IP and Your Indie Beauty Brand

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If you have built or are building your skincare or body care lines, you’ll want to understand how trademarks, copyrights, and IP affect your business, and also what you can do to protect yourself and your companies. I am not a lawyer, and nothing I write here should be considered legal advice. I hope, though, that it can help you frame the questions you ask your contract manufacturer,  and also get you thinking about how to protect your business.

What is IP?

For those of you who don’t know this term, IP stands for Intellectual Property, which deals with creations, including cosmetic formulas.

According to Wikipedia  “Intellectual property (IP) refers to creations of the intellect for which a monopoly is assigned to designated owners by law.[1] Intellectual property rights (IPRs) are the protections granted to the creators of IP and include trademarks, copyright, patents, industrial design rights, and in some jurisdictions trade secrets.[2] Artistic works including music and literature, as well as discoveries, inventions, words, phrases, symbols, and designs can all be protected as intellectual property.”

In cosmetic private label business, when you hear people talking about IP, they can mean a lot of things, including:

  • Trademark for the brand owner’s business enterprise
  • Trademark for the brands
  • Trade secrets in the event of a sale of service. e.g. trade secret for a beauty procedure
  • Patent for any scientific innovation in the industry
  • Unique formulations
  • Licenses where distributorships are ideal
  • Copyright for websites and magazines

What this article will try to address are the questions surrounding IP and your formula, which includes ingredient sources and the methodology for manufacturing the product.

Why You Might Need to Own the IP

There’s a lot of buzz in the market about the need to own the IP to your formulas. If you have investors in your company, or if your business goal is to build a business and sell it, you may want to have the IP as an asset. If you purchase the IP, you can take your formula to another contract manufacturer, and therefore mitigate the risk of the original contract manufacturer going out of business, or falling out of favor with you.  By owning the IP, you do not have to pay another manufacturer to reverse engineer your product, although you will likely need to pay R&D fees for the new lab to successfully create a test batch of your formula before going into production.

IP and the EU

If you are selling into the European Union (EU), one of the requirements you will face is that you will need to provide the formula for your product. If you’ve purchased the IP, the formula is yours, and you can share it with whomever, including the EU certification agencies.  However, if you have not opted to purchase IP, your manufacturer will likely not give you a copy of the formula to share. Instead, you will submit a Certificate of Manufacturing, (CoM) which provides information about your recipe in percentage ranges. Most agencies will accept a CoM, and you will not have to purchase your IP to meet the EU requirements. Other countries and regions have different requirements for import and sales of cosmetics, so you’ll want to check with each market you wish to sell in. Some consultants specialize in helping companies enter different markets. Depending on your budget and goals, it may be worth it to you to hire one.

Not every Formula is For Sale

When you contract with a manufacturing partner to formulate your products, you can usually choose between four different options for formulation services:

  • Private label of stock products,
  • Semi-customization of stock products,
  • Custom formula creation,
  • Customer provided formulas.

Typically when you private label stock product, the IP remains with the contract manufacturer. Anyone can purchase the stock product and sell it under their brand.  The rights to the formula, ingredient sources, and methodology all remain with the contract manufacturer.  For semi-custom products, the IP of the base product remains the property of the formulating company, and some companies may let you buy the IP for the new product, with the stock product as an ingredient, and some may not.  Custom formula creation is also a company-by-company decision; at EWL we will sell customers the IP for their custom products.  You’ll pay separately for the R&D and the IP.

Review the manufacturing contract to ensure neither your semi-custom or custom formula will be made for anyone else even if you do not purchase the IP. Ensure your customer-provided formulas remain your property. Delve into the details around IP. Answer questions like, who owns the derivative formula  if the formulator has to modify your formula for scale up?  A recipe that works in a small batch doesn’t always scale 1:1 when you compound larger quantities.

Custom Formulation vs. Private Label

Owning the IP for your formulas can be necessary or just a precaution depending on the goals of your company and your risk tolerance. We find most businesses we work with do not purchase the IP but rely on our manufacturing agreement which prohibits us from making a formula– other than stock product, for anyone but the company the formula was created for.  If you are unsure of your future needs, take into account that you can’t purchase the IP for products made by semi-customizing an existing stock formula. You’ll generally get to market much faster if you private label a stock product, but you will have a unique formula if you take the time to formulate something just for you.  During your decision-making process about which route to take, be sure to balance the need to own the IP with time to market. You may want to start with a stock product and once you see your market penetration, take the time and extra money to formulate something unique.

You may also find that you want to own the IP for some of your products, say a facial serum or a shaving creme, but not for others. If your primary value proposition is around a gorgeous shave, then you might want to custom formulate and purchase the IP for a shaving cream, but don’t need to create something unique for the beard oil you want to add to your line.

