CKE Attorneys Attend Craft Brewers Conference in Nashville

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CKE Attorneys Attend Craft Brewers Conference in Nashville
From April 30 to May 3, 2018, attorneys Evan Pitchford and Zach Page of Conkle, Kremer & Engel attended the Brewers Association’s Craft Brewers Conference in Nashville, Tennessee.  The Conference, with nearly 15,000 attendees, is the premier trade show, educational, and networking event for the craft brewing industry.  At the Conference, Mr. Pitchford and Mr. Page participated in numerous business and legal affairs seminars and conferred with brewery operators and executives, suppliers, attorneys, accountants, and consultants from California and across the country.

While the main theme of the Conference was solidarity and cooperation between independent craft brewers and their networks, prominent legal and business issues discussed among attendees often focused on the increasingly crowded space of the craft beer market.  This increasing competition has resulted in intellectual property conflicts and disputes (for example, regarding trademarks for brewery names or branding for particular beers) that craft brewers need to plan around when starting their business and expanding their portfolios.  CK&E has attorneys like Mr. Page and Mr. Pitchford who are experienced in assisting clients in selecting, registering, and enforcing trademarks and trade dress in many consumer product industries.

Another hot business topic concerned distribution models for small breweries.  In several states (including California), self-distribution is available for small breweries (California allows for self-distribution regardless of volume), but as our previous blog noted, oftentimes a small brewery reaches a point where it cannot handle its own distribution and must seek out a distributor.  And, of course, in many other states, self-distribution is not permitted at all, necessitating the involvement of a distributor when a brewery wishes to sell draught beer or package their products.  Many small breweries are concerned not only with the myriad choices of distributors, but also with finding a distributor that is the right fit and will actively promote their portfolio, and with the often restrictive laws that are involved in manufacturer-distribution relationships.  Breweries should certainly be choosy about their distributors when possible, and in many jurisdictions there are an array of potential contractual provisions (for example, regarding sales goals, chain vs. independent accounts or other account stratification, marketing, plans for brand growth, audits, etc.) that can help shape a distributor relationship before it starts.  It pays to consider and discuss as many contractual parameters as possible before signing a distribution agreement.

Additional hot topics at the Craft Brewers Conference included new Tax and Trade Bureau funding for enforcement, government regulations of taprooms and brewpubs, off-premise sales, and licenses for short-term out-of-state sales (e.g. for festivals or competitions).  As the craft brewing industry continues to grow in footprint and sophistication, look for business and legal issues to be pushed even further to the forefront of the discussion.

Contact Conkle, Kremer & Engel for assistance with your brewery business or distribution needs.

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10
MAY
0

Alcoholic Beverages, Brand Protection, California Trade Regulations, Contracts, Business and Finance, Food, Craft Beer and Nutrition, Trademarks

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California’s New, Stricter Test for Independent Contractors and Employees

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California’s New, Stricter Test for Independent Contractors and Employees
Does Your Business Pass California’s New, Stricter Test for Independent Contractors Rather Than Employees?

On April 30, 2018, the California Supreme Court issued a decision in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County that will make it more difficult for employers to classify their workers as independent contractors.  Under the new Supreme Court test, workers are presumed to be employees, not independent contractors.  Incorrect classification can have serious consequences.

Previously, many California employers thought an agreement stating a worker was an independent contractor was enough.  No more.  The Supreme Court has adopted a strict “ABC” test to determine whether a worker is properly classified as an “employee” or as an “independent contractor.”  Under this test, the Court presumes a worker is an “employee” unless the hiring business can establish that the worker meets all three conditions of an independent contractor:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) apart from the independent contractor relationship, the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

The presumption means that when in doubt employers should err on the side of classifying their workers as employees.  An employer that misclassifies a worker as an independent contractor can be liable for back wages and wage and hour penalties, including willful misclassification penalties that can range from $5,000 to $25,000 per violation.  These issues may be raised by the worker after the “independent contractor” relationship has ended.

