There is big news out of a federal court in San Diego. On Friday, the judge in two of the Tito’s labeling cases said it, loud and clear. Words matter — on labels. This is important because it was starting to get very confusing, what with all the label cases floating around, and many dismissals. There are at least eight separate Tito’s cases scattered around the country, and a couple dozen alcohol beverage litigations pending in recent months. Along the way, Judge Miller made it clear he is not too impressed with the rigor of TTB’s label review system, or the fact that the Tito’s “Handmade” Vodka labels have been approved on many occasions.
On Friday, November 20, 2015, in the U.S. District Court for the Southern District of California, Judge Jeffrey Miller issued two very similar Orders in two separate cases against Tito’s Vodka. The cases are:
– Hofmann v. Fifth Generation
– Cabrera v. Fifth Generation
In hindsight, Judge Miller’s November 20th Orders seem obvious. If the claim meant little to nothing, why would Tito spend zillions of dollars to make sure everyone knows his vodka is “handmade”? Why else would it be the main word on the main label, and throughout his marketing? Why else would it work so well, to shoot this brand to the top of a tall and slippery pole? In recent months Tito has argued that the term is mere puff. But I can’t think of any puff term that has a prayer of moving the bottles as well as a term, such as the one at issue, with a little more grit and traction. I don’t see the terms “premium,” “finest,” “smooth,” or any other agreed-upon puff terms getting anyone far, as compared to a term that is much more likely to actually mean something.
In a 17 page Order, Judge Miller denied Tito’s motion for summary judgment in Hofmann v. Fifth Generation, the first of many such cases. The Judge did likewise in a 14 page Order, in the Cabrera case. This means both cases have much greater odds of ending up at trial someday, even though most such cases are settled well before that. This also means the odds are much higher, that a judge or jury might actually tell us, someday in our lifetimes, what this inscrutable term actually means, and whether Tito’s is made thusly. Without having a strong opinion on whether Tito should win or lose, I do have a strong opinion that it is a huge copout to say, the term is simply too hard to define, or, as so many people on the internet like to say about it, “who cares.” For better or worse, my job is more or less about what words do, don’t, should, or shouldn’t mean, hence my deep interest in this case. A term like “bourbon” or “straight” means a lot, and that is good.
The Orders tend to say that TTB approval of the label and term at issue are determinative only to the extent TTB conducted a rigorous review. It is hard to say TTB’s review is other than non-rigorous, inasmuch as TTB quite clearly said they don’t even have any standards or rules around such a term. The plaintiffs argued, and the Judge agreed (in the Hofmann and Cabrera Orders), that “a federal regulator’s actions create a safe harbor only … where the agency’s actions ‘were the result of a formal, deliberative process akin to notice and comment rulemaking or an adjudicative enforcement action,’ and are therefore sufficiently formal to merit Chevron deference.” I have been interacting with TTB’s label review system on a daily basis for more than 25 years now. It would be preposterous to claim that the system has been anything close to formal, deliberative, or similar to an adjudication. Most of the time, no lawyers or neutrals are involved. Most of the time there is no evidence, and there are no evidentiary rules. Many times the system has all the rigor of a bouncer, at the trendiest nightclub, deciding whether you are cool enough to enter the club. Far less often, the system involves knowledgeable people, on opposing sides of an issue, with a plausibly neutral decisionmaker.
It is quite easy to illustrate this. Take a competing vodka; let’s call it Pedro’s. Pretend Pedro’s Vodka is demonstrably distilled in a humongous vodka plant, outside Texas, and shipped to Dallas in railroad …
We have been following various cocktail controversies in recent months, and we again thought of this one today because it appears that it got settled in recent days. Regardless of the exact, current, status, the main point remains — it really is possible to get into a full-blown trademark dispute over cocktail names, as this situation shows.
This tempest in a mug is all about … What do you need to make a real Dark ‘N Stormy®? According to Gosling Brothers Ltd.—the owner of several registered trademarks over DARK ‘N STORMY—any brand of ginger beer will do, but you better use Gosling’s Black Seal® Rum. Those planning to do otherwise may want to garnish their cocktail with a large wedge of trademark-infringement-defense.
