Sazerac Brands, LLC v. Peristyle, LLC

• Decision Date: 14 June 2018
• Docket Number: 17-5997,Nos. 17-5933,s. 17-5933
• Citation: 892 F.3d 853
• Parties: SAZERAC BRANDS, LLC, a Delaware limited liability company; Sazerac Company, Inc., a Louisiana corporation, Plaintiffs-Appellants/Cross-Appellees, v. PERISTYLE, LLC, a Kentucky limited liability company; Peristyle Holdings, LLC, a Kentucky limited liability company, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

892 F.3d 853

SAZERAC BRANDS, LLC, a Delaware limited liability company; Sazerac Company, Inc., a Louisiana corporation, Plaintiffs-Appellants/Cross-Appellees,

v.PERISTYLE, LLC, a Kentucky limited liability company; Peristyle Holdings, LLC, a Kentucky limited liability company, Defendants-Appellees/Cross-Appellants.

Nos. 17-5933

17-5997

United States Court of Appeals, Sixth Circuit.

Argued: June 7, 2018

Decided and Filed: June 14, 2018

ARGUED: Brendan J. Hughes, COOLEY LLP, Washington, D.C., for Appellants/Cross-Appellees. Brian F. Haara, TACHAU MEEK PLC, Louisville, Kentucky, for Appellees/Cross-Appellants. ON BRIEF: Brendan J. Hughes, Michael J. Klisch, COOLEY LLP, Washington, D.C., Scott P. Zoppoth, THE ZOPPOTH LAW FIRM, Louisville, Kentucky, for Appellants/Cross-Appellees. Brian F. Haara, Melissa Mahurin Whitehead, Kristin E. McCall, TACHAU MEEK PLC, Louisville, Kentucky, for Appellees/Cross-Appellants.

Before: SUTTON, McKEAGUE, and DONALD, Circuit Judges.

OPINION

SUTTON, Circuit Judge.

Colonel Edmund Haynes Taylor, Jr., "the most remarkable man to enter the whiskey industry during the post-Civil War years," built the Old Taylor Distillery in 1887. Once the "most magnificent plant of its kind in Kentucky," the distillery fell into disrepair after the Colonel’s death. Will Arvin and Wesley Murry sought to turn things around. In 2014, they formed Peristyle to purchase the property, renovate it, and eventually resume bourbon production there. Peristyle regularly referred to its location at "the Former Old Taylor Distillery" or "Old Taylor" during the renovation period.

That generated heartburn for the next player in our case, Sazerac, a company that bought the trademark rights to "Old Taylor" and "Colonel E.H. Taylor" in 2009. Sazerac objected to Peristyle’s use of the Taylor name and sued Peristyle for infringement. Because Peristyle used the Old Taylor name descriptively and in good faith, it finds shelter under the Lanham Act’s fair use defense. We affirm.

I.

In the inimitable words of our late colleague Boyce Martin: "All bourbon is whiskey, but not all whiskey is bourbon." Maker’s Mark Distillery, Inc. v. Diageo N. Am., Inc. , 679 F.3d 410, 414 (6th Cir. 2012). Bourbon must be made from a grain mixture that is at least 51% corn. 27 C.F.R. § 5.22(b)(1)(i). It must be distilled to no more than 160 proof, barreled at no more than 125 proof, and bottled at no less than 80 proof. Id. It must be aged in charred new oak barrels. Id. And it is a drink of place: It must come from Kentucky.

Generally speaking. As busy bodies from other States like to point out, bourbon need not come from Kentucky, just the United States. Id. § 5.22(l). Hence its moniker: America’s native spirit. But let Kentucky have its due. Over 95% of the world’s bourbon flows from an old Kentucky home. Bourbon Facts , Kentucky Distillers’ Association (2018), https://kybourbon.com/bourbon_culture-2/key_bourbon_facts/. A constellation of circumstances gives the Bluegrass State unique advantages in making bourbon: the local creative spirits, long lost to history, who innovated the brew; the State’s pure limestone waters, plentiful oak trees, and a grain-friendly climate, all needed to produce the drink; the too-many-to-count hollows in the eastern part of the State, all needed to sustain the continued production of the drink during Prohibition; and a rich and richly preserved history of bourbon making that stretches back to the late 18th century, all part of the experience of drinking bourbon today.

One part of that history involves the legacy of distiller Colonel Edmund Haynes Taylor, Jr. A jack of all trades, Colonel Taylor brought together marketing, finance, quality control, and lobbying capabilities under one roof, giving rise to the modern bourbon industry. See Reid Mitenbuler, Bourbon Empire: The Past and Future of America’s Whiskey 152 (2015). One historian has called Colonel Taylor "the most remarkable man to enter the whiskey industry during the post-Civil War years" and "a bridge between the old ways and the new." Gerald Carson, The Social History of Bourbon: An Unhurried Account of Our Star-Spangled American Drink 87–88 (1963).

