High Court rejects Nurofen tablet manufacturer’s appeal against $6 million penalty

High Court rejects Nurofen tablet manufacturer’s appeal against $6 million penalty

The High Court’s decision to uphold the $6 million penalty against Reckitt Benckiser (Australia) Pty Ltd, the manufacturer of Nurofen tablets, serves as an important reminder for traders to ensure all claims made in their marketing and advertising materials do not extend beyond the capabilities of the goods and services they provide. In particular, the Australian Competition and Consumer Commission has stated its intention to target large companies that engage in misleading or deceptive conduct towards consumers, and to continue to advocate for higher penalties under the Australian Consumer Law. Considering this, we strongly recommend all such companies review and consider the accuracy of their marketing and promotional materials.

Thanks to Kelly Dickson for this update – http://www.mk.com.au/our-people/kelly-dickson/

Festival of the Boot (Second Half and Final Quarter) and the Melbourne Cup

In my most recent blog post, I introduced the legal issues to consider when entering into a sponsorship agreement.  With the Melbourne Cup coming up, I continue the discussion below.

Term and termination

It seems such an obvious issue, but what is the term of the sponsorship intended to be? Is it a one year trial, three years or from a sponsor’s perspective, preferably something like an initial three year term with one or two options to extend?

malcolm-mcbratney-legallifestyle-melbourne-cup-sponsorship

There is of course a price to pay for the grant of such option rights and these financial issues need to be factored into the equation.

Early termination

Perhaps more importantly beyond the obvious term question is in what circumstances can a sponsor terminate the sponsorship early? Does the sponsor want the ability to exit should the sports team not perform in a sporting sense according to an agreed metric? For example if the team finishes in the bottom half or fails to make the finals two years in a row?

malcolm-mcbratney-legallifestyle-richmond-afl-loss-sponsorship

What if one or more key players leave? Can the sponsor walk too?

What is somebody is naughty?

One very important term is the ability of a sponsor to terminate the agreement if the team (or more usually one or more members of the team) engage in activities that can cause damage to the sponsor’s brand. Think through the many and varied forms of indiscretions that have befallen sporting stars over the years and then try and think about trying to draft a clause that exhaustively spells these out as grounds of termination. It would be a very long clause and would still be incomplete.

malcolm-mcbratney-legallifestyle-lance-armstrong-ban-sponsorship

Given this, a more general clause that allows a sponsor to terminate the agreement in circumstances where the team or its members have in the opinion of the sponsor engaged in conduct that has or could damage the sponsor’s brand or bring the sponsor into disrepute is key. Importantly this decision ideally should be “in the opinion of the sponsor” so an attempt to terminate doesn’t descend into an argument about whether the conduct was bad enough.

A sponsor doesn’t want to be debating whether for example the social media comments by player Joe Bloggs are inappropriate or not. The sponsor simply needs the ability to terminate the agreement if in their opinion such conduct damages their brand. Conversely, teams would normally seek to limit such a discretionary right.

Other benefits

Sports sponsorships can take many shapes and forms; however one often seen element is the provision of “talent” from the team for endorsements of the sponsor’s products or services and/or appearances at events for the sponsor. Like anything important, the devil is in the detail. There is significant difference in a clause that says “The team will provide players to attend events.” versus a clause that says “The team will provide the services of players x, y and z to appear at a minimum of four post-game events for a minimum of one hour each during the season.”

The exact specifics of who is to endorse what, what they are to say, what they are to attend, what they wear when attending, do they have to make a speech or just network and more should be specified.

Beer

What sports sponsorship is complete without dealing with beer?

malcolm-mcbratney-legallifestyle-footy-food-sponsorship

A little known term outside of this area of law is the term “pourage rights” – who gets to supply and pour the beer at the footy or sport of choice?! As you might expect this can be a very valuable right! Much like signage rights, it is important for a sponsor to determine who has the rights and ability to grant such rights – is it the venue? Is it the sports league? Is it the team? How do such rights interact with any other sponsorships the team has from competitors of the party holding the pourage or similar rights? Again, some form of rights audit and a comparison with the rights and obligations of the sponsor generally is needed.

Don’t forget about “pie and burger rights” either!

Conclusion

This blog post and its predecessor is a very high level view of a few key issues in sponsorship agreements. There are many more of equal importance and much devil in every detail.

