Protecting IP in the Food & Beverage Industry

So, you have an amazingly tasty, totally revolutionary, ready-to-package food or beverage product. Clever ingredients, GMO free, great reception from the neighbors. By all measures, you have a successful product in the works — but in this space, the reality is that someone else has likely put together your same ingredients in much the same way before. That’s part of what makes protecting intellectual property in the food and beverage industry so tricky. 

You might be surprised to learn that you might not really need a patent in the food and beverage industry. In fact, depending on the type of product you are pursuing, patent protection may not even be viable. A simple trademark and accompanying brand protection strategy may be all that’s required to keep your IP protected. 

However, while your product (i.e. the recipe) itself might not be patentable, you might have some other innovations at your company that are. Here are some unique aspects about trademarks and patents that often find themselves in the food and beverage industry. 

The Product Itself Is Not Likely Patentable

When we look at patentable subject matter, there’s typically no “technology” in a traditional food or beverage product that falls within the statutory realm of what’s available to patent. The closest you might get would be some type of recipe or a formulation — what the patent system calls a “composition of matter.” 

FDA regulations often require you to reveal basic information about your product such as all the product ingredients. Anyone can see what’s in your product, just not the specific ratios or the process of putting it together. You might not know how to make a soda that tastes exactly like Coca-Cola, but look on the side of a can of Coke and you can see the vast majority of what’s in it.

You can certainly patent what are called “compositions of matter”, such as a recipe that’s two parts dates, one part cherries and three parts corn syrup. However, these compositions are typically not patented. They would be super-easy to copy while avoiding patent infringement. Someone could just tweak a new product in a very slight way, while still copying you but without infringing on the patent. At least in the food and beverage industry, the protection you’re getting from a patent is usually not worth the effort and cost. 

Protect the Package Design or the Manufacturing Process Instead

Sometimes, companies patent the way they manufacture a food or beverage product. If you’re dealing with ingredients that have caused complications on traditional food manufacturing lines, or are just difficult to work with, you could patent a clever way of processing it.

For example, one of our local clients, Good Day Chocolate, makes uniquely formulated chocolate products. If you like chocolate and want an extra kick in your fix, check them out here. The confectionary industry is always dealing with problems associated with processing chocolate, which has to be in a liquid form during processing and requires some special equipment and know-how.  You can imagine how the hot, melted chocolate glops up the mechanics of a system. For these types of manufacturers a big part of their intellectual property is the process of knowing how to deal with the melted chocolate within processing machinery. 

You might also be able to focus on the product packaging. Occasionally, we’ll see IP concerning unique product packaging, whether it’s unique due to design or its utility. Perhaps the packaging provides increased spoilage resistance. Maybe it’s more environmentally friendly. An example of this would be self-stable milk products with unique packaging that preserves its freshness and shelf life. 

Focus Your Efforts on Branding and Marketing

The food and beverage industry doesn’t rely so much on true innovation as it does on deep marketing. Food and drinks have always been that way. A company gets a recipe together, it tastes good and then it’s time to focus on branding — packaging, colors, stylization, and name. Marketing, rather than innovation, is the best way to distinguish a brand in a saturated industry. 

From there, a company’s success is mainly about distribution and breadth of its consumer base. It’s about getting on online platforms and strategic retailers. I always say, if you can get your product on the end cap at Whole Foods or Walmart, you’re pretty much set. Alternately, you can try to get sponsorship or a famous celebrity endorsement. If Kim Kardashian says, "Wow, I love this drink!" and puts it on her Instagram, that exposure is worth millions of dollars.

Trademarks and Trade Secrets May Be Better

The famous formula for Coca-Cola has never been patented, and yet no one knows exactly how it’s made. 

The formulation of Coca-Cola has been kept secret for many, many years and, in cases like this where you can maintain the secret, a trade secret has a perpetual life — something you don’t enjoy if you patent the same information. If someone at Coca-Cola had patented the recipe, that patent would have expired many years ago and the recipe would be in the public domain. Instead, the company has managed to keep the formulation secret all this time and its protection lasts forever. 

Related: Worried About Product Copycats? 5 Tips to Get Ahead of the Fast Followers

The downside of this? If the secret gets out, it’s game over; there’s no unringing that bell.

You Need to Secure the Domain Name First

As your lawyer does an availability search for a product name to trademark, you need to secure your domain name. It’s simple and cheap. If you wait until after you begin using your name publicly, it’s much easier for cyber squatters to go ahead and grab domains you might want, making it difficult for you to wrestle them away.

Don’t waste time on a product name before you’ve done that availability diligence with your attorney. It’s simple to do, doesn’t take a ton of time and can prevent impediments down the road.  Securing domain names is one of those “you don’t need a lawyer to do that” jobs. If it looks appealing pay the $10/year and secure the rights to that top level domain.

