Making the Origin Count: Two Coffees

Some 15 million people in Ethiopia depend on the coffee
sector, which generates 60 percent of the country's wealth.
(Courtesy EIPO)

Coffee is the second most traded commodity in the world after oil. Altogether, we drink over 400 billion cups each year. To retailers in wealthy countries, coffee means consumers willing to pay $4 for a cappuccino. To many farmers in developing countries, it means hard toil to earn less than a dollar a day. Seeking to narrow this gap, growers and governments in coffee producing countries are using a range of intellectual property rights to differentiate their coffee in the market place and so achieve higher returns.

Representatives from two of the world’s great coffee-producing nations, Ethiopia and Colombia, told their stories at WIPO’s 2007 International Symposium on Geographical Indications in June. In this second article in our series on geographical indications, WIPO Magazine follows their experiences and the different paths they have explored in pursuit of similar goals.

Ethiopia and the Starbucks Story

Few readers can have missed the headlines which peppered the international press late last year: “Starbucks in Ethiopia coffee row – U.S. coffee chain is denying Ethiopia earnings of $88m a year, according to Oxfam” (BBC); “A Hot Cup of Money - Starbucks, Ethiopia, and the Coffee BrandingWars” (Spiegel online); and “Storm in a Coffee Cup” (The Economist). The image of coffees growers from one of the world’s poorest countries struggling to defend their interests against the mighty American chain - whose revenues in 2005 equaled two thirds of Ethiopia’s GDP - fired public sympathies and sparked a major lobbying campaign by Oxfam and other development organizations.

But Getachew Mengistie, the dynamic Director General of the Ethiopian Intellectual Property Office (EIPO) offers a more nuanced account than that of the show-down evoked in the press headlines. “It was not a matter of us winning against them, or them against us,” he said in an interview on the margins of the WIPO Symposium. “We always stressed that our strategy was intended to allow Ethiopia to work with the industry to build the value of these coffee brands. This was in the interests of the farmers, the importers, the coffee roasters, the distributors, as well as the consumers.”

The story began in 2004, when the EIPO began working with partners to identify a mechanism which would lead to a greater share for Ethiopia’s coffee growers of the high retail prices fetched by their Harrar, Sidamo and Yirgacheffe coffees. Following extensive studies and consultations, a project proposal was developed to capture the intangible value of selected fine coffees. A consortium of stakeholders led by Mr. Mengistie was formed, including representatives of farmers’ cooperatives, coffee exporters and government bodies.  The key, they agreed, was to achieve wider recognition of the distinctive qualities of these coffees as brands and so position them strategically in the expanding specialty coffee market; while at the same time to protect Ethiopia’s ownership of the names so as to prevent their misappropriation. The project secured financial support from the U.K.’s Department for International Development (DFID), technical advice from a Washington-based NGO, Light Years IP, and legal assistance from U.S. law firm, Arnold and Porter.

Sharing a bigger pie

"People used to ask: Oh, does Ethiopia produce coffee?" Getachew Mengistie outlines Ethiopia’s Fine Coffee Trademarking and Licensing Initiative at WIPO’s 2007 GI Symposium. (Photo: WIPO/EM)

The stakeholders opted for a trademark-based solution. The EIPO began filing applications to register the names Harrar/Harar, Sidamo and Yirgacheffe as trademarks in key market countries. In a novel move, this was to be combined with the offer of royalty-free licenses to foreign coffee companies to create a network of licensed distributors, who, in return would actively promote Harrar, Sidamo and Yirgacheffe to consumers in the specialty coffee market. “The theory is: make the pie bigger. Let the market pay,” explained Mr. Mengistie. “Rather than focusing on short term gain, this way we can enlist the big companies to do what we don’t have the skills or financial means for – that is, building recognition of our brands in international markets and so increasing long term demand for them.”

The first hurdle was the high cost of legal services for foreign trademark registration. (Ethiopia, moreover, is not a member of the Madrid System for the international registration of marks.) This was overcome by support from law firms which agreed to provide their services pro bono. From 2005– 2007 EIPO filed trademark applications for Harrar, Sidamo and Yirgacheffe in 34 countries, with 28 titles granted by mid 2007, including in Canada, the European Union, Japan and the U.S.