My key message for potential sponsors is to consider in detail their business reasons for the sponsorship, what they are seeking to achieve and then to tailor what they require out of the sponsorship and then record it carefully in the sponsorship agreement. This applies equally to a team taking on a sponsor.

The Festival of the Boot is behind us, yet the football (soccer) continues and cricket season is about to begin. May teams have the success they deserve and may sponsors achieve what they want from their sponsorships!

Malcolm McBratney

 

 

 

 

The Festival of the Boot, AFL and NRL Grand Finals and key sports sponsorship legal issues

This weekend Australia has seen what is known by many as “The Festival of the Boot”.

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The festival kicked off on Saturday when much of the nation watched the Australian Football League (AFL) Grand Final between the Western Bulldogs and the Sydney Swans, with the Western Bulldogs emerging the winner.

malcolm-mcbratney-legallifestyle-blog-western-bulldogs-afl-champions

The Festival of the Boot continued on Sunday with the National Rugby League (NRL)  Grand Final between the Cronulla Sharks and the Melbourne Storm, with the Sharks emerging the winner.

malcolm-mcbratney-legallifestyle-blog-nrl-grand-final

For my American friends, think of a weekend containing both the Super Bowl and the Stanley Cup and for my European friends, think of a weekend containing the Premier League grand final and the Ashes.

While for most of us this is an excuse to throw another shrimp on the barbie (hello USA friends!) or more likely some snags and steaks and maybe a lamb roast, for the sponsors of the relevant AFL and NRL leagues and the teams in the finals, this is their most important and most valuable weekend of the year.

Key sponsorship legal issues

So how does a sponsor, make sure they get bang for their buck? When setting out to sponsor a league or a team (or conversely looking to take on a sponsor), what are some of the key legal issues that should be considered?

Are you dealing with the right party?

As a starting point, sponsors must ensure that the party they are dealing with has the relevant rights to offer. The rights available at a whole of league level, differ to those able to be offered by teams which again differ from those able to be offered by the players themselves.

As a starting point it is important to understand which entities or persons own which rights. A rights audit is a useful tool to employ. A rights audit looks at what rights the relevant entity has to offer, what the legal status of those rights is, whether the entity owns the rights or has licence rights only and whether the entity has the legal ability to offer those rights to the sponsor.

Different levels will be able to provide different rights. For example, the relevant league such as the AFL or NRL are the entities able to offer broadcast rights while the league itself, a team or sometimes the venue itself may be able to provide signage rights. Usually a team will be able to offer signage rights at its home ground, but not at other grounds.

Who owns the rights or IP?

It is important to look at ownership and rights to use the IP rights being offered, especially the team brands.  You might think that the premiership winning Western Bulldogs would own their Western Bulldogs trade marks; however a simple trade mark search reveals the trade marks are owned by the AFL itself. As such in dealing with the Bulldogs in a sponsorship deal, a potential sponsor would want to determine what licence rights the Bulldogs is able to offer to the use of their logo and associated IP, given that IP is owned by the AFL.

Are you the only sponsor?

Unlikely! These days it is usual to see a swathe of sponsors for most leagues and teams, so unless you are the only sponsor (and have a contractual right saying so), the level of your sponsorship, whether it is exclusive or not, whether your competitors can also be sponsors and what other lesser or higher sponsors are allowed must be specified.

If you are to be the naming rights sponsor, then the sponsorship contract must spell out in detail what that gives the sponsor. What is the specific name? In what font and format is it used? How is it used and where? Must it always be used in full? (preferably!) The list goes on.

If you are a major sponsor, how many other major sponsors are there? Are you the number one major sponsor or are you all first amongst equals? Do you get your company logo on the left hand upper chest of the jersey in a huge format or is it hidden away on the socks?

Do you get your signage at the grounds midfield or hidden away in a corner?

These and many other specifics need to be considered upfront and specified in the sponsorship agreement. The better the signage, whether on the field or on the players, the more costly the real estate!

Competitors

Imagine you are a major electricity retailer sponsoring a team. Do you want to see your major electricity competitor sponsoring the team elsewhere on the uniform or at the grounds? Indeed not! A prohibition on the team taking on sponsorship from a competitor (and the definition of who is and isn’t a competitor is a very important issue) is a key provision a potential sponsor should insist on.

