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JL Beverage Company, LLC v. Beam, Inc.

United States District Court, D. Nevada

July 27, 2018

JL BEVERAGE COMPANY, LLC, a Nevada limited liability company, Plaintiff,
v.
BEAM, INC., a Delaware corporation, et al., Defendants.

          BENCH ORDER [1] (REDACTED)

          MIRANDA M. DU, UNITED STATES DISTRICT JUDGE

         I. SUMMARY

         This is a trademark infringement action between two beverage producers-Plaintiff JL Beverage Company, LLC (“JL Beverage”) and Defendants Beam Inc. and Jim Beam Brands Co. (collectively, “Jim Beam”). The Court held a two-day bench trial. (ECF Nos. 265, 266.) For the following reasons, the Court finds that Jim Beam did not infringe JL Beverage's marks and that Jim Beam is not entitled to cancellation of JL Beverage's “JL Lips Mark.”

         II. CLAIMS

         JL Beverage commenced this action on March 18, 2011, seeking relief for (1) federal trademark infringement under 15 U.S.C. § 1114; (2) false designation of origin and unfair competition under 15 U.S.C. § 1125(a); and (3) common law trademark infringement and unfair competition under Nevada law. (ECF No. 1 at 6-9.) JL Beverage based its claims on the “JLV Mark” depicted below: (Image Omitted) (Id.) The JLV Mark was registered for “vodka” on August 16, 2005, under United States Patent and Trademark Office (“USPTO”) Registration No. 2, 986, 519. (Exh. 1.)

         JL Beverage amended its Complaint on December 5, 2011, to assert the same claims based on an additional mark-the “JL Lips Mark”-depicted below: (Image omitted) (See ECF No. 30 at 5, 9-11.) The JL Lips Mark was registered for “distilled spirits” on October 25, 2011, under USPTO Registration No. 4, 044, 182. (Exh. 2.) JL Beverage asserts claims of both forward confusion and reverse confusion. (See ECF No. 213 at 15.) Defendants asserted counterclaims that they later amended to state claims for: (1) cancellation of the JL Lips Mark registration as being void ab initio pursuant to 15 U.S.C. §§ 1119, 1064(1), and 1052(f); (2) cancellation of the JL Lips Mark registration for failure to function as a mark pursuant to 15 U.S.C. §§ 1119, 1064(1), and 1052(f); and (3) cancellation of the JL Lips Mark registration based on a likelihood of confusion with Jim Beam's earlier U.S. Registration No. 2, 638, 476 (the “Beam Lips Mark” depicted below) pursuant to 15 U.S.C. §§ 1052(d), 1064, and 1119. (ECF No. 168 at 18-21; see also ECF Nos. 32, 33 (original counterclaims).)

         The Beam Lips Mark was registered for “alcoholic beverages, namely, liqueurs and cordials” on October 22, 2002, under USPTO Registration No. 2, 638, 476. (Exh. 663 at 2.) At trial, Jim Beam only offered evidence in support of its third counterclaim.

         III. FINDINGS OF FACT

         A. JL Beverage and Johnny Love Vodka

         1. JL Beverage is a Nevada limited liability company with its principal place of business in Henderson, Nevada. (ECF No. 30 at 2.)

         2. JL Beverage manufactured, sold, and promoted a line of vodkas called “Johnny Love Vodka” beginning around June 2005. (ECF No. 265 at 4-5, 61-62.)

         3. Liquor manufacturers must go through a multi-step process colloquially known as the “three-tier distribution” system for its products to reach consumers. Under the three-tier distribution system, the manufacturer must negotiate with, and then sell (and ship) its product to third-party liquor distributors (or, in the case of a “Control State, ” to the state-controlled equivalents), and it is the distributor that then sells the product to retailers who, in turn, sell it to consumers. (ECF No. 266 at 84-85.)

         4. JL Beverage stopped brand operations in 2008 but continued to make sales through 2011. (ECF No. 265 at 188-90.) JL Beverage did not introduce credible evidence of any sales that took place after 2011. (Id.)

         5. Johnny Love Vodka comes in five flavors (premium (unflavored), apple, tangerine, aloha, and passion) and four sizes (50 ml, 200 ml, 750 ml, and 1.75 L). (See Id. at 23-25.)

         6. On bottles of Johnny Love Vodka, the JL Lips Mark appears on the front label, the back label, and the bottle top security seal. (Id. at 28-29.) The color of the JL Lips Mark on the front label varies depending on the flavor of the vodka, with green denoting apple, orange denoting tangerine, and so on. (See Id. at 29-30.)

         (Image Omitted)

         7. Johnny Love Vodka has been sold at retail stores in the range of $0.99 to $2.99 for the 50 ml bottle; $4.99 to $5.99 for the 200 ml bottle; $14.99 to $24.99 for the 750 ml bottle; and approximately $29.99 for the 1.75 L bottle. (Id. at 33-34.)

