Intellectual Property in the FMCG Industry
Fast Moving Consumer Goods (FMCG) are those with a limited shelf life. This short durability is because of high consumer demand and because the very nature of the product suggests quick depletion. The term FMCG applies to almost every category of consumer goods, ranging from food and beverages to household cleaning products, medicines, cosmetics, clothing, electronics, and more. FMCGs are sold in large volumes and at a relatively low price. The revenue of such goods is specifically high on account of the products’ limited shelf-life, changing consumer appeal, and/or in-built obsolescence and quick technological advancement. Given these factors, the FMCG industry is one of the most saturated and highly competitive industries. Successfully obtaining, managing, using, and safeguarding one’s Intellectual Property Rights (IPRs) can help FMCG brands distinguish themselves and gain a competitive edge over others.
Due to the changing purchasing patterns of consumers and the development of technologies, the FMCG industry is undergoing a phase of powerful change. The market and the opportunities that FMCG produces, coupled with the growth of small and medium-sized businesses with the help of e-commerce, are producing a new international consumption pattern, which necessitates a new outlook towards the protection of brands.
The Presence of IPRs in the FMCG Industry
IPRs are critical in the FMCG industry because companies operating in this industry rely heavily on brand recognition and brand loyalty for their success. Intellectual Property (IP) is vital to the long-term success strategy of any consumer goods business. Therefore, such companies obtain numerous IPRs, including trademarks, patents, trade secrets, etc. The two main stages for an FMCG business are as follows:
- Product Development;
- Commercialization and Marketing
Patents represent a crucial industrial right. Efficient Patent Protection can safeguard the most imperative asset of consumer goods, especially in specialized industries such as pharmaceuticals and electronics, where goods need time and investment for development and thus take longer to generate profit.
Patents signify an exclusive right for a limited period. A rights holder may have various options through which he can pursue patent protection across several jurisdictions. There is a range of strategy and duration issues to be taken into account. The same is particularly important in FMCG since the time needed to pursue and obtain a patent varies across nations. Furthermore, it is also important to couple the advancement of these Patent Rights with other IPRs, such as trademarks or copyright. Even after the expiry of a patent, consumers can continue to be loyal to the brand’s specific product, regardless of similar competitive products in the market, if a brand has been meticulous in protecting and maintaining the Trademark Rights for its patented products. These IPRs, associated goodwill, and the maintenance of consistent quality help to establish brand awareness and loyalty, which enhances commercialization and marketing.
Trademarks, including trade dress and product packaging, are often the most prominent and long-lasting IPR, which the brands in the FMCG industry take advantage of and utilize. Trademarks are important to brands in all sectors of the FMCG industry and are often the single most vital differentiator between rivals. Apart from identifying the source of goods or services from those offered by others, trademarks represent the amassed goodwill of a brand and represent the noteworthy investments and efforts that companies make in a particular good or service, both in terms of time and money. Trademarks, unlike most other IPRs, can be held in perpetuity provided their use and/or registrations are maintained. As the external depiction of a brand’s investment in a product, trademarks can continually resonate with consumers and provide them with a motivation to choose a specific brand’s products over those of a rival, thereby generating value when other IPRs’ protection has ended.
Challenges to IP in the FMCG Industry
Once a business in the FMCG industry builds a diverse IP portfolio, it becomes equally imperative to safeguard those rights and take action when third parties start infringing upon them. Apart from infringement and passing off, which are the most common kind of challenges to IP, the following challenges are faced specifically by the FMCG industry:
- Parallel Imports
Parallel imports occur when a legitimate product acquired abroad is imported to the importing country without the permission of the rights holder. These are legitimate goods, not pirated ones. However, foreign trade legislations made to battle piracy act as a legal hindrance to such imports. They are also known as ‘grey market’ goods, but unlike pirated goods, these goods are genuine, meaning that their origin is from the trademark owner.
Confusion and alarm arise when products appear in markets that brand owners may not have been expecting. Distribution channels may be disrupted, and markets may become saturated with a surplus of genuine products. Further time and expense are taken to determine the authenticity of the goods and their origin. Although the product may be genuine, when it shows up suddenly, it is still a worry for FMCG goods. Some products may not be intended to be sold in certain markets, which may create problems and eventually damage the brand. Furthermore, the quality or distribution of grey market imports cannot be controlled.
Counterfeiting is a practice in which goods (often of inferior quality) are manufactured and sold as an imitation of the IPRs of a brand owned by a third party, without its permission, resulting in consumers buying a counterfeit product under the impression that it is genuine.
Counterfeit products pose a unique challenge for the FMCG industry, although some products, such as fashion and luxury goods, are affected by counterfeiting more than others. More than 15 percent of the world’s most counterfeited brands are in the FMCG industry. The fact that counterfeit goods are often of inferior quality can present safety and health hazards to the end consumer, specifically when the products being copied are vital medications, baby products, machinery parts, etc. Business owners in the FMCG industry may also suffer the negative repercussions of counterfeit goods when, as a consequence of these inferior or non-authentic products, the reputations and consumer confidence in their established brands are affected.
The battle against counterfeiters is perpetual; however, IP owners must prepare themselves with the necessary apparatus provided by domestic laws and international IP legislation. A cooperative approach between IP owners, assisted by IP attorneys and Customs Authorities of the particular country, health and consumer-protection agencies, is imperative to keep a check on counterfeiting.
One of the principal challenges for the FMCG Industry is enforcement. The level of infringement and counterfeiting is exceptionally high in this industry. When it is time to enforce the trademark or patent, certain criteria must be considered before attempting any enforcement action. In countries where counterfeiting and infringement are rampant, a defined and well-designed strategy is imperative. A company needs to be aware of details such as distribution channels, point of sale, manufacturing, sellers, distributors list, etc., to acquire sufficient evidence to pursue a claim.
The real challenge arises when an FMCG brand attempts to enforce in multiple jurisdictions in a short time. The counterfeiting industry is apparently unified, and there is constant communication between various producers and sellers of counterfeit or infringing goods. When an FMCG brand decides to enforce its rights in a particular country, alerts are sent to other producers and sellers, making it arduous to obtain the evidence required to proceed with an enforcement action. In such circumstances, when one small shop or point of sale is raided or sued for the sale of counterfeit goods, the rest of the system gets alerted and safeguards itself.
IPRs are exceedingly vital in attaining sustainable growth, profitability, and competitiveness in the FMCG industry. Brands can increase their chances of success by adopting ways to safeguard their IP and monitoring and enforcing their IPRs against third-party infringers. The capability to identify threats to these IPRs, and understand how to deal with such problems effectively when they arise is crucial to an FMCG brand’s longstanding success.
The following tips should be kept in mind by FMCG brands to protect their IPRs:
- Conducting relevant searches to assess conflict with competitors before applying for a brand name/trademark/patent/design;
- Filing IP applications before use of the mark in the market;
- Monitoring the use, misappropriation, and infringement of one’s IP;
- Enforcing rights through dialogue and legal means if required; and
- Periodically reviewing, valuing, and assessing one’s IP portfolio to set goals for brand building.✅ For more visit: https://www.kashishipr.com/