Trade Secrets Bring Great Value to the Food & Beverage Industry

Intellectual property brings many benefits to its owners, with each type of IP bringing different benefits. For instance, patents protect utility or functional designs as well as offer superior rights when infringement occurs. Trademarks help create brand awareness and demand. Copyrights protect works of authorship, giving authors exclusive rights for a fixed period. Trade secrets protect intangible assets, including any type of design, information, or other knowledge. However, trade secrets do not necessarily afford a company protection via a number of years, like patents. Nor do they offer specific monetary results in the event of an infringement, like copyrights. However, trade secrets can provide some of the biggest value to a company, as long as the trade secrets remain secret!

As already mentioned, each type of IP brings with it benefits and disadvantages when compared with one another. For trade secrets specifically, disadvantages include no federal protection, possible key person discounts, no prevention from someone deriving the same or similar design for an invention, and diligent administration and enforcement of non-compete and non-disclosure agreements, markings of documents, and more. However, trade secrets are easy and low cost to create, can protect more things without the kind of stipulations that copyrights and patents have, and do not require full disclosure like patents do. Therefore, when all of the elements are in place, trade secrets can be the most valuable assets a company owns. This is especially true for food & beverage companies.

The following list includes five of the most famous trade secrets in the food & beverage industry:

1. Coca-Cola: Coca-Cola is one of the most well-known trade secrets around the world. The company’s decision to keep the Coca-Cola recipe a trade secret rather than patent the concoction has positioned the company among the most valuable brands in the world. In fact, Forbes listed Coca-Cola in 2016 as the fourth most valuable brand. At that time, Forbes listed the brand worth at $56 billion. In 2018, the company commanded 43.3% of the soft drink industry.
2. Krispy Kreme: Krispy Kreme sets itself apart from other donut companies with its “fresh” donuts. While the company has kept its donut recipe under wraps for more than 80 years, it is not the actual recipe that makes it stand out, but the process in which it makes its donuts. The process that Krispy Kreme uses to make its donuts helps the company produce donuts on an assembly that allows for quick sale and gives the donuts a fresh taste. With more than 10 billion donuts made annually in the United States, Krispy Kreme accounts for 20 million of them. In 2018, Krispy Kreme donut sales reached $805 million in the United States.
3. KFC: Kentucky Fried Chicken’s 11 herbs and spices recipe has been the envy of restaurants worldwide for nearly 80 years. Until recently only one hard copy of the original recipe existed. Earlier this year, KFC took extra measures to protect its original recipe by storing a triple-encrypted copy in a nuclear bunker underground in Sweden. In 2018, the KFC brand generated $2.64 billion for its parent company, YUM! brands.
4. Twinkies: One theory for keeping a recipe a secret is that consumers may stop eating it if they fear or do not understand the ingredients, even if they are harmless. This is likely the case with Twinkies as some of the ingredients contain chemical names. As such, revealing the actual recipe could cost Hostess, the maker of Twinkies, a fortune. This is because Twinkies are among the company’s largest sellers. In a month’s time, within the United States alone, 31.44 million individual servings of Twinkies are consumed. Twinkies are among the top snack cakes within the United States, coming in fourth place (behind Hostess Cupcakes in second place) with 28.13 million people consuming them in 2018.
5. Thomas’ English Muffins: The English muffin market size reaches at least $500 million annually. Hands down, Thomas’ English Muffins is the most famous brand of muffins within the United States, selling more than one billion annually. What sets the muffins apart from other brands is the nooks and crannies that each muffin offers. The nooks and crannies make it easier for the muffins to soak up butter, jam, and other toppings. For more than 100 years, the brand has protected its secret. Therefore, no matter how many other brands try to emulate the recipe, they just cannot slice it.

As the bullets indicate, trade secrets hold extremely high value for companies when they are protected the right way. In fact, some companies can attribute their entire success to their trade secrets.

Taylor Swift’s IP Genius

Musicians are quite familiar with intellectual property–specifically, copyrights. Without it, they would struggle making a career from their music abilities. Copyrights protect their music (lyrics and audio recordings) so that others cannot steal or imitate it. This protection allows artists the ability to make money whenever their songs are played. However, the advent and popularity of streaming media makes it difficult for artists to control how and when people listen to music. Today, people have easy access to music, making it effortless to obtain it without paying for it.

