The Law of the Label · Essay 07
Who Owns the Formula?
The difference between a recipe you commissioned and a recipe you were sold access to — and why the contract is not evidence of the right but very nearly the right itself.
Every other asset in a brand has somewhere to be recorded. The mark has a register, the artwork has an assignment, the design has a filing. The formulation has nothing. It rests on secrecy, which is a state of the world rather than a legal status, and which can be lost in an afternoon by a person who never signed anything.
Paul Magaji · 18 min
Two women manufacture skincare in Ogun State, through the same contract manufacturer, on terms that look identical. Both pay for their own packaging. Both hold their own registrations. Both have signed the factory's standard agreement without amendment. Both products sell.
In the fifth year the factory's quality declines and both decide to leave. One takes her formulation to a new manufacturer in Lagos and is producing again within four months. The other is told, politely and correctly, that the formulation is the factory's, that she is welcome to continue buying the product, and that if she goes elsewhere she will be starting from a blank sheet — new development, new stability testing, new registration, and a product her customers will notice is not the same.
Nothing in either contract distinguishes them. Both documents are silent on the formulation. What distinguishes them happened five years earlier, in conversations neither woman thought worth recording: one arrived with a formulation and asked the factory to make it, and the other arrived with an idea and asked the factory what it could do.
The question is not who owns the formula. It is who brought it, and who can now show that they did.
This is the essay that decides the trade-secret position. It assumes the licence has been defined — the agreement essay set out the clause where this lands — and it assumes the reader knows which of the three arrangements she is in, which the first essay settled. What is left is the asset with no registry.
Act One
The asset that cannot be filed
Take the four principal rights in a consumer brand and ask, of each, where the proof lives.
The mark lives on the Trade Marks Register: an application, a class, a certificate, a renewal date. The artwork lives in a written assignment, because copyright arises automatically in the author and moves only by a document. The packaging shape may live on an industrial design registration under the Patents and Designs Act, if it was filed before the design was published, which it rarely is. Each of those is a piece of paper somebody can be asked to produce.
The formulation lives nowhere. There is no formulation registry, no certificate of recipe, no filing that establishes a date of creation. What protects it is that other people do not know it — and that is not a right so much as a condition, one that degrades quietly and cannot be restored once lost.
There is, in principle, one route to a registered right. A formulation may be patentable under the Patents and Designs Act if it is new, involves an inventive step, and is capable of industrial application. For most cosmetic and food formulations in this sector, the first two conditions are not met — a good product is very often a skilful combination of known ingredients, which is commercially valuable and not inventive in the patent sense.
And where a patent is available, it is usually the wrong instrument anyway, because a patent is a bargain: a monopoly for a limited term, in exchange for telling everybody how it is done. The specification is published. When the term expires the world may make it freely, and in the meantime a competitor has a written account of the formulation and every incentive to design around it.
A patent is a monopoly that expires. A secret is a right that lasts exactly as long as the secret does.
Which is why the overwhelming majority of formulations in this sector are protected as secrets, by default rather than by decision — and why the contract, which for every other asset is merely the evidence of a right, is here very nearly the right itself.
Act Two
Five origins, and what each one produces
Formulations reach a private-label arrangement by five routes. They are not equally strong, they are not always distinguishable in retrospect, and almost nobody records which one applied at the time.
Origin One
The seller brought it
The strongest position available, and the one most often weakened by the way it is handed over.
The seller developed the formulation herself, or commissioned it from a chemist or formulator independent of the factory, and brought it to the manufacturer as an input. The manufacturer is being paid to execute a specification it did not create.
Here ownership is not really in doubt. What is in doubt is proof and permission. Proof, because a formulation emailed to a factory five years ago with no covering statement of ownership is a document whose provenance is now a matter of recollection. Permission, because if it was commissioned from an independent formulator, the seller needs to be sure she acquired rights in it rather than merely a copy of it — the same failure that afflicts unassigned artwork, arriving in a field with even less paperwork.
The arrangement should say, in terms, that the specified formulation is the seller's background property, that the manufacturer acquires no rights in it beyond a licence to use it in manufacturing for the seller, and that on termination all copies are returned or destroyed.
The Boundary
A dated document, existing before the manufacturing relationship began, that describes the formulation. Its date is doing most of the work. A schedule of background intellectual property annexed at commencement achieves the same thing and takes an hour.
Origin Two
The seller commissioned it and paid for the development
Paying for development work buys the development work. Whether it buys the formulation depends entirely on what was written down.
The seller approached the manufacturer with a brief, the manufacturer's laboratory developed a formulation to meet it, and the seller paid a development fee, or paid for the trial batches, or both.
