Is Reverse Engineering Skittles Trade Secret Theft or Not? – Ep. 20[Podcast]

Summery

In this episode of Stuff You Should Know About IP, Thomas Colson and Raymond Guarnieri welcome special guest Candice Renaldo to discuss the reverse-engineering of trade secrets. The show Gourmet Makes with Claire Saffitz regularly reverse-engineers well-known candies, such as Skittles, Reese’s peanut butter cups, and Jelly Belly jelly beans. In one episode of Gourmet Makes, Saffitz deconstructed a Skittle and attempted to recreate it using the published ingredient list. Saffitz would have been prohibited from doing this if Skittles were protected by a patent, because a patent prohibits the making, using, selling, or offering for sale of a patented product. However, if Skittles had patent protection, she would not have had to reverse-engineer them to learn how they were made, because a patent teaches anyone reasonably skilled in the art how to make the patented product. In contrast, if Skittles are protected by a trade secret, the company that owns the secret would not tell Saffitz how to make the Skittles, but she would be allowed to make them if she were able to reverse-engineer the candy. Trade secrets are fragile, and they can be lost to reverse-engineering. Stealing a trade secret is known as misappropriation, however, and that is prohibited. Even if Saffitz succeeded at reverse-engineering the Skittles, she could not sell them under the Skittles name because that name is trademarked. Also, even if she were to reverse-engineer the Skittles, she could not patent them because she did not invent them. However, she might be able to patent a new formula for a healthier version of the candy. An inventor needs to carefully consider whether to protect an invention with a patent or as a trade secret. A company can produce a product that is relatively inexpensive to make but was very expensive to develop.

Transcript

Raymond Guarnieri:

Okay. What is the most exciting form of intellectual property? You guess it, trade secrets. But what if you could reverse-engineer a trade secret? What is reverse-engineering? Today, all this, plus Skittles. This is Stuff You Should Know About IP.

Raymond Guarnieri:

Okay. So what is this show that you were telling us about, Candice? First of all, let’s take a step back. Candice-

Thomas Colson:

Let’s frame it. Let’s frame it. Yeah. [crosstalk 00:00:31].

Raymond Guarnieri:

Candice first. Candice is our trusted, our favorite, dare I say, hopefully no one else on our team watches this, video shooter and editor on the executive IP team. Candice makes [crosstalk 00:00:47] content come to life. So of all time. Okay. So-

Candice Renaldo:

What an introduction. Thank you. That’s very kind.

Raymond Guarnieri:

So now that we’ve got her blushing, Candice-

Thomas Colson:

No, let’s frame it, Ray. Let’s frame the question, which is where were we when this came into our lives? We were filming on Saturday, right?

Raymond Guarnieri:

Exactly. Talking about [crosstalk 00:01:08] trade secrets.

Thomas Colson:

Right. We talked about trade secrets and Candice got out from behind the camera and said there was this show that she really wanted me to see because it made her think about trade secrets and that show was…

Candice Renaldo:

Bon Appétit. Oh no, it wasn’t. It was a show by Bon Appétit called Gourmet Makes with Claire something. It’s Claire…

Raymond Guarnieri:

Claire… I got her name.

Thomas Colson:

Yeah, don’t worry that I asked you to prep that before we started. It doesn’t reduce your credibility at all.

Raymond Guarnieri:

We’ve got to give her credit.

Thomas Colson:

I did say, “You know her name, right?” And you said, “Yes, I know her name. It’s Claire something.”

Candice Renaldo:

Clare Saffitz. I just don’t like saying people’s last name incorrectly.

Thomas Colson:

Yes. Okay. I got it. That makes sense. Okay. So you said, “You got to check out the show Bon Appétit,” and then you mentioned something about Skittles, right?

Candice Renaldo:

Yeah. So, in this show, I’m watching often in the mornings, and they’re always reverse-engineering well-known candies, like Reese’s, Skittles, Jelly Belly’s and it’s pretty hard and complicated stuff. And these are big companies. So, I mean, I’m always thinking, I wonder if these are trade secrets? Is she about to like blow them out of the water by accident? They must be aware that they are… They had to be treading on water lightly. Are the companies in on it? Are they not? I don’t know.

Thomas Colson:

Right. Yeah. And so that got me, of course, thinking about trade secrets and by the way, I think Skittles are owned by Mars maybe? Right?

Candice Renaldo:

Yeah.

Thomas Colson:

They were in a trade secret infringement or in a theft litigation two years ago that did not relate to this. I just did a quick search, and there was some senior executive, he was like the CFO or something-

Raymond Guarnieri:

Mars Wrigley.

