N E W S L E T T E R

Food & DrinkAutumn/Winter 2019

Glasgow | Edinburgh | Dundeewww.macroberts.com

Welcome to the latest edition of MacRoberts’ Food & Drink Newsletter in which we take a look at the latest developments across the food and drink sector and how your business may be affected.

While Brexit and the subsequent business uncertainty continue to loom over us as we move towards 2020, we look at how a no-deal Brexit may impact businesses who rely on the EU Protected Food Name scheme to protect their products from imitation.

However, despite all the unknowns that Brexit brings us, businesses can only prepare for what is known and there are a number of incoming changes to employment law which you should be aware of.

Development and investment in agri-tech is a real growth area for the sector – but what exactly is it and how can it benefit businesses in the industry? We look at the fantastic work a number of agri-tech businesses are doing across the UK today.

In addition to all of this, we also look at the hot topic of allergen labelling on food packaging, as well as the recent McDonald’s/Supermac’s trade mark case.

We hope you enjoy reading our Food & Drink Newsletter and, as always, we welcome any feedback or suggestions for future topics. Please do not hesitate to get in touch with our team with any comments you may have.

With very best wishes.MacRoberts’ Food & Drink Team

Contact us

Euan DuncanHead of Food & Drink

euan.duncan@macroberts.com0141 303 1222

@euand

MacRoberts was delighted to sponsor the Innovation of the Year Award at this year’s Highlands & Islands Food & Drink Awards

in Inverness on Friday 15th November.

Many congratulations to the winners, Green Grow – Aurora Sustainability Group!

Celebrating Scottish GinOn Thursday 10th October, MacRoberts sponsored the Innovation of the Year award at the Scottish Gin Awards, held at the DoubleTree by Hilton Glasgow Central.

Huge congratulations to the team behind Lussa Gin, distilled using hand-foraged botanicals on the Isle of Jura, who picked up this award!

There are three main types of protection available under the scheme:

Protected Food Names: A valuable scheme in jeopardy?

Under EU law, producers of food and drink products can ensure that the name of their product is protected from imitation by third parties by virtue of the EU Protected Food Name scheme. This scheme protects the names of products where they originate from a specific geographical region or are produced in accordance with a traditional process. A number of quintessential Scottish products are currently protected under the EU Protected Food Name scheme – think Scottish wild salmon and Ayrshire new potatoes.

The Protected Food Name scheme is incredibly valuable to producers of relevant products, to consumers and to the Scottish and UK economies – but how will a no-deal Brexit be a significant threat to UK businesses who rely on this scheme for protection?

Charlotte Fleming is a Trainee Solicitor in our Real Estate team.

About the Author

Why is the scheme beneficial to Scottish produce? Although Scotland does not have as many PGIs or PDOs as countries like Italy and Spain, the protection afforded by these schemes is particularly valuable to those involved in the sale or production of relevant products. Local producers benefit from this as it safeguards their products from unauthorised imitation or replication, whilst ensuring that the popularity of their high quality produce continues.

Furthermore, EU citizens are protected as they can be assured of a product’s quality and ingredients if it bears a protection mark.

The system also boosts the Scottish economy. Fiona Hyslop, Culture Secretary, has stated that “Scotland has an unrivalled global reputation for quality food and drink produced from our own natural larder”. She further recognises that PGI status “helps protect the provenance of products like Scotch whisky, Stornoway Black Pudding and Arbroath smokies”.

Protecting the provenance of Scottish Farmed and Scottish Wild Salmon and Scotch Whisky is particularly important (they are some of Scotland’s key exports) and they both benefit from PGI status. Scotch Whisky represents 70% of Scotland’s food and drink exports, and Scottish farmed salmon is our largest food export.

BrexitThe Withdrawal Agreement in November 2018 did provide for the EU Protected Food Name scheme to continue to apply post-Brexit. However, as this agreement was subsequently rejected, it is unlikely that the EU will continue to offer protection to products currently covered by the scheme.

