“BOURBON JUSTICE: HOW WHISKEY LAW SHAPED

AMERICA”

CLE Credit: 1.0 Friday, June 14, 2019

9:00 -10:00 a.m. Combs-Chandler Galt House Hotel

Louisville, Kentucky

A NOTE CONCERNING THE PROGRAM MATERIALS The materials included in this Kentucky Bar Association Continuing Legal Education handbook are intended to provide current and accurate information about the subject matter covered. No representation or warranty is made concerning the application of the legal or other principles discussed by the instructors to any specific fact situation, nor is any prediction made concerning how any particular judge or jury will interpret or apply such principles. The proper interpretation or application of the principles discussed is a matter for the considered judgement pf the induvial legal practitioner. The faculty and staff of this Kentucky Bar Association CLE program disclaim liability therefore. Attorneys using these materials, or information otherwise conveyed during the program in dealing with a specific legal matter have a duty to research the original and current sources of authority.

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TABLE OF CONTENTS

The Presenter .................................................................................................................. i

“Bourbon Justice: How Whiskey Law Shaped America” .................................................. 1

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THE PRESENTER

Brian F. Haara 101 South Fifth Street Suite 3600 PNC Tower Louisville, Kentucky 40202 www.brianhaara.com BRIAN HAARA is a business litigator in Louisville, Kentucky, recognized by Martindale-Hubble, Best Lawyers, and Super Lawyers. Mr. Haara’s practice includes litigation of business (including bourbon trademark litigation), insurance, and real estate disputes. His Sixth Circuit victory in Sazerac Brands, LLC v. Peristyle, LLC was recognized by Law360 as a “Top 10 Trademark Ruling of 2018” for establishing historic rights under the fair use defense. While already a bourbon enthusiast for decades, Mr. Haara’s practice led him to discover that bourbon law tracks the growth of the United States, from conquering the wild frontier, to rugged individualism, to the entrepreneurial spirit, to establishing a nation of laws. U.S. legal history was often developed around whiskey, covering many substantive areas of the law, like trademark, breach of contract, fraud, governmental regulation and taxation, and consumer protection. The interplay between bourbon, law, and history led Brian to blogging on the popular site, Sipp’n Corn®, which quickly developed into media credentials for numerous bourbon-related events, collaboration with retailers to select private barrels, inclusion in the documentary, Straight Up: Kentucky Bourbon, where he had a brief role on bourbon history and law, and ultimately his book released in November 2018, Bourbon Justice: How Whiskey Law Shaped America.

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BOURBON JUSTICE © 2019 Brian F. Haara. All Rights Reserved.

Historically, Kentucky bourbon is responsible for the growth and maturation of many substantive areas of the law, like contract, fraud, governmental regulation and taxation, and consumer protection. Bourbon also provided the bedrock for current-day trademark law, and this one-hour program provides a brief history of bourbon as seen through trademark litigation from the 1880s through today. Bourbon Justice: How Whiskey Law Shaped America tells the real history of Kentucky’s famous spirit by using only historic lawsuits between the early distillers. These old lawsuits not only expose long-lost facts, but they also reveal the historical shenanigans and maverick mentality that are part of bourbon’s rich heritage. It’s a fast-paced read because by using dusty lawsuits as the delivery method, I can tell stories instead of just reciting dry historical facts. But it’s not fast enough of a read to pack into a one-hour CLE seminar. Bourbon is the most dominant contributor to laws and customs that we take for granted today. From trademark law, to consumer protection, to the phrase “brand name,” to workplace safety reforms, and protection against illegal searches and seizures, bourbon led it all. Given the time constraints, this CLE, these materials, and the PowerPoint presentation focus on bourbon’s early influence on trademark law and show how bourbon remains a guiding industry in the continued development of trademark law today. I. BOURBON BACKGROUND