Thomas Colson:

Yes. And they own Skittles, but it wasn’t about this. So I watched that episode, Candice, about Skittles, and it was really cool. It was the reverse-engineering process by a layperson who, by the way, is not a layperson in the cooking world, but she’s not an expert at reverse-engineering. She’s just doing it. So basically I watched her as she went, it was like three weeks of… The show was only 17 minutes, but the elapsed time was like two or three weeks, and she’s trying different flavors. Basically, she started with Skittles, right? And they cut them in half and she’s looking at the thin surface of it and how do you do that? And then she’s got these people coming in and she’s making taffy, and then she’s making other stuff, and ultimately they’re trying to figure out how to make it, right? They go to the back, they read the ingredients, and ultimately by the end, she makes something that looks like a Skittle, right?

Candice Renaldo:

Yes.

Thomas Colson:

Yeah. So this though represents the fragility of trade secrets. So if you have a patent, as you know, you have protection. And if somebody copies you, or if they independently invent it, it doesn’t matter. If you have a patent, they cannot make use or sell or offer to sell in the nation where you have the patent, right? So if this woman… What was her name again?

Candice Renaldo:

Claire.

Raymond Guarnieri:

Claire Saffitz.

Thomas Colson:

Don’t know the last name, do you?

Raymond Guarnieri:

Claire Saffitz. Gourmet Makes.

Thomas Colson:

Okay? Yeah. So Claire, if she-

Raymond Guarnieri:

Because we want her to come on the show someday. Claire, if you see this, we want to know [crosstalk 00:04:49].

Thomas Colson:

Yeah. But our audience is way better than hers, so…

Raymond Guarnieri:

Oh, yeah. Right, yeah.

Thomas Colson:

Anyway, if Claire were to do this, and if there were a patent, she would be guilty of patent infringement because she would be making, it’s violating the make provision, right? But if there were a patent, she wouldn’t have to go through all these machinations because a patent teaches you how to do it, right? If you’re reasonably skilled in the art, you could read the patents kind of like a cookbook. It teaches you how to do it. So she spent two or three weeks trying to figure it out. She wouldn’t have had to do that if there was a patent, but when she did it, she’d be charged with patent infringement.

Candice Renaldo:

But if she didn’t sell it though, would she be charged with patent infringement?

Thomas Colson:

Well, she probably wouldn’t be charged because what are you going to get out of it? But she would be guilty, because you’re guilty if you make, use, sell, or offer to sell a patented product, right? So yes, she would be guilty, they would probably say, “Well, she’s actually giving publicity. Getting people all excited about buying Skittles.” Like Ray bought Skittles because of that show.

Raymond Guarnieri:

As soon as I saw her squeeze the Skittle and how soft it was, it was almost like I could smell it through the video. And I was like, my mouth watered. I was like, I haven’t had Skittles in years. I have to have Skittles now.

Thomas Colson:

They wouldn’t have sued her because they probably would have thanked her, right?

Raymond Guarnieri:

Right.

Thomas Colson:

But it doesn’t mean she isn’t guilty of it, it just means they choose not to enforce it. So the good side is you get a patent and you can read it, and it tells you exactly how to make it. Basically if you’re reasonably skilled in the field, you can make it. A trade secret, though, does not teach you how to make it. In fact, it does the exact opposite, it hides it from you. So you have to go through two or three weeks trying to figure it out. But the good news is, once you figure it out, you can do it. You can make it, you can use it, you could sell it, you could offer to sell it because there’s no intellectual property that prevents you from figuring it out yourself. And that is called reverse-engineering, which Candace, you know, because you’ve had to film enough of my boring videos that you at least look like you’re enjoying yourself. I know you’re faking, but-

Candice Renaldo:

I’m learning every day from those. It’s an important element of life.

Thomas Colson:

Right. So, she was reverse-engineering and there’s all these companies out there. I think we talked about this in a video, when I was younger, I don’t know if they still have it, but there’s a company called TAEUS, T-A-E-U-S, Tear Apart Everything Under the Sun. They are a reverse-engineering lab. They do what she did all the time. That’s what their job is. Companies hire them to reverse-engineer stuff. So the plus side of getting a patent is people can’t copy you. The downside is it only has a life of 20 years from the date of filing wherever you are in the world if you got one in that country. The plus side of trade secrets is it can be protecting you for forever. The downside is they’re fragile, because if you have a woman like Claire going in there and making the taffy and trying to figure out how it’s made, and if she figures it out, your trade secret’s blown, right?

