A victory for Starbucks in
trademark war By Kent Ewing
HONG KONG - Thanks to a judge in
Shanghai's No 2 Intermediate Court, the Starbucks
juggernaut is back on track in China. The ultimate
goal, of course, is to see the traditionally
tea-drinking country, with its population of 1.3
billion, awash in latte.
The legal assist
goes to Chief Judge Lu Guoqiang, who ordered Shanghai Xingbake Coffee
to pay 500,000 yuan (US$62,000) in
damages after ruling that the
company had copied the Seattle-based coffee
giant's logo and name. While the amount may seem
piddling in the West, it is considered substantial
in China, and Starbucks, along with other
prestigious Western companies now peddling their
goods in the country, hopes the fine will send a
strong message to other potential copycats.
Starbucks has opened 140 outlets in
mainland China (not to mention its many stores in
Hong Kong and Taiwan) and has used the
name Xingbake since the company entered the
mainland in 1999. (Xing means "star" in
Mandarin, and bake sounds like "bucks".)
The local company, which operates 38 outlets in
Shanghai, maintained that it had registered the
name prior to Starbucks' registration in Shanghai.
But the judge recognized Starbucks as the sole and
legitimate owner of its name and logo. Although
the copycat Xingbake can appeal, for now the
decision represents a significant step forward for
Starbucks and other Western companies operating in
China.
As it turned out, the ruling in
favor of Starbucks - which, ironically, borrowed
its name from a character in Herman Melville's
classic novel Moby Dick - was only one in a
series of court decisions protecting Western
trademarks released this month. There have also
been verdicts in favor of Chanel, Prada, Burberry,
Moet-Hennessy, Luis Vuitton, Gucci and Dunhill.
Indeed, so far January has been a banner legal
month for luxury goods dealers in China.
In the case of Dunhill, the Beijing High People's
Court ruled that a department store in the capital
city had copied the company's trademark and
ordered compensation of $6,200. The department
store, operated by Wangshi Baili, was selling
wallets, ties and belts that bore the famous
Dunhill name. The court had previously declared
the Dunhill lawsuit one of the top 10
intellectual-property-rights cases in the city.
Other top-10 cases have involved the French firm
Bonneterie Cevenole SARL, awarded $93,000 last
year for trademark infringement of the garment
trademark Montagut; and the Educational Testing
Service (ETS), which was compensated a whopping
(by Chinese standards) $456,000 for a copyright
violation of its Test of English as a Foreign
Language (TOEFL) exam.
The case released
recently involving Chanel, Prada, Burberry and the
LVMH group reinforced the same theme, but there
was also a new twist. In this ruling, Beijing
Xiushui Haosen Clothing Market Co, a landlord at
the Silk Street shopping mall in the city, was
deemed responsible for allowing vendors in the
mall to sell counterfeit goods and was ordered to
pay its share of the $13,000 award. Again, while
the amount may seem insignificant, this appears to
be the first ruling in China against a landlord
who rents space to vendors of fake goods.
Despite all these legal triumphs for
Western companies, however, it is still fair to
wonder whether China's culture of piracy is truly
changing. The shopping mall on Silk Street is a
perfect example. Virtually every Western brand
sold there is a fake and, despite "landmark"
rulings in Chinese courts, the situation is
unlikely to change any time soon. Proclaiming the
law is one thing; enforcing it is quite another.
By all accounts, you can still purchase a "made in
France" Luis Vuitton bag on Silk Street for about
$12. And all the other imitation goods that
spurred the lawsuit also remain readily available.
In many stores, the goods are hawked within view
of signs prohibiting their sale.
It has
been 17 months since China's State Administration
for Industry and Commerce announced its crackdown
on piracy. The agency claims it has investigated
6.77 million business units and 283,000 markets
nationwide, shutting down 6,273 of them for making
and/or selling counterfeit goods. The agency's
deputy director, Chen Wenton, says that from July
2004 through September 2005, 158 people were
prosecuted for counterfeiting and ordered to pay a
total of $46.5 million in fines. While these
numbers may represent good progress in a country
notorious for its piracy culture, in reality they
are a drop in the bucket.
Trademark
infringement remains widespread in China. In
addition to clothing and apparel companies, the
most common targets of counterfeiters, other
victims include the entertainment industry,
educational groups such as ETS, and auto makers.
According to the European Union, more than half of
the 100 million fake goods that wound up in Europe
in 2004 were made in China. These fakes ranged
from bogus medications, to food products, to
Rolls-Royce aircraft-engine parts.
The US
Commerce Department estimates that the worldwide
flood of Chinese fakes cost the United States,
Europe and Japan more than $60 billion in retail
sales in 2004. In the same year, 63% of all
counterfeit goods seized by US customs originated
in China, according to the agency. The US
administration has made counterfeiting a key
talking point between the two countries. Japan and
Switzerland have mounted their own anti-piracy
campaigns with the Chinese government.
The
Chinese response to this international pressure,
exemplified by the recent legal victories for
Starbucks and others, has been promising, but it
is not yet time to pour the latte in celebration.
The culture of piracy is so rampant and deeply
ingrained in China that these cases can only be
seen as steps forward that must be followed by
many more steps. And, of course, the ultimate step
would be the extensive enforcement of laws against
trademark and copyright infringement all across
the mainland. That is simply not happening at this
time.
In the case of Starbucks, for
example, the company is also unhappy about a
copycat in the eastern city of Qingdao. The local
company is bold enough to use not only the same
Mandarin name as Starbucks but the English
appellation as well. How many such imitators will
Starbucks have to hunt down and take to court as
it continues its quest to convert an economically
rising nation of tea drinkers into coffee addicts
willing to pay $3 for a cup of java? One thing is
for sure: Starbucks, like other Western companies
doing business in China, would like a lot more
help from the Chinese government.
Kent Ewing is a teacher and
writer at Hong Kong International School. He can
be reached atkewing@hkis.edu.hk.
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