In a ruling filed on December 23, 2011, the U.S. District Court for the Southern District of New York held that Starbucks had "failed to carry its burden of demonstrating its entitlement to relief under the amended Federal Trademark Dilution Act." The victor in the case, Wolfe’s Borough Coffee, Inc., had used the marks "Mister Charbucks," "Mr. Charbucks" and "Charbucks Blend" for one of its blended coffee products, which the "Defendant’s Principal testified during trial’ was ‘meant to evoke an image of dark-roasted coffee of the type offered by Starbucks."
The first District Court opinion in this case was issued in 2005 just prior to Congress’s passage of the Trademark Dilution Revision Act of 2005. As a result of the TDRA’s enactment, the United States Court of Appeals for the Second Circuit vacated the lower court’s decision, which ruled in favor of Wolfe’s Borough. In 2008, the District Court again found for the defendant stating that Starbucks had "failed to carry its burden of demonstrating its entitlement to relief on any of its federal and state trademark infringement, dilution and unfair competition claims." The case was again brought before the Second Circuit, which affirmed the District Court’s decision with respect to Starbuck’s trademark infringement, state dilution and state unfair competition claims, but vacated the District Court’s decision with respect to the federal trademark dilution claim and remanded the case back to the District Court on Starbuck’s federal claim of "dilution by blurring."
Dilution by blurring, not to be confused with dilution by tarnishment, refers to the situation that arises when consumers tend to associate a mark with another or second source of goods even though they understand that the sources are distinct. This, consequently, could result in a dilution of the senior user’s mark. Tarnishment, on the other hand, occurs when the junior user’s use of the mark tarnishes the positive perception of the mark. The FTDA uses a six, non-exclusive, factor test in a blurring analysis. The factors include, "(i) the degree of similarity between the mark or trade name and the famous mark; (ii) the degree of inherent or acquired distinctiveness of the famous mark, (iii) the extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv) the degree of recognition of the famous mark, (v) whether the user of the mark or trade name intended to create an association with the famous mark; and (vi) "any actual association between the mark or trade name and the famous mark." The District Court, in its latest opinion, found that only four of the factors weighed substantially, or at least not minimally, in favor of Starbucks. The court, however, found that the evidence did not support Starbucks with respect to either the "similarity" factor or the "actual association" factor. With regard to similarity, the court noted that the "Charbucks" name was not used as a standalone term, was always preceded or followed by the terms "Mister," "Mr." or "Blend," was used in conjunction with Wolfe’s Borough’s Black Bear mark, and was used on packaging that employed a color scheme different from Starbucks. The court noted other distinctions as well ultimately concluding, "The minimal degree of similarity between the marks as they are used in commerce weighs in Defendant’s favor." With regard to the "actual association" factor, the court was not swayed by a telephone survey, which it believed "did not measure how consumers would react to the Charbucks marks as they are actually packaged and presented in commerce,’ thus finding that ‘after careful consideration of the survey results and methodology, that the actual association factor weighs no more than minimally in Plaintiff’s favor." The court writes, "After considering all of the evidence and noting the dissimilarity of the marks as used in commerce, the weakness of the survey evidence, and the fact that consumers encounter Defendant’s Charbucks term only in conjunction with other marks unique to Defendant, the Court holds that the Charbucks mark are only weakly associated with the minimally similar Starbucks marks and, thus, are not likely to impair the distinctiveness of the famour Starbucks mark. In other words, Plaintiff has failed to carry its burden of proving that Defendant’s use of its marks, as evidenced on the record before the Court, is likely to cause dilution by blurring."
The District Court’s opinion underscores the role of context as it relates to "similarity" in the six factor "blurring" analysis, as well as the importance of recreating the actual packaging and presentation in commerce in developing ones surveys as evidence of actual association. You can read the court's opinion here.