Case Archives - GUJRAT INDIA

Landmark Judgement for Starbucks in Chinese IPR Case

The protection of intellectual property in china has long been high on the list of concerns for innovative foreign companies looking to do business there. What little legal framework existed around intellectual property rights (IPR) has been difficult and time-consuming to enforce. There are signs, however, that the situation may be improving for companies which use trademarks, logos and branding in the People’s Republic.

In a recent case, newly amended Chinese trademark legislation was put to the test when the American speciality coffee retailer Starbucks accused a local Shanghai company of copying their trading 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 mainland China. Shortly prior to this opening, a local company had registered its own business name – Xingbake Coffee Co. Ltd. – with the Shanghai authorities. By 2003, the Chinese firm had opened two outlets in Shanghai using the trade name ‘Xingbake’.

The legal dispute between Starbucks and their local competitor arose because ‘xing’ translates from Mandarin as ‘star’ and ‘ba-ke’ is an approximate phonetic rendition of ‘bucks’. Although Starbucks does not officially use this rough translation in China, the word ‘Xingbake’ has become synonymous with the US firm’s outlets amongst the public.

Starbucks considered that, by trading under a similar name and by the use of a very similar green and white logo, Shanghai Xingbake was competing unfairly. On this basis, Starbucks filed a law suit against Xingbake in Shanghai on December 23, 2003, alleging trademark infringement.

In reply to the accusation, Mao Yibo, General Manager of Xingbake, said that his company has registered its enterprise name with the Shanghai authorities in March 2000, before Starbucks was established in the region. By using the name ‘Xingbake’, he claimed that his company was simply using 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 ‘Xingbake’ as our brand when we planned to start a café business in Shanghai and it is just a coincidence that our name is the same with Chinese version of Starbuck [sic]”, he said. “The logo was designed by our own staff. To be frank, I hadn’t heard of Starbucks at the time, so how could I imitate its brand or logo?”

Chen Naiwei, director of the Intellectual Property Research Centre of Shanghai’s Jiaotong University does not accept this, explaining that ‘Xingbake’ has been used as the sole translation of ‘Starbucks’ in Taiwan since 1998. This predates the registration of Xingbake’s enterprise name in Shanghai by two years.

Despite Mao Yibo’s claims and his further assertions that Xingbake’s serving style and target market differ substantially from those of Starbucks, Shanghai No. 2 Intermediate People’s Court found in favour of the American giant on December 31, 2005 – two years after the law suit was filed.

Shanghai Xingbake was ordered to stop using its name, issue an apology in a local newspaper and pay 500,000 Yuan (US$62,000) in compensation to Starbucks.

The basis of the Court’s decision was the relatively newly amended Trademark Laws of the People’s Republic of China, which came into force on October 27, 2001. The amendments form part of a raft of revised legislation introduced to protect the owners of intellectual property in China. Under the new laws, the Court determined that the name ‘Starbucks’, written in Chinese or English, was sufficiently well known to be deemed a famous trademark and was, 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 crack down on IPR infringements and counterfeiting. China is believed to be the source of around 70% of the world’s pirated goods at a cost of around US$250bn each year to US companies alone.

In a statement released on January 18, Jiang Zian, the attorney for Shanghai Xingbake confirmed that the company had already begun an appeal against the judgement in the Shanghai Higher People’s Court. Jiang explained that Xingbake does not use the English translation ‘Starbucks’ and had no plans to counter claim against their competitor for using the same Chinese name. “The problem is they use Xingbake as the brand name in Chinese and we use it as our company name. We just want to keep our company name and run our own business”, Jiang said. A spokesperson for Starbucks later confirmed that it would be defending itself against the appeal.

Starbucks now has 156 outlets in mainland China and has a presence close to some of the country’s most iconic locations, including the Great Wall and the Forbidden City. At up to US$6 per cup, the company’s coffee costs more than the average Chinese worker makes in a day. Despite this, Starbucks coffee is increasingly popular with China’s emerging urban middle class.

