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Sunday, April 6, 2014

Churchill Downs Distilling Co. v. Churchill Downs, Inc. – Bourbon and The Kentucky Derby Collide.


It’s finally warm in Louisville and Derby fever is about to strike again in Kentucky and beyond.  So in celebration of the upcoming 140th running of the Kentucky Derby on May 3, 2014, I found yet another example of how bourbon history and American law are intertwined. 

Just as bourbon litigation has guided American courts and helped develop the then-emerging areas of unfair competition, consumer fraud and trademark protection, bourbon played a critical role in the notion that a trade name could be protected outside of the actual business pursuit of the owner.  In Churchill Downs Distilling Co. v. Churchill Downs, Inc., 262 Ky. 567 (1936), the Court of Appeals of Kentucky (Kentucky’s highest court at the time) established the right of an owner to protect his trade name against use by anyone else.  Imagine if the name “Coca-Cola” could be used by any business that didn’t sell beverages; a bourbon lawsuit helped change that.

It all started in 1933, when B. J. Frentz decided to get into the whiskey business by opening “Churchill Downs Distilling Co.” in Nelson County, Kentucky, about thirty miles from Louisville.  None of his business partners were named “Churchill” or “Downs,” and he had no connection whatsoever to the real Churchill Downs, but he used that name prominently on his bottles, along with identifying Louisville as his place of business.  His label included an image of the grandstand located at Churchill Downs, along with horses and jockeys racing on a track.

The real Churchill Downs had never agreed to the use of its name in this manner.  Mr. Frentz even admitted in his testimony that he used the name “Churchill Downs” precisely because it was well-known and he hoped it would increase sales.  He admitted that there was no connection with the real Churchill Downs and that he was trying to profit from the reputation of Churchill Downs, which since opening and featuring the first Kentucky Derby in 1875, had gained worldwide renown.

It seems obvious to us now that Mr. Frentz was not allowed to profit from the reputation of Churchill Downs by using its name without its permission.  But that wasn’t necessarily the law in 1933.  Mr. Frentz argued that the law only protected the name “Churchill Downs” from use by competitors, and a company’s goodwill in its name only extended to its own actual line of business.  Since Mr. Frentz did not operate a horse racing track, he argued that he was free to use the name without permission or consequence, and he was able to cite plenty of cases that supported this argument.

But the Court decided to adopt an emerging trend in the law that expanded the scope of protection for unfair competition, so that it was not confined to actual market competition.  Instead, now the law would protect against use of a trade name by anyone else who tried to pass off his goods or services as being connected to or endorsed by that that business.

There was also a thread of protectionism in the Court’s opinion, or at least an extreme sense of pride in the history of Churchill Downs and the Kentucky Derby.  The Court recited the founding of Churchill Downs in 1875 and the running of the first Kentucky Derby, and added this flowery ode to the Derby:

Louisville has always been a great racing center, commencing in 1839.  In 1875, Colonel M. Lewis Clark was a spectator at the annual running of the English Derby, at Downs, England…  He acquired [land] from his uncles, John H. and Hugh Churchill… [and] named it Churchill Downs.  In the year 1875, at the racing plant, they inaugurated the Kentucky Derby, which was modeled in general outlines after the English Derby at Downs. 

Continuously since that date the soil of Churchill Downs has been a field of honor of the winners of the Kentucky Derby.  Chivalry springs from the handsome, polished horse.  The Kentucky Derby exemplifies Kentucky chivalry…  The Kentucky Derby is a true reflection-directly from the first derby at Epsom Downs.  For the Kentuckian it sums up all the history of his forbears, their nativity and horses.  To it, annually, pilgrimages are made from distant shores.  The élite, the middle class, the captains of industry with the occupants of cabins, from every section of our country, attend it, yet in them thereat is the democracy of peers…

The celebrity of the Kentucky Derby is in every country.  Each year the royal blood of the world’s turf competes thereat…  The name “Churchill Downs” is inextricably interlaced with the origin, history, and fame of the Kentucky Derby.  Indeed, in the esteem of the general public, they are synonyms-signifying the classic home of only cultured racers.

With that kind of endorsement of Churchill Downs, it should be no surprise that the Court affirmed an injunction against the distillery for its deceptive use of the Churchill Down name and prevented any further use.

This is all still relevant today, too.  Just last month, spirits giant Diageo was sued by The Explorer’s Club – a New York City club founded in 1904 – for Diageo’s alleged infringement on the name “Explorer’s Club.”  Diageo has used the name without permission since 2012 on its Johnnie Walker line in duty-free stores.  (Click here to see the Complaint.)  Maybe Diageo hasn’t read the Churchill Downs case.

Regardless, bourbon and Churchill Downs get along fine now, so sip your favorite bourbon while enjoying a spectacular Derby Day!


Photograph credit:  Item no. 1994.18.0853 in the Herald-Post collection, University of Louisville Photographic Archives, Louisville, Kentucky, accessed at: http://digital.library.louisville.edu/cdm/singleitem/collection/heraldpost/id/953/rec/10


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