For consumers coffee is a beverage or even part of a lifestyle. For about 25% of Ethiopia's population it is a livelihood. Coffee forms a very high percentage of Ethiopia's export revenues. This exposes Ethiopia's people and economy to coffee price fluctuations.
This is a story about Ethiopia's attempt to increase coffee revenues using brands, IP strategy and licensing contracts - all founded on trade marks Ethiopia seeks to register across the world.
The story begins in 2001 when coffee-producing nations experienced a severe downward price trend. The trend continued to 2005. So the first paragraph of the September 2005 submission by the International Coffee Organization to the UN General Assembly stated:
In the ten years 1980-1989 the ICO Composite Indicator Price for coffee averaged 127.92 US cents per lb. and coffee-producing countries earned an average of US$10.2 billion in annual export revenues from coffee. In the five years 2000 - 2004 the average price had dropped to 54.33 cents and annual export earnings to US$6.2 billion.
Perhaps there is a connection between the coffee price crisis and the collapse of the International Coffee Agreement of 1975-1989. This was the last of the post World War II UN-supported international commodity agreements. It had held the minimum coffee price at US$1.20 per pound. But such agreements are now history.
For consumers coffee prices have not been dropping. As the accompanying graphic from the US BusinessWeek illustrates, there are good margins for the US registered trade mark brands of Eight O'Clock Coffee, Dunkin' Donuts and Starbucks.
Ethiopia supplies 2% of the coffee beans used by Starbucks. Ethiopia has moved to find a solution to remedy its crisis.
As a coffee bean producer it has a number of options to move above commodity-level coffee prices. Its options include strategies and calls for:
In 2005 Ethiopia adopted registration of trade marks in its policy mix. In 2005 the Government of Ethiopia filed standard trade mark applications for registration in 40 countries of three trade marks - YIRGACHEFFE, SIDAMO and HARRAR. The accompanying photo is of two packets of Sidamo coffee.
In working out its IP strategy Ethiopia had the assistance of Light Years IP, a "non-profit organisation dedicated to alleviating poverty by assisting developing country."
Light Years IP says "We assist producers, exporters, and governments in the developing world to analyse their export potential with respect to identifying the value of intangibles and then using IP tools (i.e. patents, trademarks, licenses) to secure more sustained and higher export income."
Australia is one of the countries in which Ethiopia filed coffee trade marks. There are three Ethiopian trade marks applications filed in Australia and their status on the Australian Trade Marks Register is currently as follows:
Ethiopia's applications for these marks have already been registered in some other countries, eg in Canada and Japan. Trade mark law while broadly similar in many respects nonetheless differs from country to country.
In the US, over the last year Ethiopia's trade mark applications become a fight in the court of public opinion. To argue about values (largely of an ethical nature), in that court different interest groups used video press releases and photographic presentations on the YouTube, Yahoo! and Flickr Websites. For examples see here for the view of Ethiopia's US law firm. The lawyer there is responding to Starbucks' video press release, which Starbucks removed from YouTube in the last 24 hours after it had been on for months and had attracted considerable commentary.
Starbucks (which had revenues of US$7.8 billion last year, up 22% over 2005) initially opposed Ethiopia's applications.
In the legal arena in the US and elsewhere, the dispute over Ethiopia's trade mark applications involves arcane topics in trade mark law. Following is an overview.
Type of application
A key issue is that Ethiopia filed standard trade mark applications and its critics and opponents have taken the view that a more appropriate type of trade mark application would have been for a geographic indication, certification mark, or collective marks.
Examples of certification marks for coffee include "100% Colombian", "100% Kona", "Jamaican Blue Mountain" and "Genuine Antigua".
Trade mark licensing strategy
However, a certification trade mark registration (with its focus on producers) does not have the muscle that Ethiopia and its advisers seek. A standard trade mark offers the means for control of distributors and retailers, such as Starbucks.
At this stage Ethiopia is not charging fees or royalties to distributors for the trade mark licence which it is offering and which some have signed.. At this stage it is simply requiring beans to be prominently branded with the Ethiopian trade marks on packaging (as illustrated above).
With this branding strategy, if and when demand for Ethiopian coffee grows, the licensing strategy may evolve to include fees and other terms and conditions.
Distributors and retailers have a commercial and legal concern not to be encircled by Ethiopia's trade mark registration and licensing strategy.
Progress with licences and Yirgacheffe application in US
Ethiopia has had some progress. Some have signed its licence agreement, including the US company Green Mountain Coffee Roasters (suppliers to McDonald's).
Also, in August 2006 the US Trademark Office approved YIRGACHEFFE for trade mark registration. However, in response the Specialty Coffee Association of America filed a Letter of Protest with the Trademark Office, citing evidence it claimed demonstrated the term YIRGACHEFFE is used and understood by the relevant industry and the general public as the name of a type of coffee from a district in Ethiopia.
Legal issues remain in US for Sidamo and Harrar applications
In the case of SIDAMO, Starbucks US Brands, LLC got there first, with an application in June 2004 for "Shirkina Sun-Dried Sidamo". However in June 2006 Starbucks dropped that application.
However, Ethiopia's trade mark applications for SIDAMO and HARRARR await their ultimate fate. They may be approved, rejected or they may just lapse in the United States and Australia.
There are substantive hurdles for those applications. SIDAMO and HARRAR are coffee growing regions in Ethiopia. It appears that those terms are widely used to refer to the beans grown in those regions. It is thus not surprising that the US Trademark Office has thus far rejected the SIDAMO and HARRAR trade mark applications under Section 2(e)(1) of the US Trademark Act. For HARRAR the Office has opened a door by proposing that Ethiopia convert its standard trade mark application into a certification trade mark application.
As regards prices, coffee prices increased somewhat in 2005, it seems due to increased demand from China and Russia. But still in the midst of a crisis, producing nations need new approaches to build coffee's perceived and real value.
As regards trade marks, on 19 February 2007 Starbucks announced it would not oppose Ethiopia's trade mark efforts. However, there's a long way to go yet to fully execute Ethiopia's IP strategy for coffee.
The takeaway is that Ethiopia's use of trade mark law is an illustration of how intellectual property law, combined with licensing contracts and other commercial law, can be blended and then recruited to bolster commercial strategies to increase revenues.
[UPDATE: Starbucks settles coffee trade mark law dispute , 22 June 2007]