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. 

Ways Celebrities Capitalize on Brands

Celebrities typically become well-known for their skills. For instance, many actors such as Julia Roberts, Al Pacino, Leonardo DiCaprio, and Meryl Streep are famous for their abilities to play diversified roles. Singers such as Beyoncé, Taylor Swift, and Justin Timberlake sell out concerts because they give great performances and many people like their songs. Tom Brady, LeBron James, Serena Williams, and Tiger Woods garner attention because they are among the best in their sports. As long as their skills remain strong and in demand, they continue to capitalize on their brands.

While honing a skill and performing at high levels protects celebrities and their brands, making them more valuable, publicity helps to maintain that value and keep celebrities in demand. The more celebrities are exposed, the more they are remembered and the more the public associates with them. While newer talent and age may play a factor in how long or how well celebrities can maintain their brand value, celebrities often use other methods than the skills that made them famous in the first place to keep their brand valuable.

For instance, many celebrities launch clothing lines that help to keep their brand thriving. Such lines include Fabletics by Kate Hudson, Ivy Park by Beyonce, SJP by Sarah Jessica Parker, Goop Label by Gwyneth Paltrow, Paper Crown by Lauren Conrad, and many others. Some celebrities launch their own perfumes. Justin Bieber, Jennifer Lopez, Britney Spears, Jennifer Aniston, Sean Combs, Derek Jeter, and David Beckham are just a few who market their own scents. The number of type of products celebrities launch is large. Other items may include purses, handbags, makeup lines, and so much more. In addition to their own lines, celebrities endorse a plethora of products including athletic gear, credit cards, medication, technology, and endless other products.

Although endorsing and launching products is another big avenue that can keep a brand alive, some celebrities also tap into new territory to keep their image public. For instance, many famous singers and athletes have dabbled with acting. They include Lady Gaga, Tim McGraw, Brett Favre, Christina Aguilera, Shaun White, and numerous others. Partnering with charities is also another way celebrities can benefit.

As you can see, developing, maintaining, and enhancing a celebrity brand can take a tremendous amount of time, work, experience, practice, and even stepping out of a comfort zone. However, the more a celebrity remains in the spotlight, the more important that brand becomes.

The Licensing Executives Society: A Voice for the IP Community

Founded in 1965, the Licensing Executives Society (LES) is an organization that supports, represents, and connects nearly 3,000 IP, business, and technology licensing professionals. LES provides members with best practices, education, mentoring, networking, and participation. Membership benefits are many and include chapter events, access to the LES directory, industry connections, social media channels, industry publications, certified licensing professional (CLP) certification, CLP preparation courses, free education, career center advantages, and registration discounts.

At Pellegrino & Associates, we are a big proponent of this organization and all that it offers the IP industry. This is why we are so actively involved. Our company president Mike Pellegrino is currently treasurer of LES. He is also the chair of the patent valuation standards committee established by LES, whose charter is to pursue American National Standards Institute (ANSI)-accepted standards for the valuation of patents in a variety of contexts including financial reporting, capital formation, economic damages calculations, and others. Mike is also a member of LES’s public policy committee, seeking to help set standards for intellectual property-focused regulatory matters with the SEC and others. He is also a member of LES’s standards committee for IP use in the boardroom.

While our expertise within the organization is on IP valuation, LES strives to find standards for many IP areas. These areas include the following: ISO/TC 279 innovation management, IP protection in the supply chain, FRAND licensing, IP licensing, IP management for startups, intangible assets in the boardroom, IP valuation, and IP brokerage.

Working together with IP professionals around the world, LES represents one voice for the IP management community. It supports a variety of organizations including corporations, law firms, consultant/service providers, universities/government, entrepreneurs, and students in various industries such as life sciences, high technology, consumer products, and others. We are proud to be a part of and to support this prestigious organization. To learn more, visit the LES website at https://www.lesusacanada.org/. Also, be sure to check out the Events section to learn about the annual LES meeting.

