In February 2004 Starbucks filed suit in China to protect its Chinese name from being used by a little coffee company in Shanghai.
Starbucks is using the rough phonetic equivalent of its name, "xingbake", in 109 outlets in Taiwan card and nearly 100 on the Chinese mainland. The defendant, Shanghai Xingbake Coffee Shop Ltd has only two stores and does not plan to expand.

What does this story concerning the world's largest coffee retailer doing business halfway round the world have to do small and medium sized companies in the United States? A lot more than you think. Copyright law, trademark concerns and licensing are all legal issues every retailer should understand. A little information could save you time, aggravation and money.

What'x in a name?

Specialty coffee might be the core of your business, but your name is its public face. The world can sustain countless John Smiths, but corporate identities are singular and jealously protected. At the bare minimum, you need to know how to avoid an unseemly likeness to other brands. It's not only good business, it's a good way to stay out of court.

The biggest rule is also the simplest: Don't name your company Starbucks or anything that sounds remotely like it. Now insert any other coffee company name you have ever heard. and apply the same rule. United States trademark law is quite specific and not that difficult to follow. But it requires some research on your part before choosing a name for your company. Even if you plan to only have one store and never expand beyond your neighborhood, it's better to plan ahead for success, just in case it comes your way.

Flow picky can the law get '? If you name your little neighborhood coffee stand Carbucks, because you thought that would be a clever name for a drive-thru, and someone who works for Starbucks passes your store one day or sees your ad in the neighborhood newspaper.

Expect to hear from their lawyers in short order. Sound farfetched'? Then consider this: in June 2002 Starbucks filed suit in Seattle federal court against a Brooklyn. N.Y. company, A & D Cafe, which had used the name Warbucks Coffee. Despite associations with Daddy Warbucks of 1920s cartoon fame (Little orphan Annie), the suit held up. In July 2002, Starbucks filed suit against Sambuck's Coffee House, a small independent retailer in the somewhat far flung outpost of Astoria, Ore. In this case, still pending in federal court in Portland, the plaintiffs call Sambuck's name "a confusing variation of the Starbucks name and trademark". This was news to the owners, Samantha Buck who had named the shop after herself. Not only that, she had started her business one Full year before Starbucks arrived in the area. When Ms. Buck refused to comply with a cease and desist order served on behalf of Starbucks, the case when to trial, where it remains, while Samantha Buck continues to serve espresso.
As the potential owner of Carbucks. there's always the slim chance that you could win your case. But why spend all your money on legal fees, defending your name in court, when you could avoid such hassles by being more careful in the selection of your corporate name in the first place?
"For most people, the critical focus would be: arc you stepping on somebody else's trademark," explains Patrick Dwyer of Patrick M. Dwyer PC. a law practice in Seattle, Wash. that has represented Caffe D'arte and others in the industry. The standard for legality of a trademark is one of "confusing similarity," not "identically," so Dwyer says you must use all your creativity and resources in coming up with a proper name for your business. The trademark owner is considered the custodian of the people's right to not be contused.

On the upside, your product names and blends can also be trademark, as well as your processing methods, according to Paul Gilles, vice president of operations at Portland Roasting Company in Portland, Ore. "One of the [mistakes] that retail shops make is that they don't often consider that they really may succeed. So that one shop in their neighborhood may become a chain," says Gilles, who is an attorney and also has experience running his own coffee shops.

"If you have a good concept, whether it be your shop name or whether you create your own product or a unique beverage folks should be, at a minimum, weighing the costs and benefits [of trademarking]."

Portland Roasting Company, a medium-sized roaster, includes the words "100 percent pure microroasted coffee" as part of its logo. This expression, which represents the company's commitment to quality and freshness (it only roasts for order, never for warehousing) possibly could be trademarked. But Portland Roasting has not registered it as a trademark and also has not registered any of its blends, according to Gilles. Other companies, however, have taken this additional step, which is expensive but can be helpful in trying to protect a product name.

In 1997, for example, Starbucks sought to enforce its trademark for its "Christmas Blend" in order to stop a small company based on an island near Seattle from selling a coffee blend with the same name. Starbucks eventually dropped the suit, but not before getting a lot of press about the conflict. Enforcement is up to the company that owns the trademark, but having the legal right to use a name will make most of these conflicts pretty clear-cut.

Gilles believes the value of registered your trademark and taking advantage of intellectual property laws far outweighs the effort or the expense of doing so, even though it can cost thousands of dollars in attorney fees to research and register one trademark. "The energy, passion and the money you put into building your business can be significantly deteriorated by not having done that," he adds.

