Starbucks Wins Key Trademark Case in China
Starbucks has big plans for China. It believes the fastgrowing nation will become
the company’s second- largest market after the United States. Starbucks entered
the country in 1999, and by the end of 2016 it had opened more than 1,300 stores.
But in China, copycats of well-established Western brands are common.
Starbucks faced competition from a look-alike, Shanghai Xing Ba Ke Coffee Shop,
whose stores closely matched the Starbucks format, right down to a green-and-
white Xing Ba Ke circular logo that mimics Starbucks’ ubiquitous logo. The name
also mimics the standard Chinese translation for Starbucks. Xing means “star,” and
Ba Ke sounds like “bucks.” In 2003, Starbucks decided to sue Xing Ba Ke in
Chinese court for trademark violations. Xing Ba Ke’s general manager responded
by claiming it was just an accident that the logo and name were so similar to that of
Starbucks. He claimed the right to use the logo and name because Xing Ba Ke had
registered as a company in Shanghai in 1999, before Starbucks entered the city. “I
hadn’t heard of Starbucks at the time,” claimed the manager, “so how could I imitate
its brand and logo?” However, in January 2006, a Shanghai court ruled that
Starbucks had precedence, in part because it had registered its Chinese name in
1998. The court stated that Xing Ba Ke’s use of the name and similar logo was
“clearly malicious” and constituted improper competition. The court ordered Xing Ba
Ke to stop using the name and to pay Starbucks $62,000 in compensation. While
the money involved here may be small, the precedent is not. In a country where
violation of trademarks has been common, the courts seem to be signaling a shift
toward greater protection of intellectual property rights. This is perhaps not
surprising because foreign governments and the World Trade Organization have
been pushing China hard recently to start respecting intellectual property rights.
Sources: M. Dickie, “Starbucks Wins Case against Chinese Copycat,” Financial
Times, January 3, 2006, p. 1; “Starbucks: Chinese Court Backs Company over
Trademark Infringement,” The Wall Street Journal, January 2, 2006, p. A11;
“Starbucks Calls China Its Top Growth Focus,” The Wall Street Journal, February
14, 2006, p. 1.
Read the Management Focus feature titled Did Walmart Violate the Foreign
Corrupt Practices Act? What is your opinion? If you think it did, what do you think
the consequences will be for Walmart?
Answer briefly:
1. What did King Ba Ke violate? Explain. (2pts)
2. What is Foreign Corrupt Practices Act? (2pts)
3. What are the laws concerning intellectual property rights? (3pts)
4. What are the penalties for violating intellectual property rights such as trademark,
copyrights, patent, etc. (3 pts)
Answers:
1) Not only did the name Xing Ba Ke mimic the Starbucks name, but Xing Ba Ke's stores were
virtual replicas of those operated by Starbucks. In 2003, Starbucks sued Xing Ba Ke
for trademark violations. In 2006, Starbucks won its case, and Xing Ba Ke was fined
$62,000 and ordered to stop using its name.
2) generally prohibits the payment of bribes to foreign officials to assist in obtaining or
retaining business
3) deals with laws to protect and enforce rights of the creators and owners of
inventions, writing, music, designs and other works, known as the "intellectual
property." There are several areas of intellectual property including copyright,
trademarks, patents, and trade secrets.
4) may include civil damages in the dollar amount of damages and lost profits, an
injunction to stop the infringement, payment of the attorneys' fees by the infringer
and felony charges with prison time.
