Question

Anheuser-Busch in the Czech Republic

In this activity, we will review a dispute between Anheuser-Busch and the Czech state-owned brewery Budejovicky Budvar over the use of the name Budweiser and its derivations. It is premised on the role that trademarks can play within an international marketing scenario. Here we focus on the importance of intellectual property. It contrasts the common law trademark prior use verses the code law registration issue.

Businesses face a multitude of problems in their efforts to develop successful marketing programs. Not the least of these problems is the varying legal systems of the world and their effect on business transactions. Just as political climate, cultural differences, local geography, different business customs, and the stage of economic development must be taken into account, so must such legal questions as jurisdictional and legal recourse in disputes, protection of intellectual property rights, extended U.S. law enforcement, and enforcement of antitrust legislation by U.S. and foreign governments. A primary marketing task is to develop a plan that will be enhanced, or at least not adversely affected, by these and other environmental elements.

Read the case below and answer the questions that follow.

Anheuser-Busch (AB) launched a massive public relations program in the small Czech town of Ceské Budêjovice, where a local brewery produces “Budweiser Budvar.” Anheuser-Busch planted trees along main avenues, opened a new cultural center offering free English courses to citizens and management advice to budding entrepreneurs, and ran newspaper ads touting the possibilities of future cooperation.

Anheuser-Busch’s goal was to win support for a minority stake in the Czech state-owned brewery, Budêjovicky Budvar N.P., when the government privatized it. So why was AB interested in a brewery whose annual production of 500,000 barrels is the equivalent of two days’ output for AB?

Part ownership is critically important to Anheuser-Busch for two reasons. It is in search of new markets in Europe, and it wants to be able to market the Budweiser brand in Europe. So what’s the connection? AB doesn’t have the rights to use the Budweiser brand in Europe because Budêjovicky Budvar N.P. owns it. Its public relations plan didn’t work because many Czechs see Budvar as the “family silver.” Although the Czech prime minister asked publicly for American investors to put money into the Czech Republic, Czech Budweiser was not on the government’s privatization list. “I believe in the strength of American investors, but I do not believe in the quality of American beer.”

Anheuser-Busch established the name Budweiser in the United States when German immigrants founded the St. Louis family brewery and began selling under the Budweiser brand in 1876, 19 years before the Czech brewery opened. The Czechs claim they have been using the name since before Columbus discovered the New World and that Budweiser refers to Budwis, the original name of the city where Budvar is located. That is the name commonly referred to beer brewed in that area hundreds of years before AB started brewing Budweiser.

The Anheuser-Busch Company markets Budweiser brand beer in North America, but in Europe, it markets Busch brand beer, because the Czechs have the rights to the use of the name Budweiser. Diplomacy and public relations didn’t work, so what next? The parties have each other tied up in legal wrangling over who has the rights to the Budweiser name and to derivations of it, such as Bud. More than 40 lawsuits and 40 administrative cases are pending across Europe. Because U.S. law protects Anheuser-Busch’s rights to the Budweiser label in the United States, the Czechs sell their beer as “Czechvar.”

The Czech brewery exports to 37 countries, mainly in Europe, and AB has sales in more than 70 countries around the world. Anheuser-Busch sought a court order to have the Czech company’s products taken off the shelves in Hong Kong, won a ruling in Hungary, and has launched similar lawsuits in the United Kingdom and the United States. AB said the Czech brewery had imported and sold beer in the United States labeled “Budweiser Budvar” in the state of Maryland. It also says the Czech brewery is mimicking its name to confuse beer drinkers and cash in on the U.S. company’s success.

The Czech government petitioned the WTO to grant beer regions the same kind of labeling protection that it gives to wine regions. Just as sparkling wines made in the Champagne region of France are the only ones legally entitled to call themselves champagne, it would mean that only beers brewed in Ceské Budêjovice could call themselves Budweiser and only those brewed in Pilzen, another Czech town, could claim to be Pilsner. It seems unlikely that this request will win approval, because Pilsner has become a generic designation for a style of beer, and unlike the grapes that come from Champagne, the malt and the hops that go into its beer do not come exclusively from the Czech Republic.

