Causing a Brouhaha: Trade Secrets Disputes in the Craft Beer Industry

2 minute read | February.04.2017

In recent years, the craft beer craze has taken ahold of the country and has resulted in an explosion of new microbreweries and enthusiasts. Several websites, like BeerSmith, allow users to share recipes with others; other websites, like BrewCraft, sell their recipes for home brewing.  In fact, some craft beer aficionados have even created beer trading exchanges to secure their hard-to-find favorites.  Even when a popular beer is discontinued, other microbrewers look to fill the void left on everyone’s taste buds with beers of their own.  For instance, when Russian River’s legendary craft brew Pliny the Elder was pulled from certain markets, craft brew fans raced to find similarly tasting alternatives to quench their thirst.

Due to the increased growth in this industry, though, competition between microbreweries has also increased as companies look to gain an advantage.  As a result, many disputes have erupted between breweries over trade secrets.  For example, the Summit Brewing Company in Minnesota, one of the oldest microbreweries in the country, recently filed a lawsuit against a former VP and sales marketing manager alleging the two conspired to disclose trade secrets to a competitor.  The allegedly stolen traded secrets include: proprietary sales and marketing plans; pricing and distribution plans; production goals; growth strategies; distributor relationship information; and management systems and techniques.  In another case, the Boston Beer Company (maker of Sam Adams) sued Anchor Brewing Company of San Francisco (maker of Anchor Steam) alleging the latter had poached one of its executives in violation of a non-compete and with the intent of stealing trade secrets.

Most importantly, unlike in other food and beverage industries, trade secret disputes in the craft beer industry revolve less around garden variety fights over the protection of recipes or customer lists. Instead, the most sensitive disputes center on a brewing company’s access to distribution channels.  After all, it is the distribution bottlenecks a small brewing company faces in getting its product from the warehouse to a bar’s tap or a retailer’s shelves that controls a microbrewery’s growth.

Strategic goals and distribution plans can qualify as protected trade secrets if they have independent economic value and the company takes reasonable steps to protect the information.  Therefore, it is in a microbrewer’s best interests to safeguard its distribution channel trade secrets. If a microbrewer sees an employee leave to work for a competitor and suspects that its trade secrets have been stolen, it should immediately investigate the matter and protect its trade secrets at all costs.  If a microbrewery’s trade secrets related to its distribution channels are compromised, it could result in the microbrewery losing market share and ultimately going out of business – much to the dismay of its loyal craft brew fans.