PROTECTING INTELLECTUAL PROPERTY IN A FOOD STARTUP
Food startup businesses have unique challenges that other businesses do not face and the same is true for intellectual property protection within a food startup. There are several ways that a food business can protect its intellectual property and add value to the company. One of the primary ways that a food startup can protect its intellectual property is through use of NDA's, which are nondisclosure agreements that should be used when discussing your food product with any kind of co-packers, distributors, retailers, and employees or contractors. Everybody that information about the food product is shared with should be under a nondisclosure agreement or NDA.
A second way that a food startup can protect its intellectual property is through use of a trade secret program. In fact, in the US one of the most famous examples of a trade secret is the recipe for original Coca-Cola, which is a good example of how a food company makes use of trade secrets. There are a couple of other ways that a food startup can protect its intellectual property. One is through trademark, which can be used to protect the brand name, the brand logo, and slogans. The branding of a food company can be one of its most valuable assets and so looking at the trademark aspect of protection for a food startup is something that you really want to consider.
There are a couple of other intellectual property protections that can be used in a food startup. Copyright can be used to protect images of the food, graphics used for the food packaging, and any other types of creative works for the food such as the story about the startup, the story about a particular product. Any type of creative works, whether it be written content, images, videos, anything like that can be protected through copyright. And those can also be very valuable assets for the food startup.
And, finally, something that a lot of people ask me about in my practice is whether patents apply to food startups and the answer is that they can often apply to food startups in some circumstances, although it is fairly limited but it is definitely something to keep in mind and consider. For example, patents can be used to protect a process or method of making a food product. Something called a design patent can be used for the packaging appearance and then a utility patent, in addition to protecting the process or method of making a food product, could also be used to protect the functionality of packaging if you are using some kind of unique packaging that has a particular functionality that may be novel.
So, there are a number of different ways that food startups can protect their IP and I am going to get into each of those in detail below but at the outset, I wanted to just introduce those things and also, to note that to me, an overarching principle in protecting the IP for a food startup is to try to maximize the options and keep the rights available to protect the IP of the food startup, but do not be excessive on spending for IP protection to the detriment of the overall budget. As many startup founders know, resources including time and money can be very limited at the beginning phases of a project and you do not want to be spending on IP protection in an unbalanced way that would threaten the ability of the startup to move forward. So, you want to keep that in mind and do the spending and the planning for IP protection in a balanced way that is in alignment with the goals of the business and the resources available.
Below in the next sections I will get into each of the types of IP protection available to a food startup and how a food startup can make economical use of each of those types of protection.
NONDISCLOSURE AGREEMENTS (OR NDA'S)
A nondisclosure agreement is simply an agreement that a disclosing party is in agreement with a receiving party that information being conveyed from the disclosing party to the receiving party will be kept confidential. So, it is essentially an agreement to keep something secret, if you will. This can be important for your food startup because in the initial phases you may not know what aspects of it are going to be protectable and how they are going to be protectable, but you can preserve your rights to protection, particularly within the trade secret and patent areas of IP protection, by using a nondisclosure agreement at all times. Any new employees to the company or any new contractors should all be asked to sign a nondisclosure agreement and I would note that you can access a free "fill-in-the-blanks" NDA that we provide. Just see the link or the information about contacting us for that. You can get a free NDA that you can use because I want you to have that at the very beginning to make sure things are protected and your rights are preserved. Without that, you may be giving up valuable rights that you only discover later.
So, returning back to the nondisclosure agreement, this should be used with any employees, contractors, suppliers, distributors, or retailers you come in contact with. It is also especially important to use the nondisclosure agreement with anyone doing creative work for you, such as photographs, a text for your website, brochures, videos, any kind of creative work being done. The person doing the creative work needs to be under a nondisclosure agreement and, in particular, a nondisclosure agreement that includes the IP clause like our recommended one does. That recommended nondisclosure agreement that we provide is for informational purposes for you to take and use. It is not intended to be legal advice for a particular situation and it is not intended to establish an attorney-client relationship, but it is just there as a resource for you as a general information resource to help you and to guide you in the type of things that you need to do in your food startup in a general sense.