While musicians rely heavily on copyright protection, the most successful musicians find many other ways to make money. Concert tours, endorsements, merchandise sales, and many other avenues contribute to a musician’s monetary success. Taylor Swift is just one of the musicians who has found various avenues to enhance her worth. One of the most creative ways she has managed to gain monetary growth is via her intellectual property savviness.

While copyrights are often a natural and given part of a musician’s success, Swift frequently utilizes trademarks to her advantage. Not only has she trademarked her name, but she has trademarked album titles (e.g., Reputation), phrases from her song lyrics (e.g., “This Sick Beat“), contest terms (e.g., SwiftStakes), and even the name of her pets (e.g., Meredith & Olivia Swift). Most recently, she became the proud owner of a third cat named Benjamin Button and has made the move to trademark “Meredith, Olivia & Benjamin Swift.”

Already estimated at a net worth of more than $320 million, Swift’s business tactics and concentration on intellectual property continues to garner new avenues for increasing her value. While her pets have nothing to do with her musical talent, her popularity gives her the ability to capitalize on many areas of her life.

Although unconventional in her moves to trademark song lyrics, pet names, and contest terms, they are smart business moves. Her trademarks will give her more net worth, but more importantly, they give her more control over her brand. That alone gives her great power. Who knows–she may even become one of the music industry’s biggest trendsetters in the trademark arena.

Playing Music Does Not Come Free: A Copyright Condition

Imagine going to a fitness class without music. How motivated would you be? How fun would a local bar be without a band or DJ to dance the night away? When visiting a local bar, restaurant, clothing store, fitness center, grocery, coffee shop, and other venues, we often hear music playing, even if it is subconscious. Imagine what life would be like without music? If we did not realize it before, we would feel like something was missing if there wasn’t background music in places where we just expect it to be playing. However, playing music doesn’t come free.

In many cases, listening to music is as simple as turning on a radio or television. However, every time you hear music, someone is paying to play that music. Whether it is a broadcaster or a venue, it, in most cases, must pay a royalty to the copyright owner if the music is protected by a copyright. This is because when a broadcaster or a venue plays copyrighted music, that particular business is using someone else’s intellectual property. Therefore, it must pay the people who created the music a fee. Typically, broadcasters and venues pay a blanket licensing fee that covers all music activities, such as live bands, karaoke, DJs, and more.

If a broadcaster or venue does not pay the proper licensing fees, then it may be infringing on the copyrights associated with specific songs. Musicians copyright their music to protect their work. Otherwise, anyone could take a song and claim it as his own and make money from it. Essentially, playing music in a public setting without proper licensing is the same as stealing. The penalty for such a crime can range from $750 to as much as $150,000, for each instance music is played without a license!

As you can see, the penalty for playing music without a proper license could cause a venue to go out of business, let alone deal with the troubles associated with a lawsuit. Therefore, it would be worth it for businesses to pay the licensing fee. Three organizations implement these licenses. They are called performing rights organizations (PROs): ASCAP, BMI, and SESAC. They do not hesitate to fine even the smallest venues. In fact, they file hundreds of lawsuits annually. Therefore, it is in the best interest for businesses to properly license music to benefit both themselves and the creators.

Music is a huge draw for a variety of reasons and finds its home in a plethora of settings. For most people, paying for music is likely a small sacrifice compared to the benefits.

Tiger Woods’ Masters Win Increases Brand Value

For years, sports commentators, fans, and others have been convinced that Tiger Woods should retire. His body seems to be falling apart from numerous injuries, with the most serious involving four back surgeries within four years. These injuries have caused him to miss many tournaments over the years and have affected his ability to perform at the professional level. In fact, it has been eleven years since he won a major championship. Along with his injury problems, Woods’ personal life has come under public scrutiny, namely a sex scandal and DUI charges. As a result, Woods’ career has not been a walk in the park.

At the young age of 20, he turned pro and was the youngest professional golfer to win the Masters in 1997. To date, Tiger Woods has won 15 major tournament titles, 81 PGA Tour wins, and 41 European tour wins, with five Masters wins. Woods is arguably the most famous professional golfer in the world with a net worth of $800 million and an annual salary of $50-60 million, topping at $1.5 billion since 1996, making him the most lucrative golfer in history. His accolades are numerous, including PGA Player of the year 11 times, Sports Illustrated’s Sportsman of the year twice, and AP Male Athlete of the year four times.

