Maker’s Mark & Ted’s Cigars Sue Each Other

The Bourbon Cigar is going to court.

Maker’s Mark and Spalding Group—the parent of Ted’s Cigars—have sued each other, the latest chapter to a relationship that began in 1996 as part of a licensing agreement that saw Ted’s produce and sell Maker’s Mark cigars seasoned with the company’s famous bourbon. It was an agreement that lasted 20 years, ending in 2016.

As far as the legal fight is concerned, Maker’s Mark fired first, filing a lawsuit in the U.S. District Court for the Western District of Kentucky over trademark infringement and dilution last week. It didn’t take Ted’s long to fire back with a counterclaim—along with 31 exhibits of evidence—filed the on same day.

The companies’ relationship began like many other entities in Kentucky, at the Derby. In 1996, Ted’s created a special cigar for Maker’s Mark’s annual Kentucky Derby event. That led to the relationship which resulted in the creation of a Maker’s Mark cigar to be sold at retail as part of a licensing agreement.

On May 1, 1997, an agreement was signed. Ted’s would use Maker’s Mark’s bourbon to season cigars, which would then be packaged in a manner that reflected the bourbon’s packaging, including the Maker’s Mark name, SIV logo and the red irregular dripping wax that adorns the top of the bourbon bottles.

Ted’s was to pay Maker’s Mark 10 percent of the net sales as a royalty, which totaled millions of dollars over the course of the relationship. In addition, a variety of subsequent agreements were signed over the years, which expanded the countries the cigars could be sold in and extended the partnership.

THE BEGINNING OF THE END

In December 2013, Rob Samuels, Maker’s Mark coo and the grandson of Marker’s Mark’s founder, informed Ted’s that Maker’s Mark was ending the relationship. According to Ted Jackson, the founder of Ted’s Cigars, Samuels said the company was terminating the agreement because of the risk the cigars had on the company’s liability insurance. Jackson says he tried to renegotiate the agreement but failed.

As part of the termination clause, Maker’s Mark was required to give Ted’s two years worth of notice and Ted’s had an additional six months to sell any existing inventory after the two years had passed, meaning Ted’s was prohibited from selling Maker’s Mark cigars after June 2016.

Maker’s Mark’s complaint shows the Maker’s Mark cigars versus the Original Bourbon Cigar by Ted’s.

Jackson told halfwheel that he hired an intellectual property law firm to work on a new design for a new bourbon cigar and spent over $200,000 for the rebranding. Ultimately, a new cigar was developed that first carried the name Original Cigar by Ted’s name, eventually becoming known as The Bourbon Cigar.

Like the Maker’s Mark cigar, it is sold in a glass tube, usually with a red band and red wax on the tube. The new cigar has slightly different bands: the original featured the SIV logo and Maker’s Mark name while The Bourbon Cigar is red with a fleur-de-lis. It features a secondary band that says “SEASONED WITH MAKER’S MARK®.” One notable difference—particularly as it pertains to this lawsuit—is that the red wax that is on the tube is flat, not the irregular dripping wax is trademarked by Maker’s Mark.

Ted’s The Bourbon Cigar (Image via Ted’s Cigars)

Maker’s Mark claims that Ted’s created a look that is designed to intentionally confuse consumers to think that The Bourbon Cigar is the same as the previously-licensed Maker’s Mark cigar.

It cites a variety of examples of where both stores and customers have referred to the new The Bourbon Cigar as some variation of the Maker’s Mark cigar. Maker’s further states that Ted’s marketing of the cigar—including when The Bourbon Cigar celebrated 20 years—offers additional evidence that the company is trying to sell The Bourbon Cigar as the Maker’s Mark cigar.

Maker’s Mark also claims that the alleged trademark infringement also means Ted’s violated the previous contract which barred the company from selling the Maker’s Mark cigar after June 28, 2016.

WAX, WAX, WAX

Ted’s counterclaim deals with a variety of claims, many of which are centered around whether Marker’s Mark has any rights to the use of irregular dripping wax in the cigar industry, i.e. does their whisk(e)y trademark apply to the cigar category as well.

Jackson claims that in 2002 he noticed that Gurkha had begun selling products that featured dripping wax. He then requested that Maker’s Mark legally stop Gurkha from using the dripping wax on its cigars. Jackson claims that the licensing agreement required Maker’s Mark to defend its trademarks. In short, if somebody else could use Maker’s Mark’s trademarks, why should Ted’s have to pay a royalty to do so?

Maker’s Mark declined to go after Gurkha, stating that it didn’t have the rights to irregular dripping wax for cigars meaning no trademark was being violated.

