Friday, 14. June 2024

Previous slide
Next slide

Nespresso – What else?

Saturday morning in the supermarket, coffee shelf. Bar after bar of these coffee capsules.

Coffee capsules, how else would you make coffee? – Okay, this gag is stolen from the „heute Show“.

Let’s get to the legal issues.

As is well known, Nestlé earns its money not with Nespresso machines, which are relatively cheap, but with the capsules that go with them. That’s where the profit margin is. It is therefore not surprising that many third-party suppliers are trying to get a piece of the “pie” for their part by selling capsules for the Nespresso machine.

This has been a thorn in Nestlé’s side from the very beginning. What options does Nestlé have to prohibit others from selling coffee capsules for the Nespresso machine?

Let’s go through the instruments:

1. Trademarks

The “Nespresso” brand is protected by trademark law. Only the trademark owner Nestlé is entitled to use the name “Nespresso” as a trademark. Nespresso capsules may therefore only be sold by Nestlé.

The problem here lies in the use of the trademark. This does not, of course, preclude anyone else from using the term “Nespresso”. Nestlé cannot therefore prohibit third-party suppliers from selling coffee capsules that are “suitable for the Nespresso machine”. It is just not allowed to officially call them “Nespresso” capsules.

2. Patents

Well, I am not a patent attorney, but I would say: Nespresso machines (or parts of them) are of course protected by patent law. You are not allowed to copy them so easily.

But the Nespresso capsules? I would have my doubts as to whether these capsules actually constitute a “new technical invention” within the meaning of the Patent Act (or the corresponding Swiss or European legal standards). After all, the technical design of such a capsule is relatively simple, isn’t it?

Since there are indeed so many other coffee capsules that are suitable for the Nespresso machine, there is a lot to be said for the Nespresso capsules not (any longer) enjoying patent protection. Let’s assume that.

3. Designs

And now comes the interesting point why I am writing this article here.

a) Nespresso could simply design its machines in such a way that only capsules with a certain design fit into them. This design is then legally protected according to the German Design Act (formerly known as Geschmacksmustergesetz) or the European Community Design Regulation (GGV) and – voilá – no one else except Nespresso is allowed to copy these design-protected capsules.

b) Problem solved? – No, obviously not. Because otherwise there wouldn’t be so many third-party coffee capsules that fit the Nesspresso machine so perfectly.

The reason is this. There is a provision, both in the German Design Act (§ 3) and in Article 8 of the Community Design Regulation (CDR), which reads as follows:

A Community design shall not subsist in features of appearance of a product which are exclusively due to its technical function.

A Community design does not subsist in features of appearance of a product which must necessarily be reproduced in their exact form with their exact dimensions in order that the product in which the design is incorporated or to which it is applied may be mechanically connected to or placed in, on or around another product so that both products may perform their function.

In simple terms, a design that is dictated by technical necessity cannot be protected as a design. If the capsule has to look like this to fit, then the design is not protectable.

That seems to me to be the case with Nespresso capsules. The capsules simply have to be designed to fit into the Nespresso machine. Consequently, the design is technical and cannot be protected as a design.

c) The reason behind this legal regulation is presumably that one does not want a manufacturer to monopolize the market for certain additional products. That’s why there are so many other suppliers of Nespresso capsules, and that’s why the toner for the Brother printer doesn’t necessarily have to be from Brother, but can also come from another, unnamed manufacturer.

4. Unfair Competition

Yes, but isn’t it anti-competitive to produce coffee capsules as a third party or stranger that are (only or just) suitable for the Nespresso machine? Or toner that fits (only or just) into a Brother printer?

The UWG, there § 4 No. 3 (formerly No. 9), forbids to offer goods which are an imitation of the goods of a competitor, doesn’t it?

a) Well, you have to read the provision very carefully. The imitation is only prohibited if it is accompanied by an avoidable deception of the customers about the commercial origin. This is not the case if the coffee capsules are expressly marked with a different brand name, for example Jacobs or Lavazza or Starbucks or Dallmayr or whatever. Then the customer knows that it is not a coffee capsule from Nespresso (Nestlé).

b) But § 4 No. 3 UWG also prohibits imitation if the reputation of the imitated product is unreasonably exploited.

Question: Does the Italian coffee roaster Lavazza unreasonably exploit the esteem in which the customer holds the Nespresso coffee capsules when it offers coffee capsules that are explicitly suitable for the Nespresso machine? Apparently not, because otherwise there wouldn’t be so many third-party coffee capsules for the Nespresso machine.

Personally, I think that by making coffee capsules that only fit in the Nespresso machine, you are taking advantage of Nespresso’s good reputation. After all, customers buy the Lavazza/Dallmayr/Mövenpick capsules only to use them in their Nespresso machine. If the Nespresso machine did not exist, no one would buy such coffee capsules, would they?

c) On the other hand, one can of course also ask: Why does Nestlé sell its Nespresso machines so cheaply and the coffee capsules so expensively? The whole copycat problem would be immediately off the table if Nespresso were to make a profit with its (presumably patented) coffee machines and not with its (apparently non-protectable) coffee capsules.

Must be a marketing consideration. Apparently, despite competition from other capsule manufacturers, the profit Nespresso makes on selling its own capsules is still greater than if it (sold the machines at a profit and) reduced the margin on capsule sales to a proper, competitive level. …

Anyway. It’s that an interesting story with those capsules?

Enjoy your coffee.

Dr. Wolfgang Gottwald
Attorney at Law

Attorney at Law

Leopoldstraße 51
80802 München

Tel.: 089/383 293-10
Fax: 089/383 293-13