Patent Protection Is the Foundation of the Future for Cosmetics

The Bottom Line

• Shifting tariff rates and ongoing legal uncertainty are interfering with production schedules for manufacturers, including the cosmetics industry.
• While tariffs and their effects are out of the hands of cosmetics companies, businesses can focus on using patents to safeguard their research and development efforts while maintaining their competitive edge in the market.
• Companies should keep in mind what patents they hold as well as what their competitors have so they can defend their own patent rights and avoid infringing on the intellectual property rights of others.

The market for cosmetics and personal care products in the US is estimated to exceed $100 billion by the end of 2025. However, as an industry highly dependent on international trade, with respect to both the import of finished goods and the establishment of global supply chains for materials and manufacturing, chaotic tariff rates and brewing trade wars are complicating the outlook for companies.

The Trump administration’s tariffs are expected to have a significant and disruptive effect on the cosmetics industry. Reciprocal tariff rates range from 10% to 41% and apply to most cosmetics-related imports into the US.

It isn’t clear how tariffs will continue to influence cosmetics companies as courts determine how much power the president has to set rates.

The Federal Circuit ruled the Trump administration’s tariffs are an overreach of the International Emergency Economic Powers Act, and the US Supreme Court is prepared to hear the administration’s appeal. Although the tariffs will remain in effect as the case plays out, continued legal uncertainty makes it difficult for companies to plan long-term.

There’s also a possibility the administration can use alternative strategies to impose or modify tariffs regardless of how the case plays out in court.

As a result, cosmetics companies must continue to navigate potential disruptions to supply chains, higher import costs, and pricing uncertainty, all while trying to maintain their competitive market edge. Consumers, too, are fearful of rising prices on products as companies wrestle with whether to pass on increased costs to their customers.

Patent Protection

In lieu of certainty about their import and export costs, cosmetics companies do have some control over their own fate.

Patents, which may be granted for products, processes, and uses that are new and not obvious, are valuable intellectual property assets that cosmetics companies can employ to gain market advantage in this challenging environment. Patents are territorial, meaning that they must be obtained and enforced on a country-by-country basis, and they typically provide exclusivity for the claimed innovations for a period of approximately 20 years.

Patents can protect a wide array of useful innovations related to cosmetics and can be granted for everything from compositions and formulations to manufacturing processes and intermediates to methods of use.

Exemplary patented products and processes in the cosmetics space include: formulations for bleaching hair, anti-aging skin care formulations, methods of generating artificial nails using a mobile device and 3D printer, processes for manufacturing a cosmetic pigment, methods for applying eyebrow makeup, a device that uses a deep learning model to color match foundation based on a photo of the consumer, and a brush having an elongated handle and two sets of bristles.

This list merely scratches the surface of the types of innovations that can be patented in the cosmetics realm.

Companies use patents to prevent competitors from copying and selling their innovations. Patent owners can thus secure valuable market exclusivity and ensure a return on the investments committed to research and development. Patents also serve other important business purposes, such as enhancing brand credibility, attracting investors, expanding business opportunities, and providing licensing revenue.

Creating Value

Focusing on patents while the president’s tariff-setting authority is adjudicated in court is a valuable strategy for cosmetics companies to ensure they remain viable and competitive. Patents can have a transformative business effect on cosmetics companies in a variety of ways.

Minimizing loss of market share. Rising prices may make it increasingly difficult for companies to compete based primarily on price. Having patents on the company’s products can provide exclusivity in the marketplace to prevent similar or identical products from being made, sold, used, or imported.

Exclusive rights conferred by patents can be enforced via infringement challenges in the courts to obtain damages or injunctions against competitors, or by actions in the International Trade Commission that can result in blocking of importation of infringing products at US ports of entry. Even absent full-scale litigation, patents can be licensed to others as a source of additional revenue to offset rising prices.

Maximizing effects of decreasing R&D budgets. As companies face higher input costs, they may have less money for research and development. Companies may be less prepared to pivot to new products on a regular basis and may want to prolong the market lifespan of a more limited set of technologies. Patents can help companies safeguard their prized new product developments and innovations to increase return on investment in research and development.

