How to compare two strings in 77?

I thought I could test two strings with the code below, but it doesn't
work. I'm passing a string into the function below, but the result is
always 'not equal'. How are strings compared in Fortran 77? Thanks.

function evaluateinput(str1) result(string)
implicit none
character(12) str1
character(12) string
if (str1 .EQ. 'test') then
string = 'equal'
else
string = 'not equal'
endif
return
end

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