IP Law Daily, TRADEMARK—S.D. Tex.: Casa Azul tequila unlikely to be confused with high-end Clase Azul brand tequila, (Apr 16, 2024)

By Robert Margolis, J.D.

The products marketed under the brands are different, they are sold at different price points, the trade dress for each is different, and the brands market to different consumers.

Finding that Casa Tradicion, S.A. de C.V., the maker and distributor of Clase Azul tequila, failed to establish six of the eight relevant likelihood-of-confusion factors, the federal district court in Houston has determined in holding that Casa Azul Spirits, LLC, the maker of Casa Azul tequila and canned fruit flavored tequila soda, is not liable for trademark infringement and other claims. The court therefore denied all relief sought by Casa Tradicion, including a permanent injunction (Casa Tradicion, S.A. de C.V. v. Casa Azul Spirits, LLC, April 15, 2024, Rosenthal, L.).

The brands. Plaintiff Casa Tradicion, a Mexican corporation, has been selling the CLASE AZUL brand of tequila since February 2003. In March 2008, the USPTO registered the CLASE AZUL mark for use in connection with distilled liquor (Reg. No. 3,403,628). The mark is incontestable. Casa Tradicion sells expensive luxury tequilas and mescal under the CLASE AZUL mark (the name roughly translates from Spanish to English as “blue class” or “blue category”). Notably, “azul” is commonly used in naming tequilas, since it means “blue,” the color of the agave plant from which tequilas are made. The CLASE AZUL brand of tequilas include five “icons,” which range in price from $135 into the thousands of dollars. The most distinctive aspect of CLASE AZUL products is the containers, which are most commonly tall, blue and white hand-painted artisanal ceramic decanters with a silver “bell” top that twists off. The CLASE AZUL name is on a removable label. In retail, its products are generally sold only in liquor stores and behind the counter or in locked cases, separate from other tequila brands. Marketing is directed to high-end customers and connoisseurs.

Defendant Casa Azul has an incontestable trademark, registered first in May 2008 for CASA AZUL, originally in connection with wine (Reg. No. 3,424,540). In June 2018, it registered that mark in connection with alcoholic beverages other than beer (Reg. No. 5,921,855). Since March 2021 it has sold a canned fruit-flavored tequila soda, available in twelve-ounce cans retailing for a few dollars per can. They are generally sold in stores next to other ready-to-drink cocktails.

Casa Azul also sells bottled tequila, marketed as organic, and additive-free. The prices for its three tequila variations range from $69-$129. It is packaged in frosted or tinted colored glass bottles in aqua-colored hues. They are sold in liquor stores, grocery stores, and big-box stores, on shelves adjacent to other brands of tequila, or in sections designated for organic, additive-free products. Marketing is focused on younger consumers.

Casa Tradicion brought suit against Casa Azul, asserting claims for trademark infringement and unfair competition under the Lanham Act, and state law dilution, seeking inter alia a permanent injunction and cancellation of Casa Azul’s trademark. After a bench trial, the court held that Casa Azul is not liable under any of the claims and Casa Tradicion is not entitled to injunctive relief or cancellation of the CASA AZUL registrations. The court addressed the relevant likelihood of confusion factors.

Mark strength. The court found that the CLASE AZUL mark is not strong, which weighed against a finding of likelihood of confusion. The court noted that “AZUL” is descriptive of the blue agave plant from which tequila is made, and “CLASE AZUL” is descriptive of the type of alcohol and the higher class of tequila contained in the brand. The evidence also supported the finding that the CLASE AZUL mark is not the driving force behind the brand, but rather the distinctive, hand-painted decanters, in particular since the “CLASE AZUL” labels are removable. Finally, the record showed extensive third-party use of both “azul” and “casa” in connection with tequila drinks, which further diminishes the strength of the CLASE AZUL mark.

Mark similarity. Though the court found the sound of the parties’ marks is similar, this did not overcome the different visual appearances and distinct meanings of the marks. The meaning and sight of the words is clearly different between the two marks: “CLASE” (meaning class) includes an extra letter and ends with a different letter than “CASA” (meaning house). And though English speakers may mispronounce “CLASE” as “klas-suh,” to make it sound more similar to “CASA,” the difference in sight and meanings was more pertinent, the court held. Couple those differences with the significant differences in trade dress, pricing, marketing, and other distinctions described above, and the phonetic similarity in the names alone does not support a likelihood of confusion, the court concluded.

Product similarity. This factor also did not support a likelihood of confusion. The Casa Azul canned sodas are “plainly dissimilar products” to Casa Tradicion’s tequilas. Though both parties produce distilled tequilas with the same alcohol content, the similarities end there, according to the court. Casa Tradicion’s tequilas cost between two and five times more than Casa Azul’s for every type of tequila. Casa Tradicion’s is a “luxury sipping” tequila, while Casa Azul’s (unlike Casa Tradicion’s) is organic and additive-free.

Consumers, stores. These factors also failed to support a likelihood of confusion, the court held. Casa Tradicion does not sell its products in grocery stores or big box stores. To the extent both parties sell their products in liquor stores, Casa Tradicion’s are found either behind the counter or in locked cases, while Casa Azul’s are either in designated organic or additive-free sections, or on shelves with other tequilas. The differences in price points and store location supported the finding that different consumers search out the two parties’ products. The court rejected Casa Tradicion’s argument that consumers in bars or restaurants would not be faced with the significant differences in packaging and placement. The court noted that bottles may be on display in bars, and the prices per glass would still be apparent.

Marketing, advertising. The court found insufficient similarity in the marketing of the parties’ products to support a likelihood of confusion. Casa Azul’s marketing emphasizes the “CASA” portion of its mark and is directed to a younger market. Casa Tradicion’s marketing focuses on celebrating Mexican culture and markets toward high-net-worth individuals.

Actual confusion. The evidence of confusion that Casa Tradicion proffered was unconvincing to the court, which found an absence of actual confusion. The evidence consisted of what the court described as “isolated instances of uncertainty” by persons who were not actual consumers—a job applicant, persons asking plaintiff if it was aware of defendant’s products and concerned about confusion, and plaintiff’s employees who were asked if they knew defendant’s employees. None of this amounted to evidence of actual confusion. Likewise, evidence of mis-tags on social media, which the court noted is common and not evidence that consumers themselves are confused, did not support an actual confusion finding. Finally, the court found that Casa Tradicion’s expert’s survey methods did not reflect the way the products appear in the marketplace. In contrast, Casa Azul’s expert’s “Eveready” survey, which showed only 1.7% of consumers believed the products were affiliated, was probative.

Intent. Because Casa Azul had used its mark in connection with other beverages before branching out to tequilas, the court found no evidence of bad faith. This factor, therefore, was neutral.

Consumer care. This factor was not particularly strong either way, but since Casa Tradicion’s products range from hundreds to thousands of dollars, the court found consumers would exhibit some amount of care in their purchasing decisions. This slightly supported likelihood of confusion.

The Case is No. 4:22-cv-2972.

Attorneys: Miguel Villarreal, Jr. (Gunn, Lee & Cave, PC) for Casa Tradicion S.A. de C.V. Adam David Mandell (Millen, White, Zelano & Branigan, PC) for Casa Azul Spirits, LLC.

Companies: Casa Tradicion, S.A. de C.V.; Casa Azul Spirits, LLC

Cases: Trademark TexasNews