Protecting intellectual property in China has long been a top concern for innovative foreign companies looking to do business there. The little legal framework that existed around intellectual property rights (IPR) has been difficult and slow to enforce. However, there are indications that the situation may be improving for companies using trademarks, logos and trademarks in the People’s Republic.
In a recent case, China’s recently amended trademark law was put to the test when US specialty coffee retailer Starbucks accused a local Shanghai company of copying its trade name and logo.
Starbucks opened its first Shanghai store on Huaihai Road on May 4, 2000, building on the success of its dozens of stores in Taiwan and the rest of mainland China. Shortly before this opening, a local company had registered its own trade name – Xingbake Coffee Co. Ltd. – with the Shanghai authorities. In 2003, the Chinese company had opened two outlets in Shanghai under the trade name ‘Xingbake’.
The legal dispute between Starbucks and its local competitor arose because ‘xing’ is translated from Mandarin as ‘star’ and ‘ba-ke’ is a rough phonetic interpretation of ‘bucks’. Although Starbucks does not officially use this rough translation in China, the word ‘Xingbake’ has become synonymous with the American firm’s outlets among the public.
Starbucks felt that by trading under a similar name and using a very similar green and white logo, Shanghai Xingbake was competing unfairly. On this basis, Starbucks filed a lawsuit against Xingbake in Shanghai on December 23, 2003, alleging trademark infringement.
In response to the accusation, Mao Yibo, CEO of Xingbake, said that his company registered its business name with the Shanghai authorities in March 2000, before Starbucks was established in the region. By using the name ‘Xingbake’, he claimed that his company was simply using its legitimate title rather than a trademark.
Mao denied that his company name and logo were influenced by his Seattle-based rival. “We invented ‘Xingbake’ as our brand when we planned to start a coffee business in Shanghai and it is just a coincidence that our name is the same with the Chinese version of Starbuck. [sic]”, He said.” The logo was designed by our own staff. To be frank, I hadn’t heard of Starbucks at the time, so how could I mimic their brand or logo? “
Chen Naiwei, director of the Shanghai Jiaotong University Intellectual Property Research Center, does not accept this, explaining that ‘Xingbake’ has been used as the only translation of ‘Starbucks’ in Taiwan since 1998. This predates the name registration of Xingbake Company in Shanghai. by two years.
Despite Mao Yibo’s claims and his additional claims that Xingbake’s service style and target market differ substantially from Starbucks, the Shanghai No. 2 Intermediate People’s Court ruled in favor of the American giant on December 31. 2005, two years after the lawsuit was filed. .
Shanghai Xingbake was ordered to stop using his name, issue an apology in a local newspaper, and pay 500,000 yuan (US $ 62,000) in compensation to Starbucks.
The basis for the Court’s decision was the relatively recently amended Trademark Laws of the People’s Republic of China, which entered into force on October 27, 2001. The amendments are part of a series of revised laws introduced to protect property owners. of intellectual property in China. Under the new laws, the Court determined that the name ‘Starbucks’, written in Chinese or English, was well known enough to be considered a famous brand and was therefore entitled to protection.
This decision is the first of its kind under the new legislation and may be an indication that China is responding to pressure from the European Union and the United States to crack down on intellectual property rights infringements and counterfeiting. China is believed to be the source of around 70% of the world’s pirated products at a cost of around US $ 250 billion each year for US companies alone.
In a statement issued on January 18, Jiang Zian, the lawyer for Shanghai Xingbake, confirmed that the company had already initiated an appeal against the ruling in the Shanghai High People’s Court. Jiang explained that Xingbake does not use the English translation ‘Starbucks’ and had no plans to counter the lawsuit against its competitor for using the same Chinese name. “The problem is that they use Xingbake as a brand in Chinese and we use it as our company name. We just want to keep our company name and run our own business,” Jiang said. A Starbucks spokesperson later confirmed that it would be defending itself against the appeal.
Starbucks now has 156 outlets in mainland China and has a presence near some of the country’s most iconic landmarks, such as the Great Wall and the Forbidden City. At up to $ 6 a cup, the company’s coffee costs more than the average Chinese worker earns in a day. Despite this, Starbucks coffee is becoming increasingly popular with China’s emerging urban middle class.