Forward-thinking companies are empowering their IP departments to work more closely with the R&D and marketing teams, moving them out of the legal department and raising their profile with the company as a whole. Paula Nelson, general counsel (IP), explains to Edward Fennell how this approach has worked for Nestlé.
For a company which spent the first 50 years of its life focused on just two single products – baby food and milk substitutes – the reach of Nestlé today is astonishing. Founded in the 1860s it was not until the 1920s that the company took the bold step, in the aftermath of World War I, to branch out into manufacturing chocolate. Now it operates across 10 main sectors (including everything from water to food services), including five trademark classes, and its list of brands is extraordinary – stretching, literally, from A (Aero, A lete, A ll S tArS, Alpo and ArrowheAd) to Z (ZoegAS).
The result today, explains Paula Nelson, from the company headquarters in Switzerland, is that the company has 340 ‘strategic‘ brands and a staggering 6,000 local brands. It also operates in virtually every major territory you can think of from Australia to Venezuela.
Nestlé is a big player in the consumer market and this is reflected in the company’s financial figures. In the first quarter of 2006, for example, the Nestlé Group recorded consolidated Swiss Franc sales of 22.8 billion, up 14.1% over the same period last year.
With a global presence and immense brand recognition (can there be any adult in the industrialised world who has not heard of NESCAFÉ?), there are inevitably problems and challenges across the whole field of trademarks, patents and IP protection. But while the issues are enormous the basic structure is simple. ’Nestlé’s IP Rights are centrally owned and then licensed to its local Nestlé companies,’ says Paula. ‘It’s a nice, neat arrangement for what is a massive portfolio.’
A dynamic approach
A British barrister by background, Paula was recruited in 1990 to look after employment issues in the UK. Making her way up through the legal ranks she became company secretary in the UK in 1995 and then transferred across to global headquarters in Switzerland in 2002.
‘Branding has always been vital to Nestlé,’ says Paula, ‘but up to the 1970s it was seen in a rather rigid way. Brands were properties which had to be protected. Now we see them in a very different light – they are assets which must work hard for the company. We care for them well and we are constantly looking for better ways that they can perform.’
In recent years the company has decided that the best way to achieve this is to establish an IP operation that works as a stand-alone department reporting to the chief financial officer.
‘We could quite reasonably be a unit within the company’s legal function – that would have been fine,’ says Paula. ‘But, the way we see it, that could have been restrictive, confining us to a more regulatory role. This way, we are able to be more business focused.’
For Paula there is a kind of triangular and synergistic interaction between business, law and technology, and these three must be integrated in order to achieve ‘greater strategic value’. As a result, the whole culture of the IP function within Nestlé is designed to make it a dynamic, business-focused operation.
‘We could quite reasonably be a unit within the company’s legal function – that would have been fine. But, the way we see it, that could have been restrictive, confining us to a more regulatory role. This way, we are able to be more business focused.’
Based in the business
Backing Paula up at Head office are a head of trademarks and a head of patents, supported by a 40-strong team of lawyers and patent agents based worldwide. Much of the IP team’s day-to-day work is of an educational nature ensuring that colleagues in research, marketing and other key functions understand the legal implications of what they are doing. There is a constant and ongoing programme of presentations, meetings and general dissemination of information to ensure that everyone understands why IP is important.
‘It is vital that my team should be out talking to our researchers, designers and others involved in innovation and sales,’ says Paula. ‘That way we can ensure that the various possibilities for protecting our IP are taken into account at the start of a process rather than at the end. It’s a very motivating way of working – it shows that we are not just form-fillers. Instead we must keep coming up with really tightly drawn-up patents and innovative trademarks which are going to be profitable.’
To achieve this, each of the business areas – such as beverages, breakfast cereals, chocolate and confectionery – has a couple (usually two) of IP advisers attached to it. Then in addition, there are 16 regional advisers based around the world (Europe alone has six). Together the regional and business advisers constitute a well-organised, tight global ‘matrix’ able to cover all the company’s interests both geographically and by business specialism. Indeed, one of the key features in the company is the way that the patent and trademark lawyers work hand in hand.
There are no artificial boundaries. Instead they work together for the benefit of the brands and the technology. Three IP lawyers (neither patent or trademark lawyers) also form part of the team, to ensure that R&D agreements are drawn up to give maximum protection to the company’s technology.
A key role for the lawyers is to actively manage the portfolio and it is important, says Paula, that this is kept relevant to what is happening in the market. When brands cease to have value they are allowed to lapse or are sold off.
Where brands are live, however, they are protected vigorously. In the case of NESCAFÉ, one of the world’s favourite instant coffees, this means a staggering 2,000 separate registrations – a complete contrast with some of the purely locals brands owned by the company which might have only one or two registrations. ’Infringement of trademarks is an ongoing, constant battle. For example, “lookalike” issues are inevitable with such huge brands,’ says Paula before adding firmly: ‘We attack legally all infringement issues.’
Not all these attacks, though, are straightforward onslaughts in the courts. The company is often canny in the way it goes about things. As an example, Paula looks back to the days when supermarkets used to carry yard after yard of shelf space stacked high with instant coffees, with ‘own brand’ packaging almost indistinguishable from the packaging for NESCAFÉ.
‘We wanted to take action but were reluctant to sue the supermarkets who were, of course, major distributors for our brands. So we used the law, but in an unexpected way. We radically redesigned our packaging so that it looked both distinctive and different from ‘own brand’. There was no way that the supermarkets could follow us because it would be obvious what they were doing.’ The law was used – but imaginatively, without being directly confrontational – in order to get results.
Meanwhile, in a growing number of countries – and notably in China – the court system is proving increasingly reliable in enabling Nestlé to take action against those who infringe its trademarks.
‘In both China and the Middle East we find that we are now getting good support,’ says Paula. However there are still territories in the developing world where abuses such as bulk counterfeiting takes place and the legal infrastructure is simply lacking to take meaningful action. ‘What’s important is to have a toolbox of resources so that you can use what is most appropriate in that particular case,’ she says.
It seems that Nestlé’s IP strategy is as smooth as its famous coffee – and just as ubiquitous.
For more information about Nestlé please visit www.nestle.com
This article first appeared in IP Review, issue 15