Understanding Intellectual Property Law through Coca Cola

Posted in: Intellectual Property Law- Dec 01, 2010 No Comments

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Intellectual Property Law

How does our society protect intellectual property? What rights are protected? Do some forms of intellectual property have more protection than others? These issues are often misunderstood by the public. Lay people often use the terms patents, trade-marks and copyrights interchangeably. It is the purpose of this paper to assist the lay person in understanding some fundamental basics of intellectual property rights and intellectual property law through the example of Coca-Cola, a company and product that most people are familiar with.

In the 1961 movie One, Two, Three, James Cagney, playing an executive for the Coca-Cola Company, insists that if his product is to be sold in the U.S.S.R., the Coca-Cola formula must remain a secret: “That formula stays in our vaults. If we give it to you, the next thing you know, the Chinese Communists will have it.” Cagney’s character knows that the success of a company like Coca-Cola depends on a large part on its ability to obtain legal protection for its intangible creations and intangible assets. And as this paper will make clear, each of those creations and assets is subject to a particular kind of legal protection.

Copyright

Copyright is the right to reproduce a work. The owner of the copyright in an original work, performance, or recording has the exclusive right to copy it, to decide how it will be published and distributed, to keep it from being modified against his or her wishes, and to profit from it. The copyright holder also has the right to give others a licence to use the work in specific and limited ways.

Coca-Cola owns copyright in the design of its bottles, the design of its logos, its advertising, and generally anything it creates that can be considered an original work requiring creative effort. For example, the famous Coca-Cola logo and script design is an original artistic creation that is protected by copyright law. In other words, the right to copy the logos and script design is limited by copyright law.

Defences to copyright infringement in Canada include fair dealing, which is an exception in Canada’s Copyright Act, allowing a work to be copied for the purposes of private research or news reporting.  If a newspaper is doing a story on Coca-Cola, it is allowed to display the Coca-Cola logo if it is part of the story.

Canadian law does not, as yet, extend the fair dealing exception to copying for artistic or parodic purposes. So whereas in the United States, Andy Warhol was able to use the Coca-Cola logo in a work of art under that country’s “fair use” rules, a Canadian Warhol would likely have to get special permission from the company in order to display its copyrighted work.

Trade-mark

A Trade-mark is a mark (a name, or a picture, or some other distinguishing mark) used by a person or business for the purpose of distinguishing their goods or services from other people’s.

Trade-mark protection gives Coca-Cola the right to stop competitors from passing off their goods and services as Coca-Cola’s, and to be compensated for any damage Coca-Cola may suffer as a result of this unfair competition.  Trade-mark protection also protects consumers by prohibiting confusing trade-marks in the marketplace.

A trade-mark can be registered by filing an application with Canada’s trade-marks office. The owner of a registered trade-mark has the exclusive right to use that trade-mark throughout Canada. Even if a trade-mark is not registered, it can still be recognized at common law, but a common-law trade-mark only gives the owner the exclusive right to use it in the specific geographic region where the trade-mark was created.

The Coca-Cola company holds registered trade-marks in its logo and script design. Even the distinctive shape of the Coke bottle is trade-marked. These things are trade-marks because they are distinctive marks used by the company to identify its goods and services as being uniquely Coca-Cola’s.

To prove trade-mark violation, Coca-Cola would have to show that the competitor has actually used its trade-mark as a trade-mark. If a newspaper prints the name “Coca-Cola” in a news story, that is not a trade-mark violation. But if the name “Coca Cola” appears on a soft drink bottle then that is a trade-mark violation.  The effect of this may be to confuse people into thinking they are getting a Coca-Cola product when they are not.

Trade-mark violations occur only when the “distinguishing feature” of the original has been borrowed. The most famous example of this in Canada came in 1942 in the case of Coca-Cola Co. v. Pepsi-Cola Co. (1942), 2 D.L.R. 657 (P.C.) where Coke sued Pepsi for violating its trade-mark. The courts ruled that “Cola” was simply a descriptive word identifying a type of beverage, and that the “distinguishing feature” of the Coca-Cola trade-mark was the word “Coca.” And because the distinguishing feature was not borrowed, there was no likelihood that the average person would get those trade-marks confused.

However, some trade-marks are so distinctive that borrowing even part of them is considered a trade-mark violation. In a 1988 case, Coca-Cola Ltd. v. Fisher Trading Co. Ltd. (1988) 25 C.P.R. (3d) 200 (F.C.T.D.), a Canadian court ruled that it was a trade-mark violation to sell bottles with the word “Cola” in the same script as Coca-Cola uses as its bottles. Even though “Cola” is a common word, the combination of that script with that word was uniquely associated with the Coca-Cola company, so that someone seeing those bottles might get the idea that they were getting Coca-Cola products.

The government will accept an application to register a trade-mark if the trade-mark is neither misdescriptive nor clearly descriptive.  “Cola” cannot be registered as a trade-mark because it just describes the product. “Coca Cola” is accepted as a registered trade-mark because it is not simply a description.

Patents

A patent is a limited right granted by the government to an inventor. Once an inventor has obtained a patent from the government, he or she has the sole right to make, use, sell, and licence out that invention for twenty years, after which the invention can be used by anyone.

Like many companies, the Coca-Cola company creates various inventions to assist with its business. Many of these are patented, even the ones that are not particularly unique, since an invention does not have to be totally unprecedented to be patented; it just needs to have some element of novelty.

For example, the Coca-Cola company owns a patent on a method of making “barrier coated plastic containers.” Obviously no one has the exclusive right to make plastic containers, but Coca-Cola has the exclusive right to use the particular method of making those containers that they describe in their patent.

Trade Secrets

A trade secret is a piece of information whose value derives from it not being widely known. The essential elements of a trade secret are that it must actually be a secret, disclosed only to those employees of the company who need to know it in order to do their jobs, and that the company must actually be taking stronger-than-usual precautions in order to keep the secret.

The formula for making Coca-Cola is a trade secret. The formula is extremely valuable to the company as a secret; it would be all but useless to the company if it were known to its competitors (since they would all start to copy it), it is known only to a select few people within the Coca-Cola company, and the company takes special precautions to make sure that the formula does not get out. In other words, it fulfils the essential criteria for a trade secret: The company takes special effort to keep it a secret, and that secrecy creates value.

The original formula for making Coca-Cola was patented in 1893. But when the formula changed, the company did not choose to patent the formula again. The reason for this is simple: if Coca-Cola were to patent its formula, the formula would become known to others, and once the patent expired, anyone could use it. It is possible to copyright a formula, but that would also make it known to the public.  And in any case, copyright would only protect the formula as a piece of literary expression; it would not protect the basic ideas that make the formula unique. By keeping the formula a secret, Coca-Cola can protect the formula and keep it to itself indefinitely.

However, the downside of a trade secret is that once it is out, there is almost no legal protection; if the Coca-Cola formula were to be revealed, Coca-Cola could not stop other companies from using it, the way they could use the courts to stop other companies from using a patented method or its trade-marks. It is up to Coca-Cola, then, to keep the secret from getting out, which they do through confidentiality agreements and other contracts. If you work for the Coca-Cola company, and in the unlikely event that you are one of the select few people trusted with the formula for Coca-Cola, your contract will require you not to tell anyone outside that select circle about the formula.

Conclusion

In order to stay competitive, a company needs to protect many things that are intangible and therefore harder to protect than tangible assets.  No single regime of law, no single type of legal protection, can give a company all the protection it needs for its intangible assets.  But with all four of these types of protection taken together, and properly used, a company like Coca-Cola can protect its intellectual property against its competitors.

For further reading see: Intellectual Property Law: A Primer

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