Objections

But in summer 2006 the strategy had threatened to unravel.  The U.S. Patent and Trademark Office (USPTO) had approved the application to register Yirgacheffe. But the National Coffee Association (NCA), representing U.S. coffee roasters, objected to the EIPO’s applications to trademark first Harrar, then Sidamo. The grounds for opposition in both cases were that the name had become too generic a description of coffee, and as such was not eligible for registration under U.S. trademark law. The USPTO turned down the application for Harrar in October 2005 and for Sidamo in August 2006.

Starbucks, which was widely held in media reporting to have been a driving force behind the objection, publicly offered to assist the EIPO in setting up a national system of certification marks to enable the farmers to protect and market their coffee as “robust” geographical indications. “These systems are far more effective than registering trademarks for geographically descriptive terms, which is actually contrary to general trademark law and customs,” said the company in a statement. But the EIPO and its advisors disagreed. The designations, they argued, referred not to geographical locations but to distinctive coffee types. Moreover, appropriate intellectual property tools had to be chosen to meet specific needs and situations. “You have to understand the situation in Ethiopia,” Mr. Mengistie explained. “Our coffee is grown on four million very small plots of land.  Setting up a certification system would have been impracticable and too expensive. Trademarking was more appropriate to our needs. It was a more direct route offering more control.”

Through the impasse

The EIPO filed rebuttals against the USPTO decisions with supporting evidence to demonstrate that the terms Harrar and Sidamo had acquired distinctiveness. Meanwhile, both Starbucks and the Ethiopian government were keen to resolve their differences quickly and find a flexible way forward. Their joint efforts led to an announcement in June that they had reached a mutually satisfactory agreement regarding the distribution, marketing and licensing of Ethiopia’s specialty coffee designations, which provided a framework for cooperation to promote recognition of Harrar, Sidamo and Yirgacheffe. Ethiopia’s ambassador to the U.S., Samuel Assefa praised Starbucks for its corporate citizenship. “This alliance,” he said, “highlights the significance of visionary entrepreneurs in creating space for win-win engagement between [global] corporations and developing countries.”

“Harnessing market forces and allowing poor countries to benefit from IP rights are keys to creating fairer and more equitable trade.” - Raymond C. Offenheiser, president of Oxfam America, which campaigned in support of Ethiopia’s cause.

So what was the solution? In essence, Starbucks agreed to sign voluntary licensing agreements which immediately acknowledge Ethiopia’s ownership of the Harrar, Sidamo and Yirgacheffe names, regardless of whether or not a trademark has been granted. Legal commentators have homed in on the use of the term “designation” in the agreement as a means of circumventing the obstacle caused by the status of the Harrar and Sidamo applications. “Yes,” acknowledges Mr. Mengistie, “designation is used here as a broader term than trademark, to encompass some of the trademarks that are still pending registration.  It is not related to certification.”

Sweetener

On August 21, the USPTO informed the EIPO that their rebuttal in the case of Harar had been successful. (The Sidamo application is still pending.) And even before its successful resolution, the high profile dispute with Starbucks proved not to be without a sweeter side. The media coverage has had the effect of greatly increasing public knowledge of, and interest in, Ethiopia’s coffees. “Partly because of this recognition, we have begun to see increases in their price,” says Mr. Mengistie. “I learned from the coffee farmers' cooperatives and exporters just three months ago that the price of Yirgacheffe had already increased by $0.60 cents to $2 a pound.”

Colombia’s coffee growing territory – one of the largest in the world - stretches over three cordilleras of the Andes Mountains and 86 microclimates. The resulting high quality Arabica coffees are harvested all year round. (Photo by Patricia Rincón;© FNC)

Colombia – 50 Years of Evolving Strategies

Colombia’s coffee growers have a long history of developing strategies to protect and promote their coffee. Luis Fernando Samper, Intellectual Property Director of the National Federation of Coffee Growers of Colombia (FNC) which represents the interests of 560,000 small coffee growers, offers this instructive account of the road they have traveled.

During the late 1950s, the price of Colombian coffee plummeted from US$0.85 to 0.45 per pound due to an excessive supply of coffee on the world market. The market was dominated by the coffee roasters, who would blend coffee beans from various unspecified origins in their products in order to give themselves the flexibility that would maximize their profit margins. As a result, public awareness of the origin of coffees was low. Only 4 percent of consumers in the U.S., the largest coffee market at the time, were aware that Colombia produced coffee. This, the federation of growers felt, had to change. “The FNC thought: Our coffee is good,” said Mr. Samper. “We have to tell consumers where it comes from.” So Colombia became the first coffee producing country to embark on an active strategy of differentiating and marketing its product.