The lawyers interviewed for this story agreed that if you have any dreams of expansion, you should trademark your name as soon as your cash flow makes this financially feasible.

It's expensive, because you will undoubtedly need to hire an attorney to help you register your trademark. You can do some preliminary screening before you contact an attorney, however, and you should do this even if you won't be able to afford the trademark registration just yet. Dwyer says your first clue about whether a name can be trademarked is: "If you have to ask, then it's too similar." Stay away from names that sound like something very well known. He says the best rule is to make sure your customer will think of you, not just coffee, when they learn your name. Name your store after a family secret or your favorite pet. Keep in mind, though, that you cannot buy exclusive rights to your personal name, any geographical name or any descriptive word, like "delicious." Avoid common names that promote pleasure or joy-either they've all been trademarked already. Or they arc too common to get a trademark.

State trademark registration is less expensive, but in today's smaller world, it doesn't seem to offer the protection necessary, according to Dwyer, who points out that you engage in interstate commerce every time someone from another state buys a cup of coffee at your store.

"90 percent of the work I do has to be with people making unfortunate choices about what name to use." Dwyer says. "People just aren't thinking about it at all. It's not good business to ignore that."

You may be wondering if this issues is common in all industries. The surprising answer, according to Dwyer. is that name problems around trademark concerns are notably prevalent in the coffee-industry.

Copy Cats

A related issue is the use of another company's brand name in your store, according to Jeffery Osternman, partner in Weil, Gotshal and Manages LLP of New York, N.Y. It is perfectly legal to say you sell a certain brand of coffee, for example, but you have to be very careful not to imply that this involves some sort of sponsorship.

"You're perfectly free to tell people you are selling specific products," Osterman explains. "But you have to do it so it doesn't contuse consumers into thinking that somehow you are more authorized than you are."

Here's a case in point. The National Football League has exclusive rights to the words "Super Bowl and the NFL has worked hard to protect this trademark over the years. Stores that try to run "Super Bowl Sales" often receive a letter from the NFL's lawyers saying they cannot use that trademarked name.

"The stronger a trademark, the broader they range of goods and services it will protect," Osterman says. "The stronger category is arbitrary or fanciful or just made-up names," like Xerox or Kodak, that become closely associated with the product they sell.

Another legal area that affects coffee retail is copyright law. This is somewhat related to trademark law, but other rules are involved. There are two reasons to be concerned with copyright when you own a small retail business. One concerns your marketing materials and advertisements, the other concerns playing music in your store.

What you need to know about advertising and marketing is that ad copy is protected by copyright laws. You cannot use other people's copy without their permission. If you think someone is copying your ads, legally, you are within your rights asking them to desist. This applies to your ad slogans and design as well as the detailed way you promote your business. You can register anything written on behalf of your business on the Library of Congress Web site for $30. Dwyer says this is your most effective legal protection, because if you do find someone treading on your territory, you can sue, and if you win, the infringer will have to pay your legal costs and also statutory damages, with no proof that you were injured at all. (Remember: there but for the grace of some research go you.)

It's also possible to protect your copyright without registering it, Dwyer adds, but the legal statutes are less clear. You would have to prove that you were injured and how much you were injured, and you would not recover attorney fees.

Copyright, on the other hand, lasts for the lifetime of the author or creator, plus 75 years.

One of the most common ways a retail establishment breaks the law is by playing music in the store without proper licensing or permission. The laws on this issue are rather complicated, but according to Osterman, there are a few key areas to keep in mind.

Copyright law protects the public performance of musical compositions. Ordinarily, the public performance requires a license, but within the last decade Congress has allowed certain kinds of retail establishments to play radio broadcasts and TV shows. These exemptions depend upon the size of the store. If your store is smaller than 3750 gross square feet, and has no more than size loudspeakers, and no more than four in one room, you may turn the radio on without a license.

Osterman adds, however, there are no exemptions for playing CDs or other recorded music in your store without a license. That is why there is a background music industry, whose members negotiate the rights to be able to let their customers play music. Surely you've heard of Muzaktm? Well, that company and its sisters were born of necessity. If you currently play CDs on your store stereo, turn on the radio or get a license. Don't wait around to be caught.

You should note that copyright also protects "expressive creative works," which range from your menu layout to your web site, and even the interior design of your store. Osternian says the Supreme Court ruled a few years ago on the issue of copying a restaurant's look and feel. The Supreme Court said you could have protection-trade dress rights - if it turns out that consumers associated that look and feel with you," he says.

