Saturday, September 29, 2012

A Cautionary Tale: Marble Brewery v Marble City Brewing

Mark Image

“We have beer ready to go. We have hundreds of empty kegs ready to be filled with beer. But 100% of zero is still zero,”
-Brewery Co-Owner, Adam Palmer, commenting on the state of his business after receiving a trademark complaint.

Receiving a cease and desist letter on the eve of the product launch is a nightmare scenario for any business, and can prove fatal when it is a small business launching its first product. This was nearly the outcome for a small brewery in Knoxville, Tennessee, [previously] named Marble City Brewing.

The term "Marble City" was a nickname for Knoxville that arose out of its status as a major center in the marble industry in the late 1800s. According to the brewery owners, who are cousins, they chose the name to honor the city's history.  They did not proceed blindly with the name once it was chosen--they first performed research to see if anyone else was already using the name. [Though they did not retain a trademark attorney to advise on the results of the search.]

Despite uncovering a brewery located in New Mexico named Marble Brewery in their search, and despite learning that Marble Brewery owned a federal trademark registration, the cousins decided to proceed with the name because they thought that the geographical separation between the two companies, and the inclusion of the word "City" in their mark, along with the different connotations associated with the two marks, would be sufficient to prevent any consumer confusion.

However, as they were getting close to the release of their first two beers--a raspberry wheat and a red ale--and after they had already spent thousands of dollars on signs, merchandise and promotional items, they received a call from the president of Marble Brewery, Jeffery Jinnett, demanding that they change their name. It turns out that Mr. Jinnett is from Knoxville and had received word of the brewery's impending opening from friends in town.

The cousins declined to comply with Mr. Jinnett's demands, and Marble Brewery responded by filing a lawsuit in November 2011. In addition, a few months after filing the lawsuit, Marble began selling its beer in Knoxville for the first time. (This was an important step from a legal perspective because there is a doctrine in trademark law that is followed by some courts, which states that even if a company owns a federal trademark registration, it cannot prevent another party from using the mark in a geographically remote location unless and until it shows that it is likely to enter that party's territory)

The cousins vowed to defend themselves. However, they realized that there was a possibility that they might not prevail in the lawsuit, and therefore decided that they would not use the mark (and not sell any beer) until the case was resolved. "If we lost, if it was trademark infringement, that would kill this business," noted co-owner Johnathan Borsodi. Some might ask why not simply throw in the towel and just change the name at this point. The answer here--aside from the fact that they strongly believed in their position--was that they were a small business and had already used all of their resources getting ready for the product launch. Therefore, they apparently could not afford the costs associated with a name change (e.g., new LLC filing, new permits, signage, merchandise and promotional items): "The only money going into this is our money, and we’re broke," noted Bosodi.

However, it appears that the cousins eventually either reassessed the strength of their position or decided that it was more practical to concede, as they agreed to change their name to Saw Works Brewing Company in August 2012 (after a potential settlement pursuant to which they would have licensed the "Marble" mark from Marble Brewery fell apart).