MVS Filewrapper® Blog: Flawed Evidence Undercuts "Charbucks" Trademark Suit

In Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., the U.S. Court of Appeals for the Second Circuit affirmed a district court’s decision denying injunctive relief in Starbucks’ trademark case against Black Bear Micro Roastery over Black Bear’s use of “Charbucks” for coffee. 

 

Starbucks sued Black Bear in 2001, alleging, among other things, trademark dilution in violation of 15 U.S.C. §§ 1125(c), 1127.  In December 2005 the district court ruled in favor of Black Bear and dismissed Starbucks’ complaint.  Starbucks appealed this original decision, but while the appeal was pending, Congress passed the Trademark Dilution Revision Act of 2006 (“TDRA”), which amended portions of the federal trademark law relevant to the case, resulting in the case being remanded.   The district court again ruled in favor of Black Bear, and Starbucks again appealed.  On appeal, the Second Circuit remanded again, instructing the district court to reconsider Starbucks dilution claim based on its interpretation of the TDRA provisions.  Once again, the district court found in favor of Black Bear, and once again Starbucks appealed.

On appeal, the Second Circuit made its own conclusions regarding the elements of Starbucks’ dilution case, under the TDRA.  The appellate court refused to revisit its previous conclusion that the “Charbucks” mark is only minimally similar to Starbucks famous mark.  The court also rejected Starbuck’s arguments that Black Bear’s admitted intent to create an association raises a strong presumption of actual association, and that Starbuck’s proffered survey evidence proved a high degree of association.  The court then conducted its own weighing of the factors, and concluded that—although four of the six factors favored Starbucks—the overall determination based on the weight afforded each factor favored a finding that there was not a likelihood of dilution. The court concluded that what ultimately tipped the balance was that Starbucks meet its burden due to the combination of fundamentally flawed survey evidence and minimal similarity of the marks.

The full court opinion is available here.  

MVS Filewrapper® Blog: Exhausting Patent Rights Without a "Sale"

In LifeScan Scotland, LTD v. Shasta Technologies, LLC, the Federal Circuit clarified the ability of a patnet holder to enforce patent rights in a product it has given away, but not "sold."  Defendant Shasta Technologies appealed from a decision of the United States District Court for the Northern District of California granting LifeScan Scotland a preliminary injunction.  The injunction prohibits Shasta from making, using, or selling blood glucose test strips. The District Court found that Shasta's strips likely indirectly infringed LifeScan's U.S. Patent No. 7,250,105 ("the '105 patent"). The '105 patent does not cover any corresponding test strips. Rather, the technology described in the '105 patent relates to an apparatus for measuring glucose. LifeScan manufactures a system called "OneTouch Ultra" blood glucose monitoring system, which uses this technology. LifeScan distributes 60% of its patented meters through health care providers, who in turn provide the meters to diabetic individuals for free.

   

Shasta does not sell or make blood glucose meters, but instead competes with LifeScan in the market for test strips. Shasta's "GenStrip" test strips are designed to work with LifeScan's meters. LifeScan's suit alleged that Shasta's GenStrip test strips indirectly infringed the '105 patent.  In turn Shasta claimed the sale and distribution of LifeScan's meters exhausted its rights under the method patent because the meters substantially embody the invention.

   

The District Court agreed with LifeScan, granting it a preliminary injunction. The District Court reasoned that patent exhaustion applies only to a "sale" where the patentee received "consideration" in exchange for the patented product. The district court concluded that because LifeScan did not receive consideration when it distributed the patented product, patent exhaustion does not apply.

   

On appeal, the Federal Circuit relied on Quanta Computer, Inc. v. LG Electronics, Inc., which holds that a method claim is exhausted by the sale of a product that "substantially embodies" the invention.  The appellate court also held, as a matter of first impression, that "[w]here a patentee unconditionally parts with ownership of an article, it cannot later complain that the approach that it chose results in an inadequate reward and that therefore ordinary principles of patent exhaustion should not apply."   As a result, LifeScan could not circumvent the application of patent exhaustion principles by distributing a product embodying the patent for free, and reversed the district court’s grant of a preliminary injunction.

   

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