The U.S. Court of Appeals for the Second Circuit, finding that marks do not have to be substantially similar to establish likelihood of dilution under the Trademark Dilution Revision Act of 2006 (TDRA), reversed the district court’s holding that the mark “MR. CHARBUCKS” did not create a likelihood of dilution by blurring of the “STARBUCKS” marks. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., Case No. 08-03331 (2nd Cir., Dec. 3, 2009) (Miner, J.).

The defendant, Wolfe’s Borough Coffee, doing business as Black Bear Micro Roastery (Black Bear), sells roasted coffee beans and related goods via mail, internet and a few New England supermarkets. In 1997, Black Bear began selling a dark roasted coffee called “Charbucks Blend” and then later “Mister Charbucks.” A few months after Black Bear began selling its “Charbucks” coffee, Starbucks sent a cease-and-desist letter. When negotiations broke down, Starbucks filed complaint alleging trademark dilution, trademark infringement and unfair competition under state and federal law.

After a bench trial, the district court held that Starbucks failed to prove it was entitled to relief for any of its claims. Starbucks appealed. While its appeal was pending, Congress passed the TDRA. The Second Circuit vacated the district court’s judgment and remanded for further proceedings in accordance with the TDRA. On remand, the district court once again ruled in favor of Black Bear. Starbucks appealed that judgment as well.

On appeal, the Second Circuit vacated the judgment only as to the district court’s ruling on the likelihood of dilution by blurring under federal law. The Second Circuit found that the district court erred in considering whether the marks were substantially similar for purposes of determining likelihood of dilution by blurring. The TDRA lists six non-exhaustive factors for determining likelihood of 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 and any actual association between the mark or trade name and the famous mark.

The Second Circuit found that requiring consideration of the “degree” of similarity between the marks suggested that the similarity between the marks, while a factor, need not be substantial for a claim to succeed. Moreover, the court reasoned that if substantial similarity was all that was required, the remaining five factors would be irrelevant. The court also concluded that the district court erred in considering whether Black Bear had a bad-faith intent to create an association with Starbucks, because fifth factor merely requires intent to associate. Finally, the Court found that the district court erred its analysis of the sixth factor of “actual association” because absence of a likelihood of confusion does not undermine Starbucks’ survey evidence that “Charbucks” called to mind “Starbucks.”