Is the Craft Beer and Spirits Movement Threatening Big Brands?

Andrew Buchanan had prepared for the launch of The Gentleman Distillery’s bourbon for months; however, this wasn’t just any craft spirit. Buchanan and his business partner Curtis Mackley* were releasing the first bourbon produced in Bourbon County, Kentucky since 1919, the year before the Noble Experiment began nationwide and the 26 distilleries located in the county were closed. None of them reopened after Prohibition ended, and the region didn’t produce its namesake beverage for nearly a century.

In 2014, Buchanan and Mackley, a pair with no prior distilling experience, joined the craft bourbon movement. They set up shop on Main Street in the small town of Paris, Kentucky, and began by selling rum and vodka—a common route for new startups—while aging their bourbon, which was to go on sale September 18 of this year.

That is, until Buchanan got the email that changed his business’ direction. On August 31, just a few weeks before the launch, he explains, "We got a letter informing us that our name 'The Gentleman' had infringed upon the trademark rights of a larger company and two of their brands. Even though our brand is craft, higher in price, made in extremely small batches, and doesn't get cut with GNS (grain neutral spirit), they still argued that there could be customer confusion."

... there is a pattern of larger corporations bullying smaller brands.

While Buchanan can't legally reveal the name of the distillery—although it doesn’t take much to search shelves for a likely competitor—he believes that there is a pattern of larger corporations bullying smaller brands.

"They have lawyers that sit around and do this—only this. This company generally has more lawsuits filed dealing with things like this than all of the other big brands combined," he said. "So to say it is more of a business strategy wouldn't be far off."

Buchanan points to similarities between the way "big beer" has treated smaller breweries as craft beer has become more popular; saying that if you look at the rise of craft beer over the last decade or so, it started with about one percent of the market. At that point, big beer didn't pay attention to it.

"The general consensus was that nobody would pay $10 or $15 for a six pack," says Buchanan. "Fast forward a decade and you have Budweiser buying ad space during the Super Bowl to defend its position against the craft beer revolution. The same thing is happening here."

As a result, last month, Buchanan rebranded his distillery's from "The Gentleman" to "Hartfield & Co."

Big Brands React

Disputes between big-name distilleries and breweries, and new, independent competitors over brand names and logos are increasingly common in the wine and spirits industry. According to Jonathan Hyman, an intellectual property attorney who deals with food and beverage products, that's partly because the point of entry into the field is relatively low. People with little prior experience can begin brewing or distilling in their homes or a local commercial space, and have some time before they finally need to run the paperwork for distributing products over state lines, filing a trademark application. And while these companies already have logos and brand names set, it’s not until this point that bigger names start taking notice and perhaps start feeling threatened. But with good reason. According to Buchanan, while craft spirits only make up one percent of the market right now, they are growing at a rate similar to craft breweries.

Disputes between big-name distilleries and breweries, and new, independent competitors over brand names and logos are increasingly common in the wine and spirits industry ...

While Hyman couldn’t reference specific cases, he explained these situations from the perspective of companies issuing a cease and desist letter, and the legal teams representing them: "It comes down to a couple things. The first is that customer confusion regarding the brand can ultimately devalue the product." He goes on to explain that both brand name and trade dress elements—"features such as bottle size, bottle shape, color or color combinations, graphics, or even particular packaging"—can be the sources of perceived infringement.

"There’s also this sense that companies need to address instances as soon and as often as they come up, as a trademark owner has a duty to police their marks or they can lose their rights," he states. "You don’t want it to get to the point where there are like 30 products branded similarly to yours, the mark no longer stands out amongst other brands, and then it’s too late to go back." In addition, "It is far easier to deal with these issues when they first arise as opposed to when a brand gets more established. In theory though, it all comes down to preventing confusion for the consumer."

Craft Producers Fight Back

While this may seem unfair, and even daunting for small companies to confront, many are fighting back using what tools are available to them, like social media. For example, Ale Yeah! Craft Beer Market, a store with three locations in Atlanta, went public on Instagram airing their dispute against Carolina Ale House, a 25-outlet chain restaurant scattered across the southeast, by posting a photo of the papers that were served to co-owner Eddie Holley.

LM Restaurants Inc., the parent company of Carolina Ale House, says in a complaint filed in federal court, that the craft beer store has operated under the "Ale Yeah!" banner despite allegedly knowing LM owns the rights to the phrase. According Holley, understanding the lawsuit requires some background.

