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All the IP in the Food World

Issued: February 22 2018

Trademark infringement in Taiwan will be subject to civil and/or criminal liabilities under the Trademark Act. “Due to the nature of public prosecution of criminal liabilities, the police, Customs or other judicial authorities usually will initiate criminal proceedings even if the infringed trademark owners do not file criminal complaints. The police usually will launch raid and seizure actions under search warrants and then transfer the case to courts for further investigation and trial,” says Ruey-Sen Tsai, a partner at Lee and Li in Taipei. “Since criminal actions are more deterrent and efficient, almost all trademark owners, including those in the food and beverage sector in Taiwan will choose them.”


In the past, dining out only happened on special occasions because of costs, and the number of restaurants was limited. However, due to business and lifestyle changes, F&B is now everywhere in forms of restaurants, convenience stores and food trucks or stalls, says Say Sujintaya, a partner and regional chair of the IP practice at Baker McKenzie in Bangkok. “Dining out is popular and has become a part of the modern lifestyle, particularly in big cities such as Bangkok, Pattaya, Chiang Mai and Phuket.”


Since competition is fierce, F&B companies are trying to make their products eye-catching and are trying to create customer loyalty. Meanwhile, as those products become popular, infringement rises. “It may range from the production and sale of fakes to copycat or look-alike restaurants. Thus, in addition to the provisions under the Food Act, the Trademark Act might be brought to bear against counterfeit/ imitated brands/signage, the Copyright Act to stop label piracy, and the Patent Act against product packaging (as the case may be) which have imprisonment and/or fine penalties,” Sujintaya says. “Thai authorities tend to press all applicable charges against infringers and raise public awareness of infringement. This is because fake food threatens consumers’ health and safety.”


On April 2016, the amendments to the Trademark Act, which included, among others, the protection of packaging and wrapping, were announced in the Royal Gazette and became effective July 2016. Accordingly, the act prohibits the representation of forged or imitated trademarks on the covering or packaging of goods with the intention of causing the public to believe that they are goods, including F&B, of another person. In addition, it prohibits any person from using packaging that displays another person’s trademark for their own goods or a third party’s goods to make the public believe that they are the goods of the registered trademark owner, Sujintaya says. “This technically bars the refilling of packaging with other products, meaning that refilling of genuine F&B packaging with counterfeit is considered infringement.”



Epicentre


F&B infringement is not severe in Taiwan, Tsai says. “Once it is found, not only will the police or other judicial authorities launch criminal actions under the Trademark Act, but other authorities in charge of F&B protection will also investigate and impose the fines or take measures against the manufacturing or sale of such.”


While look-alike restaurants do exist in Thailand, particularly in the flea markets in rural areas, Thai authorities take it very seriously. “Authorities including the Food and Drug Administration, the Office of the Consumer Protection Board, the police, and the Department of Special Investigation, will identify the sources of fake food and periodically go after any person engaged in the production, importation, and/or sale of such,” says Chansin Tangburanakij, a partner at Baker McKenzie in Bangkok. “Products commonly susceptible to infringement include fish sauce, soy sauce, oyster sauce, food seasonings, coffee and vinegar.”


Based on the initiative of the FDA and the police in October 2016, authorities became aware of the production of unqualified food in Pathum Thani province and conducted a raid. The raid yielded 672 gallons of 4.5-liter oyster sauce bottles, 1,840 gallons of 4.5-liter fish sauce bottles, and 12,060 bottles of 700-cc fish sauce bottles. The police pressed charges against the infringer based on the Food Act, says Tangburanakij.


“Notwithstanding the above, authorities should still seek cooperation from companies to jointly take the strongest possible action,” Tangburanakij says. “Authorities will also need to be encouraged to apply all available penalties under the IP laws in addition to those available under the Food Act.”


Vietnam is hit hard by fake food as well. Action Plan 168 Phase II noted that during the period of 2012-2015, 25,966 cases of fake products, involving 980 tons of supplementing foods, many thousands of bottles of wine and many millions of food counterfeiting marks.


To address this issue, there are a number of state agencies with rights to establish IPRs and handle IP violations, including the National Office of Intellectual Property, the Inspectorate of the Ministry of Science and Technology (MOST), the Market Surveillance Agency, the police and customs. Additionally, the government has established some subsidiary bodies concentrating on the F&B field, such as the National Steering Committee 389 and an interdisciplinary committee specializing in smuggling and trade fraud, together with building special campaigns relating to F&B IPRs, says Nguyen Duc Xuan, managing partner at Ageless IP in Hanoi. “Following the endeavour of Action Plan 168 – Phase II (2012-2015), Phase III (2016-2020) is under development and there is an urgent need for implementation to meet the emerging practical requirements for the proactive integration and development of Vietnam.”


During peak times of consumption in Vietnam, such as the Lunar New Year and other festivals, the government would also issue drastic regulations to control F&B trading activities, Nguyen says. “There are regulations restricting and handling violations in the F&B industry. The government regulates high conditions and standards for purchasing and importing or exporting F&B products, such as quality management systems, testing rooms, etc.” Besides civil and administrative measurements, Nguyen says Vietnam’s Criminal Code can also be used to handle violations. According to Article 193 of the Criminal Code (2015), activities in manufacturing and trading of counterfeit food or additives could receive a life sentence for individuals or permanent shut down for legal entities.



