Loyal readers need no introduction to the topic of today’s Aleheads Legal Corner. As we’ve previously written, our former friends at Bell’s Brewery sent a cease and desist letter to Northern Brewer, ordering Northern Brewer to stop using the name “Three Hearted Ale” for its clone of Bell’s Two Hearted Ale. While Northern Brewer was as gracious as possible in responding — and expressly threw cold water on Brother Barley’s call for a boycott — the Internet has been less kind.
What’s the issue here? Well, if you believe Bell’s barely apologetic explanation (which we scorned), “A trademark that is not defended becomes worthless.” (The response also claims Bell’s had never heard of Northern Brewer, even though it’s arguably the biggest player in the home brewing industry.) On the flip side you have the 2 billion irrational people who comprise the Internet, many of whom think the problem is that Larry Bell is a dick.
Naturally, we asked our two legal experts, Baron Sudsy von Brue and Commander Pint O. Chug, to weigh in.
Commander: The first step you’d take in analyzing this issue from a legal perspective is whether there’s even trademark infringement going on. The use of a trademark in connection with the sale of a good constitutes infringement if it is likely to cause consumer confusion as to the source of those goods or as to the sponsorship or approval of the goods. In deciding whether consumers are likely to be confused, courts look to a number of factors, including: (1) the “strength” of the mark; (2) the proximity of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the similarity of marketing channels used; (6) the degree of caution exercised by the typical purchaser; and (7) the defendant’s intent (this factor is controversial).
Baron: This happens to be an easy case: a brewing kit called “Three Hearted Ale,” designed to replicate a beer called “Two Hearted Ale.” In a legal sense, it’s almost a direct rip-off. The craft beer industry is rife with harder examples, though, usually beers from different breweries that have similar names or packaging.
Commander: Agreed–it’s pretty plainly infringing. So what could Bell’s have done about this? A few alternatives come to my mind: it could simply let it go, license the name to Northern Brewer, or ask them to stop using the name.
Baron: Yeah, but there are different stripes of asking them to stop.
Commander: Absolutely — and let’s discuss that — but first I think our readers deserve an explanation of why, and to what extent, a trademark that is not defended becomes worthless, as Bell’s claims. The risks of the “let it go” strategy are truly significant, though that strategy is increasingly being used by Web 2.0 companies like Twitter (which as far as I can tell allows people to do whatever they want with the Twitter name and logo). Clearly, the worst case scenario is that the mark “Two Hearted Ale” becomes generic, sort of like Kleenex and Band-Aid arguably are.
Baron: That is pretty hard to envision. Are you saying that people would refer to beer generically as “Two Hearted Ale”? As in, “Hey, what kinds of Two Hearted do you have on tap?” (Answer: “We have PBR, Busch Light, Dogfish Head Pangaea…”) It would be like in Demolition Man, where all restaurants have become Taco Bell. Many people think that becoming generic is the only risk of not defending a trademark, and that’s not the case.
Commander: I think we can agree there are at least two more likely scenarios. First, by tolerating infringement by Northern Brewer and others, Bell’s incrementally loses control over use of the name and uses of Two Hearted Ale. For example, someone could have Three Hearted Sluts Night at the local strip club with a big liberty bell instead of a pole… maybe including all the Two Hearted and rainbow trout you can drink and eat. The example that trademark law professors like to use is if someone wanted to put Mickey Mouse in a porno. If Disney were lackadaisical in its trademark defense, or if Mickey entered the public domain, poor Mickey could be used in all kinds of perverted ways.
Baron: Additionally, there’s the risk that the scope of what the mark protects could be narrowed. For example, by not challenging “Three Hearted Ale,” Bell’s could lose the right to stop other brewers from naming their beers things like “Four Hearted Ale,” or “Charlie Sheen’s Two and a Half Hearted Ale” (yikes). But the upshot is that neither of these scenarios results in the total loss of protection of Two Hearted Ale: Bell’s could still use, and prevent others using, the name Two Hearted Ale.
Commander: So what would you have advised Bell’s to do in this situation?
