Craft distilleries and the Commerce Clause

A new law in Oregon will allow the state’s distilleries to open additional tasting rooms and retail sales centers:

The bill allows distillers to offer tastings and sell their products at their distillery and five other locations. Current law allows distillers to perform tastings and sell their spirits one other location in addition to the distillery.

Distillers still must purchase their liquor from the Oregon Liquor Control Commission, the same way liquor store owners do now. And distillers must enter into a contract with the OLCC to sell bottles of their craft spirits.

The goal is to help the increasing number of craft distilleries continue to grow, though as it currently stands only two of them (McMenamin’s and Rogue) have enough locations to take advantage of the new opportunities. Spirits produced in Oregon now account for about 12% of the state’s liquor sales. That’s really impressive, and some of the spirits made in Oregon are fantastic. I hope this trend continues.

However this new law might not be the best way to help craft distillers. It may be nice in the short-run, but is it constitutional? I think that it’s vulnerable to legal challenge by out-of-state producers as a violation of the Commerce Clause, following the arguments that allowed wine producers to strike down discriminatory direct shipping laws in Granholm v. Heald. (I have no formal legal training, so take this as a layman’s reading. The case isn’t too complicated.)

Granholm explicitly addressed the balancing of the Twenty-first Amendment, which gives states broad authority to regulate alcohol, and the Commerce Clause, which generally forbids states from discriminating against out-of-state producers.

The Twenty-first Amendment reads in part:

The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

This has been interpreted to allow states great flexibility in deciding how to regulate alcohol, including the power of outright prohibition. The Court’s ruling in Granholm made clear, however, that these regulations must treat in-state and out-of-state producers evenly, not giving undue favor to the former. As Justice Kennedy wrote in his majority opinion:

The mere fact of nonresidence should not foreclose a producer in one State from access to markets in other States. [...] States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.

The Twenty-first Amendment does not exempt states from this requirement:

The aim of the Twenty-first Amendment was to allow States to maintain an effective and uniform system for controlling liquor by regulating its transportation, importation, and use. The Amendment did not give States the authority to pass nonuniform laws in order to discriminate against out-of-state goods, a privilege they had not enjoyed at any earlier time.

In Granholm, the question at issue was whether states could allow their own wineries to ship directly to consumers while denying the privilege to wineries from other states. The Court ruled that they cannot. States can choose whether to ban or to allow direct shipping of wine, but they must treat in- and out-of-state wineries consistently.

The case doesn’t address liquor directly, but it’s easy to extend to the logic. Oregon’s new law allows in-state distilleries to open up to five retail stores, a privilege denied completely to distilleries from anywhere else. The law’s supporters say explicitly that its purpose is to promote local businesses:

“It takes advantage of Oregon agricultural products, it promotes tourism and it promotes small business development,” said Sen. Elizabeth Steiner Hayward, D-Beaverton, who is one of the bill’s sponsors.

The law clearly discriminates in favor of Oregon distilleries. For this to be permissible under the Commerce Clause, the discrimination must be necessary to achieve some other legitimate purpose. In Granholm, the states argued unsuccessfully that their laws were necessary for the collection of taxes and to keep alcohol out of the hands of minors.

It’s difficult to imagine either of these arguments faring any better for Oregon. All of the spirits sold in Oregon, including those in the new tasting rooms, retail at a set price through the Oregon Liquor Control Commission (OLCC). The state has no sales tax. Collection of revenue, then, is not a concern.

As for sales to minors, it would be hard to argue with a straight face that local distilleries are uniquely qualified to sell only to adults.

So if Oregon distilleries can open tasting rooms and retail centers anywhere in the state, why not distilleries from across the river in Washington? Or from Kentucky? Or anywhere else, for that matter? It’s easy to imagine an out-of-state distillery suing for access to Oregon’s market on equal terms,

This hypothetical case may be strengthened by the fact that through its monopoly on liquor distribution, the OLCC can grant de facto preferential treatment to Oregon producers. Though the agency doesn’t explicitly do this, there’s good reason to believe that it has this effect. From a recent article about the state’s craft distillery boom:

OLCC officials stopped short of saying the agency shows a preference for stocking Oregon-made products at its warehouse — but it hasn’t created many obstacles for start-up distilleries.

“We make it easy. They get a listing,” said Brian Flemming, director of retail services for the OLCC.

The makeup of the Court seems favorable to extending the Granholm interpretation. As Garrett Peck notes in his book The Prohibition Hangover, dissent in the case was associated with age, with all of the justices who were alive during Prohibition siding with the states. Dissenters Rehnquist, O’Connor, and Stevens have all since retired. If a new case involving distillers does reach the Court, they may get a sympathetic hearing.

That’s a big “if.” Even if a case is brought, it may never go that far. And lower courts may decide that since Oregon’s law presents a different set of facts, the ruling in Granholm doesn’t apply.

Nonetheless, promoting craft distilleries through laws that discriminate in favor of local producers is a risky strategy that may backfire when and if they are challenged in court. There are other ways to open up the market for craft distillers that would rest on more secure legal footing.

[Photo: Still at Grand Traverse Distillery in Michigan, 2008.]

[Disclosure: I do contract work in the spirits industry, often with brands not based in Oregon.]

You didn’t brew that!

