Anheuser-Busch, Inc. v. John Labatt Ltd.

• Decision Date: 12 August 1996
• Docket Number: 95-2879,INC,ANHEUSER-BUSC,Nos. 95-2877,s. 95-2877
• Citation: 89 F.3d 1339
• Parties: , Appellee, v. JOHN LABATT LIMITED; Labatt Brewing Company Limited; Labatt's USA, Inc.; Labatt Importers, Inc., Appellants. Anheuser-Busch, Inc., Appellant, v. John Labatt Limited; Labatt Brewing Company Limited; Labatt's USA, Inc.; Labatt Importers, Inc., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1339

89 F.3d 1339

39 U.S.P.Q.2d 1347

ANHEUSER-BUSCH, INC., Appellee, v. JOHN LABATT LIMITED; Labatt Brewing Company Limited;

Labatt's USA, Inc.; Labatt Importers, Inc., Appellants.

Anheuser-Busch, Inc., Appellant, v. John Labatt Limited; Labatt Brewing Company Limited;

Labatt's USA, Inc.; Labatt Importers, Inc., Appellees.

Nos. 95-2877, 95-2879.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 10, 1996.

Decided July 8, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied Aug. 12, 1996.

Bryon L. Gregory, Chicago, IL, argued (Steven H. Hoeft and Barry A. Short, on the brief), for appellant.

Peter E. Moll, Washington, DC, argued (Joel M. Freed, Edwin H. Wheeler, Richard W. Renner, Frank N. Gundlach and Jordan B. Cherrick, on the brief), for appellee.

Before RICHARD S. ARNOLD, Chief Judge, BOWMAN, Circuit Judge, and JONES, ^* District Judge.

BOWMAN, Circuit Judge.

John Labatt Limited and its associated companies (Labatt) are brewers and distributors of beer, including Labatt Ice Beer, in Canada and the United States. Anheuser-Busch (A-B), headquartered in St. Louis, also brews and distributes beer, including an ice beer of its own. The principal issue in this appeal is whether terms such as "ice beer" and "ice brewed" are trademarks owned by Labatt. A jury decided that the "ice" terms at issue in this case are not trademarks owned by Labatt. We affirm, modifying the judgment entered on the jury's verdict to include the declaratory relief to which A-B is entitled.

I.

The factual summary that follows reflects the record in the light most favorable to the jury's verdict. In 1993, consumers in Canada and the United States had their first opportunity to purchase beers with names such as "Ice Beer" or "Ice Draft." Until 1993 no beer marketed in either Canada or the United States had the term "ice" in its name. In March 1993 Molson, a Canadian brewing company, announced that it would market a new beer in Canada by the name of Molson Canadian Ice. Days later Labatt began marketing a beer in Canada called Labatt Ice. Labatt Ice was initially successful in Canada. Labatt then decided that it wanted to market Labatt Ice in the United States through a United States brewing company, and Labatt contacted A-B to negotiate a licensing agreement for its new product. During the course of the negotiations, Labatt disclosed marketing research on its new product as well as details about its ice brewing process. A-B and Labatt entered into two agreements regarding the confidentiality and future use of the information that Labatt disclosed.

In mid-June 1993, Labatt President Hugo Powell attended a meeting at which A-B's Thomas Sharbaugh explained that A-B was considering either licensing Labatt's brewing process or developing its own ice-brewing process. On numerous occasions between June and August, A-B officials informed Powell that A-B was attempting to develop its own ice-beer process. A-B proceeded along both paths until late July when it produced a prototype beer from its own brewing process.

On August 4, 1993, A-B informed Labatt that it would market its own ice beer. The final decision was motivated in part by the unavailability of the equipment required to duplicate Labatt's patented brewing process in A-B's breweries. Such equipment may not have been available for six months to a full year. By brewing its own ice beer in a process substantially different from Labatt's brewing process, A-B could market an ice beer within a matter of months. In August 1993, Molson Ice became available in the United States. A-B began selling Ice Draft from Budweiser in the United States in October 1993. Shortly thereafter Labatt started to market Labatt Ice Beer in the United States.

On November 30, 1993, Labatt sent a letter to A-B in which Labatt accused A-B of infringing Labatt trademarks by using terms such as ice, ice brewing, ice brewed, and ice beer. In response to Labatt's letter, A-B filed a complaint in the District Court alleging that Labatt was attempting to trademark the ice terms, which A-B contends are generic. In Count I of its amended complaint, A-B sought a declaratory judgment that Labatt had no protected rights in the ice terms, and that A-B had not "infringed or unfairly competed, by false advertising or otherwise, with respect to any such rights." Amended Complaint at 6. A-B also alleged that Labatt was engaging in a false advertising campaign in violation of the Lanham Act, 15 U.S.C. § 1125(a) (1994) (Count II), and publishing injurious falsehoods in violation of Missouri common law (Count III). A-B sought both injunctive relief and damages.

