Caterpillar Inc. Bullies Cat And Cloud Coffee Shop Over Its Store's Apparel

from the who's-confused? dept

One of the more frustrating aspects of the intersection of trademarks and business is how blind the law seems to be when it comes to recognizing the primary market in which a company operates. This is specifically an issue when it comes to merch and apparel, as many companies build up brand loyalty in their primary markets and then also move to sell clothing to those loyal fans. This all makes sense until these same companies get the USPTO to grant overly-broad trademarks for those ancillary markets, which are then used to bully smaller companies with the excuse being, "Hey, we have to protect our marks, or we lose them."

A perfect example of this is the dispute currently going on between Caterpillar Inc., famed makers of tractor equipment and the like, and Cat & Cloud Coffee, which slings java.

The large corporation has trademarked "CAT" and has taken legal action against the small business to stop them from using it. Owners of the small business say they first received the letter in August of 2018.

"It seemed ridiculous. So, we responded and got a lawyer,obviously," said Jared Truby, co-owner of Cat and Cloud Coffee. "We asked them to further explain their case, asked them to drop it as we are in a completely different industry. They didn't want to, so we went back and forth a few times and called them out for bullying."

Truby says when they opened the shop almost three years ago, they couldn't have predicted something like this happening.

"Could anybody imagine a $54 billion machinery company coming after a coffee company? I don't think that's even in the cards," said Truby. "The first biggest thing they want us to do is not print the name Cat and Cloud on anything again. I think that is unbelievable. I don't think that's going to hold up."

For its part, Caterpillar has pushed back on the outcry over this, pointing out that the only trademark it is disputing is Cat & Cloud's use of the word "cat" on merch and apparel, as Caterpillar sells an absolute ton of this stuff itself. It's an attempt at claiming its being reasonable, but it very much is not.

First, a trademark on the the acronym "CAT" is plainly insane if it's going to be used against apparel that uses the word "cat." I would hope that is obvious to everyone. Such a generic trademark is simply not justified. On top of that, the coffee shop's use of the word is a reference to a literal cat. The CAT mark, on the other hand, is a reference to a caterpillar. So we're not even in the same taxonomic family. As you might expect, the branding on Cat & Cloud's apparel looks nothing like Caterpillar's.

It all kind of has that cutesy motif that is well suited for a coffee shop with a cute name and terribly suited if you're trying to fool the public into thinking you're a tractor company. Nobody looking at anything the shop sells on its site is going to somehow think Caterpillar is involved.

Which doesn't mean the bullying won't work. As is always the case in situations like this, the expense to defend itself could force Cat & Cloud's hand.

"I guess the good news is if somebody is intimidated by our small little company in Santa Cruz, it means we're doing something right," said Truby. "It leads me to believe we're doing something that's far more important than I can see right now."

Truby says they've spent nearly $10,000 already dealing with this case. He says not being able to sell apparel for extra income will have an impact on both employees and the business.

Here's hoping they get the support to stick this out. Or that someone at Catepillar gets a whiff of this and wants to craft a PR win for itself by ceasing this bullying behavior.

Filed Under: bulldozers, cat, clothing, coffee, construction equipment
Companies: cat & cloud coffee, caterpiller

Trademark Dispute Between Coffee Companies Over 'Detroit' Trademark Demonstrates The USPTO's Carelessness

from the motor-city-mayhem dept

It bears repeating: far too many of the trademark disputes we cover here at Techdirt are in large part the fault of a USPTO all too willing to grant trademarks on terms that are overtly either broad or based on geography. One would hope that it went without saying that trademarks, designed to inform the public as to the source of the products they buy, cannot work to that end if the identifying marks are not specific or original within the marketplace. Yet the Trademark Office too often doesn't seem to consider this when rubber-stamping applications.

For example, there is currently a trademark dispute going on between two coffee companies over the name of the city of "Detroit."

A local company’s Detroit-branded java doesn’t jive with an East Coast entity that claims it was the early bird in the Motor City joe business.

But the target of the complaint insists the Dec. 22 lawsuit filed by New York-based Detroit Coffee Co. is nothing more than a shakedown.

“This is a Wall Street-versus-Woodward type of mentality,” said A.J. O’Neil, owner of Hazel Park-based Detroit Bold Coffee Co. “They think the little guy will fold.”

