Wine Label Laws Power Rankings

The question often comes up, even for lawyers who are well-versed in trademark law, what is the difference between labeling laws that govern alcohol labeling and trademark laws that have a direct impact on the content of alcohol labels. The answer is that there are major differences, but ones that are difficult to understand and easy to conflate.

The idea is this: that one body of law overlays on the other; they both apply in most situations and they sometimes interact. We’ll start with labeling laws. The federal government governs the content of wine labels through the TTB. The TTB has scores of regulations that affect what appears on wine labels. The policy behind most of these are consumer protection, the idea that claims on labels should be true, accurate, and convey information that is helpful to the consumer in terms of making buying decisions based upon health, consumption, and enjoyment, among others. Additionally, the TTB set a “floor” by which all states add additional requirements. Some states are more “regulation-happy” than others, but all have at least some discrete requirements in addition to the TTB.

Thus, the TTB in some instances requires certain information (if it’s missing, your label will not be approved) and in some instances requires the removal of certain information (a misleading description). For example, alcohol content is a requirement. If one were to leave alcohol content off of the label, the label would not be approved.

Some pieces of information are optional. For example, indications of geography or grape varietal are not requirement but they are allowed. If they are included, they must be accurate under certain specifications.

For a winery wishing to create a marketable label, I think of these laws as the “must do” category. Without proper TTB approval, a wine label simply cannot be used in the United States. I like to analogize this to crossing the street. The law requires that one use a cross walk (assume that is true), but looking both ways, by contrast, is simply good practice. Think of the TTB labeling laws as tantamount to using a cross walk, while considering trademark laws as tantamount to looking both ways before you cross.

No one really requires that you consider trademarks and do a trademark analysis before you begin selling wine with a particular label on it. For the most part, the federal government is not going to be out in the world policing the trademark content on wine labels, or at least not proactively. Instead, other private parties enforce trademarks; namely, the parties who own rights in the trademarks that others might be using.

The analysis can go very deep, but in essence, trademark rights originate when the trademark begins being used in commerce. So, while TTB approvals are often done months or even years before a label is brought out in the market, trademark rights often don’t come around until the label actually gets used. (This is complicated by the TTAB registration process and particularly intent-to-use applications, but for this discussion I am leaving these out.)

So, what I’m trying to stress here is that TTB labeling requirements and trademark analysis are both very important and should be considered when creating wine labels for use in commerce. However, if one were to rank them in terms of importance, or in terms of which have the higher likelihood of de-railing ones plans for global dominance, I would rank them TTB first, and trademark laws second.

Before I go, I also want to take a minute for a shameless plug for my friend Sam in NYC, who is promoting the home brew kit for the famous Bikini Beer from Evil Twin Brewing. I’ve had beers from Evil Twin before, and these are serious beers. Good job to Sam and the gang. That said, I won’t be brewing these at home, as my skills are better as a beer drinker than a beer cooker. Sorry Sam (and the gang).
(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Consumer Protection law, Federal Regulations, Intellectual Property Law, Labeling, Regulatory/Administrative Law, Trademark Law | Leave a comment

Franchise Law Problems in the Alcohol Industry

Diageo is currently fighting a lawsuit regarding a Missouri distributor named Major Brands; the lawsuit involves, in part, various states’ franchise law.  Franchise law is, indeed, a complex area of law that can sneak up on companies in a bad way if not considered at the right time.

Like many areas of law, franchising is regulated with a federal and a state law component.  At the federal level, the Federal Trade Commission defines a franchise as having three elements: (1) Trademarks – a franchisor gives a franchisee the right to distribute for sale goods and/or services under the trademarks of the franchisor; (2) Control or Assistance – the franchisor either has control of, or gives assistance to, the franchisee (federal law has defined that this control or assistance must be “significant”); and (3) Payment – the franchisee must pay the franchisor a minimum amount of money before opening for business.

If the federal law defines a business as a franchise, then other federal laws apply, such as laws governing disclosure of certain information and required registrations.

