Trademarks are Dead - Sriracha

Dan sent this article in...

David Tran, a Vietnamese refugee who built the pepper empire from nothing, never trademarked the term, opening the door for others to develop their own sauce or seasoning and call it Sriracha.

And he is a multi-millionaire running a family business.  He wanted to make a seasoning and sell it.  He did not start a business to provide an opportunity for rent-seeking lawyers.

That's given some of the biggest names in the food business such as Heinz, Frito-Lay, Subway and Jack in the Box license to bank off the popularity of a condiment once named Bon Appétit magazine's ingredient of the year.

“Bank” off the popularity?  They will dump one SKU of risible corn syrup and soy lecithin food coloring condiment for another with some more piquant ingredients.  They will make no more money than they were before.  What possible interest could anyone who cares about “good” have in that arena?  Those dying businesses would never have provided a profit opportunity anyway, any more than Hershey has done to Cadbury’s.

Restaurant chains and candy and snack makers aren't buying truckloads of Tran's green-capped condiment emblazoned with the rooster logo. Nor are they paying Tran a dime in royalties to use the word "Sriracha" ...

Not would they have.  What we do know is Sriracha Huy Fong is cleaning up. To ponder what has not happened is ahistorical thinking.

"In my mind, it's a major misstep," said Steve Stallman, president of Stallman Marketing, a food business consultancy. "Getting a trademark is a fundamental thing."

Of course you say that.  Consultants are seldom in doubt, never informed.  I say it is a brilliant tactic, says me, President of Spiers Marketing, a company I just made up.  Of course I do marketing consulting too, and my clients directly attribute increase revenue to my advice.  Avoiding all "intellectual" "property" "rights" is a fundamental thing.

Tran, who now operates his family-owned company Huy Fong Foods out of a 650,000-square-foot facility in Irwindale, doesn't see his failure to secure a trademark as a missed opportunity. He says it's free advertising for a company that's never had a marketing budget. 

Bingo.  $80 million in sales (probably 10 net, after paying everyone, and owning biz free and clear) with no marketing budget.  None.  Actually there is quit a long list of successful companies you know that have never had any marketing to speak of...  in fact most businesses in USA do no marketing beyond opening their doors and plain, old fashioned sales.

It's unclear whether he's losing out: Sales of the original Sriracha have grown from $60 million to $80 million in the last two years alone.

Losing out on what, by whose account?  If Tran sees no lost opportunity, who is this writer to tell him otherwise?

"Everyone wants to jump in now," said Tran, 70. "We have lawyers come and say 'I can represent you and sue' and I say 'No. Let them do it.'"

The winning attitude in business.

Tran is so proud of the condiment's popularity that he maintains a daily ritual of searching the Internet for the latest Sriracha spinoff.

Occult compensation.  Priceless.

He believes all the exposure will lead more consumers to taste the original spicy, sweet concoction — which was inspired by flavors from across Southeast Asia and named after a coastal city in Thailand. 

Of course.  There will never be a run on the Jack in the Box Sriracha.  Further, most of these knock-offs will probably come to Sriracha to get a good price on producing the junk versions.

Tony Simmons, chief executive of the McIlhenny Co., makers of Tabasco, said Tran's Sriracha sauce was the "gold standard" for Sriracha-style sauces, ... Simmons was reassured by his lawyers that Tabasco would have no problem releasing a similar sauce using the name Sriracha.
"We spend enormous time protecting the word 'Tabasco' so that we don't have exactly this problem," Simmons said. "Why Mr. Tran did not do that, I don't know."

Exactly what problem, Mr Simmons?  If you calculate the “enormous time (time is money with lawyers) you spend on avoiding this problem (which you cannot actually name) what has it gotten you?  The undying love of lawyers?  Since Sriracha is surpassing Tabasco, perhaps you should reflect on the error of your business model.

There are now a slew of sauces on the market labeled Sriracha, including variations by Frank's Red Hot, Kikkoman and Lee Kum Kee.

None of which will do among Fuy Hong’s customers.  If anyone buys the above, they were never Fuy Hong’s customers.  Why should Fuy Hong worry about people who will not be their customers?  Why should Fuy Hong pay lawyers to keep people from buying what they want to buy?

