<incom> Ethiopia's loss in the Starbucks affair

[Soenke Zehle]

I became interested in the Starbucks issue a while ago when it was still 
looking like a possible example of how the IPR-logic could be turned 
around by one of the weaker players; the assessment below is quite 
sobering, Soenke

-------- Original Message --------
TITLE: Ethiopia's loss in the Starbucks affair
AUTHOR: Wondwossen Mezlekia
PUBLICATION: Addis Fortune
DATE: 19 August 2007
URL:
http://www.addisfortune.com/Vol%208%20No%20381%20Archive/ecconomic_commentary.htm
NOTE FROM GRAIN: The conflict between the Ethiopian government and
Starbucks over trademark rights to Ethiopian coffee names has generated
a tremendous amount of controversy, campaigning and reporting since it
broke out last year. Yet the recent signing of a joint agreement between
the two parties has not put the fires out. The below is one take on
the outcome.
________________________________________________________

Addis Fortune | 19 August 2007

Why did Ethiopia sign an agreement critics say is favoring Starbucks?
Wondwossen Mezlekia, an Ethiopian working and living in Seattle,
Washington -- where Starbucks is also headquartered -- has been
following the trademark dispute through his well-read blog,
http://www.poorfarmer.blogspot.com. In his contribution to a series of
articles that appeared on this newspaper, Wondowssen sheds some light on
the issue.

ETHIOPIA'S LOSS IN THE STARBUCKS AFFAIR

Ethiopia, one of the ancient civilisations in the world, collided with a
symbol of globalisation and, to some extent, challenged the status-quo
without success. The outcome should serve third-world countries as a
reminder of the harsh reality that they have a long way to go to get
control of their intellectual property rights.

Although Ethiopian coffees command a premium price in foreign markets,
particularly the United States (US), farmers who grow the beans often
live in extreme poverty. The Ethiopian coffee sector's strategy to
trademark the famous coffee brands in all major international markets
was an eye-opener for many of the coffee growing nations in Africa. But
that effort hit a dead end in the US, home of Starbucks Corporation and
this led to several months of conflict between the two.

On June 20, 2007, Starbucks and Ethiopia declared that they have both
emerged as winners. But analyses of documented facts suggest that there
is more to the affair than what either side claims. The bizarre and
mysterious ending of the dispute warrants further scrutiny of the accord.

Whether and how the terms of the truce will benefit the Ethiopian coffee
sector and the trademark project remains to be seen. What is
unquestionable is that, because of Starbucks and the National Coffee
Association (NCA), Ethiopia has lost the trademark for Sidamo in the US.
Sadly, Ethiopia has also surrendered the moral high ground that had won
it support all over the globe; it has very little to show for it.
Besides, all the windfall economic opportunities that might have changed
the lives of the poor farmers, who, for centuries, have been taken
advantage of, have vanished into thin air.

The conflict began in March 2005, when Ethiopia filed with the US Patent
and Trademark Office (USPTO) to trademark the country's most valued
brands Harar, Sidamo, and Yirgacheffe. Starbucks had filed an
application to trademark "Shirkina Sun-Dried Sidamo" in 2004, making it
impossible for Ethiopia to go forward with its own application until the
two applicants reached an agreement to drop one. The Ethiopian
government asked Starbucks to drop its claim.

Kassahun Ayele, the former Ethiopian Ambassador to the US, now serving
in the same position in Berlin, made the initial effort to engage
Starbucks in discussions to resolve the matter. But his letter to Howard
Schultz, chairman of Starbucks, went unanswered for over a month. When
it did get answered, Starbucks' response was condescending.

He received on April 21, 2005, a short and dismissive reply from a
company lawyer, and a short time later, a note from a Corporate Vice
President inviting him to attend the award event for Mr. Schultz, and to
contribute 600 dollars for the 'privilege.', according to the Embassy.

In October 2006, Oxfam launched an international campaign to force
Starbucks to come to the table and discuss with Ethiopia for resolution.
The campaign was framed to depict Starbucks as a company exploiting its
coffee producers. The theme, "For every cup of Ethiopian coffee
Starbucks sells, Ethiopian farmers earn 3¢", proved to be Starbucks'
irritant.

Arrogance combined with a desire to counteract Oxfam's unexpected
campaign actions might have blinded Starbucks' management into making
several ridiculous assertions.

First, the company claimed that Ethiopia's coffee brands cannot be
trademarked because they are generic terms for coffee, rather than
distinctive marks. They then asserted that the trademarks are against
the interests of Ethiopian farmers. At the peak of its charges, the
company went on to say that Ethiopia's attempt to trademark the coffee
brands was illegal. They exhausted all their fabricated allegations
before running out of charges to publicly discredit Ethiopia's trademark
project.