"We originally attempted to trademark the phrase ‘Ale Yeah!’ along with our logo, in 2013, within the retail services category at the U.S. patent and trade office (USPTO). Our registration of the phrase 'Ale Yeah!' was opposed by LM restaurants group, citing first use of the phrase in 2007 through occasional mentions on their food menus, as well as some marketing efforts," Holley says. "First to trademark the name, as well as first use of the name, doesn't guarantee anybody anything."

Holley points out that the USPTO operates numerous branches, and there are examples of companies in divergent industries using the same phrase—like Beretta the gun and Beretta the car. He says that for him, LM Restaurants’ opposition to their trademark registration was "a bit of a head-scratcher, as they are not a retail store, but it is a prime example of a company with more resources and money to try and push a little guy around."

Then, to top things off, after a nearly three year battle, LM sued Ale Yeah! citing trademark infringement. The lawsuit alleges they have asked the craft beer store multiple times to cease and desist using the phrase "Ale Yeah!," stating possible confusion of the two brands, but the suit completely ignores the multi-year trademark battle over the phrase. The suit was also filed in North Carolina, a state where Ale Yeah! does not do business.

"Our response to the lawsuit was to dismiss it based on this fact alone, something we are currently awaiting ruling on but fully believe that it will be dismissed," Holley says. "LM Restaurants knew what they were doing. This lawsuit is the definition of frivolous and is simply a tactic to force us to abandon our use of the name 'Ale Yeah!' and to essentially go away."

... it all comes down to preventing confusion for the consumer.

LM has also cited they don’t want customers to confuse the two brands. "Even if they owned a restaurant right across the street from one of our stores—it's also widely believed that they wish to expand into the suburban Atlanta market, another reason they are being so aggressive—there would be no confusion between a sports bar and a craft beer-only bottle shop that sells beer to-go," Holley asserts.

So why go public with the whole thing on social media? Per Holley, "I went public with it simply because getting served at my store angered me. The lawsuit is completely unnecessary and is meant to cause us pain, so why not utilize the power of social media to turn that spotlight around?"

Playing Nice

But not all legal situations end poorly for both parties. Patrick Wensink is an author living in Louisville, Kentucky. After publishing his 2012 satirical novel Broken Piano For President, lawyers for Jack Daniel’s noticed that the cover of the book was obviously inspired by their label. Perhaps a little too obviously inspired. Yet their approach to the situation was vastly different than what Holley had to deal with in facing LM.

Wensink posted what Forbes has gone on to describe as "the world’s nicest cease-and-desist letter" on his website. It started like this:

We are certainly flattered by your affection for the brand, but while we appreciate the pop culture appeal of Jack Daniel’s, we also have to be diligent to ensure that Jack Daniel’s trademarks are used correctly… As an author you can certainly understand our position and the need to contact you. You may even have run into similar problems with your own intellectual property.

They didn’t want him to take his books off the shelves, simply to redesign the cover when it was reprinted. Jack Daniels even offered to cover the costs for the redesign, which Wensink declined.

"My publisher made that choice. I told them to take the money and never look back! But my publisher at the time, Lazy Fascist Press, is a proudly independent company and didn't want anyone else involved in making decisions on things like cover art," Wensink explains. "So they ate the cost of the artwork in order to retain their independence."

It didn’t matter though. The cost was well worth it after Forbes posted the cease and desist letter, which went viral simply because of its overall courtesy (apparently a quality lacking in many of these cases). The book went on to top Amazon's satirical books chart and was the number six bestseller overall. His website hits jumped from 20 a day to 200,000 in three days.

"I was scared this giant corporation would totally ruin me. I have a wife and a kid who are partial to eating three meals a day and being sued by the world's largest whiskey maker threatened that," Wensink says. "Thankfully, they proved to be fair and level-headed and worked with me and my publisher in a way that worked for everyone. My family still eats three meals a day, which is a victory."

I asked Hyman if he was familiar with this story, and he thought for a second: "Wait, is that that Broken Piano book? That cease-and-desist letter sort of made the rounds as the best way to deal with situations like that. Approaching people kindly definitely helps."

*In the midst of this article being published, Buchanan bought out Mackley's share of the distillery and he is now the sole owner.