“BOURBON JUSTICE: HOW WHISKEY LAW SHAPED AMERICA” CLE Credit: 1.0 Friday, June 14, 2019 9:00 -10:00 a.m. Combs-Chandler Galt House Hotel Louisville, Kentucky A NOTE CONCERNING THE PROGRAM MATERIALS The materials included in this Kentucky Bar Association Continuing Legal Education handbook are intended to provide current and accurate information about the subject matter covered. No representation or warranty is made concerning the application of the legal or other principles discussed by the instructors to any specific fact situation, nor is any prediction made concerning how any particular judge or jury will interpret or apply such principles. The proper interpretation or application of the principles discussed is a matter for the considered judgement pf the induvial legal practitioner. The faculty and staff of this Kentucky Bar Association CLE program disclaim liability therefore. Attorneys using these materials, or information otherwise conveyed during the program in dealing with a specific legal matter have a duty to research the original and current sources of authority. Printed by: Evolution Creative Solutions 7107 Shona Drive Cincinnati, Ohio 45237 Kentucky Bar Association TABLE OF CONTENTS The Presenter .................................................................................................................. i “Bourbon Justice: How Whiskey Law Shaped America” .................................................. 1 THE PRESENTER Brian F. Haara 101 South Fifth Street Suite 3600 PNC Tower Louisville, Kentucky 40202 www.brianhaara.com BRIAN HAARA is a business litigator in Louisville, Kentucky, recognized by Martindale- Hubble, Best Lawyers, and Super Lawyers. Mr. Haara’s practice includes litigation of business (including bourbon trademark litigation), insurance, and real estate disputes. His Sixth Circuit victory in Sazerac Brands, LLC v. Peristyle, LLC was recognized by Law360 as a “Top 10 Trademark Ruling of 2018” for establishing historic rights under the fair use defense. While already a bourbon enthusiast for decades, Mr. Haara’s practice led him to discover that bourbon law tracks the growth of the United States, from conquering the wild frontier, to rugged individualism, to the entrepreneurial spirit, to establishing a nation of laws. U.S. legal history was often developed around whiskey, covering many substantive areas of the law, like trademark, breach of contract, fraud, governmental regulation and taxation, and consumer protection. The interplay between bourbon, law, and history led Brian to blogging on the popular site, Sipp’n Corn®, which quickly developed into media credentials for numerous bourbon-related events, collaboration with retailers to select private barrels, inclusion in the documentary, Straight Up: Kentucky Bourbon, where he had a brief role on bourbon history and law, and ultimately his book released in November 2018, Bourbon Justice: How Whiskey Law Shaped America. i ii BOURBON JUSTICE © 2019 Brian F. Haara. All Rights Reserved. Historically, Kentucky bourbon is responsible for the growth and maturation of many substantive areas of the law, like contract, fraud, governmental regulation and taxation, and consumer protection. Bourbon also provided the bedrock for current-day trademark law, and this one-hour program provides a brief history of bourbon as seen through trademark litigation from the 1880s through today. Bourbon Justice: How Whiskey Law Shaped America tells the real history of Kentucky’s famous spirit by using only historic lawsuits between the early distillers. These old lawsuits not only expose long-lost facts, but they also reveal the historical shenanigans and maverick mentality that are part of bourbon’s rich heritage. It’s a fast-paced read because by using dusty lawsuits as the delivery method, I can tell stories instead of just reciting dry historical facts. But it’s not fast enough of a read to pack into a one-hour CLE seminar. Bourbon is the most dominant contributor to laws and customs that we take for granted today. From trademark law, to consumer protection, to the phrase “brand name,” to workplace safety reforms, and protection against illegal searches and seizures, bourbon led it all. Given the time constraints, this CLE, these materials, and the PowerPoint presentation focus on bourbon’s early influence on trademark law and show how bourbon remains a guiding industry in the continued development of trademark law today. I. BOURBON BACKGROUND Bourbon and law might seem, to the casual observer, to be connected only in negative ways: Prohibition, illegal stills, and organized crime. While nostalgic in many respects, those connections focus on lawlessness. Lawlessness, however, is the mere tip of the proverbial iceberg for bourbon; the real history of