Starbucks loses 'Charbucks' appeal


By Jonathan Stempel

NEW YORK, Nov 15 (Reuters) - Starbucks Corp hasfailed to persuade a federal appeals court to stop a small,family-owned New Hampshire roaster from selling coffee known as"Charbucks."

Ruling in a case that began in 2001, the 2nd U.S. CircuitCourt of Appeals said Black Bear Micro Roastery and its owner,Wolfe's Borough Coffee Inc., may keep selling "Charbucks Blend,""Mister Charbucks" and "Mr. Charbucks" coffee.

Circuit Judge Raymond Lohier wrote for a three-judge panelthat Seattle-based Starbucks did not deserve an injunction tostop Charbucks sales, having failed to prove that consumerswould be confused through a "blurring" of its brand.

The New York-based appeals court let stand a Dec. 2011finding by U.S. District Judge Laura Taylor Swain in Manhattanthat Charbucks was "only weakly associated with the minimallysimilar" Starbucks trademark.

Many retailers, especially those selling luxury or premiumproducts, file trademark lawsuits against large and small rivalsthey believe are misusing their brands, potentially reducingprofit and revenue and damaging their reputation.

A centerpiece of Starbucks' case had been a phone survey of600 people by the pollster Warren Mitofsky, which found that"the number one association of the name 'Charbucks' in the mindsof consumers is with the brand 'Starbucks.'"

But the 2nd Circuit said the survey was "fundamentallyflawed," and drew its conclusions from how consumers thought of"Charbucks" in isolation, not its real world context.

It said that while 39.5 percent of participants thought of"Starbucks" or "coffee" when asked what came to mind uponhearing "Charbucks," just 4.4 percent said "Starbucks" or"coffee house" when asked who might sell a "Charbucks" product."Grocery store" was the most popular answer to that question.

"Viewed in light of Starbucks' fame," Lohier wrote, "thefact that more survey participants did not think of 'Starbucks'upon hearing 'Charbucks' reinforces the district court's findingthat the marks are only minimally similar."

Starbucks did not immediately respond to requests forcomment.

"This is a sound decision," Christopher Cole, a lawyer atSheehan, Phinney, Bass & Green representing Black Bear, said inan interview. "It flows from the dramatic dissimilarity betweenhow the different products actually appear in commerce and areseen by consumers."

Starbucks has grown since 1971 from a single store inSeattle's Pike Place Market into the world's largest coffee shopchain, with close to 18,000 stores in 60 countries and more than$14.8 billion of annual revenue.

Black Bear is based in Tuftonboro, New Hampshire. It created"Charbucks Blend" in 1997, and now sells dark-roast coffee as"Mister Charbucks" or "Mr. Charbucks."

The 2nd Circuit noted that one reason Black Bear used"Charbucks" was the public perception that Starbucks uses anunusually dark roast for its coffee.

The case is Starbucks Corp et al v. Wolfe's Borough CoffeeInc d/b/a Black Bear Micro Roastery, 2nd U.S. Circuit Court ofAppeals, No. 12-364.

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