         8. Consumers do not refer to Johnny Love Vodka as “the lip vodka.” JL Beverage offered evidence at trial that consumers refer to Johnny Love Vodka as “the lip vodka, ” but the Court did not find this evidence credible. (See Id. at 238.) The manager of JL Beverage, Thomas J. Diab, testified that consumers called Johnny Love Vodka products “the lip vodka” but could only identify one instance of a writing-a newspaper article-that referred to Johnny Love Vodka as “the lip vodka” when pressed on cross-examination. (Id. at 238-39.) JL Beverage did not introduce any additional evidence that consumers referred to Johnny Love Vodka as “the lip vodka.”

         1. Development

         9. A restaurant owner and bartender named Johnny Metheny created the Johnny Love line of vodkas some time before 2005. (See Id. at 5.)

         10. JL Beverage purchased the Johnny Love brand from Metheny in 2005 for approximately $940, 000. (Id. at 17.)

         2. Marketing

         11. JL Beverage spent roughly $477, 000 on marketing and advertising for Johnny Love Vodka over the life of the brand. (See Id. at 201.)

         12. Some of these funds were used to hire salespeople who solicited distributors. (Id. at 104.)

         13. Some of these funds were also used for one-time sponsorships-specifically mentioned at trial were sponsorships of the 2005 Radio Music Awards, a dune buggy race, an auto race called “24 Hours of Daytona, ” and the 2010 Miss USA pageant. (Id. at 104-05.) 24 Hours of Dayton was televised worldwide; the 2010 Miss USA pageant was televised nationally; and the dune buggy race was televised on a smaller scale. (Id. at 107-08.)

         14. Consumers exposed to JL Beverage's logo and marketing materials during the sponsorship events probably would not remember it. While Mr. Diab (the manager of JL Beverage) testified that consumers who saw the JLV Mark on the media wall at the Miss USA pageant or on a race car in 2008 would remember it six to nine years later (id. at 236-38), the Court finds that this testimony is not credible. The JLV Mark was one of many logos featured in both of those contexts, and it was not set apart from the other logos in any meaningful way. For instance, the JLV Mark did not appear to be a larger size than the other logos. (See Exh. 32A at JLSUPP000139 (photograph of race car in 24 Hours of Daytona), JLSUPP000146 (media wall from 2010 Miss USA pageant).)

         15. JL Beverage spent $2, 347 advertising in traditional media such as newspapers, magazines, and television commercials. (See ECF No. 265 at 232.)

         16. An image of a Johnny Love Vodka bottle has been featured on the home Facebook page of “I Love Vodka” continuously since 2015 or 2016, and that Facebook page has been liked by over 550, 000 Facebook users. (Id. at 109-10; Exh. 32A at JLSUPP000151.) The Johnny Love Vodka bottle was featured as a result of business dealings JL Beverage had with the owner of the Facebook page. (ECF No. 265 at 109-10.)

         17. JL Beverage entered a business relationship with Alaska Airlines in or around 2008 that lasted for about a year. (Id. at 87-88, 99-100.) JL Beverage sold Premium and Aloha flavors of Johnny Love Vodka to Alaska Airlines in the 50 ml and 750 ml sizes. (Id. at 88.) The larger, 750 ml bottles were kept in “in-airport boardrooms.” (Id.) JL Beverage sold between eight thousand and ten thousand cases[2] of the 50 ml bottles to Alaska Airlines. (Id. at 89.) Alaska Airlines featured Johnny Love Vodka on recipe cards in the seat-back pocket of its airplanes. (Id. at 90; see also Exh. 32A at JLSUPP000136.) At the time that JL Beverage dealt with Alaska Airlines, the airline had approximately 400 flights a day. (Id. at 91.)

         18. Consumers purchased Johnny Love Vodka at retail stores, restaurants, and bars. (Id. at 32.)

         19. JL Beverage continuously has held a Federal Basic Alcohol Permit for nationwide use since 2005. (Id. at 61-62.)

         20. JL Beverage established that the Johnny Love Vodka product line was available for sale in all fifty states but did not establish actual sales in all fifty states. JL Beverage established actual sales only in the following states and regions: Alaska, Arizona, Arkansas, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Maine, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin. (ECF No. 265 at 42 (listing Virginia, Pennsylvania, North Carolina, Idaho); id. at 49 (listing West Virginia, Montana, Florida, Tennessee, Washington); id. at 54 (listing Maine and Michigan); id. at 59 (listing New Hampshire); Exh. 3 (identifying the remaining states listed).)

         21. Regarding the quantity of sales, JL Beverage sold hundreds or thousands of cases to distributors in these states, except for Maine, New Hampshire, Rhode Island, and Virginia, where JL Beverage sold fewer than 350 cases.[3] (ECF No. 265 at 59-61.)