If your workers do not meet this new 3-part test for independent contractors, make sure you re-classify them as employees and pay them all the wages and benefits given to your employees under the wage and hour laws, deduct payroll taxes, cover them under your worker’s compensation insurance, and generally treat them like your other employees.

If you have questions about how the new decision applies, or whether your workers meet the new strict ABC test for independent contractors, you should promptly consult with experienced employment counsel.  Conkle, Kremer & Engel attorneys have years of experience in employment matters, advising businesses and litigating and arbitrating disputes, including class actions.

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7
MAY
0

Banking and Finance, Beauty Industry, Contracts, Business and Finance, Employment Law, Fashion, Food, Craft Beer and Nutrition, Manufacturing, Real Estate & Construction, Sales, Technology

Do You Have to Pay Your Summer Interns?

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Do You Have to Pay Your Summer Interns?
Do I Have to Pay My Interns?

Spring will soon draw to a close.  As you prepare for the arrival of your summer interns, make sure you have asked yourself this question: Do I need to pay my interns?

The easiest answer is generally, YES!  But the easiest answer is not the whole story, because you do not have to pay your interns in accordance with wage and hour laws if the company-intern relationship meets the federal (and state, as applicable) test.

The U.S. Department of Labor’s New Test

Earlier this year, the U.S. Department of Labor helped private businesses out.  It announced that it would be using a new (more employer-friendly) test to determine whether an intern is an “employee” that must be paid in compliance with wage and hour laws.  Whether an intern must be paid in compliance with federal wage and hour laws now depends on seven factors:

  • The extent to which the intern and the company clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  • The extent to which the intern and the company understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

According to the DOL, “no single factor is determinative.”  Thus, companies need to conduct a case-by-case analysis of each internship position to determine whether that intern should be paid.

I’m Located in California.  Do I Need to Be Concerned About State Laws Controlling Wage and Hour Requirements?

Here, the clear answer is YES!  For many years, the California Department of Labor Industrial Relations, Division of Labor Standards Enforcement (“DLSE”) has relied on the DOL’s old six-factor test.  For now, California businesses should also look to the DOL’s old six-factor test to determine whether they need to pay their interns.

The DOL’s adoption of this new seven-factor test this year followed a decision in the Ninth Circuit (which covers California).  In 2017, the federal Ninth Circuit Court of Appeals made a predictive statement, that the California Supreme Court would no longer use the old DOL test, and would instead apply a test more similar to the one set forth above.  Benjamin v. B & H Educ., Inc., 877 F.3d 1139 (9th Cir. 2017).  However, this statement is only predictive of what the federal court thinks the California courts would do, so it is not actually controlling law in California.

Thus, until the California state agencies and courts take a position on whether they will follow the Ninth Circuit and the DOL, companies should also check that they have considered the DLSE’s interns test to make their decision to pay (or not pay) interns.  That requires an analysis under the DOL’s old six-factor test:

  • The internship, even though it includes actual operation of the facilities of the company, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • The company that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The company and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If you have not examined your internship programs with these federal and state legal considerations in mind, you should do so immediately, before your summer interns arrive.  Review your internship materials, including your recruitment postings, company policies, and any other documents you anticipate having the intern sign before starting the summer program.

Conkle, Kremer & Engel attorneys are experienced with counseling employers in the face of a constantly changing legal landscape in employment law, and with helping companies identify and reduce areas of exposure to liability for employment claims, including wage and hour, discrimination, harassment, and retaliation claims.

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2
MAY
0

Banking and Finance, Beauty Industry, Employment Law, Fashion, Food, Craft Beer and Nutrition, Manufacturing, Real Estate & Construction, Sales, Technology

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The Conkle Firm to Attend Craft Brewers Conference and BrewExpo America

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The Conkle Firm to Attend Craft Brewers Conference and BrewExpo America
Attorneys Evan Pitchford and Zachary Page of Conkle, Kremer & Engel will be attending the 2018 Craft Brewers Conference and BrewExpo America in Nashville, Tennessee from April 30 to May 3.  The Conference, presented by the Brewers Association trade group, is one of the largest craft brewing-centric trade shows in the world, with thousands of industry professionals and exhibitors in attendance annually.

