(Ceske Budejovice, Czech Republic) — It’s not quite Constantinople, but the former name of this mid-sized city does evoke images of global empire. Budweis—as it was known in German under the Austro-Hungarian monarchy—is perhaps the world’s most definitive beer town and the legal clash ensuing over who invokes its name where has become nothing short of byzantine.
The running battle pits the world’s largest brewer, Anheuser-Busch InBev, against Budejovicky Budvar, a brand and brewery owned by the Czech state. (It has remained un-privatized, even 25 years after the fall of communism here.) Record sales last year, an export-driven growth strategy and court victories in key European markets by the Czech firm are now upping the stakes of the conflict.
Like the region’s existential struggles of the past, this one is largely about one thing. “It’s about territory,” says Jiri Bocek, Budejovicky Budvar’s general director, the equivalent of a CEO.
While there are a exceptions, in much of Europe Budejovicky Budvar—the word Budejovicky is the equivalent of Budweiser, or German for “from Budweis” in the Czech language—has the rights to the name Budweiser, forcing Anheuser-Busch InBev to use the name Bud. The reverse is true in much of the rest of the world. In the United States and Canada the Czech beer is sold as Czechvar. This is a result of a country by country trademark dispute that has seen hundreds of legal cases in the last decade.
“You have to do it in every single country,” says Rory Pheiffer, a Boston-based intellectual property lawyer who works with brewing clients for the firm Nutter McClennen & Fish. “They don’t want to let up their rights in any of these countries in case it is the next big market.”
The lines are drawn. On one side stands Anheuser-Busch InBev and its 150,000 employees producing some 400 million hectoliters of beer. On the other, is Budejovicky Budvar, which made 0.35 percent the amount of beer last year—its best ever—and employs 600 people.
Even cases that appear resolved may reopen again as conditions ferment. A court decision in the United Kingdom last year confirmed both companies had the rights to the name on the grounds that consumers can tell the difference. To some this seems a reasonable compromise. To others the result complicates matters.
“We feel this is not the right solution as we want to make sure that when our consumers ask for a Budweiser, they receive our quality beer that is renowned for its crisp, refreshing taste and tradition of beechwood aging,” says Anheuser-Busch InBev spokeswoman Karen Couck.
Not in dispute, however, is the influence the western half of the present day Czech Republic, Bohemia, has on American and global beer culture. In addition to ties to the city of Budweis, the American-born Budweiser brand purports to be of the pilsner variety, which originates in the Czech city of Pilsen. Another of Anheuser-Busch InBev’s brands, Michelob, also draws its name from the German-language name from a Czech town, now called Mecholupy.
Should any doubt remain the folks at Budejovicky Budvar are happy to trot out the words of Anheuser-Busch co-founder Adolphus Busch in a New York district court in 1896. “The Budweiser beer is brewed according to the Budeweiser Bohemian process,” he said then. “The idea was simply to brew a beer similar in quality, color, flavor and taste to the beer then made at Budweis, or in Bohemia.”
But Anheuser-Busch InBev, which is headquartered in Belgium following a 2008 merger and accounts for some 25 percent of global beer sales, claims precedent as well. It argues that its use of the Budweiser name dates from 1876. While Ceske Budejovice had many breweries predating that, Budejovicky Budvar’s facility was not launched until 1896. A 1939 agreement between the two parties conceded that then independent Anheuser-Busch was the first to trademark the Budweiser name and conceded all the territory north of Panama to the American brewer. The present-day Czech Republic was subsumed by Nazi Germany in March of that year, making pivo—the Czech word for beer—a moot point.
History would intervene further as Anheuser-Busch would expand into an international colossus over the next half-century, while the Czech brand lingered behind the Iron Curtain. Competition returned in the wake of November 1989′s Velvet Revolution and following the split of Czechoslovakia, the Czech government decided that Budejovicky Budvar would focus on exports. In 1994, Bocek said he decided not to sign a trademark agreement with Anheuser Busch that would have divided up territory around the world.
“We didn’t want to repeat the mistake of our predecessors from 1939,” says Bocek, whose father also ran the brewery from 1968 to 1972. “I believe in the trademark, the company and the people in the company. After 20 years, I can say it was the right decision.”
