TED Case Studies

Who Owns The Name Budweiser?

I. Identification

1. The Issue

This issue involves United States of America and the Czech Republic. For past hundred years, an international legal dispute continued between the American brewer Anheuser-Busch and the Czech beer producer Budejovicky Budvar over the right to use the trademark name Budweiser on their products. Currently, both of the brewers produce beer beverage labeled Budweiser, and battle over who does have the legal right to the commercial use of this name. Both the brews have a long history of existence. The disagreements over the right to use the trademark started in late 1870s, when the brewers began to export their like-named products to markets beyond their national borders. Attempting to legally win the exclusive right to the trademark use, the dispute has been taken to courts in different countries. The results so far did not provide either party the exclusive right to the name, but rather resulted in the division of market.

2.Description

The American and the Czech beer companies both claim to have the right to the name Budweiser. Currently, there are two different beer brands both named Budweiser being brewed by different producers, and such situation is a source of obvious disagreements. At the begining, the reasoning behind the dispute was that two beer beverages of similar type with the same name would be a source of confusion in the markets that both the brewers wished to target, and therefore only one should have the right to use it. Later, each of them, of course, believing in authenticity and better quality of its own product, expressed the "fear" of one party taking advantage of the other one's prestige. Lastly, since neither one managed to win the exclusive right to the use of name in general, respective law suits were filed in respective countries, markets of which were of interest to the brewers. The rulings differ, and each of the parties were able to gain trademark rights in only some cases – thus the dispute did not win them exclusive rights, but led to the division of market.

Anheuser-Busch was founded by German immigrants, the American brewers say. Adolphus Busch (a German-born American beer brewer) adopted the name Budweiser in 1876. He is said to had thought it was a great idea to give the beer distinct and evocative name --Budweiser - that reminded him of his old country which already was well-known for its high quality beer products, and was also to be brewed in the same style the Czech/German lager-style beers were.5.

The (then Czechoslovak) company named Budejovicky Budvar was founded in the town of Ceske Budejovice in 1895. The beer, however has been brewed in Budejovice ever since the 14th century. The disputed "Budeweiser" name is an adjective originating from the German name of the Czech town Ceske Budejovice – Budweis- where the beer was born in the Middle Ages and thus describing the origin of the brew. Budweiser means the beer of the Budweis region, same as Champaign in France describes the wine of the Champaign wineries. Logically then, the Czechs claim to have the right to the name from long before the Americans even started the beer brewing.6.

The Czech brewer wished to start exporting its then already existing Budvar into the markets beyond those of the Old Continent but found out another Budweiser existed. Since Anheuser-Busch has already had the trademark registered in the United States, Budvar was temporarily sold in the US under a different name - Crystal. Similarly, the American brewer, also interested in expanding its market, but now aware of the other Budweiser's existence [and due to the disputes] would use the name -Bud –abroad to get around the issue. The disagreement, however, grew larger and later included also the right to the variations of the name Budweiser which includes the name Bud (which is, now , already produced by both brewers). Teoretically, the two companies were to honor agreements about avoiding the market dominated by the other party, but they have eventually engaged in a legal dispute over who should have the right to use the trademark.

Legal Cases

As an outcome of the above described events, a number of lawsuits were filed by Anheuser -Bush in order to restrict or ban the sale of Budvar. Later Budejovicky Budvar also engaged in the legal law suits, and and some sort of legal action was employed by one or the other party in several different countries. Although Anheuser-Busch still holds unchallenged rights to the Budweiser name in most of the world, including North and South America and virtually all of Asia.7, some of the decisions ruling in favor of the Czech brewer were upheld. Following are several examples for illustration:

3. Related Cases

Following is a list of links to case studies that relate to the Intellectual Property Rights or Czech Republic. These student projects are a part of the Trade and Environment Database© (TED)managed by Professor James Lee of American University, in Washington,DC. TED is a unique inventory for cases of trade and environment. From these cases, TED is also a point of context for research and discussion of trade and environment topics.9.
  1. TEMELIN: Temelin Nuclear Plant in Czech Republic
  2. FETA : Intellectual Property Rights of Feta Cheese
  3. BANANA2: US-EU Banana Dispute
  4. BASMATI: Basmati Rice Dispute
  5. MEXBREW: Mexico-US Beer Dispute
  6. PISCO: Pisco Liquer and Chile
  7. GERMBEER: German Beer Laws
  8. ONTARIO: Ontario Beer Cans
  9. BEERCAN:Canada Beer Cans
  10. DANISH:Danish Beer Bottle
  11. RUM:Rum and Trade
  12. SCOTCH:Who Owns a name?
  13. CHOCOLAT:Chocolate Substititues
  14. GUATCOFF: Guatemala Coffe, Health and the Environment

Keywords:

4. Draft Author:

Blanka Homolova

Project Posting: May 8, 2000

II. Legal Clusters

5. Discourse and Status: Dispute and Allegation

Both American beer producer Anheuser Busch and Czech beer brewer Budejovicky Budvar have been producing beer beverages labeled Budweiser® and Bud® and thus been caught in a legal battle over the trademark ownership. Attempting to access new markets, a number of law suites have been filed in different countries. Some settlements have been made leading to the division of market.