While Woods became famous for his golfing abilities, like many popular sports professionals, he actually makes the majority of his earnings from endorsements. His earnings for playing golf total $118 million since 1996 at 7.6% of his total career revenue. His earnings from endorsements are roughly 92.4% of his total career revenue at $1.4 billion. His recent win at the Masters makes him a hot target again for companies, especially Nike, which has stuck with him through everything. In fact, just minutes after winning the Masters, Nike broadcasted a new ad.

Woods’ particular career demands a relatively clean slate in the public eye and the ability to perform his job. If he underperforms and disappoints his fans with his personal choices, he risks losing his career as well as sponsors and fans, not to mention the value of his brand. Woods’ personal mistakes have already cost him an estimated $50 million in endorsements. However, in the sports world, perseverance and winning make a player more marketable and gives the public the incentive to become more forgiving.

Woods is a smart business man who doesn’t give up when the going gets tough. His recent Masters win benefited several companies that Woods endorses. For instance, during the Masters, Nike experienced $22.5 million in exposure, Monster Energy experienced $960,000, and Bridgestone experienced $134.000. And these are only a few of the companies he endorses. In addition to his endorsements, he received recognition from President Donald Trump with the Presidential Medal of Freedom award. Not to mention, Woods is an entrepreneur. His TGR company encompasses his many businesses including a restaurant, an events company that organizes PGA TOUR tournaments, TGR Design, which designs golf courses, and the Tiger Woods Foundation. Therefore, it is likely that Woods will be just fine for a long time to come. His Masters win was just the icing on the cake that will gain him even more attention and opportunities.

Difficulties of Trademarking a Common Term

Trademarks have a specific purpose. They help people identify with a particular product, service, company, or organization. Five types of trademarks exist.

  1. Generic marks: Trademarks to which one attempts to assign secondary meaning, though such attempts will always fail because the marks describe an entire group of products (e.g., aspirin). 
  2. Descriptive marks: Trademarks that take on a secondary meaning (e.g., McDonald’s).
  3. Suggestive marks: Trademarks that suggest a quality or characteristic of the good or service that it represents (e.g., Florida’s Natural branded orange juice).  
  4. Arbitrary marks: Trademarks that tend to describe goods or services that otherwise have no relation (e.g., Apple). These trademarks are generally very strong.
  5. Fanciful marks: Trademarks that tend to describe goods or services and likely have no other precedent in the market (e.g., Allegra). These are typically the strongest trademarks.

As mentioned, typically the strongest trademarks are unique names or words. However, occasionally, a common word can sometimes be trademarked as long as people identify it with a secondary meaning other than its original meaning or the word is used to describe a service or good. For instance, consider Apple. While the original meaning represents the fruit, it has taken on a secondary meaning as representation of the technology company Apple. In fact, when researching the term via Google, the first result that appears is the website for the company Apple.

While Apple has successfully coined a common term with a secondary meaning, this is no easy task. For instance, last year, the Boy Scouts of America (BSA)announced its plans to change its program name from Boy Scouts to Scouts BSA. The change would reflect its modification from an all-boys program to the inclusion of girls into the program. However, the Girl Scouts of the United States of America (GSUSA) objected to the change and sued BSA for trademark infringement. 

Although the two organizations have coexisted for decades without trademark issues, the GSUSA argues that the suggested name change creates confusion. Currently, the terms “girl” and “scouts” used together take on a specific meaning that associates directly with the GSUSA organization. GSUSA contends that BSA cannot have exclusive rights to common terms such as “scouting” and “scouts” in relation to girls. 

When the Boy Scouts was an all-inclusive boys program, there was no question as to whom the organization targeted. However, since the program now includes all genders, it is likely the organization will have to occasionally use the term “girls” and “scouts” to recruit or describe particular aspects of its program. Therefore, it may inadvertently infringe on the GSUSA trademark. In fact, some people have already mistakenly signed up their daughters to the girls’ programs in Boy Scouts, and others believed the two organizations merged.

The BSA argues that it has the rights to use “scouts” when referring to programs associated with boys and girls, and not girls exclusively. It further argues that the GSUSA only has rights to “scouts” when referring to girls.