In February 2019, the UK Government announced plans to introduce a UK Protected Food Name scheme, which would mirror the EU scheme and ensure that products currently protected by the EU scheme would be automatically protected in the UK. However, as regards protection of current Protected Food Names throughout the EU, UK producers would be required to reapply to the European Commission Services to ensure their protection continues. New applicants would need to make two separate applications to the UK and EU schemes post-Brexit.

What other forms of protection are available for producers? Extended passing off: If a group of producers can demonstrate that they have goodwill in a trade name, they may be able protect their products against those producing or marketing products of a different origin under the same name. However, a significant amount of evidence is required to demonstrate the existence of goodwill.

UK Certification Marks: These demonstrate that a product is compliant with quality standards set by various certifying bodies, and therefore assure consumers that products are of a high quality.

General IP Strategy: Although highly valuable, the EU Protected Food Name scheme does not provide all-encompassing protection of a business’s intellectual property. Businesses should look to other types of intellectual property rights, such as trade marks, to protect their branding and reputation.

Although the potential loss of the EU Protected Food Name scheme is concerning, it is important for businesses to remember that there are other options for businesses wishing to protect their product from imitation.

1. Protected Designation of Origin (PDO)

In order to be eligible for protection under this scheme, production, processing and preparation of the product must all take place within a specific geographical area with which the product is associated. The product will also only be protected under this scheme if it is prepared using “distinct local knowledge.” For example, in Scotland, Shetland lamb is protected with the PDO mark. The label must be present on food and agricultural products, but is optional for wine.

2. Protected Geographical Indication (PGI)

This type of protection differs from PDO protection as only one stage of production, processing or preparation must take place in the relevant geographical area. However, the product must have a “particular quality, reputation or other characteristic (which) is essentially attributable to its geographical origin”. Orkney Scottish Island Cheddar, for example, is protected under this scheme. Again, the label is compulsory for food and agricultural products, but optional for wine.

3. Traditional Specialties Guaranteed (TSG)

This type of protection applies to products with traditional aspects, such as those with a traditional name or those made using traditional ingredients or techniques, without any emphasis on a specific regional area. An example in the UK is traditional farm-fresh turkey. The label is compulsory for all products.

Battle of the Macs and EU Trade Marks: Use it or lose it

Post-match debrief: genuine use is key Whilst the strength of McDonald’s brand power continues and the battle wages on between the two companies, what lessons can we take away from this landmark trade mark dispute?

1. Gather evidence Be prepared to demonstrate genuine use of your trade marks for all classes in which they are registered. Even with the significant resources available to an organisation the size of McDonald’s, they were still unable to provide actual evidence of commercial use, which led to the cancellation of those registrations. Such evidence will be invaluable in protecting your mark in the event of any challenge relating to non-use and should be considered from the outset.

2. Take care with actual useBe wary of maintaining registration of your mark within too many use classes. Continuing registrations in classes which are not being used beyond the initial five-year period will leave those marks susceptible to challenge by other parties. Furthermore, be careful that your actual use of the mark does not alter its distinctiveness. It is clear from these cases that indiscriminate use of a mark could impact the unique features that made it registerable in the first place.

Protection of IP rights and branding is of crucial importance to the Scottish food and drink industry in maintaining its competitive edge amongst the international market, so we would do well to take heed of the Battle of the Macs and pay close attention to trade mark management.

The “Big Mac” sandwich is iconic. Likewise, “Mc[Nuggets]” or a “Mc[Flurry]” are synonymous with McDonald’s – heavyweight champions in their branding portfolio. It therefore came as a shock to most when the company’s registered EU Trade Marks (EUTMs) for these words were cancelled (either partially or in whole) following two landmark cases before the European Union Intellectual Property Office (EUIPO) earlier this year.

These cases present important lessons to be learned for those operating in the food and drink sector who use registered trade marks to protect their branding. Here, we look at what happened in these two cases and the implications of these decisions for trade mark protection in the EU, and consider how you can prove and ensure genuine use of your trade marks, or risk losing them altogether.

