By now pretty much everybody has heard about the “Dumb Starbucks” episode, which pitted a Comedy Central personality against that oh-so-well-known coffee shop with locations on every street corner (if not, here is a primer). Was it a publicity stunt masquerading as satire, or was it a legitimate business engaging in an operational style that can only be characterized as avant garde? The conflict may be a short month away from reaching another boiling point (even hotter than the steaming milk that those lattes have). You see, Nathan Wilder, Dumb Starbuck’s brainchild (or was it Comedy Central?) is planning on opening another location in Brooklyn soon.

In its first installment, Dumb Starbucks was shut down within a few short days of its initial opening for… health permit violations, of all things. So will the Brooklyn store manage to outlast the short lifespan of the original? We’ll see, although it seems like New York City would be a place with health standards for food outlets that are as strict as those in California. I’m pretty sure the Dumb Starbucks brand will be on full display, at least if Mr. Wilder hopes to acquire the same attention that he acquired through his first store and make the same point he set out to make originally.

A Cronut (I mean, a pastry creation, sorry). Source: Niko Triantafillou
It was a stroke of culinary genius (some might say) to combine doughnuts and croissants together into one pastry. I mean think about it: the sweet, doughy delicacy of a donut combined with the light, airy, flaky goodness of a croissant. It was a match made in heaven. The brand used for the combination? Why, none other than a combination of the best portions of the words doughnut and croissant. Take a "cro" from here, mix with a little "nut" from there, and voila: Cronut! The creation (the product of pastry chef Dominique Ansel) was so popular that people would line up for blocks waiting to get there "Cronut" from a little cubby-hole in New York City (don't all wonderful things have humble beginnings after all?)

Now I admit, slicing and dicing of words and phrases and creating concoctions may not yield as delicious of a result as doing the same thing in the kitchen with diverse ingredients. I mean, in trademark law there is this overarching concern with creating trademarks in descriptive words and phrases. A word used as a mark cannot describe a feature or aspect of the product or service that the mark will be used with. This may be why the mastermind of this culinary creation faced such a backlash when he attempted to register the trademark "Cronut". Criticism ranged from the charge that Dominique Ansel was unfairly depriving others of the opportunity to use such a convenient word to a claim that Ansel was simply trying to take credit for inventing a particular pastry.

The famous argument between Coke and Pepsi as to which beverage is more appealing to consumers has raged on for at least 100 years. The good-natured competition between both outfits as to whose bubbly, caffeinated libation is the supremo has touched pretty much every point of product feature imaginable. The latest is the battle over bottle shapes.

Coca-Cola’s bell-shaped contoured bottle is pretty well recognized by many consumers in the US and, arguably, internationally. It is the subject of many trademark registrations in the US and other countries. “Trademarks on product packages or shapes?” you might ask? Yes, actually; registration of a package design is an invaluable tool that makers of consumer goods can (and should) use as part of their trademark protection strategy.

New Zealand is a country where Coca-Cola heavily markets (and has also released some pretty unique flavors like Raspberry Coke). Pepsi also sells many soft drinks in New Zealand through a subsidiary, Frucor Beverages. You probably wouldn’t be surprised to hear that Pepsi and Coke are just as ruthless in their competitive efforts in NZ as they are in the US. Pepsi’s choice to adopt a contoured bottle design that is similar to Coke’s ever popular bell-shaped bottle is a pretty good indication of the level of competition. Okay, maybe similar was too strong of a word to use. After all, the court only found one real commonality between Coke’s bell bottle and Pepsi’s design and Pepsi did place its logos on the side of the bottle, perhaps to dispel any notion that it was obviously copying Coke’s bottle design.

Don't worry. This blog has not been hijacked by pirates!
It is often said that imitation is the sincerest form of flattery. That might be true in many aspects of our life, but it isn’t always true for trademark owners, least if the person doing the flattering is ripping you off somehow. But how close does something have to be to truly be deemed an imitation? In the arena of trademark law and unfair competition, you might sometimes be surprised about how close you can actually get to using a trademark that is loosely based on another trademark. To see what exactly I’m talking about, lets grab the proverbial cart and go on a little shopping spree at Trader Joe’s.