Your Distribution Network Is Everything

Focus on a business strategy that addresses distribution control. Whether your product is $2 or $10 per unit, the nature of food and beverage items is that they are low-dollar, high-volume products. You have to sell a lot of units to be successful and if you don’t maintain control of your distribution, you can end up competing against yourself on retailers like Amazon. (I wrote more about the problems with reselling on Amazon in my article “Read This Before You Become an Amazon Reseller”.)

Protecting Your Food or Beverage Business

When it comes to protecting your business in the food and beverage industry, there’s no one-size-fits-all approach, but you certainly don’t have to go the traditional business route of applying for a patent. There are plenty of surprising ways you can ensure your business is both protected and successful for the long-haul. 

My Brush With Big-Law Burnout

My path to founding Neugeboren O’Dowd required some personal trauma. And while my story in “Big Law” is my own, and might have some unique situational idiosyncrasies, the underlying plot is not out of the ordinary.

Attorneys have a very high rate of mental health, physical health, and substance abuse issues that stem from the demanding pressures of the industry. Increased national focus on mental health problems in the legal profession has brought some of the more traumatic stories to light, but the general theme persists.

My Story: Big Law, Big Problems

First, I don’t think Big Law firms are evil or inherently bad. My last firm was neither of these when I was there and isn’t now. My time there was filled with amazing and supportive mentors, unique opportunities, and an environment that was clearly designed to help me succeed. No one there was a jerk. I can’t think of anyone I wouldn’t want to work with again and that firm still supports me in my career today through friendships, referrals, and advice.

I was an engineer by training and then went to law school at night while I was still working. After my graduation from law school, I followed a fairly typical Big Law career path. I began working for a large IP-focused firm in California and then moved to an even larger general practice firm in Colorado. I had just turned 30, my family was growing, and I had a great job in a busy practice.

The law firm I was at had a typical Big Law environment — namely, high productivity requirements. I worked for great people and on a great team, and I was getting excellent experience and pay; honestly, I don’t think I would have ever been able to start my own practice without having that background.

But, it was a lot of work. It came to the point that I was burning the wick at both ends.

A turning point started with something small: a tiny cut on my elbow. Probably just banged it somewhere. But somewhere along the way, that little cut turned into a big problem.

I was in Phoenix at the time visiting family and it was literally 120 degrees in the shade, but one night I was shivering while under a heavy blanket. Something wasn’t right. I looked down at my elbow and it was swollen from shoulder to wrist like a balloon about to burst. A trip to the ER in Phoenix got me triaged enough to travel back to Colorado where I could get more focused treatment if needed.

But I had a trial approaching and there was work to do, including a deposition scheduled for the next day.

On Monday morning, things hadn’t improved. Before the deposition, I went to urgent care where they gave me IV antibiotics. They left the port in my arm while I went to the deposition so I could return to urgent care for more treatment.

When I returned later, the doctor’s expression let me know that something wasn’t right and my own body told me the same thing. Forty-five minutes later, I was in surgery to clean out the wound. I was on the verge of sepsis.

Following the operation, I was in the hospital for a week as the doctors worked to get the infection under control. But I had that trial approaching, so people were bringing me work while I sat in the hospital. I did deposition designations in my hospital bed, green highlighter streaks tailing off the page as I constantly drifted off.

Eventually, the infection was under control, but I was on an IV antibiotic drip four times a day for a month. I brought my IV bags to work with me, screwed a hook in the wall to hang them, and kept going. When one of the managing partners of the firm saw the situation, she was clearly horrified.

When I was back to a normal state of mind, I needed to ask opposing counsel for an extension so I could redo those deposition designations. Clearly not my best work. (If I didn’t say it to him then, I’ll say it now: Thanks, Paul.)

This was the beginning of the end. I finally realized that I was completely burnt out.

As much as I loved my job and the people that I worked with, my body was deteriorating, weak from all the work. I needed a different job.

A great in-house role gave me a more normal routine as well as some unique experience, but was cut short when the company was “merged” with another and our entire legal team was let go. Efforts to find another in-house role never panned out and I started my own firm.

But, it needed to be different.

How Neugeboren O’Dowd Is Different

Although I wouldn’t change my experience, I certainly set out to model my own firm based on the goal of keeping a lot of margin in life — whether that’s to do fun things, engage in community activities, or just to keep sane in the work environment.

That’s fairly easy to do that when it is just you in a basement office, but as our practice grew and we added more lawyers, we needed to be more deliberate about it.

#1: Time Is Valuable

Most Big Law firms require between 1,800 and 2,000 hours of billable time per year. If you take no time off, that requires 160 billable hours per month leaving 6–7 hours a month of non-billable time in order to keep a 40-hour workweek. To maintain that type of productivity level while also taking vacations, holidays, personal time, etc., most lawyers work 60 to 70 hours per week.