Mitigating effects of supply chain variability. In an evolving tariff landscape, companies will increasingly need flexibility to adjust supply chains. Companies may choose to move supply chains to other countries with more favorable trade agreements to mitigate costs associated with tariffs.

In some cases, companies may be forced to adjust supply chains whether they want to or not due to changing availability of materials and manufacturing facilities because of the altered trade landscape. Having patents relating to key ingredients and manufacturing processes in the US and key manufacturing jurisdictions can provide cosmetics companies with greater control over their supply chains and reduce the risk of scarce manufacturing inputs being diverted to competitors.

If a company needs to move its supply chains to new countries, obtaining patents in those countries can help to secure a more stable position with less competition for the necessary manufacturing inputs.

Attracting investment and deals. In a time of upward pressure on prices and volatility in supply chains, cosmetics and personal care companies may increasingly look to raise capital, enter into partnerships, and even seek out merger and acquisition opportunities.

In a crowded deal space, patents and other intellectual property can be an important differentiator. Having patents demonstrates the company has unique products and technology it can leverage to achieve a dominant position in the market. Patents on technologies such as manufacturing processes and formulations that transcend individual products to cover entire product lines or product categories can be especially valuable.

Leveraging cutting-edge technologies. Artificial intelligence is revolutionizing many industries, including the cosmetics and personal care space, to create previously unimaginable opportunities.

AI is transforming the cosmetics industry, for example, by personalizing makeup and skincare recommendations based on user photos and virtual try-ons. Product development is also benefiting from AI innovations, from manufacturing optimization and sustainability to the discovery of new ingredients.

These advancements can, in many instances, be patented to provide additional competitive advantages to companies pursuing new technologies. Cosmetics companies that successfully patent cutting-edge technologies at the intersection of cosmetics chemistry, personal care technology, and AI will attain market-leading positions at the forefront of one of the biggest revolutions in technology in decades.

Navigating the Patent Landscape

Companies that are adjusting products and supply chains in response to global market disruptions should do so carefully, being mindful of another market risk—patents held by others.

When new products enter the market, adjustments to existing formulations are made, or supply chains move to new locations, particularly for more technologically advanced products, competitors may have patents that could be infringed by the new activity.

Rather than proceeding at risk, especially for higher value products, companies can commission patent searches to be performed to understand the intellectual property landscape related to the final product, manufacturing intermediates and processes, and the way the product will be used by consumers or service providers.

If potentially relevant patents are identified, companies can proactively work with patent attorneys to develop risk mitigation strategies. These can include altering the design of the product or process, seeking a license from the patent owner, conducting an invalidity assessment to determine the likelihood that the patent would be enforceable if asserted, and even challenging the validity of the patent in the US Patent and Trademark Office, a federal court, or other applicable forum outside of the US.

Final Touches

Being attuned to the patent landscape and having a patent strategy in place up front can save companies a great deal of money and headaches in the long run. It also demonstrates to investors and deal partners that the company is sophisticated and forward-looking and has a thoughtful plan for long-term profitability and return on investment.

As prices on imports continue to remain uncertain, cosmetics companies should consider patents as a way to protect their current products and maintain their competitive advantage in the market. Business strategies that take into account patents and other intellectual property can be game-changing, especially for companies developing new product types and solving challenging technological problems.

Even absent obtaining patents of their own, companies should be aware of the broader patent landscape to safely maneuver through the changes and uncertainty in the marketplace. Just as the right makeup foundation sets the stage for a radiant finish, patents can provide companies with the essential foundation for enhancing their competitive edge amid market uncertainty.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Lisa Silverman is partner in Morrison Foerster’s Palo Alto office and co-leads the firm’s life sciences + healthcare leadership team.

Shannon Reaney is partner in Morrison Foerster’s Palo Alto office and a patent attorney with more than 20 years of experience.

Marisa Sanders is an associate in Morrison Foerster’s New York office and a member of the firm’s patent strategy and prosecution group.

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