Some people (except those on the West Coast, where Trader Joe’s has about 200 stores) may not know what Trader Joe’s is. Trader Joe’s is a specialty grocery store. They sell a lot of the same things that big-box grocery stores do, but they have specialty foods and a lot of the stuff they sell carries the “Trader Joe” name specifically. It is what you might call a boutique grocery store because most locations are small and they cater to customers with specific tastes. In recent years, the store has garnered somewhat of a cult following given the unique products that the store offers including blueberry cultured coconut milk (sounds kind of weird) and spicy seaweed ramen (sounds really weird). My personal favorite is the chipotle seasoned almonds, but I digress.

So Costco. They are a huge wholesale place right? You go there to buy 3-thousand gallon tub of maple syrup or a year’s supply of paper towels. They even sell electronics and jewelry there. But now they are selling…. Michael Kors purses? Well they claim(ed) to, at least.

In the most recent installment of a luxury brand suing Costco for trademark infringement (see the case of Tiffany’s), Michael Kors is alleging that an email sent by Costco to its customers offered handbags on sale for $99.99 for Mother’s Day, with a picture of a Michael Kors handbag appearing in the email. The pictures of the handbags included Michael Kors signature “MK” tags along with some of the signature designs (I’m not a woman, so no I don’t know which designs exactly). What’s the big deal you ask, I just got a Michael Kors bag for $89.99 at this smokin’ hot sale at the outlet mall last week, and I didn’t have to walk past aisles stacked from the floor to ceiling with pallets of drain cleaner! Well, Costco doesn’t actually sell Michael Kors stuff so putting a picture of one of the bags in an email and providing a bargain basement price (Michael Kors purses usually retail for anywhere between $128 and $1,395) is kind of somewhat confusing if you were a desperate lad looking for a quality handbag at a reasonable price for your mum. Here's a screenshot of the email that was sent out:


The complaint filed by Michael Kors is pretty cut and dry: Costco is not authorized to sell Michael Kors handbags and by putting images of the handbags in an email and advertising a low price, the email deceived consumers and made other bags being sold by Costco look better. What defenses does Costco have? Apart from “oh, we let a marketing intern put together to email so we didn’t even notice the images used in the email, lol”), I can’t really put my finger on anything in particular that might save Costco. I’m sure there must have been some documented case of consumer confusion (I myself would have been suckered into capitalizing on such an incredible price). And fair use probably isn’t available as a defense because Costco used the mark in such a way that people would probably be confused as to whether Michael Kors purses were actually sold at Costco. 

Luxury brand owners of course have a lot at stake. A luxury brand usually has significant goodwill and customer recognition attached to it, have a high probability of becoming tarnished due to the actions of counterfeiters, and is backed by a significant investment in marketing by the brand’s owner. The investment backing a luxury brand can sometimes be on-par with that of Fortune 500 brands such as Coca-Cola. To protect luxury brands, the owner might be very selective in the kinds of distributors that they use to sell their products. If a particular product is expensive and exclusive, then it of course makes sense to make the distribution channels exclusive right? For this reason, just like we saw in Tiffany’s case against Costco, there is likely to be a lot of mudslinging with Michael Kors saying that Costco is a “low-cost, low-slung purveyor of cheap crap” and that “our goods do not belong next to industrial sized packages of bubble gum”. Costco may strike back with some daggers of its own, like it has done against Tiffany by arguing that the Tiffany name itself is generic for jewelry settings.

I’m going to be extra charitable and say that somebody in the marketing department at Costco goofed. I mean, considering the high-profile battle between Costco and Tiffany’s, why would Costco want to become embroiled in another tussle with a different luxury brand? At the very least, this episode indicates the importance of brand clearance and communications auditing not only of your own brands as a trademark owner, but also of brands that you reference in your marketing pieces. Any reference to a third-party, particularly one that places significant value on their brand names, could put you in trouble, especially if you aren’t authorized to sell the third-parties products. 

The takeaway for luxury brand owners? Be careful who you go after. You might find yourself dealing either with the war chest of a well-funded retailer or the stinging rebuke of t.o’ed consumers.

Sidenote (yes another one!): I actually love going to Costco and think they have an excellent business model. So no snarky comments as to Costco or the layout of its stores, or the wares that it sells should be taken as anything more than an attempt at witty humor to make this topic more interesting as a blog post. For the record, Costco’s all-american chocolate cake is probably my favorite dessert of all time.