However, when franchise law starts to govern the relationship between a franchisor and a franchisee, things get more tricky and sometimes litigation becomes an issue.  The main reason for this is that two parties’ relationship is usually governed by a private contract, where each party decides which rights and duties it will have (ideally).  When franchise law steps in, sometimes these rights and duties change, and even both parties might not realize it.

In Washington State, for example, state franchise law governs some aspects of the relationship.  For example, parties cannot terminate a franchise relationship unless there is “good cause.”  “Good cause” means things like a party goes insolvent, commits a crime, or ceases business operations.  Notice that this does not include something like a personal dispute or one party simply stops liking another party.

So, notice that if two parties are in a standard garden-variety contract with each other to do business, they can pretty much terminate the relationship at any time.  However, if they are determined to be a franchise under Washington law, they cannot terminate unless there is “good cause.”  Please note also that the elements to be determined a franchise are different under Washington law than the 3 elements listed above under federal law.

In the alcohol business, the three-tier system of distribution still dominates the industry.  Wineries, distilleries, and breweries, both large and small, rely on strong networks of state-level distributors, and – you guessed it – they often distribute goods with the trademarks and logos of the companies they are doing business with.

The tricky issue to take into consideration as a producer of alcohol is if an arm’s length agreement with a distributor in another state qualifies as a franchise relationship under that state’s law (or another, depending on the forum clause in the contract, such is one of the issues in the Diageo lawsuit).  If a franchise exists, it is sometimes much harder to terminate a business relationship, and the franchisee often has additional remedies when litigation ensures.
(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Contract Law, Contract/Property/Real Estate Law, Distributors, Intellectual Property Law, Litigation, Trademark Law, Wine Sales/Marketing | Leave a comment

ICANN Slows Its Roll on .wine and .vin

In April, the Internet Corporation for Assigned Names and Numbers (ICANN) decided to hold off on rolling out two new top level domains, namely .wine and .vin.

This move came based on concerns voiced by European Union members states, who worried that parties unrelated to various famous wine regions would register domains such as “bordeaux.wine” and then cybersquat on them.

This is not unlike concerns that were voiced in 2013 by the Napa Vintners Association, worrying that geographical indications would used with these new top level domains to circumvent trademark laws that protect against deceptive uses of geographical indications to sell goods.

What makes these issues interesting is that the new top level domains refer to a categories of goods (here, wine) in a way that more traditional top level domains (such as .com and .net) have no additional meaning, or at least they have lost their meaning over time and widespread use.

Combining a reference to a category of goods, and then appending that to a geographic indication that is known for making that type of good, is a trademark law headache waiting to happen.

It is good that ICANN is taking this slowly and making sure that, at the very least, it works out its internal grievance process to ensure that countries’ laws protecting against trademark infringement and geographical indicators are followed.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Intellectual Property Law, International Law/Regulations, Trademark Infringement, Trademark Law | Leave a comment

Are Wine Bloggers Like Other Wine Journalists?

Very proud to display my first ever wine blogging accolade: WBA-Finalist-Logo-2014-(SingleSubj)

I must say that I am honored to be recognized among the other finalists, and look forward to more wine blogging in the coming year.

Now on to the blogging . . . A recent case in the Ninth Circuit Court of Appeals held that bloggers enjoy the same protections as do journalists operating in more traditional media outlets.  The Obsidian Finance Group v. Cox opinion marks the first federal circuit court of appeals to so hold.

The basic issue when the First Amendment is applied to journalists often arises when a plaintiff sues a journalist for defamation, libel, or slander.  What are recognized state law tort actions, which seek to protect people against the publication of untrue statements that damage one’s character or perception in the community, run up against federal Constitutional protections for free speech and freedom of the press.

There is a long history of case law governing this tension, which starts with the 1964 case of New York Times v. Sullivan.  The gist of Sullivan provides that public figures, when positioned as plaintiffs in a defamation action, must prove that a statement made by a traditional media outlet was made with actual malice – that the statement was made with reckless disregard for its truth.