Fire in the Hole


The infringement issues that F&B companies face are similar to those encountered in other industries.


“Copycats will often imitate logos, brands, labels and packaging. In one example, McDonald’s successfully defended its ‘Big Mac’ trademark against an infringer who used the mark ‘Big Mak’ in its food products,” says Bienvenido A. Marquez III, a partner at Quisumbing Torres, member firm of Baker & McKenzie International. “Notably, copycats do not limit their activities to logos and brands. In one example, Pepperidge Farm successfully defended its trademarked fish shape, seen in its Goldfish crackers, against a competitor when the latter came out with its own version of fishshaped crackers. Strong trademarks are particularly attractive to infringers since they can easily encroach into the market share without needing to develop the goodwill of their own product.”


For trademark infringement to be a viable cause of action, there must be an existing registration in the name of the F&B client, Marquez says. “In the event that the copycat imitates an unregistered logo, brand and the like, it will not be liable for trademark infringement (no matter how well-known these are), and the trademark owner will have to rely on unfair competition to protect its rights.”


The F&B industry is also vulnerable to patent and design infringement. A common counterargument when the issue of infringement arises is that the registration of the patent or design is invalid either for lack of novelty or inventiveness.


“In one Philippine case, Mr. Ngosiok owned a design registration over rice vermicelli noodles. Ms. Wong, a rice vermicelli noodle producer, was able to successfully cancel Mr. Ngosiok’s design registration before he could file an infringement claim against her,” Marquez says. “In another example, Ms. Friend, owner of a design registration for a peace-sign shaped pretzel, filed a patent infringement claim against Keystone Pretzels and Laurel Hill Foods for making and selling similarly shaped pretzels. The case appeared to have been amicably settled with Keystone Pretzels eventually purchasing Ms. Friend’s pretzel patent.”


The role of the IP counsel is to assist in registering the patents and design. “Considering that the F&B industry is fast growing, the IP counsel should be skilled in drafting the patent and design specifications and claims in a matter which will provide the F&B client with the broadest legally allowable protection over the patent or design,” Marquez says. “Strongly-crafted specifications and claims will hold up to the counter-test of validity should it be raised.”


Counterfeit F&B goods are a great challenge, as high-quality fakes may not be visually distinguishable from the real thing and will require laboratory testing, Marquez says. “Notable examples in Asia include reports of counterfeit Nestle Maggi Magic Sarap and counterfeit Johnny Walker whisky.”


Remedies include seizure and destruction of such fake goods after a court declaration. Likewise, customs recordal is vital in preventing infringing products from entering the country, Marquez says. “Aside from handling such matters, the IP counsel may assist the F&B client in developing hidden signs or indicators which can be found only in authentic products. The development of such indicators are tricky since these must be easy for the consumer to spot and yet difficult for counterfeiters to imitate.”


Parallel goods may impair the business relationships of the F&B client with their distributors as well. “These encroach into the market share of the F&B client since parallel importers are often independent of the F&B client,” Marquez says. “Parallel imports often pose government issues since these imports are unlikely to conform with the regulatory requirements of labeling or disclosure in a given jurisdiction since these are meant for a different jurisdiction.”


Addressing parallel imports is a big challenge for F&B clients and IP counsel since parallel imports are not illegal under IP laws in many jurisdictions, Marquez says. “Potential remedies may be found under contractual interference laws and government regulatory laws.”


In Vietnam, there are many small business households in traditional villages that do not meet the accepted standards for equipment and facilities in the F&B sector. As they are usually concentrated in groups, the authorities find it difficult to detect and handle infringement, says Nguyen. “F&B manufacturers should cooperate closely, such as establishing an F&B association, to monitor and cooperate with the competent authorities for handling promptly and vigorously the infringement at the beginning, because the larger the infringement is, the more difficulty they will have to cope with.”


In Japan, energy drinks are sold as pharmaceuticals, supplements, and soft drinks, says Masanori Hiroe, director at Hiroe and Associates in Gifu. “When filing a trademark application designating energy drinks, it is important to consider which of these categories one’s goods belong to.”


Pharmaceuticals belong to designated goods Class 5 and have a similar group code 01B01. Supplements also belong to Class 5 and have the code 32F15. Soft drinks, on the other hand, belong to Class 32 and have the code 29C01.


“The similar group code organizes similar goods into groups, where goods that share a code are in principle considered similar even if they belong to different classes,” Hiroe says. “A similar or identical trademark can therefore not be registered for goods that share a code with those of another trademark.”


Therefore, when conducting a trademark search, it is necessary to search not only classes, but similar group codes as well, Hiroe says. “Pharmaceuticals and supplements, for example, belong to the same class, but since they have different codes, different applicants can register the same trademark for these goods.”