I reached out to the Tax and Trade Bureau for clarification about the White House brewery and the legality of hiring personal chefs to do one’s homebrewing. Interestingly, it’s an issue that the TTB has never had to rule on before. Check out the update to last week’s post for all the details.

A brewery in the White House

We are deep into that part of the election when it’s impossible to escape the flood of frivolous news articles about what the candidates ate, exaggerated gaffes, or pretty much anything except actual policy. This week’s example: the fervor about the homebrewed beer that Obama occasionally breaks out on the campaign trail. Crowds chant “four more beers,” reporters get to write punny headlines like “Obama plays up love of beer to ferment coalition of the swilling,” and beer lovers in my Twitter feed gush that the president makes and drinks beer just like them, so, like, who cares about all his Bush-esque civil liberties abuses?

I reacted to the story with my usual political cynicism, but on further reflection having a sitting president publicly boast of his homemade beer represents a real advance in freedom. Though it’s hard to believe as I sit here typing in Portland, Oregon, where making a batch of homebrew with friends is a wholesome afternoon activity, brewing beer at home continued to be against the law in the United States long after Prohibition.

Portland-based homebrew advocate and local legend Fred Eckhardt wrote in his seminal A Treatise on Lager Beers about the state of American beer in 1969:

After Prohibition, it remained illegal to make homebrew (it still is) and so even then there was no light to be shed on the subject. Now more than 35 years after the end of Prohibition we are just beginning to explore the possibilities of homebrewing… There are almost no quality beers made in this country, so if you want good old-country style beer you must make it yourself. Even the German beers imported into this country are being made to the so-called American taste. Pablum and pap for babies. You actually can make beer just as good as the great European master brews in your home. This book is only a start.

Indeed it was. Nine years later, President Jimmy Carter signed legislation allowing people to brew reasonable quantities of beer at home for their personal use, no permits or taxes required. Today American brewers make some of the best beer in the world and many of them got their start making small batches in their garages and kitchens. (The quote above is excerpted in Nick Gillespie and Matt Welch’s The Declaration of Independents, which should be on everyone’s election year reading list.)

Prohibition casts a long shadow, however, and there are still many regulations that can trip up homebrewers. Homebrewing is completely illegal in Alabama and Mississippi. In other states archaic laws have banned removing homebrew from the home, shutting down beer competitions. In Oregon, such a law was amended last year after public outcry. Perhaps seeing the nation’s top elected official drinking beer made at his home will give added legitimacy to the practice and help remove these remaining barriers.

For what it’s worth, I’m not sure that even Obama’s beer is completely legal. [Update: See below for a response from the TTB.] As Dan Todd pointed out to me on Twitter, the beer is made by White House chefs, not the president himself. According to Reuters:

The beer, which comes in both a light and dark variety, is made by the White House chefs who use traditional beer-brewing methods. [...] Taxpayers are not footing the bill for the beer, as both the cost of the equipment and the cost of brewing the beer is paid for by the Obamas personally, the official said.

Federal law states that homebrewed beer cannot be sold and that it cannot be produced by partnerships or corporations:

Any adult may produce beer, without payment of tax, for personal or family use and not for sale. [...]

Partnerships except as provided in §25.207, corporations or associations may not produce beer, without payment of tax, for personal or family use. [The exception referred to is for operators of licensed breweries, who may take some of their product home without paying taxes on it.]

The Tax and Trade Bureau also has strict regulations for brew-on-premises facilities (BOPs), businesses that provide equipment and space to homebrewers, and the assistance they are allowed to provide to clients:

Proprietors and employees of BOPs may not:
Provide assistance to, or on behalf of, customers in the production, storage, or packaging of beer, such as:
– Fermenting mash,
– Adding sugar, CO2, or any other ingredients to beer,
– Filtering or bottling beer, or
– Providing physical assistance in the production, tank transfer, racking, or the bottling or kegging of beer.

I don’t know the specific arrangement the White House beer is brewed under, but having employees brew beer for one’s personal use seems possibly problematic. The president may also be stretching the meaning of “personal use.” When Obama gives his beer away to potential voters while running for office, does that still qualify? It would take one hell of a gutsy TTB agent to levy fines against his ultimate boss, but it sure would be amusing to watch the attempt.

Having a brewery in the White House also provides an opportunity to raise the question of why home distilling, which essentially requires only the additional steps of boiling one’s beer and collecting portions of the condensate, remains an illegal offense that can land one in prison. Merely owning a still in this country is suspect: It must be low in volume, can only be used for making purified water, essential oils, fuel, etc., and the TTB can demand from sellers of stills the name and address of any customer, no warrant required.

Our first president, George Washington, had a distillery on his property and underground distillers continue the tradition of making quality spirits at home. Unfortunately, making craft spirits legally requires leaping some major hurdles. Darek Bell, owner of Corsair Distillery in Nashville, Tennessee, discusses this in his extremely interesting book on distilling, Alt Whiskeys:

Unfortunately, only a few countries in the world allow legal home distilling. New Zealand, for example, is one of them. In the United States, distilling whiskey without a federal permit is a felony. This is no parking ticket. It is life destroying: five years in jail and a $10,000 fine.

