Real coffee, but a fake ‘Starbucks’ in pirated Iraq

BAGHDAD (AP) — Everything from the sign outside to the napkins bears the official emblem of the leading international coffee chain. But in Baghdad, looks are deceiving: “Starbucks” in the Iraqi capital do not have a license.

Genuine Starbucks merchandise is imported from neighboring countries to stock the city’s three cafes, but all operate illegally. Starbucks filed a lawsuit in an attempt to shut down the trademark infringement, but the case was dropped after the owner allegedly threatened the lawyers the coffee shop had hired.

Be careful, he told them – and boasted of ties to militias and powerful political figures, according to US officials and Iraqi legal sources.

“I’m a businessman,” Amin Makhsusi, the owner of the fake branches, said in a rare interview in September. He denied making the threats. “I had this ambition to open Starbucks in Iraq.”

After his requests to get a license from Starbucks’ official Middle East agent were denied, “I decided to do it anyway and face the consequences.” In October, he said he sold the business. coffee shops continued to operate.

Starbucks is “evaluating next steps,” a spokesman wrote Wednesday in response to a request for comment from The Associated Press. “We have an obligation to protect our intellectual property from infringement and to maintain our exclusive rights to it.”

The Starbucks saga is just one example of what US officials and companies believe is a growing problem. Iraq has emerged as a hub for trademark infringement and piracy spanning a range of sectors from retail to broadcasting and pharmaceuticals. Regulation is weak, they say, while perpetrators of intellectual property violations can continue to operate largely because they enjoy cover from powerful groups.

Counterfeiting puts well-known brands at risk, costs companies billions in lost revenue and even puts lives at risk, they said.

Qatari broadcaster beIN estimated it has lost $1.2 billion to piracy in the region and said more than a third of online piracy of beIN channels comes from companies based in northern Iraq. The complaint was part of a public submission this year to US Special Report 301, which publicly cites countries that do not provide adequate intellectual property rights.

Iraq is seeking foreign investment away from its oil-based economy, and intellectual property will likely be at the center of negotiations with companies. But the effort to enforce the laws and crack down on the vast web of violations has historically been derailed by more pressing developments in the crisis-hit country or thwarted by well-connected businessmen.

“As Iraq strives to diversify its economy beyond the energy sector and attract foreign investment into knowledge-based sectors, it is important that companies know that their patents and intellectual property will be respected and protected by the government,” said Steve Lutes, vice president of Middle East Affairs at the US Chamber of Commerce.

Makhsusi insists he tried the legal route, but was denied permission by Starbucks’ regional representative based in Kuwait. He also said he tried to reach Starbucks through contacts in the United States, but that they too were unsuccessful.

He portrays his decision to open a branch anyway as a triumph over adversity.

Starbucks cups, chopsticks and other merchandise are obtained in Turkey and Europe, using his contacts, he said. “The coffee, it’s all authentic Starbucks,” Makhuusi added.

Makhsusi said he “had a meeting” with a lawyer in Baghdad to reach an agreement with the coffee company, “but so far we haven’t reached a solution.”

The law firm tells a different version of events.

Confidentiality agreements prevent the company from disclosing details of the case to third parties, but the AP spoke with three Iraqi legal sources close to the case. They spoke on condition of anonymity to provide details. They also asked that the company’s name not be mentioned for security reasons.

They said that in early 2020, the company was hired by Starbucks and sent a cease and desist notice to Makhsusi. They said the businessman told one of the lawyers in the case that he should be careful, warning that he had backing from a prominent Iranian-backed armed group and support from Iraqi political parties.

“They decided it was too dangerous and stopped the case,” the Iraqi legal source said. Makhsusi denied threatening Starbucks lawyers.

Makhsusi said doing business in Iraq requires good relations with armed groups, most of which are part of the official state security apparatus.

“I have friendly relations with everyone in Iraq, including the armed factions,” he said. “I’m a worker, I need these relationships to avoid problems, especially since the situation in Iraq is not stable for business reasons.”

He did not name specific armed groups he had contact with. The AP contacted two groups known to have done business in the areas where the cafes are located, and both said they had not worked with Makhsusi.

Counterfeiters and pirates have stepped up activity in Iraq over the past five years, particularly as Gulf countries responded to U.S. pressure and tightened regulators, said a U.S. State Department official, speaking on condition of anonymity because he was not authorized to do so. talk about trends.

Broadcaster BeIN has sent cease-and-desist letters to Earthlink, Iraq’s largest internet service provider, which offers subscribers a free streaming service, Shabakaty, that consists exclusively of pirated content. Iraq’s communications ministry did not respond to a request for comment.

“It’s unheard of and completely outrageous,” said Cameron Andrews, beIN’s director of anti-piracy. “It’s a huge market, so it’s a big commercial loss.”

But the biggest issue for beIN is piracy originating in Iraq and seeping into the rest of the region and the world, he said. After being copied by these companies, beIN’s channels are rebroadcast on pirated IPTV services and made available across the region, according to beIN. The company’s research found that some Iraqi operators are even distributing pirated content in the US

At least two US pharmaceutical companies have approached the US Chamber of Commerce with allegations that their brand name was being used to sell counterfeit life-saving drugs from Iraqi companies.

“I am concerned that if regulatory loopholes or intellectual property violations are allowed, then American companies will be prevented from doing business in Iraq and the quality of care could be dangerously compromised for Iraqi patients,” Lutes said.

The companies declined to be named in this report or to detail the types of drugs.

Successive Iraqi governments have promised to crack down on corruption since the US-led invasion in 2003 to restore Iraq’s political order, but none have taken serious steps to dismantle the vast internal machinery that enables state-sanctioned corruption.

Intellectual property has also historically been a low priority for Iraq. Limited bilateral talks with the US on the issue have been on and off for the past five years.

The challenge is to find a “clear leader in the Iraqi government who is interested in intellectual property issues as a way to attract foreign investment,” said a State Department official. “Until that person exists, it’s hard for us to engage.”

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