The Case For Entrepreneurship – 6 Reasons Why Starting Your Own Enterprise Is The Way To Go

Have you ever dreamed of being your own boss? Do you have a great business idea that you would like to bring to fruition? There is no better time to start a business than now! 14 million U.S women own or run a business; women owned businesses employ a whopping 27.5 million people. According to The Center For Women’s Business Research, nearly half (46%) of all businesses are at least 50% owned by a woman or women. Women are taking risks and succeeding as entrepreneurs!

Women entrepreneurs of today are innovators, problem-solvers and have taken the over the reigns governing their futures. Almost 60% of women who have transitioned from traditional jobs to the world of entrepreneurship declare that nothing would attract them back to the corporate world. Thinking of pursuing a venture of your own? Here are six propelling reasons why entrepreneurship is the way to go:

1. Financial Independence

Entrepreneurship has proven to be a major vehicle individuals use to achieve financial freedom. One of the fastest ways to build wealth is starting a business; 74% of wealthy people are business owners (not employees). From legends like Madam C.J. Walker to the well-known visionaries of our time such as Bill Gates and Michael Dell, we have mounting evidence that individuals have used their business to create millions if not billions of dollars in personal wealth. While all companies may not be billion dollar enterprises, we see phenomenal success in individuals whose entrepreneurial endeavors bring in modest cash flow whose business revenues has allowed them to pay off debt, send loved ones to college, fund retirement accounts and much more.

2. Creation of Multiple Streams Of Income

This is one of my favorites! As a business owner, you have a world of options at your fingertips. You can leverage your knowledge and expertise to create several streams of income from a single idea. Let’s take a simple pie example. Say your passion is making cherry pie. Everyone loves and requests your cherry pies all the time. You decide you can make some extra money by selling your delicious cherry pies, so you charge $10 per pie and people gladly pay. Business is great! But don’t stop there. You can create additional avenues of income by sharing some of your “special secrets” by teaching pie making classes, selling a recipe book on pies or pastries, getting local and/or chain stores to stock your pies on their shelves, offering catering services, offering to show others how to start their own pie business, starting a mail order cherry pie business, selling pie making accessories and specialized baking items, and the list goes on. I have just listed 7 possible income streams from a single idea. Think about the business you would like to start. How many streams of income can you identify?

3. Flexibility

For the most part, as a business owner, you enjoy the flexibility to work when you want, how you want and in some cases where you want. The Center For Women’s Business Research tells us that 51% of women said the primary reason for starting their own business was the desire for more flexibility. You can determine your work schedule; if family commitments are important, you will have the ability to attend functions and events that are important to you without having to ask for time off from another person. You’re the boss! An author can work on a manuscript while at her daughter’s soccer game using a laptop. A consultant can schedule clients around activities she enjoys and prefers not to miss. What matters most to you? Are your missing out on important activities due to time constraints and job duties? Have you missed out on something important due to work obligations one too many times? Your own business may be the key to stop merely existing, but instead gaining control over your life and living abundantly with no regrets.

4. Tax Benefits

The numerous tax benefits recognized by entrepreneurs are reasons in and of themselves to start a business. The government favors small business and actually wants to help you succeed! You can reap the greatest tax benefits by incorporating. While determining the legal entity that best suits your venture should be discussed with your tax advisor, I strongly recommend incorporating for almost all businesses. Small businesses are eligible to deduct car expenses including mileage and depreciation, home office, personal assets, entertainment, travel and retirement deductions. An expense is usually deductible if, in IRS terms, it is “ordinary, necessary and reasonable.” A critical difference between the taxation of an employee vs. a business owner is that employees are taxed before their expenses while businesses are taxed after their expenses. That is a big difference! Again, it is worth discussing specific tax issues with a qualified advisor as it is well worth the investment, plus, its deductible!

5. Purpose

Some of us are called to the marketplace in the same manner others are called to medical, teaching or other professions. Your deep desire to start your own business may be for specific, God ordained reasons. Your product or service could just be exactly what millions of people need! Where your passion is, often, lies your purpose. Don’t let opportunity pass you by. Don’t be deterred by lack of resources (time, money, manpower, etc…). The provision will be provided for your vision during the right season. Think of all the incredible things we have today that we can’t even imagine living without such as bridges, airplanes, electricity and the list goes on. It all started with a vision, a concept in the mind of someone with a passion and a purpose to bring it forth. Your business could be the catalyst needed for positive change in many, many lives. What’s your grand idea? The world is waiting!