Supermac’s has operated since 1978, and now has more than 100 stores across the Republic of Ireland and Northern Ireland. Despite Supermac’s modest size and presence in the market compared to fast food behemoth McDonald’s, tension between the companies began to build several years ago. Indeed, Supermac’s expansion into the United Kingdom and other EU countries has been continuously blocked by McDonald’s for some time. Although Supermac’s does not sell any products using the “Big Mac” or “Mc” word marks, McDonald’s took issue with the company’s overall branding. They argued that Supermac’s would be “piggy-backing” off McDonald’s longstanding EUTMs and that this would lead to confusion amongst consumers.

McDonald’s has long taken a hard-line litigious approach to protecting its IP assets and branding portfolio, including its EUTMs. They were famously successful before the EU General Court in 2016, preventing a Singapore-based company from registering “MACCOFFEE” as an EUTM on the basis that such registration would benefit from the reputation and brand power of McDonald’s. However, Supermac’s finally fought back in April 2017 when they filed two requests with the EUIPO for cancellation of those EUTMs belonging to McDonald’s, invoking Article 58(1)(a) of the EU Trade Mark Regulation.

The weigh-in: Supermac’s (Holdings) Ltd vs McDonald’s International Property Company, Ltd

Fergus Lawrie is a Trainee Solicitor in our IP, Technology & Commercial team.

About the Author

Round 1: “Big Mac”The first cancellation request before the EUIPO related to McDonald’s signature word mark: “Big Mac” registered in classes 29, 30 and 42 (Nice classifications). In its decision of 11 January 2019 (Cancellation No. 14 788 C (Revocation)), the EUIPO agreed with Supermac’s in ruling that McDonald’s had not proved that this mark had been put to genuine use in any of the registered classes of goods and services for a continuous period of five years following registration.

The EUIPO emphasised the need to consider the following factors when considering whether there has been genuine use of a EUTM:

These factors are cumulative and therefore any evidence of genuine use put before the EUIPO must provide sufficient indication of each.

In particular, the EUIPO noted that McDonald’s had not provided sufficient evidence that its products marked with the “Big Mac” EUTM were actually offered for sale, such as data on how long products had been offered on the market (online, or in store), nor any proof of sales. As such, the trade mark was cancelled in its entirety across all registered classes. McDonald’s lost its exclusive right to the infamous ‘Big Mac’ mark.

• time of use• place(s) of use

• extent of use• nature of use

Round 2: “Mc”[…]Supermac’s success did not stop there. A second cancellation action was filed in respect of McDonald’s registered word mark for “Mc” in classes 29, 30, 32 and 4. In its decision of 31 July 2019 (Cancellation No. 14 787 C (Revocation)), the EUIPO held that McDonald’s had only proved genuine use of its word mark for certain goods in some of the registered classes.

Interestingly in this case, EUIPO took into consideration how actual use of the mark had altered its distinctive character. Supermac’s argued (and the EUIPO agreed) that McDonald’s were unable to provide any proof that the EUTM had been used on its own. It was only used in combination with other words, which altered its distinctiveness. Whilst some of the additional words were merely descriptive (for example: McMUFFIN, McFISH), others uses had, in effect, created new distinctive marks (for example: McFLURRY). Thus, McDonald’s were only able to maintain its ownership of the ‘Mc’ mark for certain products and its blanket rights to the prefix were taken away.

The X-Tractor: The rise of agri-tech in the UK

So, what is agri-tech?Generally speaking, “agri-tech” is any form of technology that can be used in agriculture with the intention of improving the produce and making the process more efficient, whilst also increasing profit. Agri-tech also covers horticulture and aquaculture. The technology encompassed in agri-tech includes products, services and applications that have developed within the agriculture sector, aiming to improve the processes involved in the sector, ultimately playing a fundamental role in global food security.

By 2050, the world population is expected to reach around 9.8 billion. Alongside increasing life expectancy, these numbers of “hungry mouths to feed” necessitate a step-up in food production. In fact, it has been estimated that food production needs to increase by 50% by 2050 to meet the growing population’s demands.