Protecting your Brand

Ultimately, IP and trademarks are legal and marketing decisions. You’ll want to discuss with your legal advisor the implications of owning IP or not, and also how to trademark and protect your brand and your brand’s image.  Take the necessary precautions you can to protect what you’ve worked so hard to create. Owning your IP may be one way to protect your brand, as is making sure your contract manufacturing agreement fully addresses the protections you need.

If you have questions, please let us know in the comments below. And if you want to share your story about formulas, IP, and trademarks, please do.

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5 years ago

Since my business is in a start up can I do without the IP? Also, where do I go to actually fill out this information (concerning purchasing IP)?

Val
5 years ago
Reply to  Meagan

Hi Meagan, That’s a good question. Whether or not you need to buy the IP is less about your business phase i.e. startup vs. growth mode, and more about what you want to do with your business. You may never need to buy the IP regardless of the stage your business is in.

So the short answer is no, you probably don’t need to buy IP at the beginning of your business. BUT you will probably want to have the conversation with your contract manufacturer so you know whether or not you can buy the formula they are manufacturing for you. Then, depending on the manufacturing agreement you have with your manufacturer, you can purchase IP when or if you need it. The key thing is to understand if you are using a stock product or a custom product and to know the IP options for each.

As to where you go to fill out this information, are you asking about when you work with us? If you have questions about IP Purchase, just send us an email at info@ewlnatural.com

We do not sell the IP if you private label our stock products or have us create a semi-custom formula using one or more of our stock products. We use our stock products for many, many customers. We only sell IP if you have us develop a custom formula. If you’re interested in that, you can send us an email at info@ewlnatural.com.

I hope I answered your question. Let me know if you have anything else you’d like to know about. Val

Rose
5 years ago

Thank you for the timely article. A customer just asked for my formula for his private label product and I obviously turned him down. How does one determine the price of a formula if it were to be sold? This is my first experience under these circumstances.

RosaRosa
5 years ago

I use custom formulations in my new business, but want to add my own essence blends. Do I need to have an IP for this?

5 years ago

Hi, there are many levels to intellectual property. If you do not want to reveal your formula the use of Trade Secret status is a powerful tool.

I am an attorney who after 20 years of practise have my own Cosmetic line.

If anyone has further questions please email me at c@formula39.com

Christopher

Mona
5 years ago

If I use a stock formulation but add other active ingredients and essential oils to it at my own facility do I need to worry that I may be mistakingly copying a formula to which another company has paid the IP for?? Thx for the grt article!

Thomas Bland
4 years ago

Hi Val, seems there are so many ways to go about trademarking your product name etc…. I did it once a long time ago and was kind of expensive but now there seems to be companies that do it cheaper or at least get you going with all the paper work. It can be done yourself but as far as the searching aspect of it to make sure your not stepping into someone else’s business etc….. what would be your suggestion to try to keep the cost factor down? Thanks, Tom

4 years ago

Hello i make my own handmade bath and body products and sell such as handmade soaps, lotions,scrubs and few of facial products such as facial moisturizer, face scrub,clay mask ,facial soap bars and facial oils.
Can I exhibit my product line in Indie Beauty Expo if so what are requirements to attend.I have checked that in new york is in august. This the best way to bring my product line in the market so people get to about there are products without harsh chemicals.

Kate
1 year ago

Dear Val,
We have started a skin care line and are looking for some advice on industry standards regarding intellectual property. We have trademarked our name and slogan. Do most skincare companies own/patent their formulas or does the manufacturer/chemist hold these formulas. OR – is it different on a case by case basis dependent upon the uniqueness of the formula? Would not owning the formula hurt us if we were to become very successful (ie., being bought out )?

Thank you so very much!
Best,
Kate

1 year ago
Reply to  Kate

Hi Kate!

Brandon from EWL here.

It really is a mixed bag. If you hope to grow and then sell your company, owning your own IP will most likely be mandatory for your investor group. As for patenting, it seems to be less common than not. If you don’t own the IP, the manufacturer/chemist holds that formula.

Let me know if you have any more questions.

Cheers!
-Brandon

Christina
1 year ago

If you were to custom make a formulation at your lab that isn’t associated with your formulas. Do you as a lab only make the formulation and have no rights after making it?

1 year ago
Reply to  Christina

Hi Christina!

Brandon from EWL here.

We make the formula for the specific customer and do not use it for any other customer. We still own the formula. I recommend reading through our FAQ page. It will answer a lot of the questions you probably have.

Let me know if you have any more questions.

Warmest,
-Brandon