New York Law Journal "Court Examines Trademark Claims Against 'Compatible' Coffee Pods" by Steve Kramarsky

July 26, 2016

Brand protection is a tricky game. Companies often walk a fine line between maintaining a reputation for quality and angering consumers by shutting out competition. Intellectual property lawyers have observed that balancing act in a number of markets, from auto parts to printer ink to (most recently) single serving coffee pods. In these cases and many others, manufacturers have employed a mix of technological and legal tools to limit third parties from providing parts or services for their products.

 

But when limitations become too aggressive, the market tends to reject them regardless of their legal foundation, and they have to be modified or eliminated. For example, in the early 2000s, printer manufacturers added identifying microchips to their ink cartridges and installed software in their printers that locked out third-party cartridges. Competitors who copied the chips and sold compatible cartridges at a lower price were sued under the anti-circumvention provisions of the Digital Millennium Copyright Act. Cases were brought in different federal courts with different results—but the market's response was universally negative. These days, the ID chips still exist, and your printer will warn you if you use an off-brand cartridge. But the litigation has largely ceased. 

 

If printer companies learned their lesson, coffee companies apparently didn't. In 2014, Keurig announced that its new "Keurig 2.0" machines would use a similarly restrictive system for its "K-Cup" pods. This time, the market response was swift—so swift that Keurig had to scale back its plan. But only somewhat: its machines still reject unlicensed pods. This allows Keurig to control the quality of the beverages dispensed by its machines, but it comes at a cost in customer goodwill due to higher prices and more limited selection.

 

It appears that the other giant in the coffee pod arena, Nespresso, chose a different route. After the recent expiration of certain key patents, many companies entered the coffee-pod market. But rather than employing a technological lock-out to prevent consumers from using non-Nespresso products, Nespresso chose to pursue a legal strategy with a specific focus on protecting its brand. A recent case in the Southern District of New York shows how the company maximized the protection of its name and image by bringing well-established claims of trademark and trade dress infringement. The opinion is a good example of how traditional legal tools can be put to work by businesses facing novel market issues.

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