Craft distillers know the value of a good trademark. The name of a particular spirit, a logo, or a label design can be vitally important to a brand’s identity (and a distiller’s bottom line). They also know how complicated—and legally fraught—branding can be. For better or worse, trademark disputes involving alcohol beverage products are becoming increasingly common. The disputes that make it to court provide valuable insight that could prevent future legal headaches surrounding the selection, protection, and enforcement of alcohol beverage trademarks.
On June 19, 2017, the Supreme Court issued its decision in Matal v. Tam, declaring the Trademark Act’s (commonly referred to as the “Lanham Act”) “disparagement clause” unconstitutional as a violation of the free speech principles embodied in the First Amendment. If the case name doesn’t ring a bell, the players involved might. The decision was the culmination of Simon Shiao Tams’ fight to obtain a federal trademark registration for “THE SLANTS” for use in connection with his rock band. The term “Slants” can be used as a racially pejorative word for persons of Asian descent and was selected by the Asian-American band in an effort to “reclaim” the derogatory term. Tam’s win at the Supreme Court, however, wasn’t only a victory for his band. The Washington Redskins, who are also engaged in a protracted legal battle to maintain their trademark registrations despite challenge from a Native American group, hailed the decision a success. The Redskins’ owner, Dan Snyder, simply stated: “I am THRILLED.”
Current conventional wisdom in the craft beer business holds that being local helps sell more beer. This has led many brewers to emphasize their local roots on their labels and in their marketing efforts. In some ways, the trend has a “back to the future” feel, as labels and marketing materials once again feature place names that often became the brand names for many of the first generation of craft brewers in the 1980s.
But the emphasis on place can come with a price: the prospect of legal hurdles, including lawsuits, over allegations that a brand name, label, or advertisement misrepresents the beer’s place of production. Legally this subject usually goes by the name “geographic misdescription,” itself a subset of false advertising law. How can brewers minimize their chances of becoming the target of a lawsuit or government investigation alleging that a beer’s labeling or marketing deceived consumers?
On January 10, 2014, the U.S. Supreme Court agreed to hear an appeal by Pom Wonderful LLC against The Coca-Cola Company. The Court will examine whether Pom can bring a federal Lanham Act false advertising claim against a Minute Maid juice product label that had been approved by the U.S. Food and Drug Administration (FDA). (Pom Wonderful LLC v. The Coca-Cola Co., U.S. Supreme Court case no. 12-761).
At issue in the lawsuit is a Minute Maid label for “Pomegranate Blueberry Flavored Blend of 5 Juices.” The label presents the words “Pomegranate Blueberry” in larger type than the remainder of the phrase. Pom claimed that the label was misleading because the product contains 0.3 percent pomegranate juice and 0.2 percent blueberry juice.
A California federal trial court and the 9th Circuit federal appeals court in California both ruled that Pom could not bring a Lanham Act false advertising claim against the label, since it had been specifically examined and approved by the FDA. Pom has argued that the decisions were contrary to established law in other U.S. courts, and that federal regulations establish a floor –but not a ceiling — on what an advertiser is required to do to avoid a claim that the advertising is false and misleading. Coca-Cola has argued that product labeling that is specifically authorized by the Food, Drug and Cosmetic Act (FDCA) and approved by the FDA cannot be charged as false or misleading under another federal statute such as the Lanham Act.
Although the question before the Supreme Court is whether a private party can bring a Lanham Act claim challenging a product label regulated under the FDCA, the Supreme Court’s decision could potentially have significant implications for the alcohol beverage industry. For example:
If the Supreme Court rules that a competitor cannot bring a Lanham Act claim against a label that has been approved by the FDA, a natural question is whether the same rule will apply with regard to alcohol beverage labels that have been reviewed and approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB) (by its terms, the Federal Alcohol Administration Act does not preempt the Lanham Act); and
If a Lanham Act claim would be barred against labels approved by TTB, a question may arise about whether a Lanham Act claim would be barred on elements of the label that TTB does not specifically review as a matter of policy – such as contrast, size and placement of label elements.
The Supreme Court is expected to hear argument this spring and decide the case by June 2014. Depending on the decision, alcohol beverage industry members could find they have additional insulation against a federal false advertising claim, but they may likewise be limited in bringing a federal false advertising lawsuit against a competitor’s label that has been approved by TTB.
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