top of page
  • Writer's pictureTim S

Fonterra Triumphs in Patent Battle with Perfect Day

Decision by the Australian Patent Office refused the US-based unicorn's Australian patent application on artificial milk. Fonterra celebrates by announcing their movement into the alt-dairy market with Dutch nutrition multinational DSM.

The Decision (PDF below) helps clear the way (in Australia at least) for Fonterra and alt-dairy pioneers to combine artificial milk proteins to make dairy substitutes without the cow.

Not such a Perfect Day in Aussie but their upward trajectory is clear

Perfect Day completed a US$350m Series D raise in September 2021 to take their total raised to US$710m with a valuation of US$1.5b. Their tech features fermentative production of substitute dairy proteins and lipids with desirable dairy-like properties. Patent filings also indicate an interest in hypoallergenic milk proteins and elimination of esterases that inhibit production.

They have amassed 17 granted patents across 6 different countries and have a further 83 patents pending in a further 7 countries. Although the Australian Decision has no effect in other countries, the weaknesses exposed could lead to more extensive challenges of Perfect Day's patents in other countries. Losing 1 of their 7 patent families in the relatively modest Australian market for alt-dairy is unlikely to hit Perfect Day's valuation.

Perfect Day failed to demonstrate they had made the invention

Fonterra's legal challenge started when they opposed the grant of Perfect Day's Australian patent in 2019. That patent would have covered food compositions including the two major whey proteins β-lactoglobulin (~65%) and α-lactalbumin (~25%) when produced by a fungal culture. The food compositions were also required to have some poorly defined dairy-like properties such as taste, aroma and appearance.

Perfect Day’s patent was declared invalid on two main grounds:

  1. The patent tried to claim food compositions with dairy-like properties. However, there was no evidence presented by Perfect Day that these compositions could actually be made using solely the two whey proteins without also containing another milk protein - casein. The patent claims specifically excluded other milk proteins (such as casein) so the patent claims were declared invalid for lack of support.

  2. The patent did not teach the skilled reader how to make the invention. Due to the lack of support in the first ground of invalidity, the specification did not teach the skilled reader how to make compositions with "dairy-like properties" using only whey proteins without casein.

The decision can be appealed by Perfect Day. However, hopes of ultimately prevailing seem low based on the following statement in the Decision:

Under the circumstances I see no means by which the applicant [Perfect Day] could amend the specification to overcome the deficiencies identified. However, I will provide the applicant two (2) months from the date of this decision to file amendments to attempt to overcome the deficiencies.”

As is typical in these cases, Perfect Day has a divisional patent application waiting in the wings. This will allow them to have another go at getting their patent granted. However, an initial report issued by the examiner two days after the Opposition Decision rejected the divisional application. It remains to be seen whether any commercially meaningful protection is granted.

The Decision is a good reminder to patent applicants that basing your patent claims on irrelevant or questionable evidence (or no evidence) is ultimately a bad idea. Doing the mahi (work) to properly exemplify your invention is an important step if you want to gain strong patent rights.

Fonterra's "coincidental" announcement of partnership with Dutch nutrition giant DSM

Coincidentally (😉) Fonterra announced two days after the decision that they are taking their first steps into non-dairy products. This involves a partnership with Royal DSM - a Dutch multinational nutrition and bioscience company active in the fields of health, nutrition and materials. Their partnership has been ongoing since 2019 and aims to accelerate the production of proteins with dairy-like properties using precision fermentation.

Fonterra will have spent big on the patent challenge through their attorneys AJ Park. The case involved testimony of multiple expert witnesses and extensive submissions on points of law. This investment and the timing of their announcement is a clear sign that the technology in Perfect Day's patent was of concern to Fonterra/DSM. If granted, it would likely have limited their expansion plans into the Aussie market and may have put the Royal DSM partnership on ice.

Indicators are that interest in alt-dairy will continue to grow

The global dairy alternatives market is projected to grow from $25.19 billion in 2022 to $61.43 billion by 2029, at a compound annual growth rate of 13.58%. Where tech investment goes, innovation and patent filings typically follow.

Fonterra stated in their Press Release that they have already filed patents in the field of alt-dairy. These are yet to be published but should give useful insights into Fonterra's approach to the alt-dairy market.

Perfect Day have previously ignored New Zealand as a market in their global patent filing strategy but following the announcement by Fonterra this is sure to change. The alt-dairy market is hotting up and investment is flooding in. Watch this space!!

IP Australia Decision - Fonterra opposition to Perfect Day patent - Decision_23-8-2022
Download PDF • 401KB

730 views0 comments


bottom of page