Starbucks v. Obsidian Group Trademark Infringement
Overview of the Case
Starbucks is the leading global coffee selling brand for its unique and various products. For example, the Frappuccino brand served in different flavors is made of blended frozen beverages and is famous throughout America. In 2016, Starbucks Corp lodged a trademark lawsuit in the New York Federal Court accusing a Canadian food chain of naming their product Freddoccino citing similarity with Frappuccino, causing dilution (Krishnani, 2020). Starbucks owned the trademark for the term Frappuccino before other coffee chains started using it to name their coffee. According to Starbucks, a frozen drink sold at Obsidian’s Group Inc, Coffee culture cafes locations in Western New York is named Frappuccino, infringing and diluting its brand equity. Starbucks also alleged that the defendant packaged their coffee to resemble their brand, which would be deceptive to Starbucks customers.
Starbucks and Frappuccino Brands
Starbucks adopted Frappuccino as one of its coffee brands in 1994 after noticing a high interest in a blended coffee beverage from smaller coffee shops. Starbucks team first identified the niche in blended coffee beverages in Los Angeles during the summer of 1993, from where it spread to other U.S states and Canada. By 1995, Frappuccino was an iconic brand in the U.S and Canada with only two flavors; Coffee and Mocha. Starbucks made a resounding innovation in flavors and partnered with PepsiCo to start offering bottled Frappuccino in 1996 (Krishnani, 2020). Therefore, the Frappuccino brand has been promoted by, associated with, and sold by Starbucks for a long time. However, the term Frappuccino was trademarked by the original innovator George Howell by combining the word frozen and Cappuccino. Starbucks purchased the trademark from Howell and started trading it as their own.
Obsidian and Its Unlawful Activities
Coffee culture is a global beverage retailer owned by the Obsidian group. A Greek entrepreneur, Kostas Zompanakis, invented Freddoccino and gained exemplary success in the Greek market. Coffee Culture cafes sold Freddoccino products, contributing to thirty percent of their profits. Coffee Culture did not register the Freddoccino trademark in the U.S. Obsidian displays the registered trademark symbol with its Freddoccino mark on its website and products despite the lack of registration. However, The two names, Frappuccino and Freddoccino, are very similar in name and word structure. The two names for the frozen coffee drinks have the same number of syllables and similar endings. The Freddoccino beverage is identical in appearance and is served in cups resembling Starbucks’ mugs, potentially creating confusion in the market. Building a brand identity is very taking and takes much time, therefore it is elemental to protect it through copyright, trademarking, and patenting (Rashid et al., 2018). Starbucks filed an intellectual property infringement case against Coffee Culture for Freddoccino’s name’s irreparable harm to Frappuccino products.
Federal Trademark Dilution
Starbucks is the creator and owner of the Frappuccino mark because of its extensive use and advertisement. However, the similarity between Frappuccino and Freddoccino may mislead Starbucks consumers to purchase coffee. The packaging also used by the Obsidian group largely resembles Starbucks’ display, likely to confuse consumers to suppose Obsidian’s products are affiliated or attached to Frappuccino. Obsidian’s conduct is willful, deliberate, in bad faith, and undertaken with knowledge of Starbucks’ prior rights (Cornell Law, n.d.). Obsidian has no authority to use Starbucks’ registered trademark or any confusingly similar beverage mark. Starbucks produces distinctive beverage products; hence Obsidian’s Freddoccino brand consequently dilutes Frappuccino. Starbucks filed a lawsuit against Obsidian for trademark dilution protected by the Trademark Dilution Revision Act of 2006 or the Lanham Act, 15 U.S.C.
Trademark Infringement, Unfair Competition, and False Designation of Origin
Due to trademark infringement, Starbucks is set to suffer harm to its reputation and goodwill. Obsidian’s unauthorized use of the Freddoccino mark constitutes a use in commerce of a word, term, name, symbol, or device already trademarked. Confusion in the New York market is likely to result from the erroneous designation of origin, the deceptive portrayal of fact, and misleading fact description leading to unfair competition. Moreover, advertising efforts by Starbucks for Frappuccino may be diluted to favor Freddoccino. Unfair competition is prohibited under section 1114(1) of the Lanham Act, 15 U.S.C. Obsidians’ unlawful actions are against the U.S Trademark Act.
False Advertising
Obsidian’s use of the registered trademark symbol in connection with its Freddoccino mark represents false commercial advertising. In addition, Obsidians’ designing and packing of Freddoccino to resemble Frappuccino may be considered false advertising under Section 43(a) of the Lanham Act, 15 U.S.C (Cornell Law School, n.d). False advertising entails the nature, quality, characteristics, and source of its goods to consumers. The trademarked sign misrepresents the features and qualities of Obsidian’s products in New York (Melchor, 2020). False advertisement can lead to a change in consumer preference as there is no product differentiation.