Ultimately, forced by mounting public pressure, Starbucks senior
management resorted to a different strategy without losing sight of
their goals. They hired the Washington-based lobbying firm, The Whitaker
Group, and travelled to Ethiopia to convince government authorities by
employing alternative negotiating tricks.

On the lead-up to the company executives' second trip to Ethiopia in
February 2007 -- first trip was in November 2006 -- Starbucks announced
its donation of half a million dollars to CARE International, a US-based
charity organisation, for its social work in the coffee growing regions
of Ethiopia. In addition, the company issued a press release with
promises to build a farmer support centre and to double the volume of
coffee the company buys from East Africa.

During their meetings held in Addis Abeba, Starbucks succeeded in
convincing Ethiopian authorities to divert their attention to what they
called a "value-added" process. Empty promises, such as the possibility
of cooperation with the country's tea and textile sector, and implied
support through the African Growth and Opportunity Act (AGOA), were used
to entice state ministers from ministries of Agriculture and Rural
Development, Trade and Industry, Finance and Economic Development, and
others, including Getachew Mengistie, director general of the Ethiopian
Intellectual Property Office (EIPO).

None of those sectors are as vital as the most exploited coffee sector,
which continues to be the backbone of the Ethiopian economy. In spite of
that, the authorities were swayed and subsequently signed on Starbucks'
press release announcing their agreement to "work together". Four months
after that agreement and deafening secret negotiations, the government
representatives and Starbucks declared their signing of a "marketing,
licensing, and distribution" agreement on June 20, 2007.

The devil, however, is in the details.

As a global company that fights to secure its grip over the sources of
its coffee, it is evident that Starbucks' opposition to Ethiopia's
trademark initiative stems from three basic elements: Royalty fees,
monopoly over the brands and traceability.

As long as Starbucks will not be expected to pay royalty fees, and so
long as Ethiopia does not legally own the Sidamo brand, which is the
most important brand to Starbucks -- Starbucks does not hold Harar and
Yirgacheffe coffees in many of its stores -- signing some sort of weak
licensing agreement, with secret details that do not mention financial
resources to help promote Ethiopian coffee, offers a safe exit.
Therefore, a negotiated settlement outside of administrative rights to
own the trademarks is a viable option for Starbucks.

Starbucks' concern about Ethiopia monopolising the brands is already
non-existent, at least in the US, as Sidamo is not a registered mark.
Also, because Starbucks buys most of its coffees through third parties,
the concern about tracing the beans to the origin is automatically taken
care of.

Starbucks' obligations in the agreement, if any, are confidential. The
signatories imply that Ethiopia's obligations are uncomplicated and the
benefits flowery.

Getachew Mengistie said Ethiopia's obligation is not to impose a royalty
fee of any nature during the contract period whereas its benefits
include a contractual provision, which recognises Ethiopia's common law
rights where applicable.

According to available information, however, Ethiopia's benefits are not
as impressive as the words. Although common law is a valid form of
trademark rights in the US as rights stem from use rather than
registration in this country, not all countries have the same system as
the US. In some countries, Ethiopia does not have any rights at all
unless the mark is registered.

In addition, enforcement of trademarks is expensive and probably not
practical in every instance of infringement. That is why the
conventional rights of registration are important -- they help prevent
infringement and consequently avoid expensive enforcement before it occurs.

Strikingly, the negotiation process did not fully address the promises
made by Starbucks during the February 2007 meeting, which Getachew
proudly refers to as the turning point that led to the resolution. Only
the promotion of the output of other sectors is mentioned in the
contract. Even that is not listed as enforceable.

The government representatives failed to follow through on the rest of
the promises, such as building a farmers support centre and doubling the
amount of coffee Starbucks would buy from Ethiopia, which is believed to
be only two per cent. The centre was not even a negotiating point, if we
go by what Samuel Assefa (PhD), Ethiopia's ambassador to the US, said.

"Starbucks is a private company; we cannot ask them to open a farmer
support centre in Ethiopia," he told the media.

But another African country leader did just that: reached out to private
companies such as Starbucks, Google and Costco to attract business
investment. His name is Paul Kagame, the president of Rwanda.

Starbucks invited Mr. Kagame to deliver a corporate endorsement at the
company's annual shareholder meeting on March 21, 2007, -- a key moment
when Starbucks executives needed an African leader to paint a picture
different from what the shareholders have come to read in the media as a
result of the trademark dispute.