One response to this growing pressure has been to scale up production – think “super farms” and “mega dairies”, particularly in the US – but there has also been an explosion of innovation and technological advancement in this space; after all, necessity is the mother of invention. Agri-tech has been (and continues to be) heavily invested in worldwide as industry players work to stay ahead of the curve by using new technologies to produce food. Investments in this area are improving profitability, sustainability and efficiency within agriculture and the wider food production and supply sectors.

Is the future bright?With an annual turnover of £76 billion, food and drink is the largest manufacturing sector in the UK. In 2018, the UK’s agri-tech industry accounted for £14.3 billion in turnover and more than half a million jobs. By 2025, it is anticipated that the sector will be worth more than £136 billion globally. This includes over £129 billion in the Autonomous Farm Equipment Market and over £7 billion in the Precision Farming Market.

The UK Government recognises the need and scope for development in this area and has prepared a long-term agri-tech strategy to allow both society and the economy to benefit from developments in agri-tech. The strategy was initially launched in 2013, with £160 million of funding. The UK wants to become a leader in agri-tech through the institutes and university departments that are at the forefront of agriculture, through our UK farmers and through the export of UK produce to the rest of the world. At the National Farmers’ Union’s annual conference in 2018, the Government announced a further investment of £90 million in agri-tech.

Traditionally, growth in productivity on UK farms has fallen behind counterparts in other locations across the globe but with major investment in the agri-tech sector, the UK is well placed to lead the way in testing and developing new technologies.

Brexit will continue to be at the forefront of the minds of those in the food production industry – it is likely to put additional pressure on the industry in terms of a decrease in migrant labour, complexities in import and export and a range of uncertainties but it also has the potential to give rise to new opportunities, acting as a catalyst for technological innovation.

At MacRoberts we are excited about what is already happening in this space and the ideas, partnerships and advances we expect to see in the coming years. We are delighted to work with innovative organisations across the country on projects which push us beyond traditional legal thinking.

At Tesco’s recent “Agri-Tech Pitch Day 2019”, entrepreneurs and innovators were encouraged to share their ideas, with the winner awarded the opportunity to work with Tesco and their suppliers to help provide affordable and sustainable food. The winners, Roboscientic, presented new sensor technology that will assist in detecting disease, infestation and contamination within agriculture using Volatile Organic Compounds, meaning that contaminated produce will be discovered faster. Tesco’s Food Technical and Agriculture Director heaped praise on the winning technology, explaining that it will improve the food safety of produce.

Located in Midlothian, Agri-EPI conduct research and facilitate partnerships between academics and businesses within the industry. They continually research

and develop new ideas through the use of their satellite farms. Key technology is being developed and used in the dairy sector, including robotic milkers to ensure the milking process is as efficient as possible.

Agrimetrics uses data that is collected from a variety of sources to increase crop and livestock yields, ensuring a more

sustainable and profitable food system. After all, in the 21st century, data is essential to everything we do!

The Centre for Crop Health and Protection focuses on altering how farms can manage threats to their crops, including disease.

Systems that are being created and implemented include field scale precision equipment, vertical farming research, crop monitoring and crop storage research facilities.

The Centre for Innovation Excellence in Livestock researches and produces new technology and products that will assist both the efficiency and cost-effectiveness

of livestock farming, which is crucial throughout the UK.

Intelligent Growth Solutions is the company behind Scotland’s first vertical farm. Its indoor vertical farm can produce

a harvest that is substantially more than a traditional greenhouse and farming methods would yield. Vertical farming is more beneficial for the environment and can reduce fresh food waste.

There are some excellent examples in today’s Britain, including:

Jozanne Bainbridge is an Associate in our IP, Technology & Commercial team.

About the AuthorsRachel Gillan is a Trainee Solicitor in our Dispute Resolution team.

Beyond Brexit: Key employment law changes in 2020

1. A longer reference period for calculating holiday pay

The reference period for calculating holiday pay is being extended from 12 weeks to 52 weeks, or the number of weeks of employment if an employee has been employed for less than 52 weeks. This change will give employers a longer period to average holiday pay and should lead to pay being less variable due to peaks and troughs in workflow. However, as many businesses begin their year on 1 January, there will be a transition period for most. This being the case, employers need to decide whether to change the way holiday pay is calculated on 6 April, or at the start of the holiday year.

