Thursday, March 08, 2007

Ethiopian Coffee Trademark Dispute With Starbucks Runs Hot and Cold [International]

Robert Winter, a senior partner at Arnold & Porter, probably never thought he'd be pushing his client's point of view on YouTube when he agreed to help the government of Ethiopia protect the intellectual property associated with the names of three of its most famous coffee-growing regions.
But last week he defended the country's initiative to trademark and license the coffee names in a video posted on the site. It was a response to a widely viewed video posted in December by Dub Hay, Starbucks Coffee Co. senior vice president, claiming the trademark and licensing scheme was illegal.
"It's plain silly -- there's nothing illegal at all," Winter says in a grainy video of him in his office, responding to questions that flash on the screen. The video's format and typical low-budget YouTube aesthetic mimics Starbucks' offering, but at 5 1/2 minutes comes in at nearly three times the length.
So what prompted this volley of videos expounding on the finer points of U.S. trademark law on a site better known for clips of Britney Spears shaving her head and home-grown karaoke videos? The answer is that basic human staple: coffee. More explicitly, it's a conflict between the ubiquitous Starbucks and Ethiopia over the country's efforts to protect its intellectual property rights, thus obtaining a better price for a commodity that accounts for about half of its export income.
The idea is that producers in developing countries can increase the revenues they derive from the sale of their commodities by asserting control over the intangible value of their exports.
"This is much broader than Ethiopia or coffee," says Ron Layton, the chief executive of Light Years IP, a Washington, D.C.-based nonprofit that is advising Ethiopia on the trademarking and licensing initiative.
Last month the Seattle-based coffee giant's opposition to Ethiopia's initiative seemed to have softened somewhat in the wake of an Oxfam-led campaign, launched last October, questioning the company's commitment to corporate social responsibility. The public-relations push galvanized 90,000 people, including many Starbucks consumers, to call on the company to sign a licensing agreement recognizing the Ethiopian government's rights to the names, says Seth Petchers, who leads the anti-poverty organization's international Make Trade Fair campaign on coffee issues.
In late November, after a meeting with Ethiopian Prime Minister Meles Zenawi, Starbucks chief executive Jim Donald promised to work with the government to help Ethiopian coffee farmers. And in late February, Starbucks issued a press release stating it "respects the right and choice of the Government of Ethiopia to trademark its coffee brands and create a network of licensed distributors ... [and] will not oppose Ethiopia's efforts to obtain trademarks for its specialty coffees." The press release was prompted by a Feb. 14 meeting between Starbucks' Hay and Getachew Mengistie, the director of the Ethiopian Intellectual Property Office.
The meeting took place at the annual Eastern African Fine Coffees Association meeting in the Ethiopian capital city of Addis Ababa. The company also pledged to double its purchases of East African coffee by 2009 and to provide more technical assistance and microcredit facilities to support Ethiopian farmers.
Meanwhile, what exactly Starbucks meant by its pledge to respect Ethiopia's right and choice to trademark its coffee names is murky.
Starbucks has recanted its claim that the intellectual property program was illegal. "When we posted that video, we felt the information was correct, and since, we've learned a lot and realized the information about the legality of the trademark was not accurate," a Starbucks spokesman said last week in response to Winter's video.
The company continues, however, to argue that the coffee names would be better protected by a certification mark -- another form of intellectual-property protection.
Certification guarantees that names can only be used on products originating from that region but doesn't grant anyone ownership in the names. Examples include Florida oranges and Idaho potatoes.
"We believe that certification is the best way to provide economic benefit to coffee farmers while protecting the quality of the coffee," a Starbucks spokesman said in an e-mail last week. "Certification has been recognized globally as the preferred way to protect geographic names of quality agricultural products."
But a certification scheme would not give the Ethiopian government the control over its coffee brands that it is seeking, leaving it with less leverage to try to extract higher prices for its coffee.
The company spokesman also said Starbucks has no plans to sign the licensing agreement the Ethiopian government has been asking it to sign.
The issue is far from settled, Layton says, noting that Starbucks has been "twisting and turning" in response to bad publicity. "They've achieved their goal," he says. "They have confused the press."
The dispute began brewing in March 2005, when the government of Ethiopia, represented pro bono by Arnold & Porter's Winter along with partner Roberta Horton and counsel Anna Manville, filed an application with the U.S. Patent and Trademark Office to register the names of Yirgacheffe, Harrar, and Sidamo, three of the country's best-known coffee-growing regions.
