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Local Food Archive

“Local” As A Trademark Opportunity

October 26, 2015

by Lauren Handel

ATKearney’s recently released third annual report on consumer opinions about “local” food has lots of interesting information relevant to food hubs and anyone who markets local food. One of the findings is that consumers don’t buy local food because they don’t know which products are local. This finding suggests that food hubs and producers could do more with branding and labeling to identify local food. I see this as an opportunity to use trademark law for the benefit of local and regional food systems by creating marks that signify “local” to the relevant community. Such marks can be valuable intellectual property if used and protected appropriately.

For example, a food hub’s trademark (e.g., its name or logo) signifies to consumers not only that products bearing the mark come from the hub but also that those products come from a particular locality. Of course, the hub needs to invest in marketing so that consumers will recognize the mark and know that the hub sources from growers in the area.

Certification marks also are useful tools for identifying local food. Many states own certification marks (such as “Jersey Fresh” and “Certified SC Grown”) certifying that a product is produced in the state. The purpose of a certification mark is to indicate that goods meet certain standards. A food hub could operate a certification mark program for growers in its area to identify their products as local (defined however the hub sees fit) and, perhaps, as meeting other production and/or quality standards.

Another possibility, particularly for cooperatively owned food hubs, is collective marks. A collective mark signifies that a product comes from a member of a group. Through the group’s marketing, consumers will come to recognize that products sold by group members are local.

From a legal perspective, a food hub should secure its rights in its trademarks, certification marks, and collective marks by registering the marks with the US Patent and Trademark Office and by controlling the use of the marks. Registration provides nationwide rights in a mark and helps to prevent other people from using confusingly similar marks. The owners of trademarks, certification marks and collective marks must control the use of their marks or else they risk losing all rights in them. Therefore, it is very important to have licensing agreements with anyone permitted to use a mark and to not allow others to use a mark (or a similar mark) without such a license. Licensing agreements need not be complicated, but they must specify conditions for the use of the licensed mark.

Legal Tools for Food Hubs, Part 3: Planning to Minimize the Burdens of FSMA

April 11, 2014

by Lauren Handel

Food hubs and the farmers who supply them will be significantly impacted by the new regulations FDA is promulgating under the Food Safety Modernization Act (FSMA) — in particular, the rules relating to produce safety and preventive controls. The rules are only in draft form now, and new drafts are due to be released this June. So it remains to be seen exactly how the exemptions will be defined. We will be looking closely at what changes, if any, are made to the exemptions for small businesses. Businesses that might qualify for the exemptions also should pay attention and plan ahead to minimize their regulatory burdens to the extent possible.

Under both the preventive controls and produce rule, businesses will be exempt from all or most requirements if their annual food sales are below certain dollar amounts. Both rules provide a qualified exemption from most of the requirements if a business’s average annual food sales are less than $500,000 and if the majority of its sales are direct to consumers or to local retailers or restaurants. The preventive controls rule also provides a qualified exemption for “very small” businesses, meaning those with annual food sales less than $250,000, $500,000 or $1 million (FDA has not yet decided which limit to use). Also, if a farming business’s annual food sales do not exceed $25,000, it would be completely exempt from the produce rule.

What food sales count toward these limits differs under the two rules. For the preventive controls rule, all food sales of affiliated companies count. In other words, all food sales of separate food processing or handling facilities under common ownership or control will be counted toward the exemption limit. In contrast, for purposes of the produce rule exemptions, the relevant food sales are those of a “farm,” which is defined as a physical place. Thus, as the produce rule is currently drafted, a farming business with multiple farms in different locations might qualify for an exemption on one farm, but not another, depending on the relative food sales from each farm.

When the rules are finalized, small food and farming businesses should consider whether they can structure their businesses or operations to avoid taking on more of a regulatory burden than necessary. It may be possible for a food hub enterprise to keep various parts of the operation under separate ownership and control so that their total food sales will not be aggregated for purposes of determining whether any one facility is exempt from the preventive controls rule. Similarly, a farming business with more than one farm location should consider the exemption criteria when planning what crops to plant on each farm. Of course, such considerations will have to be weighed against business needs and practical concerns.

We will be monitoring this issue as the FSMA rules continue to take shape. If you would like to discuss strategies you might employ in your small food or farming business to plan ahead for FSMA, feel free to contact me or Jason at (888) 908-4959 or info@foodlawfirm.com.