6. Forum and Scope: WTO and Multilateral (potential)

The dispute that has lasted decades had taken many turns ranging from breaking of the no-competition agreement changing to aggressive marketing policies, passing through temporary proposals for common economic engagement or partnership, finally leading to Anheuser-Busch initiative aimed on attempts to prevent the export and sale of the Budvar in specific [mostly European] markets.

Ever since the 1989, Anheuser Busch has also been trying to buy out some of the stock shares of the Budvar breweries, but the Czech Government decided to get involved in the industry privatization process. Later, Anheuser-Busch had proposed to purchase the Bud trademark [which had been used by both brewers as an alternative in the other countries to get around the issue of trademark ownership] from Budvar, but the Czech Ministry ceased negotiations on charges of Anheuser-Busch's bullying marketing tactics in the United States. Due to the refusal of the Czech Ministry to go through with the Bud deal, Anheuser-Busch slowly halted its hops purchases (from the Czechs), and beer analysts say that was a hardball tactic to make the Czechs give in (Mortkowitz). Anheuser-Busch offered to buy more hops in exchange for the Bud trademark.

Both the brews have their own international standing, and therefore it is unlikely that either one of the 'Buds' will give up (especially when one adds the international attention this dispute has won for both the companies). History of brewing in Ceske Budejovice dates to 1265, Anheuser-Busch registered its trademark in 1876 , after the Budweiser had been brewed there, but before the particular Budvar brewery was incorporated. Budvar, however, insists on the original Budweiser to remain as a reference to the beer brewed in Budweiss (German for Ceske Budejovice) –place of its (geographical) origin. In legal terms, therefore , this dispute involves not only intellectual property, but also touches on issues of rules of origin and also labeling.

Individual decisions were made on case-to-case basis, the dispute settlements led to market division. (See DESCRIPTION)

The legal dispute between the Czech brewer Budejovicky Budvar and American beer producer Anheuser-Busch has not significantly affected the world trade relations, it has not yet been an issue of the WTO, but it had reached the international legal arena when different law suits were filed in a number of different countries. The two companies went to courts in mostly those countries where neither one of them had absolute trademark rights, filing about 45 different cases (Radio Praha).

In November 1999, the Czech officials expressed they were planning to take this dispute further, specifically to appeal to the World Trade Organization with a particular request to create rules for beer labeling protection. The Czechs had on mind creation of a rule, similar to that existing in reference to wines (Champagne, Bordeaux…etc.) that would treat labeling of beer by geographic location (e.g. when the products of French region Champagne only to be called champagnes...etc.) 3 This similar initiative, but on behalf of the beer was attempting to reduce the use of Pilsner (which ties to the famous Czech beer brewed in Plzen) and of course Budweiser (beer brewed originally in Budejovice [Budweis]) labeling on beers.

7. Legal Standing: TREATY

III. Geographic Clusters

8. Geographic Locations

a. Geographic Domain: EUROPE

b. Geographic Site: EASTERN EUROPE

c. Geographic Impact: CZECH REPUBLIC

9. Sub-National Factors: n/a

10. Type of Habitat: n/a

IV.Trade Clusters

11. Type of Measure:  INTELLECTUAL PROPERTY RIGHTS

12. Direct v. Indirect Impacts:  DIRECT

13. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: YES BEER

b. Indirectly Related to Product: NO

c. Not Related to Product: NO

d. Related to Process: YES INTELLECTUAL PROPERTY

14. Trade Product Identification: BEER

15. Economic Data

Before the War there were about 1500 different breweries, out of which about 1200 remained after the end of it. The socialist era brought about nationalization consequences of which left behind only about 70 brewers producing about 18.2 million hectoliters of beer. There are about 85 different breweries in the Czech Republic now, 88% of them are now owned privately and represent 92% of the overall national beer production. Average annual beer production in the last five years stands at 18.5 million hectoliters. Beer Exports represent about 5-7% of national production, and beer imports remain low.1 Searching for my trade data, I learned that in the early 16th century, the Czech beer industry contributed 87% to total municipal income to city coffers, and the Czech hops were being exported to Germany already in 1101 (Radio Praha). Beer, together with malt and hops, is regarded as a typical Czech product (see table 1).