Detroit Coffee Co., a Michigan LLC with a New York City address, filed a complaint alleging trademark infringement against Detroit Bold. It demands a jury trial in U.S. District Court for the Southern District of New York.

It's only through the absurdity of granting a trademark on something like "Detroit Coffee" to begin with that you can generate a reality that includes a New York City business suing a Detroit-based business over the name of a city combined with the name of a common product. When considering trademarks that incorporate geographic names, the bar for infringement is supposed to be much higher. And, should the case move forward, perhaps that higher standard will be applied, but it's still worth considering whether a trademark like "Detroit Coffee" ought ever to have been approved in the first place. After all, whatever the resolution in court ends up being, the monetary burden on such legal action isn't meager.

“It’s not like I have all this extra income to hire a big legal team and go (to New York) to fight this,” he said. “Those folks in New York are conjuring up something that at best has no merit.”

Adding to the strangeness of this particular case is that Detroit Coffee allowed its trademark to lapse until 2016, when it re-registered after Detroit Bold Coffee trademarked its two logos for "Detroit Bold Coffee Company."

O’Neil told The News he and his attorney, Mark Schneider, haven’t seen any evidence that Detroit Coffee actually sells any coffee under the Detroit Coffee name, or has ever sold coffee or other merchandise branded with that name. The trademarks the company pulled in the early 2000s were dead at the time Detroit Bold registered new logos bearing “Detroit Bold Coffee Co.” in early 2016, according to trademark office records.

Detroit Coffee renewed trademarks on the “Detroit Coffee” name for use on brewed coffees, teas and beverages on April 14, 2016, roughly two months after O’Neil registered two logos bearing the words “Detroit Bold Coffee Company.”

If true, that would seem to leave Detroit Bold Coffee in the clear, except it still would have to take on the burden of the court case. Which means this is all still ultimately the fault of a USPTO too willing to liberally approve trademarks.

Filed Under: coffee, detroit, trademark, uspto

Caribou Coffee Learns That Even When You Win As A Trademark Bully, You Can Still Lose

from the backlash dept

Whenever we talk about trademark bullies, especially those aggressively pursuing smaller businesses on shaky claims of brand confusion, a common question arises: what can we do to make this kind of thing stop? There are potentially several answers to this question, but one of the most simple is to behave in a way that makes trademark bullying a bad business decision.

Take Caribou Coffee, for instance. America's second-largest coffee retailer recently sued a tiny Michigan business called Blue Caribou Cafe, which is exactly the kind of small-market coffee and diner that you're picturing in your head right now. Caribou Coffee won its lawsuit, meaning that Blue Caribou Cafe will have to change its name, its branding, its storefront signage, and pay some $5,000 in attorney's fees. The basis for the lawsuit was the claim by Caribou Coffee that customers would be confused by the similar nature of the two names.

Well, those same customers are now speaking up, as they are mighty pissed off at Caribou Coffee's actions.

Comments on social media show that fans of the cafe and of small businesses generally are unhappy with Caribou Coffee for bringing the legal action, and some said they would boycott the company’s stores and products. Some of the strongest criticism has been posted on Caribou’s own Facebook page.

Those comments posted on Caribou Coffee's own Facebook page are about what you'd expect.

So, the question is whether this trademark bullying was worth it for Caribou Coffee. We can dispense with any debate over the validity of the company's legal action, I think. Pimping some kind of customer confusion between the massive retailer and a local coffee shop and diner is beyond silly. The company trotted out the tired excuse claiming that trademark law required them to do all of this, which isn't true. So, in light of all that, and in light of what has been a pretty clear public backlash from the very people whom it claimed would be confused, was the bullying worth it for Caribou Coffee?

It's hard to imagine that it was. Already the company is doing some scrambling to try to put a PR lid on this whole thing. For example, the business formely known as Blue Caribou Cafe started a GoFundMe campaign to get funds for all the rebranding it must now do, and Caribou Coffee contributed to it. That's nice, but all that does is add more to the cost of taking the unnecessary legal action to begin with. Here's the question to ask: how many customers did Caribou Coffee gain with its trademark lawsuit, and how many did it lose?

It seems clear B is greater than A in this case, which makes this whole thing a net negative for Caribou Coffee. Perhaps next time it will think twice before trying to bully a local small business.