What happens if your competitor sponsors the league as a whole or is a personal sponsor of one of the players? How these competing sponsorships interact must also be considered, but is a topic for a separate blog in itself.

This won’t stop ambush marketing (ever seen a Coke advertisement during the ad break when the game is sponsored by Pepsi?), but it will if correctly drafted, stop a competitor cutting your grass in relation to the specific sponsorship at hand.

There are many other issues to consider in sponsorship agreements. Stayed tuned for part two of this blog which will cover off issues including :

What is the duration of the sponsorship?

What are the performance criteria if any?

What are the exit mechanisms?

What is the territory? (by geography and type of media)

What is the fee structure?

What if it all goes wrong?

Tune in tomorrow…

Malcolm McBratney

 

 

 

 

 

Crowdfunding, a cool gadget, the Firebiner and a little bit of law…

Today as this this a legal and lifestyle blog, I have managed to combine the two into the one blog.

Firebiner

I recently came across and then supported via Kickstarter a nifty little gadget called the Firebiner, find it here – https://www.kickstarter.com/projects/529624630/the-firebiner .

Malcolm McBratney LegalLifestyle Blog Firebiner.jpg

It has quite a few useful everyday items on what can basically be a handy everyday keyring.

Malcolm McBratney Legal Lifestyle Blog Firebiner 2.png

What is crowdfunding?

I’m preaching to the converted a little here, however this is a handy excuse to talk a little about crowdfunding. As many of you will know already, crowdfunding has seen explosive growth over the last few years to fund many and varied products and projects. Some succeed in raising the required money, some do not. Some get the money but then fail in the market. Others are runaway successes.

Australian examples – Satellite Reign and Pop-Up Movie

A couple of Australian linked campaigns I personally know which illustrate some other types of funding campaigns and how far they can go include :

Satellite Reign – a campaign by Australian game developers, 5 Lives Studios, to create a sequel to a very popular computer game from the 90s  raised a huge £461,333 from 15,029 backers to help bring this project to life –  https://www.kickstarter.com/projects/5livesstudios/satellite-reign

malcolm-mcbratney-legallifestyle-satellite-reign

With appropriate disclaimers that this one was by my brother, Stuart McBratney, just over $10,000 raised via Pozible to fun a low budget feature film – https://pozible.com/project/32215

malcolm-mcbratney-legallifestyle-pop-up-movie

There are many issues to consider when setting up a crowdfunding campaign and also some issues to consider when donating to one.

Legal issues around crowdfunding

The legal rules around crowdfunding differ from jurisdiction to jurisdiction. In Australia, it is permissible to set up a true crowdfunding campaign in the sense of donations in return for product or service, but you have to be very careful to make sure you do not stray into capital raising territory, regulated by the Corporations Act.

I won’t give a capital raising lecture here today, but in a nutshell, under Australian law currently you cannot give equity in the business unless you abide by the rules/exceptions under the Corporations Act. If you are doing anything other than having people donate in return for being provided with the product or service, you should consider your obligations under the Corporations Act and preferably seek legal advice from someone knowledgeable in the area.

If blog readers are interested in a Capital Raising/Corporations Act 101 from me, please comment below and I will post one for you!

Australian Federal Government’s proposed crowdfunding laws now lapsed

The Federal Government did have legislation to facilitate crowdfunding on its books prior to the most recent election :

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr5588%22

The bill however lapsed with the double dissolution. We will need to watch this space to see if it is introduced once the various other high profile issues taking up the parliament’s attention are dealt with.

Progress

House of Representatives
Introduced and read a first time 03 Dec 2015
Second reading moved 03 Dec 2015
Second reading debate 10 Feb 2016
Second reading agreed to 10 Feb 2016
Third reading agreed to 10 Feb 2016
Senate
Introduced and read a first time 22 Feb 2016
Second reading moved 22 Feb 2016
Lapsed at prorogation 17 Apr 2016
Consideration of House of Reps message

  • Details: In response to a request from the House, the Senate agreed to resume consideration of the bill
02 May 2016
Lapsed at dissolution 09 May 2016

What about contract law?

