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.
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.
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.