2. A written statement of particulars will be a Day One right and must include more detail

Currently, employers have two months to issue an employee with a basic written statement of employment particulars under section 1 of the Employment Rights Act 1996. However on 6 April 2020 this is changing to become a right on day one. This change covers both employees and workers and the statement must include additional information on probationary periods, any variation in working hours, and “any other benefit provided by the employer”. If any employers do not issue written particulars on day one, or include this information, they should be aware of the change and review their documentation if necessary.

3. Changes to the tax treatment of off-payroll labour Changes to tax legislation regulating off-payroll working (commonly known as IR35) are also coming into effect. These new rules will require larger private sector businesses to deduct income tax and National Insurance contributions via payroll from fees for services paid to a personal service company (PSC) where the individual performing the services would, but for the PSC, ordinarily be regarded as an employee of the client company for tax purposes.To prepare for this, the main step employers need to take is an audit of any off-payroll labour. This should be done as soon as possible as the audit process could take some time.

4. An end to the Swedish DerogationEmployers who rely on agency workers should also be aware that legislation is coming into force which will repeal the “Swedish derogation”. Essentially, this means that all agency workers will be entitled to pay parity with permanent workers after 12 weeks’ service. This may lead to increased salary costs for employers, so it is key that every employer is aware of its agency workers and any changes to pay that are required.

Brexit is coming… eventually. Just like a Game of Thrones winter, we are reminded of this constantly and it is unlikely that anyone is unaware of Brexit and the challenges it may pose to business. Endless guidance is available on how to plan and prepare for potential changes – indeed, MacRoberts has issued many such useful updates.

However, amid the Brexit fatigue it is even more important that employers don’t ignore other key changes to employment law which are coming into force next year. To avoid knowing nothing, employers should prepare for the following changes from 6 April 2020:

Given the current uncertainty and endless Brexit stalling, employers can only prepare for what is known. Ensuring that your business is ready for these definite April 2020 changes in good time will avoid any unnecessary employment law risks once, of course. . . Brexit is here.

Meghan Jenkins is a Solicitor in our Employment team.About the Author

MacRoberts has advised Scotland’s largest haggis maker, Macsween, in its dispute with a company it accused of trying to cash in on its name.

Macsween was advised by MacRoberts after the macsweenshaggis.co.uk domain name was registered by Hillhead Hampers, an online mail order food business based in Bannockburn, to sell Macsween products. In a written decision, an independent expert appointed by Nominet – the registry which oversees .uk domain names – as part of its dispute resolution service ruled that the domain name registration was an “abusive registration” and should be handed over to Macsween.

Partner David Gourlay advised Macsween, which has been building its brand throughout Scotland and overseas for over 60 years. Macsween’s Managing Director, James Macsween, said he first became aware of Hillhead Hampers five years ago when his company was forced to pay £400 to buy another domain name they had registered, macsweenhaggis.co.uk.

James Macsween said: “We were delighted to have MacRoberts by our side throughout this process, fighting our corner and protecting the brand and reputation that our company has been building for 66 years. We have a longstanding relationship with the firm and, once again, they provided us with clear and concise advice and were always available to answer our questions.”

MacRoberts advises Macsween on domain name dispute

We were delighted to have MacRoberts by our side, fighting our corner

WARNING: May contain legislation

The UK Government is looking to introduce new allergen labelling laws, which have been welcomed by the Food Standards Agency (FSA). It is proposed that these new laws will come into force by summer 2021. However, these laws will only come into force in England, Wales and Northern Ireland. But what is the Government proposing to change?

In follow-up our ‘Free from what?’ article in our Autumn 2018 Newsletter, we look at the UK’s recent consideration of allergen labelling on food.

However, for smaller shops and cafés where food is prepared on-site, it is not a requirement to list the ingredients contained in the food on any packaging or labelling. Instead, where food is pre-packed for direct sale, the only requirement is that the customer should ask whoever prepared the food about the allergenic ingredients. This seems to be a low bar, especially where there is a risk that cross-contamination could occur at the premises.

