Avoiding Trademark Disputes in the Beverage Alcohol Industry
It is undeniable that craft beverage marketplace – both with beer and spirits – has seen tremendous growth over the past several years. The result is a crowded, somewhat confused and competitive environment where standing out from the crowd is increasingly challenging. While producing a quality product is, of course, paramount, developing a distinctive and eye-catching brand for your latest beer, wine, or craft spirit has become a critical component to success in the industry. In the beverage alcohol business, brand is (nearly) everything. Ideally, that brand will provide a springboard toward future expansion of your product line as the brand becomes known in the market and specifically requested by consumers.
The prospect of receiving a demand to immediately cease using a brand name (or logo) was likely not top of mind to many beverage entrepreneurs as they were selecting that brand. However, taking appropriate steps to proactively address possible disputes before they surface should always be on the top of your priority list during the branding process. There is nothing unique about the beverage alcohol business with respect to branding, but it seems to have more than its fair share of trademark dust ups. In this first installment of our series on the topic of branding in the beverage alcohol space, we will discuss potential risks of trademark or branding-related disputes and the potentially catastrophic consequences of failing to recognize and proactively assess and address those risks.
The branding process should always begin with doing your homework: Is there someone already in the marketplace with a brand confusingly similar with what you would like to use? In general, trademark rights in the U.S. are based on priority of use – who came first in the marketplace. So, before finalizing the brand selection process, you should understand the potential pitfalls of a branding dispute landing on your doorstep. If another beverage company with a more senior brand believes that consumers could be confused by your new brand, you may find yourself confronting demands such as:
- immediately ceasing any and all use of your brand;
- provide an accounting of your past sales of goods sold under the brand and any profits from those sales;
- in some cases, recalling any unsold product and destroying any inventory of product in your possession; and
- in particularly problematic cases, seeking enhanced damages based on allegedly willful conduct or even personal liability for company executives.
These can be panic-inducing demands with potentially fatal consequences to new or even established businesses. While it may be possible to negotiate a more reasonable resolution with the party asserting such a claim, it is important to recognize that an amicable resolution is not always possible. In those cases, you will – not may – incur substantial expense in the form of both time and money. Perhaps more importantly, you will suffer distraction from operating your business and the potential of losing considerable goodwill and consumer recognition in the marketplace if you are forced to change your brand. In a recent survey , a full third of respondents reported having to change the name of one of their brands as a result of trademark infringement allegation. The resulting expense can present a challenge even to established businesses and can quickly shutter a fledging brand.
An unfortunate truth about any branding dispute is that you will likely incur some attorney fees, at a minimum, to defend and respond to the claim even before it results in actual litigation. Trademark litigation itself often involves a request from the plaintiff for some form of temporary injunctive relief at the outset of the case. Defending these requests essentially front loads the costs of litigation and eliminates the possibility of slow playing the matter to delay expenses. Further, a court’s decision on a request for immediate injunctive relief can be case dispositive if it requires the defendant to cease using the brand at that point in time, as it will be necessary in those situations for the defendant to immediately rebrand – assuming it has sufficient resources to do so – in order to continue selling the product or even to stay in business. Changeovers like this, particularly under forced circumstances with a limited time for implementation, may simply be beyond the means of many companies.
There is a simple rule to live by: avoid selecting a brand identical or closely similar to that of another player in your market (or even in a related market). Failing to follow this simple rule is a sure fire recipe for a bad brew. However, it is also important to understand that the amount of similarity between your chosen brand and that of a competitor necessary to trigger a legitimate branding dispute is subjective – and certainly does not require that the trademarks in question be identical or used in conjunction with identical products. In 2013, the international spirits conglomerate Diageo, which owns the CROWN ROYAL brand, filed suit against a Texas distiller for use of the terms TEXAS CROWN CLUB and SOUTH CAROLINA CROWN CLUB to sell whiskey. And late last year, Stone Brewing Co., a beer purveyor located in San Diego, opposed William Cole Vineyards’ efforts to register the terms STONEMANOR and STONELADY for use with wine.
Moreover, branding issues are not limited to trademarks – they can also extend to taglines, bottle shapes, label layouts and coloring schemes. We will specifically address these issues, and ways to avoid their potentially disastrous results, in future posts.
It is also important to understand that challenges to your branding can come from unexpected directions, well beyond the beverage alcohol market. For example, Warner Bros., based on its rights to the classic movie The Wizard of Oz, recently filed an opposition to a Maryland craft brewery’s application to register SURRENDER DOROTHY RYE IPA. Similarly, Mattel recently filed an opposition to Paris Distilling Co.’s application to register OLD BARBEE for alcoholic beverages based on potential dilution of Mattel’s iconic Barbie brand.
If the risk of branding challenges isn’t sufficient to keep you up at night, the potential relevance of products and services outside of your immediate focus, on your first or next new alcohol beverage product, can impact your brand from yet another direction. Fewer companies remain static within a focused market segment as they mature. More frequently, there is a push at some point to expand the scope of a brand beyond its initial parameters. However, if an appropriate investigation has not been conducted at the outset – combined with a forward thinking strategy with future expansion in mind – you may find yourself hemmed in by a similar mark in the new market you have in your sights.
So, what can you do to reduce the risk of an infringement claim that sends your brilliant new brand quickly careening off the tracks? Stay tuned as we will address the proactive steps that you should pursue in the second installment of this article.