By Frank Knizner, J.D. and Michael Volz, Attorney
A Dark ‘N Stormy®, like a Painkiller®, or a Sazerac™, is one of a handful of trademarked cocktails. On September 15, 2015, Gosling sued Pernod Ricard USA, LLC alleging that Pernod’s use of “Dark N’ Stormy” and “Black Stormy” in recipes and advertising containing Pernod’s Malibu line of rums infringed several of Gosling’s DARK ‘N STORMY registered trademarks. The case—Gosling Brothers Ltd. et. al. v. Pernod Ricard USA, LLC.—was filed in federal district court in Massachusetts.
The alleged trademark infringement stemmed from Pernod including cocktail recipes on its website for a “Dark N’ Stormy” containing Malibu Island Spiced Rum, and a “Black Stormy” containing Malibu Black Rum. Further, Pernod released a YouTube video demonstrating how to make a “Dark N’ Stormy” using Malibu Island Spiced Rum. (A lot of the links seem to be now removed.)
As with all trademark infringement claims, the issue here boils down to whether the allegedly infringing marks are likely to confuse consumers. While “Black Stormy” is similar to Gosling’s mark, “Dark N’ Stormy” is nearly identical to “Dark ‘N Stormy®”—the only difference being the location of the apostrophe. According to Gosling, the subtle differences between the marks were not enough to avoid consumer confusion. Specifically, Gosling contended that Pernod’s use of “Dark N’ Stormy” and “Black Stormy” was likely to confuse customers as to the source of Pernod’s goods, and as to whether Gosling approves, sponsors, or endorses Pernod’s goods. Gosling claimed that Pernod’s use of these phrases was “knowing, willful, [and] deliberate” and was “performed with the intent to trade off of Gosling’s goodwill and reputation tied to the iconic … [m]arks.” Gosling was seeking treble damages (i.e., three times any actual damages suffered by Gosling), preliminary and permanent injunctions barring Pernod from using the marks, and for Pernod to relinquish any materials bearing the marks.
Pernod’s decision to use “Dark N’ Stormy” and “Black Stormy” is particularly interesting because Gosling is known to police their trademarks relatively vigorously. Back in 2009, Gosling went after rum producer Zaya for an advertisement suggesting that Zaya Rum could be substituted for Gosling’s Black Seal® Rum in a Dark ‘N Stormy®. That same year, Gosling sent a cease and desist letter to the blog Inu Ā Kena after it asked readers “what’s the best rum for a Dark and Stormy?”
The “cocktail trademark enforcers”—Gosling, Sazerac, and Pusser’s—have typically gone after smaller producers, bars, and blogs for trademark infringement. So far, all of these disputes have been resolved well before reaching court. Until this week, this dispute seemed to be headed in a different direction. What’s more, unlike its prior enforcement measures, Gosling’s Complaint gives no indication that Gosling sent Pernod a cease and desist letter before filing suit.
Until the next sign of a dispute about cocktail names, this controversy should serve as a reminder that it’s not just brand names that can cause so many intellectual property disputes in the crowded beer, wine and spirits fields. It is also every part of your website, advertising and yes — indeed — even those cute and witty cocktail names.
This webinar is today. I should have put this up a long time ago to give you all a chance to sign up. Anyway, it should be great because where else can you get some Tom Cunningham and Simon Fleischmann for less than the cost of a few rounds of fancy cocktails? The signup link is here and it’s not too late to sign up. The topic is all the recent lawsuits like Tito’s, Maker’s Mark, Beam, etc. Tom and Simon are seasoned trial lawyers on the defense side, and I will cover the regulatory issues.
Kombucha law is on the front page of tomorrow’s Wall Street Journal. Because kombucha law is so interlinked with alcohol beverage law, this is to underscore some alcohol beverage points only touched upon lightly in the article (subscription required).
- TTB has decided that most kombucha is beer for tax and permit purposes.
- This is because it is fermented tea. It is beer rather than a “malt beverage” because it lacks hops and malted barley.
- Most kombuchas are over 0.5% alcohol by volume during production, but less than that amount after bottling and at consumption. These can be called over-under kombuchas.
- It is ok for a kombucha to be 0.5% alcohol by volume or higher, after bottling, but only if the product jumps through most of the hoops required for Budweiser. This would include permits, taxes, a Government Warning, no sales to minors, sales via the three tier system. These can be called over-over kombuchas.
- Unlike Budweiser, the legal requirements would not include TTB label approval, because, like gluten free beer, the product lacks the hops and malted barely that would otherwise confer labeling jurisdiction upon TTB.