Our target is 100 billable hours per month with an attorney option to set higher benchmarks, which the firm rewards. This gives our professionals a lot of flexibility and leeway. Absent some emergency or someone’s preference to be a night owl, weekend and after-hours work is really not a thing.

And, our focus is on productivity, not necessarily on hours, so everyone’s efficiency is rewarded. Our employee manual states, “Busyness is not a virtue.”

#2: Work More or Less; It’s Your Choice

Neugeboren O’Dowd attorneys’ annual salaries are certainly lower than salaries offered at large law firms — we can’t compete on that metric. But, when you look at the production requirements, our effective “pay per hour of time billed” is actually higher than most firms. And, if an attorney wants to increase their workload to make more money, they have the ability to do so.

Everyone in the firm has families and they’ve been able to work more or less around events in their lives, whether they’re having a baby, saving up for a house, attending to a medical need, or whatever they need to do, without stressing out over it. The margin is already built in.

#3: Incentives All Around

Every lawyer has an incentive to develop their own practice. While there is plenty of room to make a career off of other’s work, all attorneys are eligible for a compensation/origination credit for developing and managing their own work. If you bring clients in, either new or clients from your prior firm, you receive extra compensation for the work associated with that client. Partners, associates, and counsel all enjoy this benefit.

Full-Time Doesn’t Have to Mean All the Time

We’re a small firm, and while we can’t offer some things in terms of prestige, fancy office space or Big Law starting salaries, we do give our attorneys a better work-life balance, the incentive to build their own practice, and the flexibility that real life requires.

We (partners included) sacrifice a wide variety of benefits (our own pay included) to make this work, but we also have that same margin in our lives.

A full-time schedule doesn’t have to mean all your time. It can mean a lot less, without giving up an attractive wage and meaningful work. If this interests you, reach out. We are growing and always looking for new professionals to join our team.


Update on China’s Amended Trademark Laws

Traditionally, China has been a more or less outlier in terms of intellectual property protections, at least in terms in how they approach the enforcement of intellectual property. Now, though, the country is starting to move toward alignment with the rest of the world.

Subtle changes, possibly in response to controversial U.S. political decisions (including recent tariffs) are good news for U.S. businesses, inventors, entrepreneurs, and startups that rely on global enforcement of their technology and brands.

China’s Relationship with IP and the Rest of the World

China — particularly over the last few years — has been an economic force on the world’s stage. But unlike other major players across the globe, China has a questionable track record in its attention to enforcing IP rights, trade secrets, and the like.

This leads to counterfeit products, infringement, potential health and safety issues, and an overall bad deal for companies.

This includes those looking to either sell a product in China or manufacture a product in that country. Once you turn your product over to a Chinese manufacturer, you have very little control over what happens and who sees your sensitive product details, unless you have rigorous protections in place.

Many manufacturers — and the American public — have put up with this fact. It’s all in the name of cheap labor and cheap products. But could this business hurdle become a thing of the past?

China’s Most Recent General Institutional Reform

Possibly because of recent tariffs and other political pressures, China is showing some substantive changes when it comes to honoring trademarks and we’re starting to see it on the patent side of things as well.

A lot of these changes are due to China’s move toward some general institutional reform, including broad-based changes to the law that impact…

  • How IP is registered in China
  • Examination timelines within the Chinese intellectual property office
  • Bad faith filings in China (more on that below)

…and more.

For example, China is beginning to improve a brand owner’s ability to log and report online infringement complaints (similar to how Google, Amazon, and eBay allow you to do so). The country is putting cybersquatting laws in place. Generally, we’re seeing more robust and predictable enforcement mechanisms in court that are more reconciled with the way the rest of the world approaches IP.

While many do not agree with the tariffs and the methodology that American politicians used to encourage these amendments, most brand owners agree that it’s good for business. They are absolutely unique and even historically monumental in some cases.

If the changes are implemented and the tariffs go away, even better. The playing field becomes level.

Bad Faith Filings: The Most Important Change of All?

Historically, it’s been easy to file trademark applications in China, and the China trademark office didn’t do a lot of diligence in terms of validating whether they were legitimate filings or not. That’s changing.

The new IP law amendments state that “applications for trademark registrations in bad faith which are not intended for use shall be refused.” This nearly mimics the sworn declaration that U.S. trademark applicants need to sign when filing an application.

Some might argue that this is the most important recent revision China has made to its brand protection system, so what else does this mean for you and your IP?

  • Chinese companies will no longer be able to apply for trademarks or any commercial signs that are similar or identical to existing, well-known trademarks and commercial signs.
  • Chinese companies can no longer apply for marks that reflect a notable place name, scenic spot, or building.
  • Applying for a large number of trademarks is also in violation of the new amendments, unless a good reason for the applications can be proven.

