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Sunday, December 29, 2013

Maker’s Mark v. Diageo – The Fight Over Bourbon’s Most Recognizable Trademark.


Until now, all of my posts about history-making lawsuits between distillers have involved really old cases.  Some have dated back practically to the birth of bourbon, like my post on the lawsuit between James Pepper and Labrot & Graham (How Woodford Reserve got to keep the (old) name of its Distillery), which traced events beginning in the late 1700’s.  The “newest” lawsuit discussed in my posts (the origin story of Maker’s Mark:  The Rise of Maker's Mark) still dealt with events occurring 70 years ago.  History is usually old by definition, but a decision not even two years ago helps show how the bourbon industry is still at the forefront of trademark law.  Even though it’s not old, it is already part of bourbon lore.

This new history, of course, was the lawsuit between Maker’s Mark and Diageo over trademark rights to the iconic dripping red wax seal.  Bill Samuels, Sr. broke from Country Distillers and struck out on his own, and ever since Maker’s Mark began production in 1958, it has capped its bottles with a red dripping 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., 703 F. Supp. 2d 671 (W.D. Ky. 2010), “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.”

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.”  This coincided with an extensive marketing push by Maker’s Mark, and through even more marketing ($22MM annually in 2010) Maker’s Mark eventually reversed its ratio of selling 90% of its bourbon in Kentucky to selling 90% of its bourbon outside of Kentucky.

Problems arose in 2001 when Diageo marketed “Jose Cuervo Reserva de La Familia,” which used a red freeform wax-like seal cap.  Here are the two competing products:

Maker’s Mark filed its Complaint in 2003 and that was enough for Jose Cuervo to start snipping the wax tendrils, although it continued to use a red wax seal and it used the lawsuit to ask the court to cancel the trademark registration on the ground that it was functional and because other alcoholic beverages were already being sealed in colorful wax.  A six-week trial was held beginning in November 2009.  Bill Samuels testified, along with then-Master Distiller Kevin Smith, company finance and marketing officers, and even experts on issues like markets and consumer recognition of brands, damages, wax composition, Maker’s Mark memorabilia and a bottle closures.

On April 2, 2010, the District Court ruled that Diageo infringed on Maker’s Mark’s trademark, and therefore it issued an injunction in favor of Maker’s Mark.  However, the District Court refused to award any damages because Maker’s Mark did not prove that anyone was actually confused or that it lost any sales.  But because Maker’s Mark won on the injunction claim, the Court awarded nearly $67,000.00 in costs to Maker’s Mark.

The case was far from over, however.  Diageo appealed to the United States Court of Appeals for the Sixth Circuit.  Maker’s Mark Distillery, Inc. v. Diageo North America, Inc., 679 F.3d 410 (6th Cir. 2012).  On appeal 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, especially Cuervo consumers, who “generally are tequila connoisseurs who spend more than $100 for a bottle of tequila, or $16-20 for a drink in a bar.”  Reading the brief, I could feel the pretentiousness dripping from those words.

Plus, Diageo argued that 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 freeform wax coating was old cognac bottles that had wax seals with 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.  Non-alcoholic products such as olive oil and vinegar have also used red dripping wax seals.  So why should Maker’s Mark get special protection?

You could have guessed the answer to that question by reading just the opening lines of the Sixth Circuit’s May 9, 2012 ruling, which followed with a veritable history lesson about bourbon, discussing:

·         the origin and history of bourbon;

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

·         the different spelling between “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, and Federal Regulations prescribing restrictions on which distilled spirits may be called "Bourbon;"

·         the Samuels family’s important role in the history of bourbon (“Maker’s Mark occupies a central place in the modern story of bourbon.”), including having been distillers since 1783; and

·         Maker’s Mark’s rise, especially after now-legendary 1980 Wall Street Journal front-page article.

Despite spending four pages on this significant history, the Circuit Court did not discuss any of the even longer history of tequila (16th Century) or Jose Antonio de Cuervo’s purchase of a blue agave farm from King Ferdinand VI of Spain (1758), and instead wrote a mere three sentences, only to 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.”  Then the Circuit Court went on to affirm the injunction and the award of costs to Maker’s Mark, protecting Maker’s Mark’s exclusive use of its red dripping wax seal.

Other bourbon brands still use wax seals, like my bottles of Evan Williams Single Barrel, Michter’s 10-Year Single Barrel and Knob Creek (like Maker’s Mark, also owned by Beam, Inc.), among many others.

But these are all black wax, and all neatly trimmed.  My guess is that no other current bourbon brand is willing to use red wax at all, and that we won’t see freeform tendrils of any color.  And 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.”  Mission accomplished.


Update:  
Here's a picture with retired federal Circuit Court Judge Boyce F. Martin, Jr., the author of the Court of Appeals opinion, when Judge Martin and I were filmed in January 2015 for the upcoming documentary Straight Up: Kentucky Bourbon from Beard Force Films. 

2 comments:

  1. I am pleased that bourbon won this case, not because I care especially for ownership of any mark, merely that I am happy for the bourbon. I appreciate the interesting article, which goes beyond the usual "tasting" ones that, although are read as well, are widely available. This kind is rare and spices it up some.

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