This is the genuinely contested case and the most common one in Nigerian practice. The seller's position is that she paid for it and it is hers. The manufacturer's position is that its formulators applied their own accumulated knowledge, that the result is a variation on the platform they always use, and that what the seller bought was development services and the resulting supply relationship.
Both accounts are usually partly true, which is precisely why silence favours the party in possession. The manufacturer holds the working notes, the batch records and the formulators; the seller holds an invoice. Where the contract does not allocate ownership of foreground developments, the seller is arguing from the fact of payment, and payment for services is not, without more, acquisition of what the services produced.
The fix is a foreground-intellectual-property clause: developments made in performance of the agreement vest in the seller, with the manufacturer retaining its identified background know-how, and with a written record of what that background consisted of at the start.
The Boundary
A background schedule dated at commencement. Without one, every improvement is arguably built on background the manufacturer will describe expansively, and the boundary is drawn years later by whoever kept better notes.
Origin Three
The manufacturer adapted its own base to the seller's brief
Adjusting a fragrance, a colour and a viscosity does not make the underlying formulation yours.
The manufacturer has a platform — a base cream, a base cleanser, a base blend — refined over years across many customers. The seller specifies a scent, a shade, an active at a stated percentage, a texture. What emerges is distinctive on the shelf and, underneath, the factory's product.
This is the case sellers most often misread, because the collaboration feels creative and the outcome feels bespoke. Ownership here generally sits with the manufacturer, and the seller's realistic negotiation is not about ownership at all. It is about exclusivity of the variant: an undertaking that the specific combination developed for her will not be supplied to another customer for a defined period, in a defined market.
That is a smaller right than ownership and a real one, and it is achievable where a demand for ownership would simply be refused. It has to be written, bounded and, ideally, paid for — an exclusivity term supported by nothing is worth what the last essay in this pair said it was worth.
The Boundary
Ask the manufacturer, before signing, whether the base predates you. The answer is usually given freely, because from the factory's side it is not a concession — and it tells the seller which of these five origins she is actually in.
Origin Four
The manufacturer's existing product, relabelled
Nothing was commissioned. A name was applied to something already in production.
The factory makes a finished product, sells it to several customers under their own names, and the seller's contribution is the label, the price and the distribution.
There is no ownership question here, and the essay says so plainly because pretending otherwise helps nobody. The formulation is the manufacturer's, the seller has bought stock, and what she owns is her mark, her artwork, her customer relationships and her market position — which may be the most valuable assets in the arrangement and are entirely hers.
What matters is knowing it. A seller who believes she owns a formulation she does not own will make three predictable errors: she will price the business on an asset she cannot deliver, she will negotiate for exclusivity she has no leverage to obtain, and she will discover the position at the moment she tries to leave. This is the first rung of the ladder the opening essay set out, and standing on it is legitimate. Misreporting it is not.
The Boundary
If the factory's own catalogue lists the product, or if a competitor's jar contains something indistinguishable, the question is settled. This is worth checking early rather than discovering in diligence.
Origin Five
It evolved between the parties over years, and nobody recorded how
The most common origin in practice, and the only one with no clean answer.
The product that ships today is the eleventh iteration. Some changes came from the seller's customers, some from the factory's chemists, some from an input shortage that forced a substitution which turned out to be better. Neither party could now separate their contributions, and both remember having driven the improvements.
There is no doctrine that resolves this well. What resolves it, in practice, is possession and evidence — and both favour the manufacturer, which holds the working notes and the current specification while the seller holds an original document that no longer describes the product being made.
The remedy is not litigation but housekeeping, and it can be done at any time: obtain the current full specification in writing, record the change history as far as it can be reconstructed, and agree ownership of the present formulation going forward, even if the past is left ambiguous. A manufacturer with a good relationship will often agree to this while the relationship is good, and will never agree to it afterwards.
The Boundary
Ask for the current specification today, while nothing is wrong. The request is unremarkable during a working relationship and impossible during a failing one, and the answer is the single most valuable document in the file.
Act Three
What Nigerian law actually gives you
A word about the legal furniture, because the imported vocabulary in this area is misleading.
Nigeria has no dedicated trade secrets statute. There is no Nigerian equivalent of the United States' Defend Trade Secrets Act of 2016 or the European Union's trade secrets directive of the same year, both of which create standalone causes of action with defined elements and remedies. Nigerian founders reading online material about trade-secret protection are usually reading American material, and are absorbing a framework their courts do not administer.
What protects confidential information in Nigeria is three overlapping bodies of ordinary law. Contract, which is the primary instrument and the reason the confidentiality clause matters so much. Equity, through the action for breach of confidence — an English formulation Nigerian courts have drawn on, requiring information with the necessary quality of confidence, imparted in circumstances importing an obligation of confidence, and used without authority to the confider's detriment. And employment law, which governs the person who is statistically most likely to be the source of the loss.