Below is a concrete example of the classification (similar group code) of energy drinks containing tea:


Class 5 (01B01): slimming teas for medical purposes, medicinal teas, herbal teas for medical purposes


Class 5 (32F15): supplements containing tea, supplements using tea and vitamin C


Class 32 (29C01): soft drinks containing tea, soft drinks using tea, tea-flavored soft drinks



Think It Forward


In the product development phase, issues which should be anticipated by IP counsel are usually related to patents, trade secrets, industrial designs and commercial espionage or information theft.


Patents


Much research goes into the development of F&B products and the investment of a company in terms of time and funds can be quite substantial, says Ann N. Edillon, an associate at Quisumbing Torres. “The means and methods for improved shelf life, delivery, packaging, inclusion of enhancements and vitamins, and improved taste may all be protected by a patent.”


For F&B to be considered inventive, it must not be obvious to a person skilled in the art. In other words, the F&B must not be an expected advancement on previously existing F&B and that the F&B is not something an expert in the industry expects.


“The challenge faced by IP counsel in this aspect is in identifying the prior art and what sets the invention apart, something which is made more difficult by the fact that the F&B industry is both fast growing and culturally entrenched,” Edillon says. “The IP counsel must also be able to present the invention in a manner that’s not obvious to a person skilled in the art. The challenge of obtaining patent protection for the F&B client lies in the skilled and judicious drafting of the patent specification and claims.”


Trade Secrets


IP clients in the F&B industry may not be willing to disclose their research output or their recipe in exchange for a limited period of patent protection of 20 years, particularly with regard to products which are the backbone of their company. One of the best examples is the Coca-Cola formula which, according to the company, is known to only a few individuals.


Recipes are not the only F&B industry relevant outputs which can be kept as trade secrets. The process in creating the product, the machine used in the process, any improvements made, the means and methods for improved shelf life, delivery, packaging, enhancements and vitamins, and improved taste can all be protected by trade secrets. In other words, an F&B client can keep everything that could be protected under the patent regime as a trade secret instead, says Edillon.


“There is no procedure for protecting a trade secret. These are simply kept secret and guarded through a variety of confidentiality measures and processes which include limiting access to the secret and having non-disclosure agreements in place,” Edillon says. “Certain jurisdictions protect trade secrets from commercial espionage and information theft and employees covered by the non-disclosures can be enjoined by courts from disclosing such secrets.”


However, the F&B client must be made aware that there is no legal recourse against an individual not bound by protection agreements who independently reverse engineered and then duplicated and used the trade secret, Edillon says. “Further, this individual could seek patent protection of the trade secret if it is found not to be protected by the patent regime.”


Industrial Designs


“Again, the challenge faced by IP counsels in this aspect is in identifying the prior art and identifying what sets the design, shape, appearance of the F&B product and its packaging apart from the existing F&B products,” Edillon says. “Proving novelty of the design of the F&B product is a major hurdle which both IP counsel and the F&B client have to overcome together.”


A client can legally obtain trademark protection over the design, shape, appearance of the F&B product and its packaging, but in practice it is more difficult to obtain trademark protection for these designs because it must be shown that the designs are distinct enough to set the F&B product apart from its competitors, Edillon says. “Successful examples include a trademark for the original Contour Bottle of Coca-Cola, the Yakult bottle, the triangular shape of the Toblerone chocolate, and the fish shape of Pepperidge Farm’s Goldfish crackers. A common thread is that these designs are distinct enough for consumers to know what they are purchasing and who the source is, even without a label to identify the product.”


In most jurisdictions, protection of the design under design rights and trademarks are not mutually exclusive. “The role of the IP counsel is to assist in determining if the design, shape, appearance of the product and its packaging should be protected and registered by the F&B client,” Edillon says. “The IP counsel’s input in deciding which regime protection should be sought is vital, especially in light of the distinctiveness issue of a design as a trademark.”


From a patent or design perspective, an IP counsel should check whether the F&B product was independently developed or was reverse-engineered from another, disclosed invention. “The nature of the use in relation to the IP should also be considered (i.e. whether the prototype of the F&B product has already been disclosed to the public; whether marketing for the product has already commenced; and the country to be exported to and its respective local regulatory requirements). This is to evaluate the risks of infringement and non-compliance with local laws or regulations,” says Bee Yi Lim, a partner at Tay & Partners in Kuala Lumpur.


“For trademarks, the availability and registrability of the mark to be used on the F&B product should be assessed. As a trademark is used on the label and/or packaging of a F&B product, licensing, product registration, labelling and packaging laws should also be complied with. The early addressing of issues arising from the non-availability, registrability or non-compliance of labelling or packaging laws would help F&B companies avoid unnecessary expenditure on IP filing fees, production cost and time.”


As the Trademark Act in Taiwan adopts the first-to-file principle and affords protection to a trademark upon registration, filing trademark applications at the earliest possible date is highly suggested, Tsai says. “Trademark searches are not required but encouraged so as to avoid any potential infringement or fruitless applications.”

 

Copyright protection under the Copyright Act will be available when the work is completed. “Copyright registration is no longer necessary or available,” Tsai says. “When the copyrighted work is published, it will be very important to place a copyright notice (such as ©2018 ABC Company) on the products or packaging, as such a copyright notice may be cited as evidence as copyright ownership."

 

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