June 16, 2010

Nespresso Sues Sara Lee over Patent Infringement

Nespresso is starting the long defense of their patented system of Nespresso capsules and extraction methods against competition through patent infringement suits. Nespresso has a lot to lose if they don't, as the Nespresso business has been a bright spot in the company's balance sheets lately.

Nespresso volume was up 20% in the last quarterly announcement, and Sara Lee recently started selling capsules in France to fit the Nespresso maker at a 10% discount to the Nespresso ones. Definitely a concern at Nestle if the Nespresso brand is to continue doing well. Clearly Nespresso sees a lot of growth ahead for its Nespresso brand and with what they believe to be a strong patent portfolio they believe that they will need to defend it and the growth potential. Sara Lee on the other hand clearly sees an opportunity or at least a need to get into this growing high end market with something that doesn't infringe on Nestle's patents.

Ethical Coffee has also released a capsule that fits the Nespresso machine in France. No news about suits versus this company, but to add a twist to this facet, the founder of this company, Jean-Paul Gaillard, used to work at Nespresso and apparently is trying to navigate around Nestle's patent coverage.

I am sure we will continue to hear about these stories well into the future.