Restaurants and intellectual property

From last week's New York Times about a New York restaurateur filing suit for against a knock off of her restaurant. Since the original article might not be available for long, I am quoting at some length.

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The suit, which seeks unspecified financial damages from Mr. McFarland and the restaurant itself, charges that Ed’s Lobster Bar copies “each and every element” of Pearl Oyster Bar, including the white marble bar, the gray paint on the wainscoting, the chairs and bar stools with their wheat-straw backs, the packets of oyster crackers placed at each table setting and the dressing on the Caesar salad.

Lawyers for Ms. Charles, 53, said that what Ed’s Lobster Bar had done amounted to theft of her intellectual property — the kind of claim more often seen in publishing and entertainment, or among giant restaurant chains protecting their brand.

In recent years, a handful of chefs and restaurateurs have invoked intellectual property concepts, including trademarks, patents and trade dress — the distinctive look and feel of a business — to defend their restaurants, their techniques and even their recipes, but most have stopped short of a courtroom. The Pearl Oyster Bar suit may be the most aggressive use of those concepts by the owner of a small restaurant. Some legal experts believe the number of cases will grow as chefs begin to think more like chief executives.

Charles Valauskas, a lawyer in Chicago who represents a number of restaurants and chefs in intellectual property matters, called their discovery of intellectual property law “long overdue” and attributed it to greater competition as well as the high cost of opening a restaurant.

“Now the stakes are so high,” he said. “The average restaurant can be millions of dollars. If I were an investor I’d want to do something to make sure my investment is protected.”

Business means money and at the bottom of most businesses is some sort of intellectual property - service/trademarks, patents, copyrights, trade secrets. Protecting the business means protecting that same intellectual property. The businesses failing to protect their most basic intellectual property is probably surprising to many - including the business' owners! That most basic intellectual property being the business' name in the form of a servicemark or a trademark. Restaurants are particularly lax at protecting their names.

The article brushes against two areas where restaurants face a bit more difficulty than other businesses.

But the detail that seems to gnaw at her most is a $7 appetizer on Mr. McFarland’s menu: “Ed’s Caesar.”

She has never eaten it, but she and her lawyers claim it is made from her own Caesar salad recipe, which calls for a coddled egg and English muffin croutons.

She learned it from her mother, who extracted it decades ago from the chef at a long-gone Los Angeles restaurant. It became a kind of signature at Pearl. And although she taught Mr. McFarland how to make it, she said she had guarded the recipe more closely than some restaurateurs watch their wine cellars.

“When I taught him, I said, ‘You will never make this anywhere else,’ ” she insisted. According to lawyers for Ms. Charles, the Caesar salad recipe is a trade secret and Mr. McFarland had no more business taking it with him after he left than a Coca-Cola employee entrusted with the formula for Diet Coke.

Mr. McFarland called the allegation that he was a Caesar salad thief “a pretty ridiculous claim.”

“I have my own recipes for my items,” he said.

I see both trade secrets and copyrights implicated in the preceding section. Recipes made public can be copyrighted but if not made public ought to be treated as a trade secret. The Times touched on patents and trade secrets:

One of Mr. Valauskas’s clients, Homaro Cantu, has applied for patents on a number of his culinary inventions, like a method for printing pictures of food on flavored, edible paper. Mr. Cantu also makes his cooks sign a nondisclosure agreement before they so much as boil water at Moto, his restaurant in Chicago.

Tim Wu, a professor at Columbia Law School, said that this almost seemed an inevitable result of bringing lawyers into the kitchen. “The first thing a lawyer would say is have all your people sign nondisclosure agreements,” he said. “It’s a classic American marriage between food and law.”

Abstractly these all sound like great ideas but I must make an assumption that patents and copyrights are justified by the potential for loss of income to the business. The time captured the practical value of patents and copyrights:

Few chefs have followed Mr. Cantu’s footsteps all the way to the Patent and Trademark Office. One who did is David Burke, the chef at David Burke & Donatella, on the Upper East Side and other restaurants. He said he had trademarked a “swordfish chop” but no longer tried to defend that term from copycats.

“You’ve got to chase people down if they use it. I got tired of it,” he said. But he said he still applied for trademarks on more recent innovations, like his bacon-flavored spray.

Many chefs are skeptical that intellectual property law conforms to their line of work. Tom Colicchio said that he had decided not to do anything about a sandwich shop that he considers a clone of his sandwich chain, ’Wichcraft. “There’s nothing you can do,” he said. “You can’t protect recipes, you can’t protect what a place looks like, it’s impossible.”

Got a recipe or a process upon which the business depends? If it fits within the definition of a trade secret, then a non-disclosure agreements seems a small enough cost to me. I have a greater problem with patents or copyrights, but particularly patents. That depends on a cost-benefit analysis based upon facts of which I have no idea at this time. However, I would suggest a patent in a situation where the item being patented could be licensed to other businesses. Think about that one.

Since writing the above, The New York Times' Diner's Journal Blog posted a bit of a follow up (and photographs of the restaurant) in the post: Pearl Oyster Bar. The blog post notes that the plaintiff's complaint includes an allegation for breach of fiduciary duty. The New York Times' writer actually does a great job defining fiduciary duty:

Ms. Charles accuses Mr. McFarland of “breach of fiduciary duty and misappropriation of corporate opportunity.” In legalese, a “fiduciary duty” is like a kind of loyalty that you owe somebody who places their trust in you. You’re not supposed to put your own interests above theirs. The term is sometimes applied to executives or directors of a corporation, but there are also times when a doctor owes a fiduciary duty to a patient, or a lawyer to a client. Ms. Charles’s lawyers are arguing that as sous chef of Pearl Oyster Bar, Mr. McFarland had a fiduciary duty to the restaurant.

The blog post also mentions allegations of the defendant poaching (the same verb used by the Times' blogger and I assume no pun was intended) employees from the plaintiff. Which makes me think that in a restaurant of this sort needs non-competition agreements for its employees. Any sort of business having a key person who can bring down a business needs a non-competition agreement for that employee.

I do suggest reading the comments to the blog. Some very preceptive comments about business generally, and the restaurant business specifically.

4/26/08 update: Follow Up on "Restaurants and intellectual property" about settlement of this case.