Filed Under: caribou, coffee, trademark
Companies: blue caribou cafe, caribou coffee

DailyDirt: Getting A Caffeine Fix Any Way You Can...

from the urls-we-dig-up dept

Some people are seriously addicted to caffeine. Maybe you get headaches if you skip a morning cup of coffee or experience other symptoms of withdrawal, but if you've built up an extreme tolerance, you might need to start incorporating it into other habits. We've mentioned a few other products that come with a dose of caffeine, but here are a few more to try if you're a real caffeine junky.

• If you can't be bothered to brew your own coffee, maybe you'll find chewable coffee snacks more to your liking. Gummy-bear-like chewables called Go Cubes deliver 50 mg of caffeine per cube, and two cubes apparently will give you a caffeinated kick for 4-6 hrs (presumably depending on your tolerance). The taste isn't described like candy, so it's a bitter coffee treat that kids probably won't like too much. [url]
• If you're planning to kill someone with an overdose of caffeine, you might want to buy some caffeinated peanut butter. STEEM Peanut Butter has 170 mg of caffeine per 2 tablespoons, so be careful how you make your PBJ sandwiches. [url]
• Power Energy Toothpaste will make your mornings brighter after a Daylight Savings Time change -- with 80 mg per ml of toothpaste gel. The Indiegogo campaign for Power Toothpaste has been funded, so if you really need a caffeine fix as soon as possible in the morning, you can try this stuff. But maybe you should make sure you don't brush your teeth with it right before you go to sleep at night. [url]

After you've finished checking out those links, take a look at our Daily Deals for cool gadgets and other awesome stuff.

Filed Under: caffeine, chewables, coffee, food, go cubes, peanut butter, power energy toothpaste, self-medication, toothpaste
Companies: indegogo

CEO Of Mobile Company Blames Everyone For Wanting Coffee Rather Than His Game

from the buy-my-game,-you-ungrateful-fucks! dept

As happens periodically and predictably, a person who created something but hasn't seen the financial return he anticipated is now blaming the public for his financial woes. It's nothing this game developer did wrong -- according to him -- it's everyone else. They all want stuff for free. (h/t Techdirt reader Sneeje)

A mobile game my team and I poured our hearts and souls into is receiving rave reviews from users. The game, Battlestation: Harbinger, was featured by both Apple and Google as one of the best new games in their respective marketplaces.

You may think that congratulations are in order. You might think that my team and I popped some Champagne and headed out on a well-deserved vacation. Unfortunately, that isn't the case. Even with these successes, my company and I are in the red, desperate to bring in more money before we have to lay off our workers and close our doors for good.

These are the words of Aksel Junkilla, the CEO of the company behind Battlestation:Harbinger. Complaints about mobile gaming are often inseparable from complaints about casual gamers and the games that cater to them. Everyone supposedly wants everything for free, which is why so many game developers have taken the "free to play" route. Game development is subsidized by a small percentage of users who will dump hundreds or thousands of dollars into the game while the other 99% play for free. It works, to a certain extent, but it also relies on large, loyal userbase.

But that's not the only problem with Junkilla's arguments. They're also premature. Any market can be unpredictable, but markets with limited data are even more so. Console gaming has been around for more than 40 years. PC gaming has been around even longer. But full-fledged mobile gaming has only been around for two decades, and its first decade or so bears almost no resemblance to today's market. To complain about the state of mobile gaming in 2015 is like complaining about the state of the motor vehicle market in 1920. The market is still mostly unexplored and, like any other creative endeavor, what works for some will not work for others. But that hasn't stopped the complaints.

Creators often talk about the internet and other democratic distribution platforms as being responsible for the "devaluing" of creative efforts. But one of the first things this game developer does in his rant about mobile gaming is devalue his own work.

You see, we have a problem in the mobile gaming sector, thanks to you. You would rather buy a pumpkin spice latte a few times a week and enjoy it for a few minutes than buy a game that you can play as long as you would like. In order for creative games to be made, there needs to be a major culture shift. We need to be willing to spend a few dollars on a quality app, rather than for a few extra lives or other in-game purchases.

When you open your rhetorical arguments by comparing your game (which is apparently "worth" far more than people are willing to pay) to a cup of coffee, you're doing your work a disservice. A game shouldn't be compared to a cup of coffee just because the two are similar in price. The rough analogy may seem like it works, but all it really does is signal you feel your game is comparable to cups of coffee and yet somehow more deserving of people's spare income than the local coffee shop.