As you can see, trademarking a common term can be complicated and difficult to implement. It will be interesting to see how this battle is resolved.

2018 Highlights

Each year at our firm turns out to be better than the year before, and 2018 was no exception! We enjoyed a remarkable year filled with new projects, new adventures, new and repeat clients, and a host of other events that kept our team busy.  

Our projects last year covered a number of topics, such as the following: analytics software, protein ice cream, additive manufacturing technologies, LED lighting technologies, thermal warming devices, scuba diving equipment, chemical looping gasification technology, and antimicrobial additives for pet food, among others. We enjoy the variety of projects we receive every year. These projects teach us about emerging technologies within different industries, and each project brings unique challenges.

In addition to our projects, throughout the year we attended a variety of conferences and were invited by several organizations for speaking engagements, such as the LES Annual Conference, IAM Patent Licensing Event, LES board meetings, IP 100 board meeting, ABA-IPL Spring Summit, and the IP Awareness Summit.

Projects, speaking engagements, and conferences take us to many places each year. In 2018, we traveled throughout the country to the following places: Phoenix, AZ; Philadelphia, PA; San Francisco, CA; Washington, DC; New York City, NY; Palo Alto, CA; San Diego, CA; and Boston, MA.

Outside of our projects and speaking engagements, was the publication of Mike’s article “Mike Pellegrino Recommends Sometimes Ignoring Expert Advice” in the Indianapolis Business Journal. Another exciting development was a $112 million jury verdict a client won. The jury awarded the damages based on our damages opinion, virtually to the dollar. To learn more about the case, click here.

While we work hard, we also find the importance in taking time out to regroup, collaborate, and enjoy the companionship of our team. This past year, we enjoyed some friendly competition bowling at a local bowling alley. We also checked out a new concept of golf, which was Topgolf in Fishers, IN. If you haven’t tried it, look for one near you and give it a try. It’s a great time! Our team also enjoyed caving at Indiana Caverns. But our favorite event of the year was attending our coworker Tejas’ beautiful wedding in Playa del Carmen. We were honored to share this special event together as a team.

As you can see, we had a productive and busy year. We look forward to all the activity ahead this year with new projects, conferences, speaking engagements, company outings, and so much more. We appreciate all of our clients and look forward to working with new and repeat clients. We love what we do. 

The Wizard of OZ Turns 80, Still Valuable

“Classic” status in the movie industry is a large feat as few movies make the list. But one movie in particular stands out. Researchers in Italy dubbed The Wizard of Oz as the most influential movie of all time for inspiring the film industry and for the number of times the film industry references the movie. Not only is the movie influential, but many people consider it among the greatest and the most watched movie of all time. The Wizard of Oz was released in 1939 at a budget of more than $2 million, which was excessive at the time. Ironically, the movie was a box office failure and did not make its money back for nearly 20 years. In 1956, the film reached the television audience, making it a huge success.

The actual worth of the film is hard to say today. However, box office numbers indicate the film is worth approximately $34 million, while DVD and Blu-Ray sales reach well over $100 million. Fathom Events rereleased the movie in theaters in January of this year, making more than $1 million in one day. The amount of revenue generated from merchandise is unknown, but is likely a relatively high number. The value of clothes and items from the actual 1939 film are worth millions alone.

This year, the film turns 80 years old. With its colorful characters, fantastical scenery, and symbolic storyline, the movie continues to capture an audience. While the movie likely does not bring the revenue that it did in the 1950s and at its peak, it still has worth. The fact that it is still referenced and still viewed keeps it alive. After all, The Wizard of Oz inspires themed parties and Halloween costumes to this day. It is also not unusual to find a stage production of The Wizard of Oz nearby. In addition, the film has influenced a variety of spinoffs, sequels, and reinterpretations including television shows and other films such as Disney’s Oz the Great and Powerful, along with numerous books. Enthusiasts can readily find a plethora of merchandise including clothes, figurines, posters, and even the film itself. 

Existing more than eight decades and still ranking as one of the most significant movies of all time, The Wizard of Oz will likely have a place in our lives forever. Its whimsical, yet symbolic storyline teaches life lessons in a fun and thrilling way. To many admirers, this alone makes the movie worth more than any revenue it generates.