Bell compares craft distilling today to craft beer in the 1980s. Small distillers are making excellent products but they’ve not yet achieved their full creative potential, hampered as they are by high start-up costs and regulatory requirements. Bell’s beer-inspired recipes provide a glimpse of what the future of small-scale whiskey might look like: Chamomile Wheat Whiskey, Huckleberry Moonshine, Bavarian Helles Whiskey. But trying these at home or experimenting with them before going commercial is forbidden, so the path that led to full-time careers for many homebrewers is closed to would-be spirits makers. Legal changes to bring home distilling into the open would help unleash this creativity.

This week’s many articles about Obama’s taste for craft beer have been inane, but they do show how far we’ve come destigmatizing and legalizing alcohol. If thirty years from now we have a president stirring Manhattans made with his special White House Whiskey, that will be an even greater sign of progress.

Update 8/23/12: I’ve been trying to reach the TTB for clarification on the legality of having paid employees brew beer for one’s personal use. I haven’t received a response, but I will update if and when I do.

Update 8/27/12: The Tax and Trade Bureau has responded to my request for clarification about the legality of hiring employees to make tax-free beer for one’s personal consumption. Short answer: This is an issue for which the TTB has never issued a ruling, but the law doesn’t preclude it.

Here’s the question I sent to Tom Hogue, who handles congressional and media inquiries for the TTB:

I’m curious if the TTB has ruled on the legality of having paid employees brew beer for one’s personal consumption. Without necessarily commenting on the White House beer specifically, would this qualify as legal homebrewing? If so, can ordinary citizens hire personal chefs to brew beer for them without paying taxes on it?

And here’s Tom’s response:

The answer to your question is generally speaking, yes. We have not issued a ruling on this issue, however, the regulations do not preclude a person from hiring a personal chef to brew beer for them, provided that they adhere to the regulatory provisions relating to personal or family use.

This is interesting for a couple reasons. First is that the White House brewery has brought up an issue that the TTB has never had to rule on before. Second is that while it’s illegal to sell homebrewed beer, one can apparently sell the labor that goes into making it. This opens up potential business opportunities. For personal chefs it’s an additional service they can offer and one more way they can differentiate themselves from the competition. It might even be possible to work as a “professional homebrewer,” traveling from house to house making beer to clients’ specifications. Who knows if there’s enough demand for that, but it’s an intriguing possibility. (There is at least one “Homebrew Guru” offering something like this in the form of home instruction.)

A caveat to the above: With no official ruling on the subject, these ideas are purely speculative. If more people start earning money making homebrew, the TTB may decide to rule and the selling beer vs. selling labor distinction might not hold up. But for now, at least, an enterprising brewer can claim a sitting president and former University of Chicago law professor as an example in his favor.

Rum and trademarks

Since intellectual property law and cocktails are a recurring topic here, it’s worth mentioning a couple recent developments. First, the tiki-themed craft cocktail bar Painkiller in New York has been forced to change its name to PKNY after Pusser’s rum sued over its use of the name Painkiller, a pre-existing cocktail that the company trademarked:

In the lawsuit filed April 12 in U.S. District Court, plaintiff Pusser’s Rum Ltd., which sells rum, cocktail mixers and rum products such as cakes under the brand name “Painkiller” sued tiki bar owners Giuseppe Gonzalez and Richard Boccato, claiming irreparable harm to its brand, unfair competition and unfair business practices, according to court documents on file in the Southern District of New York. [...]

The plaintiffs demanded that the bar stop calling itself and any of its drinks by the name Painkiller, for which they hold two U.S. trademarks, one for “alcoholic fruit drinks with fruit juices and cream of coconut and coconut juice,” and one for “non-alcoholic mixed fruit juices,” which they market as “Pusser’s Painkiller Cocktail Mix.” [...]

In a consent order signed by both parties May 16, Gonzalez and Boccato, along with their corporate entity, Essex Street Bar & Lounge, Inc., agreed to be “permanently restrained and enjoined” from using the trademarked term Painkiller or “any other confusingly similar term” in association with any bar, restaurant, grill, lounge or other establishment, or any “beverage, libation or cocktail” unless it is made with Pusser’s rum. They also agreed not to use the term in any marketing or advertising materials, and to give up their website domain within 45 days of the order, though the court did not require them to turn it over to Pusser’s.

Similarly, Portland’s own Trader Tiki has been forced to change the name of his line of syrups to B. G. Reynolds. He doesn’t name the company that would object to his marketing a line of tiki syrups with “Trader” in the name, but if you’re into cocktails you can probably make a good guess who that might be. (Side note: Why do these disputes always seem to involve rum and tiki companies?)

About a year ago, I was approached by the owners of another company of similar name, and asked cordially to stop calling myself a Trader and go off and do something else. I fought tooth and nail, but they weren’t having it. So, in respect to the original “Trader”, and with the advice of a few good friends, I am moving forward with the name change from Trader Tiki’s Exotic Syrups to B.G. Reynolds’ Exotic Syrups.

