Big Trademark Verdict for Stone Brewing Upheld and Craft Breweries Rejoice: Lessons to Be Learned?

The Ninth Circuit recently upheld a whopping $56 million jury award in a non-published opinion. Stone Brewing Co., LLC v. Molson Coors Beverage Co. USA LLC, No. 23-3142 (9th Cir. Dec. 30, 2024). This verdict might raise some eyebrows, especially considering the jury's decision that a beer drinker could confuse Keystone – a mass-market "corporate beer" – with Stone – a specialty craft beer. The Ninth Circuit's summary handling of such a significant verdict is also surprising. Are there lessons here for counsel dealing with a trademark case? Let’s see.

The Facts: First, let's dive into the facts as found by the jury and briefly related by the Ninth Circuit. Stone Brewing, a California craft beer company, has been making a variety of products under the Stone name since it applied to register its mark on April 4, 1996. Fast forward to 2017, Molson Coors launched its "Own the Stone" campaign to promote Keystone beer. Previously, Molson Coors had only referred to the beer as "Keystone" and used "Stones" to refer to the number of beers in a case ("30 stones") or as a catchphrase, like "Hold my Stones."

The jury found a likelihood of confusion and awarded $56 million in damages.

Interest and Likelihood of Confusion: The crux of a trademark claim is proving a protectable interest and a likelihood of confusion. There's a likelihood of confusion if a reasonably prudent marketplace customer is likely to be confused about the origin of the good or service bearing one of the marks.

Stone's registered trademark and its use provided a protectable interest, which the Court quickly acknowledged. Stone presented "some evidence" of actual confusion among distributors and customers who thought Keystone Light was sold by Stone Brewing. They also provided survey evidence showing that Keystone's packaging caused confusion about the beer's origin. The jury believed the marks were similar because Molson Coors de-emphasized "Keystone" and highlighted "Stone" in its new packaging in 2017.

The Court noted that both products competed in the "beer space," were sold in grocery aisles, and both companies registered or sought to register the marks at the Trademark Office in the same category: "beers and ales." Beer is relatively inexpensive, so consumers likely don't use the same level of care in distinguishing products as they might for more expensive items. While the per-unit price of the products differs (Stone is more expensive), the prices are still similar.

Beer Drinkers Likely to Wonder About All This: The jury's conclusion might surprise beer drinkers. Stone was a pioneer in the West Coast craft beer revolution, while Keystone is the kind of mass-produced beer that craft beer enthusiasts often criticize. In fact, most of the emphasis in the case was on Keystone light. Many craft beer lovers doubt light beer is even real beer. Keystone drinkers likely choose that brand for its low price.

The jury's finding that these beers could be confused is lesson number one: the only thing that counts is what the jury decides the facts are. Whatever a knowledgeable craft beer fan might think doesn't matter.

Predicting the outcome of a trademark case amounts to trying to guess what six people (and maybe an alternate or two) you've never met will decide happened. Very few lawyers are actually that clairvoyant.

Not Dilution – Reverse Confusion: The Court dismissed the argument that Stone's studies only supported a theory of trademark dilution. Trademark dilution occurs when a famous trademark's distinctiveness is weakened by unauthorized use, even without causing consumer confusion.

The Court found that Stone's point was that customers were confused about the origin of Keystone, transferring Keystone's negative attributes to Stone. This is a matter of reverse confusion, which occurs when a larger, more powerful company uses a trademark similar to that of a smaller, lesser-known company, causing consumers to mistakenly believe the smaller company's products are associated with the larger company. That is a basis for trademark infringement liability.

Surveys: Surveys are often critical in trademark cases. The Court found Stone had surveys sufficient to convince the jury of a likelihood of confusion. Molson Coors undoubtedly had surveys showing otherwise, but the important thing is which ones the jury believed.

Molson Coors argued the surveys were flawed because they emphasized images of Keystone Light featuring the word "Stone" by itself, calling the images altered. The Court noted that some ads featured the images of the can as shown in the survey. The lesson here: factual arguments about the fairness of the survey may simply be left to the jury. While some courts focus heavily on survey methodology, not all do.

Expert Testimony: One of Stone's experts presented his "brain node" theory of consumer habits. Although the case doesn't describe this theory further, it sounds suspect. Still, it was presented in a peer-reviewed textbook, favoring its admissibility, so the jury was allowed to consider it. Again, it was up to the jury to decide what to do with it.

Damages: Stone presented past lost profits of $32.7 million, future profits of $141.4 million, and corrective advertising costs of $41.8 million. The jury awarded $56 million, indicating they must have awarded something for future profits and corrective advertising.

The Court rejected the argument that future lost profits are speculative, finding expert testimony to that effect was presented, and the jury could rely on it. Finally, it rejected the idea that the law imposes any cap on corrective advertising damages.

Rejecting a Challenge in Under 8 Double-Spaced Pages: There have been some large trademark verdicts, but not that many. This is one of the larger ones in recent years. However, the Court didn't waste much ink upholding it. The decision occupies only eight double-spaced pages.

This suggests the Court found the case relatively routine, despite the large verdict. The court admitted admissible evidence, the jury considered it, and the verdict was rendered. End of story.

Some – or maybe almost all -- knowledgeable beer drinkers will find it hard to believe there could be enough confusion between a run-of-the-mill, inexpensive mass-produced beer and one of the early, iconic West Coast craft beers to justify a multi-million dollar verdict. But that's what the jury decided happened. So, for purposes of damages, that's what happened.

The Lessons: We will never know exactly why the jury decided what it did. I am confident that the defendant here put on a competent defense. The legal issues it raised may have even carried the day in some courts. 

But they didn’t in this case. 

The overall lesson, then, is that when predicting the outcome of a trademark case, you must respect the unknowable and the risk that entails.