Stay on top of Intellectual Property
Whether you’re just starting out or launching a new product, there are a wealth of intellectual property issues to consider in the world of distilling. Here, Ciara Cullen, Ben Mark and Sarah Mountain outline those do’s and don’ts, the changing landscape and how to thrive in 2021 and beyond.
1. What are the branding dos and don'ts when launching a distillery?
DO: Consider what intellectual property rights (IPR) you own or might create and how those IPR might need to be protected.
Companies often create more IP than they expect. The main categories are:
- Trade marks: A trade mark can consist of any sign that can be represented clearly and precisely. Whilst packaging shapes, colours and even sounds are capable of protection as trade marks, they are typically comprised of signs and/or symbols. The core function of a trade mark is to allow consumers to identify the origin of a product or service and to differentiate it from those of third parties. Items commonly protected by trade marks include company and product names, logos, product packaging (including, for example, the shape of spirit bottles), and slogans.
Trade marks are useful as they allow their owner to prevent competitors from using the same or similar marks which might confuse consumers or suggest an association between the two businesses.
Although trade marks can be registered or unregistered, it is desirable to obtain registration as this provides certainty over when the right came into existence and avoids disputes regarding who began using an unregistered right first. It is also desirable to obtain trade mark protection at an early stage, to avoid a situation where time and expense has been invested in a brand, only for a third party to later dispute its use or to apply for registration itself.
- Copyright: Copyright arises automatically and protects traditionally 'creative' works. Copyright will therefore usually exist in company logos and in any artwork present on product packaging or in marketing materials. Copyright also protects literary work (i.e. text), as long as it meets the test of being the author's own intellectual creation. Marketing slogans, website content and even product descriptions may therefore be capable of attracting copyright protection.
Copyright does not need to be registered, and generally lasts for 70 years from the end of the year in which its creator dies. The owner can use their copyright to prevent any unauthorised use or copying of the works.
- Design rights: Design rights protect the appearance of more functional articles, provided they are novel. This could apply, for example, to the various parts of a spirit bottle, such as its overall shape, or just the shape of a particular feature, such as the neck. Certain design rights are also capable of protecting two dimensional products such as patterns and layouts.
Design rights can be registered or unregistered, and allow their owners to prevent the manufacture and/or sale of lookalike products.
- Patents: these generally protect technical "inventions", for example a new technology which allows a distillery to make products faster or using an improved process.
The registration of a patent can be a long and expensive process, but once granted, patents provide inventors with a 20 year monopoly.
It is therefore worth any new business considering what IP it may own or create and how best to protect it. This will also be helpful if/when that business wants to seek further investment or to fundraise, as prospective investors will take comfort in knowing that the company's IP is protected.
DO: make sure you have appropriate contractual arrangements in place to ensure that any IP created for the company (in particular, by third party contractors) belongs to it, so that you can use it and deal with it as you wish. Again prospective investors will be keen to see that these types of arrangements are in place, to avoid future disputes regarding ownership.
DO: Make sure, when developing your new brand, that its use would not infringe someone else's IPR. The main things to check, before a brand is selected, are that the proposed company name and any logo are clear and not in use by a third party, particularly one that operates in the same sector. This will help to avoid disputes and wasted costs on brands that subsequently need to be abandoned.
Equally, when producing any marketing materials, do make sure that you have appropriate permissions to use all content (e.g. stock photos, which can often be licensed online for the payment of a small fee).
DON'T: share information about your company and/or its IPR with third parties, unless that information is publicly available or you have appropriate documentation in place to protect confidentiality (e.g. a Non-Disclosure Agreement).
DON'T: assume that because materials are available online, they are free to use or copy! Be careful where you take your inspiration from.
2. What about launching new product lines? What are the key things that distilleries should be aware of?
When new trends take off, it can (understandably) be tempting to develop and launch new products as quickly as possible, to satisfy and capitalise on demand. When it comes to naming and promoting a new product, there are however various pitfalls that it can be easy to fall into. The following are most relevant to distilleries:
- Naming: When deciding on the all-important name of a product, care must be taken to ensure that it does not sound too similar to goods that are already protected. Only recently, an alcohol-free sparkling wine dubbed 'Nosecco' was required to undergo a rebrand as its name was deemed too similar to 'Prosecco', which is a protected designation of origin product. 'Low-alcohol' or 'alcohol-free' claims must also comply with Regulation (EU) No 1169/2011.