6. Challenge and Reward

Make no mistake about it, entrepreneurship is hard, very hard work. It is challenging, but immensely rewarding. The initial stages of starting your own business could possibly be the hardest you will ever work in your life and be one of the most rewarding experiences as well. As an entrepreneur, you can see the direct results of your labor, immediately and over time. Successful entrepreneurs see challenges as opportunities to succeed. It may be time for you to step out on faith, away from the perceived security of a steady job into the world of entrepreneurship. There are countless organizations out there whose primary mission is to help you succeed in your entrepreneurial journey. The point is that yes, there are challenges, but despite the challenges, you don’t have to go it all alone. Ask any entrepreneur, and they will assure you that the rewards outweigh the challenges by far, any day.

I sincerely hope that you are motivated to start your business whether as a part time vehicle to earn extra income or as a full time venture. There are countless resources available to help you with your endeavor. In parting, I want share with you one of my favorite quotes by Teddy Roosevelt from a speech given in 1910

~”It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”

Real Estate Growth and Investment in India – A Case Study

The Indian economy has grown rapidly during the past 15 years, which contributed to exponential growth in real estate properties across India. According to a recent article by Indian government, realty market in India accounts to a whopping 11% of the National GDP. Ever wondered why there is rapid growth in this industry, this case study gives a snapshot of factors that is contributing to its favor.

Population of many large cities in India has grown tremendously over the past decade. There is a colossal demand for residential and commercial properties in Tier 1 and Tier 2 cities. Some of the Top 5 residential cities in India are Delhi-NCR, Mumbai, Bangalore, Chennai and Pune. There are many key drivers for this exceptional real estate growth and investment in India.

a) Government of India has put up a roadmap for economic reforms to step up Infrastructure development by inviting investments from domestic and international players by creating business-friendly and Investor-Friendly atmosphere. Also, easing of monetary economic policies by cutting interest rates to make home loans by banks to buyers easily available and affordable.

b) Growing Urbanization and large scale migration of population from rural to urban locations in search of employment, higher income, better living conditions which has led to an increased demand for residential and commercial properties in the area.

c) From an Investment standpoint, since stocks and mutual funds are extremely volatile to market conditions, more people including middle-class income group, Non-Resident Indians are investing in real estate which offers high returns both in Short and Long term investments due to soaring property prices. Investment in residential properties also gives an option for residential buyers a second income to supplement their monthly Income.

d) Business activity and Setting up of IT development Centers, BPO, large scale manufacturing units in automobile and Engineering Sectors by multinationals has spurred growth in commercial office space requirements. As more and more MNCs setup shop in cities it opens new lines for overall growth & investment in real estate industry. These industries bring lot of job opportunities in to the system. More jobs means rising income levels, increased purchasing power for property buyers which is also another factor for real estate investment and growth.

e) State Governments in India have given green signal to develop residential townships, commercial centers, shopping malls near Industrial hubs, IT hotspots inviting both domestic and international investments for Constructing Connectivity bridges, state roadways, rail networks to ease the commuting traffic. Many large residential and commercial projects have sprung up to cater to the growing housing demand for real estate.

f) Augmenting the real estate growth are government policies in the pipeline to allow FDI (foreign direct investment) in retail, insurance, healthcare sectors of the economy which will likely see the real estate development and investment opportunities in India for many years to come.

Truck Wash Business Case Study

Often smart entrepreneurs look for out of the way businesses, things out of the mainstream but businesses, which have a good customer base and steady incomes. This is an extremely interesting story. I had always considered the mobile truck washing efforts to be very profitable and believed that fixed truck washes were a big waste of money. That was until one year when a new franchisee joined our team from Oklahoma City. I run a franchise company called the Car Wash Guys; http://www.carwashguys.com. Turns out the franchisee was formerly employed by Blue Beacon Truck Washes the largest chain of truck washes in the US. They do about $138,000,000 per year with 80 truck washes and the company is very closely held. Tim our franchisee was a truck manager for them and before buying into our franchise and started washing cars in OKC even though he knows truck washing best. He had a two-year non-compete with his old company, which we have honored in OKC. He has tons of experience and had indicated to me that the business is sound and we should really get into it. Later that year I sold a franchise to a person in WA State who owned car washes (5) and he made a deal with a truck stop on an Indian Reservation, he never started the plan, but the numbers we ran on the spreadsheet looked great and very profitable.