Naturally this is creating some ill will in the cocktail community, at least in the direction of Pusser’s, which is getting blasted on Twitter today. This is part of a general backlash against trademarking cocktail names (see the conflict over the Dark and Stormy). There’s also a lot of confusion over copyright and trademarks. Tim Lee helpfully clarified the difference last year:

But perhaps the most important difference is that trademarks have a dramatically different policy rationale from patents and copyrights. Copyrights and patents are designed to create legal monopolies that drive up the price of creative works and thereby reward authors and inventors for their creativity. Although consumers may benefit from the resulting increase in creativity, the short-term effect is to force them to pay more than they would in a competitive market. Trademarks aren’t like that at all. The point is not to limit competition. To the contrary, the point is to enhance competition by ensuring that consumers know what they’re getting. This is why it’s emphatically legal to run comparative advertising featuring your competitor’s trademarks. Microsoft may own the “Windows” trademark, but Apple is free to use it as a punching bag as long as they don’t mislead consumers about what they’re getting.

The same principle applies in the Dark and Stormy case. The point of trademark law is to make sure consumers know what they’re getting (whether it’s Gosling or Zaya), not to give Gosling a monopoly on the concept of mixing ginger beer with rum. I haven’t seen Zaya’s ad and I’m not a trademark lawyer, so I don’t want to speculate on the legal merits of Gosling’s position. But certainly the apparentl purpose of Zaya’s ad—encouraging bartenders to substitute their own rum in place of Gosling’s—is entirely within the spirit of trademark law. If the net effect of Gosling’s threats is that consumers wind up with fewer opportunities to try mixing ginger beer with different kinds of rum, that is certainly not what trademark law is supposed to accomplish.

This is a matter of trademark law, not copyright. The company actively markets and owns a trademark to a product called Pusser’s Painkiller Cocktail Mix. So while it was arguably excessive of them to sue a tiki bar with the same name, it’s not totally implausible that the bar might create confusion among customers.

A more concerning part of the settlement is the requirement that PKNY no longer offer any drink called a Painkiller that doesn’t use Pusser’s rum. Though the settlement doesn’t bind anyone else, liquor companies would love to be able to trademark popular cocktails and forbid bars from substituting other brands. This is part of what was behind the Dark and Stormy dispute, and there are rumors of one whiskey brand sending cease and desist orders to bars advertising a classic drink of the same name if they don’t use their product (I haven’t been able to confirm this, so I’m not naming it here). If this strategy continues, that would be potentially be much more restrictive of bartenders’ creativity. Whatever the legal merits of the case, Pusser’s deserves all the scorn their receiving for forcing use of their rum in a cocktail that they didn’t invent.

Non-unanimous juries safe for now

Unfortunately, the Supreme Court has declined to grant cert in Herrera v. Oregon, a challenge to the state’s non-unanimous jury convictions. I wrote about the case here.

Challenging Oregon’s non-unanimous juries

I have a post at the Examiner today summarizing why the time is ripe to challenge Oregon and Louisiana’s laws allowing non-unanimous jury convictions.

Previously:
Oregon’s low bar for conviction
Dawkins doesn’t get juries

Mixing it up without IP

Man, do not steal a recipe for Eben Freeman:

After the seminar, I spoke to Freeman, who admitted he came up with the idea for the talk after becoming fed up with other bartenders and establishments taking credit for and profiting from his recipes and techniques. (Fat washing, for example, the process by which a spirit can be infused with, say, bacon, was pioneered in part by Freeman, yet is often attributed to others.) “Someone needs to get sued … to set a precedent,” he told me.

“In no other creative business can you so easily identify money attached to your creative property,” Freeman went on. “There is an implied commerce to our intellectual property. Yet we have less protection than anyone else.”

No disrespect to Freeman, who is understandably frustrated, but he fails to address the purpose of intellectual property in copyrights and patents. This is neatly summed up in the Constitution:

[The Congress shall have power] To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

Intellectual property exists to promote progress. Its purpose is not to ensure that no one’s ideas are stolen or that creative people can earn a living, unless those things are needed to promote progress in a field. The granting of temporary monopolies in the form of patents and copyrights is the price we pay for progress, not a goal in itself.

It might be completely true that bartenders are shamelessly stealing from each other, and that’s certainly something we should condemn, but we probably shouldn’t get the law involved unless we can show that this theft is causing mixology to stagnate. Along with fashion, cooking, and even magic, we’re in an industry that’s arguably better off with weak IP. This decade’s boom in craft cocktails is a sign that we’re doing OK without stricter protections, and I’d be worried that additional threats of lawsuits would have a chilling effect on the sharing of new techniques and recipes.

Perhaps Freeman or someone else has a workable, beneficial idea for expanding intellectual property related to cocktails, but I have a hard time imagining what that would be.

Update 9/1/10: Ezra Klein agrees.

Previously:
Two Pimm’s, one cup
Dark and Stormy and the piracy paradox
Dark ‘n’ Sue Me

Beware of CARE

Over at the Examiner, I take a look at the CARE Act, a wholesaler-backed bill that would essentially reverse Granholm v. Heald and exempt state alcohol laws from Commerce Clause challenge.

The Watts case and jury nullification

I’ve been following, from a distance, the case of Canadian sci-fi writer Peter Watts. Watts’ car was searched at the US border and he was beaten, pepper sprayed, and detained when he questioned the purpose of the search. I’ve refrained from commenting until all the facts were out, but with the trial concluded there’s little to vindicate his treatment and the government’s refusal to release video of the incident lends no credence to the case against him.

