Category Archives for Intellectual Property

Diageo v. Heaven Hill: Passing off in the liquor industry

Earlier this summer Mr. Justice Boswell of the Federal Court of Canada released his decision in Diageo Canada Inc. v. Heaven Hill Distilleries, Inc., which resolved a trademark and passing off dispute between two significant players in the liquor industry. At issue in Diageo v. Heaven Hill is the similarity in Diageo’s Captain Morgan mark, and Heaven Hill’s Admiral Nelson mark. Both marks are used by their respective owners to identify and market their lines of rum.

Passing off exists at common law as a tort, and is prohibited under s. 7(b) and (c) of the Trade-marks Act.

What is Passing Off?

The procedural aspects of Diageo v. Heaven Hill are somewhat complex, and need not be repeated. For Alcohol & Advocacy’s purposes the salient issue is this: Has Heaven Hill been passing off its Admiral Nelson rum products as the goods of Diageo in contravention of the Trade-marks Act?

The principles behind the common law and statutory prohibition against a manufacturer passing off its goods as those of another (usually its competitor) are not difficult to understand: a manufacturer who has invested in developing goodwill (brand recognition) in its products does not want to lose business (and potentially its reputation) to a competitor who is selling its products in a way that confuses consumers into believing that its product is the “original”. Similarly, consumers have an interest in being able to readily distinguish the origin of the products they are purchasing based on the product’s packaging, design elements, or logos.

Passing off can occur in any variety of ways. Obvious examples include counterfeiting or imitating the plaintiff’s trade mark or trade name, but more subtle examples include imitation of the plaintiff’s product wrappers, labels or containers, its vehicles, the badges or uniforms of its employees, or the appearance of its place of business.

The plaintiff in a passing off action does not need to prove that the defendant was deliberately attempting to pass its products off as the plaintiff’s, rather the misrepresentation creating confusion for consumers can occur through negligence or carelessness. Put more simply: even if by complete coincidence your company’s beer, wine or spirits happen to look like a competitors, your company may still be found liable for passing off.

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Trouble is brewing following Wal-Mart’s entrance to the craft beer market

American craft beer class action warfare remains alive and well in 2017 with Wal-Mart entering the cross-hairs earlier this month. In February Mr. Matthew Adam of Hamilton County, Ohio commenced a class action lawsuit against Wal-Mart on behalf of all purchasers of “craft” beer from Wal-Mart Stores.

In brief, Mr. Adam alleges that he was tricked into purchasing beer that was manufactured and marketed by Wal-Mart as “craft” beer, when it fact nothing about Wal-Mart’s beer was “small, independent and traditional” (*beer drinking community lets out a collective gasp*). It would appear as though no one drew to Mr. Adam’s attention Mr. Evan Parent’s unsuccessful attempt to sue the Blue Moon Brewing company over substantially similar allegations, or Alcohol & Advocacy’s commentary on the same.

In his initial filing with the Hamilton County court of common pleas, Mr. Adam says that through a “fraudulent, unlawful, deceptive and unfair course of conduct” Wal-Mart sold its Cat’s Away IPA, After Party Pale Ale, Round Midnight Belgian White and Red Flag Amber as “craft” beer to residents of Ohio and 44 other states since 2016.

Mr. Adam says that consumers are willing to pay more for high quality small batch beers, and goes on to cite dictionary and Brewers Association definitions of “craft beer”.

To produce its line of beers Wal-Mart collaborates with Trouble Brewing – a brewery that “does not really exist”. Instead, says Mr. Adam, Trouble Brewing is merely a combination of a company called WX Brands that “develops exclusive brands of wine, beer and spirits for retailers around the world” and Genesee Brewing – one of the largest continually operating breweries in the United States. Mr. Adam says that Wal-Mart’s “craft” beer is a “wholesale fiction” designed to “deceive consumers into purchasing the [beer] at a higher, inflated price.”