The question that has more recently been asked was whether these doctrines should be applied the same in the context of statements made in blogs, tweets, Facebook posts, and other Internet-based forums.

With the Obsidian decision, the Ninth Circuit appears to have answered the question by holding that the speech should enjoy the same protections, despite the fact that the forum is not a traditional media outlet.  Of course, there is still lots of room for the doctrines to be applied differently, but one thing is for sure: that a plaintiff will not be able to argue that Sullivan wholly does not apply to the speech simply because the forum is an Internet website rather than a traditional media outlet.

You might be wondering how this case relates to the wine business, which is the subject of this blog.  Well, my friend, you are reading the words of a wine blogger, who resides within a state falling in the Ninth Circuit.  With the recent Wine Blog Awards finalists announced, I thought it was a good time to turn the focus on us for once.  So, maybe if I or the other wine bloggers happen to taste a bad wine and later write that it tastes like they fermented the wine with garbage, such a statement will be Constitutionally protected opinion speech.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.) © All rights reserved Kevin Guidry 2014.

Posted in Uncategorized | Leave a comment

Supreme Court Should Clarify Granholm

A few months ago, a notable case in the 8th Circuit Court of Appeals once again affirmed that the 2005 Supreme Court decision of Granholm v. Heald only applies to producers of alcohol (i.e. wineries), as it relates to the Dormant Commerce Clause’s nondiscrimination principle, effectively overriding the 21st Amendment’s decree to allow states to have full reign over the regulation of alcohol.

In effect, Granholm stands for the principle that, while states are allowed a large amount of flexibility to regulate alcohol within their borders, that power is not unfettered, and states cannot craft regulations that favor commerce of in-state wineries at the expense of out-of-state wineries.

Since 2005, the next big question that has been asked (but not answered) is whether the decision applies only to wineries, or if the same principle should extend to distributors and retailers. So far, the Supreme Court has not taken a case to look at the question directly, and consequently, the Courts of Appeals have struggled to answer it. A few of the circuits have erred on the side of caution by not extending Granholm, instead relying on decades of precedent on the side of the 21st Amendment’s broad leeway that states enjoy.

Each circuit, though, in making these rulings, expresses that the answer is unclear, and that the high court should ultimately weigh in.

The public at large may not realize this, but the most likely instances where the Supreme Court will take a stance on a topic is when derisive decisions at the lower court levels exist, such that the Court is forced to grant cert and address the issue. Therefore, it would be nice if a few circuits (or one of the more prominent ones) would rule oppositely than the way the 8th Circuit did here, which would create a circuit split.

The Court almost always grants questions to resolve circuit splits, desiring a uniform federal law. In order to do this, large retailers and/or distributors will need to challenge state laws in federal court in the circuits where the question has not yet been answered.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Direct to Consumer Wine Sales, Distributors, Federal Regulations, Granholm v. Heald, Regulatory/Administrative Law, Wine Sales/Marketing | 2 Comments

Woodinville Wine Village Update: Part 2

This is a continuation of a recent post.  To read the original post, click here.

Construction Developments

After the Development Agreement was signed (in December of 2005), WVA applied for and received a construction loan from Frontier Bank in order to break ground. Later, the parties executed the TRIP agreement, and Woodinville broke ground on the roundabout project. Woodinville completed the work, and then billed WVA for its part, which was $1.4 million. WVA disputed the amount (as opposed to the entire debt), and so Woodinville obtained a court judgment against WVA for that amount in 2010. The unpaid judgment created a lien on WVA’s property, which, in this case, was the future site of the Village. However, because WVA had obtained a construction loan, the bank also had a lien on the property (a mortgage). Shortly after the bank began foreclosure, Woodinville filed a court claim seeking to stop the foreclosure, in order to determine if its lien was, in fact, superior to the bank’s lien.

The Foreclosure Fight

The central question in court was this: If the mortgage was created in 2005, and the judgment lien was created in 2010, why would Woodinville think its lien was senior?” Well, here’s how that argument went . . .

