Intellectual Property Licence Agreement Dispute between Kraft and Bega

Emma Macfarlane

An interesting development out of the United States, involving a dispute between Kraft-Heinz (Kraft) and Bega Cheese Limited (Bega) which is now before the New York Federal Court is highlighting the importance of properly drafted Intellectual Property Licence Agreements. 

The proceedings follow from Bega’s recent acquisition of Mondelez International’s Australian and New Zealand food range, including Vegemite and Kraft’s “never oily, never dry” peanut butter recipes. As part of the acquisition, Bega asserts that it purchased the manufacturing facility at Port Melbourne, skilled staff, as well as the associated intellectual property rights. 

These intellectual property rights include rights to the design of the jar with the yellow lid and label typically used by Kraft for its peanut butter, and now by Bega, which has introduced “slightly ‘refreshed’ packaging” for its Bega-branded peanut butter. 

Under the terms of the acquisition, Bega was able to use the Kraft logo until the end of this year and it has starting phasing out Kraft’s logo from the product range. Removing the logo isn’t enough for Kraft which has announced a launch of a new Kraft peanut butter in 2018 for Australia. The company is now seeking to prevent Bega from using the distinctive packaging, stating that: “A series of historical corporate decisions saw the brand licenced to an external company for a limited period of time under strict conditions. It’s always been our intention to continue with Kraft products in Australia.

The dispute is still before the court and we will keep you updated on any developments in this case.

Key lessons for your business 

This dispute highlights the importance of having properly drafted Intellectual Property Licence Agreements. A well drafted Licence Agreement should address the following key issues:

  1. What intellectual property is your business licensing to the third party (this requires specific identification of the rights such as any slogans, logos etc)? 
  2. Is there any intellectual property that is to be specifically excluded in the transaction?
  3. How can the third party use the intellectual property and are there any restrictions on use?
  4. Are there any geographic restrictions on where the intellectual property can be used?
  5. Who retains the intellectual property once the agreement ends and who owns any intellectual property that is developed throughout the licensed term?
  6. Should a dispute arise, are there any appropriate Dispute Resolution clauses in the agreement to resolve the dispute prior to it going to litigation?

An Intellectual Property Licence Agreement should be clear, and achieve the objectives of your transaction, without diminishing the value of your intellectual property. Proper due diligence is essential and failing to take such precautions can lead to an expensive legal battle such as that now faced by Kraft and Bega.

How the Coleman Greig Intellectual Property team can help

We can ensure that any agreement in which you intend to licence the intellectual property of your business is drafted to appropriately take into account what is to be specifically licensed, and what happens at the end of the agreement. Proper drafting of agreements can avoid the need for protracted legal proceedings, and can ensure that your next business venture is not held up. 

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