Baron: I’d certainly have taken action rather than letting it go, but exactly what action depends on some facts we don’t know. At a minimum, Bell’s lawyer should have known better than to send a nastygram to an industry player, and the notion that Larry Bell has never heard of Northern Brewer is questionable on its face. But I also don’t know the back story. Maybe Northern Brewer is packed to the gills with notorious assholes. Maybe the trademark challenges Bell’s lost (as Larry Bell mentioned in his response) really cleaned him out.
Commander: Still, as the lawyer, I would have advised Bell’s to call Northern Brewer. We are not just technicians who pronounce what the law is. You have to understand your client’s business and be sensitive to the PR concerns.
Baron: I’m not sure I agree that a phone call alone would suffice. I can appreciate the value in creating a paper record. “Hey, let’s break bread” phone calls are great in an ideal world, but they also leave a lot of room for wishy washy bullshit later down the line. The right call was probably something in between–reach out to Northern Brewer informally, and then document the resolution (or ongoing dispute) accordingly.
Commander: What about licensing in this situation? It doesn’t need to be a pricy proposition. I can imagine a brewery agreeing to license its name to Northern Brewer for $1 and a promise to collaborate on something in the future. It could be a win-win.
Baron: Licensing seems like a smart business move, but it also isn’t free. The transaction costs might outweigh either side’s desire to license the mark. That’s especially true since Northern Brewer seems fine just changing the name.
Commander: On the other hand, by licensing the name to Northern Brewer, Bell’s would arguably expand its trademark rights to include variants of Two Hearted, and would stake a claim to having a say in how clones of Two Hearted and its other beers are marketed–all without appearing to overreach. (Note Bell’s does not claim, and probably does not have, any right to control use of the Two Hearted recipe, at least under trademark law, let alone a close approximation of the recipe like the Three Hearted clone.)
Baron: I also wonder if licensing was a possible endgame for Bell’s — before Northern Brewer folded — and if taking a strong stance out of the gate was a means of improving Bell’s bargaining leverage if it came to that.
Commander: Good point. Well, what’s your verdict on the approach Bell’s did take? In my view, the legal and PR issues are heavily intertwined: whether Bell’s made the right call depends on whether it really didn’t know who Northern Brewer is, and whether it foresaw facing non-legal consequences for the action, such as Brother Barley rallying the system of tubes to boycott Bell’s. For what it’s worth, I think it’s total bullshit that Bell’s didn’t know who Northern Brewer was. (We are talking about a huge player in the craft beer industry and a huge player in the homebrewing industry. If I was a shareholder, I’d be more concerned that Larry Bell doesn’t know who the other people in the industry are than that they’d have Two Hearted Sluts Night at the stripclub in Kalamazoo.) While there are legitimate concerns about allowing someone to use a mark very similar to yours without retaining any control in that use, that doesn’t necessarily mean that sending a lawyer letter was the right call here. Of course, reasonable minds could differ, and I’m the last person you’d ask about what a reasonable person thinks.
Baron: You’re absolutely right that the legal and PR issues are intertwined. I think Bells’ position was probably overly risk-averse and adversarial, and, more significantly, that the brewery also failed to appreciate that many craft beer enthusiasts are offended by anything that smells like litigation, bottom-line decision-making, or shatters the Utopian image of craft brewing as a quasi-socio-political-religious-artistic movement. Regardless of Bells’ justification, the story that played here was: “Bell’s Sues Little Guy For Absolutely No Reason; Boycott Bell’s.” No amount of explaining after the fact what a cease and desist letter actually means changes that headline, particularly via a fairly weak press release.
At the same time, I don’t know how disastrous this will be for Bell’s. Even assuming every negative inference against Bell’s, I’ll be surprised if anyone stops buying their beer because of a PR snafu.* They’ll know better next time, and so will the rest of the craft brewing community… which is to say that, as the business grows, they’ll keep their inevitable legal altercations as quiet as possible. To that end, the simple phone call may ultimately prevail; not due to altruism, but to avoid a press event.
* Commander: I boycotted Bell’s for exactly one day until my friend Herr Direktor offered me a Kalamazoo Stout. Damn that beer is tasty.