Woodinville argued that its obligation to be paid for the improvements did not originate solely in the TRIP, but instead in the Development Agreement, which pre-dated the bank’s lien. Additionally, it argued that the combination of the Development Agreement and the TRIP created the duty to pay for the frontage improvements as a covenant running with the land. While an ordinary contract is enforceable against a particular person or entity, a covenant that runs with land is enforceable in relation to a particular piece of land, regardless of who is the current owner of the land. Anyone who has been prevented from building a shed within ten feet of the front of his or her property knows about this.

Woodinville filed the case in July 2011. In late 2013, the trial court entered a judgment mostly against Woodinville. Woodinville’s lien was held to be enforceable only against WVA, and thus it does not “run with the land.” It cannot be enforced against the property’s new owner, Woodinville Village Partners. It is believed that Woodinville is currently appealing the trial court’s ruling.

What Happens Next

During this process, the interest held by Frontier Bank was transferred more than once and eventually ended up in the hands of Legacy Capital, located in Bellevue, Washington, who created the development entity Woodinville Village Partners. Legacy now holds the reigns for developing the Village, and it is believed that it wants to move forward as soon as is practicable. Most likely, because the dispute with the City of Woodinville is on appeal and not yet completed, this may delay the re-start of development of the Village.

No one disagrees that this property in Woodinville could be a celebration of Washington wine, food, and the agricultural history of Woodinville and the entire state. The development could be a hub of new experiences in Woodinville wine country, and bring even more of a “sense of place” than Woodinville already has. Based on Legacy’s work in the past, I believe it will bring this sort of vision to the site.

However, being experienced in real estate construction, I also assume that Legacy understands that executing a project of this scope requires more of a partnership approach than a “build it and they will come” approach. Woodinville must be partner number one, rather than a quasi-adversary. Even when ground breaks, I common sense dictates that it may take roughly 18-24 months to complete a project of this magnitude. Nevertheless, until litigation is over (appeals and all), and Legacy and Woodinville reach a unified vision of what the Village will be, the site will remain a large patch of overgrown grass with three beautiful roundabouts dotting the edges – a reminder of the Wine Village that may become.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

 

Posted in Contract/Property/Real Estate Law, Local Governments, Local Regulations, Real Estate | Leave a comment

Woodinville Wine Village Update: Part 1

“Out with the old, in with the new” could be said to be the recurring theme of Woodinville, Washington’s Hollywood Winery District, as the roughly 300,000 annual visitors have seen the remarkable changes that have occurred during the last decade or so. Where there was once an abandoned service station, there is now the chic and popular home to The Station pizzeria and tasting rooms for Gorman Wines and Patterson Cellars.

However, all of the new is a mere preamble to the highly anticipated Woodinville Wine Village, or at least a preamble to the thought of it. Why, then, in a community so enveloped by change would the potential crown jewel remain a mere thought rather than a reality? Well, just as are the best wines being poured in tasting rooms throughout Woodinville, the answer is full-bodied and complex. Ok, maybe it’s just complex.

“Two Birds” to Kill: Zoning and Traffic

The story begins in 2005 when MJR Development (acting as Woodinville Village Associates) set out to develop land located in the heart of the Winery District, with the development to be known as the “Woodinville Wine Village.” The Village was planned to be situated behind the Hollywood Vineyards shopping plaza, which currently sits on the southwest corner of the intersection of Woodinville-Redmond Road and Northeast 145th Street and which houses Purple Café and Wine Bar and Sparkman Cellars’ tasting room, among others. The proposed site, roughly 45 acres in size, would stretch from where the Sammamish River Trail meets 145th Street, just across from the public sporting fields, swing around the back of the shopping plaza, and abut where the Brian Carter tasting room meets Woodinville-Redmond Road. It would make a large semi-circle shape completely encompassing the shopping plaza, and have entrances on either side of the intersection.

