All the Coffee in China

The judgment wasn't much. Starbucks (Nasdaq: SBUX  ) investors won't even notice the 500,000 yuan that the coffee chain was awarded, which amounts to a little more than $60,000. However, a trademark infringement ruling in China that sided with Starbucks over a local competitor speaks volumes about how far the world's most populous region has come in presenting itself as fertile expansion soil to global powerhouses.

The Shanghai No. 2 Intermediate People's Court ruled that rival Shanghai Xing Ba Ke went too far in copying the Starbucks concept. With a similar green and white logo design and a name that is a phonetic translation of Starbucks, the stateside proprietor prevailed in a lawsuit that had been initiated three years ago.

This is big for Starbucks. Back in May, I interviewed Starbucks CEO Jim Donald and asked him about the company's push into China. The company's long-term goal is to open 15,000 locations outside of the United States, and Donald told me that China is expected to be its largest overseas market.

Since I was unlikely to step into a Chinese Starbucks anytime soon, I also asked Donald to walk me through the differences between an American Starbucks and its overseas counterpart.

"If I blindfolded you, flew you to Xing Dao, and didn't tell you where you were, with the exception of the menu writings, you wouldn't know where you were," he said. "The experience, as well as the beverages -- there might be some regional differences that would probably tip you off -- but you would find that the experience and the quality of the beverages and the selection of the beverages are very similar."

The court ruling in Shanghai should now give Starbucks the flexibility to expand quickly, tapping into a nascent love for java in a gargantuan nation that has historically favored tea. It's also likely to encourage many of the global brands that have yet to make their presence felt in China to expand into the region sooner rather than later.

That's important, because for years China had been seen as either a closed country or one that is a hotbed for piracy. Just consider how the area had frustrated companies like Microsoft (Nasdaq: MSFT  ) and Callaway (NYSE: ELY  ) with cheap knockoffs. Obviously, piracy can't be licked overnight -- if ever -- but the climate is more corporate-friendly these days.

You see it in some of the active Rule Breakers newsletter service recommendations like NetEase.com (Nasdaq: NTES  ) and Shanda Interactive (Nasdaq: SNDA  ) that are catering to a growing citizenry, fascinated with online role-playing games. Starbucks is playing a role, too -- that of a winner.

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Longtime Fool contributor Rick Munarriz will admit that he's not much of a coffee drinker, although he finds the company's Chantico chocolate beverages irresistible. The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. Microsoft is an Inside Value recommendation.


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