Bourbon and law might seem, to the casual observer, to be connected only in negative ways: Prohibition, illegal stills, and organized crime. While nostalgic in many respects, those connections focus on lawlessness. Lawlessness, however, is the mere tip of the proverbial iceberg for bourbon; the real history of bourbon, hidden beneath the surface, is the foundation of American commercial law and its relation to American history as a whole. American history and bourbon history have each told their separate stories, occasionally intertwined, but never have their connected stories been told exclusively through lawsuits. So much of bourbon history has been lost, sometimes because records and accounts were not kept and other times because records and accounts were swept away during Prohibition. Distillers from the 1800s and early 1900s did not trouble themselves with memorializing their craft for anyone other than their son or apprentice, and first-person accounts are rare. Because of this lack of traditional historical evidence, lawsuits are an abundant resource not just for information, but for facts that satisfied rigorous evidentiary standards, or withstood the pressure of cross-examination, and were found to be reliable. Lawsuits might be the best source of facts. And only bourbon can claim the title of being distinctively – and legally – American.1 Congress did not officially recognize this distinctiveness until 1964, but bourbon

1 S. Con. Res. 19, 88th Cong., 78 Stat. 1208 (May 4, 1964).

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had certainly been uniquely American since the first drop of majority-corn distillate was barrel-aged.

II. BOURBON BASICS

But first, what is bourbon? That question is a bit more complicated than might be anticipated. “What is whiskey?” is a broader question, and a little easier to answer. Whiskey is, essentially, in its most basic form, a spirit distilled from grain. The type of grain(s) used, the location of distillation, and nature of aging, along with many other factors, then dictate the type of whiskey (or “whisky”), including broad categories such as Scotch, Irish, Canadian, or Japanese, and innumerable subcategories. “Whisky,” as a general term, is defined by law in the United States as “an alcoholic distillate from a fermented mash of grain produced at less than 190° proof in such manner that the distillate possesses the taste, aroma, and characteristics generally attributed to whisky, stored in oak containers (except that corn whisky need not be so stored), and bottled at not less than 80° proof, and also includes mixtures of such distillates for which no specific standards of identity are prescribed.”2 Bourbon is a type of whiskey, and many distillers and legal opinions remind us that “all bourbon is whiskey, but not all whiskey is bourbon.” In order to be bourbon, the whiskey must be made in the United States, and must strictly meet these criteria:

• Made from fermented mash of not less than 51 percent corn;

• Distilled to not more than 80 percent alcohol by volume (“ABV”) (160 proof);

• Stored at no more than 62.5 percent ABV (125 proof);

• Stored in charred new oak containers; and

• Because it is “whisky,” bottled at no less than 40 percent ABV (80 proof).3

Importantly, the word bourbon cannot be used to describe any whiskey not produced in the United States.4 Other countries have acknowledged this territorial naming right as well, through several agreements, including the North American Free Trade Agreement, the United States-European Union Agreement on Nomenclature of Distilled Spirits, and the United States-Australia Free Trade Agreement, which all recognize bourbon whiskey as a distinct product of the United States.

2 27 C.F.R. §5.22(b). 3 See 27 C.F.R. §5.22(b)(1)(i). 4 27 C.F.R. §5.22(l)(1).

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III. BOURBON BRANDING

One of the most important – and valuable – historical and present-day legal issues involving bourbon is protection of brand names. But first, bourbon supplies the answer to how products or company names came to be known as a brand. Beginning in the 1800s, federal law required that “the name of the distiller shall be stamped or burned upon the head of every package of distilled spirits put into bonded warehouses, and this must not be erased until the package is empty.”5 The phrase “brand name” was born from this federal law and the branding of barrels by distillers, and then it spread to other manufactured goods. Because whiskey was often sold by the barrel, the brand on the barrel head was important. (Selling by the barrel created its own problems, like refilling with lesser-quality bourbon, blending with lesser-quality bourbon, or watering it down to make it last longer. Those issues were addressed by the innovation of bottling with signed seals over the closure.) A barrel branded with “Old Crow” could be sold for a higher price, whether sold in bulk or upon resale. So, just as “brand names” today are highly sought after and protected, early distillers fought hard to protect their brand names.

