The craft beer business is often a tight-knit group, with friends starting businesses and hiring other friends. But as a brewery grows, the business becomes more than a small endeavor — things become real. Disagreements arise, decisions need to be made, and sometimes your friends have opportunities to start their own businesses.
Key employees leaving your business can raise a number of questions: Are they starting a competing business? Are they taking beer recipes with them? Is there anything I can do to stop them? How will this impact my business?
Like most things in life, the best way to answer these questions is to proactively plan for this situation. We recommend three tools to proactively protect a craft brewery’s intellectual property: trademark registration, trade secret organization, and non-compete agreement implementation.
Trademarks identify the source of goods or services. In other words, when consumers see your mark (generally your business name/logo), the consumer connects your mark with the type and quality of goods you provide. When the consumers positively react to seeing your mark, you have successfully created goodwill in your mark.
The best way to protect your mark (and that valuable goodwill you just created) is to obtain federal registration of your mark. Failure to do so can leave the door open for other breweries to use the same or similar mark in connection with another beer. If this happens, you will be forced to hire attorneys to sort out the situation with no guarantee your brand will be able to expand as you planned. This type of uncertainty prohibits business growth.
On the other hand, federal registration of your mark is a smart business investment. It locks in your position giving you nationwide rights to use your mark in connection with your beer. The cost to maintain your federal registration is minimal. And if competitors select a similar name, you will have a superior position in any negotiations.
Trade secrets are an often under-utilized form of intellectual property protection, probably because businesses don’t understand the basics. In general, trade secrets are protected under state laws, usually adopted from the Uniform Trade Secrets Act, and at the federal level under the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 et seq.
A trade secret is information, including a formula, pattern, technique, or method that is economically valuable because it is a secret. But of course, to qualify as a trade secret, the information must actually be a secret. In other words, reasonable efforts to maintain the secrecy of your recipes or processes are required for protection under trade secret law. This means you cannot share your recipe with every new employee and expect the law to protect it if it leaks.
Practically speaking, protecting your recipes as trade secrets requires: (1) identifying which recipes and processes are your most valuable secrets; (2) implementing access controls so that only employees who need to know the recipe to do their job have access to it; (3) requiring all employees with access to confidential information to sign confidentiality agreements; and (4) training employees on the confidentiality requirements that apply to their work. Taking these steps creates a record that demonstrates reasonable efforts to maintain secrecy — a record that is essential in any trade secret litigation.
Non-compete agreements can be powerful tools for protecting a brewery’s investment in training employees and developing proprietary processes — but they must be carefully drafted to be enforceable. Courts in most states apply a reasonableness standard to non-compete agreements, requiring that the restriction be reasonable in scope (what the employee is prohibited from doing), geographic reach (where the restriction applies), and duration (how long the restriction lasts).
For craft breweries, a reasonable non-compete might prohibit a head brewer who has been trained in the brewery’s proprietary methods from joining a direct competitor within a defined geographic area for one to two years following the end of employment. An overly broad non-compete — one that purports to prohibit the employee from working in the brewing industry anywhere in the country for five years — is unlikely to be enforced and may be struck down entirely in jurisdictions that apply an all-or-nothing approach rather than the “blue pencil” doctrine of narrowing overbroad agreements.
It is also important to note that non-compete enforceability law has been in flux. The FTC issued a rule in 2024 broadly banning most employee non-competes, though that rule faced significant legal challenges. Michigan has its own non-compete statute, MCL § 445.774a, which permits non-competes that are reasonable as to duration, geographic scope, and the type of employment or line of business. Any non-compete agreement for your brewery employees should be drafted by counsel familiar with current Michigan law and any applicable federal developments.
Beyond intellectual property, craft breweries must navigate the licensing requirements administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB) and the Michigan Liquor Control Commission (MLCC). A federal Brewer’s Notice is required before producing beer for sale. Michigan brewery licensing requirements depend on the type of brewery operation — microbrewery, brewpub, or production brewery — and impose specific restrictions on where and how beer can be sold directly to consumers.
Label approval from the TTB is required for beer sold in interstate commerce. The label approval process — formally called Certificate of Label Approval (COLA) — requires that labels comply with TTB regulations governing required information, prohibited claims, and standards of fill. Getting labels right before printing saves the expense of redesign and reprinting after a rejection.
Many craft breweries are co-founded by two or more individuals who contribute different skills and resources to the venture. Without a written partnership or operating agreement, the legal default rules governing business disputes — which vary by state and entity type — may produce outcomes that none of the founders intended. A co-founder who wants to exit the business, a dispute over ownership of the brewery’s brand, or a disagreement about whether to accept an acquisition offer are all situations where a well-drafted agreement is essential to a fair resolution.
Operating agreements for brewery LLCs should address ownership percentages, capital contribution requirements, profit distribution, management authority, decision-making thresholds for major actions, buy-sell provisions triggered by a co-founder’s departure or death, and restrictions on transfers of ownership interests. Getting these provisions right at formation is far less expensive than litigating a co-founder dispute years later.
Revision Legal represents craft breweries throughout Michigan and across the country on trademark registration, trade secret protection, non-compete agreements, licensing compliance, and business litigation. Whether you are launching a new brewery, protecting your existing brand, or managing a business dispute, we have the experience to help. Contact us today to discuss your brewery’s legal needs.
The best time to build your brewery’s intellectual property protection framework is before you need it — before a competitor files a similar trademark, before a former brewer takes your recipes to a competing operation, or before a departing partner claims ownership of the brand you built together. Proactive legal planning is far less expensive than reactive litigation. Contact Revision Legal’s brewery attorneys to discuss a protection plan tailored to your brewery’s specific assets, stage of growth, and competitive environment.
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