Trademarked Scents a Rarity

Trademarking a scent is an uncommon event. This is because scents usually serve as a particular function, such as perfumes or air fresheners, where their purpose is to make something smell a certain way. Therefore, scents are typically patented rather than trademarked. While patents often protect something that serves a function, trademarks typically help consumers associate certain products with a brand. Trademarks that are most familiar include logos, symbols, and slogans. However, scents, sounds, and colors may also serve as trademarks, but trying to prove that they work as trademarks is a hard sell.

To trademark a scent, the scent must be distinctive, reminding consumers of a particular product. However, this is a rare occasion. In fact, only 13 active scent trademark registrations exist today. Although distinctive smells surround us daily, we do not typically think of a particular company or product to attach that smell to. For instance, while McDonald’s French fries or even a Starbucks coffee may have a particular smell, these smells are not distinctive enough to separate them from other fast food French Fries or coffee. For instance, when we smell greasy fries, we do not automatically think of McDonald’s. We typically just associate that smell with French fries in general.

Therefore, obtaining a trademark for a scent is a remarkable feat. However, in May of this year, Hasboro joined an elite group of scent trademark owners. The USPTO determined that the Play-Doh scent is distinctive enough for consumers to associate it with the product. Given that Hasboro has sold more than 3 billion cans of Play-Doh since 1956 and sells 100 million cans annually, it is likely that millions of people have become familiar with the scent. This means that the scent is unique enough that when consumers smell it, it reminds them of Play-Doh. It means that the scent is like no other. In comparison to other companies that have been awarded trademarks for scents, Hasboro’s Play-Doh scent was likely incidental based on its ingredients. This means that the company likely did not purposefully create a scent for its products like Verizon did to help customers associate its scent with Verizon stores. Rather, the mixed ingredients just had a particular scent that worked to Hasboro’s advantage. Filing for a trademark for that scent was a smart business move for Hasboro.

Could Blockchain Technology Be the Game Changer in Combatting Cybercrime?

Cybercrime poses a huge threat, costing the world an estimated $600 billion in 2017, up from $450+ billion in 2016. Among cybercrime is the threat of identity theft. In 2017, 16.7 million U.S. citizens were victims of identity theft at a $16.8 billion cost, up from 15.4 million victims at a $16.2 billion cost in 2016. These statistics indicate that cybercrime is a serious problem that continues to climb at a rapid rate.

Cybercrime can happen in a variety of ways including sending unsolicited emails, illegally downloading music, stealing personal bank account information, creating computer viruses, and so much more. With all of these options, it’s no wonder cybercrime is so high! Furthermore, technology changes so rapidly that businesses and individuals often use outdated technology. Using outdated technology presents a host of opportunities for cybercrime to occur.

As cybercrime continues to create challenges, companies continue to improve technology. A relatively new concept called blockchains is on the horizon, which may be the game changer in slowing down cybercrime. Blockchains are digital registers that permanently and securely store transactions. This technology uses a hierarchical method to save data in blocks, with each block pointing to a previous block with a timestamp of each transaction. This method makes it easy to trace and audit transactions. It is also a secure way of tracking transactions as data saved in blocks cannot be modified or breached. In addition, the decentralization of blockchains makes it hard for cybercrime to occur.

While the technology is in its infant stages, interest continues to increase. According to Statista, the blockchain technology market will rise from an estimated $210 million in 2016 to an estimated $2.3 billion by 2021. An increase in blockchain patent filings corroborates a significant increase in the field as blockchain patent applications more than doubled in 2017 with more than 1200 applications compared to 594 in 2016. Some of the biggest companies in the world are conducting research and filing patent applications, including Sony, Google, Microsoft, Bank of America, Walmart, MasterCard, IBM, and many others. Blockchains can support a variety of industries that conduct many transactions such as finance, real estate, healthcare, music, insurance, and many others, as evidenced by the various types of companies filing for patent protection.

As blockchain technology becomes more mainstream and more companies continue to file patent protection, potential exists for combatting cybercrime on a higher level.