Casa Tradicion, which makes and distributes tequila under the brand name CLASE AZUL, brought a trademark infringement action against Casa Azul's use and registration of the mark CASA AZUL for its own brand of tequila. Having earlier denied Casa Tradicion's motion for a preliminary injunction, the district court remained unconvinced after a bench trial that consumers were likely to be confused, and denied Casa Tradicion's request for a permanent injunction and cancellation of the CASA AZUL trademark registration.
Taking no short cuts, the district court assessed each of the Fifth Circuit's likelihood of confusion factors: (1) the strength of the marks; (2) the similarity of the marks; (3) the similarity of the products; (4) customers and trade channels; (5) marketing and advertising; (6) actual confusion; (7) intent; and (8) purchaser care. Streamline Prod. Sys., Inc. v. Streamline Mfg., Inc. 851 F.3d 440, 450 (5th Cir. 2017).
Despite recognizing that the CLASE AZUL and CASA AZUL marks are similar in appearance and that both identify tequila, the court ultimately concluded that the bulk of the evidence—particularly evidence relating to differences in the parties' target customers and trade channels—outweighed those facts and supported a finding that the parties' trademarks are not confusingly similar.
Assessing the marks themselves, the district court found that Casa Tradicion's mark was not strong for two reasons. First, the court noted that over 50 brands of tequila used the word AZUL in their branding. Second, the court found AZUL (which means "blue" in Spanish) to be inherently descriptive of the primary ingredient in tequila—the blue agave plant. The court also found that the trade dress of Casa Tradicion's CLASE AZUL tequila, consisting of art-quality, keepsake, painted bottles, drove "marketplace recognition" far more than its CLASE AZUL trademark, which was not displayed prominently on packaging nor emphasized in marketing. In contrast, the court noted, the defendant's CASA AZUL mark appears seven times on each bottle and featured prominently in marketing.
As to the relatedness of the goods, the court did not stop its inquiry after finding that both marks identify tequila. The court went on to examine whether the parties' tequilas were "similar to or in competition with" each other and concluded that the products' substantial price difference and different intended use (a "sipping tequila" versus a tequila intended for mixed drinks) rendered them dissimilar.
The court's trade channel analysis also looked beyond the surface, finding that it was not sufficient for Casa Tradicion to show merely that both parties' sell their goods in liquor stores, restaurants, and bars. Rather, the court concluded that the parties' trade channels were distinct due to the products' price difference and their display in different sections of liquor stores, with Casa Tradicion's goods often in a locked display.
To assess whether the parties' customers overlapped, the court looked to the parties' marketing. Evidence of record showed that Casa Tradicion's tequila appealed "to a sophisticated and affluent consumer," whom Casa Tradicion described as a "conscious connoisseur." Casa Azul, in contrast, targeted younger consumers who follow influencers and attend festivals.
Finally, the court's findings on actual confusion were shaped by a recent Fifth Circuit ruling in Rex Real Est. I., L.P., 80 F.4th 607 (5th Cir. 2023), which held that "'isolated instances of uncertainty' by individuals who were not confirmed to be 'potential customer[s]'" would be given little weight. Thus, Casa Tradicion's "anecdotes" of inquiries it received about Casa Azul and mis-tags in social media posts were not accepted as evidence of confusion by actual or potential consumers.
The parties also offered competing expert surveys. Casa Azul's survey expert employed the Eveready methodology, which showed participants images of either CASA AZUL tequila or a fictitious tequila and asked questions "designed to measure 'source confusion,' 'sponsorship confusion,' and 'affiliation confusion.'" Casa Tradicion's survey expert employed the Squirt methodology, which showed participants CLASE AZUL tequila, followed by either CASA AZUL tequila or a fictional tequila made to look like CASA AZUL but using a different word mark, and asked whether they thought the tequilas were related by manufacturer, affiliation, or sponsorship.
While recognizing that Eveready surveys are typically used for marks more well-known than the CLASE AZUL mark, the court found Casa Azul's survey reliable overall because the parties' goods are not sold proximately. The court rejected Casa Tradicion's Squirt methodology survey as unreliable, finding that a side-by-side comparison was not appropriate for these products, which are not found in the same location within a store.
Balancing these factors, the court found that six of the eight factors weighed against finding a likelihood of confusion and two were neutral. In the absence of actual confusion or "swayed consumer purchases," and in the context of a crowded field of AZUL marks, the court found that consumers were not likely to confuse CASA AZUL with CLASE AZUL, and that the marks could continue to peacefully coexist.
The case is Casa Tradicion, S.A. de C.V. v. Casa Azul Spirits, LLC, Civil Action No. 4:22-cv-02972 (S.D. Tx. April 15, 2024).
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