WVA and the City of Woodinville had two impediments to bringing this project to reality. One “bird to kill” was the problem of the property being zoned only for multiple business uses, while the vision for the Village included residential uses along with restaurants and wineries. A zoning change was needed. Another “bird to kill” was the problem of traffic. This intersection had been notorious for traffic for many years, and the Village stood to exacerbate a traffic problem that was already there.

Killing Two Birds

Anyone acquainted with overused clichés will inform you that the best way to kill two birds is this: with one stone. Now, did WVA and Woodinville take this time-honored advice and put it to use? That is the very question that caused over a year of litigation and a complete standstill in the development of the Village project.

In order to address the zoning problem, WVA and Woodinville entered into a contract called the “Development Agreement.” The agreement was Woodinville’s asking price in exchange for re-zoning, and by consequence, the re-zoning also gave WVA access to the construction loan that it needed in advance of breaking ground. In order to address the traffic problem, WVA and Woodinville entered into a contract called the TRIP (the “Tourist District Roundabout Improvement Project”), which was intended to create a series of three roundabouts near the development with landscaping, sidewalks, and (hopefully) road improvements that would reduce traffic. The TRIP contained a promise by WVA to reimburse Woodinville for a portion of certain improvements made along the perimeter of the property.

Although at first blush, this would appear to be two separate contracts to address two separate problems, it is also possible that the TRIP was really a modification of the Development Agreement, making the entire thing – you guessed it – one stone. A stone that WVA and Woodinville then used to kill two birds.

Please stay tuned for Part 2 — and the thrilling conclusion — of my Woodinville Wine Village update.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

 

Posted in Uncategorized | 1 Comment

Washington Liquor Privatization Progress Report

Washington State liquor privatization has now been in effect for a couple years.  When proponents of privatization were pitching the idea to the people of Washington, it was all about lowering costs and paying less tax.

Of course, consumers are paying less tax to the state directly, but the state is still getting its money.  In 2013, the first full year of privatization, Washington collected roughly $500 million.  This money came in part from taxes paid by the holders of private liquor licenses.  And, like anyone who has taken a college course in business knows, if costs increase, businesses raise prices.  And so they did.

A visit to any liquor store in the State of Washington will confirm that Washington has some of the highest prices for liquor in the country.

Now, whether this is part of the plan or not, the fact remains that charging high taxes on a commodity will cause a decrease in use.  Take cigarettes, for example.  Taxes have been raised and raised over the years, and consequently, consumption has gone down, and I don’t think any local or state governments really are concerned about that.  One could theorize that a slight decrease in spirits consumption similarly wouldnn’t hurt the general public’s health and safety.

But, consider this: Seattle and other parts of Washington have one of the most dynamic and unique artisanal alcohol scenes in the country.  Driven by the world-class wineries and wine regions in the state, Washington is also home to several producers making delicious beer, mead, cider, and – you guessed it – spirits and liquors.  The high taxes in this state probably won’t cripple the likes of Jack Daniels or Absolut Vodka, but small distilleries that cannot bring their products to market without significant tax hurdles really puts them behind, and by consequence, ensuring the failure of some

Hopefully, the State will recognize that it has already recouped what it lost by letting go of state-owned liquor stores.  We must hope that the State does not get used to the extra money coming in and leave things like they are now.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Local Governments, Regulatory/Administrative Law, Spirits, Spirits/Beer/Other, State Regulations, Tax Law | Leave a comment

Changes Afoot for Chinese Trademark Law

Major revisions to Chinese trademark law are set to take effect in May of 2014.  These changes could make it much easier for American wineries to register and protect trademarks in the Chinese marketplace.

The largest hurdle for wineries at this point, in terms of trademark law, is the uncertainty in time that it takes to merely obtain a trademark registration in China.  The processes to apply for registration are not unlike those in the United States and other countries, however, in China, each step of the process has no defined time limits, and anyone who has tried to apply for a registration in China knows that it takes years to complete.

