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Beer, the Lions, and Intellectual Property: An Updated Cautionary Thanksgiving Tale.

Update: Since I originally published this article, Eastern Market Brewing has resolved its issues with Barry Sanders and no longer uses his likeness on the beer can. Same Old Lager is available again, and instead of a Lions player wearing the number 20, the brewery’s mascot graces the can against a pixilated, video-game style football field. The marketing and slogans still stand and continue to play on the Lions’ reputation for mediocrity – and perhaps Eastern Market can capitalize on the Lions’ recent coaching and GM change to push their cleverly branded lager.

Still, many lessons here for any enterprising business owner. Intellectual property law has many hidden pitfalls, and falling into one not only will cost legal fees to defend against a cease-and-desist, but also disrupt your marketing and sales.

Detroit’s own Eastern Market Brewing Company came up with a genius marketing idea: a beer called “Same Old Lager,” a clever play on the “same old Lions” saying that has become familiar to Detroit football fans after years of mediocre results. The slogan for the crisp 4.5% ABV lager is “don’t set your expectations too high” and the beer itself was announced the same day the Lions suffered a crushing 20-0 defeat to the Panthers, and just about a week out from the Lions’ annual Thanksgiving game. Clever marketing, impeccable timing, free media attention. Hit product, right?

Wrong. Apparently someone forgot to run the new product by their lawyer or if they did, their lawyer missed a big problem. The day after the new lager was announced, it was removed from sales in response to Barry Sanders’ cease-and-desist for unauthorized use of his likeness on the cans. The retro-video-game-style logo featured a pixelated football player in a Lions uniform with the number 20 (Barry Sanders’ famous number) carrying a football against a gridiron backdrop. Mr. Sanders quickly took to social media to disclaim any affiliation with the product and announced that his image was being used without his permission. As quickly as the new beer was announced, production and sales were halted. Opportunity lost and a genius marketing plan derailed.

I have previously written about Peloton and how the billion-dollar publicly-traded behemoth was facing millions dollars in liability for unlicensed use of music in their workout videos. In today’s digital world, intellectual property rights are more critical than ever, and the Eastern Market snafu is just the latest example of how (presumably inadvertent) infringement can happen. So what did the company do wrong? And how could they have done it right?

What did they do wrong?

The brewery’s marketing ploy was actually very clever. Nothing in the slogan or description expressly referred to the Lions. The Detroit Lions is a valuable trademark, along with the logo, so Eastern Market obviously did not want to pay for its use or licensing. A marketing campaign that riffs on the Lions’ reputation for consistent mediocrity, but does not expressly reference the Lions does not violate the trademark itself. In a nutshell, trademark law prohibits unauthorized use of a mark in a manner that is likely to cause confusion about the source of the goods or services. When something is clearly parody, let alone does not use the actual mark, there is no trademark violation. In other words, no one can reasonably claim that they think a beer called “Same Old Lager” is somehow actually endorsed by the Detroit Lions.

The problem was not trademark law – rather, it was the “right to publicity.” A pixelated video-game likeness of a Lions player wearing Barry Sanders’ famous number 20 jersey graces the front of the can. Generally, a celebrity like Mr. Sanders owns the rights to his own image and has the right to control its distribution. Here, the brewery used Mr. Sanders’ likeness on the beer, implying his endorsement. Accordingly, his legal team took action, which lead Eastern Market to take down its new product, likely pending a new can design. Even if Eastern Market decided to make the case in court and fight back, the campaign momentum has been disrupted, and even so, Mr. Sanders’ case appears to be fairly strong and supported by decades of caselaw. The “right to publicity” is a concept dating back to the 1950s and is related to copyright law, although they two are not the same. There are cases that have protected everything from Vanna White’s likeness that Samsung tried to replicate as a robot, to Bette Midler’s voice, to Johnny Carson’s catchphrase “Here’s Johnny,” to a human cannonball circus act. And, of course, there is a number of exceptions, including when a likeness is used for educational purposes, news items, public issues, and even “entertainment and amusement concerning interesting aspects of an individual’s identity.”

How could they have done it right?

