Case Study of a Coffee War: Using the Starbucks v. Charbucks Dispute to Teach Trademark Dilution, Business Ethics, and the Strategic Value of Legal Acumen

• Published date: 01 March 2012
• DOI: http://doi.org/10.1111/j.1744-1722.2011.01098.x
• Author: Sean P. Melvin
• Date: 01 March 2012

Journal of Legal Studies Education

Volume 29, Issue 1, 27–57, Winter/Spring 2012

Case Study of a Coffee War: Using the

Starbucks v. Charbucks Dispute to

Teach Trademark Dilution, Business

Ethics, and the Strategic Value

of Legal Acumen

Sean P. Melvin

I. Case

Two years after opening their family-owned coffee bean roastery, Jim and

Annie Clark had become accustomed to long work weeks and bootstrap fi-

nancing. By 1997, their Black Bear Micro Roastery (“Black Bear”) was finally

growing, and the Clarks were hopeful that their new specialty blend, Char-

bucks, would give their uniquely dark roasted coffee bean a catchy name

to remember. Soon after launching their new blend, Annie Clark received

a phone call from an insistent in-house lawyer at coffee giant Starbucks

that threatened the very existence of their company. Starbucks claimed that

the Charbucks Blend name and label infringed on their trademark and de-

manded that Black Bear cease the use of the name Charbucks and remove

any existing products with the Charbucks Blend label from retail shelves. Yet

the Clarks insisted that they had been careful to design the label with Black

Bear Micro Roastery logos so that the name and label were tied to their dark

roasting process and not to anything related to the name Starbucks. Despite

their belief that no infringement had taken place, the Clarks entered into

settlement negotiations to avoid the legal costs associated with defending a

trademark lawsuit. After settlement negotiations failed, Starbucks sued Black

∗Associate Professor of Business Law, Elizabethtown College. An earlier version of this article

was selected as Best Submitted International Case and as a Distinguished Proceedings Paper at the 86th

Annual Conference of the Academy of Legal Studies in Business (2011). I owe a great deal of

gratitude to the JLSE’s three anonymous reviewers for their valuable feedback.

C2012 The Author

Journal of Legal Studies Education C2011 Academy of Legal Studies in Business

27

28 Vol. 29 / The Journal of Legal Studies Education

Bear Micro Roastery, and the stage was set for a coffee war that pitted a

multinational powerhouse against a Main Street merchant.

The Black Bear Micro Roastery

Jim and Annie Clark were native New Englanders who shared a passion

for coffee and an entrepreneurial spirit. After three years of research, they

launched Black Bear Micro Roastery in 1995 with a mission of creating a

unique methodology for roasting gourmet coffee beans through use of ad-

vanced technology and “traditional Yankee work ethic.” The company was

situated in the lakes region of New Hampshire and targeted connoisseur

coffee drinkers, primarily in the New England area, who appreciated the

micro-roastery approach of producing small, high quality batches of coffee

beans. The beans were sold via Black Bear’s Web site and through New

England specialty retail stores and supermarkets. Eventually, Black Bear also

sold its products through its own retail outlet and cafe in Portsmouth, New

Hampshire.

True to their belief in the micro-roastery concept and their en-

trepreneurial courage, the Clarks invested their life savings. The couple sold

many of their assets and refinanced the mortgage on their home to raise

start-up capital. They enlisted their teenaged daughters as their labor force

and committed to seven day work weeks. Their coffee bean roastery business

was the centerpiece of the family’s livelihood.

As with many new ventures, business for Black Bear was slow and rocky

at first. The price of green coffee beans had fluctuated unexpectedly, and

the 1997 Teamsters union strike at United Parcel Service had eaten into

profit margins. Undeterred, Jim and Annie Clark kept the company going

until it began to grow ever so slowly. In order to develop a niche in the

gourmet coffee market, Black Bear began to develop unique blends with

catchy, memorable names. This included blends such as “Country French,”

“Kenya Safari,” and “Mocha Java.”

Charbucks

By April 1997, Black Bear had developed a loyal customer base from which

the company often solicited feedback and suggestions for new products. One

common theme from customers was a desire for a blend with a darker roasted

bean that yielded a richer taste. Responding to that customer demand, Black

Bear developed a darker roasted blend and named it “Charbucks Blend,” the

“Char” being a reference to the new, darker roasted coffee bean blend.