Because of this amendment, now anyone can file an opposition or invalidation of a mark on the grounds of bad faith. Previously, in order to do so, a person or business would have needed to establish prior rights in China before filing an opposition.

Plus, infringement fines have increased substantially. Overall, this makes it easier for you and your company to defend your brand while operating overseas.

What’s Next?

We can be optimistic that these changes to how China approaches IP and the rest of the world are just the start of building better business relationships with the country.

Are the changes solely the result of tariffs? And if those tariffs are removed, could China revert back to previous behaviors? Only time will tell, but for now, business owners, startups, and entrepreneurs can feel a little more confident when approaching Chinese manufacturers and doing business in China.


If Insulin is Patented, How Did Colorado Cap the Price?

Recently, Colorado took a bold stance against the pharmaceutical and health insurance industries by capping the price of insulin — a life-saving medicine used by more than 7 million Americans — at $100 per month for each patient, regardless of how much insulin is needed.

I followed this story closely not just because I’m a Coloradoan, but also because I’ve been a Type I diabetic for 35 years.

I’ve spent my whole life wrestling with diabetes and have seen first-hand how the prices have gone up over time. When I was a child, insulin cost less than $50 a bottle. Today, the over-the-counter price for a single bottle of insulin is approaching $300, if not more — and I use two bottles a month.

Before the Affordable Care Act (aka Obamacare), I couldn’t even get private insurance due to my “life-threatening” pre-existing condition. Thankfully, Cover Colorado, Colorado’s high-risk insurance pool, was available to me at that time.

But even now with the ACA, my plan’s high deductible means I still pay for my insulin out of pocket most years. That’s a chunk of change for anyone, but imagine that burden on someone in a low-wage or underpaid job.

Insulin literally keeps people alive. I will die in a matter of days if I can’t access it. Yet, due to the rising cost of healthcare, people actually ration their insulin because they can’t afford it — sometimes with dire consequences.

It’s great that Colorado passed this law to cap the price of insulin, but it is really a reaction to some broader legal issues: artificial patent extensions and anticompetitive price control.

Insulin’s Patenting Problem

The first form of insulin was patented nearly 100 years ago. The inventors believed it was unethical to profit from a life-saving drug, so they sold it to the University of Toronto for $1. The sale also gave drug companies the right to manufacture and improve it as they pleased.

That’s where part of insulin’s patent problem lies.

Even though the basic formulation of insulin is nearly a century old and the original patents are expired, refinements have been constantly made over the years. The compounds have been changed and improved to the point where the pharmaceutical companies have been able to (what most say, artificially) extend the terms of these patents. This is essentially over-patenting, sometimes known as “evergreening.”

In the case of Sanofi, more than 70 patent applications have been filed in the U.S. on one form of their insulin, which could hold off competition for decades. It makes it almost impossible to have a generic version mimic what they’re doing.

This is commonplace and completely legal. Broadly speaking in the pharmaceutical industry, those companies have been able to file new patent applications on improvements to the drug. Building a robust patent portfolio based on improvements is a strategy that’s employed across most pharmaceuticals and drugs. We counsel clients on these strategies all the time, just not typically in the pharmaceutical industry.

However, in the case of insulin, it’s remained virtually unchecked. The drug companies say that rising prices are simply “the cost of innovation”.

The Question of Insulin Price Control

The second part of Colorado’s price cap is not really a patent law issue, it’s an insurance law issue and a question of competitive pricing.

First, a state can generally tell insurance companies that if they want to do business there, the state has the right to regulate those insurance practices. Insurance companies were in the bargaining room when Colorado was trying to get this regulation passed. To their credit, many feel that they were generally cooperative in getting this legislation passed.

The second part is about pricing, which is where there’s a deeper problem.

In a normal business environment, if there is competition, especially for the exact same product competing for identical customers, prices should go down. A company should be doing everything they can to get that same customer, which usually means they’re going to offer it for a dime less than the competition and people are going to opt for the cheaper of the two.

In the case of insulin, that hasn’t happened.

A century after the first patent for insulin was sold, we have only three companies that manufacture insulin and they all happen to sell it at roughly the same price point. Prices have steadily gone up in lockstep with each other, defying a normal competitive environment. Looking at the prices historically, Drug Company A will increase their prices by $5 a bottle, and then immediately Companies B and C do the same thing.

That’s not healthy competition. It’s too coincidental that their prices have mirrored each other over the years — which many feel reeks of some type of anti-competitive price-fixing behavior. It implies that there’s some sort of behind the scenes discussions saying, “Hey, let’s all set our prices at the same level.” And that’s illegal.

In fact, Colorado Governor Jared Polis publicly called it “price gouging”. Part of the new Colorado price cap includes an investigation by the state attorney general into the rising costs of insulin. That rabbit hole will likely extend to other states and the federal government as well.


Read This Before You Become an Amazon Reseller

Amazon sounds like a great way to get your product out there — billions of shoppers, cross-promotions, and paid spots on the biggest online retailer in the world.

