November 18. 2013 10:29PM

Starbucks loses 'Charbucks' appeal against NH coffee roaster

New Hampshire Union Leader

A small, family-owned New Hampshire coffee roaster has scored a grande victory in a 12-year legal battle with coffee giant Starbucks.

The 2nd U.S. Circuit Court of Appeals said Black Bear Micro Roastery in Tuftonboro may keep selling "Charbucks Blend," "Mister Charbucks" and "Mr. Charbucks" coffee.

Starbucks Corp. had first sued Black Bear in 2001, charging that the business was "blurring" its brand by selling the beans, which were named for Black Bear's very dark roast.

Circuit Judge Raymond Lohier wrote that Seattle-based Starbucks did not deserve an injunction to stop Charbucks sales, having failed to prove that consumers would be confused by brand blurring.

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

Black Bear owner Jim Clark said the ruling was a relief. "All I can say is all my wife and I wanted for these past years is for this to be over. It has been a ridiculously stressful situation for us. Hopefully this is the end of it," he said.

Black Bear does business under the name Wolfe's Borough Coffee Inc. Clark said he had nothing against Starbucks as a corporation or Howard Schultz, its founder and chief executive. "I've listened to Schultz speak, and I think he's very pro-small business," he said. "I don't think he would have anything to do with this, but it's a big corporation and everything gets delegated. I think there were just some very bad decisions (by the company)."

Clark said his insurance originally covered the legal costs associated with the case because Starbucks had sought both an injunction and $150,000 in damages. After Starbucks appealed the case, the Manchester-based firm Sheehan, Phinney, Bass & Green took it on pro bono, Clark said. He credited the firm's lawyers with presenting a "superior" case to Starbucks' attorneys.

A spokesman for Starbucks said in a statement that the company had made "significant investments" to develop its brand and intellectual property. "We have an obligation to protect our intellectual property from infringement in order to retain our exclusive rights to it," spokesman Zack Hutson said.

Hutson did not indicate whether Starbucks would drop its legal action, but he said the company is "respecting the court's decision."

A centerpiece of Starbucks' case had been a phone survey of 600 people by the pollster Warren Mitofsky, which found that "the number one association of the name 'Charbucks' in the minds of consumers is with the brand 'Starbucks.'"

But the 2nd Circuit said the survey was "fundamentally flawed" 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 upon hearing "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.

Christopher Cole, a lawyer at Sheehan, Phinney, Bass & Green representing Black Bear, said in an interview, "This is a sound decision. It flows from the dramatic dissimilarity between how the different products actually appear in commerce and are seen by consumers."

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

Black Bear created "Charbucks Blend" in 1997 and now sells dark-roast coffee as "Mister Charbucks" and "Mr. Charbucks."

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

Material from Reuters was used in this article.