A jury convicted Watts of resisting customs officials. Fortunately the sentencing judge chose not to imprison him. Read Peter’s own account for a humorous take on the hearing, his friend’s for a more touching one.

One of the jurors who convicted Watts went so far as to advocate against a jail sentence. Regrettably, the jurors felt that they had no choice but to throw Watts at the mercy of the judge. Two quotes from jurors:

As a member of the jury that convicted Mr. Watts today, I have a few comments to make. The jury’s task was not to decide who we liked better. The job of the jury was to decide whether Mr. Watts “obstructed/resisted” the custom officials. Assault was not one of the charges. What it boiled down to was Mr. Watts did not follow the instructions of the customs agents. Period. He was not violent, he was not intimidating, he was not stopping them from searching his car. He did, however, refuse to follow the commands by his non compliance. He’s not a bad man by any stretch of the imagination. The customs agents escalted the situation with sarcasm and miscommunication. Unfortunately, we were not asked to convict those agents with a crime, although, in my opinion, they did commit offenses against Mr. Watts. Two wrongs don’t make a right, so we had to follow the instructions as set forth to us by the judge.

And:

Peter,

I believe your description of the trial and deliberations is more accurate than you could know. As a non-conformist and “libertarian” (who has had some experiences not unlike yours) I was not comfortable with my vote, but felt deep inside that it was consistent with the oath we took as jurors. I believe nearly all the jurors searched for a legitimate reason to vote differently. In the end it came down to the question “Was the law broken?”. While I would much rather have a beer and discussion with you than Officer B. I never the less felt obligated to vote my conscience. I also believe most, if not all, the jurors sincerely hope that you are handled with a great degree of leniency, we, unfortunately have no say in that matter.

It’s great that Watts was lucky enough to have a sympathetic judge but tragic that the jurors who convicted him felt compelled to do so. If there is ever a time for jurors to stand up against prosecutorial indiscretion it’s in cases in which the defendant has been abused by agents of the state. Cases like this are exactly why we have citizen juries. It’s not enough to convict and hope that, as happened here, the judge will make the right decision instead of siding with his fellow authorities. Even though Watts avoided a jail sentence he will have to bear the costs of a felony conviction, including infringements on his right to travel.

Unfortunately current law generally forbids discussion of jury nullification within the courtroom. I encourage everyone who may serve as a juror to read up on their rights and responsibilities so that they can render an informed verdict should they sit on a case such as this one.

Previously:
Oregon’s low bar for conviction
Filan doesn’t go far enough
Dawkins doesn’t get juries

Knox’s trial by majority jury

I’ve included morning links pointers to Timothy Egan’s excellent coverage of the murder trial of Amanda Knox and Raffaele Sollecito in Italy; see here and here. Sadly, they were both convicted today. By most accounts that don’t slip into tabloid-style junk reporting, the conviction was based on shaky evidence, anti-American sentiment, and the deluded fantasies of the local prosecutor. (See this post on Simple Justice, via Radley.)

I know very little about the Italian justice system, but one thing this trial demonstrates is the virtue of requiring unanimous juries for conviction. The Seattle Times notes that Italian prosecutors have to meet a much lower standard:

Italian juries have only to reach majority consensus. Each of the eight jurors imposes a sentence they believe proper, from life down to acquittal. The ultimate sentence given is the maximum that at least five of the jurors will support.

I’m not aware of the jury’s vote being published, but it’s possible that the two were sentenced to more than 20 years in prison on the basis of just 5 of the 8 jurors’ vote. They will hopefully fare better on appeal, though that process could take years.

Previously:
Oregon’s low bar for conviction

We are journalists, not marketers

The FTC has issued new guidelines cautioning bloggers to disclose ties to products they endorse or risk an $11,000 fine:

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

Yes, it’s true: Sometimes marketers send me stuff hoping that I will write about it. Shocking, right?

Speaking only of the booze blogging world, I don’t see how this rule is either necessary or workable. It’s not necessary because we all know that our credibility will take a hit if we endorse bad products. I’m more likely to mention a product that I’ve received for free than one that I have to pay for simply because I don’t have an infinite budget for liquor, but I’m not going to sell out by giving a review to every crappy product that hits my door; I have the barely touched bottles of flavored spirits to prove it. (Actually I don’t, because I give those away for friends to use at house parties when people are too drunk to care.)

If there’s a demand for disclosure policies bloggers will provide them. Doug’s doing this now at his Pegu Blog by appending every post using a free product with a note saying that “the Liquor Fairy was here.” It’s a good idea and seems to work for him. In my case though I’d have a hard time deciding when to include a disclaimer, in part because I’m courted by marketers not just as a blogger but as a bartender as well.

A clear case of when I could (and generally do) include a disclaimer is when I get a package in the mail with a sample bottle and a note saying the sender hopes I will write about the product. Some less clear and entirely realistic cases include:

A liquor company holds a contest for bartenders offering real or potential rewards to those who participate by creating a drink with their product. I like the drink I come up with and feature it here; I mention that it was for a contest but don’t specify the rewards of participation.

A liquor company gives me a bottle or taste of their product unaware that I am a blogger. I like the product and write about it.

A liquor company takes me to dinner and offers samples of their products. A few months later the same company comes out with a new product that I independently purchase and enjoy. I write about it here.