But beware of the terms you are signing when you establish that reseller account. There’s a lot in the fine print that can easily undermine your e-commerce efforts!

Selling on Amazon: What Could Go Wrong?

You’ve developed a great product. You’re getting traction in the market. But, if it’s a small-dollar item under $10 — like an energy bar, a beverage, or that new trendy small plastic gadget that you make in China for 5 cents — the key to your business’ success is selling a lot of units. One way to do so, especially for small companies, is to sell your product on Amazon.

After all, if you’re not on Amazon these days, you’re at a big disadvantage. Compared to the efforts needed to get your product to a nationwide audience on your own, Amazon seems like a win-win. If you wanted to get that energy bar or beverage into a place like Whole Foods or Safeway by yourself, you’ll deal with distribution companies, warehouses, resellers, etc., that all make the process much more complicated.

But with Amazon, it seems as simple as creating an account, uploading a few photos and you’re in business . . . right?

It’s true that setting up an Amazon reseller account is easy. Click through a few forms online, upload those photos, send some stuff to Amazon, and then the company fulfills the order. Where do things go wrong?

Are You Your Own Biggest Competitor?

One pitfall you might come across? You could actually end up competing with yourself. Let me explain.

If you’re not 100% in control of your product distribution and others have legitimate access to a supply of your product, then you might not have control over the final consumer cost when that product is sold on Amazon.

Consider these scenarios.

Scenario 1:

  • You sell your product to your distributor for $5
  • The distributor sells your product to the retailer for $8
  • The retailer sells it to the customer for $10
  • You also sell it for $10 on Amazon

If your product is priced consistently across selling platforms, this is fine! However, consider this . . .

Scenario 2:

  • You sell your product to a distributor for $5
  • The distributor sells your product to an online store for $8
  • The online store sells it to the consumer for $9
  • You list the product at your price point: $10

Suddenly, you’re competing against that other online retailer for your own product — and if they’re selling at a lower price point, they’re going to win.

You could even be competing against someone else directly on Amazon who maybe buys your product at the store and then posts it on Amazon for a low price. The bigger rub? That competitor can actually use your own Amazon advertising collateral to point toward their lower price offering. Wait, what?

As a part of the boilerplate Amazon reseller terms of service, any reseller can promote the sale of their instance of your product by pointing to the images and other advertising that you originally put up on your reseller page. Amazon refers to this broadly as the “buy box” where those “other sellers on Amazon” get to compete solely on price with your marketing collateral in the background. No bueno.

The only way to prevent this from happening is by strictly controlling your distribution network, making it very difficult, if not impossible, for a third party to obtain your product and undercut you on price.

In instances like the ones above, some businesses assume they can sue either Amazon or the other seller. Unfortunately, this just isn’t an option. No one is doing anything wrong in the situation. There’s no counterfeiting or misrepresentation. No one is pretending to be you. They purchased your product through legitimate channels and are now openly reselling it for a lower price.

Even further, the terms and conditions you agreed to when setting up your Amazon account make the entire situation 100% legal.

The Key to Amazon Success

Is becoming an Amazon reseller all bad? Of course not! You just need to be aware of what can happen and the problems that exist when you have no control over your product’s distribution.

The key is controlling the distribution system from the start and really putting effort into your initial agreements with third-party distributors. These are the agreements that you can control and negotiate (versus your reseller agreement with Amazon, which leaves zero room for negotiation).

When creating these agreements, think downstream about pricing pressures and legitimate market competition; and develop terms and conditions of sales, including terms for minimum pricing and quality standards.

Fighting Fires After the Fact

If you haven’t put these conditions in place, there are a few things you can still do.

Third-party Monitoring

Third-party services exist that will monitor on a weekly or monthly basis to see if retailers are competing against you with your own product online. Some of these services will even send quasi cease-and-desist letters on your behalf, but the legalities can be a bit hazy.

Buy It Back

In some cases, you might try to buy some of the products from these third parties and look at the condition in which they arrive. If your product comes in bland or defective packaging or the product has been handled in a way that dilutes its quality, you may be able to address the issue of brand damage and misrepresentation directly with Amazon since situations like this actually do violate the Amazon reseller terms and conditions.

Of course, if that third party product comes with any evidence of actual counterfeiting or trademark infringement, you have a separate cause of action, both on your own and directly through Amazon.

Often, a simple letter to the reseller is enough to cause them to either drop the product or work with you on agreeable terms, as they likely don’t want to deal with any potential legal issues.

Making Amazon Profitable for Your Brand

Selling your product on Amazon isn’t something you should shy away from. It can be quite profitable — as long as you have the right precautions in place.

Look at your distribution agreements right from the beginning, from all angles. Taking the future of your business into consideration is essential to protecting your brand and your profits, on Amazon and anywhere else.


