Stark v. Diageo Chateau & Estate Wines Co.

CHRISTIAN STARK et al., Plaintiffs,

v.DIAGEO CHATEAU & ESTATE WINES CO., Defendant.

Case No.: 12-CV-4385 YGR

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Dated: November 1, 2012

ORDER ON MOTION FOR PRELIMINARY INJUNCTION

Plaintiffs Christian Stark, Stark Wine LLC ("Stark Wine"), and Stay @ Home Sommelier, LLC ("S@HS") (collectively "Plaintiffs") bring this trademark infringement action against Defendant Diageo Chateau & Estate Wines Company ("Diageo"), alleging that the mark for Defendant's "Stark Raving^TM" wine is confusingly similar to Plaintiffs' "Stark Wine^®" and "Stark Thirst^TM" marks. Plaintiffs bring seven trademark claims: (1) Federal Trademark Infringement under 15 U.S.C. § 1114; (2) Cancellation of Trademark Registration under 15 U.S.C. § 1119; (3) Federal Unfair Competition under 15 U.S.C. § 1125(a); (4) Trademark Infringement under Cal. Bus. & Prof. Code § 14335; (5) Unfair Competition under Cal. Bus. & Prof. Code §§ 17200 et seq.; (6) False or Misleading Statements under Cal. Bus. & Prof. Code §§ 17500 et seq.; and (7) Common Law Trademark Infringement.

Plaintiffs have moved for a preliminary injunction to stop the advertisement, promotion, distribution and sale of Defendant's "Stark Raving^TM" wine on the grounds that consumers will likely and mistakenly associate Diageo's "Stark Raving^TM" wine with Plaintiffs' wines, which will irreparably harm the Plaintiffs' businesses. The parties submitted briefs, the Court held a two-day hearing with live testimony, at the end of which counsel presented oral argument.

Having reviewed the parties' briefs, the admissible evidence offered into the record, including during the hearing, the argument of counsel following the close of evidence, and having compared the marks themselves and the context of their use in the marketplace, the Court hereby GRANTS the Motion for Preliminary Injunction only as to Sonoma County, otherwise the Motion is DENIED.

I. BACKGROUND

A. STARK WINE

Plaintiff Christian Stark is a winemaker located in Sonoma County, California. He started his business in 2003, and sold his first wines, a 2003 vintage, in 2005. Since that time he has grown the business, and now produces eight varietals, which he sells in certain parts of the United States.¹ His passion is the Rhone varietals, Syrah and Viognier. Christian Stark testified that he had earned a reputation in the industry for producing and selling ultra-premium handcrafted wines. His mission was, and still is, quality over quantity. He sells his wine with the slogan "deliciously down-to-earth."

Mr. Stark testified about his involvement in the winemaking process over which he maintains full control. He starts by selecting grapes grown by reputable farmers with proven track records for growing exceptional quality fruit. He is responsible for fruit sourcing, grower relations and wine production. The reputational evidence in the record for Stark Wine^® focused on the winemaker himself, Christian Stark,² and the labels on his wine simply state "STARK" as shown below:

Christian Stark sells Stark Wine^® primarily direct-to-consumer in Garagiste, a tasting room co-owned by Stark Wine LLC and located in Healdsburg, Sonoma County, California. He also sells his wine online via starkwine.com,³ through wholesale accounts with California restaurants, wine bars and retail shops, and through the Stark Wine Club. Stark Wine^® ranges in price from $28 to $44 per bottle, with an average price point of $36. Output of Stark Wine^® has increased from 150 cases in 2003 to 850 cases in 2011. Christian Stark expects to produce 1000 cases of Stark Wine^® in 2012.

Christian Stark individually owns the "Stark Wine^®" trademark, registered in International Category 33 with a description of "Wine" with the United States Patent and Trademark Office ("PTO") since October 17, 2006, Registration No. 3,160,031. The "Stark Wine^®" mark achieved "incontestability" status on or about June 2, 2012.

B. STAY @ HOME SOMMELIER⁴ AND STARK THIRST^TM

In April 2012, Stark Wine LLC and S@HS launched a new sub-brand of wine called "Stark Thirst^TM." Based in New York City, Kersten Krall Walz ("Krall Walz") is the founder, marketingdirector, and co-owner of S@HS. (Krall Walz Dec. ¶ 1.) A self-described Madison Avenue refugee, Ms. Krall Walz worked in New York City's advertising industry for fourteen years, rising from administration to account director. (Id. ¶ 3.) Ms. Krall Walz worked at two of "Madison Avenue's" flagship agencies: Young & Rubicon and Saatchi & Saatchi. (Id. ¶ 3.)

