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Anstalt v. Route 66 Junkyard Brewery LLC

United States District Court, D. New Mexico

January 16, 2019

LODESTAR ANSTALT, a Liechtenstein Corporation, Plaintiff,
v.
ROUTE 66 JUNKYARD BREWERY LLC, a New Mexico Limited Liability Company, and HENRY LACKEY, an individual, Defendants.

          MEMORANDUM OPINION AND ORDER

         Plaintiff owns trademarks of the phrase Route 66 and the iconic highway shield design to make and sell beer. Defendants Route 66 Junkyard Brewery LLC (“the Brewery”) and its owner Henry Lackey also use the phrase Route 66 and a design logo to produce beer at a microbrewery in Grants, New Mexico. After unsuccessful cease-and-desist efforts, Plaintiff brought an action under the Lanham (Trademark) Act, 15 U.S.C. § 1114 against Defendants for infringement of their federally registered trademarks and against the Brewery for unfair competition under 15 U.S.C. § 1125. See Am. Compl., ECF No. 17. The parties cross-moved for summary judgment, arguing that they are entitled to judgment as a matter of law on whether Defendants willfully infringed on Plaintiff's Route 66 trademarked beer. Plaintiff additionally sought summary judgment on Defendants' affirmative defenses and an injunction to permanently enjoin Defendants from using the phrase Route 66 in connection with beer. After carefully considering the motions, briefs, evidence, and relevant law, the Court concludes that the parties' motions should be denied.

         I. BACKGROUND

         In presenting the facts taken from the parties' cross-motions for summary judgment, the Court will set forth the respective parties' version of events as supported in the record. The Court will construe the facts in the light most favorable to the non-moving party in the analysis of each party's respective motion for summary judgment.

         A. Plaintiffs Trademarks and Product Advertising

          Plaintiff owns United States Trademark Registration No. 4, 254, 249 for the word mark ROUTE 66, a standard character mark without any particular font, style, size, or color, and No. 4, 442, 767 for the following design mark:

         (Image Omitted)

         See Plaintiffs Motion for Partial Summary Judgment and Permanent Injunction, ECF No. 47 (“Pl.'s MSJ”), Undisputed Fact (“UF”), ¶ 1; Pl.'s Ex. 2, ECF No. 49-1. Both marks are for use with beer and had respective registration dates of 2012 and 2013. UF ¶ 1. Under these marks, Plaintiff manufactures and distributes an India pale ale/lager blend brewed to Plaintiffs specifications by Minhas Craft Brewery located in Wisconsin. Id. ¶ 3. Plaintiff s beers are offered as draft beer at bars in the United States and sold alongside local specialty beers. Id. ¶¶ 5-6. Where its Route 66 beer sold on draft, Plaintiff provides bars with Route 66-branded tap handles. Id. ¶ 5. Plaintiff shipped and sold its beer using its Route 66 marks in New Mexico, Kansas, Arkansas, and Missouri. Id. ¶ 8. Plaintiff currently uses a distributor, Admiral Beverage Company (“Admiral”) to sell its beer in New Mexico. Id. ¶ 9.

         Since 2012, Plaintiff has used its marks to advertise beer online throughout the United States, including New Mexico, by way of its website, YouTube channel which has garnered over 82, 000 views, and Facebook account. See Declaration of André Levy, ¶¶ 6-7; 9, ECF No. 49, (“Levy Decl.”). Since 2016, Plaintiff has also advertised images of its Route 66 beer and marks on its Instagram account where it has over 31, 000 Instagram “followers.” Id. ¶ 8. Plaintiff has also used these marks to advertise beer on billboards, radio advertisements, t-shirts, placards, in-store displays, and sponsorships. Id. ¶ 11. However, in 2014 and 2015 Plaintiff's advertising of its Route 66 beer in the United States “tailed off” because of low product sales and by 2016 and 2017 Plaintiff spent no money advertising “above the line” of its beer in in the United States. See Deposition of André Levy, 57:21-25 - 58:1-7; 59:8-25 - 60:1-23, ECF No. 52-1 (“Levy Dep.”). According to Defendants, “above the line” advertising refers to product advertising conducted by radio, television and magazine, whereas “below line” advertising refers to advertising conducted on the internet. See Defs.' Resp. Br., ¶ 2, ECF No. 52.