Two consequences follow, and they are the practical heart of this essay.
The first is that the confidentiality agreement is not a formality. For the mark, a contract is evidence of a right that exists independently on the register. For the formulation, the contract is a substantial part of what makes the information confidential in the first place — the circumstances that import the obligation.
The second is that all three routes ask, in one form or another, whether the information really was secret. Which means the seller's own conduct is evidence against her.
Act Four
Reasonable steps, for a business with six staff
The standard is not a laboratory's standard. Nobody expects a Nigerian skincare business with a small team to operate an information-security programme. What is expected is that the person claiming the information was secret behaved as though it was.
Six measures, in the order they cost least.
Do not send the whole formulation to anyone who does not need the whole formulation. Suppliers need the inputs they supply. A filling contractor needs handling parameters, not the composition. The habit of forwarding the master document because it is convenient is the commonest single failure, and it costs nothing to break.
Mark it. A document headed confidential, with the owner named, is doing evidential work years later at the cost of one line of text.
Keep the master out of the factory. The manufacturer needs a working specification. The complete formulation with its development history, alternatives tried and rationale is the seller's, and it should live somewhere the seller controls.
Put confidentiality in the employment contracts, and mean the scope. A clause covering the formulation, the supplier list and the costing, surviving employment, is enforceable and ordinary. A clause purporting to own everything an employee knows is neither.
Split the knowledge where the product allows. Where a formulation can be made from two pre-blended components sourced from different suppliers, no single supplier holds the whole. This is the oldest technique in the trade and remains the most effective.
Write down when each disclosure happened and to whom. A one-line log. It is the document that converts an assertion about secrecy into a chronology, and it is the one nobody keeps.
The question a court asks is not whether the information was valuable. It is whether the person claiming it was secret treated it as though it were.
Act Five
The leak is almost never the factory
Sellers negotiate hard with manufacturers over confidentiality and give very little thought to the people who actually hold the information: the production supervisor, the operations manager who reconciles the inputs, the chemist who ran the trials, the assistant who orders the raw materials.
The factory as an institution has weak incentives to leak. It has a reputation across many customers, a contract with a named counterparty, and assets that can be sued. An individual leaving to start a competing line has none of those constraints and every incentive.
The instruments available against that person are narrower than most founders assume. A confidentiality obligation surviving employment is enforceable and should be in every contract. A restraint on working for a competitor is a different matter: Nigerian courts, following the common-law approach, treat restraints of trade as prima facie void and enforce them only so far as they are reasonable in duration, geography and scope, and only where they protect a legitimate interest rather than merely suppressing competition. A two-year nationwide bar on working anywhere in cosmetics will not be enforced. A six-month restriction on soliciting the employer's manufacturers and customers may well be.
And a great deal of what actually holds — the sense among staff that the formulation is not theirs to carry, that this is a place where such things are taken seriously — is not enforceable at all. It works by expectation rather than by remedy, which is a category the trust essays deal with directly: the letter of wishes is the same species of instrument, binding conduct without binding anyone in law.
The practical measure is duller than any clause. Know who has the whole formulation. It is generally a shorter list than the founder assumes, and generally includes at least one person nobody remembered.
Act Six
Two questions that settle it
Strip away the vocabulary and the position reduces to two questions, each answerable today, without a lawyer, by anybody currently in a private-label arrangement.
Can you take this formulation to another manufacturer tomorrow? Not whether it would be commercially painful — whether you would be entitled to, and whether you hold a document specifying the product completely enough for somebody else to make it.
Can this manufacturer make the same product for somebody else? Not whether it would; whether anything prevents it.
Yes and no is Origin One or Two: the seller owns the formulation and has protected it. No and yes is Origin Four: she has bought stock, and her assets lie elsewhere. Yes and yes is a shared position, and it is stable only while the relationship is. No and no is unusual and generally means an exclusivity term is doing more work than the seller realises — and will expire.
Most sellers, asked these two questions, discover they do not know the answers. That is the finding, and it is not a failure of drafting. It is that nobody told them the question existed until they tried to leave.
The formulation is the only asset in the brand that can be lost without anyone taking it.
The two women in the opening had the same contract, the same factory and the same silence. What separated them was a single fact, established in the first month and recorded by neither: which of them arrived holding something. One had a document with a date on it. The other had a conversation.
This publication is educational and analytical. It describes how legal and commercial structures work; it does not advise on any particular matter, and nothing here should be relied upon as advice on a reader’s own affairs. The author holds commercial interests in the brand-building and private-label sector examined by this series.