Putting aside corporations law compliance, those setting up a crowdfunding campaign should remember that they are still putting in place a contract between themselves and the funders for the sale of a good or service. As a result, all of the usual contract law and liability issues arise. These include :

  • certainty as to what is being delivered;
  • certainty around timing;
  • terms and conditions of sale;
  • product liability and insurance;
  • returns policies;
  • implied terms under consumer and sale of goods laws (e.g. fitness for purpose, merchantable quality etc)

Crowdfunders should make sure these issues are clearly spelt out in their online material. Similarly, those looking to support a campaign should read this material carefully to ensure they understand what they are signing up to.

The legal issues of running a business of course also should be covered off up front- a suitable corporate structure, written contracts with employees and contractors, confidentiality, IP protection, manufacturing and services agreements with suppliers and the list goes on.

Crowdfunding is here to stay. The donation model both here in Australia and overseas is working well; however I personally am hopeful that we will see the Australian legislation find its way back to parliament again soon, accepting that while it doesn’t go as far as may wish, every little bit helps.

Lastly, go get yourself a Firebinder and share with your contacts. Sharing links here :

Facebook Share: http://bit.ly/FB4OEshare

Tweet: http://bit.ly/Twt4OEshare

Tumbler Share: http://bit.ly/Tmblr4OEfirebiner

Malcolm McBratney

 

 

 

 

 

 

 

 

Ever wondered why the media (usually!) pixelates the face of accused murderers? I’m not sure The Courier Mail does…

I picked up Saturday’s Courier Mail (our one and only physical local paper here in Brisbane (sorry Brisbane News online only edition) at a coffee shop yesterday (I refuse to pay actual money for it) to be greeted by this front page :

malcolm-mcbratney-legallifestyle-courier-mail-edited-front-page-tia-palmer-story

Now clearly, the Courier Mail didn’t leave large white spaces on their front page, that is me deleting the aspects of the story that are in my opinion potentially prejudicial and I didn’t want to republish here and make the same mistake.

Why not republish Malcolm, this is just a blog?

Social media is generally governed by the same restrictions on publication that govern the mainstream media. See this example where the womens’ lifestyle site, Mumamia, found itself in trouble for potentially prejudicial commentary during the trial of now convicted child sex offender, Hey Dad!’s Robert Hughes.

https://mumbrella.com.au/mamamia-face-possible-contempt-court-charges-robert-hughes-case-219065 .

Media Watch also commented on how these laws apply when the internet and google allow all of us to find images and facts that the mainstream media don’t publish :

http://www.abc.net.au/mediawatch/transcripts/s3542172.htm

My two cents here is that just because another media outlet, website or other service publishes something, that doesn’t excuse you from doing the same thing. Two wrongs don’t make a right and you as publisher, whether mainstream media outlet, website or blogger are still liable.

Why does the media sometimes pixelate faces?

Many of us would have seen the pixelation of the face of defendants accused of serious crimes such as murder. In particular it is in my opinion still quite clear under Australian law that in a murder trial the identity of the murderer is always an issue and as such the face or other identifying features (e.g. a large tattoo or a missing arm) should not be published.

The law has been clear on this point ever since Time was handed a $200,000 fine way back in 1995 for contempt of court by publishing the face of backpacker murderer, Ivan Milat, while he was still on trial. How does this front page really differ from the Courier Mail one?

ivan-milat-who-weekly-malcolm-mcbratney-legallifestyle-blog

The idea is that if a witness to the crime or events leading up to or after it sees the face or other identifying feature of the defendant in the media, that could cloud their recollection of the true facts. For example, having seen the face of the defendant on the front page of the Courier Mail, a witness might respond to a question from the prosecutor such as “Is this the man you saw walking along the street?” with “Yes, it most certainly is.“, when in fact they are recalling the face from the newspaper, not the actual sighting.

How can The Courier Mail show the defendant’s face?

Having acted in media law for over 20 years, this is one of those rules that is Media Law 101. However it seems the Courier Mail doesn’t think the law applies to them. Some other media outlets also seem to think the same thing. Publications such as this run the risk of prejudicing the trial and can be grounds for the trial to be aborted.

Identity is always an issue in a murder trial and publication of the defendant’s face in such a trial is in my opinion in contempt of court.  It is in my view, irresponsible journalism.

What else is wrong with the Courier Mail story?