Taylor built the Old Taylor Distillery in 1887 in Woodford County, Kentucky. The distillery resembled a medieval limestone castle, surrounded by pergolas, pools, turrets, and gardens, earning distinction as the "most magnificent plant of its kind in Kentucky." Mitenbuler, supra , at 151. But beauty and success gave way to decay, and the distillery eventually fell into financial ruin. It exchanged hands several times in the decades after the Colonel’s death and even served as a consolidation warehouse during Prohibition. Production ceased for good in 1972.

Bluegrass natives Will Arvin and Wesley Murry entered the picture in 2014. They formed Peristyle, LLC to purchase and renovate the Old Taylor distillery with an eye to resuming bourbon production there. Peristyle has since renamed the property "Castle & Key" and intends to do business under that name going forward, including when marketing its bourbons and whiskeys in the years ahead. But during the renovation period, the company regularly referred to its location at "the Former Old Taylor Distillery" or simply "Old Taylor." E.g. , R. 109-28 at 3; R. 109-18 at 2.

That did not sit well with Sazerac, which owns the trademark rights to "Old Taylor" and "Colonel E.H. Taylor" and produces bourbons under both names. R. 1-2; R. 1-3. Sazerac sued Peristyle, alleging trademark infringement, unfair competition, and false advertising under the Lanham Act as well as common law trademark infringement, unfair competition, and passing-off violations. Peristyle counterclaimed on several grounds: trademark invalidity and cancellation, false designation of origin, false advertising, and unfair competition.

The district court granted summary judgment to Peristyle on all of Sazerac’s claims against Peristyle. But it did not rule on any of Peristyle’s counterclaims. Both parties now appeal.

II.

Jurisdiction . That last observation might suggest we lack jurisdiction over Sazerac’s appeal. Congress grants us appellate jurisdiction over final decisions of the district courts. 28 U.S.C. § 1291. And a decision customarily becomes final only after the district court ends litigation on the merits, leaving nothing to do but execute the judgment. Van Cauwenberghe v. Biard , 486 U.S. 517, 521, 108 S.Ct. 1945, 100 L.Ed.2d 517 (1988). That requirement at first glance seems to pose a barrier to this appeal because the district court has not yet resolved Peristyle’s counterclaims against Sazerac.

But in the Rules Enabling Act, Congress granted authority to the rule makers to define when a district court ruling is "final" under § 1291. 28 U.S.C. § 2072(c). To that end, Civil Rule 54(b) gives a district court judge this option: "When an action presents more than one claim for relief—whether as a claim, counterclaim, crossclaim, or third-party claim—or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay." The district court made that express determination here. We thus have appellate jurisdiction over the district court’s grant of summary judgment to Peristyle on all of Sazerac’s claims against it.

Trademark Infringement. Sazerac brings both Lanham Act and common law trademark infringement and unfair competition claims. Because Kentucky common law tracks federal law in this area, we apply a uniform framework. See Oaklawn Jockey Club, Inc. v. Ky. Downs, LLC , 687 Fed.Appx. 429, 433–34 (6th Cir. 2017).

The Lanham Act makes any person who uses "any word, term, name, symbol, or device" in a way that is "likely to cause confusion, or to cause mistake, or to deceive as to ... affiliation, connection, or association" liable to a senior trademark owner. 15 U.S.C. § 1125(a)(1)(A) ; see id. § 1114. The benchmark is whether the plaintiff has demonstrated a likelihood of consumer confusion, assessed via an eight-factor, nothing-is-off-the-table, totality-of-the-circumstances test. Frisch’s Rests., Inc. v. Elby’s Big Boy of Steubenville, Inc. , 670 F.2d 642, 648 (6th Cir. 1982) ; see Polaroid Corp. v. Polarad Elecs. Corp. , 287 F.2d 492 (2d. Cir. 1961) (Friendly, J.).

The Lanham Act also creates affirmative defenses. One of them is fair use. It applies when "the use of the name, term, or device charged to be an infringement is a use, otherwise than as a mark, ... of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin." 15 U.S.C. § 1115(b)(4).

As an affirmative defense, fair use applies even when the plaintiff has met his own burden and thus it "tolerate[s] some degree of confusion." KP Permanent Make–Up , Inc. v. Lasting Impression I, Inc. , 543 U.S. 111, 119, 125 S.Ct. 542, 160 L.Ed.2d 440 (2004). That’s because descriptive terms qualify as trademarks only after they take on a secondary meaning "distinctive of the applicant’s goods." 15 U.S.C. § 1052(f). At that point, the registrant gets an exclusive right to use the mark in the way associated with his goods, but ownership of the original, descriptive sense of the word remains public. "When the mark is used in a way that does not deceive the public," as Justice Holmes put it, "we see no such sanctity in the word as to prevent its being used to tell the truth. It is not taboo." Prestonettes, Inc. v. Coty , 264 U.S. 359, 368, 44 S.Ct. 350, 68 L.Ed. 731 (1924).

So distilled, the fair use defense has two elements. The defendant must (i) use the label in a descriptive or geographic sense and (ii) do so fairly and in good faith. See ETW Corp. v. Jireh Pub., Inc. , 332 F.3d 915, 920 (6th Cir. 2003).

Peristyle used the Old Taylor name in a descriptive and geographic manner. It referred to Old Taylor to pinpoint the...