February 20, 2012

Latest intellectual property clash in China? It's the hamburger

The Associated Press

LOS ANGELES — Millions of Chinese have come to love Big Macs and Whoppers. So when a California-inspired chain put up signs in Shanghai announcing the coming of the Double-Double, local burger lovers rejoiced.

click image to enlarge

The Double-Double is In-N-Out's signature burger, but a Chinese company has started selling it anyway.

The same can't be said of In-N-Out.

The California company doesn't operate any stores in China. So its owners were miffed to see a red-and-yellow doppelganger called CaliBurger laying claim to its signature burger, touting "Animal Style" fries topped with cheese, special sauce and onions, and planning to serve thick shakes in palm-tree-print cups.

Enforcing its intellectual property rights half a world away might seem a challenge for privately held In-N-Out, whose cult following belies its modest size. But it turns out CaliBurger's founders were Americans with company offices in Diamond Bar, Calif.

They agreed to tweak CaliBurger's menu and decor after In-N-Out filed suit in U.S. District Court in Santa Ana, Calif., for trademark infringement and counterfeiting. In-N-Out wouldn't comment on the settlement except for a statement saying "the matter has been resolved."

But in Shanghai, where CaliBurger opened its first branch last month, some of the restaurant's employees aren't shy about the source of their inspiration. Jonathan Wong, CaliBurger's chef de cuisine and director of training and development, is a former manager at an In-N-Out store in Northern California.

"The model was In-N-Out," said Wong, 28, a native of Hercules, Calif.

Still, CaliBurger has made some tweaks to the In-N-Out formula that even some Southern California die-hards might find an improvement on the original: booze and babes.

The Shanghai restaurant serves California wine as well as vanilla shakes spiked with bourbon. And its mascots are leggy, mostly Western models "as golden as the California sun" who represent the company at events in China, according to the CaliBurger website.

"The staff really loved them," Wong said.

The burger battle is just the latest skirmish over intellectual property in China, where pirated movies and merchandise are giving way to knockoff services and retail businesses.

Photos of a fake Apple store in southern Yunnan province went viral on the Internet last year.

Global restaurant chains have become popular targets as well. Big Chinese cities are filled with knockoffs such as Dairy Fairy, Pizza Huh and Jambo Juice. Then there's OFC, or Obama Fried Chicken, a restaurant in Beijing that was threatened with legal action by KFC, which has zeroed in on China as a major market.

Executives at CaliBurger, which is now part of a holding company based in the Cayman Islands, figured Chinese fast-food lovers were ready to step up to made-to-order burgers.

"In Asia, which has fast-growing economies ... we saw more opportunity for a higher-end, premium brand," said John C. Miller, a Los Angeles native and one of the chain's three co-founders.

Miller and CaliBurger executives wouldn't comment on the feud with In-N-Out. But the spat began last year when CaliBurger began constructing its outlet in Shanghai. It placed English-language signs reading "Enjoy a Double-Double" and "Messier is Better/Animal Style" over its future home but didn't mention the company name.

No matter. Photos of the signs soon began circulating on the Web, and speculation started flying about In-N-Out going global.

It wasn't _ not yet anyway. Long a regional chain, In-N-Out didn't venture beyond California until 1992 when it opened in Las Vegas, which remained its only out-of-state location until 2000.

The chain now has more than 250 restaurants in California, Arizona, Nevada, Utah and Texas. It has no stores outside the United States. But it wasn't about to let a bunch of upstarts from its home state copy its style in one of the world's fastest-growing consumer markets.

In September 2011, In-N-Out filed a lawsuit, alleging CaliBurger's actions led to "substantial damages" and "irreparable harm."

CaliBurger made some changes and launched a menu and decor that seem slightly less like an In-N-Out clone. Diners can order a dual-patty (and trademarked) Cali Double wrapped in wax paper for about $7.60. The fries can now be ordered "Wild Style." Burgers without buns are referred to as LC Style, or "low-carb."

CaliBurger uses Australian beef instead of American meat because of import restrictions, chef de cuisine Wong said. The company imports Land O' Lakes cheese and frozen French fries from the U.S. and is developing a "secret" menu with more vegetables.

Executives said CaliBurger plans to open a second store in China and one in South Korea by the end of the year. The chain, which also hopes to expand to Taiwan, Hong Kong and elsewhere, said it will partner with franchisees for all international growth.

Meanwhile, In-N-Out appears to be testing the market across the Pacific. In December, it took its signature burgers to Shanghai for a one-day pop-up event to introduce the brand to consumers. Last month, In-N-Out held a similar tasting in Sydney, Australia.

Protecting its image is nothing new for In-N-Out, which has been quick to take legal action against U.S. copycats. A Maryland chain called Grab-N-Go Burger agreed to change its red-and-yellow logo after In-N-Out sued last year for trademark infringement.

All the fuss was lost on Chinese customers dining at the Shanghai CaliBurger on a recent Friday night. Though the initial buzz was driven by expatriates, many diners had never heard of In-N-Out.

"I live in the neighborhood and I wanted to try something new," said Stephen Sun, 31, a shoe salesman dining with his wife. "I like how they toasted the bun. I also like how strong the spiked shakes are. I worked hard today."

Zhang Wenting, a 24-year-old local resident wearing Dior glasses and a faux-fur coat and carrying a dark Gucci purse, said the California vibe was lost on her. She found the cream-colored banquettes and chessboard floors uninspiring.

"I think they need to do something about the color scheme in here," she said, describing her plain burger as "no different from Burger King."

Customers who knew about the In-N-Out connection _ mostly U.S. expats _ said CaliBurger is a welcome addition to Shanghai, which is better known for its famous soup dumplings, or xiao long bao.

As she attacked a cheeseburger, Cheryl Hung, an American, said its flavor was close enough to In-N-Out to satisfy her taste buds.

"It's China," said Hung, 26. "Anywhere else and I'd be surprised by a rip-off."

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