Mr. Adam alleges that Wal-Mart stocks its “craft” beer next to other (presumably legitimate) craft beers, and has designed its label to convey the look and feel of genuine craft beer. Finally Mr. Adam says that consumers are particularly vulnerable to these kind of “false and deceptive labelling and marketing practices.” Mr. Adam believes that most consumers do not have enough knowledge to tell the difference between fake craft beer and the real deal. Without judicial intervention, Mr. Adam believes Wal-Mart’s scheme to defraud and victimize consumers will remain ongoing.

Mr. Adam’s lawsuit is tough to stomach for a variety of reasons, not least of which is the glaring omission of an allegation that Wal-Mart actually describes its Trouble Brewing beer as “craft”, or that it claims the beer is made in small batches by traditional methods. Instead Mr. Adam in his statement of claim appears to equate fancy labels, contract brewing arrangements, and the location of beer displays with the very specific representation that the beer at issue is made in accordance with the Brewers Association definition of “craft beer”. Mr. Parent, in his failed class action proceeding against Blue Moon Brewing took a similar tack, and each of those basis for a claim were deconstructed and dismissed by Judge Curiel. Alcohol & Advocacy fully expects this merit-less claim to be dismissed at an early stage for similar reasons.

Canadian manufacturers, importers and distributors should take note of this, and similar litigation. Are these lawsuits entirely frivolous? Or are they a reminder that consumers continue to place a considerable premium on how beer is made, and if they feel they are being deceived will act accordingly?

If your company requires advice on Canada’s labelling laws, or British Columbia’s liquor marketing regulations contact Dan Coles at Owen Bird.

*Alcohol & Advocacy publishes articles for information purposes only. They are not a substitute for legal advice, and persons requiring such advice should consult legal counsel.


Craft Beer Litigation: Understanding the Blue Moon Class Action Part 2

In part one of Craft Beer Litigation: Understanding the Blue Moon Class Action Alcohol & Advocacy outlined the facts of a class action lawsuit started by a self-proclaimed “beer aficionado” against MillerCoors after he learned, to his horror, that Blue Moon beer was not a “craft beer” after all.

In his April 24, 2015 statement of claim, the plaintiff Mr. Parent complained that MillerCoors caused him damage by: failing to disclose its ownership of the Blue Moon Brewing Co., by marketing Blue Moon beer as being “Artfully Crafted”, and by pricing the beer as a premium product.

On a pre-trial application by MillerCoors, Judge Curiel dismissed the claim for the following reasons:

Trade Names and Corporate Structures

The Blue Moon Brewing Company is what is known in California as a “fictitious business name” or a trade name. The name is duly registered as such in the state by MillerCoors. By registering the trade name “Blue Moon Brewing Company” the court held that as a matter of law MillerCoors successfully put the world on notice of its ownership and use of the Blue Moon trade name. Moreover, the Federal Alcohol Administration Act which regulates the distribution of alcoholic beverages in the United States, provides for regulations that specifically address the labelling of bottled beer. Those regulations require that each bottle of beer “shall show by label or otherwise the name or trade name of the brewer….” A similar California law that regulates beer packaging also permits the use of fictitious businesses names.

While this answer may not be very reassuring for consumers, MillerCoors is playing well inside the established rules. The court held that MillersCoors cannot be found to be misleading consumers while at the same time being fully compliant with the letter of the applicable labelling regulations. Put another way, the conduct complained of is the same conduct that is authorized by law.

Artfully Crafted

The court considered whether the reasonable consumer would be deceived by the “misrepresentations” MillerCoors made by:

  • failing to mention its ownership of Blue Moon on the Blue Moon website;
  • identifying Blue Moon as a craft beer on its website;
  • using the trademark “Artfully Crafted”; and
  • its premium price point.

To determine the issue the court relied on the “reasonable consumer” test which asks whether members of the public would likely be deceived by the complained of actions. A likelihood of deception means that it is probable that a significant portion of the general consuming public, or the targeted consumers, acting reasonably in the circumstances, could be misled.

