AI created Collaborative brewing

Craft Collaboration

When two brewers create a collaboration beer, it usually results in an interesting beverage.  The breweries themselves also benefit when they share resources, expertise, and increased market visibility. However, no collaboration comes without some risks, and it is very important to be aware of the potential legal risks involved in such collaborations. Here are some common legal risks that breweries may face when collaborating on a project:

 

  1. Contractual Issues:

 

When collaborating, breweries rarely enter into formal agreements or contracts which outline the terms and conditions of their collaboration. Failing to clearly define each party’s rights, responsibilities, and obligations can lead to disputes and complications down the line. It is crucial to have things written down to address key aspects such as the limits of the collaboration, deliverables, timelines, revenue, publicity, ownership, and dispute resolution mechanisms.

 

  1. Intellectual Property (“IP”):

 

Collaborations may involve the creation or use of intellectual property, such as recipes, special ingredients, techniques, trademarks, or copyrighted materials. It is essential to establish clear ownership rights and address how IP will be used, licensed, or protected during and after the collaboration. It is important to know who owns what and how it can be used at the end of the project.  This can be problematic if down the road, one of the breweries is acquired and the new owners decide to use something that does not belonged to them.

 

  1. Liability and Indemnification:

 

Collaborations may expose breweries to liability risks. If one party breaches its obligations or causes harm to third parties during the project, it could lead to legal claims and financial losses. Imagine a co-branded collaboration beer that has an inadvertent contamination issue that causes significant spoilage.  Retailers and consumers might know to go to the brewery which actually produced the collaboration brew, but the supporting brewery may be asked for restitution on top of any bad press.  Further, if employees and other resources are shared, it is important to know which insurance policy will cover an accident.

 

  1. Compliance with Laws and Regulations:

 

Breweries collaborating on a brew must ensure compliance federal and state laws, alcohol regulations, as well as consumer protection laws, health and safety requirements, or employment laws need to be considered. Each brewery should be responsible for accurate record keeping and reporting within their own bonded space.  Brewers should also be aware that other areas of compliance could be a common responsibility if the roles of each brewery are not clearly spelled out.

 

  1. Dispute Resolution:

 

Disputes can arise between collaborating businesses, whether related to contractual issues, performance, or disagreements over project outcomes. Having a mechanism in place to resolve disputes, such as mediation, arbitration, or a specified jurisdiction for legal actions, can help prevent costly and time-consuming litigation.

 

To mitigate these legal risks, breweries should at a minimum outline their collaboration in writing.  It is also never a bad decision to consider consulting with legal professionals experienced in business collaborations, contracts, and intellectual property matters. They can help draft appropriate agreements, identify potential risks, and provide guidance to ensure a smoother collaboration process while protecting the interests of all parties involved. Of course, you will not need a written agreement when everything goes right, but you will definitely benefit from having one when things go wrong.

AI created collaborative brewing #2

It should be noted that this blog is for educational purposes only and does not constitute legal advice. This article, or contacting Apex, does not in any way form an attorney-client relationship. Speak to a licensed attorney if you need help or advice navigating the legal issues surrounding breweries. If you have any questions or would like to learn more, please contact George Ptasinski at george@apexlg.com or visit our website and blog.  You might also like to read “The Joint Venture Policy and The Parent-Subordinate Consistency Policy” or “Important Provisions for LLC Operating Agreements.”

 

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