Legal Tools for Food Hubs, Part 2: Contracts Are Not Evil

April 10, 2014

by Lauren Handel

Earlier this week, I wrote about intellectual property as a valuable legal tool for food hubs and all food businesses.  This second installment on legal tools for food hubs is about contracts. In particular, supply and sales agreements can be important tools for risk management and to take advantage of special protections afforded to produce sellers.

First, I feel the need to dispel some misconceptions about contracts. Contracts are critically important legal tools for food businesses. Yet, so many values-based businesses seem to feel that contracting is a hostile act. But legal contracts are not inherently antagonistic, unfair, or devoid of values. To the contrary, a contract should be the foundation for a cooperative, mutually beneficial relationship. And a contract can be instilled with the parties’ values — for example, by requiring that suppliers use sustainable practices, raise animals humanely, and pay workers fairly. Parties to a contract have enormous flexibility to define the terms of their relationship and transactions. However, if parties do not spell out their agreement in a contract, the law will apply default rules, which may not be consistent with the parties’ intent. 

Contracts are an essential part of an overall risk management strategy. Food can be a risky business. And every seller in the supply chain — from the farmer or manufacturer to the distributor to the retailer — is potentially on the hook if a consumer gets sick from tainted food. Therefore, food hubs, or anyone selling food produced by someone else, should use their supply contracts to ensure that producers and processors use safe practices, that the buyer will be indemnified for harms it did not cause, and that the suppliers have sufficient insurance coverage. With regard to insurance, buyers should require that their suppliers name them as additionally insured on the suppliers’ general liability policy which must include product liability coverage. Contracts also can address what will happen in the event of a product recall by defining the parties’ roles and their responsibilities for the costs of the recall.

In addition, food hubs should use their sales contracts and invoices to take advantage of the special protections afforded to produce sellers under the Perishable Agricultural Commodities Act (PACA). PACA applies to dealers, brokers and commission merchants of fresh or frozen produce who, on any given day, buy/sell/broker the sale of at least 2,000 pounds of produce. The law does not apply to retailers until they sell at least $230,000 worth of produce in a calendar year. In general, food hubs are subject to PACA and, therefore, required to be licensed by the US Department of Agriculture.

PACA provides some extraordinary protections for produce sellers, including food hubs, provided that they take steps to preserve their rights. PACA requires produce sellers to be paid promptly, which means within 10 days unless the parties agree in writing to a longer term, not exceeding 30 days, before the transaction takes place. The law also creates a trust for the benefit of unpaid produce sellers, by which the buyer must hold in trust all produce in the buyer’s possession, all of the buyer’s inventory of goods derived from produce, and any proceeds the buyer receives from the sale of produce until full payment is made to the seller. These rights can be lost, however, if the seller does not notify the buyer of its intent to preserve its rights under PACA. If the seller is a PACA licensee, such notice may be given in the invoice using particular language specified in USDA regulations.

It is not possible to discuss here all of the contract tools available to food hubs and other food businesses. Feel free to contact us at (888) 908-4959 or info@foodlawfirm.com to discuss your business’s contracting concerns.

Legal Tools for Food Hubs, Part 1: Intellectual Property

April 7, 2014

by Lauren Handel

I recently spoke on Legal Tools for Food Hubs at a conference put on by the Wallace Center’s National Good Food Network. (By the way, the conference was truly excellent, and I recommend that anyone working in food hubs, or local food generally, attend next year.) For those who don’t know, a “food hub” is a business that connects farmers to local markets by providing various services, such as aggregating products, marketing, and distribution. There are many legal tools that are potentially useful for food hubs or any food business. I focused my presentation on three issues of particular relevance to food hubs: (1) intellectual property; (2) contracts; and (3) business planning to minimize upcoming regulatory burdens associated with the Food Safety Modernization Act (FSMA). I thought I would share here some of what I told the group. Today’s post is about intellectual property. Later this week, I’ll cover contracts and FSMA issues.

Every business should have a strategy for identifying, protecting, and leveraging its intellectual property (IP). Food businesses are no different. Trade secrets, copyrights, and trademarks are valuable assets. But, if these assets are not carefully protected, they will be lost. The first step in protecting IP is to know what you have. An IP audit should be done and periodically updated to consider what IP the company has, what it is doing to protect that IP, and whether any steps should be taken to better protect the IP. The audit should consider the company’s patents or patentable inventions, copyrighted works, trade secrets or other confidential business information, and trademarks.

