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

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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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The Conkle Firm Wins Injunction Prohibiting Trade Dress Infringement by Zotos

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In September 2016, Conkle, Kremer & Engel attorneys filed a case on behalf of Moroccanoil against Zotos International, Inc. for trademark infringement by its “Majestic Oil” products. Just four months later, CK&E obtained a Preliminary Injunction against Zotos’ competing products, and within days the case was over.

A Preliminary Injunction is a powerful litigation tool that can immediately stop a defendant from selling products during the litigation. Securing a Preliminary Injunction at the beginning of the case often brings a prompt settlement, as the defendant must decide whether to settle or to fight over the product packaging that it cannot sell.

Getting a Preliminary Injunction can be challenging because the plaintiff must show that it is likely to win the case, and that it will be irreparably harmed if the defendant’s products are allowed in the market while the case proceeds to trial. Recently, courts have made Preliminary Injunctions tougher to get by raising the standards for showing irreparable harm.

In Moroccanoil’s case, the Preliminary Injunction prohibited Zotos from selling its Majestic Oil products in packaging that was confusingly similar to Moroccanoil’s distinctive trade dress. Zotos is a subsidiary of Shiseido America.  Drawing on its knowledge of the beauty industry, CK&E’s presentation of irreparable harm to Moroccanoil’s reputation proved effective – the Court found that continued sales of Majestic Oil products would erode Moroccanoil’s premium position in the hair care market as a professional brand. The Court’s Order granting Moroccanoil’s Motion for Preliminary Injunction is available here, and is published at Moroccanoil, Inc. v. Zotos Int’l, Inc., 230 F. Supp. 3d 1161 (USDC C.D. Cal. 2017).

On the heels of the Preliminary Injunction, the parties settled the case with Zotos agreeing to pay a substantial portion of Moroccanoil’s attorneys’ fees and to drop the confusingly similar trade dress of the Majestic Oil products. In total, the case was fully resolved within 6 months of filing, and the only litigation activity was CK&E’s Motion for the Preliminary Injunction.

To learn more about the case, contact the CK&E attorneys who lead the team for Moroccanoil, Mark Kremer, Evan Pitchford and Zachary Page.

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