There are a few key things you need to know about the nondisclosure agreement. The receiving party is the person receiving the information, so that is the company or person that you are going to be talking to about your food product. The conveying party or the disclosing party is you. You are the one with the information that you are going to disclose. And so the nondisclosure agreement binds the receiving party to keep the information disclosed by the disclosing party secret for a period of time. Also, this NDA that we use includes an IP clause that transfers all rights in any derivative works from the disclosed information to the disclosing party. It also includes a provision that any creative work done is being done as work for hire and the ownership is with the disclosing party. That work for hire phrase is an important phrase that we will touch on more in the copyright section, but just to let you know that is in there and that is a very key thing for any creative types doing work for you on any type of creative work.
Be sure to use the NDA as much as possible. There are some times when large companies may not want to sign an NDA or it may be such that it needs a review by their legal department and it is going to become a major speed bump for your business. In those cases, you just need to use your common sense and use your discretion about what are your business goals because your business goals need to be met and the business comes first. You need to just kind of use your common sense and your discretion about whether you would feel comfortable talking to a company without the NDA in place. But just to let you know, large companies may or may not want to sign an NDA. I would say that most smaller companies and individuals should be required to sign it because they are not going to have a legal department that is going to put the brakes on everything.
But even when you do disclose something to a large company that does not want to sign an NDA, you still should mark all of your materials proprietary and confidential and that way you are conveying to the other party, even though they may not have signed the NDA, that these materials are still confidential and are to be kept confidential and not distributed. You may want to put that in a footer of your document, the words proprietary, confidential, and not for distribution.
TRADE SECRET PROGRAM
A trade secret program is one in which you maintain certain information that is valuable to your business and retains its value if it is not generally know. It is things like recipes, materials, ingredients, perhaps even sources for ingredients, and customers. Any kind of lists or information that you have worked to obtain or worked hard to develop that if generally known may lose their value, those are things that you want to keep in your trade secret program. Of course, recipes would be the first thing that comes to mind, but think about all of the other things, too, that you spend time and effort working on. Perhaps it is sourcing your ingredients or working to identify suppliers or co-packers, that kind of thing. So, really anything that you are putting effort into in terms of information or resources for your business you may want to apply those to your trade secret program.
It does not apply to information that is already publicly known and so you cannot put already known information into your trade secret program, but you can put any particular information to your business that is not generally known to the public into your trade secret program. Generally, I would say error on the side of caution and put anything in there you think may be a trade secret. Your trade secret program really just needs a policy and procedure to keep the information that is secret a secret and so you really need to have something in place that says these are the things that are secret, this is how we identify them such as confidential, proprietary, and maybe even the word trade secret in the footer of a document. You need to mark all of the documents that are trade secrets accordingly and you just need to have a policy and procedure in place to safeguard those things. For example, putting them in a locked box for which only a limited number of people have access to and those people have a need to access it. And then all of the people that can access the trade secret information are under a nondisclosure agreement and also maybe even under a trade secret agreement that lets them know that these documents in particular are trade secrets and that they are not to be shared at all with anyone else.
Basically, you can just follow a trade secret policy and I would say when I work with startups, one of the things that is important, as I mentioned earlier, is to scale the IP protection to the right level or appropriate level for a startup. You can have a trade secret program in place as a startup and it does not need to be some elaborate thing with bank vaults and armed guards at the startup level, but it can include hey, I lock this in a certain place, here are the people that have the keys, and everybody is under a nondisclosure agreement and I have reviewed this trade secret policy with all employees and contractors. That can be something that you can do and keep it relatively simple but meet all of the requirements of a trade secret program.
And in addition to the NDA that we provide, we also provide a template for a trade secret program that you can use. Again, we provide that as general information to help you as a guide, but it is something that you can use as an example or a template and work from there. Trade secrets can be very important. A couple of things to know about trade secrets are there is no application that you have to make to the government to have something be a trade secret. You simply have to have the trade secret policy and plan in place and your procedures to keep something secret.