Even as a serial entrepreneur, I had never considered the fixed site truck wash business, as the mobile truck wash business seemed so much more efficient and so little over head; http://www.truckwashguy.com . So even with all this knowledge on the team we still did not enter that market. One of our competitors in the car washing industry bought up two

truck washing chains for a total of fourteen truck washes and proclaimed it more profitable than his other car washes by 5 times as much money. They now own nearly 100 locations of truck and car washes nationwide. After looking into it some more a franchise buyer who owned Fuel MAN, an East coast Fuel Card for fleet owners approached us in South Carolina to use the Truck Wash Guys name and develop a truck wash mid state. At that point we decided to start working on the details. Then a franchisee in OH made a deal with a truck stop between Columbus OH and Pittsburgh, to operate a 24 hour truck wash and de-ice business. He thought how easy this is and now so we have made deal in WV at a truck wash as well. Our Ohio Franchisee at the time took on another partner in WV.

Still reluctant to fully dive into the subcategory of full service truck washes we found our Ohio Franchisee going full guns to put together a deal with Pilot Truck Stops. Pilot Truck Stop has the most Truck Stops on the Planet and sells 8% of all the diesel fuel in the United States. So we planned a pilot program at pilot. Our temporary set up is a trailer unit, which sits at the truck stops and washes made sense. We then worked on plans for a building to submit them to the Building dept. for approval, meanwhile the deals in

OH and WV and SC were suddenly in the works. We figured if our deal with the truck stops worked well, the Truck Stops will get more traffic and fuel sales while we generate

revenue and a percentage of the total take for the truck stop for the privilege of working there. We are so use to washing trucks and have on our team a gentleman who sells simonize truck wash and has been in the car washing and pressure washing equipment business for 20 years. By using the fuel man fuel cards as currency on the east coast and name recognition of Pilot we figured we could move into this industry and pick up the slack.

There is a shortage of truck washes across the country and also a shortage of oil change facilities for trucks. A franchisee could be trained by our truck wash prototypes and probably on the top performing franchisee in our mobile truck wash

division; then quickly set up in their own markets. Pressure Washing companies which specialize in fleet truck washing should in fact consider this type of strategy for moving into the fixed site truck washing business.

If you study entrepreneurial companies you will in fact see that many companies fall into markets due to opportunities which present themselves, it is amazing the opportunities which exist out there and how fast companies can grow when they can handle the demand of those markets. Think on this.

The Case For Privatisation and SMEs in Nigeria and Sub-Saharan Africa

In the first five years of this decade, 37 countries in Sub-Saharan Africa together raised more than $11 billion through privatisation programmes. Although the bulk of this corpus was raised in low-value transactions in competitive sectors, the figure puts the region next only to Europe and Latin America in global privatisation trends. While Africa, Ghana and Zambia were among the top contributors, Nigeria takes the undisputed lead. Africa’s third largest economy contributed more than 70% of the $975 million generated between 2004 and 2005, most of it through a single deal involving the disinvestment of a major port operation.

Across Africa, privatisation had become the guiding principle for countries trying to develop dynamic private sectors and expand their economies. Yet, countries continue to face tough challenges in terms of disappointing social indicators, deficient infrastructure and huge productivity shortfalls. Essentially, the continent’s integration into the global economy had been held back by extreme poverty, especially in the Western regions where it continues to vitiate attempts at sustainable development.

Nigeria has managed to lead the pack in aggressive privatisation in Africa based on the realisation that it is the only relevant and economically viable means towards rapid and inclusive growth. Since the return of civilian rule at the end of the last century, Nigeria has also prioritised poverty alleviation based on sound macroeconomic policy interventions. The thrust of its endeavour has been on curbing state expenditure and involvement in direct economic production, mobilisation of resources and promotion of local and foreign investment. However, given its overwhelming dependence on oil exports and the gross mismanagement that marked successive decades of military rule, Nigeria faces a dizzyingly uphill climb.