         B. Mr. Lackey Establishes the Brewery

         Mr. Lackey opened the Brewery in July 2016 and brewed and sold draft beer there. See UF ¶¶ 17; 12. The Brewery used the words Route 66 in connection with selling beverages. See Pl.'s Req. for Admis., Ex. 2, ECF No. 48-1. Mr. Lackey is the Brewery's president and sole owner and he decided to use the name Route 66 in connection with the Brewery. See UF ¶¶ 10-11. Mr. Lackey was unaware of Plaintiff and its Route 66 beer at the time he established the Brewery. See Affidavit of Henry Lackey, ¶ 5, ECF No. 52-1 (“Lackey Aff.”). Before opening the Brewery, Mr. Lackey did an internet search of the terms “Route 66 brewery, ” but not of the terms “Route 66 beer.” Deposition of Henry Lackey, 55:7-12, ECF No. 48-1 (“Lackey Dep.”). Nor did Mr. Lackey consult with a trademark attorney before opening his business. See UF ¶ 15. Mr. Lackey believed that Route 66 belonged in the public domain and stated that “I think that if you want to use something that's already been made popular by somebody else, then that's the risk you run that other people are going to use it, ” and that he chose to use the words Route 66 with the understanding that “someone else is going to sell Route 66 beer.” Lackey Dep. 91:5-8; 92:1-8. An internet search of the term “Route 66 beer” would have returned Plaintiff's website as the first result. See UF ¶ 14.

         After the Brewery opened, one of its best-selling beers was a pale ale that Defendants referred to as “Route 66 Junkyard Brewery Metro” on a menu. Id. ¶ 23. Defendants also referred to the pale ale as a “Route 66 Junkyard Metro” on a dry erase board. Id. Defendants used the following logo to promote their beer:

         (Image Omitted)

         Pl.'s Ex. 8, ECF No. 48-1. This logo was used on the Brewery's Facebook page, food and drink flyers, menus, and on various signs located on the Brewery's interior walls, the bar where drinks were served, and on a sign next to the Brewery's exterior doorway. See id.; Pl.'s Exs. 22 - 26, ECF No. 48-1. Defendants' logo differed from Plaintiff's Route 66 shield mark in five ways: Defendants' logo has a spigot on the side; is yellow; has bubbles within the yellow coloring; contains the word “Junkyard;” and has a different font. See Defs.' Motion for Summary Judgment on Non-Infringement, ECF No. 56 (“Defs.' MSJ”); Defs.' Resp. Br. ¶ 3(a)-(e); Pl.'s Reply Br. 1, ECF No. 54.

         In requests for admission, Defendants admitted that they used the words Route 66 to identify the Brewery and not to identify the Brewery's address as being on Route 66. See UF ¶ 28. The Brewery's physical address is 1634 B Highway 66. Id. ¶ 29. In an affidavit, though, Mr. Lackey stated that he did use the name Route 66 to describe where the Brewery was located. See Lackey Aff. ¶ 4.

         C. Plaintiff's Cease-and-Desist Efforts

         On September 21, 2016, about two months after Mr. Lackey established the Brewery, Plaintiff sent Mr. Lackey a cease-and-desist letter notifying him of Plaintiff's trademark registrations and requesting that he stop using Route 66 in connection with selling and brewing beer. See UF ¶ 24. Mr. Lackey did not respond, so on November 4, 2016 Plaintiff sent a follow-up letter. Id. Mr. Lackey replied in late November saying “Route 66 Junkyard Brewery is the name of the location and not the name of a beer that we sell. We currently have on beer that we brew and it is called Metro, … We will never sell a beer called route 66!” Pl.'s Ex. 1 (cited by Plaintiff as Ex. 28), ECF No. 48-1. Plaintiff responded to Mr. Lackey in December and reiterated its infringement claim. See UF ¶ 26.