TABLE 1: CZECH BEER PROFILES
IMPORTERS OF CZECH BEER FIVE BEST-KNOWN BREWERIES TOP CZECH BEER EXPORTERS TO FOREIGN MARKETS
GERMANY Plzensky Prazdroj Pilsner Urquell®
ENGLAND Smichovsky Staropramen Budweiser Budvar®
SWEDEN Gambrinus Brewery Staropramen®
AUSTRIA Pivovar Velke Popovice Radegast®
Pivovar Ceske Budejovice Gambrinus®
Data Source: http://users.vscht.cz/~starecm/history.htm

YEAR Number of Breweries Production Ownership
mid 1900s 1052 --- ---
1912 1666 --- ---
1918 1526 --- ---
1946 1260 --- ---
1989 71 18.2 mil/Hl ---
1999 85 92.7% 88.7% Private

Data Source: http://users.vscht.cz/~starecm/history.htm

16. Impact of Trade Restriction: YES

17. Industry Sector: AGRICULTURE

18. Exporters and Importers:United States and The Czech Republic

V. Environment Clusters

19. Environmental Problem Type: INTELLECTUAL PROPERTY

20. Name, Type, and Diversity of Species: N/A

21. Resource Impact and Effect: LOW AND REGULATORY

22. Urgency and Lifetime: LOW AND 1 YEAR

23. Substitutes: LIKE PRODUCTS

VI. Other Factors

24. Culture: YES

City of Ceske Budejovice It is important to consider not only historical but also cultural aspects, as they relate to the case. The Radio Prague Survey reported that Czechs are well aware of quality of their beer products which they proudly consider a part of the national heritage. Given the lower price and high quality of Czech brews, it is understandable that the Czech beer – drinkers tend to be very loyal to the domestic products, and the foreign brewers are left with only a little portion of the market shares. As for the Budvar brewer [one of major Czech beer exporters] the product and recognition are closely linked to the national identity and history.The beer refinery tradition identified with the Czech lands for centuries, and the original Budweiser comes from the name of the town of its origin in Czech Republic - Budweis (Ceske Budejovice), and it has been recognized there since approximately 1400s. Budvar, specifically is important not only to the city, but also to the country. Historically, it was due to the beer brewed in this location that won Budejovice the city recognition from the king, and it was no surprise that the brew itself was known as the Beer of Kings. Some people seem to agree with Budweiser® being a geographically -specific trademark - claim that is unacceptable to the American brewer despite the fact that Anheuser-Busch registered its trademark only about a century ago. Czech beer in general has been brewed since 10th century. The first clear g olden beer ever, named Pilsner Urquell, caused international sensation and changed forever the taste and face of beer, which until that time was dark, flat and cloudy8.

25. Trans-Boundary Issues: NO

26. Human Rights: NO

27. Relevant Literature

  1. Beaumont, Stephen. A Tale of Two Budweisers. Globe and Mail Magazine. 1994.
  2. Protz, Roger  The Ultimate Encyclopedia of Beer
  3. US Department of Commerce- National Trade data Bank: Czech Republic Trade Regulations and Standards. Tradereport
  4. Kratochvil, A. History(of Brewing in the Czech Republic).Internet Source
  5. Radio Praha The History of Beer in the Czech Lands Internet Source
  6. Journal Of Commerce. Location
  7. Budweiser Website
  8. Budejovicky BudvarWebsite
  9. Ruzicka, Roman.Snatek nebo Anexe? Ekonom vol.15/1997 pp.49 (in Czech)
  10. Real Beer Page.Location
  11. Flags courtesy of Anthems, Flags and Facts of Nations.
  12. Czech Republic Economic Information. Website
  13. Czech Republic: Business Opportunities. Publication of the Embassy and Consular Offices of the Czech Republic in the United States. April 1999. For Further Information Visit: Website

FOOTNOTES:

  1. A. Kratochvil
  2. Ruzicka, Roman. Snatek nebo Anexe? Ekonom vol.15/1997 pp.49
  3. Czechs Seek labeling Protection. Source
  4. BeerNews:English Find Two Buds Better Than One.February 2, 2000. Source
  5. Poston, John. BUD vs. BUD:Czech 'Budweiser' and St. Louis 'Budweiser' Face Off Over Game. February 2, 2000.Source
  6. Poston, John. BUD vs. BUD.Source
  7. BeerNews. Source
  8. Czech Republic: Business Opportunities. Publication of the Embassy and Consular Offices of the Czech Republic in the United States. April 1999
  9. TED Database. Main Page

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