In 2010, Krall Walz left the advertising industry to start a business that would allow her to "stay at home" to raise her son and to pursue her passion for wine. Prior to leaving the advertising industry, she spent five years taking classes to obtain a diploma in Wine Studies from London's Wine & Spirit Education Trust, one of the world's most comprehensive and rigorous wine study programs. (Id. ¶ 5.) She met Christian Stark in the fall of 2010. (Id. ¶ 7.) Initially, she did brand consulting for Stark Wine, helping to develop its current strategic brand position and update the website. (Id.)

In the summer of 2011, Krall Walz formed S@HS to merge her advertising experience with her knowledge and passion for wine. At this point she had been working on several brand extensions for Stark Wine, i.e. using other words in combination with the word "stark" for purposes of selling wine. Krall Walz conceived of this idea on her own. Christian Stark never attempted brand extensions and did not assist in her work. In the summer of 2011, Krall Walz and S@HS partnered with Christian Stark to create the Stark Thirst™ brand extension.

Ms. Krall Walz conducted market research, including holding focus groups to decide on a brand name and a brand identity using extensions on the word "stark." Her target audience was Generation Y, defined in the alcohol industry as individuals in the 21-35 year range ("Gen Yers"). Her research revealed that (i) 24% of Gen Yers drink wine as their preferred alcoholic beverage, (ii) Gen Yers are looking for bottles priced under $15 and are socially conscious, and finally, (iii) the name "Stark Thirst" tested better than the other extensions.

Plaintiffs launched Stark Thirst^TM as a more affordable brand, marketed towards these younger wine drinkers. It retails for approximately $16 per bottle, with 10% of profits donated to WaterAid, an international charitable organization that brings safe drinking water to those in need. The mission for Stark Thirst^TM is to give people a charitable way to drink delicious wine. Plaintiffs have produced 216 cases of Stark Thirst^TM.

On October 19, 2011, S@HS applied to the PTO to trademark "Stark Thirst^TM." In February 2012, the PTO denied the "Stark Thirst^TM" on the basis that the dominant feature of both the "Stark Wine^®" and "Stark Thirst^TM" marks is the word "Stark," which the PTO stated is identical in sight, sound, and meaning. Subsequently, Christian Stark filed a consent agreement with the PTO noting that Stark Wine LLC and S@HS are business partners that sell wines under both the Stark Wine^® and Stark Thirst^TM marks.⁵ On June 20, 2012, PTO found that the "Stark Thirst^TM" appeared to be entitled to registration and approved the mark for publication. The trademark registration for Stark Thirst^TM is pending with the PTO.

C. DEFENDANT DIAGEO CHATEAU & ESTATE WINES COMPANY

Diageo is a subsidiary of an international beverage conglomerate that owns such recognized brands as Smirnoff Vodka, Jose Cuervo Tequila, Guinness Beer, Tanqueray Gin, Johnnie Walker Scotch, Captain Morgan Rum, Veuve Cliquot Champagne and Dom Perignon. Diageo Chateau & Estate Wines Company focuses exclusively on wines. Its brands include Acacia Vineyard, Beaulieu Vineyard, Chalone Vineyard, Provenance Vineyards, Sterling Vineyards, and Rosenblum Cellars. Stark Raving™ is a sub-brand of Rosenblum Cellars.

In November 2011, Diageo began plans for sub-brands of wine to target the millennial consumer segment of the population, defined as ages 28-38. This resulted in the "Stark Raving^TM," "Rose-N-Blum™" and "Butterfly Kisses™" sub-brands. Diageo wanted to create a wine that goes against the grain and celebrates the idea of doing things differently and with great passion. The concept for "Stark Raving^TM" was to bring to life the personality of Rosenblum Cellars' founder, Kent Rosenblum, who left a successful career as a veterinarian to pursue his passion for winemaking. (See Declaration of Mary Frances Light Dusenbury ("Light Dec."), ¶ 11 ("Our founder quit his day job to make wine in his garage. They said he was stark raving mad. Mad? We call it inspired!").) The Stark Raving™ sub-brand revolves around a mad scientist persona and uses the tag line "Crazy Good Wine" as illustrated below:The wine attempts to appeal to male millennials by being fruitier and juicier than other wines, and it is packaged in a screw-top bottle with a label design modeled on craft beers.

On February 13, 2012, Diageo applied to the PTO for the trademark "Stark Raving^TM" in International Category 33 with a description of "Alcoholic beverages other than beer." Plaintiffs allege that Diageo not only knew of the "Stark Wine^®" trademark in the same International Category 33, but with a description of "Wine," but in fact, knew that the "Stark Thirst^TM" mark had been rejected days earlier for being too similar to the "Stark Wine^®" mark. Plaintiffs allege that Diageo intended to mislead the PTO by using the description "Alcoholic beverages other than beer" instead of "Wine," knowing that its application likely would be rejected if Stark Raving^TM was described as "Wine." The actual evidence produced at the hearing demonstrated that Diageo had filed over 80% of all of relevant applications in International Category 33 with the broader description "Alcoholic beverages other than beer." The PTO approved Diageo's application on June 26, 2012.

In the summer of 2012, Diageo...