee called 'Charbucks.'" Id. at *21. The court responded, however, that "[t]his statistic says nothing, however, about the likelihood that those respondents' negative impression of a coffee called 'Charbucks' would affect detrimentally their perception of Starbucks," and that "[i]t would be just as reasonable to conclude that their negative impressions of a hypothetical coffee named 'Charbucks' were based on their strong allegiance to Starbucks, something Defendant observes by noting that 71% of those respondents had a positive impression of Starbucks." Id. at *21-22. The court also observed that "the record at trial established that Defendant's product is a high-quality coffee with rigorous quality control mechanisms," and thus "Defendant's actual 'Mr. Charbucks' coffee product is of such a quality that its association with Starbucks is unlikely to be damaging." Id. at *22. For these reasons, the court rejected Starbucks' dilution by tarnishment claim.
In concluding its decision, but without additional analysis, the court reinstated its December 2005 holding that rejected Starbucks' federal trademark infringement and unfair competition claims, holding that Starbucks "is unable to prove the requisite likelihood of consumer confusion as to source, sponsorship, or association of Defendant's goods with the Starbucks mark." See id. at *22-23.
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