5 Common Issues With DIY Trademarking

On its surface, the trademark application filing process is relatively uncomplicated. The trademark office offers an online form for preparing and filing your trademark application and it’s simple and easy to use. All you need are basic computer skills and — voila! — you have a trademark application on file.

If it’s all so simple, why does our firm see so many issues?

1. The Application is Too Good (and Easy) to Be True

The first and most common problem people get into with DIY trademarking comes with the supposed simplicity of the form itself.

As you’re putting together your trademark application, there are a lot of selections to make, certifications to attest to, documents to upload, and correct language to use. All of these nuanced details impact how the trademark office judges your application. Without a clear understanding of all of these things, you might receive an unfavorable response from the trademark office months after your initial application, possibly even after already using your mark in a public-facing way.

While it might be easy to get started on the forms, push the ‘submit’ button, and pay your fee, there are a lot of hidden traps you can fall into if you’re not clear on what you’re doing.

Unfortunately, if you do fall into one of these traps and submit your application, you won’t know until you receive a response from the trademark office after the typical wait time of three or four months. At that point, not only did your mark get rejected, you may have already invested time and money into building your brand.

2. You’re Not Automatically Protected

Many trademark DIY-ers don’t quite understand their rights. Some assume that as soon as they submit their trademark application, they have rights to use the trademark.

However, this is a false sense of security. Without knowing the precise status of your brand rights, you might begin using improper terminology, make incorrect representations to the world about the status of your brand, and/or incur some financial risks or other legal liabilities.

Additionally, the trademark office may come back to you and let you know someone else already has prior rights to your same brand. Now, if you’ve gone ahead and used the mark just because you thought you had the right to by merely submitting your application, you’re suddenly in the wrong.

3. Your Brand Might Infringe Someone Else’s Trademark

One trap that many people fall into when taking the DIY trademarking route is that they don’t truly understand how to search for other trademarks that might precede their own.

The trademark office offers a search engine where you can type in a phrase, like your business name, and see marks that meet your search criteria.

Many people use the search engine and, if no direct hits show up, assume they’re in the clear.

However, the trademark office search engine is not fail-proof and not sophisticated enough to show you all the trademarks that might be similar to the one you want. It is a simple interface that gives simple results. Most don’t understand that common trademark “workarounds” such as phonetic equivalents, misspellings, and the like are not going to be enough to avoid trademark infringement. And these subtleties often don’t show up in a simple search at the USPTO.

4. You Must Understand and Prove “Use in Commerce”

In order to get a trademark registered in the United States, you eventually have to show that you are actually using the mark in commerce, which means that you are essentially offering for sale, or selling, the products identified in your application in connection with your brand.

That concept can be hard to grasp for some people. They think just by putting the words in an article or using it in a PowerPoint slide, that’s enough. . . but it’s not. Trademark applications filed by foreign entities frequently stumble on this issue as many countries do not require proof of use as the U.S. does.

You actually have to sell the goods across state lines, in a federal “use in commerce”-type environment. Not fulfilling this requirement will lead to a rejected application or a registration that is subject to cancellation if this use was alleged inappropriately.

5. DIY Legal Platforms Do Not Necessarily Provide More Safeguards

If you think you can register your trademark using a DIY legal platform and benefit from more legal protection, think again.

For a trademark application, popular self-service legal platforms give you a form to fill out, but it basically just asks the same questions that are on the trademark application. Then, the service’s clerks take that information and fill out the trademark application on your behalf with the information you’ve provided.

You won’t eliminate any of the pitfalls discussed above, as you rarely actually have a conversation and interaction with a legal representative that can help you avoid these.

Doing It Correctly Now Saves Time and Money Later

DIY trademarking can cost you both time and money, as well as potentially get you involved in some legal issues if you end up on the wrong side of a trademark infringement claim.

As is in most IP law cases, the best route is to make sure you properly protect and register your brand right from the beginning. If not, fixing your mistakes at a later date can be much more costly.

Questions about protecting your intellectual property? Schedule a consult.

The Politics of Intellectual Property

President Trump recently announced a 25% tariff on $200 billion worth of Chinese goods. Originally set at 10%, these recent increases will hit a much larger portion of the U.S. economy. According to CNBC, the United States imports nearly $540 billion in Chinese goods, and the trade deficit was $419.2 billion in 2018.

While politicians are looking to strike a deal with China, other trade changes are occurring on the Mexican and Canadian borders. NAFTA’s replacement, the U.S.-Mexico-Canada Agreement (USMCA), is intended to expand agriculture, manufacturing jobs, and enhance protections on U.S.-based intellectual property.

What does this mean for your company’s IP?

IP Protection: A Problem That Crosses Party Lines

No matter your political party, just about everyone can agree that international IP protection is a problem that needs solving. The current administration is putting pressure on China that the country has never faced before.