The countersuit argues that either Maker’s Mark in fact does not have said trademark, in which case a very large piece of its claims in the original Ted’s suit are likely void; or that Maker’s Mark does have rights to the irregular dripping wax, in which case its decision to not go after Gurkha was a breach of its own contract and means that Ted’s is entitled to damages.

TEQUILLA WAX

That’s not the only discussion about the wax.

Maker’s Mark’s trademark—which specifically covers both whisk(e)y and steak sauce—is described as “wax-like coating covering the cap of the bottle and trickling down the neck of the bottle in a freeform irregular pattern.”

In 2003, Maker’s Mark sued Diageo over its use of wax on Jose Cuervo Reserve de la Familia, a tequila. In the original complaint, Maker’s Mark described the wax as “a freeform irregular pattern (hereinafter the “Freeform Wax Seal Mark”). At the time Diageo’s wax was both red and dripping. It’s important to note that the description of Maker’s Mark’s trademark doesn’t include a specification about the color of the wax.

Less than two weeks later, Diageo requested that Maker’s Mark’s application for a new trademark—2,690,813—which included red wax be canceled. Diageo argued that Maker’s Mark’s original 1985 trademark didn’t specify the color of red on seals or the neck of bottles and as such, Maker’s Mark couldn’t have a claim to all red wax or seals on liquor bottles.

Diageo filed another request for the cancellation of Maker’s Mark’s 813 trademark in 2008. This time it alleged that Maker’s Mark new trademark—which applied to “the color red as applied to the seal that extends down the neck of the bottle” was not distinctive enough as other brands, including Diageo’s own J&B whisky brand had been using red seals before Maker’s Mark had been created.

In September 2009, Maker’s Mark filed another lawsuit, this time alleging that Diageo’s use of “red wax-like neck coating” violated the company’s trademark.

The new Jose Cuervo Reserva de la Familiar, without dripping wax. (Image via Jose Cuervo)

The important part for the purposes of the Ted’s lawsuit, according to the cigar company, is that Maker’s Mark ultimately dropped claims to red wax in general; instead, it focused on red dripping wax.

Maker’s Mark abandoned the 813 trademark, but prevailed on the red dripping wax claims in the second lawsuit. Diageo is no longer allowed to use red dripping wax on bottles in the U.S., though there are various Jose Cuervo products sold with non-dripping, non-red wax.

Ted’s claims that Maker’s Mark’s decision to focus solely on the red dripping wax in 2009 means Maker’s can have no claim to non-dripping wax in 2019. It should be noted that the court declined to decide whether Maker’s Mark has rights to more colors than red dripping wax, as the judge determined it wasn’t relevant for the Diageo case as the Jose Cuervo bottle in question used red dripping wax.

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In April 2017, Samuels contacted Jackson via email indicating that he believed The Bourbon Cigar was in violation of Maker’s Mark’s trademarks.

“Of course I’m not saying you cannot offer a bourbon cigar seasoned with bourbon flavors,” wrote Samuels. “But I do ask that you can stop using the Maker’s Mark name, red wax, and dripping wax of any color.”

Jackson replied making many of the same arguments that are outlined in the lawsuit: the Gurkha question, the fact that “SEASONED WITH MAKER’S MARK” doesn’t use the type face used on the Maker’s Mark bottle, and stated that The Bourbon Cigar doesn’t use dripping wax of any kind.

In June of that year, Maker’s Mark sent Ted’s a cease and desist letter.

Jackson’s countersuit then says that nothing happened from a legal perspective until this month. During that time he claims Maker’s Mark continued to sell him bourbon for his cigars and that Maker’s Mark and its parent company—Beam Suntory—bought cigars from Jackson to use at their own events. He also cited one event specifically where he claims that Maker’s Mark employees placed bottles of Maker’s Mark bourbon on a table where he was displaying The Bourbon Cigar, indicating that they could have been the ones responsible for the alleged confusion. Jackson also produced multiple emails where employees of Beam Suntory and Maker’s Mark tried ordering Maker’s Mark cigars after June 2016. Employees for Ted’s responded indicating that they no longer offer the Maker’s Mark cigar, but sell a bourbon cigar.

Ted’s claims that even if Maker’s Mark was entitled to exclusive rights to red dripping wax on cigars, which he contends it is not, that there was no way based on the company’s actions beginning in 2002 with Gurkha and as recently as last year—when the liquor company was buying cigars—to determine that Maker’s Mark was making claims to the exclusive rights to red dripping wax on cigars.

Both parties have requested a trial by jury.

Maker’s Mark did not return a request for comment regarding Ted’s countersuit.