Also, another very valuable aspect of trade secrets is that there is no expiration. So, for example, as I mentioned earlier, the formula for original Coca-Cola is a trade secret and it is one of the more famous ones in the U.S. It has also been a trade secret for more than a hundred years. So you can compare that with the term of a patent on the utility patent side, which is 20 years, and on design patents it is 15 years. You can see the value by keeping the formula a trade secret versus patenting. Coca-Cola has been able to preserve their intellectual property rights to the Coca-Cola formula for more than a hundred years. I would say it is also a little bit of trivia and some insight perhaps for you to know that one of the early investors of Coca-Cola was a patent attorney and he had Coca-Cola keep the formula as a trade secret versus patenting it, which he would have been very familiar with.
So that gives you some insight and the direction even over a hundred years ago that a patent attorney would have recommended for a food startup company which, at that time, Coca-Cola was a startup that was formed inside of a drugstore in Georgia. It is kind of an interesting little story there, but it also gives you a good illustration about how powerful trade secrets can be and it is something that could start off simple, does not require a huge effort in terms of legal fees or application fees to the government and that kind of thing, but it is something that you can use to your advantage and keep in place for a very, very long time. Do not overlook the trade secret aspect and I would say assume in the beginning that everything that you are going to do in terms of the recipes is a trade secret. Treat it all like that in the beginning because you really just do not know what aspect of your food startup may go on to be something as famous as Coca-Cola that becomes part of almost everyone's daily life in some way. So be sure to protect everything in the beginning because you just do not know.
As I mentioned in the introduction, trademarks can be a very valuable aspect of a food startup. Trademarks can be used to protect the brand name, the logo, and the slogan associated with the food product. So, for example, we will use Coca-Cola again. The name Coca-Cola is trademarked. The way that they write Coca-Cola in that stylized way is a trademark and the little sideways "S" curve swish symbol that they use under Coca-Cola is also a trademark. And I believe that Coca-Cola has even trademarked the shape of their glass bottles. Although those are not used a whole lot anymore, that shape was a trademark as well. So, basically, everything about the packaging of Coca-Cola was trademarked so that consumers would know the source of that soda. When you look in a store, you do not even have to see the front of a Coca-Cola bottle. You could just see the glass bottle and you will know right off that is a Coke or if you see the letters or the little sideways curvy symbol, everybody almost in the U.S. and probably around the world knows that is Coca-Cola.
What that does is tells consumers hey, this is a genuine Coke product and it will be of good quality, it is safe, it is something that you can trust, and you know that it will be consistent. You will have a Coke and it is just like the Coke that you had yesterday and just like the Coke that you had 20 or 30 years ago, perhaps with the exception of the sweetener change over the years from sugar to corn syrup. But other than that, the basic flavor of Coke will be essentially the same for the last probably 50 years or more. And so it is something that gives a lot of value to the brand when people know and trust the product.
Think about that in terms of your food startup. You want people to associate your branding with a high quality product that tastes great, that is consistent, and that they know they can trust. When they make a purchase of that product that they are getting what they think they are going to get. Those things can be very valuable for a food company. Trademarks are something to definitely consider.
One thing that you want to consider before you spend a lot on branding your food startup is to do a trademark search to make sure you are not going to run afoul of another company's trademark that they have registered previously. You want to make sure that your name that you are going to invest into is one that you will not lose the investment if you are challenged later about the name. You want to have a clear name that looks like it will most likely be registrable in the federal system and you want to use something that is what the trademark office calls fanciful which is unrelated or maybe not even a real word. For those you could think of Google or Yahoo as brands that are unrelated to their product. Monster energy drink - monster is unrelated to the actual beverage, that name.
You want to think of something that it could be somewhat suggestive because I believe Coca-Cola from its early days was probably something suggestive because I have read that the early versions of Coca-Cola contained possibly cocaine or some derivative of the cocoa treat that may have contained cocaine. I do not know if those stories are true or not, but if you look at the name Coca-Cola, it does sound like it is at least some tangential reference to a cocoa tree where chocolate and cocaine are both derived from. It can be somewhat suggestive, but it cannot be descriptive. You do not want to name your food startup the Most Delicious Chocolate Chip Cookie Company because that may be descriptive of what you are making or considered descriptive. You do not want to name it the Blueberry Muffin Company, something like that. You want to call it something that people may associate with your product, but not be directly descriptive of your product.
