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The protection of intellectual property in China has long been high on the list of concerns for innovative foreign companies that want to do business there. What little legal framework existed around intellectual property rights (IPR) has been difficult and time-consuming to implement. However, there are signs that the situation may be better for companies using brands, logos and trademarks in the People's Republic.
In a recent case, recently amended Chinese trademark law was tried when US specialty coffee retailer Starbucks accused a local Shanghai company of copying their trade name and logo.
Starbucks opened its first Shanghai outlet on Huaihai Road on May 4, 2000, building on the success of its dozens of stores across Taiwan and the rest of China. Shortly before this opening, a local company had registered its own company name - Xingbake Coffee Co. Ltd. - with the Shanghai authorities. In 2003, the Chinese company had opened two stores in Shanghai with the trade name & # 39; Xingbake & # 39 ;.
The legal dispute between Starbucks and their local competitor arose because & # 39; xing & # 39; translates from mandarin to & # 39; star & # 39; and & # 39; ba-ke & # 39; is an approximate phonetic representation of & # 39; dollars & # 39;. Although Starbucks does not officially use this rough translation in China, the word & # 39; Xingbake & # 39; has become synonymous with the American company's stores among the public.
Starbucks considered that Shanghai Xingbake competed unfairly by trading under a similar name and using a very similar green and white logo. On that basis, Starbucks filed a lawsuit against Xingbake in Shanghai on December 23, 2003, alleging trademark infringement.
In response to the accusation, Mao Yibo, head of Xingbake, said that his company registered its company name with the Shanghai authorities in March 2000, before Starbucks was established in the region. By using the name & # 39; Xingbake & # 39; he claimed that his company simply used its legitimate title instead of a trademark.
Mao denied that the name of his company and its logo had been influenced by their Seattle-based rival. "We invented & # 39; Xingbake & # 39; as our brand when we were planning to start a cafe business in Shanghai and it's 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 honest, I hadn't heard of Starbucks back then, so how could I imitate its brand or logo? "
Chen Naiwei, Director of the Shanghai Intellectual Property Research Center & # 39; s Jiaotong University does not accept this and explains that & # 39; Xingbake & # 39; has been used as the only translation of & # 39; Starbucks & # 39; in Taiwan since 1998. This preceded the registration of Xingbake's company name in Shanghai for two years.
Despite Mao Yibo's claims and his further claims that Xingbake's serving style and target market differ significantly from those of Starbucks, Shanghai found No. 2 Intermediate People's Court of the American Giant in December 31 2005 - two years after the lawsuit arrived.
Shanghai Xingbake was ordered to stop using its name, make 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 law of the People's Republic of China, which entered into force on October 27, 2001. The amendments form part of a series of revised laws introduced to protect the owners of intellectual property in China. Under the new laws, the court ruled that the name & # 39; Starbucks & # 39 ;, written in Chinese or English, was well-known enough to be considered a well-known trademark and therefore entitled to protection.
This ruling 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 break down intellectual property infringement and counterfeiting rights. China is believed to be the source of about 70% of the world's pirated goods at a cost of about $ 250 billion each year for US companies.
In a statement released on January 18, Jiang Zian, the lawyer for Shanghai Xingbake, confirmed that the company had already filed an appeal against the Shanghai Higher People's ruling. Jiang explained that Xingbake does not use the English translation & # 39; Starbucks & # 39; and had no plans to counter their competitor for using the same Chinese name. "The problem is that they use Xingbake as a trademark in Chinese and we use it as our company name. We just want to keep our company name and run our own company," Jiang said. A Starbucks spokesman later confirmed that it would defend itself against the appeal.
Starbucks now has 156 stores in mainland China and has a presence near some of the country's most iconic locations, including the Great Wall and the Forbidden City. Up to $ 6 per cup, the company's coffee costs more than the average Chinese worker in one day. Nevertheless, Starbucks coffee is becoming increasingly popular with China's growing urban middle class.