Trademark Dilution Under New York General Business Law
The Frappuccino mark has become well-known to consumers in the State of New York as exclusively associated with Starbucks and as a special designation of the source of Starbucks’ goods. The presence of Freddoccino in New York confuses consumers and thus can dilute, blur and tarnish the unique characteristics of Starbucks’ Frappuccino brand. The conditions of trade dilution are that the plaintiff’s mark should be distinctive, the defendant was using the mark without authorization for financial gain, and the defendant’s use of the mark harms the plaintiff (Bedi & Reibstein, 2020). This trademark dilution violates the Trademark Dilution Revision Act of 2006 and may lead to decreased brand goodwill. Trademark dilution also favors Obsidians’ sales and revenue against Starbucks.
Deceptive Business Practices Under New York General Business Law
Obsidian has engaged in consumer-oriented conduct that has affected the public interest of New York and has resulted in injury to Starbucks’ Frappuccino products. Obsidian brands its cafes as “Fair Trade Certified,” although their coffee products are not certified. Starbucks is known for ethically sourcing its coffee and observes the Coffee and Farmer Equity (“C.A.F.E”) to differentiate itself from competitors. Freddoccino’s name and Obsidian’s conduct violate the New York General Business Law, particularly codes 349, 350, and 360-1 that prohibit unfair competition and false advertising through misinterpretations of a product’s nature, characteristics, and qualities (Rachman et al., 2021). Freddoccino products and Coffee Culture’s conduct in the New York market is unlawful.
Determining the Level of Infringement
The fundamental criterion used to assess the severity of a trademark violation is consumer confusion and brand dilution. When customers are encouraged to believe the goods, services, or brands are the property of the trademarked business, confusion in the marketplace results. The mark’s strength, the items’ closeness, the resemblance of the patterns, evidence of actual customer misleading, marketing channels employed, and type of goods determine infringement (Mechlor, 2020). Also, the court considers the court’s determining the scope of a breach, the degree of care likely to be taken by the customer, the defendant’s intent when choosing the mark, and probability of expanding the product lines.
Harm due to Obsidian’s Activities
The similarity in brand names can confuse customers in the marketplace when ordering quality beverages. Customers may be misled to purchase Freddoccino beverages believing they are purchasing a product of Starbucks’ quality.
Obsidian’s activities may hurt Starbucks’ customer retention ratio as they can be diverted to its competitor whose products are of different quality. I chose the Starbucks vs. Obsidian case since it indirectly reflects how deceptive naming of products, market positioning, and branding could violate intellectual property laws. The case also indicates the significance of protecting intellectual properties. I reviewed this trademark case because I think, Obsidian would have legal immunity for their Freddoccino products if they had registered the trademark.
Case Verdict
The likelihood of confusion on the part of the relevant public between Starbucks’ registered Frappuccino trademark and the Obsidian Freddoccino mark is clear. The two beverages have almost similar names and thus may mislead consumers. Starbucks restrained Obsidian group from using, diluting, displaying, advertising, or imitating the Frappuccino brand. Coffee Culture changed the name to Freddo from Freddoccino by dropping a part of the trademarked name. I agreed with the case outcome since Obsidian was violating Starbucks’ intellectual property causing dilution of the Frappuccino brand.
Analysis of Starbuck’s decision
The documents from the lawsuit show significant similarities in the drinks and the structure of the names. The two names for the frozen coffee drinks have the same number of syllables and similar endings. Obsidian’s activities amounted to unfair competition and false advertising. This abundance of similarity could result in possible confusion in differentiating between the two beverages. Due to False advertising, Obsidian’s inferior goods, services, and business conduct would cost Starbucks’ reputation and sales. Additionally, Coffee Culture used a fake trademark sign and deceptively packaged its coffee to gain an advantage over its competitor, Starbucks. The decision would help consumers differentiate between Starbucks and Coffee Culture. Trademark registration is a distinguishing factor that helped Starbucks protect its brand identity and status.
References
Cornell Law School. (n.d.). Trademark infringement. Legal Information Institute.
Bedi, S., & Reibstein, D. (2020). Measuring Trademark Dilution By Tarnishment. Ind. LJ, 95, 683.
Krishnani, S. (2020). Famous trademark cases for businesses. Sonis vision. Web.
Melchor, L. (2020). Determining the likelihood of confusion. The Pick Fu Blog.
Rachman, M. J., & Wildes, J. J. (2021). Trademark laws, New York. Practical Law.
Rashid, S. M., Cohen, D. A., & Ghose, K. (2018). An Exploration On The Process Of Brand Identity Building In The Context Of Malaysian Cafe.