The Magic Hat / West Sixth Trademark Dispute: Settlement

The good news is that Magic Hat and West Sixth breweries agreed on a settlement to their intense, and public, dispute.  A joint press release stated that the parties have come to a mutually agreeable solution to the trademark problem.  Here it is in its entirety

"Official Statement
West Sixth & Magic Hat

The parties have a mutual interest in assuring that consumers perceive their products as distinct.

The parties have mutually resolved the issues addressed in the lawsuit in a manner that eliminates potential confusion about product origin and resolves the lawsuit in a mutually acceptable way.

To the extent West Sixth in any way represented that Magic Hat filed a frivolous lawsuit, that Magic Hat initiated litigation improperly, that Magic Hat was unresponsive in negotiating a resolution, that Cerveceria Costa Rica was itself involved in the dispute or its resolution, that Magic Hat claimed ownership of the numeral 6, that Magic Hat sued West Sixth after West Sixth had already acceded to its demands, that Magic Hat has no Vermont presence, or that Magic Hat sought to recover for or enjoin West Sixth from truthful public statements, such representations are retracted. West Sixth regrets that it in any manner communicated any inaccuracies, and hereby corrects those errors.

Both Magic Hat and West Sixth have agreed that this joint statement will be the last public communication from either side regarding the resolved dispute.

Each wishes the other good fortune and continued success."

So, there it is.  It seems the mediation worked, and the slight change to West Sixth's label was the removal of a compass / star image.  That's it...as far as labeling goes.  But what takes up the bulk of this joint message is public relations mending.  Why is the biggest paragraph essentially an apology from West Sixth about its public comments during the dispute?  After all this time and threats of litigation, what comes out is a simple (relatively) label edit and a long, drawn out "regret". Does this seem odd?

In fact, no, it doesn't. At least not to those in the field of conflict management. To them, they see this paragraph of apology as addressing the main issue for Magic Hat: public image and possibly hurt feelings.  While the label dispute was the main issue, as soon as it hit the social media stream it became a side dish.

They're not alone. Even more recently the international, conglomerate brewer, giant corporation AB-InBev reportedly issued a cease and desist to extremely tiny, ma-and-pop brewery Belleville Brewing in the UK.  Now, Ab-InBev is the type of large corporation that can weather a flame war of public image on the social networks, so they probably aren't worried about this dispute's affect on their image. And as far as image goes, this can help Belleville...assuming it survives the legal costs. This dispute is a bit different from other brewing trademark cases because of the disparity of sizes between the disputants. This is not true with most other cases, where disparity in size may exist, but not to this extreme.

The fact is, most breweries involved in trademark (or other) disputes cannot afford negative press, litigation or drastic label changes. One may suggest that breweries refrain from hitting the social media airways that flame the dispute.  Yet social media is a weapon, and powerful enough to counter, or at least dissuade, the use of legal maneuvering. Plus, anything filed through the courts is public domain anyway, so the dispute is not reserved to privacy. This does not mean that relying on social media is effective or efficient. It creates an uncontrollable firestorm; a Pandora's box of back-and-forth. It can get ugly.

With Magic Hat and West Sixth, at least the label dispute is resolved and the public firestorm over (well, maybe not. Supporters of both sides, and fed-up neutrals, may still vent and foam over this mess). Both companies can go about making beer, and making a living.  That's the important part. Hopefully this situation serves as a lesson to other breweries in similar situations.  Hopefully.

Mediation Between Magic Hat and West Sixth Breweries

Magic Hat and West Sixth breweries go to mediation!   Well, sort of...

It is refreshing to see that the two parties in a trademark dispute are opting for mediation, according to reports.  Lawsuits and court processes are expensive, drawn out, unpredictable and uncontrollable by the parties. Mediation offers an alternative process that is quicker, less expensive, and retains control of the process to the parties. Unpredictability remains, but this is usually a good aspect allowing for the discovery of hidden or latent problems, and/or the creation of unique solutions. Hopefully, Magic Hat and West Sixth will benefit from this mediation, and I applaud them for their efforts.

What troubles me is the selection of a magistrate judge to serve as mediator.  Now, I do not know who this judge is, so I don’t want to…judge, but for the most part, judges are not mediators.  Sure, they can “mediate” according to their definition of mediation, but this falls short of the processes used by experienced mediators.  A common mistake is to assume that those in the legal profession (attorneys, judges, etc) are also seasoned mediators.  This is not true most of the time.  To be sure, some mediators are, or were attorneys and have changed professions. Yet, the experience gained in the court system does not translate well to mediation.

