G. Heileman Brewing Co., Inc. v. Anheuser-Busch, Inc.

• Decision Date: 26 April 1989
• Docket Number: ANHEUSER-BUSC,INC,Nos. 88-1223,88-1309 and 88-1310,s. 88-1223
• Citation: 873 F.2d 985
• Parties: , 10 U.S.P.Q.2d 1801 G. HEILEMAN BREWING COMPANY, INC., and Miller Brewing Company, Plaintiffs-Appellees, Cross-Appellants, v., Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 985

873 F.2d 985

57 USLW 2676, 10 U.S.P.Q.2d 1801

G. HEILEMAN BREWING COMPANY, INC., and Miller Brewing

Company, Plaintiffs-Appellees, Cross-Appellants, v. ANHEUSER-BUSCH, INC., Defendant-Appellant, Cross-Appellee.

Nos. 88-1223, 88-1309 and 88-1310.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 30, 1988.

Decided April 26, 1989.

Robert M. Newbury, Pattishall, McAuliffe, Newbury, Hilliard & Geraldson, Chicago, Ill., for defendant-appellant, cross-appellee.

David E. Beckwith, Foley & Lardner, Laurence C. Hammond, Jr., Quarles & Brady, Milwaukee, Wis., for plaintiffs-appellees, cross-appellants.

Before CUDAHY and KANNE, Circuit Judges, and WILL, Senior District Judge. ^*

CUDAHY, Circuit Judge.

Defendant-appellant Anheuser-Busch, Incorporated ("Busch") appeals a judgment declaring that "LA" is not a protectible trademark for a low alcohol beer introduced by Busch in 1984. The district court found that the initials LA are merely descriptive of low alcohol beer and have not acquired secondary meaning. Accordingly, the district court concluded that the use of LA (or "L.A.") by G. Heileman Brewing Company ("Heileman") and Miller Brewing Company ("Miller") on their own low alcohol beer labels does not constitute trademark infringement or unfair competition. Heileman and Miller cross-appeal the district court's denial of their requests for permanent injunctive relief and for a declaratory judgment that LA is generic. We affirm.

I.

While traveling in Australia in 1981, August A. Busch III, the president and chief executive officer of Anheuser-Busch, studied the production and marketing of low alcohol beer, a product that has experienced immense popularity in that country since its introduction in 1979. In Australia, the name "LA" has gained widespread recognition as signifying low or light alcohol beer on labels such as Tooth LA, South Australian LA, Courage LA, and Carling LA. G. Heileman Brewing Co. v. Anheuser-Busch, Inc., 676 F.Supp. 1436, 1453 (E.D.Wis.1987) ("Heileman "). After returning to the United States, Mr. Busch directed his company to commence research and development of a low alcohol beer. Internal memoranda during this early planning phase reveal that Anheuser-Busch aspired to preempt the low alcohol beer market and emulate the success enjoyed previously by Miller in capturing the low calorie beer segment with its "LITE" beer. Anheuser-Busch envisaged a new low alcohol product that would appeal to current lifestyle trends, which emphasize physical fitness and moderate drinking habits. See Answer and Counterclaim of Anheuser-Busch, No. 84 C 0738, at 3. On November 21, 1983, Busch obtained approval from the Bureau of Alcohol, Tobacco and Firearms ("BATF") for beer labels using the designation LA. At that time, BATF regulations prohibited references to reduced alcohol content on beer labels; thus, Busch could not include the terms "low alcohol" on its LA label but presumably viewed the initials LA as an effective subterfuge. ¹

In an effort to select a brand name that could become the "bar call of the 80's," Busch retained the Interbrand Corporation to develop and test potential names for its new low alcohol beer. After researching the subject, Interbrand advised Busch that using "LA" as a stand-alone brand name "would not, in all likelihood, be protectible since it clearly and obviously stands for low alcohol, and as such is clearly an abbreviation of the generic descriptor." Trial Exhibit 12. Interbrand also warned Busch that low alcohol or LA would probably be referred to as a category descriptor for all low alcohol beers, including those produced by other brewing companies, thereby presenting a significant potential for confusion. Id. Therefore, Interbrand recommended a corporate source approach employing the name "LA from Anheuser-Busch," which Busch ultimately adopted.