"My 'rooster killer' (ed note: Tabasco) jumped into the market," said Tran, borrowing a description he saw on a food blog. "They're a big company. They have a lot of money and a lot of advertising."
Simmons isn't counting on toppling Sriracha any time soon.
"Mr. Tran got an awful big head start," he said.
After a limited release, Tabasco will distribute its Sriracha sauce nationwide sometime in the first quarter of this year, Simmons said.

Demonstrating to the world that Tabasco is now a follower, not a leader.  This signals the phase when the owners begin to milk the brand by cutting back on costs, including ingredients.  This will end very badly for Tabasco, and it is too late for them to get out of it now.  Get your Sriracha flavored-popcorn and watch Tabasco die the death of a thousand cuts.

It may be too late for Tran to successfully argue that the trademark belongs to him.
Two dozen applications to use the word have been filed with the United States Patent and Trademark Office. None has been granted for Sriracha alone. The word is now too generic, the agency determined.

Two dozen idiots.  Even Fuy Hong knows this is a fad, and when it dies down he’ll have a state of the art food production plant in the LA basin which he can lease out to other food producers.  In the meantime two dozen entities are forking over money to lawyers for no reason whatsoever.  Ka ching!

"The ship has probably sailed on this, which is unfortunate because they've clearly added something to American cuisine that wasn't there before," said Kelly P. McCarthy, a partner and expert on brand protection and trademark issues at the law firm Sideman & Bancroft.

LOL.  Of course he would say that.  What ship has sailed?  What unfortunate thing happened? Yes, something was added to American cuisine, with zero "intellectual" "property" "rights" the founder got very rich, and nary a lawyer involved.  Is that the unfortunate thing?  Yet another instance demonstrating public law and business have nothing to do with each other...

"My instinct is to want to go after the people that used the Sriracha name," said Berman, an intellectual property lawyer who has represented the Los Angeles Lakers, Pom Wonderful and Nordstrom.

Yes.  “Mr. Berman, is this lawsuit absolutely necessary?”  “Yes, my summer cabin needs remodelling.”  His socially conditioned instinct is to interfere in people making agreements among themselves.

"Large companies, the Mattels and Disneys of the world, try to protect everything and have the budget for that," Berman said. "With smaller enterprises like Huy Fong, you have to pick and choose."

But Huy Fong is wildly successful without lawyers!  Proving smaller enterprises don’t “have” to do anything rent-seekers advise.

That's why Tran has gone after knockoffs of Huy Fong's Sriracha from China. Unlike the name, Tran trademarked his rooster logo and distinctive bottle.

This is a mistake on Tran’s part.  A trademark in China will get you no more than in the USA.  He need only adapt traceability, a QR code on each bottle, and then track the smartphone hits around China to see where he is being knocked off, and then take specific direct action, through marketing, business, not law.  It is always a mistake to call a lawyer when you have a business problem.

At the same time, Tran has signed licensing agreements with a handful of specialty producers such as Rogue, which brews a Sriracha hot stout beer packaged in a red bottle and green cap to look like Huy Fong's signature sauce, and Pop Gourmet, which makes a Sriracha popcorn and will soon release a Sriracha seasoning spice.

And why pray tell, when no public law requires it, do these various companies sign private contract law agreements (as opposed to “intellectual” “property” “law” agreements) with Fuy Hong? Because they do not want to be embarrassed by co-branding with second rate sriracha.  "jack-in-the-box sriracha flavored beer?" I don't think so...This is called private law, an example of why we need no rent-seeking public law.

Even with these partnerships, Tran doesn't charge any royalty fees. All he asks is that they use his sauce and stay true to its flavor.

Right.  Who needs royalties when you are selling Sriracha to the people with the “license”?

"David is fine with that since in some indirect way, we will still reap the benefit of the word 'Sriracha' being used," said Donna Lam, Tran's longtime deputy. "We seem to be the best-known Sriracha out there, and everyone seems to use our brand as the gold standard. If anything, we are proud we started the Sriracha craze."

Exactly.  And if and when people want to showcase themselves as followers and second rate, then can go get a license from Tabasco, after paying lawyers enormous sums.  Or they can go to Fuy Hong.

We need to restore freedom from public law in the USA markets.

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