Each form of IP is acquired differently and protected differently under the law. For example, patent rights exist only if a patent is obtained from the government, but copyright is protected by law as soon as an “author” creates an original work in a fixed, tangible form. A trade secret is a property right in some piece of information or know-how — such as a proprietary recipe, formula, customer list, or pricing information — that gives the owner a competitive advantage precisely because it is not generally known. A trade secret is protected under the law only if it is kept secret. Thus, if a company with trade secrets does not take steps to maintain confidentiality, it loses the ability to protect those secrets legally, and competitors will be free to use the information. A trademark is a symbol, logo, words, or anything that distinguishes goods or services as coming from a particular source (i.e., the manufacturer or service provider). Trademark rights are derived from the use of a mark in connection with the sale of goods or services in commerce. A trademark owner who does not continue to use the mark, or who freely allows other people to use the mark or similar marks, will be deemed to have abandoned his or her rights.

Company policies and contracts are key to protecting and maintaining IP rights. For example, when a company hires a designer to create a website or marketing materials, the designer generally will be the owner of any copyright in the works created unless the company and the designer enter into a work-for-hire agreement or assignment of copyright to the company. Companies with valuable trade secrets should have internal policies in place to maintain confidentiality and nondisclosure agreements with employees and outsiders to whom trade secret information is disclosed. Whenever a company allows someone else to use its trademark, it should have a written license agreement controlling the use of the mark. Without such control, the trademark owner risks abandoning its rights.

Trademarks are especially important to “good food” businesses because the only way that a small, local, sustainable food company can compete in the marketplace is by distinguishing itself from conventional, industrial food. Even though the owner of a trademark has legal rights without registering the mark with the US Patent and Trademark Office, registration is a good idea. Without federal registration, a trademark owner’s rights extend only to the geographic area where the mark is used in commerce. That means that a trademark owner has no right to block a competitor in another state from using the same or a similar mark. In contrast, national registration on the Principal Register confers nationwide rights to block trademark infringement. Federal registration of a trademark provides other benefits as well, such as a presumption that the mark is valid and, after 5 years, “incontestability” status, which makes it much harder for anyone to attack the mark in court.

A particular challenge for local food businesses is to choose a brand name that can be protected under trademark law. A brand that includes the name of a geographic place (for example, “Pleasantville Food Hub”) is descriptive and, therefore, would not qualify for full trademark protection. Because trademarks are meant to distinguish the source of goods or services, the less distinctive the mark, the less likely it is to be protected. If a mark is descriptive, one option is to register it on the Supplemental Register. Although such registration does not confer the full set of rights that comes with registration on the Principal Register, it can deter others from using a similar mark and will block the registration of confusingly similar marks. Through continuous use and marketing, a descriptive mark can acquire so-called “secondary meaning” — that is, it comes to be associated with the owner of the mark such that it then can be registered on the Principal Register.

This is far from a comprehensive discussion of IP issues that may be relevant to food hubs or other food businesses. Feel free to contact us at info@foodlawfirm.com or (888) 908-4959 to discuss your business’s IP concerns.

 

 

Media Round-up: The Limits of Food Progressivism

March 3, 2014

by Jason Foscolo

Public health advocates have sought to change the food system along a handful of major axes. Right up there with calls for greater clarity in nutrition labeling are initiatives to solve the “food desert” problem and to change the nutrition content of the national school lunch program.

The media is just now beginning to percolate with indications that some of these efforts do not immediately have their intended effect. Today the Kansas City Star reports that some schools are seeing an increase in their food waste as children reject the healthier foods they are being given. Earlier in February, the L.A. Times reported on this study which said that low-income neighborhoods did not in fact pounce on the opportunity to eat healthier after more nutritious shopping options were introduced into their neighborhoods.

The benevolent intent of food policy leaders seems to be too easily frustrated by consumers and school children. Granted these stories are based on preliminary reporting, but they leave me wondering about Act II of the drama (or comedy, as you may prefer). Human volition continues to obstruct the aims of those who encourage people to eat healthier, and this undeniable fact leaves me wondering what public health advocates will call for on the next round of change.

The Bright Side of Food Safety for Local Farmers During Shutdown 2013

October 17, 2013

Now that the federal branch of government is back in the game, it’s a good time to reflect on the food safety implications of the Shutdown.

