In a recent opinion, Sazerac Brands, LLC v. Peristyle, LLC, the U.S. Court of Appeals for the Sixth Circuit issued a decision finding in favor of a Kentucky bourbon distillery that their use of “the Former Old Taylor Distillery” or “Old Taylor” was classic fair use of Sazerac’s trademarks OLD TAYLOR and COLONEL E.H. TAYLOR.
Bourbon lovers will delight in the decision, which begins with Bluegrass State-centric recitation of the history of bourbon and a tribute to Colonel Edmund Haynes Taylor, Jr., “the most remarkable man to enter the whiskey industry during the post-Civil War years.” Colonel Taylor built the Old Taylor Distillery in 1887 in Woodford County, Kentucky. While the distillery was successful during Colonel Taylor’s life, it fell into disrepair after his death, and production ceased in 1972.
In 2014, Peristyle, LLC was formed. It purchased the distillery property with the intent to resume bourbon production there. During the year-long renovation period, Peristyle referred to the location as “the Former Old Taylor Distillery” or “Old Taylor.” Eventually, Peristyle decided to brand the bourbon under the name Castle & Key.
Sazerac, which owns the trademark rights to OLD TAYLOR and COLONEL E.H. TAYLOR for bourbon, sued Peristyle, alleging trademark infringement, unfair competition, and false advertising under the Lanham Act, and related common law claims. The district court granted summary judgment in favor of Peristyle, specifically that Peristyle’s use of “the Former Old Taylor Distillery” or “Old Taylor” was protected by the affirmative defense of fair use. The appellate court agreed and affirmed the district court’s decision.
A party is liable for trademark infringement under the Lanham Act if it uses “any word, term, name, symbols, or device” in a way that is “likely to cause confusion or to cause mistakes, or to deceive as to … affiliation, connection, or association.” 15 USC § 1125(a)(1)(A). The Lanham Act also provides an affirmative defense of fair use 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 USC § 1115(b)(4). In other words, for one to take advantage of the fair use defense, the defendant must (1) use the mark in a descriptive or geographic sense, and (2) do so fairly and in good faith.
In explaining the balance between trademark rights, consumer protection, and one’s ability to describe its own products, the Court quoted Supreme Court Justice Holmes: “When the mark is used in a way that does not deceive the public…we see no such sanctity in the word as to prevent it’s being used to tell the truth. It is not taboo.”
The Court found that Peristyle used the Old Taylor name in a descriptive and geographic manner. The use referred to the historic location of Colonel Taylor’s distillery (which, as the Court noted, is also listed on the National Register of Historic Places).
The Court also found that Peristyle’s use was in good faith. Peristyle referred to the distillery as Old Taylor because it had yet to settle on a brand name for itself. Quoting the district judge, the Court noted that “Peristyle is not attempting to trade off the goodwill of Sazerac. Instead, Peristyle is enjoying the goodwill already ingrained in the property it purchased and is advertising itself for what it is: a distillery first built by Colonel Taylor, subsequently abandoned, but once again purchased, renovated, and restored to life as Castle & Key.” The Court when on to comment that “[t]he contrast is as stark as comparing a bourbon to a scotch.”
The Court also found that the 400- foot “Old Taylor Distillery” sign on the distillery’s barrel storage warehouse and a 20-foot “The Old Taylor Distillery Company” sign above the entrance to the main building did not constitute bad faith, because those signs were part of the building before Peristyle purchased it.
In sum, the Court concluded that Sazerac’s trademark rights did not extend to preclude Peristyle from describing the location of its distillery:
“Past is prelude when it comes to Peristyle’s future. It plans to put up a Castle & Key sign next to the historic signs before the company opens the yet-to-be-finished distillery to the public. Once they do, visitors will know they are at the historic Old Taylor distillery, where Castle & Key distills its own bourbon. Trademark law demands no more.”
While the Court could have ended there, it took the opportunity to address Sazerac’s criticism of the Sixth Circuit’s threshold “trademark use” test in examining fair use. Courts in the Sixth Circuit uniquely require the plaintiff to carry a threshold burden to show that the defendant is using the mark “in a trademark way.” If the plaintiff clears that threshold, then the plaintiff has the burden to prove the conventional likelihood of confusion as set forth by the U.S. Supreme Court in KP Permanent Make-Up, Inc. v. Lasting Impression, I Inc.
Sazerac argued that the threshold test has received criticism by the Second Circuit and by Professor Thomas McCarthy, the author of the leading treatise on trademark law. Professor McCarthy asserts that the Lanham Act does not require this threshold test. The Court dismissed these criticisms, asserting that there is “little daylight” between its threshold test and the “descriptive use” required by the Lanham Act. However, the Court was willing to “acknowledge that fact patterns might arise where our test might make a difference and where we might wish to reconsider whether our test respects the language of the statute.” However, this case was not such an occasion, and the ability to challenge the Sixth Circuit’s threshold test was shelved for another case.