Baghdad's 'Starbucks' Points to Growing Problem in Iraq

Everything from the signboard outside down to the napkins bears the official emblem of the top international coffee chain. But in Baghdad, looks are deceiving: The "Starbucks" in the Iraqi capital is unlicensed. Real Starbucks merchandise is imported from neighboring countries to stock the three cafes in the city, but all are operating illegally, per the AP, which reports Starbucks is now "evaluating next steps" to "protect our intellectual property." The company filed a lawsuit in an attempt to shut down the trademark violation, but the case was halted after the owner allegedly threatened lawyers hired by the coffeehouse. Be careful, he told them—and boasted of ties to militias and powerful political figures, according to US officials and Iraqi legal sources.

Amin Makhsusi, the owner of the fake branches, denied making the threats in a rare interview in September. After his requests to obtain a license from Starbucks' official agent in the Middle East were denied, "I decided to do it anyway, and bear the consequences," he said, depicting the decision as a triumph over adversity. In October, he said he sold the business; the cafes continued to operate. 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 violation and piracy that cuts across sectors, from retail to broadcasting and pharmaceuticals. Regulation is weak, they say, while perpetrators of intellectual property violations can continue doing business largely because they enjoy cover by powerful groups.

Counterfeiting is compromising well-known brands, costing companies billions in lost revenue and even putting lives at risk. Qatari broadcaster beIN estimated it lost $1.2 billion to piracy in the region, with more than a third of internet piracy of beIN channels originating from companies in northern Iraq, while at least two US pharmaceutical companies have approached the US Chamber of Commerce with complaints that their trademark was being used to sell counterfeit lifesaving medication by Iraqi companies. "As Iraq endeavors to diversify its economy beyond the energy sector and attract foreign investment in knowledge-based sectors, it is critical that companies know their patents and intellectual property will be respected and protected by the government," says Steve Lutes, the chamber's vice president of Middle East Affairs. (More Iraq stories.)