If that's the argument, this is the rebuttal. Here's Rob Fearon, a game developer in his own right, but one you'll never see arguing that the (potential) customer is always wrong.

What if I didn’t spend that money I’m supposed to save for an app on a coffee. I mean, that’s possible because I don’t even like coffee.

What if I spent £2.99 or whatever…

on food to eat because I need to eat?
on milk or a bottle of juice or two or a Ribena or something?
going towards a pack of nappies for my youngest or some wipes or something?
bus fare to the hospital?
train fare to see my relatives or friends?
or most of it anyway on a Big Issue?
some great tunes I can listen to for years to come?
a comic or a magazine I enjoy reading?
some second hand books?
some new books!
someone else’s videogame because I didn’t like the look of yours? Like Spellbound. I paid £2.99 for Spellbound. Do past purchases even count or is this a modern malaise where it’s only apps or coffee?

Junkilla's inability to see beyond his own price point -- one he had decided was "fair" before "consulting" the buying public (by offering it for sale) -- stunts his own argument. As Fearon points out, mobile game purchase decisions aren't binary. It's not THIS APP or THIS LATTE. It's this app or any number of things that seem more worth the cost. But Junkilla wants to believe the world is keeping him from doing what he loves because they can't stop throwing away their money on spiced lattes.

It could be any other small expenditure, but for some reason, people seem to want to compare [insert thing for sale here] to cups of coffee. Fearon's list is far more expansive and it takes into consideration the fact that humans have many things to spend money on and each person will make decisions based on subjective value -- rather than the "use anywhere" objective value Junkilla seems to believe exists.

And when Junkilla finally moves on from criticizing his potential customers for blowing money on coffee rather than on him, he moves on to indirectly blame them by complaining about free-to-play games and what they've (supposedly) done to the robust market he assumes would be there if not for Clash of Clans, etc.

Even apps that find success in their marketing campaigns cannot make up the money spent on development because people would rather spend $5 on a latte every other day than on the app. Why? Because the most popular games are free-to-play, with a monetization model that lets most players play for free while milking some customers for thousands of dollars.

Junkilla blames people who prefer lattes to his game. He blames people who prefer free-to-play to pay-up-front. He blames bogus reviews left at Google's Play store that rate his game lower because it's not cheaper. He blames popular culture for being popular and generally being more successful than niche offerings like his own. Everything about mobile gaming -- as it exists now -- is the problem. Nothing about his lack of success can be traced back to him or his game… at least according to him.

A review of the comments, however, uncovers a variety of reasons why people may be unwilling to pay the price he's asking, none of which have anything to do with discretionary coffee spending or wanting everything for free.

adambaranek
I would gladly play console game prices for a console game experience.

Brill
Me too. On a console.
I have zero interest in playing Zelda on my phone. Because I don’t use my phone that way. I use my phone for short, distracted, frequently interrupted gaming sessions. If I’m going to sit down and play through a console/PC level game, I’m not doing it on my phone.

[...]

Troy_Costisick
Mobile is still too fluid an ecosystem to expect people to go for premium games right now. Players are limited by ram, storage, download speeds, data limits, screen size, and social footprint. Until tablets/smartphones stop changing so much every 12 months, developers aren’t going to have any idea what kinds of games they can develop and consumers aren’t going to trust anything except free because they’re either upgrading their device so often or dropping the stupid thing on the pavement and cracking the screen in a million places.

There just isn’t enough stability in the hardware to give the author what he wants in the marketplace. When you buy a console or a PC, you’re going to keep it for years. You buy a Kindle or an iPhone and you’ll upgrade it in 12-24 months.

This is a just a small sampling of responses. Other issues brought up are fluky mobile control schemes and phone screen sizes frequently not being optimal for "console-level" gaming. Then there are comments from other game developers, one of which points out the folly of complaining about how the only way to make money is to go "free-to-play" while simultaneously demanding the rest of the world come around to your way of thinking, rather than going where the money actually is.

By the time Junkilla arrives at his conclusion, he's contradicting himself.

Gamers need to learn to vote with their money. This will allow developers to build the great games that everyone wants to see on the expanding mobile platform.

And yet, when the wallet voting occurs, Junkilla is right there to complain about the tallied votes. The public has spoken and his game apparently won't make him rich, much less allow him to break even. THESE THINGS HAPPEN. But they are not symptoms of a severely damaged system.