Mr. Pitchford and Mr. Page will attend to take meetings and keep abreast of the latest industry trends, including legal developments, craft brewing distribution and business issues, and evolving beer styles.  Conkle, Kremer & Engel brings its expertise to bear on a number of beer industry-specific issues, such as brand protection and intellectual property, distribution and vendor relations, regulatory issues, advertising and labeling, employment law, and litigation and alternative dispute resolution in state and federal courts.

If you’re an industry professional or craft beer-related business who will be at the Craft Brewers Conference and would like to connect with Mr. Pitchford and Mr. Page before, during, or after the event, please contact them at e.pitchford@conklelaw.com and z.page@conklelaw.com.  They would be happy to arrange initial discussions about particular issues you may be facing.

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26
APR
0

Advertising and Labeling, Alcoholic Beverages, Brand Protection, California Trade Regulations, Contracts, Business and Finance, Food, Craft Beer and Nutrition, Trademarks

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Consumers are Exposed to Extreme Risks from Counterfeit Products

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Consumers are Exposed to Extreme Risks from Counterfeit Products
Some consumers may view offers of brand name goods from sellers not within the manufacturer’s regular distribution chain as just a way to “get a good deal.”  But those offers can result in purchasers receiving counterfeit products, which are no bargain and can expose unknowing consumers to some of the worst risks imaginable.

At the very least, counterfeit products are frauds – they are not from the manufacturer whose trademark appears on the product, so the consumer is cheated out of the quality that the brand represents.  But in reality, the consumer has absolutely no idea what the contents and construction of a counterfeit product may be – it is a product of unknown origin, regardless of whether the consumer purchased from a known reseller.  Because virtually any product a consumer can purchase can be counterfeited, consumers can be placed in great danger from unknowingly purchasing substandard products.  A couple of recent events in the news highlight the extreme risks of counterfeit products.

In April 2018, the Los Angeles Police Department announced that it had raided sellers of supposedly discount brand name cosmetics, and seized $700,000 of counterfeits.  Consumers had complained to the brand manufacturers that makeup products they purchased were causing rashes and bumps on their skin.  The products were determined to be counterfeits that tested positive for high levels of bacteria and animal waste.  This is undoubtedly because the counterfeits are not manufactured with any quality controls or regulatory oversight – they are the result of a black market, pirate operation.  LAPD Detective Rick Ishitani was quoted in the press as saying, “Those feces will just basically somehow get mixed into the product they’re manufacturing in their garage or in their bathroom — wherever they’re manufacturing this stuff.”  One of the brands asserted to be counterfeit was Kylie Cosmetics. Kylie Jenner’s sister, Kim Kardashian West, tweeted:  “Counterfeit Kylie lip kits seized in LAPD raid test positive for feces. SO GROSS! Never buy counterfeit products!”

The risks to consumers of counterfeits unfortunately do not stop even there.  An even more extreme case of product counterfeiting hit the press a few days later.  Tragically, famed rock artist Prince died in April 2016.  It was soon determined that he had died from an overdose of fentanyl, an extremely powerful and dangerous synthetic opioid.  But in April 2018, local prosecutors announced that Prince had consumed the fentanyl by taking tainted counterfeit Vicodin, a brand name medication of AbbVie, Inc.  There was no determination as to how Prince obtained the counterfeit Vicodin pharmaceuticals.  “In all likelihood, Prince had no idea he was taking a counterfeit pill that could kill him.  Others around Prince also likely did not know that the pills were counterfeit containing fentanyl,”  Carver County, Minnesota Attorney Mark Metz was quoted as saying at a news conference.