Last year about half of the 1.42 million hectoliters of beer it brewed was sold in 66 foreign countries. “They understood early on that the only way they could grow was to develop foreign markets,” says Max Bahnson, an author and beer blogger who often writes under the name Pivni Filosof, Czech for “beer philosopher.”
Barriers for doing business in many such markets are falling. Adding interesting if complicating subtext to the dispute are continued negotiations between the United States and the European Union on a free trade agreement. Concurrent trademarks are an issue as is a philosophical divide on what are known as protected geographical indicators (PGIs or GIs), the phenomenon that seeks to guarantee that certain products, champagne for example, come only from a certain region.
While U.S. law recognizes the concept it is wrapped up within trademark law more generally. This “pulls the rug from under the whole idea,” says Jacques Pelkmans, a senior fellow at the Centre for European Policy Studies in Brussels who is tracking the free trade deal.
“GIs are a special case because for the United States this is narrowed down to trademark protection, which, of course exactly undermines what a GI stands for: A long historical tradition of making local, quality products at a level that cannot be easily imitated, but where the reputation is so attractive that bad imitations are popular, even under trademark,” he said.
Budejovicky Budvar claims two such designations for itself, defining it as drawing its ingredients from a certain territory, including well water from Ceske Budejovice. However, both are officially registered in Czech as “Budějovické pivo” and “Českobudějovické pivo”. It is not clear what relevance this might have internationally as Anheuser-Busch InBev is unlikely to use such phrasing on its own products.
As Pelkmans notes, despite a stated goal of completing trade pact negotiations by the end of this year, this “gigantic” agreement appears years away. While such a deal would have global economic implications, the tug-of-war over the Budweiser name also has a distinctly local feel.
It is the source of its ingredients that Budejovicky Budvar cites as its chief rationale for carrying the Budweiser mantle. The beer is brewed with water from a well under the brewery filtered through sand. All the beer is made at its one brewery in Ceske Budejovice. As one might expect, Anheuser Busch In-Bev disputes that the qualities of beer are dependent on geography and cites itself as proof that beer can be brewed anywhere in the world.
But Anheuser-Busch InBev did not become the world’s largest brewer by sitting around sipping suds. In 2012 the firm acquired its own water source in Ceske Budejovice along with a Czech trademark to a separate loss-making brewery based in Ceske Budejovice. “It is another arrow in their quiver,” explains Pheiffer, the trademark lawyer. “They are going to continue to battle.”
The willing seller of the water source and trademark was the Czech businessman Fratisek Savov. Most industry observers believe Savov acquired such properties with the exclusive intent of selling to Anheuser-Busch InBev, something he denies. “All my activities are always aimed at bringing the firms I acquire to profit,” he says. While Savov claims he first approached Budejovicky Budvar about selling those rights, Anheuser-Busch InBev officials say the acquisition “was about settlement of litigation and intellectual property.”
But the intrigue does not end there. In late 2013, Savov restructured what remained of his Ceske Budejovice-based brewing properties, another brewing label named Samson. This has prompted speculation that yet another deal was afoot. “There is nothing for sale,” Savov says. Anheuser-Busch InBev officials declined to comment on future acquisition plans.
When it comes to acquisitions, the elephant in the room is that Budejovicky Budvar remains state-owned, an arrangement unlikely to continue, even as the brewery remains profitable. Privatization almost always requires that government’s sell to the highest bidder. It is hard to believe there are companies that would covet Budejovicky Budvar and its claims on the Budweiser name any more than Anheuser-Busch InBev.
Such negotiations have started and then stalled in the past. No talks are underway now. It’s unlikely that the world’s largest brewer would have much use, save for the trademarks, for a South Bohemian brewery with few efficient transport connections to major markets. “If the highest bidder were InBev, what could they do?” Bahnson asks.
Diplomatic as he is, there is a palpable sense of pride exuding from Bocek when he talks about the brewery he oversees. Although it is clear it comes with plenty of headaches, it seems he relishes fighting a sort of guerrilla war with the world’s largest brewer. Would he be disappointed if Anheuser Busch InBev were ever to acquire his beloved beer brand?
“Of course,” Bocek says.