But the buck doesn’t stop there as you will see from the other pixelated aspects of the story. I have erred on the side of caution (and my limited picture editing abilities) and blocked out passages that also contain what in my view are contemptuous statements. I won’t say what they are here as to do so would be to republish the offending statements, but suffice it to say the media (and all of us in these days of social media) need to be careful about publishing evidence, statements or other facts that a jury may or may not hear in the trial.

Examples include aspects of evidence, prior convictions,  other separate charges, some background facts and also comments or statements that infer the guilt or otherwise of the defendant.

What should the media do and what should happen here?

The Tia Palmer story is a very sad one and this blog article in no way is intended to take away from that. To ensure justice is done and trials are not aborted it is vitally important that the media plays by the rules. This is not the first instance by the Courier Mail of playing loose with the law in order to sell a few more papers (http://www.sbs.com.au/news/article/2014/03/21/qld-newspaper-faces-fine-over-court-breach) and it is time they in particular, but other media outlets also lifted their game.

What should happen here apart from the Curious Mail lifting their game? Yvette D’Ath, as Queensland’s Attorney General, I’m looking at you.

Malcolm McBratney

 

 

 

Rods, Chains and Scruples, more on the imperial measurement system…

After yesterday’s post (https://legallifestyle.wordpress.com/2016/09/23/a-legal-trip-back-in-time-care-of-the-land-titles-office/) and Greg Cambrell’s comments containing a list of imperial measures (thanks Greg!), I have had quite a few queries on imperial measurements.

Greg has kindly sent me a scan from the back of his school exercise book from the 1950s :

malcolm-mcbratney-legallifestyle-exercise-book-imperial-measures

Who knew there were so many types of measures and weights? I’d heard of inches, rods, roods and chains before, along with ounces and pounds, but I wonder how many of us knew there were 3 Scruples to a Dram and 8 Drams to an Ounce?

Of course the imperial system (to a metric mind like my own at least) seems as crazy as the English language must seem to a native speaker of the latin derived languages such as French, Spanish, Italian or others. Doing some further research, I have discovered this is also somewhat a hot topic in some circles.

By way of introduction, here is a history of measurement care of Wikipedia :

https://en.wikipedia.org/wiki/History_of_measurement

and Encyclopaedia Brittanica :

https://www.britannica.com/science/British-Imperial-System

henry-vii-malcolm-mcbratney-legallifestyle-weights-and-measures

and here is a fiery debate on imperial versus metric!

http://www.bwmaonline.com/Imperial%20Origins.htm

Lastly, whenever you are next faced with an imperial to metric conversion or vice versa, here is a handy calculator (noting you can usually just type the conversion you want into Google and it will do it for you on the spot) :

http://www.metric-conversions.org/converter.htm

So next time you are at the shops, have some fun and ask for 2 scruples of cumin, a flemish ell of fabric, 3 gills of lemonade and ask the real estate agent how many poles the block of land has? (he or she will then likely start looking at the fence posts).

Have fun!

Malcolm McBratney

A legal trip back in time care of the Land Titles Office…

 

I was cleaning out some boxes yesterday and stumbled across some old certificates of title for my previous house at 383 Gregory Terrace, Spring Hill. It got me thinking, while our online world certainly makes things quicker and more accessible these days, we certainly have lost something when you look at this lovely certificate of title, written in a lovely longhand cursive style and so full of history too.

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These old titles office documents are very rich in history. From this one, we can see than one Thomas Woodcock obtained the title to the land on which my old house stands in 1874 from Patrick Scanlan. An earlier certificate of title shows that Patrick Scanlan, who sold the house to Thomas Woodcock, was one of Brisbane’s early property developers, being granted in the 1860s what we would now basically call “the suburb of Spring Hill“, which he then set about subdividing.

Some googling then finds that Thomas Woodcock was a tailor in Queen Street :

 

 

 

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I founds this advertisement using Trove http://trove.nla.gov.au/newspaper/article/1365255 Trove from the National Library of Australia is a wonderful resource if you are doing historical research.

