Transfer Pricing Associates

A small British manufacturer hurts one of the biggest coffee suppliers

post Wednesday June 5, 2013


Dualit, a small British manufacturer, gave Nespresso a proverbial slap in the face. The outcome of the recent ruling was very negative for Nestlé Nespresso. The High Court of Justice has decided that Dualit did not infringe Nespresso’s patent on capsules, which fits only in Nespresso machines.

In 2004 Nespresso sent 40 machines to consumers in Belgium and Switzerland for testing and consumer review. Nestlé made a considerable mistake in their attempt to distribute their Nespresso with their demonstration models that they shipped to consumers. According to the ruling, Nestlé lost their chance to gain patent protection on their formerly proprietary capsules in Belgium and Switzerland. Nestlé’s argument that the machines were tamper proof and could not be disassembled got no response from the High Court.

The ruling gives the consumer the opportunity to make a choice between two brands, Nespresso or the 12 dollar cent per capsule cheaper, Dualit. According to Nikki Powel, a lawyer at Addleshaw Goddard, the loss for Nespresso is a victory for the British coffee consumers. “It’s certainly a common sense victory”.

Leslie Gort-Barten, the managing director of Dualit, gave orders to a manufacturer to start producing Dualit’ pods which will fit in the machines of Nespresso, while both sides were still waiting for the result. He was extremely satisfied after the latest judgement and Mr. Gort-Barten subsequently planned various meetings with major distributors in order to begin selling the Dualit capsules across stores in Europe.

The sales of Nespresso pods will most likely decrease considerably, as a result of the ruling. Jamie Isenwater, an analyst at Deutsche Bank, estimated the actual annual sales of Nestlé Nespresso at $4,76bn. According to Euromonitor, Nespresso has a market share of one-third, more than the other two big players, Green Mountain and DE Master Blenders, have combined.

Mr Gort-Barten has declared that Dualit spent one million dollars on the legal costs during the 10 months of litigation. This was a huge risk for Dualit, but certainly one that looks like it will be profitable in the long term. Nespresso said they were very disappointed following the recent judgment. Daniel Weston, the general counsel of Nestlé Nespresso, said: “We believe the decision is inconsistent with the ruling by the European Patent Office in April 2012, confirming the validity of a key patent for the Nespresso system. We are currently reviewing the judgment and will make a decision on next steps in due course”

Source 1: Financial Times

Source 2: Financial Times

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