Townsend’s clients who own famous trademarks received good news recently from the Second Circuit Court of Appeals. In Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., (2nd Cir. 2009) the Second Circuit clarified that federal anti-dilution law does not limit its protection to likely dilution caused by marks that are identical or substantially similar to the famous mark. The Court held that the Trademark Dilution Revision Act of 2006 (TDRA) does not necessarily require that the subject marks be “substantially similar” for a famous brand owner to sustain a dilution by blurring claim. Rather, courts should consider the “degree of similarity” in concert with the five other non-exclusive factors outlined in the TDRA.

In April 1997, Wolfe’s Borough Coffee, Inc. adopted its “Charbucks” mark, selling coffee under the name “Charbucks Blend,” and later “Mr. Charbucks.” Starbucks promptly challenged the competing coffee producer’s use of the “Charbucks” marks, asserting a federal trademark dilution claim, among other claims, to protect its famous “Starbucks” marks. The district court found that the “Charbucks” marks were only “minimally similar” to the “Starbucks” mark. The district court held: “This dissimilarity alone is sufficient to defeat [Starbucks’] blurring claim, and in any event, this factor at a minimum weighs strongly against Plaintiff in the dilution analysis.” Starbucks Corp. v. Wolfe’s Borough Coffee, Inc. (S.D.N.Y. 2008). On appeal, the Second Circuit agreed that the “Starbucks” and “Charbucks” marks were only minimally similar, partly because of the products’ dissimilar packaging. It concluded, however, that the district court “erred to the extent it required ‘substantial similarity’ between the marks.” Starbucks Corp., (2nd Cir. 2009). The Second Circuit relied on the TDRA’s plain language: The statute calls for analysis of the “degree of similarity,” which “does not lend itself to a requirement that the similarity between the subject marks must be ‘substantial’ to succeed.” The Court remanded, instructing the district court to balance the TDRA’s six factors:

  1. the “degree of similarity” of the marks,
  2. distinctiveness of the famous mark,
  3. exclusivity of use of the famous mark,
  4. degree of recognition of the famous mark,
  5. whether the defendant intended to create an association with the famous mark, and
  6. any actual association between the marks.

The Second Circuit acknowledged that lower courts had some justification for their uncertainty about whether a threshold level of similarity was necessary for a dilution claim. It attributed the adoption of a “substantially similar” requirement to “the lack of guidance under the former federal statute and the existence of a ‘substantially similar’ requirement under state dilution statutes.” Under the TDRA, however, if the courts continued to require substantial similarity, “the significance of the remaining five factors would be materially diminished.” This does not mean that similarity is not an important factor. The opinion cautions that similarity between the subject marks will continue to work as “an integral element in the definition of ‘blurring.’”

The Ninth Circuit’s holdings on this issue thus far have restated its rule under the original federal dilution statute; that is, famous marks only are protected from likely dilution caused by “identical or nearly identical” marks. See Jada Toys, Inc. v. Mattel, Inc., (9th Cir. 2008); see also Perfumebay.com Inc. v. eBay, Inc., (9th Cir. 2007). None of those decisions, however, have squarely addressed the arguments or reasoning advanced in the Starbucks decision. The Ninth Circuit is expected to take up this issue directly in the pending appeal in Levi Strauss & Co. v. Abercrombie & Fitch Trading Co. (9th Cir. Docket No. 09-16322).