- Most kombuchas need FDA rather than TTB labeling.
- The article mentions a few recent lawsuits on these topics. So far there are five class action lawsuits. Two of them allege that GT Dave’s Enlightened Kombucha has hundreds of percent more than the legal limit of alcohol, for a product marketed as non-alcoholic. One of them alleges similar for the Health-Ade brand.
- The biggest case is Retta v. Millennium Products, Inc. I say biggest because it is a nationwide class action suit, and it is much farther along in litigation, compared to the other cases. It was first filed in March of 2015 but it was only amended to include the alcohol claims as of October 8, 2015. Before that, the claims were based on allegedly exaggerated anti-oxidant claims. This case is filed in federal court in Los Angeles. The first three pages of the 85-page complaint are here.
- Two other class action lawsuits allege that the same brands grossly understate the amount of sugar.
Kombucha raises some great legal issues. Lately I have been saying that kombucha has a lot to do, to catch up with the law, and the law has a lot to do, to catch up with kombucha. For lots more information on this topic, see this post from just a few hours ago, covering a kombucha law webinar of last week. And for lots and lots more information on this topic, see AHPA‘s six or so recent hours of webinars on kombucha law. It was a great pleasure to be part of this webinar series.
For those without a Wall Street Journal handy, here are some juicy excerpts:
Federal regulators have fired off warning letters in recent weeks to some kombucha producers after finding alcohol levels above one-half of 1%, the U.S. dividing line between alcoholic and nonalcoholic drinks.
Two consumer complaints seeking class action status also were filed last month in California claiming deceptive practices in alcohol-content labeling by industry leader Millennium Products Inc., the maker of GT’s Enlightened and Synergy brands. One of the lawsuits allege alcohol levels of up to 3.8% compared with about 5% in beer.
Millennium and others dispute the government’s and the lawsuits’ alcohol-content allegations, and say the government’s method of testing is flawed. Millennium says its drinks’ alcohol content is below the U.S. limit for labeling alcoholic drinks.
And for those without Westlaw, here are some juicy excerpts from the Retta complaint:
Millennium Products, Inc. has passed off millions of bottles of its wildly successful kombucha beverages as non-alcoholic, when, in fact, the beverages contain two to seven times the legal limit for non-alcoholic beverages. Having been caught selling alcoholic kombucha beverages to unsuspecting customers in 2006 and 2010, Millennium decided to market and distribute an alcoholic version of its kombucha products (the “Classic” kombucha line) and a “non-alcoholic” version (the “Enlightened” line), knowing that the non-alcoholic line has a much greater market appeal and could be sold in far more retail locations. But the purported distinction between the “Classic” and “Enlightened” lines is a sham designed to confuse the public and government regulators, as both lines of products contain alcohol levels far surpassing the legal limit for non-alcoholic beverages.
Just like Ben Carson who finds himself newly in the spotlight for good (polls) and bad (almost stabbing a person with other than a scalpel), kombucha has so arrived. It faces the glare of TTB, the courts, the plaintiffs bar, AHPA, the press and Rep. Polis.
Last week I had the honor of participating in AHPA‘s webinar on kombucha law. Part of the recording is above and here. The American Herbal Products Association has been active since 1982, and now has more than 300 food, beverage and supplement members. It was an honor because of the eminence of my co-presenters:
- Justin Prochnow, FDA lawyer at Greenberg Traurig, Denver
- Will Garvin, FDA lawyer at Buchanan Ingersoll, Washington
- Peter Evich, Lobbyist, Van Scoyoc Associates, Washington
- Art Libertucci, Consultant, The Buckles Group, Washington
Justin spoke on bottle bills issues. Will covered FDA labeling. Peter covered pending legislative issues. Art helped organize the webinar. I spoke on the various TTB issues raised by kombucha.
It was also an honor because the issues are so timely and challenging. Kombucha is surging in popularity. It raises difficult issues such as:
- is it beer, wine, cereal beverage, malt beverage, food, supplement, or some combination
- what TTB permits may be needed
- does it need FDA or TTB labeling, or both
- what taxes apply
- what penalties may apply, if you blow it
The entire video is about 2 hours, but I have chopped it down to the 30 minutes or so that covers the TTB issues (1-5 as listed above). The entirety, with about 20 minutes of questions and answers, is available from AHPA as here.