As far as the application process goes, you can apply for a trademark before you are using the mark in commerce. That is called an intent to use application. At some point for the trademark to be fully registered, you will have to be using it. It is a requirement of the Trademark Office. At some point you have to be using the mark and prove that you are using it in interstate commerce in order to be eligible for it to be registered. There is an application process for each mark, so a lot of times you may think of your branding as the name, logo, and slogan. Each of those things is registrable separately potentially and each would require its own application. You could put more than one of them together, but often the name, the logo, and the slogan are done separately so that you can be more free to use them in different contexts. Just know that there will be a separate application for each one.
The cost for the application vary, but you could probably expect to be somewhere between $800.00 and $2,000.00 for the initial application. The applications are filed per class of goods or services. If you are just in one food category, it might be one class; but if you are in food and beverages, for example, it might be two classes and that would require two government filing fees and two attorney fees possibly. Just keep that in mind for trademark. You do not have to register it initially. You could, but you should try to make sure the name is clear before you start using it and then register it as soon as you can or are able to. At least start to register the name itself.
As we have mentioned earlier and hit on in the introduction and in the nondisclosure agreements, copyrights are used to protect creative works such as images, artwork, text, video, music, et cetera. Anything that we think of as the creative works is something that is generally protectable by copyright. The key point that you want to make sure of in terms of copyright is that any creative types that are doing work for you are under a written agreement that states that the work they are doing is something called work for hire and that phrase does need to appear in the written agreement and that all rights in that work are owned by you and not the person creating the work. This is very important in the world of copyright because the default position is that the copyright rights belong to the creator or what is called the author in copyright legal terms. Whether it is written work or some other type of work, they usually refer to the creator as the author. The default position in the U.S. is that the author owns the rights in the creative work. Even if you are paying them to develop it, what you are getting when you pay a creative type and you do not have any kind of other agreement in place is you are getting one copy essentially for you to use. The rest of the rights stay with the creator unless you have a written agreement in place that states the work was work for hire and states that all rights are owned by you. This is one of the key things to know about in the copyright world.
I have seen many, many cases where a person or a new startup company was not aware of this aspect of copyright law and it can cause quite a bit of problem. Just be aware of that. Always have them under agreement right from the beginning. And just a tip for you: when creative types or any other type of person is offering a service and is trying to get new work, they will generally sign whatever agreement you put in front of them to be able to discuss the new project that they may potentially get new work from. And so that is the time to have them sign a nondisclosure agreement that includes a work for hire clause and includes an IP assignment clause that states you are the owner of anything that comes out of working with them related to your project. That is something that is key. I cannot stress that part enough.
So going back to the copyrights again, once you have the work done for you - or you could do it yourself - or have them done by a creative type, you can register that copyright with the Copyright Office. The copyright rights attach automatically when the work is created in what the Copyright Office refers to as fixed in a tangible medium which is just a legal phrase of saying that the work has been put into some kind of fixed form. In other words, not a live performance of something and is not captured in a fixed form. Once it is in a fixed form, the copyright rights attach automatically and so what you do in the copyright registration process if you are simply registering the copyright right that already exists so that it can be in public record with the Copyright Office.
There is an application process and in part of that process you provide a copy of the material that is being registered and a copyright attorney can help you with this process. It is relatively inexpensive and pretty straightforward. There are not usually any problems with copyright registrations. Occasionally there can be, but typically it is a pretty smooth process. I would say on copyright registration you are probably looking for a fee somewhere between $500.00 and $1,500.00 for the registration application. The official fees are fairly low. They are around $65.00 at the time of writing this.
