Petaluma’s Lagunitas brewery backs away from trademark lawsuit against Sierra Nevada

Petaluma-based Lagunitas Brewing Co. sued rival Sierra Nevada Brewing Co. over alleged trademark infringement on its new Hop Hunter IPA label, but then quickly backed away late Tuesday from a legal battle between two of the nation's biggest craft brewers in an industry noted more for its collegiality than for litigation.

In a suit filed Monday in U.S. District Court, Lagunitas owner Tony Magee argued Sierra Nevada's design for its Hop Hunter India Pale Ale — which features 'IPA' in large, bold, black capital letters — is too similar to the design for his Lagunitas IPA label.

But late Tuesday night, a series of tweets posted on Magee's Twitter account said the suit would be dropped Wednesday morning.

'Today was in the hands of the ultimate court; The Court of Public Opinion and in it I got an answer to my Question; Our IPA's TM (trademark) has limits,' according to a tweet posted to Magee's account.

'Today I was seriously schooled & I heard you well,' another tweet declared.

Magee founded Lagunitas in 1993 and is heavily involved in every aspect of the business, including designing all Lagunitas labels and packaging on his laptop computer. He also is known for his counter-culture persona with a Twitter feed that is more stream of consciousness, complete with misspellings, than corporate speak, and a penchant for throwing barbs at others in the beer industry.

In an interview before the decision to drop the lawsuit was announced, Magee was filled more with sadness than bravado.

'This is one of the worst things ever,' he said. 'Sierra is a great brand. They were one of the inspirations for my brand.'

The suit came as each brewery is engaged in a massive expansion to increase its national distribution. The craft market grew by 18 percent during the first six months of 2014, with Lagunitas opening a second plant in Chicago and Sierra Nevada opening a brewery near Asheville, N.C.

Sierra Nevada is the second-largest craft brewer in the United States, while Lagunitas is No. 5.

Lagunitas alleged that the Hop Hunter 'IPA' lettering is a 'radical departure' from Sierra Nevada's traditional design, which features much smaller text that is typically preceded by a descriptive term, such as 'Fresh Hop,' 'Extra,' or 'Rye.' The 'Hop Hunter' lettering is in a much smaller font that is overlayed on the IPA lettering. IPA is an acronym for India Pale Ale, a hoppy beer that has come to dominate the Northern California market while making major inroads across the country and also internationally.

Distributors have already contacted Lagunitas, according to the suit, expressing their concern over confusion in the marketplace between the two brands.

Lagunitas also is worried the confusion could lead consumers to think it is entering into a collaboration with Sierra Nevada. Sierra Nevada has led the craft industry in collaborations with other breweries, most recently in its 'Beer Camp Across America' promotion last summer. Bottled beers were released amid a seven-city beer festival tour to promote the opening of Sierra Nevada's North Carolina facility. The collaborators included Santa Rosa's Russian River Brewing Co.

Magee has been an ardent opponent against craft-beer collaborations because he contends it could devalue his brand.

'I think that collaborations can lead to confusion,' Magee said.

The suit raised a similar issue. 'Particularly given this reputation for collaboration with other brewers, and based on the obvious similarities to the Lagunitas 'IPA' Family of Trademarks, there exists a great likelihood that consumers mistakenly will believe that the 'Hop Hunter IPA' is a collaboration with Lagunitas, and thereby, sponsored or approved by Lagunitas,' the suit reads.

Lagunitas filed four claims in its suit: federal trademark infringement; common law trademark infringement; unfair business practices; and unjust enrichment.

Sierra Nevada dismissed any notion that Hop Hunter could create customer confusion between Lagunitas IPA. 'We intend to vigorously dispute that any consumer could possibly confuse our Hop Hunter packaging with anything that Lagunitas has,' said Hunter Sasser, marketing manager.

Sasser also said that Hop Hunter is scheduled to be released 'in the very near future.'

In a Dec. 11 letter to Lagunitas, Sierra Nevada attorney Jorge Arciniega wrote that 'even at a cursory glance, whether up close or from afar, the two labels are starkly different.'

Arciniega further went into detail in a critique akin to an exacting graphic-design artist. He said Lagunitas' claim that it had unique spacing between the letters 'P' and 'A' is not true and 'is insufficient to serve as a brand identifier.' Arciniega also took aim at the charge by Lagunitas that elimination of periods in 'IPA' made it unique, noting that a number of other IPAs do not have periods.

Lagunitas faced long odds in its lawsuit, said Brendan M. Palfreyman, an associate attorney with Harris Beach LLC in Syracuse, N.Y., who specializes in intellectual property and represents craft brewers.

'My initial reaction is that Lagunitas is going to have a tough time proving trademark infringement here,' Palfreyman said.

He added that design cases are less clear cut in trademark infringement cases than disputes where one company has named its product the same as another already in the marketplace. For example, in 1997 a federal jury found that E&J Gallo's Turning Leaf label did not infringe on Kendall-Jackson's Vintner Reserve label just because it had a similar grape leaf design on its bottle.

And in the craft beer industry, the notion of filing lawsuits to settle disputes is anathema to many loyal consumers who adhere to the ethos that their industry — which represents 9 percent of the U.S. beer market — is more collegial and different than the big corporate players such as Budweiser, Miller and Coors that dominate the market. Their thinking is that such disputes should be settled with handshakes over beers rather than depositions in legal offices.

For instance, when Russian River and Avery Brewing Co. of Boulder, Colo., both had their Salvation brand in the marketplace, they decided to brew a collaboration beer in 2006 rather than duke it out with lawyers.

Magee stressed that he didn't want to go to court and had a conversation with Sierra Nevada founder and CEO Ken Grossman to try to resolve the dispute while at the same time sending a cease-and-desist letter.

'We tried to talk to Sierra about it and were rebuffed. The legal process is total last resort,' he said.

But trademark disputes are likely to become more common, especially as the number of craft breweries in the county has topped more than 3,000, according to the Brewer's Association, a trade group for the craft industry.

Magee himself has been at the center of such disputes before. In 2013, Lagunitas dropped any future use of the term '420,' slang for marijuana, on its label after Sweetwater Brewing Co. of Atlanta noted it had a pale ale on the market with the same name.

A year earlier, Magee was successful in getting Knee Deep Brewing Co. in Placer County to drop the label design of its IPA beer because it resembled Lagunitas. Knee Deep disputed the claim and changed the design and the name to 'Batch 138' after Magee agreed to pay the cost of the change.