A liquor company holds an open tasting event geared toward bartenders, bloggers, and enthusiasts. I attend and blog about the product.

A liquor company sends me a bottle for review. I don’t review it here, but I mention liking it on Twitter.

You get the idea: Spend enough time in this business and a lot of free stuff is going to come your way. And given the massive consolidation in the liquor industry there’s not going to be any brand owned by one of the big companies that I won’t have some plausible connection to. Trying to disclose all of this would get rapidly out of hand; not disclosing it leaves me liable to thousands of dollars in fines under an untested rule. (It’s unlikely the FTC would come after me, but all it takes is one vindictive person to file a complaint.)

I’ve been considering adding an explicit review policy to this site and may do so soon, but I don’t know how I could fully comply with the FTC guidelines even if I wanted to. The same ends are accomplished by bloggers’ need to maintain credibility without the potentially chilling effect this rule would have if it’s enforced too liberally.

What strikes me as the biggest flaw in these guidelines is that they treat bloggers as equivalent to celebrity endorsers or “word-of-mouth marketers” rather than as journalists. With possible exception for sites designed specifically as disguised ads, it seems better to leave disclosure to journalistic discretion rather than codifying it into law.

[Via @BrookeOB1.]

Two Pimm’s, one cup

Here’s another case of cocktails and intellectual property colliding. This time it’s Diageo’s Pimm’s product versus a chain store knock-off called Pitchers. Click through to see the two labels; Pitchers is clearly building off of Pimm’s image. I don’t know what the legal ramifications of this would be in the UK.

More interestingly, part of Diageo’s claim has to do with the use to which the products are put. Specifically, Diageo doesn’t like the fact that Pitchers boasts that it mixes well with lemonade and fruit, a traditional pairing for Pimm’s often ordered by customers as a Pimm’s Cup. Pitchers also boasts that it outperforms Pimm’s in taste tests.

This is strikingly similar to the Dark and Stormy controversy. Diageo might have a legitimate claim that the bottle design dilutes their brand, but it’s hard to imagine any public good coming from forbidding competitors to tout their superiority in a popular mixed drink.

(For more on the American law regarding trademarks and cocktails, be sure to check this guest post at The Scofflaw’s Den by practicing attorney Chris Leger.)

Dark and Stormy and the piracy paradox

My friend Tim Lee, whose new blog I linked to this morning, follows up on the Dark and Stormy controversy with a clarification about the purpose of trademark law:

[...] trademarks have a dramatically different policy rationale from patents and copyrights. Copyrights and patents are designed to create legal monopolies that drive up the price of creative works and thereby reward authors and inventors for their creativity. Although consumers may benefit from the resulting increase in creativity, the short-term effect is to force them to pay more than they would in a competitive market. Trademarks aren’t like that at all. The point is not to limit competition. To the contrary, the point is to enhance competition by ensuring that consumers know what they’re getting. This is why it’s emphatically legal to run comparative advertising featuring your competitor’s trademarks. Microsoft may own the “Windows” trademark, but Apple is free to use it as a punching bag as long as they don’t mislead consumers about what they’re getting.

The same principle applies in the Dark and Stormy case. The point of trademark law is to make sure consumers know what they’re getting (whether it’s Gosling or Zaya), not to give Gosling a monopoly on the concept of mixing ginger beer with rum. I haven’t seen Zaya’s ad and I’m not a trademark lawyer, so I don’t want to speculate on the legal merits of Gosling’s position. But certainly the apparent purpose of Zaya’s ad—encouraging bartenders to substitute their own rum in place of Gosling’s—is entirely within the spirit of trademark law. If the net effect of Gosling’s threats is that consumers wind up with fewer opportunities to try mixing ginger beer with different kinds of rum, that is certainly not what trademark law is supposed to accomplish.

This a good point. It’s also of interest that the recent boom in craft bartending has occurred with very little IP protection for recipes. Some enterprising writer might want to look into mixology as an example of creativity that thrives in a low IP environment as discussed in this famous paper on the “piracy paradox” in the fashion industry. My impression is that most of the recent innovations in recipes and technique have been driven by bartenders and bars seeking acclaim for their work and patrons eager to try their drinks; I’m personally thrilled when a recipe of my own invention is copied elsewhere, especially if credit is given to me or my bar. In contrast, the cocktails pushed by marketing campaigns tied to specific products are usually pretty unremarkable.

My perspective may be biased however by being so tied into the transparent, blogging parts of the bar community, and marketing cocktails may improve as firms realize the importance of getting their products used in craft bars. But even then it’s not clear that IP would play any essential role in the development of drink recipes.

Dark ‘n’ Sue Me

The Dark ‘n’ Stormy is a cocktail I like on a summer day. And like any good bartender, I know that it’s generally made with Gosling’s Black Seal Rum. What I didn’t know is that the name of the drink is a legal trademark:

That’s according to two trademark certificates on file with the United States Patent and Trademark Office, which — in an exceptionally rare instance in the cocktail world — dictate the precise ingredients and amounts required to call a Dark ‘n’ Stormy, well, a Dark ‘n’ Stormy.

