Contractually Exclude Competitors, Attorney Suggests at BevNET Live

Scott Greenburg, left, and Nick Giannuzzi

With knowledge of some legal terminology and a well-prepared plan, your brand can avoid a suffocating contract and keep investors interested.

At least, that’s what a group of lawyers told BevNET Live attendees during a breakout session in which they covered everything from trademark law to buyout terms.

After a lunch break that included networking, relaxation and beverage sampling, the conference’s first day offered two hour-long breakout periods, one of which identified legal issues worth knowing for entrepreneurs looking to avoid common mistakes.

Justin Prochnow, partner at Greenberg Traurig LLC, Nick Giannuzzi, founder of the Giannuzzi Group LLC, and Scott Greenburg, partner at K&L Gates ran the session.

To better prepare startups before they approach investors, Giannuzzi outlined a few points commonly found in contracts, such as product exclusivity and non-competition, length of term and renewal terms, termination without “cause” (buyout amount, buyout calculation method), right to service “excluded accounts,” shifting legal burden to a distributor and protecting your product. Every distributor has its own ideal contract in mind, Giannuzzi said, and brands need to ask themselves if their plan is compatible with that of the distributor so they don’t lock themselves into a restrictive deal.

“As the brand, you want to fight to have certain accounts to be excluded,” Giannuzzi said.

Prochnow made the reason for his presence known rather immediately.

“There’s a real lack of understanding of some of the core principles of intellectual property,” he said.

He then dove into the differences between patents, trade secrets, trademarks and copyrights. Patents, which typically last 17-20 years, protect inventions that are novel (new worldwide), non-obvious (no other variants existing) and useful, and must disclose how the invention is made and used.

Trade secrets include formulas, practices, processes, designs, instruments, patterns or compilations of information that aren’t generally known or reasonably ascertainable. With this information that is unknown by the public, a business can obtain an economic advantage over competitors or customers. Prochnow used the Coca-Cola recipe as an example.

A trademark is a word, phrase, symbol or design that identifies the good of a party, separate from another party. There are no laws on the usage of the TM, but federal registration is required to obtain the circled R.

Copyrights are a form of protection for original works of authorship fixed in a tangible medium of expression.

“You’re not copyrighting the ideas or the actual facts,” Prochnow said. “You’re copyrighting the form of those facts.”

With a strong grounding in the legal details behind launching a business, a startup would be wise to digest Greenburg’s advice before reaching out to investors. Greenburg noted that brands targeting investors of any kind should prepare a compelling and entertaining presentation, a detailed business plan tailored to investors and answers to any relevant question.

“If they ask you a question and you don’t know the answer, they’re going to think nobody in your company knows the answer,” Greenburg said.

Learn more about important legal rules covering intellectual property and other topics related to regulation, labeling, and functional claims specific to the beverage industry at BeverageSchool.com, BevNET’s on-demand video learning site.