What’s In A Name? A Starbucks Trademark Dilemma

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By Aaron B. Thalwitzer

Ethiopia makes good coffee. You might have had some. Starbucks has a delicious bean it calls “Shirkina Sun-Dried Sidamo.” It sounds exotic, and it is. Starbucks used to buy Ethiopian coffee beans for an average price of $1.45 per pound. After costs, the farmers netted less than $1 per pound (Sidamo was once $26 per bag at Starbucks). Ethiopian coffee tastes good, but not 1,800%-markup-good. Even so, Starbucks knew that consumers paid more for Ethiopian-labeled coffee.

A worker sweeps up spilled beans in an Ethiopian coffee mill.

Ethiopia didn’t mind that Starbucks was making money hand over fist. But it wanted their farmers to net more than $120 per year. Ethiopia needed leverage and applied for a trademark on the names of their coffee-growing regions. The problem was that Ethiopia applied one year after Starbucks submitted their application. Until Starbucks’ trademark application was resolved, Ethiopia’s claim could not go forward. Ethiopia demanded satisfaction, and Starbucks told it to talk to its lawyers.

Starbucks’ trademark application was somewhat unusual, because the words it was trademarking (Sidamo, Yirgacheffe and Harrar, all coffee-growing regions) didn’t describe what type of coffee you were buying, only where it was grown. Starbucks told Ethiopia that geographic certification, which certifies that a product is made in a certain place, was more appropriate. But, Ethiopia knew that certification would accomplish little, since Starbucks could still sell Ethiopian beans, as long as they were grown in the advertised region.

Ethiopia needed IP protection for its beans. With a trademark, it could force Starbucks to sign licensing agreements and pay higher prices for Ethiopian beans.

Starbucks' original label for Sidamo beans.

Starbucks' original label for Sidamo beans.

Geographically-based names are a gray area of U.S. trademark law. The first question is whether consumers associate the name with qualities independent of its physical origin. Second, the word can’t be so widely used that it refers to products other than those of the trademark holder. So, “Washington State apples” fails the first test. “French fries” fails the second.

The gray areas are broad, and much depends on the persuasiveness of the lawyers and the judgment of the examining attorney.

Eventually, Starbucks gave in. No one says ‘I want a cup of Sidamo’ to mean they want a cup of regular coffee and the word ‘Sidamo’ isn’t used for anything besides coffee. Ethiopia, in all likelihood, would have prevailed, and Starbucks knew it.

Eventually, Starbucks announced it would not oppose Ethiopia’s trademark efforts. Rather than setting a bottom-floor price, Starbucks agreed to pay farmers based upon the retail value of beans. Now, the farmers make more than $120.00 per year, and Starbucks gets to use the name Sidamo on their products. Score one for the little guy.

Comments

[...] This post was mentioned on Twitter by George Grellas, Gina Hayes, Spacecoast Business, Zies Widerman Malek, Mark Malek and others. Mark Malek said: check out our new post on Tactical IP – a #Starbucks #Trademark Dilema: http://bit.ly/980U1J [...]

Posted On
Oct 10, 2010
Posted By
markmalek

What ever happened to good ol’ regular coffee with milk and sugar?! God Bless Dunkin Donuts for not complicating things!

Posted On
Oct 11, 2010
Posted By
Aaron Thalwitzer

I got nothing against Dunkin. Good coffee and good doughnuts (and great crullers!). But Ethiopian is good stuff.

Posted On
Oct 16, 2010
Posted By
Starbucks v. Kenyan Farmers | Infinite Monkey Theory

[...] that Starbucks and the US National Coffee Association eventually realized it was going to lose and gave in. This entry was posted in Uncategorized. Bookmark the [...]

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