Finally, Junkilla's implies that his game's critical success should result in commercial success, despite the entire history of cultural and creative efforts showing these two elements rarely go hand-in-hand.

As has been famously noted, the Velvet Underground never sold many albums, but every album they sold resulted in someone starting a band. At any pop culture site, you can find multiple lists of TV shows critics loved but only survived a few seasons because the general public was less impressed. The movies with the best reviews aren't the ones racking up hundreds of millions in ticket sales. Studios behind universally-acclaimed games have closed up shop.

That's the way it goes. It's still a relatively untested market and no one has all the answers. Junkilla, however, doesn't even have the right questions. Attacking potential customers and blaming them for spending their money elsewhere is no way to grow a business. The world isn't just gaming apps and cups of coffee. Connecting the two just because it's an easy way to compare prices does a disservice to both your argument and the public.

Filed Under: aksel junkilla, apps, battlestation:harbinger, blame, business models, coffee, demand, economics, supply

Keurig CEO Sort Of (But Not Really) Apologizes For Company's Ridiculous Foray Into Obnoxious Coffee DRM

from the We're-sorry-for-being-a-little-too-innovative dept

You'll recall how last year, Keurig Green Mountain created a surprising, negative public relations tsunami with the news it would be using a form of "coffee DRM" in its latest Keurig 2.0 coffee maker. The new technology basically prevented anyone from being able to use refill pods from competitors, or any of the more environmentally-friendly, more cost-effective refillable pods available online. Company CEO Brian Kelley and Keurig's marketing department then made matters dramatically worse when they tried to claim the ham-fisted market lockdown was "critical for performance and safety reasons."

The story got notably more amusing when "hackers" started defeating the company's DRM measures with rather low-brow hacks consisting of pieces of Scotch tape. Competitors similarly began either developing pods that quickly defeated the embedded technology, or gave away plastic clips that confused the system into accepting competitors' pods. In short, what Keurig thought was a clever way to lock down a market and make extra money, wound up making the company look like a tone-deaf, anti-competitive, mechanical dinosaur powered by over-caffeinated nitwits.

A little more than a year after the embarrassing saga began, Keurig appears to finally be beginning a not-entirely graceful about-face on the matter. After the company's stock took a notable nose dive and sales of brewers and accessories dropped 23% last quarter, Kelley claims he's now seen the error of his ways. Sort of.

Reading the actual transcript of Keurig's latest earnings call, Kelley still can't help but minimize the backlash as the concerns of a "small percentage" of "passionate" users. Meanwhile, while Keurig focuses heavily on the fact it was wrong for pulling the company's own, reusable "My K Cup" from the market, the fact Keurig tried to bulldoze its way to market domination via obnoxious, heavy-handed DRM is, as you might expect, downplayed dramatically:

"I would tell you the other thing we heard loud and clear from the consumer while very small percent of consumers, a very vocal and intense, passionate consumer who really wanted the my K-cup back, what we learned that it’s important the message and the signal that it sends, the ethos that it sends is that we want consumers to be able to brew every brand, any brand of coffee in their machine and bringing the my K-cup back allows that.

...My K-cup wasn’t going to work with a new system as the new system had to identify the pod versus a carafe, so we took the My K-cup away and quite honestly we’re wrong. We missed, we didn’t – we underestimated, it’s the easiest way to say, we underestimated the passion that consumer had for this. And when we did it, and we realized it, we’re bringing it back because it was we missed it. We shouldn’t have taken it away, we did. We are bringing it back.

So yes, while it's great to hear the company admit it was "wrong," Kelley only admits to being wrong for pulling Keurig's own reusable pod from the market, not necessarily for trying to block all competing products -- or for spending a year trying to argue that the ridiculous foray into DRM was necessary for the safety and security of Keurig's products. Meanwhile it's still apparently going to take Keurig until Christmas to re-introduce its own, refillable pod, and, contrary to media coverage, there's no clear statement here that the company's planning to back away from coffee DRM entirely. Still, it's at least a partial victory, and Keurig's sort-of-mea-culpa is the perfect way to belatedly celebrate this week's International Day Against DRM.