The brewery should have requested a legal opinion from an attorney approving the marketing as well as the packaging. Once the attorney flagged the right to publicity issue and the possible misuse of Barry Sanders’ likeness, a minor redesign would have likely taken care of the issue. Changing the number of the player, removing the number, changing the uniform colors, or any other number of tweaks are possible options. Another potential issue is the design’s likeness to the beloved retro football game “Tecmo Bowl” – and an attorney should have researched and cleared that issue (potential copyright infringement) as well before the design went to print.

The bottom line is that the marketing team can get ahead of the legal team. Copyright, trademarks, patents, licensing, and the “right to publicity” are all important concepts that all business owners should be aware of. Doing it right may cost a little bit more in the short run, but can avoid significant costs down the line.

Need a legal opinion about your marketing campaign? New logo? Design? Product? Contact Dan Artaev by email or by text or call today to set up your free consultation.

Disclaimer: This article is for general informational and promotional purposes only. Nothing herein constitutes legal advice and is the author’s individual opinion. Every business is different and faces its own unique set of challenges. Do not take any action with respect to your business until you have obtained specific guidance from a qualified professional.

© 2020 Artaev at Law PLLC. All rights reserved.

5 Legal Tips for Business Owners Weathering the Coronavirus Disruption

There is no doubt you are distracted by this coronavirus outbreak. Constant news alerts, supply shortages, government-mandated closures and cancellations make it all but impossible to also run your business. However, remember that your lawyers are available to assist you. For example, if you have questions about obligations to your employees, insurance coverage questions, contract responsibilities, or anything else related to your business, feel free to reach out. In the meantime, here are 5 legal tips to help your business through the crisis with minimal disruption:

  1. Review your existing contracts for a “force majeure” clause. Do you have a contract with a supplier, distributor, or vendor? Has the coronavirus outbreak affected performance under the contract – for example, are payments being delayed? Are shipments delayed? Has demand dropped to the level where you are having trouble paying normal operating expenses? The reality is that a lot contracts were negotiated in “good times” without the threat of external forces disrupting business operations. This means not all contracts provide for what happens in times of crisis, and if they do, they are often generic provisions that may not even be applicable to the current situation. Nevertheless, some contracts have standard terms — known as “force majeure” or “Act of God” clauses — that allow for contract termination, modification, or delay in performance under certain extraneous circumstances. Importantly, even if your contract does have such a clause, it often includes notice obligations to the other party – so if you suspect that contract performance may be disrupted (either on your end or on the part of the other party), contact a business attorney for guidance on your rights and obligations.
  2. Review your existing lease and make sure you know your rights and responsibilities. Leases are another type of contract that may be affected by the pandemic. In general, commercial leases are drafted in such a way that a tenant’s obligation to pay rent is absolute and non-excusable. If you are a business owner having trouble making rent payments due to decreased demand, you need to carefully review your lease for any possible options, including early termination. Alternatively, you should be prepared to discuss lease modifications with your landlord. If you are on the landlord side, reach out to your tenants and discuss any potential issues directly. While eviction is still available as a remedy, consider that finding a replacement tenant may be more difficult at this time, and you may want to conserve resources instead of spending money to evict someone. And as always, reach out to an attorney if you have any questions about your rights and obligations under any lease.
  3. Purchasing or selling a business? Adjust your expectations or consider termination. Uncertainty is high, which means that many business deals that seemed profitable a few months ago may no longer be attractive to potential buyers. Whether you signed a letter of intent and are conducting due diligence, or you are at the purchase agreement drafting or even closing stage of the transaction, make sure you know your rights and responsibilities. Is there a specific time for performance and what happens if there is a delay? Is “time of the essence” to this transaction? Particularly, be aware of any penalties or liabilities that may be attached to termination of the pending transaction before closing. There may be a liquidated damages provision involved, or perhaps something more onerous, like an “actual damages” clause, including attorney fees. You should have an attorney representing you in any buy-sell transaction, and in the current situation, it is especially important to retain advice about your options.
  4. Know that courts are still functioning, although in a diminished or delayed capacity. One of the reasons that it is critical to know your rights and responsibilities under your various contracts, is that you want to avoid business litigation. But you may think, aren’t courts closed? So how can I protect my rights? Most courts are actually operating in a “diminished” capacity, with civil litigation taking a back seat to criminal matters. However, a lawsuit can still be filed. And, if there is a need for emergency relief like an injunction against a former employee actively stealing customers, it is still available. Understand that even if the justice system is operating in a limited capacity, it is still operating. Litigation is a possibility – and expect that even when this pandemic is over, there will still be litigation fallout over breaches of contract and other business matters that arose due to business disruptions in this difficult time.
  5. This is a perfect opportunity for “corporate catch-up.” Even if your business is currently slow or completely shut down, this time may be a great opportunity to talk to your lawyer about some business matters that you have been putting off. For example, have you trademarked your logo, slogan, or business name? Do you have a new business idea and need to incorporate a new business? Or, do you need to update your LLC’s papers to reflect the fact that you hired your niece as your new CFO? Are there old corporate entities out there (after an acquisition or merger) that continue to exposre you to personal liability? And ask yourself, is your business prepared for the 4 Ds — divorce, death, disability, and debt? Now may be the perfect time for “corporate catch-up.”