The trademark applications were part of a broader initiative devised by the Ethiopian Intellectual Property Office, working with Light Years IP, to build the value of the brands, to enable coffee farmers to capture a greater share of the retail price of Ethiopian coffees in foreign markets, and to gradually increase export revenues from coffee. Currently, coffee shops such as Starbucks sell Sidamo coffee for approximately $26 a pound because of the coffee's reputation as a high-end specialty coffee, while coffee farmers receive about $1.35 per pound for their beans, Layton says.
Coffee is critical to the Ethiopian economy and accounts for about half of the country's export income. But in 2001, global coffee prices plummeted to 100-year lows due to oversupply, according to the London-based International Coffee Organization. Ethiopia is among one of the world's poorest countries, with an average gross domestic product per capita of less than $1,000.
In addition to its applications in the United States, the government has applied to register its trademarks in 30 other countries. So far, registrations have been approved in the European Union, Japan, and Canada, among others, says Arnold & Porter's Horton, who notes that the firm's London office coordinated the international applications.
The second part of Ethiopia's plan involves licensing the use of the names to individual coffee companies. Although Ethiopia is not asking licensees to pay a royalty, the license agreements would give the government leverage over its distributors and eventually allow it to gain a larger share of the retail price of the coffee.
Eleven companies in the United States, including Waterbury, Vt.-based Green Mountain Coffee Roasters Inc., have agreed to the licensing agreement, Horton says.
Ethiopian coffee exports currently account for about $400 million in export income, Layton says. If successful, the IP initiative could eventually boost the government's export revenues by about $100 million, he adds.
And the project may have ramifications beyond Ethiopia's borders, Winter and Layton say. Intellectual property has contributed greatly to wealth creation in the developed world, and Winter and Layton see no reason it can't be harnessed to spur the development of Third World countries' economies.
In the United States, the applications to register each of the three names went to different examiners. Under U.S. trademark law, terms that are primarily geographically descriptive -- such as Yirgacheffe, Harrar, and Sidamo -- can be registered if they are shown to have acquired distinctiveness in the marketplace.
Yirgacheffe sailed through, but the applications to register Harrar and Sidamo lingered. The first roadblock to the Sidamo application came from the fact that Starbucks had applied to register the name Shirkina Sun-Dried Sidamo in June 2004. The efforts of Ethiopia's then-Ambassador Kassahun Ayele to discuss the problem with Starbucks management were rebuffed for more than a year, says Oxfam's Petchers, who tried to facilitate the discussions. Starbucks did withdraw its application in early July 2006, after Ethiopia filed an action opposing it.
By then, another obstacle to the applications had surfaced. In June, the National Coffee Association, a group that represents coffee roasters, retailers, and importers, among others, had filed a letter of protest with the PTO arguing that the registration of Sidamo and Harrar should be refused and submitting hundreds of pages of Web site printouts it argued showed that the names were used generically. Oxfam claimed that the NCA filed its protest at the behest of Starbucks, which is one of the trade association's leading members, but both Starbucks and the NCA have denied this allegation.
On July 17, 2006, the PTO refused registration for the Sidamo and Harrar applications on the grounds that they were generic. A generic term is one that the relevant purchasing public understands primarily as a common name for goods or services. A prime example in the coffee context is java. Java is a term used for coffee so widely that it has come to refer to all coffee rather than just to coffee from Java, an Indonesian island.
But the office didn't make its decision final, leaving the door open for Ethiopia to submit further arguments as to why the trademarks should be registered.
In documents Ethiopia filed with the PTO on Jan. 17 urging the agency to reconsider its refusal to register the trademarks, it argued that Sidamo wasn't synonymous with a broad category of coffee and proffered its licensing agreements -- which acknowledge that Sidamo is owned and controlled by Ethiopia -- as evidence that the public recognizes it as a mark. "Unlike terms like 'fontina' or 'swiss cheese' that identify cheese that may come from anywhere in the world, SIDAMO coffee is associated with coffee grown exclusively in the Sidamo region of Ethiopia," Arnold & Porter's Manville wrote.
The back-and-forth on the trademark registration between the PTO and the Ethiopian government could go on for some time, says Horton.
Starbucks and Ethiopia have a long way to go to find some kind of mutually acceptable solution. "We have no plans to sign the licensing agreement that was put in front of us," the Starbucks spokesman said. "We will need to find other options."
Alexia Garamfalvi
Legal Times

No comments: