Hershey's Demands Payment From Small Brewery Over Beer Made With Milk Duds, Jolly Ranchers

WAUCONDA, Ill. (CBS) -- A real David and Goliath situation has unfolded in the northwest suburbs of Chicago -- and it all has do to with beer. A small brewery is being pitted against candy behemoth The Hershey Company, as the latter tries to protect its product.

There is one brewery in Wauconda, Side Lot, and it's Phil Castello's.  "Single-barrel brewery -- we try and keep a pretty wide variety of styles of beer on tap at all times," Castello boasts.

The small business owner told WBBM-TV's Marie Saavedra that he can't believe the lengths to which Hershey's is going to battle him. He is five years into Side Lot Brewing, and is making a name for his business with creative beers. "The creativity's endless," he says.

But two of those creative beers landed him in hot water. "I never thought it could happen," Castello admits.

Side Lot Brewery in Wauconda, Illinois.

Side Lot's Halloween offerings featured a pale ale made with Jolly Ranchers, and a Milk Duds porter. Both were publicized on the brewery's website and social media - and it reached a law firm that represents Hershey's.

Hershey's in turn sent Castello a cease-and-desist letter for using its trademarked candies on Dec. 2. "It was scary!" Castello recalls. "You know, this is the year with anybody in the hospitality business, like you don't need another surprise."

He says he followed demands, getting rid of the beer and reporting his sales numbers. Then Monday brought another letter that says in order to settle with Hershey's, he has to pay that money back to the candy giant. "I was just kind of angry," Castello said. "It's like Hershey's is this billion-dollar corporation, and they're worried about a thousand square-foot bar that over two years made a little over $8,000 by saying we used Jolly Ranchers in beer."

But WBBM Legal Analyst Irv Miller says trademark law does not discriminate. "If you use a name that's protected, you have to suffer the consequences," Miller explains. "In any situation like this, you have to make a decision - do I want to fight it? Do I want to settle it? Do I want to somehow compromise it?"

Castello would love a compromise over what this lesson could cost his business. "Right now, I can't. I can't write you a check for $8,500," Castello said. "To find this little place, it baffles me that this, we would be a target."

WBBM reached out to Hershey's, and a spokesman says he understands the appeal of using the company's popular products as tie-ins. But he explains that the way Side Lot Brewing went about it was not the way to do it.

The documents say the brewery has to pay back that money by Jan. 4.