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The Pepsi Formula: Trade Secret or Free Speech?
May 18, 2012 – A recent lawsuit filed against Pepsico, Inc. could threaten the company's most valuable trade secret, the formula for its flagship beverage, Pepsi-Cola. On the other side of the dispute, however, is not the Coca-Cola Company, but the First Amendment. The plaintiffs are the son and daughter of the late Richard Ritchie, the man who developed the current formula for Pepsi-Cola in 1931. The lawsuit, filed in the U.S. District Court for the Southern District of New York, seeks a declaration that Joan and Robert Ritchie should be allowed to disclose the formula as part of their father's life story. The Ritchies are asking the court to find that such disclosure is protected by their First Amendment right to free speech and should not be considered a trade secret violation.
The original Pepsi-Cola formula was created in the late 1890s by Caleb Bradham, a pharmacist from North Carolina. The beverage derived its name from two of its ingredients: pepsin and cola nuts. Apparently, that formula was not well received; as Bradham lost his company in bankruptcy after World War I. At that same time, Ritchie was developing candy formulas at a company called Loft Inc., when that company's president, Charles Guth, bought the bankrupt Pepsi-Cola Company. According to the complaint, Guth was not satisfied with the Pepsi's flavor and asked Ritchie to reformulate it.
The Ritchies allege that their father's formula became a commercial hit by 1934 and helped make PepsiCo the success it is today. According to the suit, Ritchie provided the president of Pepsi with a copy of his formula in 1941, but Pepsi was aware that Ritchie kept the original himself. Those original documents weren't discovered by Ritchie's heirs until 2008, when their existence was disclosed to a PepsiCo historian. A company representative apparently visited Ritchie's home to view the materials and subsequently demanded the return of the documents.
Pepsi asserts the documents, especially the actual formula itself, are company property and any disclosure of them would be a misappropriation of Pepsi trade secrets. The Ritchies claim that "[t]he original formulas of iconic beverages and the lore that surrounds their genesis and provenance are of great interest to the public." The lawsuit also seeks damages for "unjustified and improper acts that have interfered" with the right to use and disclose Ritchie's documents.
The conflict between protection of intellectual property and protection of free speech is not a new one. The fact that the Pepsi formula is the focus of this particular conflict, however, reminds us that any piece of information can be the subject of IP rights and content disclosure disputes. Even though most of the world may be interested in learning the secret Pepsi formula, we are more interested in knowing if either party has insurance that will cover them for claims arising out of the use of such "content," especially given the formula's significance to Pepsi and the potential cost of this litigation for all involved. Also, we think it far more likely that we will learn the answer to the insurance question, since the Pepsi secret formula will probably stay a secret. In the meantime, we will continue to help protect both intellectual property and free speech.
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ThinkFriday Archives
May 18, 2012: The Pepsi Formula: Trade Secret or Free Speech? (Read now)
May 11, 2012: HIPAA Privacy and Data Security Rules are a Concern for Healthcare Related Companies of All Sizes (Read now)
May 4, 2012: Will Good Intentions Lead to a Mobile Device Apocalypse? (Read now)
April 27, 2012: Lest We Forget, Data Breaches are Still a Threat (Read now)
April 20, 2012: Intellectual Property Rights Can Be as Transitory as Quarterbacks (Read now)
April 13, 2012: Trademark Issues Can Ruin Your "Book" of Business (Read now)
April 6, 2012: Foreign Copyrights Get New Life in the U.S. (Read now)
March 30, 2012: Most Recent Ponemon Study Reveals Good News (Read now)
March 23, 2012: Will 2012 See the Resurgence of Privacy Rights? (Read now)
March 9, 2012: Did We Need a New Reason to Advise Securing Your Internet Access? (Read now)
March 2, 2012: A Follow Up on the Dangers of ZIP Codes and Skimming (Read now)
February 24, 2012: Did We Mention That Vendors Are a Big Factor in Data Security? (Read now)
February 17, 2012: Shining the Light On Yet Another Privacy Regulation (Read now)
February 10, 2012: Super Bowl Can Create a Super Hangover for Unwary Advertisers (Read now)
February 3, 2012: Even the SEC Sees the Value of Data Security Insurance (Read now)
January 27, 2012: Black Wednesday? (Read now)
January 20, 2012: Designing Privacy One Regulatory Action at a Time (Read now)
January 13, 2012: Your Search Has Returned 1,000,000 results and . . . a Lawsuit (Read now)
January 6, 2012: Ridiculous Claims Can Still Be Expensive (Read now)
December 30, 2011: Hiding in Plain Sight (Read now)
December 23, 2011: Overbroad Social Networking Policies Can be Unfriendly to Employers (Read now)
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