"You shouldn't go out and retain someone to recreate the interior of Starbucks. The might claim that they have trade dress rights."

In the era of barista signature drinks, it's important to know that recipes may tall under copyright law. Listings of ingredients, such as recipes, formulas, compounds or prescriptions, are not protected, according to the Copyright Office. But if a recipe is accompanied by "substantial literary expression, namely, inclusion of step-by-step instructions or collation with other recipes in a cookbook-there may be a basis protection".

Coffee Shops On Mars

Sometimes, instead of suing you, a coffee company will play you to recreate its look and feel in a location where it wouldn't ordinarily do business. Welcome to the world of licensing.

Peet's Coffee & Tea of Berkeley, Calif calls itself "the grandfather of special coffees," since it was founded in 1966. It is also one of the grandfathers of coffee law. Most of the time when you experience some freshly brewed Peet's it will be in a Peet's Coffee bar, but you may be surprised to learn that Peet's also has partnership agreements with Larry's Coffee Market in Seattle and Safeway Inc., and has licensed the food services department of Stanford University and John F. Kennedy International Airport to expand its reach and serve its customers aware from home.

According to Bill Lilla, executive vice president of food service for the company, Peets' has been involved in licensing for about three years, with a selected list of partners who can give their guests an experience identical to that of visiting a Peet's Coffee bar. "We only do licensing where we don't have options to control the environment," he says like in an airport or university.

One way that smaller coffee companies can get involved in licensing is by being at the other end of the agreement with corporations like Peet's. For example, many airports ask for bids before arranging new retail concessions. Small operators can hid to run coffee stands licensed to a company like Peet's, if they have entered into a licensing agreement with that company. Airports bid out these contracts because they arc looking to bring in name brands, according to 1-111a, but you can help them bring in the those brands by taking a proactive approach and making the licensing agreements on your own. Lilla says Peet's has not formed any agreements like this with small operators, but would not be opposed to the idea in the future.

"There are difficulties when you do licensing," Lilla cautions. "It's always important to make sure the partner fully understands your expectations. Our customers have very high expectations."

In addition to the financial benefits of licensing-Lilla refers to customers in airports as a "captive" specialty coffee market-there's a long-range potential benefit to building a loyal customer base in new places. In the future, Lilla expects to make licensing agreements with entertainment complexes, health care centers, Hospital food courts, and others. "We're all waiting for the first coffee shop on Mars," he adds, only partially in jest. "I think that's going to happen in our lifetime."

And when it does, issues of licensing, copyright and trademark will be there waiting.

Weighing The Effort

The law can be intimidating, but knowledge is power. While and article like this should not be considered legal advice, it can help you understand the issues involved.

For more specific questions, Government Web sites give a good introduction into various pertinent areas of the law. For more information on the copyright law, you can visit the Web site of the U.S. Copyright Office. http://lcweb.loc.gov/copyright. For trademark law, visit the Web site of the U.S. Patent and Trademark Office, http://www.usto.gov.

Beyond definitions and terms and downloadable manuals and publications, these sites offer a wealth of possibilities for those roasters and retailers already further along in the process. For example, you can file for a trademark on-line (by following the Trademark Electronic Application System link), search for pending and registered trademarks (using the tree Trademark Electronic Search System), find out about fees, and check on the status of your own application. It' you have a conflict. You can visit the Trademark Applications and Registrations Retrieval site.

You will also be able to inform yourself about timetables for trademark registration. This is crucial if your business-especially aspects like grand openings, loans, leases, product-launch promotions-depends upon timing. After you have met the minimum filing requirements for a trademark, it can still take months of attorney review for your trademark to he published. Then it's 12 weeks to the Notice of Allowance, and possibly another six months to the Statement of Use and your ability to enter commerce with the trademark.

If you are considering giving your shop or product an on-line presence, the Trademark Office site can also put you in touch with the Internet Corporation for Assigned Names and Numbers (ICANN). This nonprofit handles the nuts and bolts of Internet commerce.

As an important, if not essential next step, you should consult an attorney, knowing that prevention is the best medicine.

"If you're a small company, for almost anything that involves potential legal hassles, it's not going to be worth the trouble to fight. It's difficult to be too conservative when it comes to intellectual property law," Osterman Says.

Donna Gordon Blankinship is a free-lance writer living in Seattle, Wash. She can he reached via e-mail at donna@ghostwriteronline.com