Some believe that counterfeits can be identified by the price alone, and warn against buying brand name products at steep discounts.  While an inexplicably low price is certainly a red flag of a potential counterfeit, in fact counterfeit products are often sold to consumers at prices very close to those of the brand name product.  This is often because many intermediaries have handled the product, taking a profit with each transaction, in the course of a murky gray market distribution process.

The popularity of online sales make the risks even worse for consumers, as it is nearly impossible for the consumer to inspect the product before purchase and delivery, and it is often very difficult for consumers to determine who is actually selling the product online.  For example, many popular online sellers act as marketplaces for innumerable third party sellers, and a purchaser cannot always determine which seller will actually deliver the product purchased.

If you are a consumer, you really need to exercise great caution when considering purchases of brand name products from sellers who are not in that manufacturer’s authorized distribution channels.  It generally matters little whether the seller is known to the consumer – it only matters where the seller obtained the product.

If you are a brand name manufacturer or trademark holder who suspects that unauthorized parallel market sellers may be offering counterfeit products, you are well advised to promptly contact counsel well-versed in the issues and methods of enforcement of your intellectual property rights.

 

 

 

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22
APR
0

Beauty Industry, Brand Protection, Copyrights, Fashion, Food, Craft Beer and Nutrition, Patents, Personal Care Products, Sales, Trademarks, Unfair Competition

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2018 Changes to the California Alcoholic Beverage Control Act

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2018 Changes to the California Alcoholic Beverage Control Act
Each year brings changes to the California Alcoholic Beverage Control Act, and 2018 is no exception.  Most of the changes for 2018 are quite esoteric, relating only to the provision of licenses in particular counties or venues, or allowing some additional rights to non-profit corporations who use temporary licenses for events.

However, a chief new feature of the ABC Act that will have state-wide impact is the Responsible Beverage Service (RBS) Training Program Act of 2017 (California Business and Professions Code § 25680 et seq.).  The RBS Act provides that the California ABC will develop a best-practices training program by 2020 that all on-premises servers of alcohol (and their managers) throughout the state will need to complete in order to be certified to serve alcohol.  Servers employed prior to July 1, 2021 must complete the program by August 31, 2021, and all servers hired after July 1, 2021 must complete the program within 60 days of being hired.  ABC advisories indicate that food servers, bartenders, cashiers, doormen, and bouncers all may be considered “servers” for purposes of the RBS Act.

The RBS law appears to encompass a wide manner of licensees that operate on premises – bars, restaurants, brewpubs, tasting rooms, clubs.  For non-profit special events/temporary licenses, the licensee is required to designate one certified server who must remain on site for the entire event.  Covered licensees are required to maintain records of their various certifications, and violators are subject to unspecified “disciplinary action.”

The 2018 ABC Act also permits for the first time beer manufacturers to provide free or discounted ground transportation rides for consumers (i.e. from the brewery taproom to local hotels, etc.) for purposes of public safety.  (California Business and Professions Code § 25600.)  This harmonizes the treatment of beer manufacturers with winegrowers and distillers.  The manufacturer cannot, however, make the transportation contingent on the purchase of an alcoholic beverage, and beer wholesalers cannot have any interest in the transportation arrangement.

In instances where small beer manufacturers (License Type 23) and winegrowers have adjacent production facilities, the 2018 revisions also permit a common-licensed area in which consumers can drink both wine and beer.  (California Business and Professions Code § 25607.)  This is a new exception to the general prohibition of anyone possessing alcoholic beverages on a manufacturer’s premises other than the types that manufacturer is licensed to produce.

Staying up to date on laws and regulations affecting the industry is vital to successfully protecting and growing alcoholic beverage businesses.  For assistance navigating beer-industry specific legal issues, contact Conkle, Kremer & Engel.