         22. Consumers technically were still able to purchase Johnny Love Vodka at the time of trial (see, e.g., ECF No. 266 at 262-63), though JL Beverage did not produce credible evidence of sales to distributors after 2011 (see ECF No. 265 at 188-90).

         3. Profitability

         23. JL Beverage never earned profit from its business activities. (ECF No. 265 at 162-65; see also Exhs. 521-26.)

         24. JL Beverage's lifetime sales of Jonny Love product have totaled less than $2.6 million. (ECF No. 265 at 138-39.)

         25. By 2009, JL Beverage's revenue from sales of Johnny Love Vodka had dropped to $161, 000, representing the shipment of 413 cases of product. (See ECF No. 265 at 170-76, 186; Exh. 525; Exh. 25 at 3.)

         26. Over the next two years, sales of Johnny Love Vodka continued to fall, with JL Beverage selling 228 cases of product in 2010 and 112 cases in 2011. (See ECF No. 265 at 176-77; Exh. 25 at 3.)

         27. JL Beverage did not produce credible evidence of sale of any Johnny Love products after 2011. (ECF No. 265 at 188.)

         28. JL Beverage suspended Johnny Love brand operations in 2008. (ECF No. 265 at 188-90; Exh. 25 at 2.)

         29. JL Beverage did not introduce evidence that it restarted Johnny Love Vodka operations at any time after 2008.

         B. Jim Beam and Pucker Vodka

         30. Jim Beam comprises Delaware corporations with a principal place of business in Deerfield, Illinois. (ECF No. 32 at 3.) Jim Beam promotes and sells a line of flavored liqueurs and a line of flavored vodka products under the name Pucker through the three-tier distribution system. (See, e.g., ECF No. 47 at 2;[4] ECF No. 47-1 at 2-3; ECF No. 47-2 at 2-3; ECF No. 266 at 108-09.) Jim Beam launched its Pucker vodkas nationwide in April 2011. (Deposition of Kim Washington (“Washington Dep.”) at 27, 66; see also Deposition of Maria Martin (“Martin Dep.”) at 44.[5])

         1. Development

         31. Jim Beam has sold a popular line of flavored liqueurs (prior to the launch of Pucker Vodka) in the United States that goes by the name “Pucker” since 1996. (ECF No. 266 at 102.)

         32. The trade dress used with Pucker liqueurs has always featured both the Pucker name and a design that depicted a set of “open lips.” (Id. at 102-07, 110, 171; Exhs. 885, 952, 1121.) The color of the lips that appear on the Pucker products corresponds to the flavor of the liqueur, as shown below:

         (Image Omitted) (ECF No. 266 at 381-85.)

         33. In the years leading up to the events in this case, Jim Beam was selling, on average, about 500, 000 standard (nine-liter) cases of Pucker liqueur products a year. (ECF No. 266 at 103.) Jim Beam continues to sell Pucker-branded liqueurs (featuring lips) to this day. (See Id. at 110.)

         34. Jim Beam began work on a project to extend the goodwill consumers associated with the Pucker name and trade dress for flavored liqueurs (including the use of lips in colors that correspond to flavors) to a new line of flavored vodkas in early 2010. (Id. at 43-45, 116-20, 135-36; see also Exhs. 798 (presentation materials containing early ideas about Pucker Vodka), 1040 (summary supporting the development of Pucker Vodka); Washington Dep. at 14-18, 25-27; Martin Dep. at Exh. 11 (packaging design brief).)

         35. Jim Beam initially sold Pucker liqueurs under a license from third-party Koninklijke de Kuyper, B.V. (“De Kuyper”). (See Martin Dep. at 34, 36; ECF No. 266 at 37.)

         36. Jim Beam purchased the Pucker brand and intellectual property assets from De Kuyper in December 2010 for XXXXX dollars even though Jim Beam already had a XXXXX license to use the mark because Jim Beam decided that it wanted to own the entirety of the Pucker brand. (Martin Dep. at 34, 36-37; id. at Exh. 20; ECF No. 266 at 57-59, 65, 102-03, 204; Exh. 53.)

         37. Among the rights associated with the Pucker brand that Beam acquired from De Kuyper were the three federal trademark registrations depicted below:

U.S. Reg. No. 2535369
U.S. Reg. No. 2665405
U.S. Reg. No. 2638476

(ECF No. 47 at 2-3; see also ECF No. 266 at 355; Exh. 663.)

         38. Jim Beam wanted the Pucker Vodka line to look distinct from the Pucker liqueur line while at the same time extending the goodwill consumers associated with the Pucker name and trade dress (including the use of lips in various colors) to the vodka line. (See ECF No. 266 ...


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