IV. BOURBON’S PRECURSOR TO THE FAIR USE DEFENSE

Bourbon litigation helped define the parameters of brand name protection, including by limiting the use of one’s own family name. The “Labrot & Graham Distillery” is what Brown-Forman called its distillery in Woodford County, Kentucky, when it began producing Woodford Reserve, although it has since renamed the distillery the “Woodford Reserve Distillery.” The original name of the distillery, however, plowed new ground for brand name rights and defenses. Elijah Pepper started distilling in Woodford County in 1812. After he died, his son, Oscar Pepper, completed a new limestone distillery building in 1838, and the distillery became known as the “Old Oscar Pepper Distillery.” By 1833, and through 1855 (except for two years), Oscar Pepper employed the venerable James Crow as his distiller, and the distillery was renowned for its bourbon and for refining and defining what we know as bourbon today. The case of Pepper v. Labrot picks up the story after Oscar died and his son, James, owned the property.6 James Pepper produced the “Old Oscar Pepper” brand, also known as “O.O.P.” bourbon.7 But he experienced financial hardships

5 Kentucky Distilleries & Warehouse Co. v. Wathen, 110 F. 641, 642-43 (C.C. W.D. Ky. 1901) (citing Section 3295, Rev. St., as amended by the act of July 16, 1892, 27 Stat. 201). 6 Pepper v. Labrot, 8 F. 29 (C.C.D. Ky. 1881). 7 Id. at 38.

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and was declared bankrupt in 1877.8 After a series of short-term owners, the property was finally sold to Labrot & Graham.9 James Pepper’s financial fortunes seemed to have reversed, and he built a new distillery on Old Frankfort Pike in Lexington.10 There he hoped to continue to trade on his father’s name and the tremendous reputation achieved by his father and James Crow.11 The problem was that Labrot & Graham was using the “Old Oscar Pepper” brand and was still calling the distillery the “Old Oscar Pepper Distillery.”12 James believed that only he should be able to use the “Pepper” name, and in 1880 he filed a lawsuit in federal court to gain back part of what he had lost in bankruptcy.13 Specifically, James claimed that the Old Oscar Pepper brand that he burned on barrel heads was his trademark:14

After James lost the property, and after the eventual acquisition by Labrot & Graham, Labrot & Graham used a similar brand for its barrel heads, and specifically used the name “Old Oscar Pepper Distillery”:15

8 Id. at 33-34, 39. 9 Id. at 39. 10 Id. at 34. 11 Id. 12 Id. at 31-32. 13 Id. at 30. 14 Id. at 31. 15 Id. at 31.

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Labrot & Graham responded to the lawsuit by explaining that it was using the name “Old Oscar Pepper Distillery” properly because the distillery it now owned was called the “Old Oscar Pepper Distillery.”16 The court posed two questions: (1) should Labrot & Graham be forced to change the name of a distillery that it purchased and denied the right to call the distillery by its name, and, conversely, (2) should James Pepper be allowed to continue to use the name of his father’s former distillery, when his new bourbon was not distilled there?17 As might be expected by the way the court presented these questions, Labrot & Graham won the case.18 The court ruled that reference to “Old Oscar Pepper’s Distillery” meant the place of production, and was not a trademark.19 Moreover, James could not truthfully use the phrase since he no longer owned the Old Oscar Pepper Distillery.20

V. BOURBON’S TOP LITIGANT

Colonel Edmund Haynes Taylor, Jr. made his mark on bourbon law through a series of cases from the late 1800s and early 1900s that helped establish the boundaries for trademark protection in a name. Colonel Taylor acquired his first distillery on the banks of the Kentucky River in 1869. He christened his distillery the “O.F.C.” (“Old Fire Copper” or “Old Fashioned Copper”) Distillery and there he produced the famous O.F.C. whiskey brand. While “O.F.C.” was the focus, Colonel Taylor adopted a script signature as part of his branding:

16 Id. at 32. 17 Id. at 39. 18 Id. 19 Id. at 41. 20 Id.

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As described in Newcomb-Buchanan Co. v. Baskett, Colonel Taylor’s troubles were brewing at least by the spring of 1875.21 Just months before the running of the first Kentucky Derby, Colonel Taylor sold 150 barrels to J. S. Baskett, a Henry County farmer.22 But then Colonel Taylor sold the same 150 barrels to Newcomb-Buchanan Co. (one of the largest distillery groups in Kentucky at the time).23 Newcomb-Buchanan, in turn, sold 25 of Baskett’s barrels and credited Taylor’s account, shipped another 101 of Baskett’s barrels to George T. Stagg in St. Louis to cover debt Colonel Taylor owed to Stagg, and still had the remaining barrels when Baskett came looking for his bourbon during the summer of 1877.24 Colonel Taylor was nowhere to be found. It has been reported that Colonel Taylor fled to Europe and left one of his sons behind to deal with the creditors – but the court simply noted that “In May, 1877, Taylor left the state on account of pecuniary troubles,” so Baskett sued Newcomb-Buchanan.25 Newcomb-Buchanan defended on the ground that it simply did not know about Baskett’s ownership of the barrels. The court of appeals ruled in favor of Baskett, reasoning that Newcomb-Buchanan never had an ownership interest in the barrels because Colonel Taylor never had the right to (re-)sell the barrels in the first place, and instructed the trial court to assess damages in favor of Baskett.26 Colonel Taylor’s debt went far beyond what might be saved by a double sale, however. He needed a buyout, and he needed it fast. In December 1877 George T. Stagg, a St. Louis whiskey merchant and a large creditor of Colonel Taylor, bought Colonel Taylor out of bankruptcy by paying twenty cents on the dollar to the creditors.27 In exchange, Stagg became the owner

21 Newcomb-Buchanan Co. v. Baskett, 14 Bush 658, 77 Ky. 658 (1879). 22 Id. at 661. 23 Newcomb-Buchanan Co. v. Baskett, 14 Bush at 661. 24 Id. at 661-62. 25 Id. at 662. 26 Newcomb-Buchanan Co. v. Baskett, 14 Bush at 666.

27 Geo. T. Stagg Co. v. Taylor, 16 Ky.L.Rptr. 213, 95 Ky. 651, 27 S.W. 247, 248 (1894).

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of the O.F.C. Distillery and the O.F.C. trademark.28 Stagg leased the O.F.C. back to Colonel Taylor and O.F.C. whiskey “attain[ed] a phenomenal reputation.”29 A year later the success of Colonel Taylor and Stagg allowed them to build the Carlisle Distillery next to O.F.C., and they continued to enjoy great success.30 Stagg formed the E. H. Taylor, Jr. Company in 1879 and registered the “O.F.C.” trademark.31 Importantly, the trademark registrations focused on “O.F.C.” and not on the use of Colonel Taylor’s name.32 In time, however, the use of Colonel Taylor’s name became more and more prominent, finally resulting in the use, in 1880, of the well-known script signature.33 But this script signature was never protected by Stagg as a trademark.34 Stagg and Colonel Taylor parted ways toward the end of 1886, and effective January 1, 1887, the split was official.35 Stagg retained the O.F.C. and Carlisle Distilleries, and Colonel Taylor acquired for himself the J. S. Taylor Distillery in Millville, Kentucky, which had been owned and operated by one of Colonel Taylor’s sons before becoming part of Stagg’s E. H. Taylor, Jr. Co. in 1882.36 Colonel Taylor immediately formed a partnership with his sons, J. Swigert and Kenner, again using his name for the name of the business: “E. H. Taylor, Jr. & Sons.”37 He renamed the distillery the “Old Taylor Distillery” and immediately started using the same script signature that he had previously used with his O.F.C. bourbon, except he added “& Sons.”38 In the meantime Stagg, who formed the “George T. Stagg Co.” after his split with Colonel Taylor, was in the process of making improvements to the O.F.C. and Carlisle Distilleries, which remained idle for eighteen months.39 The court had no doubt that Stagg’s “ambitious purpose” was “to substitute his own name, or that of

28 Id. 29 Id. 30 Id. at 249. 31 Id. at 248-49. 32 Id. 33 Id. at 249. 34 Id. at 250. 35 Id. 36 Id. 37 Id. 38 Id.

39 Id.

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the corporation bearing his name, as the distiller and proprietor of the famous O.F.C. and Carlisle Distilleries.”40 However, when Stagg resumed production in January 1889, he started using Colonel Taylor’s script signature instead.41 So, Colonel Taylor sued Stagg on October 16, 1889, asking for an injunction to stop Stagg from using the company name of “E. H. Taylor, Jr. Co.” or his script signature, and for monetary damages.42 The Franklin Circuit Court noted in its 1891 judgment that Colonel Taylor had named his distillery the O.F.C. and that the trademarks consisted only of the O.F.C. and Carlisle names; Colonel Taylor’s script signature used on the free end of barrels and on labels was not part of the trademark.43 This ruling gave Colonel Taylor the exclusive right to use his name and script signature, and the trial court ruled that it was “untruthful” for Stagg to use Colonel Taylor’s name in any way for whiskey made after January 1, 1887.44 After an appeal by Stagg, in 1894 the Kentucky Court of Appeals agreed and sided with Colonel Taylor, prohibiting Stagg from using the script signature on any bourbon distilled after January 1, 1887 (because Colonel Taylor was the distiller before that date).45 Appeals continued through 1902 but ultimately upheld Colonel Taylor’s right to use his own name.

VI. BOURBON’S INFLUENCE ON TRADE DRESS

Ever since Maker’s Mark began production in 1958, after Bill Samuels, Sr. struck out on his own, Maker’s Mark has capped its bottles with a red wax seal that partially covers the neck of the bottle and drips down to the bottle’s shoulder. As noted by the district court in Maker’s Mark Distillery, Inc. v. Diageo North America, Inc., “That design was the brainchild of Margie Samuels, mother of Maker’s Mark’s current president Bill Samuels, who was still at home when his mother perfected the dripping wax in their family’s basement.”46 Maker’s Mark registered this trademark in 1985, describing it as the “wax-like coating covering the cap of the bottle and trickling down the neck of the bottle in a freeform irregular pattern.”47 This move coincided with an extensive marketing push by Maker’s Mark, and through even more marketing the company eventually

40 Id. at 250-51. 41 Id. at 251. 42 Id. at 248. 43 E. H. Taylor Jr. & Sons v. Geo. T. Stagg Co., Franklin Circuit Court, April 9, 1891 Order, at 1-2. 44 Id. at 8. 45 Geo. T. Stagg Co. v. Taylor, 27 S.W. at 251. 46 Maker’s Mark Distillery, Inc. v. Diageo North America, Inc., 703 F.Supp.2d 671, 680-81 (W.D. Ky. 2010).

47 Id. at 681.

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reversed its ratio of selling 90 percent of its bourbon in Kentucky to selling 90 percent of its bourbon outside of Kentucky.48 Problems arose in 2001 when Diageo – the world’s largest spirits company – marketed “Jose Cuervo Reserva de La Familia,” which used a red freeform wax-like seal cap.49 After Maker’s Mark filed its complaint in 2003, Jose Cuervo started snipping the wax tendrils on the Reserva de La Familia bottles, although it continued to use a red wax seal. Diageo also used the lawsuit to go on the offensive, asking the court to cancel Maker’s Mark’s trademark on the ground that it was functional and because other alcoholic beverages were already being sealed in colorful wax.50 On April 2, 2010, the district court ruled that Diageo had infringed on Maker’s Mark’s trademark, and therefore it issued an injunction in favor of Maker’s Mark.51 On appeal52 Diageo argued that purchasers of Jose Cuervo Reserva de la Familia – a $100 per bottle luxury tequila – were unlikely to ever be confused that their prized tequila was affiliated with an inexpensive bourbon like Maker’s Mark. Plus, Diageo argued, Maker’s Mark was hardly the first company to use a dripping wax seal on a bottle. Wax seals have been used for centuries, and Diageo emphasized that Bill Samuels admitted that the inspiration for the Maker’s Mark free-form wax coating was old Cognac bottles with wax seals and an irregular or uneven edge. Maker’s Mark’s experts admitted that numerous other bourbons and other spirits have used red wax seals or dripping wax seals. Wines and even beers have also used wax seals, many of them red, and many with tendrils. Nonalcoholic products such as olive oil and vinegar have also used red dripping wax seals. So, why should Maker’s Mark get special protection? The answer to that question became evident by reading only the opening lines of the Sixth Circuit’s May 9, 2012 ruling, emphasizing that while bourbon has distinct economic force, it also is entitled to protect its assets in the courts:

Justice Hugo Black once wrote, “I was brought up to believe that Scotch whisky would need a tax preference to survive in competition with Kentucky bourbon.” Dep’t of Revenue v. James B. Beam Distilling Co., 377 U.S. 341, 348-49 [1964] (Black, J., dissenting). While there may be some truth to Justice Black’s statement that paints Kentucky bourbon as such an economic force that its competitors need government protection or preference to

48 Id. 49 Id. 50 Id. at 682. 51 Id. at 704. 52 Maker’s Mark Distillery, Inc. v. Diageo North Am., Inc., 679 F.3d 410 (6th Cir. 2012).

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compete with it, it does not mean a Kentucky bourbon distiller may not also avail itself of our laws to protect its assets.53

The outcome became even clearer when the court gave a veritable history lesson about bourbon, discussing:

• the origin and history of bourbon;

• the difference between “whiskey” and “bourbon;”

• the different spellings of “whiskey” and “whisky;”

• bourbon mash bills and Dr. James Crow’s perfection of the sour mash method;

• early marketing of bourbon and early fans, like Ulysses S. Grant and Henry Clay;

• the rise and fall of rectifiers and President William Taft’s 1909 interpretation of the 1906 Pure Food and Drug Act;

• distiller consolidation after the repeal of National Prohibition;

• more name-dropping of bourbon fans, like President Harry S. Truman and Ian Fleming, who reportedly switched from martinis to bourbon;

• the action of Congress, in 1964, to designate bourbon as a “‘distinctive product of the United States,’ 27 C.F.R. § 5.22(l)(1), and prescribed restrictions on which distilled spirits may bear the label ‘bourbon’”;

• the Samuels family’s important role in the history of bourbon, including having been distillers since the 1783; and

• Maker’s Mark’s rise, especially after now legendary 1980 Wall Street Journal front-page article about Maker’s Mark, and craft bourbon generally, that garnered national attention for the bourbon, the red dripping wax seal, and the family behind it.54

Despite spending four pages on this significant history, the circuit court did not discuss any of the even longer history of tequila (dating back to the sixteenth century) or Jose Antonio de Cuervo’s purchase of a blue agave farm from King Ferdinand VI of Spain in 1758, and instead wrote a mere three sentences, only to

53 Id. at 414.

54 Id. at 414-17 (citing David P. Garion, “Maker’s Mark Goes Against the Grain to Make its Mark,” Wall St. J., Aug. 1, 1980, at 1).

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reference the name of the Cuervo brand, its initial use of a straight-edged wax seal, and its transition in 2001 to a “red dripping wax seal reminiscent of the Maker’s Mark red dripping wax seal.”55 Then the circuit court went on to affirm the injunction and the award of litigation expenses to Maker’s Mark, protecting Maker’s Mark’s exclusive use of its red dripping wax seal.56

Many other bourbon brands use wax seals today, but none use red, and all are neatly trimmed. No brand seems willing to use red wax at all, or free-form tendrils of any color. That seemed to be part of the district court’s reasoning for imposing an injunction: the court recognized that its ruling “also protects Maker’s Mark from other competitors or quasi-competitors in the industry, in that it may serve to discourage them from treading too closely on the mark.”57

VII. BOURBON BRINGS TRADEMARK LAW FULL CIRCLE Pepper v. Labrot broke new ground, bourbon trademark law established limitations on rights to use one’s own name, bourbon lawsuits clarified limitations on the scope of trademark protection, and bourbon law has emphasized the importance of its own history. This precedent spanning nearly 140 years culminated last summer in the most significant bourbon trademark case in decades, and its ruling has wide implications for all of trademark law. In Sazerac Brands, LLC v. Peristyle, LLC,58 the Sixth Circuit rejected Sazerac’s claims for trademark infringement, unfair competition, and false advertising under the Lanham Act and state law against owners of the historic Old Taylor Distillery in Millville, Kentucky.

55 Id. at 417. 56 Id. at 424-25. 57 Maker’s Mark Distillery, 703 F.Supp.2d at 705. 58 892 F.3d 853 (6th Cir. 2018).

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Colonel Taylor designed the Old Taylor Distillery to resemble a medieval castle with manicured lawns and ornate buildings, it was quickly regarded as a showcase property, and it was frequented by tourists and picnickers alike. Operating under the name “E.H. Taylor, Jr. & Sons,” Colonel Taylor developed the Old Taylor brand of bourbon at the Old Taylor Distillery. The Old Taylor Distillery stopped production during a severe downturn in the industry, and over time fell into near-apocalyptic condition. In April 2014, Peristyle, LLC purchased the property from an entity aptly named Old Taylor Partners, LLC. Peristyle focused first on the enormous job of renovating the property. It was not until almost a year after purchasing the property that Peristyle hired additional staff members, including master distiller Marianne Eaves, which garnered national attention because Ms. Eaves became the first female master distiller in Kentucky since Prohibition. From the beginning of the project, Peristyle planned to adopt a new name for the distillery and the goods and services that would be offered in connection with it, while still paying homage to the history of Colonel Taylor’s masterpiece. Before selecting a new name for the distillery, it was often referred to as “the historic site of the Old Taylor Distillery” or “the former Old Taylor Distillery,” although sometimes just the name “Old Taylor” was used. Historical signage at Castle & Key Distillery still refers to the Old Taylor Distillery. For example, “Old Taylor Distillery Erected 1887” is set in stone on the side of the castle:

Similarly, there are faded painted letters on the side of one of the warehouses that read “Old Taylor Distillery.” There also is a sign over the front entrance of the castle door that reads “The Old Taylor Distillery Company.” Sazerac’s claims arose largely out of the allegation that Castle & Key’s actions infringed or created confusion regarding its trademarks for Old Taylor and Colonel E.H. Taylor. So the stage was set – could Sazerac restrict the use of historical facts by preventing Castle & Key from using the historically-accurate geographic name of the property based upon Sazerac’s ownership of the Old Taylor and Colonel E. H. Taylor trademarks?

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The district court granted Castle & Key’s motion for summary judgment and denied Sazerac’s motion for summary judgment on July 14, 2017.59 Specifically, the district court held that Castle & Key had not used “Old Taylor” or “Colonel Taylor” in a way that identifies the source of Sazerac’s goods, and therefore Castle & Key’s use of “Old Taylor” and “Colonel Taylor” did not constitute trademark use as a matter of law. The district court reasoned that Castle & Key’s use of “Old Taylor” and “Colonel Taylor” was merely historical. For example, Castle & Key referred to the distillery as the “Former Old Taylor Distillery” and “The Historic Old Taylor Distillery” in Castle & Key’s promotional materials before it adopted the name “Castle & Key.” In each of these instances, the district court found that Castle & Key was recounting a historical fact. The district court went on to explain that Castle & Key “is advertising itself for what it is: a distillery first built by Colonel Taylor, subsequently abandoned, but once again purchased, renovated, and restored to life as Castle & Key.”60 Because Castle & Key had not used “Old Taylor” or “Colonel E.H. Taylor” in a way that identified the source of the parties’ goods, any reference to “Old Taylor” and “Colonel Taylor” fell outside the scope of liability under the Lanham Act.61 This ruling was based upon the district court’s application of a so-called “threshold test” used in the Sixth Circuit – in which a plaintiff must show “trademark use” in order for the Lanham Act to apply to the alleged use in the first place. Sazerac argued on appeal that the threshold test is inconsistent with the Lanham Act and should be overruled, relying on cases from the Second and Fourth Circuits, which have rejected such a threshold test.62 Notwithstanding what the Second and Fourth Circuits have held, however, controlling law in the Sixth Circuit must be followed by a panel, so absent an en banc review, the Sixth Circuit either had to apply the test or affirm under the fair use defense. The two defenses are similar in some respects. Classic fair use “is a defense to a charge of trademark infringement under which the junior user argues that it is not using a descriptive, geographically descriptive, or personal name designation in a trademark sense, but only to describe the defendant’s goods or services, or their geographic origin, or to name the person involved in running the business.”63 The fair use defense applies even if a plaintiff establishes that the defendant’s use of a

59 Sazerac Brands, LLC v. Peristyle, LLC, No. 3:15-CV-00076-GFVT, 2017 WL 4558022 (E.D. Ky. Jul. 14, 2017). 60 Id. at *5.

61 See Interactive Prods. Corp. v. a2z Mobile Office Solutions, 326 F.3d 687, 695 (6th Cir. 2003). This rule has been reaffirmed in subsequently-published decisions. See Grubbs v. Sheakley Group, Inc., 807 F.3d 785, 793-94 (6th Cir. 2015); Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 610 (6th Cir. 2009). 62 See, e.g., Kelly-Brown v. Winfrey, 717 F.3d 295, 307-08 (2d Cir. 2013), and Rosetta Stone, Ltd. V. Google, Inc., 676 F.3d 144, 169 (4th Cir. 2012). 63 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition §11:45 (4th ed. 2013).

