Here’s an update on a quirky story I reported on earlier this year. An Ontario coffee roaster is suing Keurig Green Mountain for $600 million for engaging in anti-competition practices by embedding “DRM” into their latest model of single-serving coffee machine.
As CBC reports the issue is that the patent on Keurig’s ‘k-cup’ coffee pods has now expired, which has opened the door to other manufacturers such as Club Coffee (the complainant in this case) to make their own ‘pods’ for use in these machines. This is cutting into Keurig’s profit, obviously—when they were the exclusive source for the pods, they made all the money, and they are invested in keeping it that way.
As the article explains:
“First, their new brewers have what they claim to be ‘proprietary technology’ that rejects any single serve pods not authorized by them,” a Club Coffee spokesperson told CBC News in an email. “Secondly, Keurig has used the threat of this lockout technology to coerce retailers into exclusive arrangements to sell only Keurig-controlled products.”
I think that this form of DRM really is bad for business, and may indeed fall under monopolistic anti-competition rules. Club Coffee alleges that their pods have several advantages, including that they use less plastic and are more environmentally friendly, and they also are less expensive for the customers. Keurig has recently raised prices on their k-cups, and letting them maintain sole selling rights in the coffee pod market really does amount to a form of price-fixing. And it also violates the core principle behind patent law. Keurig developed this technology, has exclusive use of it during the length of their patent, and now that patent has expired. That’s the process. So other companies should now be allowed to use this technology without fear of interference.
As a business strategy, this is doomed to failure.
Club Coffee should design and market their own single cup coffee pod brewer. Their marketing strategy could be: “Why lock yourself into one brand of coffee pods? Buy our machine and you can use any coffee pod from any supplier, including home made pods and pods from our competition if you want to.”
That way, Keurig can lose the brewing machine side of their business as well as the consumable coffee pod side of the business.
They must be taking lessons from printer manufacturers.By now the time and money spent on making better printers is surely less than the time and money spent on trying to make sure people don’t use cheap generic refills and toner in place of the expensive proprietary equivalents.
Just being picky… as far as I know, Keurig never was “the exclusive source for the pods.” For some time now, their parent company Green Mountain has been the major source, but there are a number of independent licensed suppliers.
Vendor lock-in, that’s all about it. That is the same as razor blades. Those are so much patent-encumbered that it is impossible to make compatible ones legally. When the patents expire, they launch a new model, with new patents.
Nespresso tried the same strategy but as they have currently more than 80% of the world pod coffee machine market, they were prevented by monopoly laws.