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Getting Defensive: Analyzing the Arguments in Stone’s Keystone Lawsuit

February 16, 2018

Source: Good Beer Hunting

By: Bryan Roth

February 13, 2018

After a weekend of media alerts that began the afternoon of Feb. 9 and continued with cryptic Twitter messages from Stone Brewing executive chairman and co-founder Greg Koch, the big unveil came this week: Stone is suing MillerCoors.

According to the lawsuit, filed in U.S. District Court of Southern California, Stone is seeking payment of damages for MillerCoors’ “misguided campaign to steal the consumer loyalty and awesome reputation of Stone’s craft brews and iconic STONE® trademark” in the promotion of its Keystone family of brands.

Both companies volleyed accusatory statements after Stone’s announcement, which was shared publicly via a prepared YouTube video featuring Koch and followed up by a separate press release.

“By deliberately creating confusion in the marketplace, MillerCoors is threatening not only our legacy, but the ability for beer drinkers everywhere to make informed purchasing decisions,” Koch said in his company’s release.

In response, Marty Maloney, manager of media relations for MillerCoors, said the lawsuit was a “clever publicity stunt.”

“Since Keystone’s debut in 1989, prior to the founding of Stone Brewing in 1996, our consumers have commonly used ‘Stone’ to refer to the Keystone brand and we will let the facts speak for themselves in the legal process,” Maloney said in a statement.

The back and forth is likely to continue, especially among beer enthusiasts, but as the industry waits for MillerCoors’ official, legal response, due within 21 days, the intermediate period is now about one question: does Stone have a case?

“Like any complaint, it’s a very persuasive document,” says Brendan Palfreyman, who specializes in brewery trademarks as an attorney at Syracuse, New York’s Harris Beach PLLC. “Things get a little murky when you get the answer to the complaint, but at first blush, it seems like a pretty decent case.”

There are certainly some grey areas, Palfreyman says, but the core position around a Keystone rebranding in 2017 makes for one area of worthy argument. In April of last year, MillerCoors announced on its blog that new packaging had a specific plan “that plays up the ‘Stone’ nickname.” This marketing tactic is black and white, and Stone’s filed complaint says as much, showing images of Keystone cans with the big, bolded “STONE” on one side. The complaint also points at “confusing case stacks” of Keystone 30-packs that create a “wall of STONE.” When placed in a specific way, the cardboard cases of Keystone only show the word in question. There are several other examples provided by Stone Brewing, showcasing the focus on the word “Stone” across social media and print advertising.

“That’s pretty on the line or stepping across the line,” Palfreyman says. “Keystone has a registered trademark…which is prior to the beginning of Stone Brewing Company. Where Stone and Greg Koch have a valid complaint is if Keystone has, indeed, shifted its branding to the use of ‘Stone’ alone.”

These examples are not the end-all for the lawsuit, especially since MillerCoors still gets the chance to tell its side of the story. The challenge for Stone Brewing is to prove that there is a likelihood of confusion between the two brands, which relies on eight factors that range from similarity of the good to likely expansion of product lines to the overall impression created by use of “Stone.”

Among some of the additional factors are the physical proximity of the goods in a retail marketplace (Stone as craft beer and Keystone as macro are often found separated, although always in the same general location) as well as evidence of confusion. On the latter, Stone only provides one instance: “In December 2017, for example, a consumer reached out to Stone to inquire about the brewery’s new ‘STONE LITE’ product – a non-existent beer that appears only in MillerCoors’s deceptive advertising,” Stone Brewing states on page 18 of its complaint.

“If there’s evidence of actual confusion, it’s typically going to be featured prominently in the complaint because it’s such powerful evidence,” Palfreyman says. “My educated guess would be that’s all they have, but it’s possible they have more and that’d come out in discovery.”

John Szymankiewicz, an attorney with the Beer Law Center and author of the book, Beer Law: What Brewers Need to Know, says that the critical question to ask in this lawsuit is what a consumer understands or believes about these brands.

Specifically, Szymankiewicz notes that a “sophisticated” customer in a legal sense is one that does in-depth research on a specific product before buying it. Two similar trademarks could be OK if a purchaser is knowledgeable and can understand differences clearly and easily. However, beer buyers are generally not “sophisticated” in this sense, he says, because at retail, all beer is within the same general proximity and a typical shopper doesn’t do research before choosing a particular product. The Brewers Association—of which Stone is a very proud member—only counts its defined collection of “craft” breweries responsible for 12.3% of the national volume of beer.