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mark is likely to confuse the public.64 To prove fair use, the defendant invoking the defense must prove: (1) the defendant used the phrase other than as a trademark; (2) the phrase was used to describe the goods or services; and (3) the defendant exercised good faith.65 The evidence showed that Castle & Key’s references to “Old Taylor” or “Colonel E.H. Taylor” had been primarily descriptive, in that they described the location and history of its property, and that all references to phrases that included the Old Taylor and Colonel E.H. Taylor names had been made in good faith. Use of the descriptive term “distillery” helped add a geographically-descriptive dimension to the use, and while it is arguable that “Old Taylor Distillery” could be used under Pepper v. Labrot,66 because that case established the right to use the historically-accurate geographic name of a property, it was written long before trademark law was codified in the Lanham Act. In affirming the district court, the Sixth Circuit became the first court to formally recognize that the Lanham Act’s fair use defense can protect the use of a historically-accurate geographic name of a property, even when that name is part of a trademark.67 This conclusion opens new doors for those seeking to invest in historic properties and may provide protection if they intend to refer to the property’s historically-accurate name, even if there are trademark concerns. However, this protection is not absolute. If there is evidence that a party is using the trademark with the intention of exploiting the goodwill of the brand associated with the trademark, and not simply enjoying the goodwill inherent in the historic nature of the property, the fair use defense is unlikely to apply. The court emphasized that Castle & Key used Old Taylor “in a descriptive and geographic manner … to pinpoint the historic location where [Castle & Key] planned to make a new bourbon, not to brand that bourbon.”68 Similarly, the Sixth Circuit ruled that far from showing any intent to dupe consumers, Castle & Key “is not attempting to trade off the goodwill of Sazerac … [but, instead,] is enjoying the

64 KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 118-22 (2004); Hensley Mfg., 579 F.3d at 612. 65 Fortune Dynamic, Inc. v. Victoria’s Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1043 (9th Cir. 2010); see also Hensley, 579 F.3d at 612. 66 Pepper v. Labrot, 8 F. 29 (C.C.D. Ky. 1881). As noted earlier, Pepper recognized that the name

of a distillery stays with the physical location of the distillery, even when the distillery ownership changes and another company possesses a registered trademark containing that name. Id. at 38-39. 67 892 F.3d 853, 858-59 (6th Cir. 2018). Unlike the district court, the Sixth Circuit did not rely upon the “threshold” issue of trademark use. In fact, the court recognized the external criticism of the threshold question. Id. at 859-60; see also 4 McCarthy on Trademarks and Unfair Competition §23:11.50 (5th ed.) (describing the split between the Sixth and Second Circuit on the issue of the threshold question, and citing the Sixth Circuit’s commentary in Sazerac Brands that it “‘might wish to reconsider’ its position in a future case”). 68 Id. at 857.

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goodwill already ingrained in the property it purchased and is advertising itself for what it is: a distillery first built by Colonel Taylor, subsequently abandoned, but once again purchased, renovated, and restored to life as Castle & Key.”69 These facts helped demonstrate good faith by Castle & Key.70 Moreover, the historic signs that Sazerac complained about were not placed there by Castle & Key, but “adorned the building” before Castle & Key purchased the property, and Castle & Key did not use the signs in bad faith.71 In sum, the Sixth Circuit concluded that references to the “Old Taylor Distillery” – even when marketing a few limited events held on the property before it opened to the public – were “quite natural in view of the reality that every event occurred on the site: the Old Taylor Distillery. One way to make sure that people get to an event is to describe the location accurately. Fair use at each turn.”72 This ruling brought bourbon law full circle from 1881 to 2018. During that span of well over a century, bourbon law established rights and defenses under trademark law, limitations on rights to use one’s own name, consumer protection, and more – always relying on the importance of bourbon’s own history.

69 Id. at 858 (quoting Sazerac Brands, LLC v. Peristyle, LLC, No. 3:15-cv-67, 2017 WL 4558022, at *5 (E.D. Ky. July 14, 2017)). 70 Id. 71 Id.

72 Id. at 858-59.

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