ABSTRACT
The Second Circuit vacated the district court's decision on plaintiffs-appellants' federal dilution-by-blurring claim based on an analysis of three of the six dilution factors under the Trademark Dilution Revision Act ("TDRA"). The Second Circuit concluded that the district court had erred in applying the "degree of similarity" factor by requiring that plaintiffs-appellants show a "substantial similarity" between their famous STARBUCKS mark and the defendant-appellee's CHARBUCKS mark, overturning pre-TDRA Second Circuit case law that had required a showing of "substantial similarity" for a federal dilution claim. The Second Circuit also held that the district court had erred in (1) requiring a showing of bad faith under the "intent to associate" factor; and (2) finding that the absence of "actual confusion" weighed against Starbucks under the "actual association" factor.
CASE SUMMARY
FACTS
Plaintiffs-appellants Starbucks Corporation and Starbucks U.S. Brands, LLC (collectively "Starbucks") own the famous STARBUCKS trademark for coffee and a wide variety of other goods and services. Starbucks has used the mark since 1971, and has extensively promoted and obtained protection for its STARBUCKS mark. It owns approximately sixty U.S. trademark registrations covering the STARBUCKS mark in various forms.
Defendant-appellee Wolfe's Borough Coffee, Inc. d/b/a Black Bear Micro Roastery ("Black Bear") is a family-run business located in New Hampshire that sells coffee. In 1997, Black Bear began selling coffee called "Charbucks Blend," and later began selling "Mister Charbucks" coffee.
The district court ruled against Starbucks on its claims of federal trademark dilution, federal trademark infringement and unfair competition, and state trademark dilution, and Starbucks appealed. On appeal, the Second Circuit reversed the district court's decision on Starbucks's federal dilution-by-blurring claim and remanded the case for further consideration of that claim.
ANALYSIS
Under the TDRA, there are six nonexhaustive factors courts consider in determining whether there is dilution by blurring:
- The degree of similarity between the mark or trade name and the famous mark.
- The degree of inherent or acquired distinctiveness of the famous mark.
- The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark.
- The degree of recognition of the famous mark.
- Whether the user of the mark or trade name intended to create an association with the famous mark.
- Any actual association between the mark or trade name and the famous mark.
15 U.S.C. § 1125(c)(B)(i)-(vi). On appeal, Starbucks contested the district court's holdings on the first, fifth, and sixth factors, and the Second Circuit reversed the district court's application of all three of those factors.
The appeals court addressed the "degree of similarity" factor first. The Second Circuit had earlier held in pre-TDRA cases that a showing of "substantial similarity" was a threshold requirement for a dilution claim. The district court applied this "substantial similarity" standard, finding that the absence of a "substantial similarity" may alone have been sufficient to defeat Starbucks's dilution-by-blurring claim. In this case, the Second Circuit held that the post-TDRA federal dilution statute provided a "compelling reason to discard the 'substantially similar' requirement for federal trademark dilution actions." The court noted that it was "significant that the [post-TDRA] federal dilution statute does not use the words 'very' or 'substantial' in connection with the similarity factor." Moreover, the court acknowledged that interpreting the statutory language "degree of similarity" to mean "substantial similarity" would diminish the significance of the remaining five statutory factors, and thereby be "at odds with the federal dilution statute, which list, 'degree of similarity' as one of several factors in determining blurring." Thus, it found that "the district court erred in focusing on the absence of a "substantial similarity" between the STARBUCKS and CHARBUCKS marks. The Second Circuit also criticized the district court for placing "undue significance on the similarity factor."
The Second Circuit next considered the fifth and sixth dilution-by-blurring factors. For the fifth factor, the Second Circuit held that determination of an "intent to associate" does not require consideration of whether bad faith existed and that the district court erred in requiring such a showing. For the sixth factor, the district court had found that the absence of evidence supporting "actual confusion" weighed against Starbucks. The Second Circuit held that the district court erred in relying on evidence supporting the absence of actual confusion to find an absence of association. Clarifying that the absence or likelihood of confusion is not determinative of trademark dilution, the Second Circuit noted Starbucks's telephone survey indicating that 30% of consumers associated Starbucks with the mark "Charbucks." The Second Circuit, however, did not indicate whether the survey results were sufficient to show likelihood of dilution, instead remanding the factor for determination by the district court.
CONCLUSION
Most significantly, this case clarified the standard under the first factor for a federal dilution-by-blurring claim in the Second Circuit. The appeals court held that the "substantial similarity" test that was applied in pre-TDRA cases in the Second Circuit was not the correct standard to apply to post-TDRA cases. A successful claim of dilution in the Second Circuit does not require a threshold showing of a particular level of similarity (e.g., "substantial similarity"). Rather, courts must weigh the "degree of similarity" as one of the six factors in determining the likelihood of dilution by blurring.
Less than a week after it issued, the Southern District of New York relied on the Second Circuit's Starbucks decision in Miss Universe, L.P. v. Villegas, 2009 WL 4643232 (S.D.N.Y. Dec. 9, 2009), in analyzing a claim of dilution by blurring. The court noted that "[a] district court must now weigh the degree of similarity—substantial or not—between particular marks as just one of the factors that bear on the dilution question. Substantial similarity is not necessarily required, and a lack of similarity is not necessarily dispositive." Applying Starbucks, the district court found that the mark "Miss Asia USA" was not similar enough to "Miss USA" to create a likelihood of dilution when considered with the other relevant dilution factors.
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