Labatt answered A-B's amended complaint and filed a counterclaim. Labatt's second amended counterclaim included eight counts: (I) false designation of origin in violation of § 43(a)(1) of the Lanham Act, 15 U.S.C. § 1125(a)(1); (II) false advertising in violation of § 43(a)(2) of the Lanham Act, 15 U.S.C. § 1125(a)(2); (III) unfair competition in violation of § 44(b) and (h) of the Lanham Act, 15 U.S.C. § 1126(b), (h), and the Convention for the Protection of Industrial Property, June 2, 1934, art. 10 bis, 53 Stat. 1748, 1780 (Paris Convention); (IV) tortious interference with business expectancy; (V) injurious falsehood; (VI) common-law unfair competition; (VII) dilution of trademarks in violation of Mo.Rev.Stat. § 417.061 (1994); and (VIII) breach of the March 30, 1993 confidentiality agreement between Labatt and A-B. Labatt sought injunctive relief, an accounting of profits, damages, punitive damages, and costs and attorney fees.

After a nineteen-day trial, the jury found that the ice terms are not trademarks (A-B Count I) and that Labatt had not proven any infringement of trademarks (Labatt Count I). The jury also found in favor of A-B on all of the remaining counts in Labatt's counterclaim that the court had submitted to the jury: false advertising (Count II), common-law unfair competition (Count VI), injurious falsehood (Count V), tortious interference (Counts IV), and breach of contract (Count VIII). The jury found in favor of Labatt on A-B's false advertising claim (A-B Count II) but in A-B's favor on its injurious falsehood claim (A-B Count III), awarding compensatory damages in the amount of one dollar and punitive damages in the amount of five million dollars. A flurry of post-trial motions followed the jury's verdicts.

Labatt's motions for a new trial and for judgment as a matter of law were denied by the District Court. Labatt also moved for judgment as a matter of law on Count III of Labatt's counterclaim (unfair competition in violation of the Lanham Act and the Paris Convention) because the District Court had refused to submit Count III to the jury. The District Court denied the motion. At the same time, the District Court entered judgment in favor of A-B on Labatt's state-law dilution claim (Count VII). On Labatt's motion, the District Court set aside the jury's award of punitive damages. The court held that A-B failed to give adequate notice that it sought punitive damages and failed to allege facts in its amended complaint that would support an award of punitive damages. Thus the result of the nineteen-day battle between these beer-garden goliaths is this: Labatt has no trademarks in the ice terms, and A-B recovered, in addition to its costs, one dollar (with interest accruing at a rate of 7.03% per annum) for Labatt's publication of injurious falsehoods. As noted above, both sides appeal the judgment.

II.

Labatt has raised a plethora of substantive issues on appeal, seeking either judgment as a matter of law or a new trial. We review the District Court's denial of motions for judgment as a matter of law de novo but its denial of new trial motions only for an abuse of discretion. Butler v. French, 83 F.3d 942, 943, 944 (8th Cir.1996).

Labatt also has raised one procedural issue, which we will dispose of before considering the substantive issues. Labatt contends that the District Court erred when it refused to grant Labatt's motion to set the order of proof at trial and to realign the parties. Labatt argues that it should have been allowed to present its case first, as the plaintiff, because it carried the burden of proof in the trademark action (A-B Count I) even though A-B initiated this lawsuit as a declaratory judgment action. A district court has wide discretion to set the order of proof at trial. Skogen v. Dow Chemical Co., 375 F.2d 692, 704, 706 (8th Cir.1967). Ordinarily, the trial court extends the privilege of opening and closing the case to the party that has the burden of proof. Martin v. Chesebrough-Pond's, Inc., 614 F.2d 498, 501 (5th Cir.1980) (per curiam). While Labatt bore the burden of proof on the trademark count in A-B's complaint, A-B bore the burden of proof on the other two counts. Moreover, A-B was required to prove that Labatt did not have any protected interest in the ice terms, which is the essence of the trademark count, in order to prevail on Counts II and III of its complaint. In the circumstances of this case, we do not believe that the District Court abused its discretion by denying Labatt's motion to set the order of proof and realign the parties. Both Labatt and A-B bore the burden of proof on distinct counts of their causes of action. The District Court understandably chose to allow the actual plaintiff, the party that filed the lawsuit, to proceed first.

A. Trademark Issues

The principal issue in this appeal is whether terms such as ice beer and ice brewed are trademarks owned by Labatt. The jury found that the ice terms are not trademarks. On appeal, Labatt argues that the District Court abused its discretion by (1) admitting irrelevant evidence and (2) improperly instructing the jury on the burden of proof. Labatt contends that, but for these errors, there is insufficient evidence to support the jury's verdict and thus the District Court should have granted either Labatt's motion for...