Candice Renaldo:

Yeah. So, but how could they do anything? So say she did that almost perfectly, how would they know, first of all, that… Obviously the company would know, but the layman, anyone else like me watching it, I’m like, Oh, I’m going to go attempt to make a Skittle now and start selling them. What would then happen?

Thomas Colson:

Okay. So here’s the interesting thing. Number one, you can figure it out on your own with reverse engineering and you’re totally fine. However, if you steal the secrets, if somebody from the company sells Claire the secrets, now they can enforce their trade secret because it’s trade secret misappropriation. So if you figure it out on your own by taking their product apart, doing what she did, you’re okay. Now let’s say Claire decides she wants to go to market with an unpatented Skittle, right? So she goes out with her colored Skittles. She puts Skittles on the box and he sells them in the marketplace. Is she okay?

Raymond Guarnieri:

No.

Thomas Colson:

Why?

Raymond Guarnieri:

Well, because there’s this little circle R next to the word Skittles.

Thomas Colson:

Exactly. Because there is another form of intellectual property, right? We’ve only been talking about trade secrets and patents, but there’s trademarks too, right? So Skittles is trademarked.

Raymond Guarnieri:

I feel like I just got the answer right in class.

Thomas Colson:

Oh my God. I’m so thrilled [crosstalk 00:09:43]. Just two short years ago, you would’ve said, “I don’t think so.”

Raymond Guarnieri:

No. I don’t know. As I dragged my knuckles across the floor.

Thomas Colson:

Right. But today, and by the way, I just want to have a little quick little side note, Ray is going to start law school in August of 2021. He’s going to become a patent lawyer. I just want to throw that out there.

Raymond Guarnieri:

If they let me in.

Thomas Colson:

For our millions of followers out there, Ray is going to become a patent lawyer in four short years because he still has the problem of having to get a science degree too. But it’s just a detail.

Raymond Guarnieri:

Darn that Bachelor of Arts.

Thomas Colson:

Yeah. Yeah. You got to get the science degree. But anyway, he’s going to do it. So getting back to it though. Yeah, there’s more than one form of intellectual property. There’s trade secrets, there’s patents. I mean the big four are patents, trade secrets, trademarks and copyrights, and in this case, if Claire decided, “Hell yes, I’m going to go to market now. I figured it out on my own. There’s no patents. I reverse-engineered their trade secret. I’m going to market. I’m going to make me some money.” Right?

Candice Renaldo:

Could she patent it then?

Thomas Colson:

No. Well you mean because she figured out what someone else did? Great question, but no. You know why? Because first of all, she didn’t invent it, she figured out what they did. But what if she figured out another way, because you might remember in that episode, she wasn’t really trying to figure out what they did as much as trying to figure out, I think she said a healthier alternative, to the same taste and the same flavor, right? So what about that? Can she patent her new formula? And the answer is probably. I mean, it’s probably patentable subject matter. I mean, it’s a complicated question, but your point is well taken and that is if she does it differently, it’s not like a copyright where if you create a derivative work, it’s still infringing the copyright, right?

Raymond Guarnieri:

Mm-hmm (affirmative).

Candice Renaldo:

Yeah.

Thomas Colson:

With this, if you create a derivative work, if you will, if you enhance what’s already out there, if you make it different, right, you can get your own patent on it. Now, just so that we’re clear because there might be some IP dinks out there who are already getting angry. If you get a copyright and if Candice has a copyright and Ray creates a derivative work, like you have a painting and he makes a sculpture of it, right?

Candice Renaldo:

Right.

Thomas Colson:

Derivative work would probably violate your copyright, but he can get a copyright on his derivative work, right? He can’t actually reproduce it without violating yours, but he can get a copyright. And then much the same in patents, except that in patents, unless you’re infringing the original one, which means you make something that contains all the elements of the broadest claims, you’re not infringing, which means your enhancement can be independently patented and you can block them from going to market with them and you can go to market because you’re not infringing their patent. Does any of that make sense?

Candice Renaldo:

Mostly.

Raymond Guarnieri:

Yeah.

Candice Renaldo:

Okay. So, but anyway. So yes, that’s pretty… It’s an interesting situation with this woman because she’s reverse-engineering, she’s figuring it out, there’s no patents, we assume, she can go to market, but she’d have to come up with something new. A new brand name, right? And maybe new packaging because they probably have trademark infringement and they probably also have trade dress infringement on the packaging of that Skittles bag that you just showed us.

Raymond Guarnieri:

Would that be the way that the wrapper is… What would you call that? Tapered?