bourbon, hidden beneath the surface, is the foundation of American commercial law and its relation to American history as a whole. American history and bourbon history have each told their separate stories, occasionally intertwined, but never have their connected stories been told exclusively through lawsuits. So much of bourbon history has been lost, sometimes because records and accounts were not kept and other times because records and accounts were swept away during Prohibition. Distillers from the 1800s and early 1900s did not trouble themselves with memorializing their craft for anyone other than their son or apprentice, and first-person accounts are rare. Because of this lack of traditional historical evidence, lawsuits are an abundant resource not just for information, but for facts that satisfied rigorous evidentiary standards, or withstood the pressure of cross-examination, and were found to be reliable. Lawsuits might be the best source of facts. And only bourbon can claim the title of being distinctively – and legally – American.1 Congress did not officially recognize this distinctiveness until 1964, but bourbon 1 S. Con. Res. 19, 88th Cong., 78 Stat. 1208 (May 4, 1964). 1 had certainly been uniquely American since the first drop of majority-corn distillate was barrel-aged. II. BOURBON BASICS But first, what is bourbon? That question is a bit more complicated than might be anticipated. “What is whiskey?” is a broader question, and a little easier to answer. Whiskey is, essentially, in its most basic form, a spirit distilled from grain. The type of grain(s) used, the location of distillation, and nature of aging, along with many other factors, then dictate the type of whiskey (or “whisky”), including broad categories such as Scotch, Irish, Canadian, or Japanese, and innumerable subcategories. “Whisky,” as a general term, is defined by law in the United States as “an alcoholic distillate from a fermented mash of grain produced at less than 190° proof in such manner that the distillate possesses the taste, aroma, and characteristics generally attributed to whisky, stored in oak containers (except that corn whisky need not be so stored), and bottled at not less than 80° proof, and also includes mixtures of such distillates for which no specific standards of identity are prescribed.”2 Bourbon is a type of whiskey, and many distillers and legal opinions remind us that “all bourbon is whiskey, but not all whiskey is bourbon.” In order to be bourbon, the whiskey must be made in the United States, and must strictly meet these criteria: • Made from fermented mash of not less than 51 percent corn; • Distilled to not more than 80 percent alcohol by volume (“ABV”) (160 proof); • Stored at no more than 62.5 percent ABV (125 proof); • Stored in charred new oak containers; and • Because it is “whisky,” bottled at no less than 40 percent ABV (80 proof).3 Importantly, the word bourbon cannot be used to describe any whiskey not produced in the United States.4 Other countries have acknowledged this territorial naming right as well, through several agreements, including the North American Free Trade Agreement, the United States-European Union Agreement on Nomenclature of Distilled Spirits, and the United States-Australia Free Trade Agreement, which all recognize bourbon whiskey as a distinct product of the United States. 2 27 C.F.R. §5.22(b). 3 See 27 C.F.R. §5.22(b)(1)(i). 4 27 C.F.R. §5.22(l)(1). 2 III. BOURBON BRANDING One of the most important – and valuable – historical and present-day legal issues involving bourbon is protection of brand names. But first, bourbon supplies the answer to how products or company names came to be known as a brand. Beginning in the 1800s, federal law required that “the name of the distiller shall be stamped or burned upon the head of every package of distilled spirits put into bonded warehouses, and this must not be erased until the package is empty.”5 The phrase “brand name” was born from this federal law and the branding of barrels by distillers, and then it spread to other manufactured goods. Because whiskey was often sold by the barrel, the brand on the barrel head was important. (Selling by the barrel created its own problems, like refilling with lesser- quality bourbon, blending with lesser-quality bourbon, or watering it down to make it last longer. Those issues were addressed by the innovation of bottling with signed seals over the closure.) A barrel branded with “Old Crow” could be sold for a higher price, whether sold in bulk or upon resale. So, just as “brand names” today are highly sought after and protected, early distillers fought hard to protect their brand names. IV. BOURBON’S PRECURSOR TO THE FAIR USE DEFENSE Bourbon litigation helped define the parameters of brand name