Everything Restaurants Need to Know About Intellectual Property Rights
Trademarks, patents, and other legal protections are often associated with inventions, artistic works, and images—but not so much with restaurants. Nevertheless, intellectual property rights encompass everything from a restaurant’s name and logo to proprietary recipes and kitchen processes. Without proper protections in place, operators run the risk of competitors capitalizing on their “secret sauce.”
Alicia Bell, a partner at Portland, Oregon–based law firm Miller Nash Graham & Dunn, understands those risks all too well. She has worked on intellectual property conflict cases with restaurant clients for almost eight years.
“It seems like there’s far more of an opportunity for a conflict now when a restaurant sort of automatically has national reach by virtue of the fact that they have a website,” Bell says.
Greg McNally, CEO and principal consultant of California-based restaurant business advisory agency FoodPower, says times have changed since he opened his first restaurant in 1989, in large part because of the internet. He recently received a call from the former business partner on that now-closed venture and learned something surprising—and a bit unsettling.
“[The concept] was pretty unique, but recently we found a restaurant with the exact same name … the exact same font, the exact style, and look of our restaurant. We never would have found it, but because of the internet, you just came across it easily, even though it’s in another part of the country,” McNally says.
McNally says he doesn’t mind now, but if he and his partner were still in business, it would be an entirely different matter.
Despite the hazard of easy online access to information, the basic tenets of protecting intellectual property haven’t changed much, McNally says. He recommends—especially if a management company owns the restaurant in question—that layers of protection be put in place. For firms like FoodPower, holding the rights for trademarks, logos, and intellectual property is almost a given, but it might not be something on the radar for mom and pop restaurants and smaller chains.
Bell says one of the most common issues she sees involves former employees leaving with key recipes or trade secrets. In these cases, restaurants might not have much recourse if they don’t already have the proper protections in place.
“These are things that the restaurant thought [they] should have owned, but employees will have access to that information and take it down the road and start their own competing restaurant,” Bell says.
The other most common issue, Bell says, is when a restaurant copies the look of a competitor’s restaurant—or the logo or name—in a way that suggests the two are related, potentially chipping away at sales from the established concept.
To further complicate matters, it’s fairly difficult in the U.S. to get a patent on a dish or recipe unless the item in question is incredibly unique, Bell says. While trademarking the name of a dish is a step in the right direction, the most effective action is to create a contract assigning intellectual property rights of special dishes or processes to the restaurant. Chefs and staff with access to those recipes and processes would then sign the contract or other binding agreement to protect confidential details, essentially making such information a trade secret, Bell says.
Bell and McNally also advise new restaurant partners to sign a written agreement, specifying that the business owns any intellectual property created therein.
Industry experts strongly encourage would-be restaurateurs to conduct thorough market research ahead of time. It’s not unheard-of that a restaurant should open only to discover months later that it bears the same name as one halfway across the country. Names are one of the most commonly copied factors among restaurants, whether it be intentional or not, McNally says. However if a restaurant features a common name, such as “Michael’s Restaurant,” it can’t necessarily be trademarked.
Boston-based dumpling restaurant Dumpling Daughter filed a lawsuit in 2015 alleging trademark infringement and misappropriation of trade secrets by a competitor restaurant called Dumpling Girl, which was founded by several former employees in a city called Millbury, on the outskirts of Boston.
The lawsuit alleges that opening Dumpling Girl was a “blatant act of commercial piracy,” with dishes and a menu that were “virtually identical” to Dumpling Daughter, with “proprietary, trade secret recipes misappropriated” from the restaurant. According to a 2016 article in the Millbury-Sutton Chronicle, the case was settled some months later, after Dumpling Girl changed its name to Star Dumplings.
Scott Gottlich, chef and owner of 18th & Vine BBQ, has opened multiple restaurants in Dallas over the years. Having also cofounded management company Fruition Hospitality with his wife, Gina, Gottlich has experience navigating the tricky realm of intellectual property rights. Like Bell and McNally, he says it’s important to have all partners in a new venture sign a contract specifically laying out what belongs to the business and what does not. He also suggests that from the very early stages of developing a concept, partners sign something akin to a nondisclosure agreement so no one person can leave with the idea.
While Gottlich has not been embroiled in any conflicts over intellectual property, he did witness the now-defunct Place at Perry’s in Dallas go out of business in 2015. For more than a decade, the restaurant was confused with a different business, Houston-based Perry’s Steakhouse & Grille, which actually moved to Dallas years after Place at Perry’s had opened.
According to the entertainment division of the Dallas Morning News, Place at Perry’s was originally just Perry’s but changed its name in part because of a threatened lawsuit from the steakhouse. Place at Perry’s even tried relocating to a different area in Dallas, but according to the newspaper, it “never quite recovered” from the name dispute.