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Smart Legal Tools for Food Businesses

Intellectual property, contracts, and food safety planning
Legal Ease

Even though the owner of a trademark has legal rights without registering the mark with the USPTO, registration is usually a very good idea. Without federal registration, a trademark owner’s rights extend only to the geographic area where the mark is used in commerce. This means a trademark owner has no right to block a competitor in another state from using the same or a similar mark. In contrast, national registration on the Trademark Principal Register confers nationwide rights to block trademark infringement. Federal registration provides other benefits as well, such as a presumption that the mark is valid and, after five years, comes “incontestability” status, which makes it much harder for anyone to attack the mark in court.

A particular challenge for food businesses is to choose a brand name that can be protected under trademark law. For example, a local food business might use a brand that includes the name of a geographic place (for example, “Pleasantville Foods”). Such a brand name is descriptive and, therefore, would not qualify for full trademark protection. Because trademarks are meant to distinguish the source of goods or services, the less distinctive the mark or name, the less likely it is to be protected.

If a mark is descriptive, one option is to register it on the Supplemental Register. Although such registration does not confer the full set of rights that comes with registration on the Principal Register, it can deter and block others from using similar wording or symbols likely to confuse consumers.

Through continuous use and marketing, a descriptive brand or mark can acquire so-called “secondary meaning”—that is, it comes to be associated with the owner of the mark, rather than being merely descriptive of the goods or services—and then it can be registered on the Principal Register. After five years of continuous use, a descriptive trademark is presumed to have acquired secondary meaning, making it much easier to register on the Principal Register.

Contracts, in particular supply and sales agreements, can be tools for risk management and to take advantage of the special protections afforded to produce sellers. They are critically important for businesses dealing in food.

Supply contracts can be especially important for a specialized local, artisanal, sustainable (pick your adjective) food business that cannot rely on the spot market to meet its needs for ingredients meeting specific criteria.

First, it’s necessary to dispel a few mis-conceptions about contracts. Many smaller, values-based businesses seem to feel contracts are a hostile act; but legal contracts are not inherently antagonistic, unfair, or devoid of values. To the contrary, a contract should be the foundation for a cooperative, mutually beneficial relationship.

And a contract can be instilled with the parties’ values—for example, by requiring suppliers use sustainable practices or pay workers fairly. Parties to a contract have enormous flexibility to define the terms of their relationships and transactions. However, if they do not spell out their agreements in a contract, the law will apply default rules, which may not be consistent with either party’s intent.

Risk Management and Food Safety
Contracts are an essential part of an overall risk management strategy. Food can be a risky business and every seller in the supply chain—from the grower or processor to the distributor and retailer—is potentially on the hook if a consumer gets sick from tainted food. Therefore, anyone selling food handled or produced by someone else should use supply contracts to ensure producers and processors use safe practices; that the buyer will be indemnified for harm it did not cause; and that suppliers have sufficient insurance coverage.

With regard to insurance, buyers should require that suppliers name them as additionally insured on their general liability policy, which must include product liability coverage. Contracts also can address what will happen in the event of a product recall by defining each party’s role (for example, who will handle customer communications) and responsibilities for the costs of the recall.