The Licensing of Alcoholic Beverages in Montana Part 3: Distilleries

March 2015

Part 3: Distilleries

This article is the third in our three-part series on the burgeoning winery, brewery and distillery industries in Montana. RoughStock Distillery of Bozeman claims to be the first legal distillery in Montana since the Prohibition, and 17 micro distilleries have opened in Montana since 2010. According to the American Distilling Institute, the number of micro distilleries in the United States increased five-fold--from 50 to 250--from 2005 to 2012. Triple Divide Spirits, founded by attorney Karen Powell, is one of the newest Montana breweries. Located in Helena, Triple Divide Spirits introduced its first vodka a year ago. Bozeman Spirits Distillery's product line includes a huckleberry-flavored vodka and Ruby River Gin®, which is flavored with botanicals from the Ruby River Valley. Tease Law is proud to represent all three of the companies mentioned in this paragraph.

There are fewer regulations governing Montana distilleries than there are for wineries and breweries, which may be on the reasons our state has seen a proliferation of micro distilleries in recent years. Distilled spirits are also regulated on a federal level, however, and unlike beer and wine, distilled spirits may not be made at home for personal use. The production of distilled spirits in the United States requires a federal application, the posting of a bond, the use of approved equipment, a separate building (other than a personal residence), the maintenance of records and the filing of reports. One of the first things a would-be distiller must do is obtain a federal Distilled Spirits Permit (DSP) from the Alcohol and Tobacco Tax and Trade Bureau (TTB), an arm of the U.S. Treasury Department. The TTB also administers labeling requirements for all alcoholic beverage products, a full discussion of which is beyond the scope of this article. We often work with clients to ensure that their product names are available for federal trademark registration before the product label is submitted to the TTB.

Montana distilleries must also obtain a domestic distillery license from the Montana Department of Revenue, Liquor Control Division. Under current law, all distilled spirits produced in Montana must first be shipped to a warehouse in Helena for distribution by the state. Mont. Code Ann. § 16-4-311. In a bill that is currently under consideration by the Montana legislature (HB 506), a distillery producing less than 25,000 gallons of product annually would be permitted to deliver its product directly to a state agency liquor store; the distillery must use its own equipment, trucks and employees to do so, and the amount delivered must be at least a case. As of the drafting of this article, a hearing on the bill was scheduled for April 8.

In a somewhat strange (and strained) juxtaposition of federal and state law, controversies have arisen in the distillery industry concerning state of origin labelling.

Under U.S. trademark law, a product need not be manufactured in the state in order to include the word "Montana" in the product name. Rather, in order to avoid a geographically misdescriptive refusal, a trademark applicant must show some nexus between the goods sold and the geographic location that is part of the trademark. For example, in the apparel category, one of our clients was required to show that it planned to locate its distribution facility for a DAKOTA DIRT clothing line in North Dakota. Similarly, in the example noted above, Bozeman Spirits was required to show that its RUBY RIVER GIN® had some connection to the Ruby River Valley.

In cases involving marks that include the word "Montana," the applicant is usually required to disclaim the word "Montana" (which simply means that the owner of the mark cannot prevent others from using the word "Montana") without requiring any particular showing of connection to the state. Examples of the latter include U.S. Trademark Registration No. 3890739 for the mark MONTANA GHOST WOOD, U.S. Trademark Registration No. 3726454 for the mark ROUGHSTOCK MONTANA WHISKEY, and U.S. Trademark Registration No. 4685436 for the mark MONTANA 1889 WHISKEY. (If the applicant is located in Montana, the trademark office usually presumes there is some connection between the goods and the state of Montana.) In fact, the only legal requirement in terms of federal trademark registration is that the applicant show that the goods will be manufactured, packaged, shipped from, sold in or will have any other connection with the geographic location named in the mark. See 37 C.F.R. §2.61(b); TMEP §1210.03 (emphasis added).

In the distillery context, however, certain industry giants (Brown-Forman and Diageo) have locked horns over what constitutes "Tennessee" whiskey. A bill that was passed by the Tennessee state legislature in 2013 imposes specific limitations on when a product can be represented as a "Tennessee whiskey." For example, the bill requires that the product be manufactured from mesh fermented in Tennessee, distilled in Tennessee, aged in charred oak barrels, etc. The Tennessee Attorney General apparently believes the bill is unconstitutional, and its fate is uncertain. Montana has no such legislation, the salient point being that under federal trademark law, as long as the product has some connection to the state of Montana, use of the term "Montana" in connection with the name of a distilled spirit product is perfectly legal. The TTB requires that the state in which a product is distilled must be specifically identified on the label if it is not the state in which the distiller is located; this requirement has nothing whatsoever to do with the use of geographic terms under federal trademark law, however, and is particular to the distillery industry. Finally, no seller of any product can make affirmative representations in connection with a product that are false or misleading; such practices are illegal under Section 43(a) of the Lanham Act.


Amicable photo of Toni

Antoinette M. Tease, P.L.L.C.