Filed Under: brian kelley, coffee, coffee drm, drm, keurig
Companies: green mountain roasters, keurig

Keurig Competitor Offers Free Hack Workaround For Keurig's Absurd Java Bean DRM

from the you-do-it-to-yourself dept

We've of course been covering for some time Keurig's attempt to lock down the coffee pod market via the "java DRM" it embedded in its latest Keurig 2.0 coffee maker. The technology effectively tries to stop consumers from being able to use competitors' replacement pods (or the reusable pods), something the company's CEO originally (and quite feebly) tried to insist was necessary for the performance of the product and safety of the consumer. Not surprisingly, the effort resulted in a lot of mockery and a number of lawsuits, and it didn't take long for consumers to figure out ridiculously simple ways to beat the technology.

In an entirely new level of entertainment, Keurig competitors have now taken things one step further, and are giving away free Keurig 2.0 hacks that allow consumers to use whatever pods they like. Rogers Family Company Coffee and Tea's new plastic "Freedom Clip" simply attaches to the inside of the maker and fools the embedded scanner into believing all inserted coffee pods have been sanctioned by the great Keurig coffee authorities on high:Granted you can do the same thing with a piece of tape, but it's a more permanent and convenient solution for those who still insist on using a Keurig (instead of a traditional espresso machine like a civilized person). Rogers is, of course, milking Keurig's ham-fisted attempt at market dominance for all it's worth over at the company website:

"It does this by visually identifying a special ink on the lidding. Any cup without this “special” ink is rejected by the machine thus ensuring Keurig’s marketplace dominance. While other companies are quickly working to adopt this special ink to their cups we at Rogers Family Company believe that your right to choose any option is imperative...This clip is our gift to you. Now go forth and brew with freedom."

So really, all Keurig managed to accomplish with its ham-fisted java-bean DRM is make itself look incompetent and greedy, while at the same time giving competitors a massive new marketing opportunity by offering choice and freedom back to Keurig customers. Surely these lessons will be reflected in Keurig 3.0, right?

Filed Under: advertising, coffee, drm, hack, keurig
Companies: green mountain roasters, keurig, rogers, rogers family company coffee and tea

Keurig's Controversial Java 'DRM' Defeated By A Single Piece Of Scotch Tape

from the kids-these-days-just-like-a-challenge dept

You'll recall that earlier this year, news leaked out that Keurig's latest pod-based coffee maker (Keurig 2.0) would come complete with the java-bean equivalent of DRM, preventing the device from using third-party pods -- or reusable pods that allow users to simply use regular ground coffee. After the story gained traction, Keurig quickly went into damage control mode, insisting that the DRM was necessary to bring consumers "interactive-enabled benefits." The company's CEO then compounded the silliness, issuing a statement claiming that the DRM was "critical for performance and safety reasons."

By summertime, those claims had all proven to be bunk, lawsuits had arrived and competitors had figured out how to crack the DRM's code, allowing them to once again manufacture pods for the new units. By last month, consumers had started figuring out ways to bypass the DRM using magnets or other modifications, something the company recently claimed was simply because people really like a challenge and overcoming hurdles:

Frustrated coffee drinkers who have "hacked" their way around pod roadblocks built into the new Keurig brewers may just be looking for a hurdle to overcome, says the president of Keurig Canada Inc. "There are some, when you give them a challenge, they'll really get at it," Stephane Glorieux said in an interview Monday."Whatever you throw at them, they'll find some way of doing it."

As it turns out, some folks have found that all it takes to defeat the DRM is a single piece of Scotch Tape (and a previously-used official k-cup):Of course you (and your piece of tape) are the very worst sort of villain for violating anti-circumvention laws, even though it's Keurig that's engaged in anti-competitive behavior and making customers jump through hoops. Meanwhile, annoyance at Keurig has been gaining momentum the last few months in Canada, with a growing number of competitors and smaller companies filing formal complaints with Canda's Competition Bureau. This includes companies interested in making biodegradable pods to help tackle one of the worst parts of the pod coffee craze: the environmental impact of millions of plastic k-cups.

Filed Under: circumvention, coffee, drm, keurig, scotch tape, technology protection measures
Companies: green mountain roasters, keurig

Awesome Stuff: Coffee, The Other Kickstarter

from the morning-routine dept

For this week's awesome stuff we start your Saturday out the right way: with some coffee. Or, more accurately, some new crowdfunded coffee makers, divided into three categories.

Keep It Simple!

