Deglobalisation and Tariffs – Risks and Opportunities for IP

In light of the ongoing economic and geopolitical uncertainty caused by tariffs, any imminent changes in the tax landscape will also impact IP assets owned by food and beverage companies. Read our analysis below on the risks and opportunities from an IP perspective, for EU based companies.

Deglobalisation and protectionism are terms that are increasingly used, with the imposition of, and changes to, tariffs between the US and its trading partners.

When tariffs are imposed, they create issues with pricing, supply chains, and ultimately consumer choice. These changes also impact intellectual property assets owned by companies. We consider the key impacts from an IP perspective on food and beverage companies in the EU.

What are tariffs?

Tariffs are a form of tax. They are applied on imports from other countries, and are used to boost revenue and in turn, in theory, domestic economies. The idea behind the imposition of tariffs is that where imported goods cost more than the same or similar domestically produced goods, consumers will be encouraged to purchase from domestic producers of those goods. However, history tells us that tariffs often lead to higher prices for consumers in the country imposing the tariffs.

How do tariffs affect IP?

Some products and services are less sensitive to price changes as customers will still purchase them at increased prices. However, food and beverage goods are particularly impacted by deglobalisation strategies through tariffs. Many grocery items, such as butter, for instance, are available locally and customers will only tolerate an increase in price to a certain level before they substitute the product.

The imposition of these measures forces companies to rethink their supply chains and markets. This can create new opportunities as companies in the EU look at alternative markets to supply their products.

New markets and IP protection

Countries such as Canada, which have trade agreements like the EU-Canada Comprehensive Economic and Trade Agreement, are increasingly attractive to EU food and beverage companies. This should result in a surge of trade mark, patent and design applications in the likes of Canada. Similarly, China may become a more attractive market for EU and UK companies to export their products. There is also increasing interest in the Arab world, particularly in the food and beverage industry. This is due to the large proportion of imports in many of these countries. Saudi Arabia, for instance, imports over 80% of its food needs.

An EU trade mark will protect a brand throughout all EU Member States. While most companies in the food and beverage industry register their trade marks as EUTMs rather than national trade marks, this is not always the case. The EU market is one of the largest single markets in the world, so EUTMs should be sought as far as possible. This applies equally to companies outside of the EU who may also be looking at alternative markets due to tariff measures.

Licensing strategies

A good IP protection strategy could also assist with mitigating issues caused by tariffs. For example, certain IP could be licensed to local partners in a country that has imposed tariffs, so that products could be manufactured locally. If a company has already registered its trade mark in the US, it could license it and other relevant IP to a third party to produce its product within the US as required. This will, of course, depend on any other tariffs being imposed on the likes of royalties. Licensing agreements should be carefully drafted to address these issues.

Food and beverage companies should carefully consider whether protected food names or geographical indications are relevant before adopting any licensing strategy with overseas manufacturers.

Counterfeit goods

Tariffs can also lead to an increase in counterfeit goods. As the genuine product becomes more expensive, counterfeits can hit the market. While this may affect food and beverage products less than other products, such as luxury fashion, it is still a risk and companies need to monitor for this.

What should food and beverage companies do?

In the midst of the ongoing economic and geopolitical uncertainty caused by tariffs, food and beverage companies should focus on their IP when reconsidering their business strategies, including the following:

• Review IP portfolios and consider current filing strategies.
• Consider whether you need protection in any new countries or markets you are planning to enter. Keep in mind that some countries, like Canada, can take some time to register trade marks, so take action early.
• Appropriate clearance searches should be carried out before launching new products or brands in new territories to avoid infringement issues.
• Before expanding into new regions, you'll also need to think about changes to product packaging, or indeed product composition as well as language and transliteration issues.
• Consider whether there are new IP licensing possibilities to provide for local production by third party manufacturers.
• Existing IP licences should be reviewed in case any renegotiation is necessary.
• Consider your medium to long term IP strategy. Some measures being considered by the US could affect IP revenue and location of IP. However, we have already seen changes in policy regarding tariffs in the US. Moving IP between countries is a considerable undertaking and countries like Ireland, as an EU base, will continue to be attractive as a location for IP.
• As patents and trade marks take a long time to become registered in the US, the US market should not be ignored for new applications. This will future-proof the business, given the possibility of further changes to US trade policy.
• Engage with customs authorities, where relevant, to seek to reduce the risk of counterfeits.
• Keep a close eye on policy changes that could affect your business and its IP, and be ready to adapt as needed. Take action quickly to enforce IP rights when infringement is encountered.

Conclusion

Maintaining a diverse market mix including IP in various countries, will strengthen the business’ resilience. This helps protect against deglobalisation measures taken by individual countries.

Lastly, if additional financial support becomes available through local government initiatives, businesses should not overlook the importance of securing and maintaining IP protection. This is especially important in domestic markets to safeguard valuable product packaging and brands.

For more information and expert legal advice on how best to protect your intellectual property rights, please contact a member of our award-winning Intellectual Property team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.