Have more questions? Contact Dan Artaev at dan@artaevatlaw.com or 269-930-0254 to set up your free initial consultation.

© 2020 Artaev at Law PLLC. All rights reserved.

3 Common Mistakes that Compromise a Business’s Corporate Protection and Expose Your Personal Assets.

Businesses that commingle assets, forgo record keeping, official minutes, and fail to keep their registration with the State of Michigan up to date risk losing their corporate protections. In most cases, the corporate form limits your personal liability and insulates your personal assets from business debt – unless a creditor successfully argues that the corporate form is a sham and used to perpetuate fraud. However, this protection is not an absolute and there are many situations where that protection may be set aside and personal assets (the owner’s house, boat, car, bank account, etc.) are at risk.

Even if you run a perfectly organized business with current paperwork and a separate bank account, there are still situations where you are at risk of personal liability for your business debts. The following three scenarios are most common:

  1. Did you sign a personal guaranty for a business lease or a business loan? Personal guaranties (or guarantys) are additional collateral that you may be asked to execute as a prerequisite to a business loan or even a business lease. A personal guaranty is effectively an agreement that waives your corporate protection and allows a creditor to go after your personal assets directly. Because a small business does not have many assets to collateralize a loan or assure a landlord that obligations will be paid, you may be asked to sign the personal guaranty. Whether you accept that risk is up to you, but at a minimum you should read the document carefully and discuss it with your attorney so that you understand the implications. You may also be able to negotiate for a lease or loan without a personal guaranty, but in most cases you will need to provide sufficient collateral or other assurances to secure your obligations.
  2. Are you knowingly breaching a contact or a lease? Some business owners erroneously assume that because they have an LLC, they can ignore contracts or leases. For example, if your company signed a 3-year lease in a dying shopping center – what’s to stop the LLC from defaulting on the lease and walking away? A lawsuit can only reach the LLC, right? That’s not only wrong, but it is also a dangerous line of thinking that may put your personal assets at risk. A court will not allow the abuse of the corporate form to evade obligations or escape debts. Understand that corporations are created by statute – i.e. the law – to facilitate business. At the same time, the court system will not apply the law to facilitate a party’s evasion of its contractual obligations. If you are abusing the LLC to default on loans, other contracts, or lease obligations, a court may very well determine that you are abusing the system, pierce the corporate veil, and impose personal liability.
  3. Are you moving assets around to another company? You may also think that you can simply start over by forming a new LLC, transferring the assets of the old LLC to the new one, and leave the loans, contracts, and leases behind with the old shell of a company. But even if you declare bankruptcy for the old LLC, your assets are not immune from creditors. The bankruptcy proceedings allow aggrieved creditors to challenge any transfers made before bankruptcy as “fraudulent” and have them set aside for the creditor’s benefits. And even if your old business had no assets, a court may still impose personal liability and pierce the corporate veil if it is determined that your actions were for a fraudulent purpose – such as escaping a debt, contract, or lease obligation.

Have more questions? Contact Dan Artaev at dan@artaevatlaw.com or 269-930-0254 to set up your free initial consultation.

© 2020 Artaev at Law PLLC. All rights reserved.

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