My main objection to the pod-style coffee makers that have exploded in popularity, before the DRM or the price or anything like that, is the unnecessary complexity. It irks me to see the brewing of a simple cup of coffee require a barcode reader when there really are only two ingredients and one simple step to perform. That's why I'm glad to see the growing trend of simple "pour-over brewers" that are just a stand, a funnel, and a splash of good product design.

For the individual, there's the bamboo POUR brewer or the more portable Coffee Gourmet (with a built-in filter). If one cup at a time isn't enough, there's the double-sized Pour Lab, which lives up to its name with a cool chemistry-set look. For the commercial coffee brewer, there's the Poursteady station with five cups and some automated assistance.

Keep It Cold!

If you live where I do, this isn't the best time of year to be talking about iced coffee. But, if you're going to drink your coffee cold, you should brew it right, not just chill and dilute some near-sludge you cooked up earlier. The Fridge Barista seems like an excellent solution to the challenge of cold-brew coffee: it sits in your fridge where it brews, filters and stores the coffee all by itself, so all you need to do is open the tap. For those who want the best of both worlds, there's the Brewover — much like the pour-over brewers above, but with a glass funnel and a drip control valve to allow brewing at any temperature.

Make It Smart!

Yes, I started out praising simplicity in coffee makers — but I'm all for innovation when it actually brings improvements. Those who really want the automation, ease and technological precision of a push-button brewer can at least avoid locking themselves into the K-Cup regime with the Arist, a smartphone-controlled smart brewer that grinds, weighs and brews the coffee while giving you fine control over each setting at each step. There's another, similar offering — the BRUVELO — that's worth checking out too.

Filed Under: awesome stuff, coffee, crowdfunding

Antitrust, DRM & Coffee: Is It Illegal For Keurig To Lock Down Its Brewers?

from the the-k-cup-dilemma dept

Even before the landmark United States v. Microsoft Corp. antitrust case, competition law was a bit schizophrenic when it came to the question of interoperability. Monopolists have no general duty to make their products work with those of competitors, but what about the situation where a dominant firm deliberately re-designs products to render them incompatible with others? That is the provocative question raised by several pending antitrust lawsuits filed against Green Mountain Coffee, manufacturer of the Keurig line of single-serve coffee makers and coffee "pod" products.

TreeHouse Foods alleged in a complaint last winter that after its patent on "K-Cups" expired in 2012, Green Mountain:

abused its dominance in the brewer market by coercing business partners at every level of the K-Cup distribution system to enter into anticompetitive agreements intended to unlawfully maintain Green Mountain's monopoly over the markets in which K-Cups are sold. Even in the face of these exclusionary agreements that have unreasonably restrained competition, some companies, such as TreeHouse, have fought hard to win market share away from Green Mountain on the merits by offering innovative, quality products at substantially lower prices. In response, Green Mountain has announced a new anticompetitive plan to maintain its monopoly by redesigning its brewers to lock out competitors' products. Such lock-out technology cannot be justified based on any purported consumer benefit, and Green Mountain itself has admitted that the lock-out technology is not essential for the new brewers' function.

In the consolidated multi-district litigation that ensued, Green Mountain is specifically charged with designing a so-called "Keurig 2.0″ brewer which features technology that allows it to detect whether a coffee cartridge is one of Keurig's K-Cups or is made by a third party that does not have a licensing agreement with the company. The machine will not brew unlicensed coffee pods.

The federal court overseeing the MDL cases denied the plaintiffs' motion for an injunction on procedural grounds in September, issuing an opinion which reasoned that commercial success of the "2.0" brewers was uncertain and that coffee competitors would still have open access to some 26 million Keurig "1.0" machines for several years. In other words, the court did not reach the merits of the monopolization claim against Green Mountain.

So where does that leave Keurig? As Ali Sternburg observed before revelations of its new 2.0 technology, Green Mountain's prior 20 years of patent protection allowed the company to build a competitive advantage by "cultivating its brand (which likely involves trademark protection), honing its supply chain efficiencies, and generally maintaining its dominance due to having the first-mover advantage." More than ten years before those patents first issued, moreover, the federal courts had ruled that new product introductions by monopoly firms — in one well-known instance, Kodak — would not be considered an antitrust violation because "a firm that pioneers new technology will often introduce the first of a new product type along with related, ancillary products that can only be utilized effectively with the newly developed technology."