The court resolved this issue swiftly. Given MillerCoors’ significant internet presence, and the fact that its ownership of the Blue Moon brand is prominently displayed on its website, the court could not conclude that a significant portion of the general consuming public would be misled about Blue Moon’s corporate ownership.

For the same reason, the fact that on MillerCoors’ own website it describes Blue Moon as a “craft beer” is of no significance because a consumer in the market for craft beer would know that MillerCoors does not qualify of as craft brewery and thus could not reasonably conclude that a beer manufactured by it would be a true craft beer product.

The “Artfully Crafted” trademark was resolved along the same lines as similar lawsuits filed against Tito’s vodka and Maker’s Mark bourbon. The court observed that in California, like in British Columbia, it is doubtful there is a legal or controlling definition of “craft beer”. Even if such a definition did exist, the court held that the phrase “Artfully Crafted” is a general and inherently vague term that amounts to non-actionable puffery. To be actionable as a misrepresentation a statement must make a specific and measurable claim, capable of being proven false or being reasonably interpreted as a statement of objective fact. “Artfully Crafted” – whatever that means – falls short of that standard.

Sales Tactics

Lastly, the court could find no evidence that MillerCoors had any control over where retailers placed Blue Moon on their shelves, and that there is no authority for the proposition that the price a product is sold for can itself constitute a representation or statement about the product.

Having dealt with Mr. Parent’s complaints summarily, and finding that they did not support a “cognizable legal theory” the court dismissed the claim.

For craft beer enthusiasts the Blue Moon lawsuit raises interesting questions, with no ready-made answers. Most craft beer drinkers will tell you their passion is “all about the beer” – but at the same time, no one likes being deceived. If your favourite BC brewery was purchased by a large publicly traded company, would the beer taste any different?

Perhaps more than anything else the Blue Moon lawsuit, and liquor law litigation generally, should make consumers and manufacturers more aware of the intricate web of laws and regulations governing trademarks, trade names and corporate structures.

If your bar or brewery needs assistance navigating the laws and policies that affect your business contact Dan Coles at Owen Bird.

*Alcohol & Advocacy publishes articles for information purposes only. They are not a substitute for legal advice, and persons requiring such advice should consult legal counsel.

Craft Beer Litigation: Understanding the Blue Moon Class Action Part 1

Readers of Alcohol & Advocacy will not be surprised to learn that as craft beer and spirits grow in market share and notoriety, so too does the volume of class action lawsuits filed against their manufacturers.

From Maker’s Mark bourbon, and Tito’s vodka being challenged over their claims of being “handmade” to allegations that Blue Moon Brewing Co.’s “misleading” packaging suggests it’s a craft beer product – litigious drinkers in the United States are always on the lookout for their piece of the next big class action lawsuit. Whether these lawsuits are frivolous simpliciter, or serve a valid purpose keeping manufacturers honest with their marketing practices, is a topic for a separate post.

In this two-part feature on the Blue Moon litigation, Alcohol & Advocacy explains the facts of the lawsuit and the court’s response to the allegations.

The Blue Moon Brewing Company lawsuit (known to lawyers by its style of cause Parent v. MillerCoors LLC), was brought under Californian consumer protection and advertising legislation. For this reason the case has little to offer Canadian drinkers or manufacturers from a legal point of view. However, on a more general level the allegations raised in the lawsuit offer excellent food for thought:

  • If we like the way a beer tastes, does it matter how it was produced?
  • Is it reasonable for consumers to demand that the corporate structure of every brewery be set out  on the labels of the beer it produces?
  • Why are consumers obsessed with defining the “craft” label?

