June 24, 2021 – Historically, most trademark offices, including the U.S. Trademark Office, have divided alcoholic beverages between “beers” and “alcoholic beverages except beer.” The explosive growth of the hard seltzer market, which features brand expansions from both well-known beer brands and well-known distilled spirits brands, has effervescently bridged the gap between these two popular libation types. Accordingly, alcoholic beverage brand owners and their counselors are reevaluating their brand management strategies from clearance to enforcement to adapt to the sparkling drink du jour.
Unlike patent and copyright law, trademark law is derived primarily from consumer protection law, not property law. Brand management attorneys are constantly evaluating two trademark questions. First, is a word or term unique enough that it can serve as a source indicator for a good or service? Second, if a word or term is capable of being a source indicator for a good or service, is it available or is it taken?
For both the first and second question, the key data points are (1) the proposed word or term and (2) the good or service. Different combinations of words/terms and goods/services create different “absolute” and “relative” outcomes. For example, two companies could use an identical term for unrelated goods (think Delta Airlines and Delta Faucets). But because trademark law is a derivative of consumer protection law, the boundaries of a trademark are often fuzzier than the boundaries of a copyright or patent. Marks are compared based on similarity, not identity. And goods and services are compared based on relatedness, not identity.
Under the federal Lanham Act, the U.S. Trademark Office is permitted to establish a classification system to group generally similar goods and services into classes “for convenience of Patent and Trademark Office administration.” Since 1973, the Office has used Nice Classification, an international classification system created and administered by the World Intellectual Property Organization.
International Class 32 has the short heading “light beverages” and includes soft drinks, fruit juices, isotonic beverages, and energy drinks, but also beer. International Class 33 has the short heading “wines and spirits” and includes, in addition to wines and spirits, alcoholic beverages like alcoholic malt coolers, prepared alcoholic cocktails, and hard cider.
According to WIPO, when Nice Classification was created in 1963, “beers were included in Class 32 because they were often commercialized by the same companies that produced and/or sold soft drinks. They were also considered as an alternative to soft drinks.” Of note, “[s]ubsequent proposals aimed at transferring beers from Class 32 to Class 33 have always been rejected by the Committee of Experts of the Nice Union.” It seemed, therefore, manifest destiny that hard seltzer was assigned to Class 33, even if hard seltzer had more in common with beer than wine or distilled spirits.
Although the classification system serves a critical administrative purpose for the U.S. Trademark Office — it is used to calculate the fees an applicant or registrant owes the Office — the Lanham Act cautions that the Office may not use the classification system “to limit or extend [an] applicant’s or registrant’s rights.” Accordingly, classification is not intended to have any role in evaluating whether an applied-for trademark is available vis-a-vis prior rights.
As a result, it would seem that the delineation of beer into Class 32 and all other alcoholic beverages (including hard seltzer) into Class 33 is illusory, especially in light of beer’s Class 32 status being an anachronism. But, in practice, there are still many brand-management processes that rely on classification.
The first step in the brand management lifecycle is selecting and clearing a trademark. Seasoned practitioners cast a wide net when evaluating the availability of a potential trademark to ensure that similar marks for related goods and services are considered, not just identical marks for identical goods or services. For example, clearing a band name for live concerts (an entertainment service) requires searching for identical or similar marks used or registered for recorded music (a good). But many databases use classes for searching. So, for alcoholic beverages, it is critical to evaluate at least both Classes 32 and 33.
Another critical step in the brand management lifecycle is policing a trademark. Like clearance, many seasoned practitioners cast a wide net when evaluating potential infringements, especially when determining whether to oppose a third party’s application to register a particular mark. Many of the trademark search vendors also provide published trademark application notification subscriptions and ask for brand owners to list the classes to be watched. For brand owners that were only watching Class 32 or 33, it is worth the extra cost to watch both classes.
Finally, trademarks may often be the subject of a license agreement, coexistence agreement, settlement agreement, or even an injunction. For convenience, trademark lawyers and judges sometimes reference trademark classes, rather than specific goods, to either create privileges (for example, Party A is permitted to use the licensed mark in connection with Class 5 goods) or restrictions (for example, Party Y shall not use the licensed mark in connection with Class 10 goods).
References solely to classes can have unintended consequences when new, unanticipated product categories pop up. Accordingly, alcoholic brand owners would be wise to audit their agreements and court orders to determine whether amendments or modifications are needed to address trends in alcoholic beverages.
The use of classifications in agreements and injunctions can be especially challenging when products qualify for registration in multiple classes. Refusing to be confined to just one class, White Claw’s brand owner, Mark Anthony Brands, disrupted conventional trademark registration practice by simultaneously registering its White Claw® trademark for hard seltzer in Class 33 and “brewed sugar-based beer” in Class 32.
While brewed sugar-based beer may only apply to a subset of all hard seltzers, it applies to enough of them that dozens of applicants have followed suit filing applications in both classes for a single product. It will be interesting to see whether the U.S. Trademark Office continues to allow brand owners to register one product in both classes and whether such registrations will be maintainable and enforceable in both classes over time.
The nebulous nature of whether hard seltzer is a sugary beer (in Class 32), a spritzy cocktail (in Class 33), or possibly both has been put under a microscope by the Southern District of New York. Under a perpetual license to use the Corona® brand for beer in the U.S., a licensee launched Corona-brand hard seltzer. The brand owner/licensor filed suit against the licensee, alleging that hard seltzer was outside the scope of the license.
The licensee responded, arguing that hard seltzer is a subset of beer and that a trademark license for branded beer, though silent on the topic, is tantamount to a license to sell hard seltzer under the same name if that hard seltzer can conceivably be considered a brewed sugar-based beer.
While the litigation is ongoing and will certainly have implications with respect to alcoholic-beverage trademarks, it is also an important reminder that branding is in a constant state of growth. Each year, there are new categories of unexpectedly proliferating products, such as face masks in 2020. Brand owners must have an eye to the future when selecting marks, protecting marks, enforcing marks, and licensing marks.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters.