07 January 2020
In this article for AgFunderNews, Mathys & Squire partner Michael Stott highlights the importance of food and drink companies protecting their intellectual property in order to prevent competitors from exploiting their innovations.
The food and drink sector is the largest manufacturing sector in the UK — larger than the automotive and aerospace sectors combined. It is home to significant innovation, with companies looking to develop new consumer products and striving to keep up with consumer trends, all while ensuring compliance with evolving industry regulation and keeping pace with commitments to improve green credentials. Protecting the intellectual property (IP) resulting from this research and development can help companies to maintain their competitive advantage by preventing others from exploiting the fruits of their labour. However, the full potential of IP is not always harnessed in the food and drink sector. This article is intended to demystify IP in the food and drink industry and shed light on the full extent of the opportunities available to companies to protect and benefit from their IP, with a particular focus on the role patent protection can play.
Research commissioned by the Food and Drink Federation (FDF) in 2018 to identify both the opportunities available to manufacturers and the barriers to growth found that almost nine in 10 (89%) of food and drink manufacturers in the UK were involved in new product development and that nearly half (46%) of respondents have an on-going collaboration with higher education or research initiatives. Clearly, there is a significant focus within the industry on research and development and a consequence of that is the generation of different forms of protectable IP rights that are of varying value to innovative companies, examples of which include:
Patents – these provide protection for products (including food, drink, packaging and machinery), processes (such as recipes or production methods), and uses of products. Granted patent rights provide the patent holder with a temporary monopoly that means that no one can work the invention covered by the patent (for example, make or use a patented product or operate a patented process) without the patent holder’s permission while the patent is in force.
Trade secrets – these can endure indefinitely if the invention remains a secret (which has worked well for Coca-Cola’s original drink formula). However, they provide no protection if another company independently develops the same product or process, or if they successfully reverse engineer a product.
Registered designs – these provide protection for aesthetic aspects of products, such as packaging or aesthetically-pleasing food products. Some protection is also available for designs which have not been registered (unregistered designs).
Trade marks – these identify a product as being from a particular company and include logos (for example, KitKat’s “have a break…”) as well as branding.
Copyright – this comes into existence automatically and protects only against copying of literary, dramatic, musical or artistic works (e.g. artwork on product packaging or the written form of a recipe).
As is evident to many, trademarks and branding play a vital role in distinguishing products and services in the food and drink sector and it is therefore no surprise that these IP rights are often the initial focus of food and drink businesses. However, the possibility of patent protection should also be an early consideration for innovative companies for much the same reasons as it is, for instance, in the pharmaceutical and automotive industries. Patents can provide the means to ring-fence an area of innovation so that it cannot be exploited by competitors so as to help reinforce a dominant market position.
Trade secrets, or confidential know-how, have been relied upon historically by the food and drink industry to a varying extent to maintain competitive advantage, typically beyond the maximum lifetime of patent protection (20 years). However, trade secrets are only useful to the extent that it remains possible for the know-how to remain secret, and it remains difficult for other parties to replicate the know-how by, for instance, reverse engineering a product. Trade secrets are therefore not always the most appropriate way to protect innovation, particularly as advances in chemical analysis can make reverse engineering more achievable than it has been previously.
Patent protection represents an alternative form of IP protection that, despite not providing indefinite protection that is potentially possible with trade secrets, has a number of benefits to innovator companies. Not only do patents offer a monopoly right, they are assets that can be used to add value to a business that can be attractive to investors and they can be sold or licenced as with other forms of property. Products covered by granted patent rights can also benefit from corporation tax relief, such as the ‘Patent Box’ in the UK. Granted patent rights can also be a useful marketing tool – a stamp of approval that a new product is innovative and unique.
With all the potential benefits offered by patent protection in the food and drink sector, there still can be misconceptions surrounding exactly what forms of innovation may be eligible for patent protection, and it may come as a surprise to some companies that their innovations could be patent protected. In order to be granted a patent, an invention must be new and represent a non-obvious solution to a technical problem. Although the features of an invention which define a contribution over what was previously known must have technical character, an invention does not have to be complex or necessarily the result of ground-breaking or expensive research to be patentable. Some very familiar food products have been the subject of patent protection, including for example rice cakes (EP1025764), granola bars (US 4,451,488), new orange juice formulations (WO 2004/060083), veggie burgers (EP3125699) and even a fast setting donut glaze (EP2101595).
One more common misconception is that recipes (i.e. product preparation processes) cannot be patented. They can. So long as they fulfil the basic requirements set out above. For instance, a recipe for a new fish and chip batter was found to be patentable on that basis that it reduces oil uptake during the frying process (GB2543623). A new bread recipe was found to be patentable for giving improved textural properties (GB2545647). A recipe for an “egg gel” composition was considered patentable on the basis that it confers the organoleptic properties of fresh egg, whilst providing an extended shelf life to confectionary compared to normal egg-containing products (GB2565178). A recipe for preparing oat milk having improved soluble oat protein content was also found to be patentable (EP2953482). Numerous examples of patented recipes exist.
Innovative companies should also remember that process know-how can be just as patent-eligible as the new products they produce, which can open up different opportunities for potential revenue growth. A new feature of a food manufacture process, for instance, might allow a food product to be made with a desirable texture which obviates the need for certain additives to be used or for certain customer cooking steps (e.g. oil frying) to be implemented. For example, a process for preparing low-fat oven-fries involving a super-heated steam treatment step which confers a texture of normal “French fries” without oil frying at home was found to be patentable (US7560128). Process patents can be particularly useful for innovative companies to licence their technology and open up additional revenue streams and can be particularly useful in supplementing product patents in a company’s portfolio.
According to the FDF, 96% of food and drink manufacturing businesses in the UK are small to medium-sized enterprises. It is these smaller companies that may be less familiar with the patenting process and the benefits to their businesses, yet which are actively innovating and potentially overlooking opportunities to exploit the IP that is being generated. Although the costs of obtaining granted patents are not insignificant, these may seem trivial when weighed against the potential value addition to a business, opportunity to obtain a monopoly in the market place, ability to generate revenue through licencing and opportunity to benefit from corporation tax relief associated with the sales of patented products.
This article was first published on AgFunderNews in December 2019.
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