The court battle with the food giant is over which company has the right to market and use a straw that releases flavour into a liquid when it is drawn from a container.
Unistraw, based in New South Wales, has filed suit against Nestlé in London's High Court claiming that the company infringes or plans to infringe on its patents for its Sipahh brand of straw. Nestlé denies the allegations.
Sipahh is a transparent milk straw that contains dozens of flavoured tapioca granules. Plain milk becomes flavoured when milk is sucked through the straw and flows through the granules. Sipahh currently makes the granules in chocolate, strawberry, banana and caramel flavours.
Unistraw launched Sipahh in Australia in November last year. The company claims to have captured about 25 per cent of the multi-million dollar flavoured 'milk modifier' category in supermarkets.
A Unistraw spokesman told FoodProductionDaily that the suit was sparked after the company found out that Nestlé plans to release what it calls "Nesquik Magic Straws".
The Unistraw suit alleges the Nestlé straw is a similar product based on its design. Unistraw is seeking a multi-million award in damages, the company spokesperson said.
Nestlé's UK spokesperson Jayne Bassham said the company intends to vigorously defend itself against the action.
"Nestlé is not a company which seeks to gain commercial advantage over its competitors by breaching obligations of confidence as alleged by Unistraw," she said. "In addition, Nestlé has a strict policy that it does not infringe any third party rights which it considers to be valid. Nestlé considers that the sale of Nesquik Magic Straws does not contravene this policy."
Nestlé intends to continue the launch of its Nesquik Magic Straws backed by a £3 million marketing campaign as planned, she said.
The Unistraw claim accuses Nestlé UK of breaching its European design rights and also accuses it of breach of confidentiality agreements. Unistraw is seeking an injunction to stop production and sale of Nestlé's lookalike straw and the destruction or return of all straws produced to date.
The Australian company claims the recipes for and the method of manufacture of the straws are "trade secrets" owned by the company and invented by Peter Baron, who started developing the product nine years ago in Australia.
Baron, originally from Yorkshire, said Unistraw was not intimidated by the Nestlé's size and ability to engage in a court battle.
"This is very serious claim although it may be perceived as a David and Goliath type battle," he stated. "We are determined not to let Nestlé get away with this and we will not be backing down in our claim against them."
In its claim against the food giant, Unistraw alleges that it entered into negotiations with Nestle UK in late 2002 to discuss the commercialisation of the Sipahh straw.
Confidentiality agreements were signed between the two parties, which were later breached, Unistraw alleges.
The court claim alleges that twice during 2003, Nestlé employees visited the Unistraw factory and other facilities in Australia, under terms of confidentiality, to witness various aspects of the manufacturing process.
During these visits confidential information was imparted and Nestlé employees made "detailed notes" during their visits," the claim alleges. Negotiations between the two companies broke down in July 2004 after eighteen months of talks.
Nestlé later "manufactured, offered and stocked" drinking straws in the Sipahh design "without the consent" of Unistraw, the claim alleges.
The company claims that Nestlé's version of the straw is "practically identical" to their own Sipahh straw and that Nestlé's versions were developed in a "quite remarkably short space of time".
"The claimants (Unistraw) infer that the defendant (Nestlé) merely utilised all the information that had been imparted to the defendant in the course of commercial confidential negotiations between the parties," the claim alleges.
Unistraw claims that the actions of Nestlé have caused "loss and damage" to its company. The company wants the court to impose an injunction to stop Nestlé "making, offering for sale, putting on the market, importing, exporting or using in any way howsoever within the Community a product to which the Sipahh® design has been applied or incorporated."
The company is also seeking an order for the "delivery up or destruction upon oath of all products, printed or written matter, packaging, labels or other articles" in the possession of Nestlé as well as damages.
Unistraw's chief executive, Martin Chimes, has also written to many UK retailers informing them of the court action against Nestlé.
Part of his letter alleges: "It has come to our attention Nestlé UK Limited intends to launch a lookalike straw and has made representations to certain retailers that Nestlé developed the Sipahh straw in conjunction with Unistraw. Nestlé did not contribute at any stage to the development of the Sipahh straw."
The Nestlé defence in response to the claim is due by 20 January.