The legal battle for the exclusive right to use the brand names Bud and Budweiser has spread worldwide. So far, this tactic hasn’t worked too well either. Britain’s high court allowed both companies to use the names Bud and Budweiser, whereas Switzerland’s highest court banned Anheuser-Busch from selling beer under the Bud name.

We all know that the proof of who’s best is in the tasting, right? Both lagers have legions of fans. The U.S. version lives up to its old slogan of “king of beers,” at least as far as sales go: It’s the top-selling beer in the world. The Czech version—nicknamed the “beer of kings” because it comes from a town that once brewed for royalty—has large followings in Germany and other parts of Europe. So the St. Louis Post-Dispatch hosted a blind taste test to determine which beer is better— Budvar won. And, most recently the Europeans have won another battle: In 2009, Anheuser-Busch agreed to merge with InBev, with its global headquarters now in Leuven, Belgium.

Now we're not sure who really has had the last laugh on this long-running dispute. In 2012, European-owned Anheuser-Busch finally succeeded in buying its Czech rival.

Sources: Al Stamborski, "Battle of the Buds: Taste Testers Say That Budvar Is Better," St. Louis Post-Dispatch, November 28, 1999, p. E1; "Prime Minister Says Budvar Will Stay Czech," Modern Brewery, March 2000; Gregory Cancelada, "Czech Brewery Retains Right to Use 'Budweiser' and 'Bud' Trademarks," St. Louis Post-Dispatch, February 17, 2003; "Budweiser Brewer Anheuser-Busch Buys a Czech Rival," Associated Press, January 13, 2012.

1) Why does Anheuser-Busch (AB) wish to acquire ownership in the Czech brewery Budêjovicky Budvar?

A) The Czech brewery was on the government's privatization list.

B) The Czech brewery has tremendous output that is of interest to AB.

C) The Czech brewery is up for sale and is approved by the Czech government.

D) The Czech brewery is a dominant player in Europe.

E) It will allow AB to open new markets and be able to market Budweiser in the Czech Republic.

2) Why doesn't Anheuser-Busch (AB) have the rights to “Budweiser” as a trademark?

A) While unclear, the Czech brewery claims it was first to use the name.

B) AB failed to sell Bud in Europe first.

C) AB did not register the Bud name in Europe.

D) AB had unsuccessfully registered the Bud name in Europe.

3) Which of the following would not have been a risk for AB when it decided to take the Czech brewery to court?

A) fear that its trade secrets would be compromised

B) difficulty in collecting a judgment that may otherwise have been collected by other means

C) fear of creating a poor image and damaging public relations

D) the loss of confidentiality

E) possible unfair treatment in a foreign court

4) As an example of how litigation may not necessarily resolve disputes, take the case of the legal battle for the exclusive right to use the brand names "Bud" and "Budweiser" in Britain. What happened there?

A) Britain's high court allowed Anheuser-Busch to use the names.

B) Britain's high court allowed both companies to use the name.

C) Britain's high court disallowed both to use the name.

D) Britain's high court refused to rule on the matter.

E) Britain's high court allowed Budvar to use the names.

5) What is the most likely motivation for Budvar’s use of the phrase, “the beer of kings”?

A) The Czech brewery is reviving an old slogan.

B) The Czech brewery is attempting to distinguish its beer from the similarly named Anheuser-Busch version.

C) Any similarity to Anheuser-Busch's slogan is merely a coincidence.

D) The Czech brewery is attempting to profit from Anheuser-Busch’s global popularity.

E) This slogan came about from the Czech brewery's relationship with InBev.

Answer 1

1. E) It will allow AB to open new markets and be able to market Budweiser in the Czech Republic.

2. A) While unclear, the Czech brewery claims it was first to use the name.

3. A) Fear that its trade secrets would be compromised.

4. B) Britain's high court allowed both companies to use the name.

5. D) The Czech brewery is attempting to profit from Anheuser-Busch's global popularity.