While its intention for economic reform has never been in question, Nigeria’s track record in handling privatisation deals has been rather chequered. The broad parameters of its initiative drew on past successes elsewhere in the world, from the UK to Russia, and from Europe to the USA and Asia. Nigeria’s formal introduction with the concept came about with the Privatisation and Commercialisation Decree of 1988, an initiative mandated by the IMF-funded Structural Adjustment Programme. In 1999, the Bureau of Public Enterprise (BSE) was set up by federal government enactment to prepare and implement the government’s privatisation policies. Embarrassingly, a number of the first privatisation deals ended in fiasco.

The government of former president Obasanjo sold off two refineries to a private consortium, but the sale was later overturned by the administration of Late President UM Yar’Adua over allegations of wrongdoing. Subsequent efforts to privatise refineries have had to be stalled because of policy loopholes. Disinvestment of the Nigerian public sector telecom monopoly NITEL ended in disaster when the company suffered huge losses and failed debt obligations, forcing the government to retake control earlier this year. The now defunct national carrier, Nigerian Airways, likewise failed to take off despite several attempts at commercialisation. Besides indicating ineptitude in policy and implementation, these instances, more importantly, serve to highlight the extensive failure of big business in Nigeria.

In the US, small firms with less then 500 employees account for 99.9% of the country’s 24 million business. SMEs in the European Union together provide 65 million jobs or two-thirds of all employment, while 90% of all Latin American businesses are micro-enterprises. Nearer home in Kenya, 2003 figures reveal SMEs contributed 18% of national GDP. Considering global trends in the last several decades, the arguments in favour of SMEs over large enterprises are simply overwhelming. Rapid enterprise development in an atmosphere conducive to private sector growth is the only way Nigeria can hope to achieve it MDG commitments or its indigenous Vision 2020 goals.

The benefits arising out of privatisation are too crucial for Nigeria to ignore in the context of its long-term growth plans:

• Depending on prudent implementation, privatisation can help strengthen capital markets by widening local ownership through reservation of shares for citizens.

• Many governments have successfully reduced national debt by raising money through disinvestment and related instruments, curbing the need for subsidies and tax concessions.

• Privatisation engenders healthy competition that helps expand markets, establishes best practices and improves production and service standards.

• World Bank research confirms substantial performance improvement in private enterprises with the removal of administrative constraints typical of public sector operation.

• Developing countries like India and Brazil with strong commitment to free markets have succeeded in acquiring massive foreign investment by privatising public sector monopolies.

Foreign direct investment in Africa jumped from less than $1 billion in 1995 to $6.3 billion in 2000. Although this makes for a healthy increase, the flow of investment into Nigeria and the rest of sub-Saharan Africa remains curtailed because of local restrictions. The region lacks competitive markets and consistent regulatory frameworks that provide the right atmosphere for privatisation. Considering its past experiences, it is imperative that Nigeria formulate effective public sector reforms before pushing ahead with any further sale of public assets. Moreover, such measure must be undertaken as part of a larger effort at promoting economic efficiency.

The privatisation of utilities and large public-sector infrastructure tends to throw up even harder challenges. Nigerian lawmakers must be particularly concerned about strengthening institutional mechanisms that regulate market operations. This entails reinforcement of administrative and legal systems, capacity building of implementation agencies and reduction of corruption and political interference. The failed disinvestment of Nigeria’s flagship RORO Port in Lagos is a case in point when it comes to demonstrating the pitfalls in the privatisation process in this corner of the world.

The three separate facilities at the Lagos port that handle an estimated 180,000 tonnes of annual cargo was under private operation for a number of years. The owners showed huge salary expenditure to explain dismal profits averaging just over $40,000 annually, forcing the Nigerian Port Authority to resume control. Within a year and without any further investment, profits had jumped back up to over $1 billion.

Although shocking, such incidents suggesting massive corruption have regularly punctuated Nigeria’s economic recovery. Some estimates go so far as to say that 70 Kobo of every Naira the federal government spends is absorbed by the very bureaucracy that it meant to deliver it. Whatever the direction of its privatisation policies, governance in Nigeria is as much in need of radical reforms as its economy!