The primary distinction between mediation and litigation is the focus of advocacy.  Whereas the attorney advocates for her/his client and for a winning judgment, a mediator advocates for the mediation process and helps parties come to an agreeable resolution. The goal is not to prove right/wrong, legal/illegal, or decide who put forward a better argument; it is to overcome the dispute through a resolution that both parties agree on, and, for the most part, create.

Perhaps attorneys and judges realize this, and they probably do. Their challenge is to reach such resolution by using the most effective techniques during mediation. While facts and figures work well in the courts, they have little bearing in most mediations. Again, mediation is about resolving a dispute on agreeable terms by both parties, and not what the data influences. After years of argumentation, adjudication, and client advocacy, it is difficult for anybody to transfer to process-focused methods. This is not to say that some once-legal-minded mediators cannot effectively mediate, but merely to point out the fact that mediation skills are not easy to grasp and practice. Becoming a skilled and effective mediator takes time; it is a full time practice.

My fear is that the mediation West Sixth and Magic Hat will, reportedly, undertake may be more of an arbitration and less of a mediation.  That is, the mediator will hear the arguments and decide on a resolution for the parties, instead of the parties coming up with one with the assistance of the mediator. I could be wrong.  But if this mediation does not work, it will give Mediation in general a bad rap. And that will hurt everybody who becomes involved in a dispute, and that’s all of us.

Trademarks: Here We Go Again

It seems like we can't even blink between trademark disputes in the craft brewing industry. And it also seems like each dispute grows uglier than the previous.  Today, we see two breweries engaged in this ugliness: Magic Hat Brewing Co. and West Sixth Brewing, with the former suing the latter for trademark infringement. Social media sites just ooze of nastiness, mostly from supporters of each brewery, but occasionally from the breweries themselves--at least, they have not done much, if anything, to stop the flow.

Some of the rancor stems from the image of a giant beer company picking on a weaker one. And this does not sit well in a culture that has only recently become aware of the affects of bullying. Magic Hat is the playground bully; West Sixth is the new kid at school. The fight has begun.

Sadly, it could have been avoided. Private phone conversations, one-on-one discussions and even email would have been preferable to social media, lawyers' letters and lawsuits. Even though it sounds like attempts at personal contact were unsuccessful, going from discussion to lawsuit is a giant leap over some critical steps. Facilitated dialogue, mediation, and settlement conference are always options for disputants.  While more effective prior to retaining legal counsel, these options are still on the table.

Still, it surprises me that Magic Hat and its corporate connections have not figured out the power of social media. A power that can build and destroy. West Sixth knows this and are using it to their advantage. At least, so far. While I'm no prognosticator, this dispute will harm both breweries. And that's sad. 

Small BREW Act, Taxes and Craft Brew

The growth of craft beer as an industry has persuaded some to take notice as to what "craft" brewing really means and its role in the overall beer industry. While debates continue over craft v. crafty, production levels salience on definitions and independent v. corporate brewing, one issue has craft brewers seemingly debating each other, and that issue is tax.  More precisely, excise federal tax on the production of beer, no matter if it's craft, independent, neither or both. 

Basically the excise tax code is set up so that those breweries who produce more beer are taxed more on the federal level. Right now, that production level is 2 Million barrels per year (those producing such quantities are taxed more per barrel than those producing less).  On the ground, it currently means that all craft breweries do not pay this extra tax, but large breweries (like SABMiller and AB-InBev) fork over the money.

Yet, the growth of craft beer has pushed some breweries closer to this 2 Million barrel level, and therefore more taxation.  As such, or by coincidence, the Brewers Association has altered/updated its definition of craft brewery to include breweries producing up to 6 Million barrels per year (among other stipulations).  Following this, there have been efforts to alter/update the tax code.  Without getting into details, the new tax proposals seek to increase the production level to 6 Million barrels per year before enduring the full excise tax of $18/barrel. 

This has some people in an uproar (or at least discomfort).  Some claim that only a handful of large craft breweries will benefit from this while most of the other medium/small craft breweries will see little benefit, especially if the money saved by the large breweries is spent on marketing--giving them a leg up on the competition, which is the smaller breweries.  Are you following?  It's a bit complicated, so to summarize:  Craft breweries are getting bigger. Getting bigger means more excise tax.  Change definition of "bigger" to avoid this tax burden increase. Those "bigger" breweries benefit most, while smaller breweries see little gain. I think that's the gist of it.

This will be interesting to watch to see if a rift develops (or grows) between the handful of big craft breweries (like Sam Adams, Sierra Nevada, New Belgium , etc) and the more numerous small breweries (like Crooked Stave, Lagunitas, Foothills). It will also be interesting to see how the Brewers Association handles this disagreement.  It should be noted that the BA supports this new tax code, as well as a majority of its member breweries. Consensus is difficult to achieve in any industry, so we'll see how this situation develops, if at all.  Sources predict that this new tax code will not pass Congress.

