Starbucks, Ethiopia Agree on Licensing

By JANET ADAMY June 21, 2007; Page B6, WSJ

Starbucks Corp.’s decision to sign a licensing agreement with the Ethiopian government could make it easier for other coffee-growing countries to harness their intellectual property.

The Seattle coffee chain said that it reached a deal with Ethiopia to license, market and promote coffees named after several of the country’s coffee-growing regions. Starbucks had for months refused to sign a licensing agreement with the African country on the grounds that it was legally onerous and wouldn’t help Ethiopian growers earn more money. The dispute was the subject of a page-one article in The Wall Street Journal in March.

Neither side would explain exactly how Starbucks and Ethiopia bridged their differences. But Ethiopian officials said they made their greatest strides after Starbucks Chairman Howard Schultz stepped in to broker the agreement in March.

“He is clearly the one who enabled for mutual trust to immediately set in, for conversation to replace hostile argumentation, for us to travel, both of us,” said Samuel Assefa, Ethiopia’s ambassador to the U.S.

Ethiopia has spent the past few years trying to trademark the names of three prized coffees it grows - Sidamo, Harar and Yirgacheffe - in order to eventually earn higher prices for the beans by turning them into stronger brands. As part of that effort, it has asked coffee companies to voluntarily sign royalty-free licensing agreements that would help build the market for its beans.

The agreement Starbucks signed is broader than the one it initially rejected. Under the deal, Starbucks will promote Ethiopia’s coffees in its stores and help farmers improve the quality of their beans. Starbucks won’t pay a licensing fee to use Ethiopia’s regional names on its packages.

Starbucks initially bristled at the idea of signing a licensing agreement because some of the coffee names it covered hadn’t earned trademarks in the U.S. But the agreement it signed applies even to Ethiopian coffees with names that haven’t earned a trademark. Ethiopian officials say they hope the agreement will eventually lead to higher prices for farmers.

“It’s a great framework for cooperation between Starbucks and the Ethiopian coffee sector,” said Sandra Taylor, Starbucks’s senior vice president of corporate social responsibility.

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