Consumers often buy spirits because of bottle aesthetics. Although the number of spirits producers is small, the sheer number of brands that they produce can overwhelm a normal consumer at a liquor store. Without having tried the spirit or received a recommendation, the consumer has no other criteria for buying except for the brand name, label information, and bottle design. Thus, spirits producers often seek to protect design features of their brands’ bottles.
In the bourbon industry, red wax covering the cap of the bottle is associated with the iconic Maker’s Mark bourbon. Maker’s Mark has held a trademark for its dripping wax bottle element since 1985. In 2003, it sought to enforce its trademark when it sued Jose Cuervo for selling its “Reserva de la Familia” tequila in bottles with dripping red wax, alleging trademark infringement. Although Cuervo discontinued its use of dripping red wax, it counterclaimed by asking for cancellation of Maker’s Mark trademark. Finally, in 2012, the United States Court of Appeals for the Sixth Circuit resolved the dispute by agreeing with the lower court that Maker’s Mark trademark is due protection and that Cuervo had infringed the trademark.
The dripping red wax is not functional because competitors would not have difficulty designing around the mark or competing in the market with an enforceable trademark like this one. Therefore, the dripping red wax is deserving trademark protection. Further, there was a likelihood of confusion between Maker’s Mark and Reserva de la Familia largely because of the “extreme” strength of the trademark and the similarity of the dripping waxes. Thus, this likelihood meant that Cuervo infringed on Maker’s Mark valid trademark, its “signature trade dress element.”
This ruling showed that spirits producers can validly register trademarks on bottle design elements important to the spirit’s reputation, and protect these trademarks in courts. Other producers should follow Maker’s Mark lead in recognizing that bottle design can enhance its brand image and influence consumer buying decisions by registering trademarks on these design elements as quickly as possible and not being afraid to enforce these trademarks in courts.
The world’s insatiable desire for bourbon was on full display last month when Beam Inc., the parent company of major bourbon brands Jim Beam and Maker’s Mark, announced that it was being acquired by Suntory Holdings Ltd., a premium Japanese spirit and beverage company, for $16 billion including the assumption of debt. Suntory, which produces Japanese whiskey (e.g., Yamazaki), Scotch whiskey (e.g., Bowmore), and beer (e.g., Malt’s), will pay $83.50 a share for Beam, which besides bourbon also produces Scotch whiskey (e.g., Laphroaig), Irish whiskey (e.g., Connemara), Canadian whiskey (e.g., Canadian Club), and other spirits (e.g., gin, tequila). The amount per share represents a premium of 25% over Beam’s closing price the business day before the merger announcement. Driven by American popularity of and increasing worldwide appetite for bourbon, Suntory is aiming to be a global spirits powerhouse transforming its business outside Japan and into large (e.g., U.S.) and emerging (e.g., Brazil, India) economies. With the acquisition’s closing, which is expected in the second quarter pending regulatory and shareholder approval, the combined companies will be the third largest spirits company in the world behind Diageo and Pernod Ricard.
Although the foreign acquisition of a company known for its quintessentially “American” whiskeys is divisive, the American public should not be worried about Beam’s products or lost American jobs. First, as documented in the first post, bourbon must be produced exclusively in the U.S. for it to be legally labeled as a bourbon; thus, Beam’s bourbons will remain American-made and not outsourced. Second, Americans should be aware that foreign companies already own many other well-known bourbon brands, including Four Roses (Japan) and Wild Turkey (Italy). Third, if these other brands are to serve as examples, foreign investment will raise global sales of Beam’s brands and therefore, create more jobs when the foreign parent builds more infrastructure to meet the growing demand. Fourth, Suntory and Beam already work together and thus have a familiar relationship distributing each other’s products in different parts of Asia. Lastly, Beam’s management will remain in place, so Beam will be business as usual in its Illinois headquarters.
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