As we know from recent high-profile media coverage, this low requirement has resulted in several allergy incidents, including subsequent death.

→ the name of the food; → a ‘best before’ or ‘use by’ date (or instructions on where to find

it); → any necessary warnings; → net quantity information; → a list of ingredients (if there is more than one); → the name and address of the manufacturer, packer or seller; → the country of origin, if required; → the lot number or use-by date; → any special storage conditions; and → instructions for use or cooking, if necessary.

Proposed changesFollowing a consultation earlier this year, and a public FSA board meeting, it was agreed that full ingredient labelling will become a requirement for all pre-packed direct sale foods.

However, it seems that, to date, there is no intention to introduce such legislation to Scotland. Furthermore, as I am sure many of our readers are well aware, Brexit could impact these planned changes to the legislation.

Such legislation for food labelling will no doubt be welcomed by those suffering from food allergies, although it seems that some manufacturers have already begun to be more cautious. As someone who constantly checks the allergen labels of food products, it seems that more and more manufacturers are becoming wary of the potential harm that could be caused. This is demonstrated by the change to certain products, now stating that certain foods are no longer suitable for, e.g. , coeliacs due to processing methods. Since 2014, this is a requirement, with manufacturers being obliged to check their supply chains and the processes carried out by them, as well as their own processes.

The food industry as a whole is becoming more and more aware of allergens and how these affect people’s daily lives. This cannot come soon enough for those trying to suss out exactly what they can, and cannot, eat. However, there will no doubt be difficulties for small businesses trying to ensure they comply with the new legislation, once in force.

Only time will tell whether the new legislation will make as significant an impact as imagined, whether it will be enforced (given Brexit), and whether Scotland will follow up with similar legislation in the future!

Amy Roberts is a Solicitor in our Construction team.About the Author

MacRoberts advises on sale of Cultivate to Deliveroo

MacRoberts has advised on the sale of Cultivate Software Limited, an Edinburgh-based software consultancy business, to international food delivery operators Deliveroo.

Deliveroo, a longstanding client of Cultivate, made the strategic acquisition in a bid to use its Edinburgh-based technical expertise to create its first UK tech centre outside of London.

Cultivate has been working with Deliveroo for three years on its payment system, which handles millions of transactions every day. Paul and the rest of the Cultivate team will continue to work for Deliveroo in Edinburgh focusing on improvement of payment processes and increasing data available to restaurants and riders through the app. Deliveroo plans to double the number of employees at the Edinburgh base in the next 12 months.

→ celery → cereals containing gluten – including wheat (such as spelt and khorasan), rye, barley and oats

→ crustaceans – such as prawns, crabs and lobsters

→ eggs → fish → lupin → milk → molluscs – such as mussels and oysters

→ mustard → tree nuts – including almonds, hazelnuts, walnuts, brazil nuts, cashews, pecans, pistachios and macadamia nuts

→ peanuts → sesame seeds → soybeans → sulphur dioxide and

sulphites (if they are at a concentration of more than ten parts per million)

Current legislationCurrently, there must be certain basic information detailed on the ingredients list for foods. In addition, there must be certain warnings. This includes providing information on the following:

In addition, if one of the 14 main allergens, as outlined below, is an ingredient or process aid, it must be included on the label.

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MacRoberts is one of Scotland’s leading law firms with a history and heritage tracing back over 150 years. Through the delivery of high-quality, innovative and practical solutions for clients, along with an impressive ability to adapt to the contemporary commercial landscape, we have maintained a position of leadership and prestige in the Scottish legal sector and beyond.

Our strength comes from our collaborative relationships and connections – we have an extensive network of clients and contacts throughout Scotland, as well as strong links to the wider UK and international markets.

We are more than just lawyers – we are industry experts with unrivalled commitment to the sectors in which our clients operate. In this era of digital revolution and economic difficulty, we have risen to the challenge in the same way we have done for more than 150 years – with sophistication, passion and expertise.

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