         After receiving Plaintiff's cease-and-desist letter, Mr. Lackey researched Route 66 beer to determine whether he should comply with the letter. See Lackey Aff. ¶ 13. Mr. Lackey learned that Sierra Blanca Brewing Company in Moriarty, New Mexico sold a Route 66-branded beer. Id. ¶ 24; Lackey Dep. 24:19-25 - 25:1-20. In fact, Mr. Lackey sold Sierra Blanca's Route 66 beer at the Brewery, and he knew that Plaintiff also targeted Sierra Blanca with cease-and-desist letters. See Lackey Dep. 22:21-24. Despite Plaintiff's cease-and-desist letter to Defendants in 2016, Defendants sold Sierra Blanca's lager and referred to it verbally and on a dry erase board as a Route 66 beer. See UF ¶ 27.

         Another brewery, Blue Grasshopper Brewing in New Mexico, also sold Sierra Blanca's Route 66 branded beer, with Admiral acting as the distributor for several years. See Affidavit of Greg Nielsen, 1, ¶ 1, ECF No. 52-1 (“Nielsen Aff.”). Plaintiff sent Blue Grasshopper's owner, Mr. Nielsen, a cease-and-desist letter in mid-2017, asking him to stop selling Sierra Blanca's Route 66 beer. Id. ¶ 2. Mr. Nielsen still sells Sierra Blanca's beer, but the beer goes by a new name. Id. ¶ 3

         E. Plaintiff's Beer Sales in the United States and Admiral's Distribution of Plaintiff's Beer

         Mr. Levy, Plaintiff's Trademark Advisor, testified that Plaintiff sold no Route 66 beer in New Mexico until 2016, although Plaintiff did continually advertise its beer and marks in New Mexico by means of online advertisements. See Levy Dep. 67:3-17. Plaintiff had on its website a list of locations in the United States where its Route 66 beer was sold retail in stores or bars so that customer could find where to buy its beers. Id. 82:22-25 - 83:1-2. No. more locations were added to this database after May 2014, although the database was incomplete. Id. 84:8-12. Mr. Levy testified that Plaintiff's beer sales in the United States temporarily ceased while Plaintiff “reviewed the situation” because of poor product sales. Id. 84:16-25.

         How long that temporary cessation lasted is disputed by the parties.[1] One of Plaintiff's business records titled “Route 66 sales 2016 to 2017” shows that Plaintiff's beer sales were in Europe and the Middle East. At the time Mr. Levy was deposed in July 2017, however, Plaintiff had renewed beer sales within the United States, including New Mexico.

         Kevin Lente, Admiral's Craft Brand Manager, purchases and distributes beer to retailers in the Albuquerque area. See Affidavit of Kevin Lente, ECF No. 61-1 (“Lente Aff.”). Mr. Lente stated in an affidavit that Admiral sold Plaintiff's Route 66 beer in July 2017 and that Plaintiff's beer was sold retail through Jubilation Wine & Spirits in Albuquerque, New Mexico. Id. ¶¶ 2, 4. Because Plaintiff's beer sales underperformed, Mr. Lente informed Plaintiff in an October 6, 2017 e-mail that Admiral did not plan to purchase more of Plaintiff's beer. Id. ¶¶ 5-6. Until Plaintiff approached Mr. Lente in 2017 to sell its beer, Mr. Lente never heard of Plaintiff or its Route 66 beer. Id. ¶ 7.

         Plaintiff submitted a rebuttal affidavit from Greg Brown, Mr. Lente's superior at Admiral. In his affidavit, Mr. Brown stated that “Mr. Lente did not have authority to make the statements contained in his … affidavit … and Mr. Lente was not making statements in that affidavit on behalf of Admiral.” Affidavit of Greg Brown, ¶ 3, ECF No. 65-1 (“Brown Aff.”). Mr. Brown stated that “Admiral is currently the distributor of Lodestar's Route 66 beer in New Mexico and will distribute additional Lodestar branded beer in New Mexico.” Id. ¶ 4.