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22
MAR
0

Alcoholic Beverages, California Trade Regulations, Contracts, Business and Finance, Food, Craft Beer and Nutrition, Regulatory Compliance

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The Unintended Industry of Proposition 65: Plaintiffs’ Lawyers

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The Unintended Industry of Proposition 65: Plaintiffs’ Lawyers
One of the unfortunate and unintended consequences of California’s extensive regulatory efforts has been to create a small industry of plaintiffs’ law firms and repeat clients apparently determined to extract settlement money from businesses.  Proposition 65 was implemented with the best spirit of consumer protection in mind.  But those regulations have since transmogrified into tools that primarily profit a small group of plaintiffs’ attorneys, to an extent that has become increasingly burdensome for consumer product manufacturers, resellers and property owners.

Proposition 65 provides for private enforcement actions, which enable individuals or groups to enforce the statutes against consumer products companies, property owners and others.  Prop 65 is a “right to know” law intended to help consumers make informed decisions about their purchases. The combination of a growing list of substances, difficulty in determining exposure levels with scientific certainty, sparse judicial and government oversight, and a right to attorneys’ fee awards under the statute, have transformed Prop 65 into a lucrative business model for a handful of law firms and closely-related consumer groups.  Hundreds of Prop 65 actions are settled each year, with about 70% of the settlement money paid being allocated to attorneys’ fees for the plaintiffs’ lawyers.

California’s published statistics from 2013-2017 show an accelerating trend of more Notices of Violations filed each year.  In 2016 alone, for example, 1,576 Notices of Violation were sent to businesses selling products in California, while 2,710 Notices of Violation were sent in 2017.  The attorneys’ fee provisions of Prop 65 undoubtedly have much to do with that trend.  In 2016, 760 judgments or settlements were reached totaling $30,150,111, of which $20,062,247 was paid as attorneys’ fees to plaintiffs’ lawyers.  In 2017, 688 judgments or settlements were reached totaling $25,767,500, of which $19,486,362 was paid as attorneys’ fees to plaintiffs’ lawyers.

With that kind of monetary motivation, it is easy to see why some law firms make a practice of filing and serving Prop 65 Notices of Violations.  This effectively creates a small industry of lawyers who pursue Prop 65 claims, often for a small group of repeat-plaintiffs who appear again and again with the same lawyers.  Public records identify at least the following law firms, attorneys and their associated plaintiff clients, who pursue multiple Prop 65 claims:

  • The Chanler Group
    • Represents repeated Prop 65 plaintiffs Anthony Held, Ph.D., P.E.; Whitney R. Leeman, Ph.D; Mark Moorberg; John Moore; Paul Wozniak; and Laurence Vinocur
  • Lexington Law Group
    • Represents repeated Prop 65 plaintiff Center for Environmental Health
  • Yeroushalmi & Yeroushalmi
    • Represents repeated Prop 65 plaintiff Consumer Advocacy Group, Inc.
  • Aqua Terra Aeris Law Group
    • Represents repeated Prop 65 plaintiffs Environmental Research Center; and Center for Advanced Public Awareness, Inc. (“CAPA”)
  • Law Office of Daniel N. Greenbaum
    • Represents repeated Prop 65 plaintiff Shefa LMV, Inc.
  • Klamath
    • Represents repeated Prop 65 plaintiff Mateel Environmental Justice Foundation
  • Lucas T. Novak
    • Represents repeated Prop 65 plaintiff APS&EE, LLC
  • Custodio & Dubey
    • Represents repeated Prop 65 plaintiff Ecological Alliance, LLC
  • Sheffer Law Firm
    • Represents repeated Prop 65 plaintiff Susan Davia
  • O’Neil Dennis, Esq.
    • Represents repeated Prop 65 plaintiff Alicia Chin
  • Bush & Henry, Attorneys at Law, P.C.
    • Represents repeated Prop 65 plaintiff Michael DiPirro
  • Brodsky & Smith, LLC
    • Represents repeated Prop 65 plaintiffs Gabriel Espinosa; Kingpun Chen; Precila Balabbo; Ema Bell; and Anthony Ferreiro
  • Law Offices of Stephen Ure
    • Represents repeated Prop 65 plaintiff Evelyn Wimberley
  • Lozeau Drury
    • Represents repeated Prop 65 plaintiffs Environmental Research Center, Inc.; and Community Science Institute
  • Robert Hancock of Pacific Justice Center
    • Represents repeated Prop 65 plaintiff Erika McCartney
  • Khansari Law Corporation
    • Represents repeated Prop 65 plaintiff The Chemical Toxin Working Group, Inc.
  • Law Office of Joseph D. Agliozzo
    • Represents repeated Prop 65 plaintiff Sara Hammond
  • Glick Law Group
    • Represents repeated Prop 65 plaintiff Kim Embry

