Starbucks Corp., a company primarily engaged in the sale of coffee products, was founded in Seattle in 1971. Starbucks has grown to more than 8,700 retail locations in the United States, Canada, and foreign countries and territories. In addition to operating its retail stores, Starbucks supplies its coffees to hundreds of restaurants, supermarkets, airlines, sport and entertainment venues, motion picture theaters, hotels, and cruise ship lines. Starbucks prominently displays its federally registered “Starbucks” marks (the “Starbucks Marks”) in all of its commercial activities and spends large sums of money on advertising and promotional activities that feature the Starbucks Marks. Those marks include the “Starbucks” name and the company’s logo, which is circular and contains a graphic mermaid-like siren and the phrase “Starbucks Coffee.” Starbucks has approximately 60 U.S. trademark registrations and trademark registrations in 130 countries. The company devotes substantial effort to policing the marketplace for possible violations of its trademark rights. 

Wolfe’s Borough Coffee Inc., which does business under the Black Bear name (and which will be referred to here by that name), also sells coffee products. Black Bear, whose principal place of business is New Hampshire, is a small, family-run business that produces and sells roasted coffee beans and related goods via mail order and Internet order as well as at a limited number of New England supermarkets. In addition, Black Bear sold coffee products from a single retail outlet. In April 1997, Black Bear began selling a “dark roasted blend” of coffee called “Charbucks Blend” and later “Mister Charbucks” (together, the “Charbucks Marks”). Charbucks Blend was sold in a packaging that showed a picture of a black bear above the following large-print words: “BLACK BEAR MICRO ROASTERY.” The package informed consumers that the coffee was roasted and “Air Quenched” in New Hampshire and stated, in a fairly large font, that “You wanted it dark . . . You’ve got it dark!” Mister Charbucks was sold in a packaging that showed a picture of a man walking above the large font “Mister Charbucks.” The package also informed consumers that the coffee was roasted in New Hampshire by “The Black Bear Micro Roastery” and that the coffee was “ROASTED TO THE EXTREME . . . FOR THOSE WHO LIKE THE EXTREME.” 

Not long after Black Bear made its first sale of Charbucks Blend, Starbucks demanded that Black Bear cease use of the Charbucks Marks. When Black Bear did not comply with this demand, Starbucks sued Black Bear in a federal district court. Starbucks alleged that Black Bear should be held liable for trademark infringement and trademark dilution under federal law. Did Black Bear commit trademark infringement? What about trademark dilution?