         In a supplemental affidavit, Mr. Levy, stated that Admiral “is currently and has continuously been the distributor for Lodestar's Route 66 beer in New Mexico and will distribute additional Lodestar Route 66 branded beer in New Mexico;” that Admiral “has distributed Lodestar's Route 66 beer to at least three locations in Albuquerque, all of which currently offer the product for sale;” and that it is also for retail sale outside of New Mexico. See Supplemental Affidavit of André Levy, ¶¶ 2-4, ECF No. 65-2 (“Suppl. Levy Aff.”). Mr. Levy also stated that in October 2017 Plaintiff marketed and promoted its Route 66 beer at the National Beer Wholesalers Association in Las Vegas, Nevada and that it is establishing regional and national distribution agreements to sell its beer nationwide. Id. ¶¶ 5-6.

         II. PROCEDURAL HISTORY

         Plaintiff brought a two-count amended complaint on March 17, 2017 against Defendants, claiming that Defendants' alleged use of its federally registered Route 66 marks in connection with the sale of beer constitutes infringement (Count I) and unfair competition (Count II), both of which are violations of the Lanham Act. In its Prayer for Relief, Plaintiff seeks to permanently enjoin Defendants from the continued use of the word Route 66; a monetary award for corrective advertising to rectify alleged customer confusion caused by Defendants' alleged infringing use; disgorgement of profits; damages and treble damages under the Lanham Act; and attorneys' fees. See Am. Compl. ¶¶ 1-7 at 7.

         Mr. Lackey answered pro se on behalf of the Brewery. See ECF No. 13. The Court struck that pleading as violating D.N.M.LR-Civ. 83.7, which requires a business entity to appear in federal court through legal counsel. See ECF No. 14. Defendants complied with the Court's Order and Defendants' subsequent filings have been through counsel. In their Answer, Defendants pleaded seven affirmative defenses: fair use, unclean hands, trademark abandonment, failure to mitigate damages, failure to state a claim upon which relief can be granted, equitable estoppel, and lack of standing.[2] See Defs.' Answer, ECF No. 29, 4-6. On October 16, 2017 discovery closed and the deadline to submit dispositive motions and fully briefed Daubert motions was October 30, 2017. Both parties timely moved for summary judgment on the issue of infringement, arguing that they were entitled to judgment as a matter of law on whether Defendants infringed on Plaintiff's marks.

         On December 20, 2017, after the dispositive motion deadline passed, Defendants moved to reopen discovery to formally depose Messrs. Lente and Brown from Admiral, and to re-depose Mr. Levy. See ECF No. 67. Defendants contended that Mr. Levy made contradictory statements concerning whether Plaintiff's beer was only sold internationally, and that reopening discovery would resolve material fact issues concerning whether Plaintiff's marks are commercially strong and whether consumers are likely to encounter Plaintiff's mark and Defendants' logo. The Honorable Jerry H. Ritter, United States Magistrate Judge, denied Defendants' motion to reopen discovery to depose the witnesses. Judge Ritter found that Defendants had three months of discovery to follow-up with Mr. Levy, but never did so, and that the need to depose the Admiral witnesses was foreseeable, yet Defendants never bothered to depose either witness. See Mem. Op. and Order, ECF No. 73.

