Tales of the Cocktail Session: Intellectual Proper...

Tales of the Cocktail Session: Intellectual Property II

Last year, innovative bartender and consultant Eben Freeman led a seminar at Tales of the Cocktail on Intellectual Property. I ripped Eben a new one about it, based mostly on coverage of the session in The Atlantic. Eben was gracious enough to visit this venue himself and respond at length in the comments. The gist was that while the Atlantic article did a reasonable job of outlining the issues that concerned him, it did him a disservice as to his suggested remedies. He also suggested that had I actually attended, I’d have had a different view. That’s the problem with blogging, we usually don’t have the resources to do enough shoe-leather reporting.

Well, this year, I did manage to attend Tales of the Cocktail. And there was one session that I was looking very much forward to attending in person: Intellectual Property II, with Eben Freeman….

Eben was joined on the panel by intellectual property attorneys Sheila Fox Morrison and Riley Lageson of Davis Wright Tremaine, LLC. All three began the session with the explicit declaration that their mommas hadn’t raised no dummies, and that they had learned much from the general reaction to last year’s event. This presentation was a refinement and clarification of what they presented last year, with a focus this year on proactive business practices to protect your intellectual property, rather than legal action.
Since this approach was essentially what I’d ranted in favor of last year, I naturally am of the opinion that this year’s version was a giant, riotous success….

The seminar was broken up into several segments, the first ones dealing each with a specific kind of intellectual property protection. Sheila would define the segment and outline its legal implications. Riley would amplify business consequences, and Eben would add anecdotes or other context for the bar world. They would then conclude with a discussion of the best means of conflict resolution and, more importantly, prevention.

They began with patents. This is the most complicated, most laborious, most expensive, most lucrative area of intellectual property protection. It also has the least application in the cocktail world, so I will summarize the while thing thus: If you really do invent some new bar tool, machine, or culinary process, consult with a qualified IP lawyer. (And either get ready to dip into the vast reserves of accumulated capital most culinary types have built over their careers… or start sizing up your better-heeled customers as investors.)

The first legally registered trademark was for a booze product.

Next for discussion was trademark protection. Given much of the controversy on this subject of late, there was a real buzz in the room when we got to this point. I thought Eben did a good job heading off the crowd’s urge to make this topical by briefly addressing, then spiking any discussion of navy rums, bar syrups, or tiki bars. This was good, because there was a lot to go over here on a subject that has been pretty hot lately, is important, and is not well understood. For my part, I was glad to have some of my beliefs confirmed, and to discover that some other things that I “knew”, turned out not to be true. (Turn of phrase copied from Ronald Reagan, lest anyone think I’m being a plagiarist.)

Here’s my definition of trademark, as gleaned from this discussion and other reading: A trademark is a word or phrase, in some circumstances a logo or graphic, to which the holder is granted exclusive right of use in commercial speech in a specific arena of commerce to identify the holder’s goods or services. In some circumstances relating to well-known and long-standing trademarks, this protection can extend beyond the holder’s own commercial field to broader commercial speech. Trademarks are more of a living property than other IP protections in that they remain in force indefinitely, so long as the holder maintains and nurtures that property in certain specific ways. Finally, the societal good which justifies trademark protection is not property protection for the holder’s investment, but consumer protection. Trademarks exist to prevent consumer confusion in the marketplace.

One of the more famous, and complex, trademarks.

There were several key takeaways from this part of the session for me. First was that as a matter of practice, trademark is less an intellectual property protection as it is a marketing device. I felt confirmed in my main takeaway from my last post on this, that the negative marketing consequences of employing trademark protection in the cocktail industry may often outweigh any positive ones. Companies and individuals should think long and hard before they go around trademarking cocktail products, recipes, etc. The discussion never got around to the process of how or whether a particular trademark should be granted (e.g. Disney’s near-debacle with SEAL TEAM 6), and I apologize for not thinking to ask the question myself.