While most might not agree with the means (or merely the messenger), many, if not all, do agree with the end goal.

That goal is a positive worldwide shift in IP protection across a variety of industries stemming largely from China’s historically poor treatment of intellectual property rights, private property, and various humanitarian issues that continue to linger.

At the Root of the Matter: Chinese IP Laws

China is still a Communist country, but the country’s business policies have shifted over the years to encourage private enterprise, making them a dominant player in the world economy.

While the Chinese government has moved away from complete state control of all business, the state still has control (or at least strong oversight) of most business activities in the background. Those controls often impose threats or other disadvantages on foreign companies doing business there.

However, these same policies have made it easy for China to offer cheap labor and the resulting inexpensive products — something the United States has fallen in love with and grown accustomed to over the decades.

Whether you’re in electronics, clothing, or consumer/consumable goods, you often can’t do business in the U.S. without taking advantage of the low-cost labor in China and other developing countries.

The problem is, in order to do business in China, American businesses must comply with Chinese laws. We have no control or say in this fact. In our practice, this effectively requires a forced transfer of the intellectual property to a Chinese state-controlled organization of some form with little control on its distribution or enforcement.

Unfortunately, there is still an inherent lack of respect for IP and trade secrets in China. A lot of things are stolen; it’s why American consumers deal with counterfeit products all the time!

When a company starts doing business in China, there’s not a lot of control over who might see your product, who has access to your plans, or who knows your manufacturing methods. This is even more pronounced when the U.S. company does not maintain a constant presence in China or provide consistent oversight into the day-to-day manufacturing of their products. And often this lack of oversight and control leads to other Chinese manufacturers making cheap knockoffs of your product.

Americans have put up with this for quite a while, primarily in the name of making our products for a more competitive cost.

Looking Ahead: Are Tariffs Good for IP?

This is one of the underlying problems being addressed by the trade wars you’ve likely seen in the news. If China wants to continue selling to the United States, they must meet our standards of intellectual property protection. Otherwise, they face a high tax on every product they send to the United States.

Unfortunately, retaliation takes the form of similar tariffs on U.S.-made products that are sold into China. So, everything gets more expensive . . .

A negotiated result that unifies the treatment of individual IP rights would be good for every company’s intellectual property, as brands would be able to establish a set of rules that must be followed regarding assets such as their customer lists, pricing guides, IP, and other technology.

I recently spoke on an Outdoor Industry Association panel discussing this very topic. When costs go up, people look for cheaper ways of doing business. In my world of intellectual property law, that means issues with counterfeiting, trademark and patent infringement, and other surreptitious ways to get cheap products to market.

The end goal is to force China to reconcile their intellectual property laws so that they’re more aligned with the United States, Europe, and other regions that respect personal property rights.

What Does This Mean for IP Protection?

It’s now more important than ever to protect your intellectual property.

If a U.S. company chooses to file their U.S. patent application in other countries around the world, they must comply with strict and unforgiving timelines.

For many, it’s a no-brainer to file that patent in places like Europe, Canada, Australia, or Japan. They have very similar IP protection laws that respect personal property rights and are generally reconciled with U.S. laws.

While China does have straightforward processes for procuring your patents and trademarks, the enforcement of those rights is still a moving target and is largely unpredictable. Despite this, we often recommend our clients file their patent there now as the uncertain environment hopefully continues to decrease over the next few years.

A properly enforced patent in China should give you similar rights as it would in the U.S. — a roughly 20=year exclusive right to make, use, sell, and offer for sale your patent-covered product. If a client waits until the hostile environment lessens to file the patent, they may never have the opportunity to do so. Filing your patent in China is important now so that you’re ready for the future.

New policies will hopefully convince countries like China, that might not have really respected intellectual property to U.S. standards in the past, to do so in the coming years. While global IP has trended toward this change for a while, albeit very slowly, this change is now occurring rapidly.

Almost Infamous: Separating Your Product From Defective Brands

In late 2015, Segway, maker of the famous two-wheeled, self-balancing scooter, sued a company called Swagway, then-producer of a motorized transporter called Hovertrax — aka, a hoverboard. Swagway’s hoverboards were reported to cause fires and injuries (which they were already being sued for). Compounding the negative coverage were the many problematic hoverboard knockoffs.

In this case, Segway argued that the brand names were close enough that consumers would confuse their brand with a competitor linked to consumer injuries and lawsuits.

(Things got even more confusing when the scooter company Razor acquired patent rights to Hovertrax, prompting Segway to sue both Razor and Swagway for patent infringement as well.)

This type of brand protection scenario is pretty common in the intellectual property space. Maybe if you’re selling, say, a cellphone case, you’re not really worried about someone hurting themselves with a knockoff product. But if you’re selling an electronic device or a pharmaceutical — something where a fraudulent brand could actually hurt someone — the stakes of protecting your intellectual property are much higher.

