In a report prepared for the European Commission, the International Fragrance Association maintains that current controls among IFRA-compliant firms are adequate to ensure the safety of scents they create, while full disclosure of fragrance formulas would have far-ranging detrimental effects on the industry.

“IFRA supports EU legislation that promotes consumer safety but believes that regulations that would require full disclosure of fragrance formulae ... would provide no meaningful health benefit to consumers and seriously damage the competitiveness of the European fragrance industry in the global market,” the trade group states in its “Valuable Yet Vulnerable” report released in March.

IFRA submits the report in the context of the EC’s ongoing study on trade secrets and the security of confidential business information in the European Union.

The commission closed an online public consultation last month designed to gain perspective on misappropriation of confidential business information in the marketplace and to assess how effectively the current legal framework protects against violations to ensure fair competition.

In addition, the EC has commissioned a targeted survey of more than 700 European companies, which is being conducted by the Milan office of law firm Baker & McKenzie.

In its report, IFRA stresses the importance of trade secrets to the health of the fragrance industry, identifies current challenges industry players face in safeguarding trade secrets and calls for legislation to keep the market strong.

“Robust legislation on trade-secret protection would provide legal recognition and protection for information that is of great value to the fragrance industry,” IFRA asserts.

“Quintessentially European Industry” Threatened

IFRA notes that historically, trade secrets concerning the confidential formulations of fragrances have been at the heart of industry’s intellectual property and remain vital to its success.

In today’s marketplace, unique fragrance compositions are generally divided between three consumer markets – household products and detergents (50%), personal-care products (30%) and fine fragrances (20%). A regulatory framework that guards against IP violations helps to ensure that brand owners in those segments can make compelling offers to consumers – i.e., products with novel, enticing scents – and fragrance creators in turn can benefit from the business of clients that respect their IP, IFRA points out.

According to the trade group’s report, trade secrets in the fragrance sector have become more difficult to defend with the emergence of “relatively cheap” technologies that enable competitors to reverse-engineer fragrances and “rapidly bring close approximations of the original to the market without having to recover the substantial R&D investment of the innovator.”

Fragrance houses typically invest 16% to 18% of annual turnover in their R&D platform to remain competitive, IFRA notes.

At the same time, marketers of fragranced products are under mounting pressure from regulators and public advocacy groups to provide greater ingredient transparency to consumers by disclosing fragrance recipes in full through their websites, marketing materials and product labeling Also see "Women’s Voices Join In Fragrance Disclosure Debate, Citing Allergy Risks" - HBW Insight, 4 March, 2013..

“Increasingly, fragrance industry clients are demanding, on safety grounds, the formulae and related information on products supplied to them. This increases the risk that such clients will eventually formulate the fragrance themselves or commission another house to recreate it at a lower price,” IFRA says.

Such trends pose the risk of driving innovators from the fragrance sector and weakening the overall consumer goods and luxury markets, the association warns.

In essence, without dependable IP protections, the creative fragrance industry could undergo a restructuring “to one that focuses on low-cost production of a narrow range of established fragrances with limited product innovation,” IFRA says. It adds: “This would also shift the focus of production of fragrances away from the EU into locations with lower labor costs.”

Small and medium-sized enterprises – which represent “a characteristic” of the fragrance industry – could be hit especially hard, the group suggests.

IFRA holds that fragrance is a “quintessentially European industry” that accounts for nearly 1 million jobs, conservatively speaking, and €51 billion in gross value added in the EU alone. Currently, the group says, Europe stands as the largest market for fragrances and the world’s leading exporter of cosmetics and fine fragrances that rely heavily on innovations from the fragrance industry.

The trade group calls for “unambiguous legislation” that provides effective protections for trade secrets – and mechanisms for obtaining compensation and redress – through consistent application and enforcement across the EU, compared with the “patchwork” of unevenly policed laws that currently governs such activities.

Dismissing the limited effectiveness of patents and trademarks for fragrance creators, IFRA emphasizes that safeguarding “trade secrets remains the most practical and efficient means of protecting the intangible assets that [are] produced by day-to-day innovation,” and failure to do so “will endanger future job and wealth creation in the EU industry sectors.”

In the meantime, consumers purchasing scented goods can rest assured that fragrance compounds from IFRA members are compliant with “the strictest health standards,” according to the trade group, which has reported 100% compliance with its Code of Practice for the last six consecutive years Also see "In Brief" - HBW Insight, 16 July, 2012..

IFRA Report To EC Addresses Trade Secrets, Dangers Of Full Disclosure

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