On January 20, 1984, Anheuser-Busch issued a press release announcing its new product and informing the industry and the public that "LA from Anheuser-Busch" was a "light alcohol product." Trial Exhibit 22. In its efforts to develop an effective marketing strategy, Busch proceeded warily in pursuit of its dual objectives: to use LA as an arbitrary or suggestive term in order to attain trademark protection and, concurrently, to describe the unique low alcohol quality of its new beer to consumers without violating regulations that proscribed the advertising of reduced alcohol content. Busch orchestrated a publicity campaign in which it tacitly encouraged public relations and advertising agencies, as well as media representatives, to describe LA to consumers as low, less or light in alcohol. ² Heileman, 676 F.Supp. at 1459. The district court found that, although Anheuser-Busch personnel equated LA with low alcohol in communications within the company and in advertising and point-of-sale materials, Busch subsequently sought to disclaim the initialism in various ways. For example, it deleted the periods from the letters; it claimed that the letters had no meaning; it modified its advertising message from "low alcohol" to "half the alcohol" and promoted the phrase "reduced alcohol" as the category descriptor for the new beer. Id. at 1458.

Meanwhile, the concept of low alcohol beer had been fermenting elsewhere in the beer industry. On March 7, 1984, the Stroh Brewery Company obtained BATF approval for two beer labels: SCHAEFER LA and OLD MILWAUKEE LA. Despite objections from Busch, Stroh then issued a press release announcing its plans to market SCHAEFER LA. Likewise, Heileman had been developing its own version of low alcohol beer since early 1982. Apprised of Busch's new LA product, of Stroh's announced plans to market SCHAEFER LA and of the BATF approval of both brewers' beer labels, Heileman announced on March 29, 1984, its plans to market low alcohol beer under labels containing its own house marks with "L.A." as a category descriptor--for example, CARLING BLACK LABEL L.A. and BLATZ L.A. Heileman, 676 F.Supp. at 1452. Miller was also on the LA campaign trail. In March of 1984, Miller began developing a low alcohol beer and sent its brand manager to Australia to study the established low alcohol beer market there. After consulting its retained advertising agency, Miller ultimately adopted "SHARP'S LA" as its brand name.

On March 16, 1984, Anheuser-Busch became the first user of the LA label in commerce by sending shipments of low alcohol beer to its wholesalers. After learning of Heileman's plans to begin using the LA label, Anheuser-Busch sent a cease and desist letter to Heileman, dated April 2, 1984, claiming exclusive trademark rights in the initials LA. Heileman responded on April 18 by filing this action to protect its right to use "L.A." with a Heileman house mark on its own low alcohol beer. ³ The following day, Heileman commenced use of the "L.A." mark in commerce. Thereafter, on June 4, 1984, Miller filed a parallel action against Busch which was eventually consolidated with Heileman's case. Busch filed counterclaims against both brewing companies alleging trademark infringement, unfair competition and trademark dilution. Meanwhile, on May 23, 1984, the United States Patent and Trademark Office had rejected Busch's applications to register "L.A." and "LA" on the ground that the initials designated "Los Angeles." Heileman, 676 F.Supp. at 1458.

In its complaint, Heileman seeks a declaratory judgment that LA is descriptive and generic and that, therefore, its use does not constitute trademark infringement or unfair competition. In addition, Heileman requests injunctive relief permanently enjoining Busch from interfering or threatening to interfere with Heileman's use of the term "LA" to denominate low alcohol beer. Miller's complaint requests similar relief. ⁴

Two months after filing its complaint, on August 13, 1984, Miller actually began employing the SHARP'S LA label on beer shipped in commerce. By the time of the consolidated trial, which commenced on September 24, Miller had been selling SHARP'S LA at retail outlets in five test markets.

Three years after the nine-day trial, on December 31, 1987, the district court issued its decision, finding that Busch had been the first or senior user of the LA mark; that the initials LA were merely descriptive as applied to low alcohol beer; that Anheuser-Busch failed to establish secondary meaning with respect to the initialism; and that the use of LA by Heileman and Miller in connection with strong house marks or brand names was not likely to cause confusion as to the source of the beer products. Accordingly, the district court entered a judgment in favor of Heileman and Miller on the trademark declaratory judgment claims, but denied Heileman and Miller any injunctive relief because the court "would not expect that Anheuser-Busch will continue to interfere with the use of the 'LA' name for low alcohol beer by Heileman and Miller." Heileman, 676 F.Supp. at 1500.

Busch has appealed from the district court's denial of its claims of trademark infringement and unfair competition. In addition, Busch claims that the district court erred in failing to dismiss Miller's complaint for lack of subject matter jurisdiction. Heileman and Miller have cross-appealed from the court's denial of their requests for a permanent injunction prohibiting Busch from continuing to interfere with their use of LA in the future and for a declaratory judgment that LA is generic.

II.

As a preliminary matter we must determine whether the district court properly exercised subject matter jurisdiction over Miller's claims. Busch asserts that Miller's complaint seeking declaratory relief did not present a ripe justiciable controversy at the time it was filed and that, therefore, the district court lacked jurisdiction over Miller's claims.

As we stated in Tempco Electric Heater Corp. v. Omega Engineering, Inc., 819 F.2d 746 (7th Cir.1987):

A declaratory judgment is available where a...