Letter from AmeriKat - Trade Mark Dilution

The frosty and blustery rain of the past three weeks has left the AmeriKat disheartened with her eyes peeled to the sky to catch any small sliver of sun to escape from the stubbornly persistent dour clouds. In these cold dark months of winter the AmeriKat is at least able to take solace in people, things and events that can warm her paws. Even on the dreariest day prowling through Marylebone High Street and the oak shelves and floors of Daunt Books with a great friend can warm her spirit. The harsh reality of the AmeriKat’s early weekday mornings are softened by clasping her cold paws around a Starbucks venti skinny chai tea latte, no water, extra chai (before any witty comments are made about her order, the AmeriKat knows of at least one other person who orders that identical drink).

Charbucks May Be Diluting Starbucks

Starbucks have also been able to warm their spirit this week with the news on Thursday that their 2001 lawsuit to stop a family-owned New Hampshire coffee roaster from selling a blend called “Charbucks” was revived. The U.S. Court of Appeals in New York vacated part of a 2008 federal appeals court ruling that had favored the Black Bear Micro Roastery. In their 28 page judgment, the US Court of Appeals held 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.”

Under federal law an owner of a famous, distinctive mark is entitled to an injunction against the user of a mark that is likely to cause dilution of the famous mark (15 USC§ 1125(c)(1)). It was not disputed that the Starbucks marks were famous. At issue in the case was whether there wnce of dilution. Under the federal statute dilution is actionable in two cases: (1) dilution by “blurring” and (2) dilution by “tarnishment”. Regardless of the presence or absence of actual or likely confusion or economic injury, dilution by blurring can be found if an “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark” occurs (15 USC § 1125(c)(2)(B)). Under the statute, there are six non-exhaustive factors that a court considers when determining whether there is dilution by blurring (15 USC § 1125(c)(2)(B)(i)-(vi)). These are:

1. The degree of similarity between the mark or trade name 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 mark or trade name intended to create an association with the famous mark.
6. Any actual association between the mark or trade name and the famous mark.

The District Court found that factors 2-4 inclusive favored Starbucks. It was the first factor, the degree of similarity between the marks, which was subject to the appeal. When considering the degree of similarity between the marks a court has consideration for the differences in the ways the marks are presented and “the overall impression created by…the context in which they are found” (Playtex Prods (2004); Star Indus(2005)). The Court of Appeals therefore stated that:

“Although Charbucks is similar to Starbucks in sound and spelling, it is evident from the record that the Charbucks Marks — as they are presented to consumers — are minimally similar to the Starbucks Marks. The Charbucks line of products are presented as either “Mister Charbucks” or “Charbucks Blend” in packaging that displays the “Black Bear” name in no subtle manner, and the packaging also makes clear that Black Bear is a “Micro Roastery” located in New Hampshire.”

However, the US Appeals Court acknowledged that there was still some obvious similarity between the marks and “the existence of some — but not substantial — similarity between the subject marks may be sufficient in some cases to demonstrate a likelihood of dilution by blurring. Thus, upon reconsideration of the application of the blurring factors, the absence of “substantial similarity” will not preclude the District Court from concluding that there is a likelihood of an “association arising from the similarity between[the two marks].

Prior to the Trademark Dilution Revision Act 2005 (TDRA), the courts had placed substantial reliance on the similarity of marks in determining infringement under this head. After the TDRA, the Court stated that:

“Although “similarity” is an integral element in the definition of “blurring,” we find 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…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.”

The Court then went on to consider factors 5 and 6 – the remaining disputed factors – in which the Court also held the District Court erred in their consideration. The Court then considered Starbucks’ claims for tarnishment in that the name “Charbucks” invokes negative impressions in consumers of “bitter, over-roasted coffee.” The Court did not find favor in this argument and stated that the fact “Charbucks line of coffee is marketed as a product of ‘very high quality’ – as Starbucks also purports its coffee to be – is inconsistent with the concept of ‘tarnishment’.

( Above right: Starbucks is also guilty of dilution...by "ice cubes")

The moral of the story, therefore, is that a finding of little or no ‘substantial similarity’ between the two marks will not preclude a finding of dilution by blurring. All that needs to be satisfied is that there is at least some existence of similarity between the two marks – whether it is substantial or not is irrelevant in this consideration.

The case has now been remanded for further proceedings. For further information please see this article in the New York Law Journal.