Recent reports indicate that Starbucks eyes Rwanda for setting up the
Farmer Support Centre.

Another widely publicised promise was that Starbucks would increase its
Ethiopian coffee purchases. As of this day, there is no indication that
Starbucks bought more Ethiopian coffee; nor is there any way to
substantiate this claim in the future as Starbucks buys most of its
coffee through third parties, mainly from Germany.

How else Ethiopia benefits from the agreement is either not defined, or
undisclosed.

"Having the commitment and support of Starbucks will help enhance the
quality of Ethiopian fine coffees and improve the income of farmers and
traders," Getachew, told the media.

But Starbucks' executives do not acknowledge any such commitment.

In an interview with the Seattle PI, Sandra Taylor, Starbucks senior
vice president of Corporate Social Responsibility, said that the deal
was not intended to set prices.

"Starbucks pays based on the quality and marketplace," she said. "If
this works right, it will lead to better pricing for high quality . . .
For Starbucks, we have long paid premium prices."

Starbucks would work with Ethiopian farmers to improve quality and crop
yield, but not dedicating any new financial resources, according to the
paper's report. The status-quo is conserved.

What did Ethiopia lose? Everything it tried to gain, and then some.

Starbucks succeeded in preventing Ethiopia from gaining permanent
control of the mark Sidamo in the US market, effectively eliminating
Ethiopia's opportunity to move beyond its cycle of poverty.

In addition, the long fought battle to this ruinous end was exasperated
by Ethiopia's loss of dignity in the process. Oxfam's approach of using
images of poor farmers, the victims of Starbucks' insensitivity, was
meant to coerce the company into changing the way they do business; but
instead, Ethiopia once again garnered a reputation reminiscent of 1984.
The country was dishonoured in front of the world while its Ambassador
was disrespected. The trademark initiative was discredited and the
project was delayed by over two years. As if that was not enough,
Ethiopia was deceived by empty promises.

Starbucks has still not admitted any of its wrong doings: its misleading
statements, which unlawfully undermined the people's rights, and its
disrespect to a sovereign country's Ambassador, much less apologise for
trying to publicly discredit the country's efforts. To this day, the
company has not expressed regret for its opposition that cost Ethiopia
the opportunity to trademark Sidamo.

The trademark dispute which carried the hopes of over 15 million people
was concluded with a reprehensible remark by Ambassador Samuel:
"Ethiopia salutes Starbucks for its exemplary display of global
corporate citizenship. This alliance highlights the significance of
visionary entrepreneurs in creating space for win-win engagements
between corporations that operate globally and developing countries such
as ours."

And Oxfam celebrated "resolution" of the dispute between Starbucks and
Ethiopia.

Starbucks recently increased its coffee prices in the US by nine cents a
cup, which further widens the income gap between Starbucks and coffee
farmers. But, the equation still remains the same: "For every cup of
Ethiopian coffee Starbucks sells, Ethiopian farmers earn three cents."

________________________________________________________

GOING FURTHER (compiled by GRAIN)

Oxfam, "Oxfam celebrates win-win outcome for Ethiopian coffee farmers
and Starbucks", press release, Washington DC, 21 June 2006.
http://www.oxfam.org/en/news/2007/pr070621_win-win-outcome-for-ethiopian-coffee-farmers-and-starbucks.html

Government of Ethiopia and Starbucks Coffee, "Joint statement: Starbucks
and Ethiopian Intellectual Property Office (EIPO) partner to promote
Ethiopia's coffee and benefit the country's coffee farmers", Addis Ababa
and Seattle, 20 June 2007.
http://www.starbucks.com/aboutus/pressdesc.asp?id=779

Amy Goodman (host), "Following public campaign for trademark efforts,
coffee giant Starbucks signs licensing deal that could bring millions to
Ethiopian farmers", Democracy Now!, New York, 9 May 2007.
http://www.democracynow.org/article.pl?sid=07/05/09/1515200

Anton Foek, "Trademarking coffee: Starbucks cuts Ethiopia deal",
CorpWatch, Oakland, 8 May 2007.
http://www.corpwatch.org/article.php?id=14474

David Bollier, "Starbucks, trademarks and coffee colonialism", On the
commons, 6 March 2007.
http://onthecommons.org/node/1108

Joshua Gallu, "Starbucks, Ethiopia, and the coffee branding wars", Der
Spiegel, 16 November 2006.
http://www.spiegel.de/international/0,1518,448191,00.html

Light Years IP
http://www.lightyearsip.net/

Ethiopian Trademarking and Licensing Initiative
http://www.ethiopiancoffeenetwork.com/