Was Dumb Starbucks Smart?

by Jaburg Wilk
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Comedian Nathan Fielder created a media stir, and long lines, when he opened a coffee shop called Dumb Starbucks.  The establishment was quickly closed down for not having a permit. In the short time that the shop was open, legal commentators everywhere speculated about whether Starbucks would sue for trademark infringement, and if it did, how the case would turn out. The shop looked virtually identical to Starbucks in every way, using the chain’s logos, product names and look and feel.  The difference, of course, was the prominent placement of the word “dumb” before each of the trademarks.  Another difference reported by the media was that the coffee and hot chocolate were of low quality.

The stunt makes most people wonder what the rules are and what would have happened if Starbucks had filed a lawsuit.  The first concept to consider is the classic trademark infringement analysis.   A trademark is a word, symbol, picture, phrase or even color scheme that identifies the source of goods or services.  Starbucks is the owner of multiple federally registered trademarks, many of which were used by Dumb Starbucks without permission.  It is trademark infringement to use a competitor’s trademark without permission in a manner that is likely to cause consumers to be confused as to source, sponsorship or affiliation.  Also, when a trademark is famous, uses that dilute the trademark are also actionable.

The alleged infringer must be a competitor for there to be traditional trademark infringement.  Thus, it is not infringement when an unhappy customer uses a company’s trademark to openly complain about the company.  Had Mr. Fielder created a magazine, website or newsletter called Dumb Starbucks as a forum to express his opinion about Starbucks, it would have been highly unlikely that Starbucks could prove the competitive injury necessary to prevail in a trademark infringement claim.  In that case, Starbucks might have a defamation claim if Mr. Fielder had made any false statements of fact about Starbucks in his content.  Otherwise, Mr. Fielder would have clearly been protected by the First Amendment.

But Mr. Fielder opened a coffee shop; a directly competing business. And he did it using not only the Starbucks name, but also its logos, product names and color scheme. Starbucks would have had no difficulty proving he was competing with them.  What would have been very difficult, if not impossible, to prove would have been a likelihood of confusion.  When it is a close call, likelihood of confusion is often proven by a consumer survey.  If a substantial number of consumers surveyed believe there is an affiliation or sponsorship, then there is a likelihood of confusion. Here, it really wasn’t a close call and a survey would probably not have yielded favorable results for Starbucks.  No one thought that Starbucks had opened a coffee shop called Dumb Starbucks. 

The only theory left for Starbucks under existing case law was a dilution claim.  Anti-dilution laws only protect famous trademarks.  Starbucks is a famous trademark.  Anti-dilution statutes protect the value of the trademark from blurring and tarnishment. Blurring is association arising from the similarity between the two trademarks that impair the distinctiveness of the famous mark. In determining whether a trademark is likely to cause dilution by blurring, courts will consider how similar the two trademarks are, how distinct and famous the famous mark is, and whether the new user of the trademark intended to create an association with the famous mark.  Dilution by tarnishment is association arising from the similarity between a trademark and a famous mark that harms the reputation of the famous mark.

So far, it sounds like Starbucks would have had a pretty good anti-dilution claim against Dumb Starbucks.  If you have been following the news story, though, you know that Dumb Starbucks keeps saying “it’s a parody.”   Here’s why.  The federal statute on dilution has an exclusion that provides that identifying and parodying, criticizing, or commenting upon the famous mark owner or the good or services of the famous mark owner is not actionable as dilution by blurring or tarnishment. Dumb Starbucks seems to have been well-aware of the law in devising this media stunt. At first blush, it is hard to argue that Dumb Starbucks was not a parody of Starbucks.  On deeper look though, I haven’t found any cases that apply the parody defense to a direct competitor selling an identical product using a trademark that is comprised of the exact famous trademark. The point of the parody defense is that the activity is protected by free speech. In America, we take our right to make fun of others very seriously.   Here, however, if the activity was more about selling coffee than free speech, that might be a chink in the parody armor.                

The final consideration that the Dumb Starbucks shop raised was the potential for a change in existing case law.  Lawyers like the saying, “bad facts make bad law” because courts tend to want to “do the right thing” and provide a remedy for what seems like a wrong.  These facts are the type of facts that might make a judge create new precedent.  There is the feeling that it was wrong for Mr. Fielder to use Starbucks’ property and reputation to compete with Starbucks. It would have been interesting to see what the courts would have done with this fact pattern.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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