India: The Siren's Guide To Global Coffee Domination: Business, Technology And Intellectual Property

Last Updated: 11 July 2018
Article by Intepat Team

Starbucks' Siren Trademark is amongst the most recognizable in the world, with the logo being automatically associated with its characteristic reliable service, premium pricing, wide range of products, inclusion of consumer desires, strong intellectual property regime and, lastly, homely coffee and its variations. Unsurprisingly, it boasts of over 27,000 retail locations worldwide, with plans to not only further expand and evolve their operations but also engender a global coffee revolution. Founded in 1971, its present stature comes from astute business practises, continuous technological innovation and, possession and protection of a wide intellectual property portfolio. In more ways than one, the right mix of the same formula will be a game-changer moving forward.

It is only natural that such a behemoth would have smaller establishments trying to ride on its coat-tails- and it would have gone unpunished to the financial detriment and brand dilution of the company- if it hadn't been for the trigger-happy litigant team at Starbucks proactively working to prevent being shanzhai'd. Thus, Starbucks' foray into the Chinese gourmet coffee market began with the registration of its major trademarks by 2000, but also by approaching the Shanghai No. 2 Intermediate People's Court in 2003 for relief due to a local café utilizing the "Xingbake" moniker, which was the literal Mandarin translation for Starbucks. Success, however, has been mixed with only 62 thousand dollars' worth of compensation given in the prior case, and a string of trademark infringement suits failing in the US and Japan. While the 2nd U.S. Circuit Court of Appeals adjudged in 2013 that Charbucks had not caused the blurring of Starbucks' brand, with a phone survey having been conducted by the latter to be "fundamentally flawed" as it was considered in isolation, Article 4(1)(vii)(xi)(xv) of the Japanese Trademark Law was held to not have been violated by Bull Pulu Tapioca in 2014, with respect to Starbucks' famous intellectual property, as neither the literal elements and design depicted in the centre of its logo were same nor was it an affront to public order and morality.

While Starbucks was successful in suing Coffee Rocks for infringement, IP litigation remains a precarious step, especially when parody ventures such as Dumb Starbucks serve free coffee as an exhibition of art in 2014 under fair use laws, and smaller institutions such as The End Café suing and accusing Starbucks of wilfully misleading customers into believing that the Unicorn Frappuccino was a product of its own creation that shared all the nuanced attributes of the original, which not only had an earlier priority filing date but also contained ingredients that were fundamentally different. While the case was settled amicably out of court in 2017, the takeaway from the exercise as a whole is that not only is litigation a two-way street but Starbucks' also has to supplement its offerings with better accompanying technology to better ingrain themselves in the public conscience.

Starbucks has thus revolutionized both mobile payments and app-based ordering. The My Starbucks Rewards Program has over 13 million customers, integration of the Digital Flywheel Artificial Intelligence into its application has allowed for context based recommendations, location based push notifications and real time triggers to bridge the gap between the real and the digital world. Suggestions can include alternative food items based on order history or time of the day, and so on. Furthermore, its payment portal boasts of over 23 million American consumers, making its user base large than both Apple Pay and Samsung Pay. It has expanded to 30 percent of all financial transactions, with 10 percent of all orders coming through the app. Loyalty is rewarded with co-branded debit and credit cards and free goodies.

This does not, however, concretize the future path that can be employed by Starbucks, and neither is it blind to the winds of change. With around 15 percent of all total revenue coming from China this year and over 50 percent of its growth coming from the Asia-Pacific Region, Starbucks admits that the baton is being passed, with it poised to enlarge its presence through 6000 stores planned by 2022 in what is potentially its largest foreign market. In light of China's complex regulatory environment, sound and adaptable business practices are increasingly necessary to remain a market leader. With rising costs of opening new branches and greater competition, and to accommodate for the reduced profit percentage in China as compared to the US, Joint Ventures, integration of local cultures and ingredients and deputizing intellectual property protection is the logical manoeuvre.

Starbucks' joint venture with Uni-President Enterprises has been hugely successful with the former completing a 1.3 billion dollar acquisition of the latter, and other venture partners simply because they help navigate regulations, monitor and absorb legal costs, leverage local talent and resources, help enhance knowledge and expertise and, most importantly, protect intellectual property rights through a mix of legal, practical and technical experience; all the while integrating local tea-based ingredients and leveraging the common assumption that western brands such as Starbucks are bourgeoise and thus better. The idea is not to repeat the same mistake as Michael Jordan, Chivas Regal and Hermes when they lost suits in 2012 because their brands or their Chinese translations weren't famous enough, before it was registered by a Chinese entrepreneur.

Thus, the perfect balance of nurturing between the aspects of business, intellectual property protection and technology must be maintained, while remaining contemporary. Not only has Starbucks worked with a small start-up to sell Ember Temperature Control Mugs in its stores that integrates temperature regulatory mechanisms and, allows for the admixing of coffee and carbon dioxide but has also filed for a patent in 2014 for a paradigm-altering process of brewing coffee that makes cold coffee evergreen, reduces preparation time from 20 hours to 45 minutes, reduces acidity, compliments non-milky bases and employs an ascending filtration flow under the trademarked Aqua Tamp Technology. Paired with their flagship Reserve Roastery that has a 3D printed tea bar, an accompanying Augmented Reality experience that gives a virtual tour of the equipment in the premises, custom filters with virtual badges and an outlet for the sampling of fresh concoctions and technologies, Starbucks' marriage of the above three key elements is realized and it is on right track to global coffee domination, even if there are a few hiccups on the way.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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