The plaintiff in Parent v. MillerCoors LLC was an individual named Evan Parent, a self-described “beer aficionado and home brewer.” Mr. Parent alleged that between 2011 and 2012 he regularly paid a premium price to purchase Blue Moon beer from San Diego-area retailers because MillerCoors created the deceptive and misleading impression in his mind that Blue Moon was a “craft beer”. In July, 2012 Mr. Parent was “informed by friends that Blue Moon is not a craft beer, but rather a mass produced beer made by MillerCoors.” In his class action complaint Mr. Parent describes himself as being “initially skeptical” of this news, but eventually “verified the facts through his own research.”

According to Mr. Parent, Blue Moon does not qualify as a “craft beer” because such beers are produced by “small, independent and traditional” craft breweries and MillerCoors is not such a brewery. Mr. Parent claimed that for a beer to qualify as a “craft beer” it must be produced by a brewery that meets the Brewers Association definition of an American craft brewery, which includes a limit on annual production of less than six million barrels, share ownership restrictions, and a condition that beer is made using only “traditional or innovative brewing ingredients.” MillerCoors produces more than 76 million barrels of beer annually.

Mr. Parent claimed that though Blue Moon is not a craft beer, MillerCoors engaged in deceptive, misleading and even fraudulent business practices to misrepresent the product as a craft beer in order to capture a sliver of the burgeoning craft beer market, and charge “up to 50% more” for Blue Moon beer than it charges for other MillerCoors products.

At the risk of oversimplification, the basis for Mr. Parent’s lawsuit can be considered under the following headings:

Trade Names and Corporate Structures

Mr. Parent alleged that MillerCoors goes to great lengths to disassociate Blue Moon beer from the MillerCoors name. For example, although Blue Moon is owned by MillerCoors that ownership is not disclosed on the bottle or packaging of the beer. Instead, the packing reads that the beer is manufactured by “Blue Moon Brewing Co.” In reality Blue Moon is brewed by MillerCoors at its Golden, Colorado and Eden, North Carolina breweries (which also produce all of MillerCoors’ other beers).

The Blue Moon Brewing Company website contains no mention of MillerCoors’ ownership of the brand, although the MillerCoors website lists Blue Moon among its “craft beer” brands.

Artfully Crafted

Mr. Parent complains that MillerCoors’ use of the trademark “Artfully Crafted” in the labelling and advertising of Blue Moon misleads consumers into thinking Blue Moon is a craft beer. MillerCoors also identifies Blue Moon as a “craft beer” on its website.

Sales Tactics

Mr. Parent complains that even the “premium price” that is charged for Blue Moon adds to the deception that Blue Moon is a true craft beer, and that its placement by retailers “among other craft beers” misled him into believing Blue Moon was a craft beer.

At first blush these arguments seem compelling. Is MillerCoors taking advantage of consumers with its approach to branding Blue Moon? Even if they are, if Mr. Parent enjoyed the beer does it matter? Or is this merely a case of caveat emptor?

In Part 2 Alcohol & Advocacy  will explore the court’s response to MillerCoors’ motion to dismiss the action, and why supporters of the craft beer and spirits industry should take notice.

*Alcohol & Advocacy publishes articles for information purposes only. They are not a substitute for legal advice, and persons requiring such advice should consult legal counsel.

Battle of the Glen Part 3 of 3: You can take the “Glen” out of Scotland, but you can’t take the Glen out of “Glen Breton”

The Federal Court of Appeal allowed the appeal and directed that the Registrar of Trade-marks allow Glenora’s application to register Glen Breton. Although the Association sought leave to further appeal to the Supreme Court of Canada, leave was denied, thus bringing the Battle of the Glen to a close in Glenora’s favour.

Unfortunately for whisky lovers the Court of Appeal’s reasoning was not based on the characteristics of Glen Breton, the origin of the word “glen”, or what Scotch drinkers look for when perusing the shelves of liquor stores. Instead the Court of Appeal overturned Justice Harrington on the basis that he made an error of law in his trade-mark analysis. The Court of Appeal held that Justice Harrington was wrong when he decided that the word “glen”, having only previously been used as part of various registered trade-marks, was in fact a “mark” within the meaning of section 10 of the Act.