If you are unfortunate enough to receive a Prop 65 Notice of Violation from one of these lawyers or plaintiffs, or from any others, don’t ignore it.  The problem will probably not go away by ignoring it, and prompt action can help keep the matter from getting far worse.  Handling it yourself is also usually not a great plan.  Remember that the plaintiffs who sent the Notice of Violation are almost always represented by counsel experienced in Prop 65 matters.  You should contact experienced counsel to help you respond promptly and handle the matter with minimum disruption to your business.

Conkle, Kremer & Engel attorneys have many years of experience advising clients about how to avoid regulatory compliance issues, and we regularly defend clients against Notices of Violations of Proposition 65 and other California regulations. CK&E uses its extensive experience to help clients who are accused of regulatory violations quickly and effectively resolve claims, so clients can focus on growing their business.

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19
MAR
0

Beauty Industry, Fashion, Food, Craft Beer and Nutrition, Litigation, Arbitration and Mediation, Manufacturing, Personal Care Products, Proposition 65, Real Estate & Construction, Regulatory Compliance, Technology

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Women Make Their Presence Known at Natural Products Expo West

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Women Make Their Presence Known at Natural Products Expo West
Conkle, Kremer & Engel attorneys Heather Laird and Desiree Ho attended the Natural Products Expo West in March 2018, where they encountered product trends emphasizing simple recognizable ingredient formulations, and business trends emphasizing strong women’s influences in ownership and management.  Demonstrating the growing consumer interest in natural and organic products, attendance at this year’s Expo was reported to be the largest ever, exceeding 85,000 visitors to more than 3,500 exhibitors.  CK&E attorneys visited clients’ exhibit booths and met with entrepreneurs in the beauty, food, and beverage industries to help them strengthen their brands, navigate regulatory and labeling issues, and grow their business.

Exhibitors showed strong cross-cultural influences, with many products and flavors from around the world, all emphasizing the trend toward fewer and more recognizable ingredients in simple formulations.  Businesses clearly demonstrated they are responding and catering to the adventurous interests and palates of health-conscious, worldly, and informed consumers.  Countless product lines were customized for consumers committed to paleo, vegan, and gluten-free diets.  Another popular trend is toward products and businesses that are dedicated to championing charitable causes, so consumers can use their purchases to support causes they are passionate about and can feel loyal to brands that are as committed as they are.

Mirroring recent cultural trends, women-owned and managed businesses were very notable throughout the Expo.  Many entrepreneurs proudly advertised their Women’s Business Enterprise National Council (WBENC) certifications.  The WBENC certification “validates that the business is 51 percent owned, controlled, operated, and managed by a woman or women.”

In the beauty arena, there were a refreshing number of brands actively encouraging women to maintain an open dialogue with the product manufacturer to address issues they regularly face.  The trend of businesses expending great effort to establish dialogue and long-term relationships with their consumers through social media and direct contacts has become clear.  These overlapping trends resulted in prominent presentation of many products “made for women, by women,” ranging from beautifully packaged feminine hygiene products to natural pre-natal and post-natal products promoted as safe for use by pregnant women and around infants.

CK&E attorneys provide full service to businesses in the beauty, food, and beverage industries.  They regularly attend important trade shows to help their clients stay abreast of trends, new regulations, and developments in the law and the marketplace affecting these industries.

