By: Amanda Connors

Liquor industry giant Sazerac Co. (Sazerac) has been involved in numerous trademark infringement lawsuits in recent years.[i] For example, in September, Sazerac filed suit against Stout Brewing Company LCC claiming that Stout Brewing tried “to pass off its own product [Fire Flask] as Fireball Cinnamon Whiskey.”[ii] The companies settled the dispute on Sept. 22, and Stout Brewing agreed to “cease selling its product with infringing labels and redesign its label.”[iii]

Sazerac also filed suit against Salt Tequila USA, LLC in September alleging the defendant company “applied last year to register two stylized versions of ‘Salt’ that the company uses as logos.”[iv] Sazerac claimed that allowing Salt Tequila to “monopolize the term would be ‘to the detriment of Sazerac and others in the alcoholic beverage industry’” because “salt is an integral part of tequila.”[v]

The above examples are likely the tip of the iceberg. “Today, trademark holders are using this course of conduct to expand their trademark rights, not just to object to truly objectionable uses.”[vi] Companies like Sazerac often send cease-and-desist letters, which regularly “are followed by hundreds of trademark infringement filings. These cases are almost never prosecuted on their merits. In fact, if prosecuted to a trial on their merits, the trademark holder/plaintiff would likely lose because they are not very meritorious claims.”[vii] The effect of this type of lawsuit is that new companies will face higher costs to be competitive in the market or be deterred from entering the market at all.[viii]

Kentucky expects twenty new distilleries to open within the next few years. [ix] Currently, distilling is the second largest industry in Kentucky, providing 15,400 jobs and $7.6 billion of economic output.[x] If Sazerac’s trademark infringement suits are meant to extort new distilleries, they may be discouraged from entering the market or may face higher costs to be competitive. Thus, fewer new industry jobs may be created and economic output in the distilling industry may grow at a slower rate.

As a result, Kentucky’s agriculture industry may also experience a lower growth rate. Since Kentucky “distillers buy 40 percent of the grain they use from in-state farmers,” the industry supports approximately “1,360 farm jobs and $56 million in farm output in Kentucky, and an additional 100 jobs in the agricultural support sector having a payroll of $2 million.”[xi] Kentucky farmers have the potential to “supply up to 80 percent of the state’s distiller’s grain needs.”[xii] If in-state farmers double their supply of grain to in-state distillers, “there would be an additional impact of 210 jobs with a payroll of about $5.7 million.”[xiii] The distilling industry also supports the state’s farming industry by selling or giving farmers spent grain used in the distilling process to be used as food for livestock.[xiv] If Sazerac continues to file predatory trademark infringement lawsuits, not only could the growth of Kentucky’s distilling industry slow, but the growth of the state’s agriculture industry may also be hindered.

[i] See generally Igor Kossov, Sazerac Settles Whiskey Trademark Lawsuit, Law360 (Feb. 10, 2015), http://www.law360.com/articles/619775/sazerac-settles-whiskey-trademark-lawsuit; Vin Gurrieri, Sazerac Fires Off Suit Over Cinnamon Whiskey Trademarks, Law360 (Feb. 14, 2012), http://www.law360.com/articles/309335/sazerac-fires-off-suit-over-cinnamon-whiskey-trademarks; Bill Donahue, Buffalo Trace Whiskey Sues Over Rival’s ‘Bison Ridge’ Product, Law360 (Feb. 28, 2014), http://www.law360.com/articles/514309/buffalo-trace-whiskey-sues-over-rival-s-bison-ridge-product; Bill Donahue, Brand Battles: Anheuser-Busch, Toronto Blue Jays, Sazerac, Law360 (Aug. 15, 2014), http://www.law360.com/articles/567722/brand-battles-anheuser-busch-toronto-blue-jays-sazerac; Bill Donahue, Brand Battles: MPAA, Diageo, ‘Wizard Of Oz’, Law360 (Apr. 18, 2014), http://www.law360.com/articles/529566/brand-battles-mpaa-diageo-wizard-of-oz; Sazerac v. Hood River Distillers, No. 3:12CV-79-S, 2012 U.S. Dist. LEXIS 180425 (W.D. Ky. Dec. 20, 2012).

[ii] Vin Gurrieri, Sazerac, Brewer Iron Out Fireball Trademark Dispute, Law360 (Sept. 24, 2015), http://www.law360.com/articles/707041/sazerac-brewer-iron-out-fireball-trademark-dispute.

[iii] Id.

[iv] Bill Donahue, Brand Battles: Conan Doyle Estate Eyes ‘Sherlock Homeboy’, Law360 (Sept. 11, 2015), http://www.law360.com/articles/701815/brand-battles-conan-doyle-estate-eyes-sherlock-homeboy-.

[v] Id.

[vi] Kenneth L. Port, Trademark Extortion: The End of Trademark Law, 65 Wash. & Lee L. Rev.

585, 589 (2008).

[vii] Id.

[viii] Id. at 602-604.

[ix] Barry Kornstein & Jay Luckett, The Economic and Fiscal Impacts of the Distilling Industry in Kentucky 4 (Univ. of Louisville 2014), available at http://usi.louisville.edu/wp-content/uploads/2014/12/KDA-USI-Final-Report-2014.pdf.

[x] Id. at 31.

[xi] Id. at 4.

[xii] Id.

[xiii] Id.

[xiv] Id. at 5.