Intellectual property rights in food startupsRecipe for Success: Part 1
From alternative meats and proteins to diet specific snacks, startups focussing on consumer packaged goods in the food industry have been making their mark in recent years and taking on long standing industrial food conglomerates. While the barrier to entry creating products in the food industry is generally low, the recipe for success is more complicated. How then, do these recent success stories attract such rapid growth with high valuations? One of the key elements of any emerging company’s startup roadmap is a consideration of intellectual property. Do you have it? How do you monetize it? How do you protect it?
Part 1 of this Recipe for Success series sets out the application of the four traditional areas of intellectual property rights (trademarks, copyright, patents, and trade secrets) and provides insight as to how these may apply in the food industry.
At its most basic level, a trademark is a combination of letters, words, sounds, or designs that distinguishes one company’s goods or services from another. These are unique to the company and ultimately the baseline to build the brand and reputation. Registering a trademark gives the holder an exclusive right to use it for a specified period of time in each filing jurisdiction. For example, in Canada, a trademark registration will garner 10 years of initial protection, which may be renewed. Many foods’ distinctive names are trademarked (Big Mac may not be a surprise, but did you know that Broccolini and Butterscotch are also registered trademarks?).
Traditionally, trademarks have been registered on names, logos and slogans. Companies often register trademarks for the unique name of the food item specifically as well as the company’s brand or logo more generally. Trademarking is the best way to protect the brand recognition that you are building. It won’t protect the underlying recipe for your food products or the idea you’re building on from being used by someone else, but it will generally prevent others from infringing on your trademark by using the same name or logo or one that is confusingly similar.
If an infringer tried to register the same name in the same area as you have a registered trademark, the trademark registration would provide them with notice of the conflict. If an infringer simply used your trademarked name without attempting to register, your registration would provide grounds for redress for the infringement. Practically speaking, if a company plans to build customer loyalty and brand allegiance, a trademark provides the most bang for the filer’s buck.
Similarly, when considering whether to build out a particular brand, it is always advisable to consider the other side of IP protection: whether a proposed brand, logo, or product name might infringe on a third party’s existing trademark. We generally advise companies to review their branding strategy from this perspective early on in the process, before spending time and money garnering brand loyalty only to receive a cease and desist letter.
Copyright is the exclusive legal right to produce, reproduce, publish, or perform an original literary or artistic work. The creator of copyright is usually the copyright owner by default, subject to an employment relationship or an agreement stating otherwise. An original work is automatically protected by copyright upon creation, but the creator may register a copyright and receive evidence of ownership. Copyright exists for the creator’s lifetime plus 50 years. It then falls into the public domain.
Many people assume or feel that recipes should or would fall under the banner of copyright protection. This, however, is expressly not the case. Courts have determined that identifying the ingredients required for a certain dish is a statement of fact, not a copyrightable work. Similarly, copyright also does not protect other listings of ingredients including formulas and prescriptions. Copyright could, however, protect the literary expression (description, explanation, picture) that often accompanies a recipe, the order and manner of the presentation of the elements of the compilation, or as is perhaps more notable in today’s marketing age, content created and posted in marketing efforts, including on social media.
Patents may be awarded for new and useful inventions (product, composition, machine, process) or any new and useful improvement to existing inventions. The requirement for usefulness is a low bar, and generally questions “does it work?”. Newness requires that the invention be the first in the world. The requirement for the invention to be inventive (or non-obvious) requires the invention to be non-obvious to a person working in the field of the invention. Filing a patent provides the inventor (or patent holder) with the rights to prevent others from using or selling the underlying invention for up to 20 years.
To actually be granted a patent for, say, ice cream, a filer isn’t going to get far with simply claiming it is the best ice cream ever (though it may be!). Rather, a patentable invention may be a completely new and non-obvious process for freezing ice cream or ensuring a longer melt time. An important distinction here is that the patent is filed for the process of freezing not the recipe or list of ingredients used to create the ice cream. For many companies or entrepreneurs in the food space, the process of filing a patent application will be impractical, due to its cost and the high bar to successfully obtain a patent grant. One area, however, that is a great recent example of patentable food products, is lab grown meat alternatives, a very clearly novel number of methods of creating tissue culture for human consumption.
A trade secret is pretty much what it sounds like. It’s a secret. It requires either only the holder know the recipe or to have a good internal system for maintaining secrecy about the specific ingredients, measurements, and the process involved. There is no formal method for registering trade secrets and the protection will last as long as the information is kept secret from the public. An example in the consumer packaged goods and food space would be Dr. Pepper’s 21 flavours, or KFC’s 11 herbs and spices. We’ve heard these companies note time and time again that these secrets are under lock and key. Obviously, having one person know the secret sauce brings about scalability challenges. Companies relying on trade secrets at a large scale will instead have internal processes to keep knowledge compartmentalized and also rely on good non-disclosure and confidentiality provisions in their agreements.
Trade secrets are often part and parcel with packaged food products. Regulations require the disclosure of ingredients to a certain degree, but not an entire recipe. Specific natural or artificial flavours, spices and so forth are not always required to be listed. Neither is the specific source of most ingredients, the relative volume, or the process involved in bringing them all together. Your recipe and process are classic examples of a trade secret.
Considerations in developing an IP strategy
Registering intellectual property rights can be a great tool to initially protect, build, and maintain value in a company’s recipes or products. However, their value depends on the company or entrepreneur’s willingness to take thoughtful steps to protect, maintain, and properly monetize those rights.
In considering how and what intellectual property rights to register, it is useful to start with considering what is important to your company or new venture. Is it your branding, labeling, recipe, following, loyalty, suppliers and retail partners, relationships you’ve made, or - more likely - some combination of the foregoing?
Trademarking a product could protect the name (the Big Mac) or some element of the appearance such as the logo, the shape of the food (the Toblerone chocolate bar) or the shape of the packaging (Coca-Cola’s contoured, hourglass bottle). Copyright regarding a food product may protect the reproduction of the language used to describe the recipe, the ad designs, the marketing copy, but not the ingredient list itself. Trade secrets are valuable only to the extent they are closely guarded and not shared (so, publishing or sharing the recipe would defeat any value in a trade secret). The key for many companies in the food sector is often a combination of intellectual property rights. For example, many companies that rely on trade secrets, have also heavily invested in trademarks to protect loyalty based on brand recognition. We may not know what makes KFC’s fried chicken so particularly good, but we know that KFC knows how to do it and they have relied on this point to keep people coming back to the original.
The key to making intellectual property rights work for your food business is to carefully consider and plan in advance. Do not spend time and money building a brand and brand recognition without first checking for conflicting trademarks. Think about the jurisdictions where you may need protection, now and in the future. If a potential global distribution channel is in your mind’s eye, consider taking a broad look to potential jurisdictions. Otherwise, you may end up having to switch out branding for jurisdictions where the trademark is in use. Putting in the time to come up with a truly unique name now will almost always pay off later. If you plan on relying on trade secrets, make sure to take legal and practical steps to protect those secrets, including with employees, contractors, and potential collaborators. If you are working with manufacturers, co-packers, or other partners, make sure your agreements properly protect your intellectual property to maintain the strength of your registrations and other protections.
Much like the recipes and formulas you’re developing, an intellectual property strategy requires an understanding of the ingredients, and no two companies will ever come up with exactly the same blend. Consider your goals early and seek advice as to how to operate now and set yourself up for future growth with maximized opportunities for your intellectual property.Read the next article in our Recipe for Success Series: Part 2 - Monetizing Intellectual Property Rights for Food Startups.