It should also be noted that the main argument in favor of this proposed tax code is job creation.  With the money saved from the discounted excise tax (from $7/barrel to $3.50/barrel for production under 60,000 barrels), small breweries can re-invest in their companies, hire more employees and build up their neighborhoods.

What's More Important: Definitions or Beer?

What is a gypsy brewer?  How do they differ from regular brewers? Should they be held with the same regard as regular brewers?  These questions have come up, either directly or indirectly, in a recent blog from a brewer in Massachusetts. A gypsy brewer (or contract brewer) is one who uses other breweries' equipment to brew his/her beer.  Mikkeller is probably the most commonly known one, but there are many others. So why are they getting some heat?

The gist is that gypsy brewers are not real brewers since they do not brew the beer themselves and/or are not present when their beer is brewed. They do not own brick and mortar localities and rely on the talents of others for brewing their recipes. Financially, they have not invested or risked as much as those regular brewers, which makes them seem as just trying to get a piece of the pie with less effort.

These are opinions, based on facts.  It is a fact that gypsy brewers use equipment that is not theirs (or the bank's). It is true that sometimes they are not present when their beer is brewed. The opinions rise from there. 

But what is also true is the common claim, by brewers, that beer isn't beer until the yeast has done it's job: brewers make wort, yeast makes beer.  So, who are the real brewers?  Ok, so this is nitpicking a bit.  Yet, I think it's important to acknowledge the whole process before rendering opinions of absolute labeling.

Of course, we could look at new technologies and ask ourselves who the brewers really are. Push button computer software can follow the progress of the brewing cycle and make minute changes when need to follow a recipe. Some software can even be overseen and controlled off premise: that is, by the brewer from his/her couch at home. In this case, is the brewer still a brewer?

My answer is, who cares?  What's the deal with the focus on definitions of such trivial scale? Sure, I can understand the difference between sweating all brewing and picking up wort. I'm not saying brewing and gypsy brewing are the same. My question is why should it matter? Maybe giving credit where credit is due is the underlying issue.  If so, then perhaps labels on the bottles/cans can provide satisfaction.  I'm sure they are options to consider.

The bottom line for me is that if you admonish some beers for being "contracted", then you are missing some great beer.  AND doing disservice to those who actually did sweat all day making the wort. It's still great beer, those who worked on it got paid, and the yeast finished it off.

What's the Matter with Craft Beer? Cracks in the Foundation

The Craft Beer industry is taking off; sales are rising, approaching 10% of overall beer sales, which interestingly have dropped. Craft Beer is growing, even through Recession. No doubt this is time for rejoicing for craft beer, craft beer geeks and tap rooms. But there are fractures in the foundation that are coming to light. How these are managed can either fix the cracks, or expound them.

It is important to note that craft brewing is a business and must take on certain business responsibilities. One is establishing and protecting a brand. For the most part a brand is a name. To differentiate beers consumers (for the most part) identify with names: Sam Adams (by Boston Beer Company), Budweiser (AB-InBev), Coors (MillerCoors).  If Boston Beer Company labeled one of their beers "Bud", AB-InBev would see this as trademark infringement (and so, too, would a judge).  This blatant example illustrates why trademark laws are in place.

However, in the business world of trademark infringement the devil is in the details. While "Bud" is an obvious example, Righteous is not, nor is Seven Seas. In these cases the breweries involved are geographically separate, their markets do not overlap. Ostensibly the struggle is to keep other craft breweries from copying each other, stealing names and taking advantage of others' successes.

While some of this might be true, we must look at the business side: protecting trademark.  For if a company does not protect its trademark, then it could lose it, if not now then later. So a brewery on the west coast must keep an eye out for similar beer names/labels emerging on the east coast, not for fear of theft of customers, but of losing trademark. If that happens, then larger companies that are closer can start using that same name/label, and no infringement of trademark can be claimed.  

So, to take "Bud" as an example (which was actually contested in court), if Boston Beer Company started using "Bud" to label a product, and AB-InBev did not claim infringement, then anybody could start using "Bud"…even MillerCoors. Brand recognition would be out the window as would fair competition.

While this may sound easy to avoid, it certainly is not. Trademark infringement disputes are going to happen. In a growing industry full of small companies, it is inevitable that names/labels will fly under the radar, only to appear in the form of cease and desist (CD) letters.

And this is how management of these disputes can either fix the cracks, or widen them. Sometimes the business decision is not best for the business, especially in a personal industry like Craft Beer, and with the explosion of social media.  Trademark protection is necessary, but it's not as black and white as a CD letter.