What is a “mark”? A “mark” is word or symbol used by a person for the purpose of distinguishing his or her wares or services from those wares or services made or sold by competitors.

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The Battle of the Glen Part 2 of 3: Confusion in the Marketplace

When Glenora applied to Register “Glen Breton” as a trade-mark for use in association with its whisky, the Association opposed the registration. Specifically the Association challenged Glenora’s ability to use a mark prefixed with the word “glen” for its whisky. It claimed that the use of “glen”-prefixed marks in association with several well-known single malt Scotches, including Glenlivet, Glenmorangie and Glenfiddich, has resulted in an association in consumers’ minds between the word “glen” and whiskies distilled in Scotland.

If “glen” in ordinary and commercial use was a mark that had become shorthand for “whisky made in Scotland” than Glenora would be unable to register Glen Breton as a trademark under the Trade-mark Act.

The Trade-marks Opposition Board rejected the Association’s objection on the basis that although there was evidence of “glen”-prefixed marks being used by Scotch whisky distillers, the Board found that this use was not widespread enough to have instructed Canadian consumers to associate the word “glen” with Scotch whiskies. The Association appealed.

By 2008 when the appeal of the Trade-marks Opposition Board came before the Federal Court, along with it came volumes of new evidence on the history of Scotch drinking in Canada and details of single malt Scotches sold with “glen” in their name. Apparently in the year 2000 there were some 22 different whiskies sold in Canada that contained the word “glen”. After reviewing the new evidence, Justice Harrington was of the opinion that there was extensive reputation associated with “glen”-prefixed Scotch whisky brands. He found that there was actual confusion in the marketplace, and that some consumers were not aware that Glenora’s product was not a Scotch distilled in Scotland.

Justice Harrington did not accept the argument made by Glenora that any confusion by consumers was due to the fact that Glen Breton has many of the characteristics of Scotch (flavour, aroma, colour etc.) and found instead that the confusion was due to the use of the “glen”-prefixed mark. Justice Harrington concluded that “Glen Breton” was not a registerable trade-mark as the word “glen” had by ordinary commercial use become recognized in Canada as designating Scotch whisky. He therefore allowed the appeal and directed the Registrar of Trade-marks to refuse Glenora’s application to register Glen Breton.

Glenora appealed that decision.

The Battle of the Glen Part 1 of 3: What’s in a name?

When is Scotch whisky not Scotch whisky?

The answer of course is when it is not distilled and matured in Scotland. While you might expect that question and answer to be taken from the pages of a whisky guide, or a Scotch blog, those words were in fact lifted from the first paragraph of the 2008 Federal Court decision in Scotch Whisky Association v. Glenora Distillers International Ltd.

The branding and marketing of alcohol has always been big business, but unlike previous eras “micro” distilleries, breweries and wineries are now competing nationally and internationally for consumers’ dollars and loyalty. While healthy competition is good for everyone, fledgling business owners must be careful about encroaching on the intellectual property rights of their competitors. Those colourful beer, wine and whisky bottle labels that we all enjoy are vested with copyright and trade-mark protections that must be respected.

What follows is an example of a small Canadian distiller attempting to enter the lucrative market of single malt whiskies, and the Scotch Whisky Association’s attempt to stop them by way of intellectual property rights litigation. Though most observers would probably agree that the merits of whisky are better off debated over a few drams at a tasting, or in industry publications, occasionally the courts are called on to act.

Glenora Distillers International Ltd. (“Glenora”) is a distiller located in Cape Breton, Nova Scotia. Construction of the distillery began in 1988 on a 900 acre site in Glenville, Inverness County. The distillery consists of malt storage (like many distillers Glenora contracts the malting process to an outside source), grist mill, mash house, still house, warehouses, bottling plant, as well as tourism facilities. The structures were constructed in traditional post and beam style just like the famous distilleries found in Scotland. The two copper pot stills were made by Forsyth & Sons of Speyside Scotland.

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