         III. PLAINTIFF'S EVIDENTIARY OBJECTIONS

         Before turning to the merits of the case, the Court must address Plaintiff's numerous evidentiary objections to statements in the affidavits of Messrs. Lente, Lackey, and Greg Nielsen. All three men appear as trial witnesses. See Pretrial Order, ECF No. 72. Rather than setting forth its legal analysis in a motion to strike, which is the more common practice for mounting a challenge of this kind, Plaintiff instead objected to the witnesses' affidavits in its summary judgment briefs. For their part, Defendants unhelpfully failed to respond with facts and legal arguments to Plaintiff's challenges, even though as the proponent of the evidence, it is their burden to show that the witnesses' statements are admissible or that Defendants can “put the … substance or content of the evidence [] into an admissible form” for trial. Brown v. Perez, 835 F.3d 1223, 1232 (10th Cir. 2016).

         A. Affidavit of Kevin Lente

         Mr. Lente is an employee at Admiral. Admiral is purportedly both Plaintiff's and Sierra Blanca's beer distributor. Plaintiff challenges Mr. Lente's affidavit statements that Plaintiff's beer did not perform well in sales, that Admiral did not order more of Plaintiff's beer, and that it had no plans to purchase more of Plaintiff's beer. Plaintiff also challenges Mr. Lente's statement that he was unaware of Plaintiff or its beer until 2017 and that New Mexico law prohibits microbreweries from selling beer not produced in New Mexico such that Plaintiff's beer cannot be sold in a microbrewery in New Mexico. See Lente Aff., ¶¶ 5-7; 9-10; Pl.'s Evidentiary Objections to Lente Aff., ECF No. 62. Plaintiff objects that Mr. Lente lacks personal knowledge to make these statements, that his statements exceed the bounds of lay testimony, are hearsay, irrelevant, and that Mr. Lente was not disclosed as a potential witness before discovery ended in violation of Fed.R.Civ.P. 26.[3]

         Plaintiff is incorrect that Mr. Lente lacks personal knowledge that Plaintiff's beer sales underperformed, that Admiral ordered no more of Plaintiff's beer and had no plans to do so, and that Mr. Lente was unaware of Plaintiff or its beer until 2017. It is hard to see how Mr. Lente lacks personal knowledge on these matters given that he oversees buying and selling beer to retailers. Plaintiff's rebuttal affidavit from Greg Brown that Mr. Lente's statements were not made on Admiral's behalf, that Mr. Lente “did not have authority” to make his statements, and that “Admiral is currently the distributor of Lodestar's Route 66 beer in New Mexico and will distribute additional Lodestar [beer] in New Mexico, ” does not decide the matter. Rather, these are issues over which there is a genuine dispute of material fact for the trier of fact to resolve.

         Plaintiff also says that Mr. Lente's statements about whether Plaintiff's beer is sold in New Mexico are irrelevant to the likelihood of confusion analysis.[4] Citing the Tenth Circuit's statement that “federally registered marks receive nationwide protection regardless of the area in which the registrant actually used the mark, ” First Sav. Bank, F.S.B. v. First Bank Sys., Inc., 101 F.3d 645, 651 (10th Cir. 1996), Plaintiff argues that its 2012 and 2013 federal registration of its marks put Defendants on nationwide notice that they could not use a confusingly similar mark, regardless of whether Plaintiff sold beer in New Mexico. However, Plaintiff's registration of its trademarks does not answer the question of whether, in fact, Plaintiff's marks and Defendants' logo are confusingly similar. Mr. Lente's statements concerning the scale of Plaintiff's business presence in New Mexico are relevant evidence of whether consumers are likely to affiliate the parties' goods and whether the parties compete in overlapping channels. The Court will consider as part of the summary judgment record Mr. Lente's affidavit statements in paragraphs five through seven.

         However, the Court will not consider as part of the summary judgment record Mr. Lente's affidavit statements in paragraphs nine and ten in which Mr. Lente stated that “New Mexico law prohibits New Mexico Microbreweries from selling out of state beer” and therefore “Lodestar's Route 66 beer cannot be sold at any New Mexico Microbrewery.” Defendants have not shown that Mr. Lente is competent to provide opinion testimony about the rules governing microbreweries. Paragraphs nine through ten of Mr. Lente's affidavit will not be considered in the Court's evaluation of the summary judgment evidence.

         B. Affidavit ...


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