With forty-five percent of its employees furloughed this October, the Food & Drug Administration’s (FDA) ability to support food safety activities rapidly dwindled throughout the federal government shutdown. The agency’s assistant commissioner for public affairs recently released a statement saying the agency would no longer be conducting routine domestic or international inspections of food facilities, and would also have to cease activities involving compliance and enforcement, monitoring of imports, and notification programs (e.g., food contact substances, infant formula), to name just a few.

The CDC also said the disappearance of government funds drastically cut its ability to respond to food-borne illness outbreaks, considering that 68 percent of its staff had been placed on furlough.

Throughout the shutdown, an obvious question arose: which foods could you actually feel comfortable feeding yourself and your family?

The USDA’s Food Safety and Inspection Service was able to hold down the fort on our meat, poultry, and egg supply because its inspectors are required by law to be present in every meat-processing facility or the plant can’t operate. (The FDA plays a smaller role in these factories.) More importantly, any of its employees tasked with inspection cannot be furloughed in the case of a shutdown.

The federal agency overseeing US fisheries (National Oceanic and Atmospheric Administration (NOAA)) continued to inspect American-sourced shellfish and seafood (the NOAA is not funded through Congress). However, American-raised seafood accounts for only 9% of the shellfish and seafood sold in our nation. The remaining 91% of imported shellfish/seafood was not being inspected by the FDA during the shutdown.

The same went for produce. The FDA did not inspect nearly 50% of the fruit and 20% of the vegetables Americans had been consuming this month.

Even in this time of political discontent, there is a silver lining in it for local food producers. Recall that all foods shipped, driven, or flown from other states and other countries are subject to federal inspection. All foods produced and sold locally, however, are subject to state inspections, which were unaffected by the federal Shutdown. That’s a good point to remember for the next shutdown.

Food Safety Rules: How Will They Affect You?

June 6, 2013

Mark your calendars for June 20th at 6pm. We will be presenting about Food Safety on behalf of the Amagansett Food Institute at The Silas Marder Gallery in Bridgehampton. Great for not only farmers and food entrepreneurs but anyone interested in learning more about where their food comes from. See you there! 

Bits and Pieces

November 20, 2012

A few things to pass along in this truncated work week:

1. Baylen Linnekin’s latest piece on the lapsed Fat Tax in Denmark over at Reason.com is a must read. He not only relishes the demise of the tax, he also takes a well-deserved shot at the gushing Mark Bittman in the meantime:

“Well lookee here: the inevitable move toward taxing unhealthful foods to raise income and discourage damaging diets has begun,” Bittman announced last year. He also predicted a wave of similar taxes would sweep across Europe and suggested the United States “needs these taxes more than any country in the world”—predicting “a serious celebration” if and when such laws come stateside.

Bittman hasn’t written about the law since it took effect around this time last year, hasn’t discussed its repeal, and didn’t reply to my email asking for comment.

I concur with Baylen’s enthusiasm over the demise of the fat tax, and I also concur that these are a dumb idea wherever they are implemented. I’ve always thought that our food culture isn’t necessarily over regulated or under-regulated. Most of the time, it’s just misregulate. The chemical process for creating high-fructose corn syrup was discovered in the 1950’s, but did not become an economical process for producing syrup until Earl Butz and the “fence-row to fence-row” policies of crop subsidies and subsidized insurance dropped the price of corn, the raw material for the process. So get this – taxes support the surfeit of production that makes it economical to produce and then over-consume sugar. The fad trend now is for local governments to try counterbalance that macroeconomic process through prohibitive consumption taxes. Why hit the citizen twice? Doesn’t make much sense to me, and I am glad to see such measures go down to defeat either in Denmark or in the last domestic election. Fat tax cheerleaders should recognize that governments and regulations can sometimes be the source of the problem. This kind of intellectual honesty will force us to correct our course at the point of production and not the point of consumption.

2. Now that the election is over, there are some who feel that the regulations to implement the Food Safety Modernization Act are about to drop any day now. I’m skeptical of the imminence of the date, but I am nonetheless preparing my clients for it as if it were a pressing reality. Processors, producers, and distributors should read the act through to see how it will affect their interests. I am sure it will precipitate some changes in the way they conduct business.

By the way some of the provisions of the Act like mandatory recall went into effect immediately after it was signed into law. Economic losses due to recall are almost always not covered by a standard insurance policy, so the Act might already have exposed businesses to risks that they are not aware of.