- Health claims: When preparing marketing materials and advertising their products, distilleries should be particularly wary of making health related claims, which are heavily regulated under the CAP Code. Under section 15.6, claims that either state or imply that a person's health could be affected by not consuming a drink are prohibited, as are claims which state or imply that a drink prevents, treats or cures human disease. The Advertising Standards Authority (ASA) has published detailed guidance on this, a selection of which can be viewed here and here.
- Green claims: Care should also be taken when making 'green' claims about products. The ASA released useful guidance in 2020, which highlighted the importance of being able to properly substantiate any sustainability claims. The Competition and Markets Authority (CMA) is taking a similarly robust stance, announcing that it will investigate descriptions and labels used to promote products and services claiming to be ‘eco-friendly’, and whether they could mislead consumers.
- Packaging: Under European law, no alcoholic beverage containing more than 1.2 % ABV may make health claims in the EU. Whilst EU law ceased to apply to the UK, following the expiry of the Brexit transition period, on 1 January 2021, this continues to be a relevant restriction for distilleries wishing to sell and promote their products in the Eurozone.
- Allergens: With any consumable products, it is essential that all possible allergens are identified, appropriately verified and labelled.
If distilleries are uncertain or have any questions regarding the applicable regulatory landscape, we would recommend that they seek pre-product launch legal advice.
3. Has the IP landscape changed in recent years and if so, how has this impacted brands?
One of the most significant changes to the IP landscape in recent years has been the broadening of the scope of copyright protection, through a string of EU cases. You can find some of our commentary on these cases here and here, but essentially their effect is that even more functional (as opposed to artistic) designs can now benefit from copyright protection.
The threshold for a 'work' to benefit from copyright protection is now relatively low, so it is worth being especially cautious when copying anything from the internet, even if it is not obviously an artistic work. For example, Ts & Cs may appear purely functional but may still constitute literary works protected by copyright. Similarly, the design of a functional item like a spirit bottle may now be protected by copyright as well as by design rights. This is significant because copyright protection lasts for much longer.
Also and although not strictly IP-related, many businesses will be aware of the General Data Protection Regulation or 'GDPR', which came into force in April 2016. Any business that processes customer data (including distilleries) should ensure that they understand and comply with the requirements of the GDPR, to avoid the sanctions and significant financial penalties that data breaches can carry.
4. 2020 was undeniably a very challenging year. What advice would you give distilleries on how best to move forwards?
2020 was challenging across the board but for businesses operating within, or servicing, the hospitality sector, the impact of the COVID-19 pandemic was felt particularly acutely. When bars, restaurants and pubs were forced to close for the first-time, in March 2020, many distilleries saw a significant percentage of their business dry up overnight. Whilst various relief packages were offered and emergency legislation passed, second and third lockdowns at traditionally busy times of the year dealt a heavy blow to the already strained sector.
Whilst certain factors like consumer confidence and the progress of the COVID-19 vaccination scheme are outside the control of businesses, innovation and versatility will be key components of future success. Health and wellbeing has been a huge trend in recent years and the desire to obtain and maintain a healthy mind and body has only been exacerbated by the pandemic. For the food and drink sector, this has resulted in many alcohol brands creating or adding to their low and no-alcohol offerings. A recent poll, commissioned by The Portman Group (the social responsibility and regulatory body for alcohol in the UK), found that UK consumers are embracing no and low products like never before. Of those surveyed, 62.5% reported having sampled a low or no product and a quarter regard themselves as 'semi-regular consumers'.
Year on year, consumers are also becoming increasingly ethically and environmentally conscious. To satisfy the growing demand for products that are made in a responsible and sustainable way, distilleries should consider who and where they source their ingredients, services and labour from. Cross-sector collaborations between likeminded businesses are also on the increase and distilleries should give careful thought to the image and message that both they, and those that they work with, present.
Recent events have also changed (possibly forever) the ways in which many businesses operate. For the food and drink sector, this has meant a huge surge in home delivery services (independent and through platforms like Deliveroo). In the current climate, distilleries should consider the channels through which their products are sold and any direct to customer routes that are available.
In the post COVID-19 world, greater attention is also being paid to contractual provisions that were previously thought of as largely boilerplate and innocuous. Where new contractual arrangements are entered into or when new agreements are negotiated with key suppliers and customers, it will be important, at the outset, for the parties to consider the risk that some or all of them may be unable to perform their obligations, in the event of further lockdowns or other force majeure events. Ensuring that this risk is properly and fairly apportioned and that appropriate contingency plans are in place will help to ensure (as much as is possible) the continuance of both the contract and the parties' ability to do business with each other.
This article first appeared in Distillers Journal Summer 2021.