Starbucks vs. Ethiopia (cont.)

By Stephan Faris, Fortune

The farmers

Nobody is arguing that the farmers have it easy. In a UN ranking of human development, Ethiopia placed 170th out of 177 countries. A recent visit to Fero found most coffee farmers working without shoes. Their clothes were ripped. Most live in mud huts with thatched roofs and subsist on the fruits and vegetables they grow. "We are angry," says Teshome Debigo, a 28-year-old farmer. "But to whom can we cry?"

This year the cooperative that manages the Fero farmers' production and sales produced 300,000 pounds of coffee. If the coffee sells as it did last year, each of the cooperative's 2,432 farmers will net about $120 - the total yearly cash earnings for themselves and, on average, four other family members. Another $20 per farmer is captured by the cooperatives and unions, which goes toward infrastructure and administration. Starbucks awards $15,000 to the producers of its premium lines. In Fero that amounts to about $6.20 per farmer.

For some in Ethiopia, the trademark effort is the next step in the fair-trade movement, in which distributors like Starbucks voluntarily set a bottom price for green coffee, allowing farmers to ride out slumps in the commodity price. The added revenue from fair-trade coffee, of which Starbucks is the largest buyer in North America, allowed the farmers in Fero to bring electricity to their village from the power grid 2.5 miles away.

But unlike fair trade or other types of aid, trademarking would not rely on the beneficence of the buyer. According to calculations by Oxfam, which has taken up Ethiopia's cause, if trademarking pushed prices of specialty coffee up 80 cents a pound, Ethiopia would stand to gain $88 million a year. "We don't want help," says Tadese Mesekela, manager of the Oromia Coffee Farmers Cooperative Union. "We want a good price for the coffee."

Gray areas

Ethiopia has registered all three names in Canada and two in both Europe and Japan. But in the U.S., those seeking to trademark geographic names - rather than to certify them - walk a narrow line. Consumers must associate the name with qualities independent of its physical origin. But the word can't be so widely used that it refers to products other than those offered by the holder of the trademark. "Washington State apples" fails the first test. "French fries" would fail the second. The gray areas are broad, and much depends on the persuasiveness of the lawyers and the judgment of the examining attorney. "Everything turns on the way that consumers understand things," says Roger Schechter, a professor at George Washington University Law School.

Ethiopia's three applications are being handled separately, and last summer Yirgacheffe made it through. But Sidamo and Harrar hit stumbling blocks. In June, Starbucks dropped its application for Shirkina Sun-Dried Sidamo, which it says was a limited-time offering. But two weeks earlier the National Coffee Association, a trade group whose government-affairs committee is chaired by Starbucks' Dub Hay, had submitted a letter of protest to the Trademark Office, successfully arguing that the names were commonly used to refer to coffee and thus could not be trademarked. Starbucks says it learned of the letter only later. "There was no committee meeting on this whatsoever," says Hay. Association officials declined to be interviewed, but the organization said in a statement that the matter "was not brought to the attention of the NCA by any of its members."

In November, Starbucks CEO Jim Donald met with Ethiopian Prime Minister Meles Zanawi in Addis Ababa but failed to reach an agreement on the trademark issue. "They don't explain what their concerns are," says Getachew.

Ethiopia is appealing the rulings in the U.S. "Nobody says, 'Let's go get a cup of Sidamo' and mean just any coffee," says Roberta Horton, an intellectual-property expert at Arnold & Porter, a Washington, D.C., law firm representing Ethiopia. On February 19, Starbucks announced it would not oppose Ethiopia's trademark efforts. But the company continues to maintain that certification is more appropriate for coffee.

Starbucks says that if Yirgacheffe's trademark is challenged, it too will be canceled. "It's our understanding that the U.S. Patent Office did not know it was a geographic region," says Hay.

Few in Ethiopia understand the intricacies of trademark law, but in a country where coffee accounts for 60 percent of exports, those who sell to Starbucks are spooked. "There are two things we have to think about: the rights of the farmers and the market," says Ashenafi Argaw, export head of the Sidamo Coffee Farmers Cooperative Union, to which Fero's farmers belong. "We'd prefer these things to be resolved smoothly."

The outcome of the case will be closely watched. Ethiopia's Intellectual Property Office has nine more types of coffee it would like to protect, and other countries or industries might be tempted to follow suit. "Anytime you see a picture of a farmer or a member of an indigenous community on a product, it raises the question of what it is that consumers value in it," says Seth Petchers, coffee manager at Oxfam America. Ethiopia's effort could turn out to be just the first drip in a very large pot.

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