So-called technological ties exist all over the tech world, from smartphone apps that work only with a single website, to PC printers that only accept chip-enabled ink cartridges from the printer manufacturer, to proprietary media DRM protocols such as Apple's AAC format for music, to Sony's failed attempts at proprietary flash-memory stick technology. Yet there's a profound difference between designing a new photographic system like the then-revolutionary Instamatic II in 1978 (subject of the Foremost Pro Color decision quoted above) and re-designing an existing product line to disable competitive substitutes.

The Verge called Green Mountain's tactics "locking down its coffee makers to keep out cheap refills." And despite world-class defense counsel, little that Keurig has said so far connotes serious efficiency or product quality advantages to its pseudo-DRM approach to coffee pods. If those are the facts, the courts will be forced to face the competitive merits of the MDL plaintiffs' claims in circumstances in which innovation, the keystone of the doctrine permitting technological tying, is notably absent. Conversely, the first antitrust competitor, TreeHouse, announced in August that it had successfully reverse-engineered the Keurig 2.0 system so that its coffee pod products "will work in both existing and next generation coffee makers manufactured by the leading supplier of personal at-home brewing systems in the United States."

Which is it, innovation or predation? Certainly it is impossible to judge from afar or to make generalizations. Under the burden-shifting legal approach to monopolization claims laid out by the Microsoft courts, proof of exclusionary effects require a Section 2 defendant to come forward with a procompetitve rationale for the challenged practices. Keurig claims its pod-detection interactive technology allows 2.0 coffee makers to determine which type of package (including Vue-packs, an earlier Green Mountain technology for larger brew sizes and more intense flavors that never achieved commercial success) has been inserted and offer up the appropriate user interface. "Keurig 2.0's interactive technology is Keurig's platform for future innovation," write the company's antitrust lawyers.

As the law stands today in the U.S., antitrust courts recognize that whether any particular act of a monopolist is exclusionary, rather than a form of vigorous competition, can be difficult to discern: "the means of illicit exclusion, like the means of legitimate competition, are myriad." Faced with conflicting evidence and a non-pretextual claim of efficiencies, the MDL court will therefore be required to balance good versus bad — that is, determine whether "the anticompetitive harm of the conduct outweighs the procompetitive benefit." That's a tall challenge in the case of Keurig.

Yet it is also one at the cutting-edge of competition law that presents serious ramifications for disruptive innovation. Could Uber be required as an antitrust matter to open its system to Hailo drivers? Is Twitter liable to TwitPic for integrating its own photo-posting function into the 140-character tweet service, thus effectively putting some third-party companies out of business? Are Microsoft, or Google, or Apple required to open their APIs to competitors or, once opened, legally prevented from reverting to a closed ecosystem? Those are competition questions that cannot, and should not, be answered based on either a 30-year old case involving Instamatic cameras and film or a 15-year old case involving Windows '95 and Internet Explorer 1.0.

In another context, American courts have long held that First Amendment protection for the free exercise of religion means the judiciary cannot assess whether a belief system that claims to be a religion really is one, because courts lack the basic competence to make such judgments reliably. One could often say the same thing about competition analysis, since differentiating innovation from exclusion is fraught with dangers. One court of appeals has held, as a consequence, that

[t]here is no room in [antitrust law] for balancing the benefits or worth of a product improvement against its anticompetitive effects… There are no criteria that courts can use to calculate the ‘right' amount of innovation, which would maximize social gains and minimize competitive injury. A seemingly minor technological improvement today can lead to much greater advances in the future.

Indeed, the leading U.S. antitrust treatise concludes that "[b]ecause courts and juries are generally incapable of addressing the technical merits or anticompetitive effects of innovation, they quickly make the relevant question turn on intent. We believe this is the worst way of handling claims that innovation violates the antitrust laws."

Yet a black-letter rule of "per se lawfulness" that necessarily prohibited competitors from challenging product re-designs based on facial claims of technological innovation would, in this author's judgment, go too far in the other direction. Hopefully, the Keurig 2.0 antitrust lawsuits will not end as a re-affirmation of the old legal adage that hard cases make bad law.

Reposted from the Disruptive Competition Project

Filed Under: antitrust, coffee, compatibility, competition, drm, interoperability, k-cups, keurig
Companies: green mountain coffee, treehouse foods