“We defend that trademark vigorously, which is a very time-consuming and expensive thing,” said E. Malcolm Gosling Jr., whose family has owned Gosling’s since its founding in Bermuda in 1806. “That’s a valuable asset that we need to protect.”

But a trademark-protected drink — especially one as storied and neo-classically cool as a Dark ‘n’ Stormy — seems anathema to the current bartending practice of putting creative individual spins on time-tested drinks. Drinks like this one undergo something like a wiki process: a tweak here, a substitution there, and the drink is reimagined.

As this article at Halogen Life notes, applying intellectual property to cocktails is a rare thing. (The article uses “patent,” “copyright,” and “trademark” somewhat interchangeably, but I think it generally intends to refer to trademarks.) An early example (non-trademark) is the Bacardi cocktail, which by court decision can only be made with Bacardi rum. This is understandable given the value of the brand name and the expectations of customers ordering it. Similarly, if a customer orders a Captain and Coke the bartender shouldn’t serve him a Sailor Jerry’s and Pepsi instead, at least not without asking. (Though I have to wonder if it’s possible to harm the Captain Morgan brand any more than one would do by actually serving Captain Morgan.)

Of the few cocktails that are trademarked, most are the gimmicky concoctions found in chain restaurants and tourist spots. The Dark ‘n’ Stormy is a rare trademarked cocktail that craft bartenders care about.

This would all be of merely intellectual interest if not for the fact that a competing rum company, Zaya, ran an ad in the most recent issue of Imbibe recommending its 12 Year Estate Rum in a Dark ‘n’ Stormy. According to the New York Times article quoted above, Gosling’s plans to take action protecting their trademark. Zaya responded with a press release arriving in my inbox on Monday:

Zaya Rum fully supports Mixology as an artform. By imposing a trademark or patent on a cocktail recipe one is suggesting to undermine a Mixologists’ artistic freedom. We applaud bartenders who put their personal thumbprint on a libation as an integral part of the artform; it’s what creates a recipe in the first place.

Gosling’s might be on solid legal ground, but as a craft bartender I’m firmly on the side of Zaya. I use Gosling’s in a Dark ‘n’ Stormy because it tastes good, but it’s hardly written in the fabric of the universe that no other rum pairs so perfectly with ginger beer. If another rum company thinks they’ve made a product that’s even better, I want them to tell me about it. Using unique ingredients in classic cocktails is part of what makes tending bar creative. For example, a couple weeks ago my pal RumDood wrote about his good results substituting different rums in the Painkiller, a cocktail marketed by Pusser’s Navy Rum. It’s that kind of experimentation that moves mixology forward.

Gosling’s contends that using any other rum in a Dark ‘n’ Stormy would leave customers unimpressed, decreasing sales of the cocktail and therefore of Gosling’s itself. Perhaps. The New York Times compares Gosling’s to Campari, but you don’t see bartenders throwing other Italian aperitifs willy-nilly into Negronis despite that drink’s not having any trademark that I know of. Or they give the drink a new name if they do, like the Cin-Cyn using Cynar; not because they’re required to, but because Campari really is distinctive enough to merit its own iconic cocktail. This kind of bottom-up market test is a working method of deciding when a recipe deserves a distinct name.

So when I see Gosling’s calling in the lawyers to prevent people from trying out substitutes, I start to doubt whether their rum is as good as they say it is. Hell, they’re a rum company. Would this kind of behavior impress Ernest Hemingway? Or would he mock them from his bar stool whilst demonstrating knife stunts and tossing back a daiquiri? The question answers itself!

Here’s the three-word response I’d rather see from Gosling’s: “Bring. It. On.” Dark ‘n’ Stormy competition, blind tastings by a panel of consumers and mixologists, sampled side-by-side. The loser pays for the winner’s ad campaign touting its brand as the ultimate rum for the Dark ‘n’ Stormy. What do you say, Gosling’s? Will you put your money where your mouth is?

No, of course they won’t. And I can’t say I blame them. They’ve got a good thing going with their trademark and no reason to risk losing it. But their actions have made me want to switch brands out of spite. If a “Dark ‘n’ Sue Me” shows up on my cocktail menu soon, you’ll know I found a winner.

Further discussion: Inventor’s Rock provides legal clarification and Vidiot at Cocktailians provides an excellent overview of coverage.

Update: It’s worth noting that Australian rum maker Bundaberg markets a bottled Dark and Stormy beverage. I have no idea if they have any plans to enter the US market, but keeping that particular bottle off of store shelves might be one reason Gosling defends its trademark so vigorously.

Oregon’s low bar for conviction

We’re one of only two states that allows felony convictions from a non-unanimous jury, requiring only 10 votes to convict out of 12. The law is being challenged by an Oregon man and may reach the Supreme Court:

Mr. Bowen may find allies in two of the current court’s more conservative members, Justices Antonin Scalia and Clarence Thomas, who have often joined with more liberal justices to enforce the original meaning of constitutional provisions protecting the rights of criminal defendants.

The men who drafted the Sixth Amendment understood criminal convictions to require, as William Blackstone put it in 1769, “the unanimous suffrage of 12” of the defendant’s “equals and neighbors.” The Supreme Court has invoked that language in recent decisions concerning the importance of the jury’s role in determining facts supporting convictions.