They began by putting a face on Colombian coffee – literally. With the help of a New York advertising agency, the FNC created the character of Juan Valdez®, to represent the archetypal Colombian coffee grower. Television commercials shown in North America in the 1960s featured Juan Valdez in the coffee fields with his faithful mule, painstakingly selecting and hand-picking the ripest beans. Consumers began to respond to the message that Colombian beans are grown and harvested with great care, with little help from machines, in ideal climatic conditions with plenty of rain, sun and fertile volcanic soil. Demand grew. Many coffee roasters began marketing their products as Colombian coffee.  And a number launched high end products consisting exclusively of Colombian coffee.

From branded ingredient to certification mark

To obtain a license to use the Juan Valdez trademark, a product must consist of 100% Colombian coffee and meet quality standards stipulated by the coffee growers’ federation. (Photo © FNC)

Having established the reputation of Colombia’s coffee beans and created demand, the next challenge was how to let consumers know which of the brands they saw on the shop shelves contained genuine 100 percent Colombian coffee. Registering the term Colombian coffee itself as a trademark was not an option, since the term is a description of a geographical origin. Instead, during the early 1980s, the FNC designed and registered the now familiar Juan Valdez logo. The plan was to license this mark to roasters for use on their own branded products which contained exclusively Colombian coffee.  “We developed a trademark-based ingredient branded strategy,” explained Mr. Samper, “- much like the use of the “Intel inside” sign on computers today.”

While the principle was sound, this trademark-based approach could not, of course, oblige roasters interested in selling Colombian coffee to license the logo. A number of coffee roasters and marketers proved unwilling to fulfill the conditions of the trademark license agreement that would allow them to use the Juan Valdez ingredient brand alongside their own product brand. So a complementary strategy was devised to capture this segment. Working with the FNC, the Republic of Colombia registered the word “Colombian,” in relation to coffee, as a certification mark in the U.S. and Canada. The formal standards attached to these certification marks now provided a guarantee that the actors in the market place would meet minimum quality standards when selling Colombian coffee, thereby protecting its hard-earned reputation.

By 2004, surveys conducted by KRC Research showed that consumer awareness of Colombia as a coffee growing country had climbed to 91 percent or more in key markets such as the U.S., Canada and Spain, and had reached very high levels in other major consumer markets. As far afield as China, awareness had risen to 72 percent. Yet the certification mark route was not proving an easy ride. The FNC found enforcing their certification marks in North America difficult and expensive, and their lawyers had to make regular presentations to the USPTO so as to prevent registrations of trademarks containing the word Colombian which would give brand owners the right to sell products containing little or no Colombian coffee. “We had to oppose a substantial number of trademark applications,” explained Mr. Samper, “and make sure that coffee marketed as Colombian was indeed 100 percent Colombian. Not an easy job! Each test could cost us US$ 500 to carry out, and complementary chemical tests to analyze the composition of the coffee were even more expensive. We ended up investing in the technologies to perform the tests ourselves.”

Moreover, neither trademarks nor certification marks necessarily protected against the use of the words Colombian blend or Colombian type. “After living this situation for some years,” said Mr. Samper, “we needed another alternative to help us defend and protect the Colombian origin.”

Stepping forward – Geographical indications

The way forward, the FNC concluded, lay in the use of geographical indications (GIs). Colombia already had in place the same legislation as Peru for the protection of GIs, and in December 2004 the FNC presented the Colombian government with an application to recognize Café de Colombia as a GI. Within three months it was ratified. In 2005, the FNC broke new ground by applying to protect Café de Colombia as a Protected Geographical Indication under the European Union (EU) system - the first time this had ever been done for a product from a country outside the EU following the opening of the EU system for non-European GI products. After some ups and downs along the way, the EU procedure concluded successfully in June this year, when the two-year period of opposition expired and the formal recognition of Café de Colombia as a Protected Geographical Indication under the EU system became official in September.

Summing up, Mr. Samper highlighted the attraction of GIs for the Colombian coffee industry, where origin is a key tool for differentiating and adding value to the product, but where coffee marketers prefer to downplay origin in order to gain flexibility. Unlike trademarks and certification marks, GIs are intrinsically linked to attributes and quality standards related to origin. GI systems, which guarantee origin and methods of production, he concluded, are set to flourish in today’s climate of increasing demand from consumers for more and better information about the products they consume.