 

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16
MAR
0

Beauty Industry, Brand Protection, Food, Craft Beer and Nutrition, Industries Represented, Intellectual Property, Personal Care Products, Regulatory Compliance

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Big Beer, Craft Beer, and Trademark Infringement: Harm to Premium Brands

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Big Beer, Craft Beer, and Trademark Infringement: Harm to Premium Brands
As the craft beer market continues to expand in popularity and threaten the market share of older “macrobrewery” giants like Molson Coors and Anheuser Busch, courts have seen increased legal disputes in the beer industry as brands fight for both their independence and the attention of consumers.  Most recently, Molson Coors has been sued in federal court in San Diego by Stone Brewing Co., one of the oldest and largest independent craft brewers in the United States.  In its complaint, Stone Brewing claims that Coors is infringing the “STONE” trademark by rebranding Coors’ sub-premium, low cost “Keystone” brand as “KeySTONE,” with a particular emphasis on the single word “STONE” in packaging and marketing materials.  Because of this, Stone Brewing alleges, Coors is sowing consumer confusion between the two brands.

Keystone Rebranding Comparison from Stone Complaint

Unless there is a swift settlement, one can assume that Stone Brewing will make good on the threat in its complaint that it will move for a preliminary injunction in order to stop the sale of Coors’ “KeySTONE” branded products during the pendency of the lawsuit.  A motion for a preliminary injunction is often a critical juncture in such trademark infringement lawsuits, and Stone Brewing will need to show that it will be “irreparably harmed” if the injunction is not granted.  This showing has in recent years become more difficult, as courts no longer presume irreparable harm when the plaintiff shows that consumers are likely to be confused by trademark infringement, but rather require an additional showing of likely irreparable harm.  “Irreparable harm” (also known as “irreparable injury”) generally means injuries that cannot be readily compensated by money damages, and since money damages are usually available for trademark infringement this standard presents special hurdles for infringement plaintiffs that can be difficult to overcome early in a case.

To show irreparable harm, one argument Stone Brewing will likely make is that its “premium brand” is being tarnished by confusion with Coors’ “value brand.”  This argument is presaged throughout Stone Brewing’s complaint (referring to Keystone’s beers as “watered down” and “fizzy yellow offerings,” as opposed to Stone Brewing’s “bold” and “artisanal” products).  The argument, which has been judicially adopted in relatively few cases, is essentially that the premium or niche brand is irreparably harmed by the association with the value, mass-market brand, which usually is of lesser quality.

Conkle, Kremer & Engel, which has experience in both trademark litigation and issues specific to beer production, distribution, and marketing, has succeeded in making this premium-vs.-value argument in federal courts in California.  For example, in Moroccanoil, Inc. v. Zotos International, Inc. (230 F. Supp. 3d 1161 (USDC C.D. Cal. 2017)), a 2017 trademark infringement case with similarities to the dispute between Coors and Stone Brewing, CK&E represented the manufacturer of Moroccanoil Treatment, a luxury oil-infused hair care product sold in distinctive packaging.  The defendant Zotos, part of a large personal care products conglomerate, had created a low-cost “value” hair oil product called “Majestic Oil” that, in addition to its similar name, used packaging that was a close likeness of Moroccanoil’s trade dress.

CK&E, in its successful motion for preliminary injunction, argued that sales of low-cost “value” Majestic Oil products would erode Moroccanoil’s carefully-built premium image.  The presentation included evidence establishing that once a product is no longer perceived by consumers as “premium,” it is difficult or even impossible for the seller to regain that perception.  The court agreed with CK&E and Moroccanoil, finding a likelihood of irreparable harm and granting a preliminary injunction against further sale of the Majestic Oil products.

Preliminary injunctions can be dramatic turning points in infringement cases.  In Moroccanoil’s case, the court’s preliminary injunction prevented Zotos from any further sales, advertisement or distribution of its infringing products, and required Zotos to recall all of its infringing products already in the market.  As could be predicted, the case settled swiftly thereafter and Zotos made permanent substantial changes to its product name and packaging to avoid infringing Moroccanoil’s intellectual property rights.

