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Intellectual Property ownership question - please help
I have a question I need answered in a short time frame so I hope that someone could assist me here. I would really appreciate it.
I have worked with a “private labeler” that works directly with a contract manufacturer for years. The private labeler owns the formula and wants to leave the business and sell me the formula. He told me selling me the formula would not be considered intellectual property. Is this because he is not the formulator? Does he not own the IP to his formula? Or should I be worried he does own it and is selling a copy of the formula per se?
I was under the impression when you have a chemist do a formula, they sell you the formula as IP. Is this a red flag or should there be a transfer of intellectual property if I am buying the formula? Does it even matter as long as I own the exclusive right to the formula?
Please advise. Thank you in advance to anyone that can help me out here.
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7 Replies
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It ALL depends on what is in the contract(s) between the various parties and who owns the IP in the form of a legal document.
Be very aware though of what happens in the real world. If you market a new “unique” cosmetic product you can guarantee that (if it is considered by competitors worthwhile to do so) a close copy of your cherished invention will be on the market within a very short time.
Having spent many years in the perfumery industry I know that some perfumery businesses exist almost solely on producing copies of any and all new fragrances that are introduced on to the market and then modifying them to suit almost any end use. One example was that a Calvin Klein CK1 look-alike (smell-alike) perfume was very quickly adopted as the “standard” fragance in liquid handwash products. Going back further to the1920’s, and the first “modern” perfume, Chanel No5 was followed few years later by a copy by Coty called L’Aiment. Modern instrumental analytical techniques mean that very close copies can be created in a very short time even though there may be hundreds of ingredients.
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It depends on what definition of “intellectual property” you want to use. From a legal standpoint, a lot of people consider IP to be a set of information that is defensible, i.e., is a legal monopoly granted by the government, like patents, copyrights, and trademarks. They’re defensible because you can sue someone you catch using it.
A formula, on the other hand, is more like a trade secret. If someone copies it, you have no recourse. As a result, it has little to no real-world value, at least not to a lawyer or accountant.
The other things to consider are how many other people have access to the formula, and what kind of arrangement your formulator has with the contract manufacturer. You also need to consider whether you’re buying exclusive rights or not - is he going to sell the formula to anyone else?
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It sounds like the private labeler just wants you to pay to find out what the formula is. As Bob said, that doesn’t mean you’ll have legal recourse to prevent anyone else from using the formula if they learn it.
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There are no legal rights until a provisional (at the least is filed with USPTO.) .This must be prior to public disclosure:this is the crux of custom formulation ie to provide a contract to the effect the client owns the formula and process upon completion.The client can file as per the foregoing if he/she wishes prior to contacting a Packager or make some agreement with the latter.
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Thank you for the replies. It sounds like the word Intellectual Property in regards to a formula can be used loosely. The contract will say exclusive, but I realize that the formula can be slightly changed and that would loophole the contract.
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We have had several people over the last twenty or so years with similar problems with contract packagers.many go out of business and the marketed formula for the product goes with them.Too bad but it happens.
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On the plus side, brand success doesn’t have much to do with the performance of the product. If your formula is reasonable, functional and stable, that will be good enough. If your formula is the most brilliant thing ever made, you’d still need great marketing to make it a success.
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