Ice warriors gird for round two

The court case Anheuser-Busch v. Labatt ended last month in St. Louis with the jury awarding a-b u.s.$ 5 million in damages and deciding that the terms ice beer, ice brewed and ice brewing, which Labatt Breweries of Canada had hoped...

The court case Anheuser-Busch v. Labatt ended last month in St. Louis with the jury awarding a-b u.s.$ 5 million in damages and deciding that the terms ice beer, ice brewed and ice brewing, which Labatt Breweries of Canada had hoped to trade mark, are generic terms.

The St. Louis case also raised several issues about the development, marketing and advertising of Labatt Ice Beer that could affect two other cases expected to be heard later this year: Labatt v. Miller & Molson, in Detroit, and Labatt v. Molson, in Toronto.

a-b filed the suit in December 1993 when, on the heels of initiating action against Molson Breweries and Miller Brewing, Labatt intimated in a letter that it would also hold a-b accountable for damages resulting from its launch of Budweiser Ice Draft.

The jury awarded punitive damages for injurious falsehoods made in advertising claims by Labatt that could cause financial loss to a-b.

The jury based its decision, in part, on the Labatt Ice Beer launch campaign from Lowe SMS, (formerly Scali McCabe Sloves) of Toronto.

The campaign made a number of contentious claims for Labatt Ice, such as:

‘They invented it. They perfected it. The process demanded sophisticated new equipment. They built it. They alone own it. Labatt Ice Beer. It’s here. It’s real. It is the only one.’

Labatt is awaiting the results of its appeal of the punitive-damages decision, which can be overturned by the judge.

An interesting aside to the case is that a-b and Labatt are brewing partners: Labatt brews and markets Budweiser brand in Canada, which is estimated to net Labatt $45 million in annual profits.

In turn, Labatt was expecting to license its Ice Beer process to a-b. Labatt later signed a u.s. deal with a-b rival Coors and now has licensing agreements signed with 10 different brewers worldwide.

Sharon Paul, Labatt executive vice-president of public affairs, says the court process did not strain the relationship between Labatt and a-b and denies that it could jeopardize the Budweiser licensing agreement.

While the relationship between the two brewing companies might not be strained, testimony from George Taylor, Labatt chief executive officer, must have pushed it to its limit.

Taylor, in conceding that he had wanted a-b to pay Labatt a licensing fee, stated, ‘I think when people steal things they should be accountable and, yes, I did want to be paid for my process. And my trade marks…

‘I’m sure the man in the street does not believe that Anheuser-Busch tells lies, steals, cheats. The fact of the matter is they have demonstrated that’s exactly what they have done.’

While the court proceedings in the u.s. will not have an effect on the Canadian case, the Molson defense would gain ammunition for their cause by reviewing the trial testimony of Labatt executives.

During questioning, Hugo Powell, Labatt Breweries president, tried to persuade the court that there is only one ice beer product, Labatt Ice Beer.

Powell said the ‘ice beer category’ refers to a single product, unlike other beer categories, such as dry and light, which refer to a number of similar products.

The ice-beer category is a ‘category of one,’ insisted Powell.

But a-b’s lawyers argued Labatt adopted that stance only after competing breweries began coming out with ice beers of their own.

And Powell was forced to admit that at the time of the Labatt Ice Beer launch, before the ice wars heated up, Labatt referred to the ice beer category in a more traditional manner.

In a press release issued March 25, 1993 about the time of the Labatt Ice Beer product launch, Labatt claims to have created a ‘new market segment’ with what it describes, not as the world’s only ice beer, but as the world’s ‘first ice beer.’

It was also discovered during Powell’s testimony that he was able to secure $26 million in product research development funds from the Labatt board of directors without revealing details of the product or supplying reasons for the secrecy, until March 24, 1993, the day before the launch.

Meanwhile, product details had been a matter of public record since Dec., 1992. That was when the Trademark Alert publication of the u.s. Patent and Trademark Office published information on Labatt’s Nov. 4, 1992 trade mark application for Labatt Ice Beer.

During cross examination of Powell, lawyers from a-b suggested the product under development was kept secret from the board, not because of the fear of information leaks, but because he feared board members might balk at his plans.

a-b’s lawyer Peter Moll said Powell was worried board members would say: ‘Wait a minute. We’re going to spend $26 million because somebody thinks we’re going to have exclusive rights to the term ice beer?’

On the subject of false and misleading advertising, Stephen Hauser, senior product manager for Labatt U.S.A., testified that, contrary to advertising claims: ice crystals are not gently removed during brewing; Labatt’s ice brewing process was not 10 years in development; and while copy said the process was patented it was not at the time the u.s. campaign launched.

Labatt subsequently acquired a patent on its brewing process in the u.s., but its application to trade mark the terms ice beer and ice brewed was denied.

The company has submitted patent applications in over 80 countries, including Canada, where it has also applied for a trade mark for Ice Beer.

The second u.s. trial is expected to begin late this year in Detroit. Labatt has brought action against both Molson Breweries and Miller Brewing for infringement on its patented brewing process.

Curiously, although Labatt does not have trademarks for the terms ‘ice beer,’ ‘ice brewed,’ ‘ice’ and ‘ice brewing,’ it is still suing Molson for trademark infringement over Molson’s use of those terms.

The St. Louis decision, if unchanged by Labatt’s appeal, could have some bearing on the Detroit case.

The Toronto trial is anticipated to begin this fall.

In Canada where Labatt does not have a patent on its ice brewing process, it is claiming the term ice brewed identifies beer made by Labatt; that Molson’s ice brands are conventionally brewed; that Molson is, therefore, directing public attention to its wares in a manner that causes confusion with Labatt’s wares; and that Molson is making false and misleading representations.

Molson, which announced its ice beer brand two days earlier than Labatt in March 1993, has countered with a claim that Labatt’s advertising is false and misleading and that the advertising statements attempt to discredit the business and products of Molson.