Click here to learn more about CK&E’s Moroccanoil v. Zotos matter or contact CK&E attorneys who work on beer industry matters, such as the brand protection that can make or break participants in the crowded craft beer market, including John Conkle, Evan Pitchford and Zachary Page.

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15
FEB
0

Advertising and Labeling, Brand Protection, Food, Craft Beer and Nutrition, Intellectual Property, Trademarks, Unfair Competition

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The “Fourth Tier” of Beer: Internet Sales and Direct-to-Consumer Delivery

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The “Fourth Tier” of Beer: Internet Sales and Direct-to-Consumer Delivery
In previous posts, we discussed the background of the three-tier system of alcohol sales in the United States – manufacturer (or importer), distributor, and retailer.  For the beer consumer, historically this has meant purchasing beer immediately, in person, at a restaurant, bar or liquor store.  Each state has its own licensing requirements and operational rules for such brick-and-mortar sites selling beer.  But with the ubiquity and borderless nature of the internet, what some call the “fourth tier” of craft beer sales is rapidly taking root.  Following models previously used in the wine industry, several beer delivery websites and cell phone apps are now available, with the proprietors often providing “services” to otherwise licensed beer sellers (i.e. not taking legal possession of or selling the products themselves, but instead acting as service-providers to the licensed sellers).  For regional brands without an expansive distribution footprint, and for the craft beer lovers who seek out those regional beers, this is a promising development.

States have begun to reshape their policies and laws to accommodate this relatively new direct-to-consumer beer delivery conduit.  As can be expected in this early developmental stage, there is a wide range of permitted activity among the different states.  The most permissive regulations in a small number of states allow suppliers, both in-state and out-of-state, to make unlimited shipments for consumers’ personal use.  Other states require suppliers to obtain a simple permit in order to ship beer direct to consumers.  Certain states only permit direct-to-consumer shipments from in-state breweries, along with outbound shipments to out-of-state consumers.  Some states allow outbound shipments to other states but no in-state shipments whatsoever.  Several states prohibit direct-to-consumer shipments of beer altogether.  Perhaps needless to say, potential international sales present an entirely different set of complications.

In California, beer (not wine, which is treated differently) can be sold directly to consumers via the internet with certain restrictions.  These restrictions are not directed at the internet as a sales medium per se – instead, the restrictions stem more from the historical requirements placed on importation and off-premises alcohol retailers.  (See, e.g., California Business and Professions Code §§ 23661 and 23671.)  With respect to retail sales, the seller must already be licensed to sell beer in California by “traditional” means.  First, the seller must have a licensed brick-and-mortar location in California.  Second, the seller must keep their inventory at that particular location (i.e. no shipments directly from the seller’s suppliers).  Third, the seller has to sell (or at least be able to sell) products at that location itself and not solely online – in other words, the seller must have a real in-person sales facility, not just a warehouse to service internet sales.  (See 4 California Code of Regulations § 27.)  With respect to sales directly from California-based beer manufacturers, the California ABC has determined that “as a matter of policy,” beer manufacturers are permitted to make online sales of beer to consumers.  (See Form ABC-409.)  It remains to be seen, however, if California will continue to allow beer delivery websites and apps to operate under the auspices of “services” or if additional requirements will be imposed on such providers.  (It’s also worth noting that the U.S. Postal Service will not transport alcohol – that must be done through a private carrier.)

It is easy to see that anyone wishing to distribute beer by online sales, especially across state lines, can quickly put themselves at risk of regulatory or legal issues.  If you are a brewery, retailer, or beer delivery service that wishes to engage in internet or other direct-to-consumer sales, it is advisable to contact qualified counsel for assistance before beginning or expanding such service.

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Alcoholic Beverages, California Trade Regulations, Contracts, Business and Finance, Food, Craft Beer and Nutrition

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