Kentucky Bourbon, Printer Ink, and Property Law

The alcohol industry has experienced ebbs and flows in recent years due to shifting consumer desires, tariff trouble, and more non-alcoholic beverage competitors. Despite these challenges, Buffalo Trace Distillery located in Frankfort, Kentucky remains a stronghold amid a global decline in alcohol sales. The distillery is one of the oldest and most well-known in the United States. Famous for its high-end bourbon, the distillery has been around for over 200 years and has grown along with our nation: overcoming prohibition, war, and in recent years, historic flooding. Its offerings include the flagship Buffalo Trace Bourbon, and specialty brands such as Blanton's Single Barrel, Eagle Rare, W.L. Weller, E.H. Taylor, Jr., and the highly sought after Pappy Van Winkle.

How has Buffalo Trace remained so iconic? Part of their intrigue derives from the scarcity of their specialty brands. Buffalo Trace employs certain techniques to artificially control the supply and demand of their products. For example, if you purchase a bottle of Eagle Rare directly from the distillery, the salesclerk will mark down your ID and place a 90 day hold on your ability to purchase another bottle. The rule is designed to prevent resellers from stockpiling bottles to resell in the secondary market, which could present competition for the distillery and impact the scarcity of their specialty brands. A Bourbon Collector may wonder, “If I promise not to resell, can I buy two bottles?” But, because the law disfavors restraint of a purchaser’s alienation rights after purchase, including their ability to resell the product, the distillery restricts who can obtain the product in the first place, producing similar market-control effects while avoiding the limit imposed by this critical pillar of property law.

This principle was further outlined in Impression Products, Inc. v. Lexmark International, Inc. The case involved a manufacturer of cartridges used in laser printers who sought to prevent the resale or reuse of their product. However, a remanufacturer continued to refill and resell the cartridges at a lower price. The primary manufacturer sued for patent infringement, stating that under patent law they had the right to prevent reuse or resale of the cartridges, even after sale. The Supreme Court disagreed. Chief Justice Roberts’ opinion asserted the long history of the rule against restraints on alienation: “As Lord Coke put it in the 17th century, if an owner restricts the resale or use of an item after selling it, that restriction ‘is voide, because . . . it is against Trade and Traffique, and bargaining and contracting betweene man and man.’” Applying this rule, the Court rejected the manufacturer’s argument and held that they did not have the right to impose post-sale restrictions on their products.

The property law rule against restraints on alienation helps identify why Buffalo Trace imposes the 90-day rule rather than simply ask their customers not to resell. As stated in Impression Products: “If an owner restricts the resale or use of an item after selling it, that restriction ‘is voide, because . . . it is against Trade and Traffique, and bargaining and contracting betweene man and man.’” Thus, if Buffalo Trace were to sell multiple bottles to a customer who promised not to resell the bourbon, the restraint would be immediately void under this rule. Per the law’s disdain for restraint of alienation, customers would not be bound by their promise not to resell. Therefore, Buffalo Trace applies the 90-day rule to artificially control the market without coming in conflict with the limits imposed by this rule.

While the rule against restraints on alienation allows consumers to do what they want with the product once they have it, the rule does not prevent companies from limiting who can access the product in the first place. Oftentimes large resale markets function as a way to level the playing field for consumers, expanding access to certain goods. However, when there is a strict limit on the number of units entering the market, the resale market operates as more of a gatekeeper than a level-setter: a bottle of E.H. Taylor at Buffalo Trace costs about $45.00, while a bottle on the secondary market is double that, if you can find one. Will property law meet Buffalo Trace where they are at by adopting new rules aimed at expanding consumer access? This outcome is unlikely. While there is an argument to be made for expanded access, generally businesses retain the ability to control the sale of their property as the exclusive owners thereof.

Emily Lewantowicz is a law student at the American University Washington College of Law.

Image: Kittugwiki, Buffalo Trace Tower.