The second thing is that the “evergreen” protection of trademark protection is only maintained with a lot of fertilizer. It is not just a part of the requirements, but it is the responsibility of the trademark holder to actively monitor and guard the use of the trademark. Remember that trademarks are at their heart a consumer protection. The holder of a trademark only maintains it by ensuring what Sheila termed “quality control”. The point here is not that a holder has to make sure that everything sold under its trademark is “good” (we all buy crappy stuff with ® on it all the time), but that it is what the consumer expects when they see the trademark. Fulfilling this requirement requires active vigilance, and sometimes active measures, for as long as you wish to maintain the trademark. So, if you are Gus Tatory, private bartender in Peoria, you have every right and power to trademark your new Calcutta Cooler® cocktail if you like. Just expect to lose money every day you maintain that trademark yourself.

The last big thing to come out of this part of the session was a big clarification for me, regarding the aforementioned requirements of protecting trademark rights. In actual practice, the bright-line enforcement requirements of preserving a trademark we keep hearing about, and which holders keep brandishing in defense of bullying charges are not in practice so bright-line. The use of private contracts or licenses can provide protections for all sides in many disputes. Marginally infringing behavior does not have to be forbidden outright, every time, just to preserve the copyright. Minor considerations or even just a mutually-agreed upon disclaimer may be enough to settle many disputes in a manner that won’t result in a PR nightmare and damage to the very brand being protected. The only real requirement that I think overrides is ensuring that efforts are made to maintain that “quality control” in consumer expectations.

The last main segment of IP protection discussed was copyright law, with a healthy does of work for hire. Much of this segment was new ground, added this year in response to requests. Most of that, I’ll be covering in a separate post, as it pertained to journalists and writers, rather than the industry professionals targeted in the material I’m discussing here.

The big thing about copyright is that you can’t copyright recipes. As creativity in the bar industry becomes more and more valuable, this central fact continues to escape many professionals, and to rankle those who do understand it. So Gus Tatory from our example above can require Bob’s Bar on Central Park to make his Calcutta Cooler exactly the way Gus says it is to be made (through the use of trademark protection), but he has no way to stop them from using his exact recipe, and calling it something else. Nor can he get one red cent from them for this either. It’s not gonna happen, and whining about it is both bad business and bad for your stomach lining. And, since most of us are one good bitch session away from a peptic ulcer anyway, it’s a good idea to turn our eyes to what you can do to protect and profit from your ideas.

Not Shown: Actual amount of money to be earned creating cocktails….

Having outlined the traditional forms of raw Intellectual Property protections, Eben took a few moments to tell a parable. It starred… Eben Freeman.

Eben took a one year job with an establishment to design and implement a new bar program. Only a few months in, he had done his job well and the bar program was humming along smoothly. The menu worked. The bartenders were trained and capable of training replacements. In short, all the work had been done.

And the business terminated Eben long before his year was up….

Um, not to put too fine a point on it, but of course they did! Frankly, any business person who would not do this (given these raw circumstances) is unlikely to be a successful one. If a consultant or other contract professional has completed the work to be done, then they are dead weight going forward.

Back to the parable. Not only is Eben out several months of promised compensation, but all the work he did, all the ideas and creations he produced for the bar, is now the property of the bar, with no residual value owned by him. Most of what he produced, most of what anyone produces in the bar consulting (or any other consulting field for that matter) isn’t really protectable property through any of the above rights we discussed. First and foremost, you can’t protect recipes. And if there is anything of his work that might be considered ownable intellectual property, it doesn’t belong to him, it belongs to the bar. This is due to a concept called Work For Hire. Any idea, invention, or piece of passionate, purple prose you produce while on the job for someone else is by default the property of the employer.
[UPDATE: Sheila Fox Morrison has written me with a correction/amplification to the previous paragraph:

It would be important to note the if a person is a traditional employee (paid by the hour or on salary, with benefits, etc), the above underlined statement is true. However, it is the opposite if one is a contractor (project based, contractor is responsible for its owns taxes, no benefits etc). If one is a contractor all protectable IP is owned by the contractor unless there is an agreement to the contrary, but the hiring party likely will have a non-exclusive license to use all work product.