I don’t have an informed opinion on the original meaning of trial by jury, but as a matter of policy I’d be happy to see a higher bar needed for felony convictions. Local prosecutors aren’t pleased with the prospect, a sign that requiring unanimity is a good idea:

Joshua Marquis, the district attorney in Clatsop County, Ore., said requiring agreement among just 10 jurors was efficient.

“Pretty much the only difference is that we have fewer hung juries,” he said.

Mr. Marquis added that 10 votes were required for conviction or acquittal and so the requirement favored neither the prosecution nor the defense. “Those two people who hold out,” he said, “are as often holdouts for the prosecution.”

Obviously the situation isn’t really so symmetric: In the case of a hung jury the defendant doesn’t go to prison and the prosecution may not bother to retry him. Hung juries are a useful signal that reasonable doubt exists. Nor do we necessarily want symmetry. Various rules of criminal justice (the burden of proof, non-reviewable acquittals) are intentionally biased against the prosecution to protect against false convictions. This will be an interesting case to watch if the Court takes it up.

Previously:
Dawkins doesn’t get juries

Starbucks vindicated

Last year Starbucks took a lot of heat in the press for an $86 million ruling against them for taking tips from baristas and giving them to management. In reality the “managers” in question were shift supervisors doing essentially the same job as baristas and customers leaving tips reasonably expected them to get their share. I defended Starbucks at the time and I’m glad to see that a California appeals court has reached the same conclusion [full decision in .DOC format here):

Specifically, the undisputed facts show: (1) the vast majority of the time shift supervisors and baristas perform the same jobs; (2) these employees rotate jobs and work as a "team" throughout the day; (3) customers intend that their tips placed in the collective tip boxes collectively reward all of these service employees; and (4) Starbucks's manner of dividing the collective tip boxes among the service employees (based on the time worked by each employee) is fair and equitable. [...]

Because the trial court’s interpretation of section 351 was not supported by the statutory language and led to a result contrary to the fundamental purpose of the statutory scheme, it is one that the Legislature could not have intended. We reverse the judgment in its entirety.

Cue allegation from amazingly persistent commenter Gary that the appeals court must have been bribed by Starbucks in 3… 2…

[Via Starbucks Gossip.]

For the sake of a quirky, historic upper-case ‘E’

made in oregon

The sign above graces the entrance to downtown Portland from the Burnside Bridge. It’s a nice sign. I like it. Does that make it mine?

I don’t think so, but many of my fellow Oregonians do. The owners of the sign have asked the Portland Historic Landmark Commission for permission to change its text. Citizens are protesting the alteration; nearly 10,000 of them have joined a Facebook group dedicated to opposing it. Pat Mobley, writing at Blue Oregon, argues that the sign “transcended simple advertisement status long ago” — apparently a good enough reason for denying its owners the right to put it to profitable use. City officials have put forth an even stranger justification: “The loss of the quirky, historic upper-case ‘E’ and cut-off ‘g’ in the text are not in keeping with the landmark character of the sign,” they write in a staff recommendation.

The facts are straightforward:

– The sign with Oregon outline was built in 1940 and advertised White Satin Sugar.

– In 1959 it was switched to an ad for White Stag sportswear, adding the iconic white stag.

– In 1997 it was changed again to promote Made in Oregon stores, a retailer that sells Oregon products.

– Made in Oregon no longer has any ownership of or presence in the building that hosts the sign. Nor does it pay for the electricity used to light it.

– With the exception of holidays, the sign went dark from 1989 to 1996 because no one was paying for it, and it may do so again.

– The University of Oregon now has a presence in the building and has paid for major renovations. They’ve offered to purchase the sign from its current owner, Ramsey Signs, and to keep it lit, under the condition that they are allowed to change it to read “University of Oregon.”

Perhaps I cling to quaint notions of property rights or maybe I just dislike the idea of text that’s younger than me being declared a historic landmark, but that strikes me as a perfectly reasonable transaction. And if the people of Portland feel strongly otherwise, they don’t have to resort to seizing the sign without compensating its owners. They or their proxies at City Hall could offer a competing bid to keep the sign intact. I suspect they’d realize they don’t actually care all that much about the sign if preserving it required making a donation or spending tax money rather than simply joining a feel-good Facebook group.

Unfortunately, given the realities of historic landmark laws, feeling good is practically cost-free. As Robert Levy and William Mellor describe regulatory takings in their book The Dirty Dozen:

If property is taken for public use, it makes sense — both morally and economically — to spread the cost of obtaining the property over the entire public. [...]

The allocation of these costs also has political implications. If the government is required to pay for the benefits it seeks to provide, taxpaying voters can weigh the costs they incur against the benefits they receive. Legislators will then have an electoral incentive to engage in takings only when the net benefit to society exceeds the net cost. Voters who must bear the additional cost will punish legislators who abuse such takings.

In contrast, if legislators are free to enrich a large group of voters at the expense of a single property owner or a small group of owners, it is in their electoral best interest to do so. Voters can be expected to accept and even demand any benefit, no matter how insignificant, if it costs them nothing to obtain it.

I have a slight preference for the sign reading “Made in Oregon” rather than “University of Oregon.” I have a strong preference for seeing property rights respected. I hope the change goes through.

[Photo from the Flickr stream of Drewish.]