In the latest instalment in a long-running trade mark battle in the United States, the US Court of Appeals has upheld a decision that the use of “Charbucks” in relation to coffee did not violate Starbucks’ registered trade marks.

In 1997, U.S. Black Bear Micro Roastery (whose coffee is apparently unusually darkly roasted) developed a dark coffee blend which they called “Charbucks”. An example of their packaging is here:

Click here to view the picture.

Unsurprisingly, global coffee giant Starbucks objected to the use of “Charbucks Blend” claiming trade mark infringement under federal and state laws, as well as dilution of the “Starbucks” trade mark.

The matter has been running since 2001, being subject to a drawn-out appeal process, during which the trade mark infringement claims were dismissed. The dilution claim was recently heard by the U.S. Court of Appeals, where it upheld the earlier rejection of that claim by the US District Court for the Southern District of New York, finding that Starbucks had failed to show that use of “Charbucks” was likely to dilute Starbucks’ trade mark.

The Proceedings

Starbucks’ appeal concerned the Federal Trademark Dilution Act of 1995, a statute which allows the owner of a “famous mark” to enjoin unauthorised use of the mark which is likely to cause dilution by blurring or tarnishment of the famous mark. The Charbucks case concerned a claim of “dilution by blurring”, which has been described as “the whittling away of the established trademark’s selling power and value through unauthorized use by others.” (Tiffany (NJ), Inc. v eBay, Inc., 600 F.3d 93 (2d Cir. 2010)

The Dilution Act required the Court to take into account all relevant factors in considering whether a mark is likely to cause dilution, including:

  1. The degree of similarity between “Starbucks” and “Charbucks”;
  2. The degree of recognition of “Starbucks”;
  3. Whether the user of the mark or trade name intended to create an association with Starbucks; and
  4. Any actual association between “Starbucks” and “Charbucks”..

In particular, Starbucks challenged the District Court’s findings that there was only “a minimal degree of similarity” between “Starbucks” and “Charbucks” and further, that Starbucks had demonstrated only a weak association between the marks.

The Court of Appeal upheld the District Court’s finding that there was minimal similarity between the marks in dispute. The Court held that the way the “Charbucks” mark actually appeared to consumers (i.e. on the packaging of the “Charbucks” coffee) was quite different to that of the Starbucks mark, and the word “Charbucks” was always used alongside other words (i.e. “Charbucks Blend” and “Mister Charbucks”) whereas “Starbucks” is a standalone mark. The Court stated that although minimal similarity between marks was not a barrier to a finding of trade mark dilution, in this case the marks as they appeared to consumers were not similar enough to support that finding.

On the issue of association, the Court upheld the District Court’s finding that the actual association between “Starbucks” and “Charbucks” was relatively small. While the Court accepted the fact that Black Bear had chosen the name “Charbucks” with the intent of creating an association with Starbucks, it was ultimately decided that Black Bear’s intentions were not definitive proof of an “actual association” between the two marks.

The Court also remarked on the use of consumer surveys as evidence. Starbucks undertook a telephone survey in which 30.5% of respondents associated “Charbucks” with Starbucks. Under the United States’ law, a plaintiff is required to show the use of a mark in commerce is likely to cause dilution, however the survey did not present the mark as it appeared to consumers (i.e. on packaging and alongside other words such as “Mister” and “Blend”). As a result, the Court could not attach significant weight to the survey results. The Court also stated that even if it could attach weight to the survey, a 30.5% consumer association rate would not be a high enough response to make a finding of trade mark dilution. The Court cited cases which were able to show between 70 and 90 per cent consumer association percentages.

Australian Law Comparison

Given Starbucks is a global brand, we thought it only fair to consider the case from an Australian perspective.

Unlike the U.S., Australia does not provide protection against trade mark dilution per se, although the “well-known” trade marks provision in section 120(3) of the Trade Marks Act 1995 (Cwth) (“TMA”) serves a similar function.

However, in this case, because Black Bear was using “Charbucks” in relation to coffee (being goods in respect of which the “Starbucks” trade mark is actually registered), we think that Starbucks would have been able to pursue a more straightforward claim of infringement under s120(1) of the TMA if this case had arisen in AustraliaUnder section 120(1), Starbucks would have had only to establish substantial or deceptive similarity between “Starbucks” and “Charbucks”, with factors such as actual or intended association being of very limited relevance. Given the strong visual and aural similarities between “Starbucks” and “Charbucks”, we think Starbucks would have had a very strong claim of infringement if this claim had arisen locally.

The Charbucks decision is interesting for a number of reasons, not least because of the finding of minimal similarity between “Charbucks” and “Starbucks”. To Australian eyes (and ears) this finding appears, with the greatest respect to the U.S. Court of Appeals, perverse given the strong visual similarity and the fact that the marks are aurally almost identical.

Alex Noonan