Thanks, Sheila. I’ll note that her response provides a useful example of what I’m saying below.]
In the end, Eben was left with a third of his expected pay and no residual value for all the work he did.
It’s a sad outcome… and it’s exactly the way things should have worked out… given Eben’s actions.

Yes, it’s cold.
It’s business.
We may love to think that the cocktail business is a congenial, collegial, friendly environment where gentlemen rule. But the facts are that it is an intensely competitive, low-profitability business segment where nice guys are likely to finish sitting on someone else’s barstool.

Please note, I am not suggesting that good business people should or do screw everyone available, as hard as they can, at every opportunity. Hollywood villains aside, in the real world acting this way often makes it hard to hire the next good person, and impossible to get a good night’s sleep.

But in Eben’s own story about himself, he wasn’t getting screwed. It was just sensible business. So why was he unhappy? Because, as Eben himself and his panel emphasized this year, Eben had been a bad businessperson.

A formerly bad businessperson speaks….

Eben has learned how to prevent, painlessly but painstakingly, virtually all of the ways this job failed to work out. He learned the hard, bloody way, and has been banging away at these IP sessions at Tales for two years now to help others get the same knowledge without the whole professional road-kill part of the learning curve.

The answers to the problems in Eben’s parable, and to most of the others that arise from the limitations discussed above in traditional IP rights are: Contracts and Licenses. A reasonably, intelligently crafted contract will put employer and consultant (or bartender or manager) on the same side, with the same expectations.

Eben took on a contract with project-based responsibilities, but time-based compensation. He did a bang up job on the job, so there was no need to pay him for more time than it took to do it. Had the contract specified that payment for the project was X, then Eben would have gotten X. It might have come in 12 monthly payments to accommodate a new business’s cash flow, but it would have been for the project, not 12 months of work.

And all the work Eben did became the property of the bar. The concept of Work for Hire bit him on the ass. But WFH is not absolute. A reasonably well-drafted contract can dictate any assignation of these rights. Do any new ideas, drinks, etc. belong to Eben? The Bar? Both?
Through a license, perhaps Eben owns them, but the business has an indefinite license to use them. Maybe the restaurant’s license requires Eben to not sell his ideas to any other joint in town, or for 18 months. Sheila made the point very clear that, “the great thing about a contract is that it can say pretty much whatever you want it to.”

And as I alluded to above, this doesn’t just apply to contract workers. Employment contracts can be crafted in the same way, preserving rights for the employee (or the business owner).
Of course, it is possible that one side in a contract won’t want to be a reasonable negotiator. This is absolutely fabulous, if you ask me. If a guy wants to be a greedy, unreasonable sonofabitch over your contract, what on Earth makes you think he’d be anything other than poison to work with? Go find a better job (if you are worth a damn yourself) and watch for whoever buys his assets when he goes bankrupt… a bankruptcy that won’t be spilling onto your reputation.

There was a tremendous amount more in this session than I can go over in this already over-long post. A last concept I’ll touch on in closing was advocated by both Riley and Sheila. One somewhat sure way to prevent your ideas from being copied is to go all Don Beach and Vic Bergeron. They can’t steal your stuff if they don’t know what it is. And if you must let employees mix your secret Fabulous Fandango, make them sign a non-disclosure contract as a condition of employment.
Of course, while keeping lots of secrets in the drinks world may make you seem an exotic force of nature, it also might leave you viewed as a colossal douchebag…. There are no truly free lunches.

The whole discussion was an incredibly useful and interesting hour and a half. If you missed it, I bet Eben will be doing some variation on it next year at Tales. The lost year you save may be your own.

  1. Rawim

    3 August

    excellent and informative.

    thanks for the work and time of putting this post together.

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  2. Tony Harion

    3 August

    Hey Doug!
    Right before you went into this session I knew great stuff would come out of it.
    Thanks for the great repost back, sounds like it was a pretty good talk.

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  3. DavidS

    5 August

    Great post, Doug. I’m actually kind of shocked that someone of Eben’s experience got himself into that situation.

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  4. Doug: As someone with experience of being a government contractor, this is why all project always take the maximum amount of time, right up till the deadlines.

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  5. Doug

    15 August

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