If you find your company in a Segway/Swagway-type scenario, how can you distance yourself from a brand with a rocky reputation?

Proactive Brand Protection

When other brands are copying what you’re doing, it’s a bit of a backhanded compliment. It usually means that your product has been really successful. However, as flattering as imitation might be, it’s still not preferable for the brand looking to set itself apart, especially when the imitator is linked to bad news.

In terms of enforcing your own intellectual property, there are generally two main approaches: patents and trademarks. Both aspects need protection in different ways, and both have gray areas where a knockoff might be able to exist without actually infringing on your rights. This is why I recommend always coming at intellectual property protection from multiple directions.

The Pitfalls of Patent Protection

On the patent side, someone could knock off your product so it looks and feels exactly the same, but it might not infringe the patent that you have in place because of subtleties in how the claims of the patent were drafted.

For example, you may produce a mechanical widget and also have a patent on some aspect of that widget. The inventive aspect might be something small, or a minor improvement buried in the mechanics or software.

So what happens when someone comes up with a competitive product that looks, feels and even operates the same, and is even marketed to the same consumer?
If they’ve done their work and designed their product around your patent, there’s little you can do. The competitor isn’t actually infringing on your patent because your patent covers something specific that the competitor deliberately avoided.

The Gray Area of Trademark Protection

On the trademark side, things are a little more fuzzy — which could actually work in your favor.

Say you don’t have a patent on your product or the patent only covers something very narrow, but your product has a good brand and a good name associated with it. You find a competitor selling a similar product and is doing something to pawn off of the goodwill you’ve established with your brand — maybe the competitor has a similar name, uses some of the look and feel of your branding, or is doing something surreptitious online to drive traffic to their site. That’s a different story in terms of enforcement.

Because there is more subjectivity in determining an instance of trademark infringement as opposed to patent infringement, your options for enforcement may be more numerous. In a broad sense, the specific product being sold by your competitor may not matter so much. What matters is that a consumer might be confused as to the source of those competing goods.

In these instances, if a consumer is likely to be confused into thinking that a knock-off brand is your brand or that they are associated with your brand’s reputation, that may be enough to move forward with a trademark suit.

And this is when you should have formal trademark protection in place.

Reactive Brand Protection

These preventative measures aren’t always enough, though. Crooks don’t often care about legal protections. If they want to copy a product, most of the time they’re not going to do any kind of diligence to avoid litigation unless they’re a large or otherwise sophisticated company. For them, it might just be easier to ask for forgiveness rather than permission, and that may be their only true legal strategy from the start.

Often, one might find themselves in a reactive, rather than proactive, situation as they try to enforce their intellectual property. What are your options without getting involved in a messy court battle?

Step 1: Make Your Intentions Known

In some cases, a one-page cease-and-desist letter can be enough to scare away the problem.

Our firm works with clients that sell consumer products to a wide range of customers. The products are generally low-dollar, high-volume items sold through large third-party distributor networks — the type of product that is at a high risk of encountering knockoffs or unauthorized sales.

For these clients, we employ a counterfeit avoidance program to constantly monitor where these products are being sold (online or elsewhere). We get reports showing us all the vendors out there selling the same product. Some of these services can send an automated short-form, cease-and-desist letter on the first round. With just that, you can successfully get rid of up to 80% of the bad apples without a ton of legal work.

Then, if needed, a second letter could come from a lawyer. It doesn’t necessarily say anything different, but when they see our legal letterhead with “intellectual property litigation” in the tagline, that gets people’s attention.

Most of the time, this is when we get that “please forgive us” response from the offender and they cease the bad behavior. Many of these genuinely didn’t know what they were doing was wrong. But not all . . .

Step 2: Determine If Litigation Is Right for the Situation

For the 10 or 20% that ignore the warnings and their actions are true instances of trademark infringement or counterfeiting, the next step is typically some form of litigation.
If it’s a U.S. company and you have a U.S. trademark registration in place, then you file a trademark infringement lawsuit. If it’s a counterfeit product pawning off on your goodwill, the claims will generally focus on some form of unfair competition.

Once you’re in litigation, things can become very expensive, time-consuming, drawn out, and uncertain. You have to pick your legal targets carefully. Some just aren’t worth litigating.

Step 3: Drum Up Some Good Press

In instances where a lawsuit is not preferable, it’s advised that your brand have a good public relations campaign in place to make sure consumers are informed (and maybe even give them tips for identifying problematic knock-off products). This campaign could include everything from basic press releases to emails to social media.

Having a strong patent or trademark doesn’t mean getting bogged down in endless IP litigation. However, having a routine and repeatable process in place to address any form of brand damage is important, especially when you’re trying to protect the positive associations that consumers have with your brand or product.

Questions about protecting your intellectual property? Schedule a consult.