Nestle Has Patent For Nespresso System Revoked

October 12, 2013 Leave a comment

October 11, 2013, 8:23 a.m. ET

Nestle Has Patent For Nespresso System Revoked

By John Revill

ZURICH–A European regulatory body revoked a Nestle SA (NESN.VX) patent covering its Nespresso coffee system, the latest blow to the Swiss food giant’s efforts to protect its lucrative brand from encroaching rivals. The European Patent Office’s appeals board said Nestle’s patent for a device that handles coffee capsules as they sit in the Nespresso machine was invalid and will detail its reasons in the next few weeks. The patent covered the way capsules are ejected from the machine after being used.The EPO decision is a setback for Nestle, which is trying to use its patents to prevent rivals, such as Ethical Coffee Company SA and Mondelez International Inc. (MDLZ), from producing capsules that fit into the Nespresso machine. So far, those efforts have had mixed results.

“We believe that the decision fails to recognize the unique innovations inherent in the design of the Nespresso system,” the company said in a statement. Nestle said the decision was unlikely to affect its Nespresso business.

Nespresso is one of Nestle’s fastest-growing brands and racks up an estimated 4.5 billion Swiss francs ($4.96 billion) in annual sales. That success has attracted competitors, who want a slice of a business that carries higher margins than instant coffee and is growing at a faster rate.

As a result, Nespresso sales growth momentum decelerated to 16% in 2012 from nearly 29% in 2009, according to estimates by Bank Vontobel.

The EPO decision isn’t the first setback Nestle has experienced in its efforts to protect Nespresso. In April, a British court ruled that Dualit, a U.K. manufacturer that sells coffee pods compatible with Nespresso machines was not infringing patents.

Last year, a court in Dusseldorf rejected an attempt by Nestle to stop Ethical Coffee Company from selling Nespresso-compatible capsules in Germany.

The EPO’s decision is final and covers 28 countries in Europe.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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