Thomas Colson:

Well, that could be a design patent, the way that they… I mean, trade dress and design patents are similar anyway, but what I’m thinking is the color scheme, the whole flavor of… And basically if someone sees that package, even if they don’t see the word Skittles, they’ll probably think it’s Skittles, which means the Mars company probably has trademark protection on the term Skittles in connection with their product in there, and then also trade dress protection on the whole packaging, colors and all that sort of thing.

Candice Renaldo:

So what do you think the Skittles IP or their legal team thinks when she makes a show like that?

Raymond Guarnieri:

Yeah. That’s a great question. Yeah,

Candice Renaldo:

Yeah. Because I don’t know if they’re more excited because… Well, the marketing team is excited. Okay. So there’s different parts of the Mars company. There’s the legal team, they might not be as excited. The marketing team is thrilled, because Ray went out and bought Skittles just because he watched that video, right?

Raymond Guarnieri:

I only watched the first five minutes of it and I wanted Skittles.

Thomas Colson:

You wanted Skittles, right?

Candice Renaldo:

I need Skittles, stat.

Thomas Colson:

I’m unquestionably going to be getting Skittles next time I’m at Wegman, which by the way is my favorite grocery store on earth, but I’m definitely going to be getting me some Skittles because I watched it. So the marketing department is probably thrilled, but the legal department, the IP department, if it’s a trade secret and we don’t even know if is one, we’re just speculating. But if it is, they’re probably cringing a little bit because they probably don’t like when people reverse-engineer their stuff.

Candice Renaldo:

And broadcast it.

Thomas Colson:

Yeah. I mean, because if you think about trade secrets, they are fragile. They could live forever. The Coke formula. The Coke formula is trade secreted it from like 1890 or something, and if they had patented it back in those days, patents only lived for 17 years from the date of grant, it would have been no longer a patent by like 1910 or so and there probably wouldn’t even be a Coca Cola anymore because everyone would have copied them and they might not have had enough chance to build their strong brand at that point, but because of the mystique around their trade secret and the fact that no one can really know what’s in it exactly, they’ve built Coca-Cola company, probably a lot around that trade secret. So it’s lasted over a hundred years, right? The secret has lasted over a hundred years, but if somebody leaked it, it would have only lasted a hundred days.

Thomas Colson:

That’s the weakness of these trade secrets. So, you have to really think about it. So basically here’s a quick question, here’s something you should ask yourself, I’ve got an invention. Should I pursue patent protection? Or should I pursue trade secret protection? Right? Because, they’re the same kind of things. If you can get a patent, you can also probably try to protect it as a trade secret. So you have to ask yourself, number one, can we keep it secret? Are we the kind of organization that’s really good at keeping stuff secret? If not, let’s go for patent protection. Secondly, can someone reverse-engineer it? Because if they can, our trade secret won’t last that long, so we should get a patent. At the same time though, you might say, wow, patents are not long enough, I need 50 years of protection. Well, then hopefully it’s not the kind of thing someone can reverse-engineer easily, and you have an organization that can keep secrets.

Candice Renaldo:

And I wonder how much you really have to reverse-engineer to really blow that trade secret out of the water. If it’s off by one thing… I mean, does it have to be exactly spot on or-

Thomas Colson:

I don’t know. Ask RC Cola.

Candice Renaldo:

I guess so.

Raymond Guarnieri:

What is RC Cola?

Thomas Colson:

Well yeah, you guys might not know because you’re not old enough, but when I was a kid, there was a thing called RC Cola. And when I was a kid, we used to always say, wow, that tastes just like Coke. And clearly Ray doesn’t even know what RC Cola is, so they haven’t succeeded even though they probably went after and tried to make it just as good, right? And who knows, maybe they even nailed it. Because you know when they do those blind taste tests with Coke and Pepsi, it’s 50/50, half the people don’t get it right?

Candice Renaldo:

Yeah.

Thomas Colson:

It’s because these things are probably all very similar, but the trade secret is more than just about the trade secret. It’s about the mystique around it. It’s about the branding around it. It’s about Coke and this awesome brand, which is largely because of their trade secret. Even if someone did crack the code. So if somebody comes out with the… Candice, if you come out with the Candice brand, the Candice Candy, the CC, the Candice Candy, and it looks and tastes a lot like Skittles, I’m still grabbing for the Skittles. Because I’m comforted by that brand. Ray, hold that package up. You hold that package up, and I feel comfortable because I know when I rip that bag open, I’m going to like it. Why? Because it’s Skittles.

Candice Renaldo:

Because it’s the same every time.