Patents can be used in several ways in a food startup, as we mentioned in the introduction. For example, a utility patent application can be used to try to protect the method or process of making a food product or the actual recipe of the food product itself, the ingredients and the way they are combined. There are different ways that a patent can be used on the food product itself, although it can be quite challenging. You would want to look into patenting a food product if you have some unusual ingredient that yields a result that is kind of surprising maybe or if you have a process that deviates from the known processes in some way that yields a food product with a desirable quality. You may want to look at the patenting of the process of the food product or of the recipe. But if you are following pretty much standard recipes but you are tweaking the ingredients and the spices a little bit and the seasonings to make it your own, then a utility patent on the food product itself might not be the best idea. It might be that you want to go with the trade secret program that we mentioned earlier. That may be your best idea. But if you have any doubt or any question about whether your food product itself can be protected, then you definitely want to talk to an IP attorney, in particular a patent attorney that can help advise you on whether to apply for a patent on the food product itself.
Besides the utility patent on the method of making the food product or the food product itself, there are a couple of other ways that patents can be used to help protect a food product. The utility patent can also be used to protect a packaging design that has a certain structure or functionality that is novel and nonobvious. For example, if you have a container that you sell your food product in that performs a function and it is different than other containers out there, that is something you may want to look into in terms of potentially applying for a utility patent on the container itself.
And also related to the container or the packaging, there is a type of patent called a design patent. Design patents protect the ornamental appearance of an object and so you can possibly apply for a design patent on your packaging if you feel that the packaging has a unique or novel appearance aspect to it. You could potentially patent the packaging through the design patent as well. Those are just some things to keep in mind in terms of patenting.
The patent process is generally more expensive than the other types of IP protection we have mentioned here and can take quite a bit longer, so just be prepared for a patent process to cost in the thousands of dollars, probably somewhere between $3,000.00 or $4,000.00 and $15,000.00, and be prepared for a process that takes one to three years in the government. Just to give you an idea, those are just rough estimates, but give you kind of ballpark ideas of time and money associated with getting a patent. You also want to make sure that what you are doing is worth it.
Now, do you have to patent your product initially? No, not necessarily but there are a couple of caveats with that that you need to know about. In the U.S., on the utility side we have a one-year grace period from the time your product is made public until when you have the deadline to file a patent application. On the design side, that grace period is six months. So you want to be aware of those two grace periods. You do not have to initially patent something, but you have to within the grace period for the U.S. The other thing to be aware of is that those grace periods are specific to the U.S., and so if you have any idea that you may want to patent your product outside the U.S., you need to apply for a patent before the product is made public because almost all other countries in the world do not have that grace period. They operate under something called absolute novelty and in those countries, the application has to be made first prior to any public disclosure. The U.S. application can meet that requirement as it can serve as a priority application for a foreign filing, so just keep that in mind. If you have any idea that you may want to do international protection for it, then you want to apply for a patent first before it is made public.
And then one other caveat I would add about waiting to file is that the U.S., since 2012 is on something called the first inventor to file system. Under that system, it is better to file sooner rather than later because filing date is important now. And so you want to establish that filing date as soon as you can. Those are the only two caveats I would add to the grace periods that are provided in the U.S., to wait for filing because sometimes it does make sense to wait to see how the market reacts to a product to decide if you want to invest the money in patenting. That is an approach that makes a lot of sense. If you think you may want to patent your product but you also may want to wait and you want some guidance on that, by all means seek the advice of a patent attorney to help you set up a program that can meet the goals and meet your objectives there with your business. They can help guide you and set up a way to protect it and be within the guidelines and the different grace periods and everything.
As you can see, there are several different ways that you can protect the intellectual property of a food startup company. Some range from things that you can do within the company that do not require assistance necessarily of outside attorneys or the government and others range to things like patents that may require an attorney and may require a fairly lengthy and costly interaction with the government. You can look at all of these and determine how you want to fit them into your food startup given what resources you have of both time and money and the way that your product and packaging are being developed. You can see and kind of help get an idea of what protections that you may want to avail yourself of for your particular products and company.
I hope this article has been helpful to you and if you need any information or would like to discuss any of this for your food startup, I would be happy to have an initial consult with you at no cost. See our links on the website here below or in other places where you can schedule a no-cost consultation with me. I would be happy to speak with you. Good luck with your food product.