Nestle loses patent battles

Nestle SA, the world’s biggest food company, lost court rulings over attempts to stop companies from selling rival capsules compatible with Nespresso machines in Germany.

Nestle’s patents for the coffee machine system don’t prevent consumers from using other capsules, the Dusseldorf Regional Court said yesterday. The capsules are neither the key component nor a “special feature” of the protected invention, the judges said.

Nespresso faces increased competition as food companies including DE Master Blenders 1753 seek to sell single-serve capsules that can be used with Nespresso machines. The German court’s decisions came from Vevey, Switzerland-based Nestle’s suits against Ethical Coffee Co and Betron AG.

“This is not the end of the story,” said Warren Ackerman, an analyst at Societe Generale in London. “There’ll be more court cases and this is just one small battle in the war.”

Nestle, which had asked for a preliminary injunction under fast-track proceedings, can ask the court to hear the case under full civil-trial process in an effort to get a different decision and can also appeal yesterday’s judgment.

“We are convinced of the power of our legal arguments and will thus take further steps to defend our intellectual property,” Holger Feldmann, managing director of Nestle’s German Nespresso unit, said. “Competition must be fair and rules must be the same for all.”

Master Blenders markets its L’Or capsules in France, the Netherlands, Belgium and Spain, while Ethical Coffee’s rival capsules are available at least 10 countries including Austria and Germany.

Both Betron and Ethical Coffee are selling capsules that say they are “usable for Nespresso machines” at prices that are as much as a third cheaper than the Nestle capsules, according to the court.

“Since the buyer acquires the right to use the machine, there is no patent violation when he uses capsules of other producers,” the German court said.

Nespresso, which produced 3.5 billion Swiss francs (€2.85bn) in revenue in 2011, or 4% of Nestle’s sales, has been one of the company’s fastest-growing brands.

— Bloomberg