The new revisions will place time limits on various parts of the process, and they will also add new and more efficient processes that were not in place before.  For example, paper filings are currently still the primary method by which applications are processed.  Electronic applications are only allowed by a small group of qualified agents.  After these changes, any applicant will be allowed to initiate applications electronically.  Of course, from the perspective of American trademark law, this is old hat, as the USPTO was a pioneer in bringing electronic filings to the American public.

Nevertheless, this change should speed up the process for applicants.  Additionally, there currently is no time limit for the China Trademark Office (“CTO”) to review an application.  With the changes coming in 2014, there will be a 9-month time limit.

Also, just like in American trademark law, once the Office determines that a trademark is eligible for registration, it is then published for opposition by the public (and importantly, existing holders of registered trademarks).  With the new changes, the opposition period will last no more than 12 months.  And, if a pre-registered trademark is opposed, the applicant has the ability to petition for review, which also must be completed within 12 months.

These two 12-month limits add more certainty to the process.  Again, as the law currently stands, this process often takes several years to complete.

These are not the only changes coming in 2014.  The law will be further amended to attempt to protect “well-known” trademarks and curb the rampant counterfeiting and infringement that is occurring in China.  Holders of very famous marks like Nike and Louis Vuitton are probably watching this very closely.  However for wineries trying to do business in China, these changes relating to streamlining the registration process will probably have the biggest immediate impact.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Consumer Protection law, Intellectual Property Law, International Law/Regulations, Trademark Law | Leave a comment

American Canyon Trying to Capitalize on the Napa Valley

Recently, the American Canyon Tourism Improvement District Committee was presented with an idea to boost tourism: apply for the American Canyon to be a recognized federal AVA.

The American Canyon is an area in the southernmost part of Napa County.  It is south of the town of Napa and adjacent to the Carneros AVA.

If one has ever driven through the American Canyon, one would readily see that it looks more like neighboring Vallejo, a city with a typical East Bay and suburban character, than its neighbor to the other side, Napa, a city known internationally for wine, dining, and relaxation.

So, if American Canyon is to capitalize on Napa’s tourism, it probably needs a little more than just being recognized as an AVA.  However, there is no reason to think that gaining AVA status is not a good start.

Let’s take two other nearby AVA’s as a comparison: Carneros and the Oak Knoll District.  Carneros straddles the southern parts of both Napa County and Sonoma County.  Carneros is very well known for its cool-weather wines made from Chardonnay and Pinot Noir, as well as for lesser amounts of Merlot and Syrah.  Carneros is also a big destination for tourism.

The reasons for this tourist traffic are probably numerous and hard to quantify, but for one, the main road that passes through Carneros is a convenient way for wine tasters to travel between southern Sonoma County and the Napa Valley.  The region itself is quiet and very pretty, where at some high points one can see all the way to the Pacific Ocean.  Several wineries have added luxurious tasting rooms and the Plumpjack Group added a very high-end restaurant and hotel property, The Carneros Inn.  Carneros certainly does not lack for tourist appeal.

Oak Knoll, by contrast, is hardly even known as an AVA, even by people in Napa.  Most people just think it is the part of the valley that is driven by and quickly forgotten as one approaches Yountville from the south.  It is not a region that is very well known for adding distinctive characteristics to its wines, as is a place like Carneros.

I don’t know the history, but I’m sure at some point the local growers and wineries in the Oak Knoll applied to make it an AVA, envisioning some sort of marketing benefit.  This would not be unlike the idea that is currently being tossed around for the American Canyon.

So, the lesson here is that American Canyon needs to strive to become more like Carneros than like another Oak Knoll.  These things happen slowly and organically, so doing this overnight would be impossible either way.  Nevertheless, the American Canyon folks should be thinking a few steps ahead as they try to take this multi-prong approach to making American Canyon part of the “Napa Valley” experience.

(This posting is not to be construed as legal advice. If any of the information in this posting relates to legal issues that you are facing, you should contact an attorney.)

© All rights reserved Kevin Guidry 2014.

Posted in Federal Regulations, Regulatory/Administrative Law, Terroir, Wine | 2 Comments