“So, would a typical beer buyer understand that the can that has ‘Stone’ as one of the major design elements of the package is not from Stone Brewing?” Szymankiewicz asks. “Well, I’ll let the judge decide on this one. But I think the answer is ‘no, that’s confusing to consumers.'”

The opposing side to that argument may actually be made by Koch himself. In his announcement video, he holds up a can of Keystone Light, with his middle and ring fingers covering the word “Key” stacked above the word “Stone,” and points out that the can “says ‘Stone Light,’ two words that you would never see together in association with our company.” In this moment, Koch is stating that the words used on the can have no connection to his beer, yet would still create confusion around his own product. But! It also creates an ironic situation that Palfreyman said could be advantageous for MillerCoors’ own response, though it could also only be a “peripheral issue.”

Michael K. Fretwell, an associate attorney with Maryland’s Laubscher, Spendlove & Laubscher, P.C., sees the lawsuit through two issues: what’s on Keystone cans and what’s used to market the product. In terms of MillerCoors using “Stone” to create confusion toward Stone Brewing’s brands on packaging, he says arguments by Koch are not outrageous, but are “a bit thin.”

“If MillerCoors were using ‘Stone’ as the new mark on the cans without anything else, or with little else, then it would be the use of the ‘Stone’ mark and that would be a problem,” Fretwell says. “However, the cans also include ‘Key’ and ‘Light.’ I think it is clear that the can of beer is Keystone Light from MillerCoors.”

Advertising is another issue, however. Fretwell says there are solid arguments because of the 2017 rebranding that more strongly emphasized “Stone” as a standalone word to represent the product, rather than the full name of “Keystone.” In this case, a court could find that MillerCoors is actively working to rebrand its name in the consumer’s mind with “Stone.”

“There is a good chance consumers would see some of the advertising and think it is Stone and not Keystone,” Fretwell says. “Also, the heavy emphasis on the use of ‘Stone’ may lead consumers to start referring to Keystone as simply ‘Stone,’ which could create confusion over time.”

Tony Glover, a Florida-based alcoholic beverage attorney and founder of Glover Law LLC, notes that the method of Stone’s announcement was well-crafted in a way to “generate significant earned media.” Within 24 hours of the press release and video, stories appeared across local and national news outlets.

“Regardless of the outcome, Stone Brewing is further establishing themselves as a hero to craft beer fans and as a leader in the ongoing craft versus macro conflict,” Glover says.

Glover adds that, even though the two products are “quite different,” a court would likely want to focus on whether Keystone’s marketing efforts actually cause enough confusion to damage Stone’s reputation.

In a roundabout way, Szymankiewicz says that confusion could come back to a years-old argument against businesses owned by Anheuser-Busch InBev, MillerCoors, and others. Because ownership structure isn’t plainly listed on the packaging of breweries like MillerCoors’ Blue Moon (once involved in a lawsuit of its own) or ABI’s Wicked Weed, it can create an impression these parent companies are working to obscure the full ownership or source of that beer.

“If anything, these brands strengthen Stone Brewing’s argument that it’s the brand that matters,” Szymankiewicz says of breweries owned by multinational companies. “Whatever is on the can in big letters is what people will identify with, not the actual source of the product.”

Whether or not this is relevant in the court of law is questionable, thanks to failed suits against WalmartCraft Brew Alliance, and MillerCoors. But it does emphasize ongoing tensions between craft and non-craft producers, however those terms may be defined.

In the past, these lawsuits have provided levels of ire, but usually not press kits, which raises the important value of Stone’s efforts in the court of public opinion. Three years ago, Lagunitas founder Tony Magee announced his own trademark suit against Sierra Nevada over the use of “IPA” on a beer label, but dropped it after 24 hours because of social media backlash.

“When the court of public opinion weighed in, they said in no uncertain terms that what I was doing was a bad idea and they didn’t approve,” Magee told the Chicago Tribune at the time. “Overwhelmingly it was clear that the course I had undertaken was the wrong way to go.”

That lesson learned by Magee could be valuable for Stone. At least initially, the careful rollout of the lawsuit—Stone’s PR team has declined to answer questions—has seemed to embolden Koch’s case, perhaps partially aided from beer enthusiasts’ passionate distaste for all things macro. Whether backlash toward MillerCoors and Keystone is legally warranted will be left to the courts, but in this moment, Koch’s efforts are meant to be less of a proper announcement and more of a rallying cry, complete with hashtag.

“Are we doing this for publicity?” Koch asks the camera in his announcement video, which has been viewed 55,000 times in 24 hours. “No. This is a weird way to get publicity, because it really doesn’t talk about the attributes of our beer, which is what we like to do.”

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