3. My good friend Ed Cox at Drake University’s Agricultural Law Center put together a fantastic guide on Sustainable Farm Leasing that you might want to peruse in between turkey fueled bouts of narcolepsy. Tons of good stuff in there that can change the way you think about a simple legal document like a lease. I promised Ed I would secretly plagiarize him but my conscience got the best of me and I’m sharing it instead.

4. A classmate of mine from the LLM Program in Agriculture and Food Law at the University of Arkansas, Cassie Peters, recently published a killer guide to local food systems which she prepared for the West Virginia Food and Farm Coalition. Anyone who has a serious interest in the look and feel of a dirt-up food system needs to read this.

Enjoy the days ahead. Try to buy a local bird.

Legal Advice for the Urban Farmer: The Lease

August 30, 2012

I was stoked to hear today that one of my favorite towns, Ft. Collins, Colorado, will begin changing its zoning laws to accommodate urban farming. This news is just one of several urban farming items to come up on my radar this week. Entrepreneur recently profiled two very successful urban mushroom growers who sell both mushrooms and grow-it-yourself kits to Whole Foods. They  run the operation from a 10,000 square foot warehouse in Oakland. The phenomenon of urban farming also has its own book now.

Here’s a free tip for urban farmers, especially the ones that farms sustainably. Since the vast majority of you will be growing food on land leased from a municipality, you will find that your new urban landlord has very little experience with the business of agriculture. They will offer you a highly marginalized piece of land, which probably has buried tires, glass, and chunks of concrete embedded in it. They will expect you to magically, profitably  turn this land into a high-yield, biodynamic community resource and offer you a one-year lease to make your money back and your dreams come true.

If you are an urban farmer, a one-year lease is for suckers. By all means, discard the trash, enrich and rehabilitate the soil. Grow something delicious and make friends with the neighbors. But always be cognizant that your rehabilitative efforts constitute a transfer of wealth from your time and labor into the earth of your municipal landlord. Make this value known during the negotiation process. Insist that your business plan depends on a multi-year lease which will allow you to recoup the rehabilitative expenses you have made in year one. If you are an exceptionally good negotiator, you will be able to persuade the city that the improved soil quality that you leave behind at the conclusion of your term is equivalent to the same type of wealth transfer that would occur if you were to leave behind any other piece of infrastructure, like irrigation. Argue that this transfer of wealth justifies a handsome rent rebate.

Grab value where ever you can, and welcome to the agriculture industry.

 

Why “Local Food” Should Not Be Defined By Geography

December 20, 2011

McDonald’s is set to launch a new advertising campaign which personifies the farmers that grow their potatoes. Already some are calling it “farmwashing”, a blatant attempt by the fast food giant to co-opt the idea of “local” and apply it to the farmers that produce the raw materials for their fatty fatty french fries.

Small farm advocates let the definition of “local” slip away from them when they tried to define the term geographically. Ever shop at a farmer’s market that wouldn’t accept vendors from outside of a 100 mile radius? Why not 101, or 99? I have yet to hear someone proffer a definition of “local” that was not based on some arbitrary mileage limit.

The mileage limit definition misses the point entirely. For every McDonald’s located in Idaho, the french fries are local. A geographic definition of “local” is unnecessarily inelastic and it will be remorselessly green-washed as Big Food finds its groove.

Big Food is responding adroitly to the new skepticism of consumers. Giant’s like Land-O-Lakes have web pages that personalize the commodity farmers who produce their milk. Smithfield has trademarked the phrase “Good Food. Naturally”, for whatever the hell that means in the hellish context of commodity hog production (Serial Number 77375782 in the USPTO database). Tyson has its own Sustainability Report to demonstrate its own good stewardship ethic. Whatevs.

A social distance methodology to define “local” would describe far more accurately the kind of close (closed?) relationship between producers and consumers which small-farm advocates would like to see. “Local” should define a relationship, an information loop between a producer who knows her customer and a customer who knows something about how the food is made. It would require a simple drafting change to incorporate a social distance definition of “local” into the bylaws of an agricultural coop, the business plan of a neighborhood grocery store, or the vendor’s guidelines for a farmers market. There is no need to change preexisting practices – just codify the act of direct marketing farm products. On limitless marketing budgets, industrial producers will obfuscate the meaning of words like “local” and “sustainable” all day long. No amount of money will allow them to fake the seamless nexus between the grower and the eater, which is the best asset a small scale farm can have.

Now behold! this clip from Seinfeld, as I further persuade and entertain you!