NESTLE CASE OF INTELLECTUAL

PROPERTY RIGHTS
Intellectual property (IP) is a legal field that refers to creations of the mind such as
musical, literary, and artistic works; inventions; and symbols, names, images, and designs
used in commerce, including copyrights, trademarks, patents, and related rights. Under
intellectual property law, the holder of one of these abstract "properties" has certain
exclusive rights to the creative work, commercial symbol, or invention which is covered
by it.

Intellectual property is a bundle of exclusive rights over creations of the mind, both
artistic and commercial. The former is covered by copyright laws, which protect creative
works such as books, movies, music, paintings, photographs, and software and gives the
copyright holder exclusive right to control reproduction or adaptation of such works for a
certain period of time.[1]

The second category is collectively known as "industrial properties", as they are typically
created and used for industrial or commercial purposes. A patent may be granted for a
new, useful, and non-obvious invention, and gives the patent holder a right to prevent
others from practicing the invention without a license from the inventor for a certain
period of time. A trademark is a distinctive sign which is used to prevent confusion
among products in the marketplace.

An industrial design right protects the form of appearance, style or design of an industrial
object from infringement. A trade secret is non-public information concerning the
commercial practices or proprietary knowledge of a business. Public disclosure of trade
secrets may sometimes be illegal.

The term "intellectual property" denotes the specific legal rights described above, and not
the intellectual work itself.
PURPOSE

Intellectual property rights give creators exclusive rights to their creations, thereby
providing an incentive for the author or inventor to develop and share the information
rather than keep it secret. The legal protections granted by IP laws are credited with
significant contributions toward economic growth.

Economists estimate that two-thirds of the value of large businesses in the U.S. can be
traced to intangible assets. Likewise, industries whose reliance on IP protections are
estimated to produce 72 percent more value per added employee than non-IP industries.[2]

Additionally, a joint research project of the WIPO and the United Nations University
measuring the impact of IP systems on six Asian countries and found that "a positive
correlation between the strengthening of the IP system and subsequent economic
growth." [3] However, correlation does not necessarily imply causation.

Case Study Company Nestlé SA

Regions Involved H.Q. at Vevey, Switzerland. Worldwide Brands

Case Study Date 2nd March, 2007

Recognise the value of brands and patents. One of the significant differences between the
value of a company on its accounting books and the value of a company as determined by
the market can be the value of intangible assets. For Nestlé, a key element of these
intangibles assets is the value of its registered Intellectual Property (IP). Therefore at
Nestlé, IP is valued and guarded to the same extent as other valuable assets within the
business.

Legally register the company’s IP and be prepared to defend brands and patents by every
legal remedy available.This means the business should allocate adequate financial
resources to do so. These resources should be applied both at the outset in terms of
putting the right personnel and legal protections in place and also when defending any
infringements. Nestlé always prosecutes unauthorised use of its intellectual property
rights. This may be costly but it is far less expensive than diminishing the value of the
brand in the marketplace.

Background

Nestlé is the world’s largest food and beverage company and employs around 265,000
people worldwide. In 2006 Nestlé’s sales, at $80billion, accounted for 1.5% of the total
global food market. The company has a diverse range of product lines including:

· Soluble Coffee

· Infant Nutrition

· Confectionery
· Dairy

· Chocolate Milk Beverages

· Bottled Water

· PetCare

· Ice Cream

In each of these food ranges, Nestlé aims to be the market leader and to provide at least
one leading brand for each product line. In this context, the company’s brands and patents
are critical. Nestlé market their products under six strategic global brands: NESTLÉ,
NESCAFÉ, NESTEA, MAGGI, PURINA and BUITONI. Local trademarks are also
registered to accommodate the diverse cultural nuances around the world.

Nestlé has a long established history of carrying out extensive R&D with dedicated
Product Technology Centres across the globe. Also an increasing trend has been the
licensing-in of innovative technology from external sources and this complements the
R&D work being carried out internally. The legal process for licensing-in technology
needs to be carefully managed as the technology itself can become a critical element of
Nestlé’s products and processes.

Corporate Structure Considerations

With over 6365 trademarks and 9500 patents the need for effective management of
Nestlé’s IP portfolio is clear. Acknowledging the growing importance of Nestlé’s IP the
company recognised the need for a strategic overhaul of its corporate structure in this
area. An experienced legal expert was needed to implement the necessary organisational
changes and to advise on best practice regarding the protection of brands and patents. Ms.
Paula Nelson was appointed General Counsel – Intellectual Property for Nestlé SA.
Paula says “One of the first things I realised was that it was essential that the lawyers
involved in creating and protecting our intellectual property should become part of the
business teams. I organised the IP department so that I had at least one patent lawyer and
one trademark lawyer in each area of the business”

This was made simpler by the fact that all businesses are managed by the management
team in Vevey with whom the IP lawyers can easily interact. 17 Regional IP Advisers
based in different countries around the world and reporting in to Paula's team in the
Vevey HQ give local and regional input.

The Nestlé Approach

The re-organization of the company’s internal IP legal structure has allowed Nestlé to
control and defend its patents and trademarks in a centrally co-ordinated manner.

Nestlé places high value on its IP and recognizes it as a major financial asset. Paula notes
that traditionally the difference between a company’s balance sheet value and the value
of a company as determined by the market is the value of its intangible assets and
especially its brands. The legal protection of IP is a key element in maintaining this
value.

CASE ANALYSIS

IP is valued and guarded to the same extent as other valuable assets within the
business.Intellectual property rights are usually limited to non-rival goods, that is, goods
which can be used or enjoyed by many people simultaneously - the use by one person
does not exclude use by another. The term "intellectual property" denotes the specific
legal rights described , and not the intellectual work itself.

Company realised that it was essential that the lawyers involved in creating and
protecting our intellectual property should become part of the business teams. Company
must organise the IP department so that it had at least one patent lawyer and one
trademark lawyer in each area of the business”

Submitted by:

Sandeep Kaur

MBA-G

Roll no: 50