The Brisbane postal directory from 1874 also shows that Thomas Woodcock lived between William Street (now Kinross Street) and Park Street on Gregory Terrace in the days before house numbers :

malcolm-mcbratney-legallifestyle-blog-thomas-woodcock

The complete 1874 Postal Directory here (is your house there Brisbane residents?) :

http://www.chapelhill.homeip.net/FamilyHistory/Other/QueenslandHistory/The1876PostalDirectoryforBrisbaneTown.htm

So, what might have been a boring legal document, in fact is the starting point for an interesting and informative journey back in time. From something like this in 1874 (not the original house at 383 Gregory Terrace, but a likely similar 1860s/70s house still standing on Gregory Terrace) :

malcolm-mcbratney-legallifestyle-old-gregory-terrace-house

to the current house at 383 Gregory Terrace today (built in 1914) :

malcolm-mcbratney-legallifestyle-383-gregory-terrace-spring-hill

Happy historical hunting!

Malcolm McBratney

 

Is IP protection bad? Possum Magic, Khe Sahn and the Productivity Commission vs Intellectual Property

Australian TV show, Q&A, gave intellectual property a rare but brief time in the sun on Monday night.

Interestingly, it took one of our most right wing politicians, Jacqui Lambie and one of our hardest rockers, Jimmy Barnes, to lambast what I agree is a quite ludicrous proposal from Australia’s Productivity Commission.

malcolm-mcbratney-legallifestyle-blog-jimmy-barnes-possum-magic-jacqui-lambie-copyright-qa

Amongst other proposals in its draft report into Australia’s Intellectual Property Arrangements (http://www.pc.gov.au/inquiries/current/intellectual-property/draft), the Productivity Commission suggested that the term of copyright protection in Australia be reduced from the current term (in most cases) of the life of the author plus 70 years to a flat 15 years.

There are policy arguments either way and I won’t bore everyone with them now. You can read them in the report if you are finding it hard to fall asleep.

You won’t find me agreeing with Jacqui Lambie terribly often, but her Possum Magic (http://memfox.com/books/possum-magic/) argument (that one of Australia’s most loved books would now not be protected by copyright) was one of the best IP arguments I’ve heard in some time.

Similarly, I suspect Jimmy Barnes’ political views would usually differ from my own, but again, I can’t see how the Productivity Commission could seriously be suggesting that Khe Sahn should no longer be protected by copyright.

As an IP lawyer however, what I found most astounding however was that in its own report the Productivity Commission even notes that Australia is party to various international treaties and agreements that require us to adhere to various IP standards, including the term of protection and prevent us from doing so. For example in their own report the Productivity Commission says :

At section 4.1 “Although copyright law is implemented on a domestic basis, the minimum coverage and duration of protection has long been governed by international treaties. As noted in the previous chapter, the earliest multilateral copyright treaty, the Berne Convention, was signed in 1886.

And

At section 17.3 “Australia has a long history of multilateral cooperation on standards of IP protection.   Australia is a party to a number of international agreements that set common rules for the protection of IP:

• Early treaties, such as the Paris Convention for the Protection of Industrial Property 1883 and the Berne Convention for the Protection of Literary and Artistic Works 1886 represent initiatives to agree IP standards on a multilateral basis.

 

• TRIPS, establishes a minimum set of obligations on WTO members for the protection and enforcement of IP. Countries can provide higher levels of protection, but they cannot provide less without risking a dispute with another WTO member.

These proposals and many more of the other suggestions simply don’t take account of real world realities. If Australia followed this and other equally ludicrous proposals (don’t get me started on what they said about patents) we would be in breach of a treaty that has been in place since 1883 and the TRIPS agreement, both with significant adverse consequences for Australia and its innovators and creatives.

I do wonder how many hospital beds could have been funded out of the money spent on this quite pointless and also dangerous exercise. Intellectual property is not bad, it is a necessary legal right to encourage creativity and innovation. Australia cannot and should not resile from its international IP obligations.

If we have Jacqui Lambie and Jimmy Barnes agreeing on something, maybe the Productivity Commission and our government should listen.  Otherwise there will be no more possum magic and the last train out of Sydney will certainly be gone.

Malcolm McBratney

Nespresso and the Importance of Intellectual Property

As I sat down to a cup of coffee this morning and put a non-Nespresso pod into my legitimate, made under licence, Nespresso machine, I got thinking about the change we have seen in the Nespresso market over the last few years as the original Nespresso patents around the pods have expired.

malcolm-mcbratney-legallifestyle-blog-grinders-nespresso-pods

Nespresso patents – Nespresso pods are the only game in town

When I was first introduced to Nespresso quite some time ago, as Henry Ford would have said if he was a Nespresso consumer, you could buy any pods you wanted, as long as they were Nespresso.

