Minnesota company replicated Keurig’s K-cups, alleges former customer stole its coffee pod tech

In 2014, a Minnesota tech company helped a generic coffee-pod maker crack Keurig’s top-secret ink signature so its knockoff pods could work with the newest versions of the popular single-serve coffee machines.

Now the tech company, Blaine-based Microtrace, is accusing TreeHouse Foods of reverse-engineering its own reverse-engineered breakthrough.

TreeHouse allegedly broke contracts “by using, relying on and reverse-engineering taggant ink, confidential information and trade secrets provided by Microtrace in a way that was not permitted,” according to a federal lawsuit filed this week.

Chicago-based TreeHouse Foods, a $3.4 billion manufacturer of store-brand and private label groceries, did not respond to a request for comment.

When Keurig released its next-generation coffee machine in 2014, the devices came with a sensor that would recognize only Keurig-brand K-cups with a special “fingerprint” in an attempt to ward off competitors. Without this unique chemical “taggant” printed on the coffee pod, the brewer wouldn’t work.

“Competitors of Keurig, including TreeHouse, faced immense pressure to decipher and replicate Keurig’s sophisticated spectral taggant signature technology to continue to compete in the marketplace,” according to the complaint.

While many major coffee brands decided to keep working with Keurig rather than try to produce their own competing pods, TreeHouse asked Microtrace to engineer a solution that could ensure its private label pods work with the new machines.

Microtrace, which has developed taggants for anti-counterfeiting and other uses for several decades, “invested tens of thousands of hours and millions of dollars” to crack the code, the lawsuit said.

A TreeHouse researcher later said Microtrace “saved a $400 million, 50% margin business and overcame Keurig’s strategy to lock out private label companies,” according to the lawsuit.

Then in 2021, the contract between Microtrace and TreeHouse expired. Yet the company kept producing Keurig-compatible pods, purportedly with a copy of Microtrace’s taggant, the suit said.

Microtrace is alleging breach of contract and a number of other claims against TreeHouse, its subsidiary Bay Valley Foods and printer ProAmpac. The suit seeks unspecified monetary damages.

The case had anti-competitive issues from the very beginning, said Mitchell Hamline School of Law Professor Sharon Sandeen.

“The use of technology to prevent competition is problematic,” she said. “So the plaintiff figures out a way to circumvent that technology, and in theory, they could do that and keep that information as a trade secret.”

Reverse-engineering is not against the law, she said, but the suit centers on the contract that prohibited TreeHouse from using Microtrace’s approach.

“In other words, they couldn’t do the same thing the plaintiff did,” Sandeen said. “That’s a huge policy issue in trade secret law that hasn’t been resolved.”

Sandeen, an expert in intellectual property law, said TreeHouse will likely claim that so many years later, the technology is no longer a trade secret. The suit itself said other “third-party workarounds” to gain access to Keurig machines had hit the market in the years after Microtrace started working with TreeHouse.

“The more time that passes, the greater the possibility that information is not a trade secret anymore or is not even confidential,” she said. “And this is something a lot of courts and judges mess up on: What is happening outside of the parties is relevant.”