Is a similar trademark name enough to prove trademark infringement? We have seen in a recent ruling regarding tequila companies with products Casa Azul and Clase Azul that the answer is: No.
Specifically, a judge has denied Casa Tradicion’s lawsuit against Casa Azul Spirits, roundly tying up arguments about trademark confusion and damages owed. How exactly did the judge reach this opinion?
Casa Tradicion Goes After Casa Azul
Tequila manufacturer Casa Tradicion, the maker of Clase Azul tequila, filed a trademark infringement action in September 2022 against Casa Azul Spirits, who markets the tequila Casa Azul. At first glance, the companies might seem to be overlapping. Both sell tequila. Both prominently use the Spanish word for “blue,” with a similar – though not identical – cadence to their names. It certainly seems like a situation ripe for trademark confusion.
However, the outcome of a case rests more on details than first impressions. In the Southern District Court of Texas, Judge Lee H. Rosenthal teased apart the differences that ultimately make the tequila makers’ competition too indirect to support a trademark infringement claim.
Many of those points were delineated in an opinion issued by Judge Rosenthal in which he concluded that Defendant Casa Azul Spirits, LLC was not liable for trademark infringement, unfair competition or dilution of the Plaintiff’s trademark and the Plaintiff’s application for an injunction and claims for other relief were denied.
Why?
The Sticking Points
Different Brand Timelines
For starters, Casa Azul is a far less established brand than Clase Azul. Casa Tradicion has been selling tequila in distinctive, hand-painted ceramic bottles for over 20 years, with their price point spanning $120 to over a thousand. Casa Azul began selling low-priced tequila-based sodas in 2022, adding straight tequila in frosted glass bottles a year later – the price point of which generally falls in the $50-100 range.
The distinctive bottles of Clase Azul make quite a difference here. The judge noted that Clase Azul’s brand recognition rests more on the distinctiveness of their packaging than their name.
Different Ingredients Targeting Different Audiences
The opinion addressed the product ingredients that set the tequilas apart. Clase Azul’s tequila is more processed, containing flavorings, artificial sweeteners, and colorings, and they source from different agave producers. Casa Azul, on the other hand, uses a single growing estate to produce organic tequila, free of additives.
The Judge’s opinion also reviewed the tequila brands’ differing audiences. Consumers of the higher priced product Clase Azul are not likely to be confused as to the source of the lower priced product, Casa Azul. If different types of consumers are searching for products, then the likelihood of consumer confusion diminishes.
No Profits = No Damages
Perhaps most importantly, Casa Azul has been rather blunt about their lack of profit in this case. They have cited operating costs of over $8 million, with revenue from its tequila products totaling less than $1 million thus far – the expected “in the red” period of a newer brand developing its consumer recognition foundation.
Clase Azul, on the other hand, has turned profits of over $200 million in the past few years. In other words, Casa Azul argued that Clase Azul’s sales are not hurting due to Casa Azul’s introduction into the market. In the end, the judge agreed: if no damage is done, is trademark confusion even an issue?
This is a fascinating case, and it will be interesting to see if the decision is appealed by the Plaintiff. An appellate court may see the facts and potential for likelihood of confusion in a different light.