Nestle, the creator and owner of Nespresso had for an IP lawyer such as myself, done what we IP lawyers love to see, they had as part of the innovation process (not after the fact!), surrounded the Nespresso product with IP protection in the form of patents, registered designs and trade marks, along with their automatic more limited copyright protection. Their first patent was filed way back in 1976 and it took until the 1990s for an international launch and in reality it wasn’t until  the 2000s and “Clooney Time” in 2006 that Nespresso really took off.

malcolm-mcbratney-legallifestyle-blog-george-clooney-nespresso

Nestle’s Nespresso IP rights, especially their patents, gave Nestle a monopoly on the machines and especially the pods, allowing Nestle to keep out competing coffee manufacturers wishing to sell non-Nestle, but Nespresso compatible pods. Nestle did not underestimate the power of the dark side, i.e. patents over the Nespresso pods and machines (I am pro-IP by the way, I just couldn’t resist a Star Wars play on words here).

I won’t repeat the Nespresso timeline here, but a short version is here – http://www.ecommerce-digest.com/nespresso-case-study.html and the offical version here – https://www.nestle-nespresso.com/about-us/our-history# .

Did the Nespresso IP portfolio make Nestle lazy in product innovation?

While I have not conducted a detailed empirical evidence based study, my impression is that while Nestle had these core patents in place and while it continued to innovate technically, the range of Nespresso pods available remained relatively stable and restricted to the core flavours, with the occasional “special” flavour. Why not? Nestle has a strong patent portfolio (which they enforced vigorously) and they were able to keep out competing pods for many years.

That didn’t stop us all buying Nespresso pods online or in store and we all readily parted with our cash to buy official Nespresso pods.

What happened after the core Nespresso patents started to expire?

Only in the last few years have we seen non-offical Nespresso pods come to market. When making my coffee this morning, I have a choice from Robert Timms, LOR or Grinders non-official Nespresso pods. Each of these I was able to buy at the local Coles supermarket for 50c a pod, rather than 68c-78c a pod for official Nespresso pods. I also didn’t have to jump online and wait or drive out of my way to find a Nespresso store.

In response to this, I have noticed, especially recently as I re-engaged with Nespresso after some time off, that Nestle has gone all out on various special flavours and promotions.  Right now and not co-incidently timed with the Rio Olympics, you can now buy a very flash Brazilian Nespresso pod for the bargain price of 93c a pod :

https://www.nespresso.com/au/en/order/capsules/cafezinho-do-brasil-limited-edition-coffee

Over recent years, other limited editions have arrived with increasing frequency in an attempt not just to innovate, but to differentiate from the generic competitors :

What are the lessons from the Nespresso and Intellectual Property story?

As I finish my Grinders Nespresso compatible espresso as I type this post, I am reflecting on the lessons from the Nespresso story. First and foremost, it is an excellent real world example of the importance and value of intellectual property. Imagine if Nestle had not put in place IP protection around the Nespresso concept? With the unauthorised competition, it is unlikely Nestle would have continued to invest in a product that was in fact unprofitable in its early days.

Instead, Nestle enjoyed in return for its investment in innovation various monopoly periods around the world and became the success it is today. Now that the core patents have expired, consumers can now choose to buy offical Nespresso pods online or in Nespresso stores or those made by competitors and sold at a cheaper price and more conveniently in supermarkets and elsewhere.

Does this spell the end of profitability for Nespresso? Certainly not. Nespresso is now firmly established and while I would expect some decline in profit from the emergence of competing pods, Nestle continues to innovate and continues to vigourously protect and enforce its IP.

For me, I’ll keep buying the cheaper and more convenient competing products. I do however seem to have accumulated 3 legitimate “made under licence” Nespresso machines, so don’t forget a royalty got paid back to Nespresso on each of those by the manufacturers too.  I must say some of the non-authorised pods do get stuck in the machine…

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Do you still by real Nespresso pods or buy the non-authorised competitor products? Please comment below and please do follow my blog itself if it is of interest.

Malcolm McBratney