Starbucks: A rich brew of IP rights

When the Dumb Starbucks store opened in Los Angeles in February 2014, many in the media had hoped for a bang, a David and Goliath battle even, but instead they got a whimper.

Featuring the familiar Starbucks siren logo with the combination of green and white colours, but with the word ‘Dumb’ included in it, many had seen it as a brazen attempt to infringe the Starbucks brand.

The store was opened by Nathan Fielder, a US comedian who has a show called Nathan for You broadcast on Comedy Central. While the customers travelled in and the coffee headed out, Starbucks merely said it was looking into what action it could take. In the end, however, the media did not get the battle they had wanted: Dumb Starbucks was shut down by the Los Angeles Department of Public Health for violating hygiene codes.

Such carefulness on Starbucks’s part comes with a wealth of experience in protecting intellectual property rights over many years and across multiple jurisdictions. Starbucks, which has outlets in countries ranging from Austria to Vietnam, boasts a trademark portfolio that has 17,000 registrations.

Kim Teraberry and Batur Oktay, directors of corporate counsel for Starbucks, and their team are constantly vigilant about protecting the Starbucks brand from infringement.

“We employ 16 people and we coordinate everything here in the US,” explains Teraberry.

“We have four attorneys and we have one that works on copyright; we all primarily work on trademarks. And we have eight paralegals who split the work between regions and groups across the world,” she says.

Jokes about the size of Starbucks are nothing new. In an episode of The Simpsons in series nine, Bart is ushered out of a piercing shop because it is about to become a Starbucks store; the image of the mall expands to show a row of Starbucks outlets.

Oktay says: “We don’t see that many true parodies of Starbucks—we see more commercial uses where they’re trying to be funny, but they’re actually not really falling under the legal definition of parody.

“We haven’t had a case where somebody has claimed what they are doing is a parody and we have had to litigate it. Usually people are more interested in trading off our goodwill, and trademark infringement doesn’t matter,” he adds.

In the case of Dumb Starbucks, Fielder went to great lengths to ensure the store would be protected by US parody law. He consulted a lawyer and went public about his actions.

For Starbucks, taking legal action against infringers is always a complex decision. When you throw in its image as a multinational company, every move it makes is followed by the general public.

Oktay says the decision to take legal action against an alleged infringer is done on a “case-by-case basis”, with one of the most important factors being that the dispute is clearly “winnable”.

Location, location

Because Starbucks operates across the world, and protection for brand owners differs enormously in different countries, the location of infringement can often determine the company’s likelihood of triumphing in legal action.

“It’s going to be a different case depending on the country, because we have stronger rights in some countries than others, which makes it easier to go after infringement,” Oktay says.

For instance, in 2002 Sergey Zuikov, a resident in Russia, set up a company called Starbucks LLC and registered its name as a trademark with Rospatent, the body responsible for administering patent and trademark applications in Russia.

Zuikov opened coffee shops in Moscow that looked similar to Starbucks’s and even tried to sell the trademark to the US company for $600,000. Instead, Starbucks brought a cancellation action against Zuikov and was successful in blocking the trademark.

"The decision to take legal action against an alleged infringer is done on a 'case-by-case basis', with one of the most important factors being that the dispute is clearly 'winnable'."

Closer to home, Starbucks has not always been that fortunate. An infringement claim Starbucks filed against Black Bear Micro Roastery, a coffee shop based in New Hampshire, for selling ‘Charbucks’ coffee, failed. In November 2013, the US Court of Appeals for the Second Circuit rejected Starbucks’s claim that the product would confuse consumers and dismissed its requested injunction.

Monitoring many jurisdictions can be a difficult task, with Teraberry saying: “We have of course to make sure that we haven’t been late to evaluate applications and make sure no-one registers something we consider infringing.

“We’re in 65 countries with 150,000 employees, and they can send information. So we have to have investigators on the ground in more problematic countries.

“Then we’re going to registries, purchasing domain names, and seeing what’s out there and looking at our strategy and looking at some of the new digital stuff and deciding what’s the biggest threat.

“China is one of the most difficult places to protect our brand, as well as Turkey, Mexico, India and Indonesia, where we have a lot of cases. They are the most difficult to resolve,” she adds.

It’s one of the downsides of being a recognisable brand across the world. Whenever Starbucks enters into a new market, there is a sudden surge of individuals and businesses attempting to trade off its reputation by filing bad-faith trademark applications associated with the Starbucks brand.

Teraberry says: “If we open in a new market such as India, then we start dealing with infringements in that area. We’ve had more cases since we opened in India than I think we’ve ever had before, as well as in Vietnam … and we see some issues in Cambodia. Before, there wasn’t that much awareness.

“In China the primary form of infringement is the use of our Chinese name on a wide variety of store fronts. Also, online sales of infringing products probably are a big issue in China,” she adds.

Oktay says: “Outside the US it is mostly cafés and restaurants that use a similar logo to Starbucks. We also find Frappuccino (a trademark registered by Starbucks with the US Patent and Trademark Office in 2005 to cover the drink) all over the place.”

But they are finding that things are improving and that protecting Starbucks’s trademarks is getting easier in some areas.

Oktay says: “Depending on how sophisticated the court system and the trademark office is in that country, and how much the Starbucks brand is well known within that market, it becomes easier to protect our brand, especially since we have many stores and our brands are well recognised.

“In some of those markets, I think it is improving overall,” he adds.

Beyond trademarks

It is not just trademark rights that occupy Starbucks’s IP legal team. A sizeable patent portfolio covering its mobile payment methods, which Oktay claims is the “largest mobile payment system in the US”, has meant the company has been on the receiving end of lawsuits from non-practising entities, otherwise known as ‘patent trolls’.

“We did see a lot of patent litigation by patent trolls in the last few years. It diminished in the last year. The Alice case changed the patent landscape and ever since that decision we’ve seen a drop in those patent lawsuits,” he adds.

Unlike its well-established logo, the packaging design of certain Starbucks products is constantly changing, meaning the legal team has to keep up to date with its marketing department.

Teraberry says: “We have a marketing review group and they take the initial look at packaging design, for things other than trademarks. Some stores change their design every six weeks, so it’s constantly flying through and the main concern is that we make sure we have the rights to use whatever we use. Our group would handle any infringement reports.”

The sheer size of Starbucks means it is always attracting ire and affection from millions of consumers across the world. On the surface, Fielder’s Dumb Starbucks looked provocative but there was an insistence from him that it was not “affiliated in any way with Starbucks” and that, “in fact, we love Starbucks and look up to them as role models”.

But attempts to create parodies can make it difficult for Starbucks to decide whether to take action against alleged infringement. If Starbucks had chosen to target Fielder then it may have resulted in bullying accusations—a big brand unfairly tackling an individual or small company. And this problem could multiply as Starbucks continues its march into new territories across the world.

Its global IP team, however, is prepared for more difficulties, and its experience with such situations should ensure it survives any disputes with its image intact. The Dumb Starbucks episode had the potential to drag Starbucks into a public relations trap, but its IP team’s carefulness ensured that when the saga went up like a firework, it did not go off with a bang.