Last weekend, residents and tourists in Los Angeles were surprised to see a new coffee shop called “Dumb Starbucks”. The logo of the store was an exact replica of the Starbucks logo, except with the prefix ‘Dumb’. The interiors and menu were done up in a way similar to Starbucks, too. The only difference was that everything on offer at Dumb Starbucks, was for free. The store became an instant rage on Social Media, and in a rather anti-climatic ending, was ultimately shut down because it did not have the requisite health permits. Dumb Starbucks, however, claims that it does not need health permits (as it is a work of art-further discussed below), and if the claim is successful, it may re-open and the chain may even expand.
For those (like us on SpicyIP) seeking answers on the myriad IP questions this spoof raised, Dumb Starbucks had a list of FAQs put up for everyone to see. It was claimed that Dumb Starbucks is not in violation of Starbucks’ IPR on the logo because they were “technically making fun of it, which allows [them] to use their trademarks under a law known as fair use”. The FAQs also clarified that for legal reasons, the coffee shop had to be categorized as a work of parody art, thereby making the coffee “art” and the shop an “art gallery”.
If this incident were to take place in India, it could be pointed out that Dumb Starbucks is in error by conflating trademark and copyright law by invoking fair use, since fair use is a defense only for copyright infringement in India. However, in the USA, fair use is also a defence for trademark dilution. However, it must be kept in mind that the functions of trademark and copyright law are different. Copyright law aims to protect the interests of authors of creative works. The primary purpose of trademark protection is to prevent unfair competition by preventing competitors from taking advantage of consumers’ confusion by using someone else’s name. Hence, there are two aspects worth examining here- the first being whether adding “dumb” to a copyrighted work will constitute fair use, and the second being whether there was trademark dilution in the present case.
Fair Use is an oft-discussed topic on SpicyIP- you can find all previous posts on the topic, here. The gist of the doctrine is that copyrighted work can be used if it is “transformative” in character. The U.S. Courts have been quite inconsistent in determining what constitutes fair use. Judges use the ‘four factor’ test while making this determination, the four factors being a) The purpose and character of your use, b) the nature of the copyrighted work, c) The amount and substantiality of the portion taken and d) the effect of the use upon the potential market.
What is of interest to me here is the fourth factor- the effect of the use upon the potential market. What the courts consider here is whether the parody is depriving the copyright holder of income or undermines a new or potential market (Rogers v. Koons, 960 F.2d 301 (2nd Cir, 1992)). One way of looking at it is whether the parody “fulfills the demand for the original” (Fisher v. Dees, 794 F.2d 432 (9th Cir.1986)). In this case, the menu of Dumb Starbucks was identical to that of Starbucks, and the coffee offered by Dumb Starbucks was completely free. While they may claim that this makes their coffee shop an “art gallery”, what they may have to worry about in a potential law suit is Starbucks claiming that it is losing business to its ‘Dumb’ version, since the latter is essentially offering the same product for free!
If the same incident were to take place in India, the determination would have to be made in accordance with S.52 of the copyright Act and judicial decisions such as Blackwood and Sons (AIR 1959 Mad. 410) and Civic Chandran v. Ammini Amma (1996 PTR 142). Here too, the same tests would apply and the question would turn on whether Dumb Starbucks’ free coffee is affecting the profitability of Starbucks.
Starbucks, however, has surprisingly reacted in a laid-back manner, and has refused to rush into a lawsuit. Perhaps they realize how dicey Fair Use litigation can be; or perhaps they have taken into account that even if Dumb Starbucks directly reduces the demand for Starbucks coffee, any losses incurred would be minimal compared to the costs of going to Court. In a statement issued by them, they do not speak about their copyright claim, but instead say that Dumb Starbucks must stop doing what it is doing because of dilution of trademark.
The Trademark Angle
In my opinion, a claim of trademark dilution would be a strong one (for a contrary view, click here). According to the Trademarks Dilution Revision Act, 2006, trademark dilution can occur through either ”blurring” or “tarnishment” . In 2006, the Act was specifically amended, to say that “likelihood of dilution” would be sufficient to constitute the offence. The threshold for “likelihood of dilution” is quite low, and if this case goes to court, the onus is likely to be placed on Dumb Starbucks to show that there is no such likelihood. In my opinion, Dumb Starbucks is more likely to count as “Tarnishment”, if Starbucks can prove that the use of Starbucks’ trademark is used in connection with inferior products, or if the reputation of Starbucks is likely to be tarnished. The prefix of “dumb” could possibly constitute tarnishment, as it is quite possible for a well-executed prank to change the opinion of the masses about the brand if the prank becomes popular enough. Admittedly, what follows from this analysis is that every prank on a popular brand would constitute “tarnishment”- but it must be remembered that ordinarily, parodies are covered by Fair Use.
According to the Trademarks Dilution Revision Act, “non-commercial use” is also an exception to trademark dilution. Since the coffee was given for free, Dumb Starbucks could have argued that it was non-commercial. However, in the FAQs on display in the shop, they admitted that the entire gimmick was for “marketing purposes”. Initially, visitors were confused as to whom the marketing was for. It was ultimately revealed that the set-up was funded by the media conglomerate Viacom, in order to advertise Comedy Central. With this, the defense for non-commercial use defense falls as well.
In an Indian scenario, such dilution is covered by Section 29(4) of the Trade Marks Act, 1999. The section reads as follows:
S.29(4)- A registered trademark is infringed by a person who not being a registered Proprietor or a person using by way of permitted use, uses in the course of trade, a mark which-
(a) is identical with or similar to the registered trade mark and
(b) is used in relation to goods or services which are not similar to those for which the trade mark is registered ; and
(c) the registered trade mark has a reputation in India and the use of the mark without due cause takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trade mark
It can be established that Dumb Starbucks has taken “unfair advantage” of Starbucks. In addition, in India, a claim for trademark infringement can also be made (note that dilution is a form of infringement in Indian law, and not a separate offence like it is in US law). In US law, “likelihood of confusion” is an essential test for trademark infringement. However, in India, likelihood of confusion is only one of the tests, codified in S.29(2). There are other ways in which trademark can be infringed, such as “likelihood to cause an association with a registered trademark” (S.29(2)); and when a registered trademark is used in the course of trade by the infringer in such a way that the mark is likely to be taken as a trademark (S.29(1)). These are very broad tests which would certainly encompass the Starbucks scenario, given the level to which Dumb Starbucks has imitated Starbucks. The action may also fall foul of S.29(8), which covers product disparagement, where advertising which is detrimental to the distinctive character or reputation of the trademark will constitute as infringement.
Starbucks had previously been embroiled in major trademark-related litigation against a small roastery called Black Bear, which called its darkest roast coffee “Charbucks”. Starbucks lost this suit. In the course of litigation, it had garnered flak for attacking a small establishment for an alleged infringement which in reality would not have caused major damage to the company. In this case, Viacom is a major media conglomerate with deep pockets; but it appears as if prior experience has made Starbucks shy away from running to the courts of law.