Thomas Colson:

Right. Exactly. Same quality. It’s good. It’s going to be what I want. It’s what my brain is forcing my tongue to salivate over, right? But if I get the Candice brand, I don’t know what I’m going to get. So I’ll probably still buy the Skittles, even if it’s more expensive because I trust the brand. So intellectual property is not just one thing. When you look at a product or service, you need to be thinking about all forms of intellectual property because they all touch our brains in a different spot. The taste from the actual Skittle, the brand identity with the Skittles packaging and the Skittles trade dress, the thrill that maybe this is trade secret and Candice can’t possibly figure it out, although Claire may have.

Candice Renaldo:

Claire was spot on with a lot of those things. She would be the valuable asset to any team who was trying to-

Thomas Colson:

Figure stuff out. Hey, so quick question. Before we close up, do you know offhand of any other products that she’s done this with?

Candice Renaldo:

Oh yeah. Reese’s-

Thomas Colson:

Can you think of any? What? Reese’s? Wait, wait. Not the peanut butter cup?

Candice Renaldo:

Oh, yeah.

Thomas Colson:

Oh my God. I love the Reese’s peanut butter cup. That’s worth the calories.

Raymond Guarnieri:

You know, we just do a different candy every week on the show and I’ll try them all.

Thomas Colson:

Yeah. Then we’ll all be like 30 pounds heavier by the end, whatever the end is.

Candice Renaldo:

But it makes you appreciate those candies a lot more because you watch her take three weeks to make 15 Skittles and you’re like, “Shoot, I could just go to the store and buy a bag for $2.” And there we go, I can eat them.

Thomas Colson:

It also shows you, here’s another thing. I often hear this. Let’s just switch to drugs for a moment. I don’t mean illegal drugs, I mean prescription drugs. People complain that drug companies can make a drug for like a dollar and they sell it for $200. But look how hard it is to figure out. I mean, we’re talking about Skittles, right? It took her three weeks and she’s a cooking expert, right?

Candice Renaldo:

Oh yeah.

Thomas Colson:

This is her thing, and it took her like three weeks and she still probably didn’t nail it totally, right? But she probably came close, but it took her three weeks to figure it out, right? I mean, these things don’t just fall off a tree. You have to figure these things out, and drugs I mean, my God, they spend billions trying to figure out drug… Look what’s happening with COVID right now. They’re trying to come up with a cure for our pandemic. They’re spending, probably, I think it’s the B word. It’s probably billions.

Candice Renaldo:

At least.

Thomas Colson:

Yeah. Trying to figure this out, and then when they get a little pill that looks like a Skittle and we take it and we’re like, “Damn. Why don’t they just charge like 30 cents? Cause it only costs them 30 cents each.” But it costs them billions to figure out.

Raymond Guarnieri:

Materials costs 30 cents. But the R&D costs billions.

Thomas Colson:

I mean people now Skittles are Skittles, but… And by the way, let’s look at the difference. She’s reverse-engineering, right? When you’re talking about drugs, they’re not reverse-engineering. They’re figuring it out, right? And it’s way more complicated than a nice sugar taste.

Raymond Guarnieri:

Sure. Right.

Thomas Colson:

Although now-

Raymond Guarnieri:

They don’t taste as good, but-

Thomas Colson:

But if you go to Reese’s Peanut Butter Cups now, I don’t know. That’s pretty… That’s impressive. That’s one of my top hundred things ever invented in this world.

Raymond Guarnieri:

All right. So next episode, Reese’s Peanut Butter Cups. Maybe we can get Claire on for that episode and the four of us can, I don’t know… [crosstalk 00:22:04] We’ll help her expand her audience a little bit.

Thomas Colson:

Yeah, yeah, yeah, yeah. Yes. We’ll help her to expand because we have a much bigger audience than she does.

Raymond Guarnieri:

I think she’d be doing us a huge favor.

Thomas Colson:

Yes.

Raymond Guarnieri:

All right. Well, Candice, thank you so much for coming on the show today. This was a really awesome topic. We got to talk about trade secrets, reverse-engineering. We even somehow squeezed in trademarks and patents, which is cool because that wasn’t even part of the plan.

Thomas Colson:

You’d think you were intellectual property people.

Raymond Guarnieri:

Exactly. Right? So, all right. Thanks everyone for tuning in. If you enjoyed this, don’t forget, hit the subscribe button. When you do, hit that bell notification if you’re on YouTube. If you’re on LinkedIn, like, share, and comment. Tell us what you think of this. You want more of this? You want to see me eat more candy? Because I’d be more than happy. Just let us know in the comment box below, and thank you. Stuff You Should Know About IP.

Thomas Colson:

All right. See you.

Candice Renaldo:

See you. Bye.