Pinot Law

A couple of interesting articles caught my eye this week — one humorous and one quite telling for the wine industry.

First the humor, from an article here. TTB has ordered a California brewery to stop using the phrase “Try Legal Weed” on its bottle caps. On the one hand, I can understand TTB’s position that it does not want to condone drug use in any way, shape or form. On the other hand, the brewer in question is located in Weed, California. The article is very good and well worth the read (hat tip to Snark Hunting and Above the Law for bringing this to my attention).

Second comes the business article. According to this article here, equity fund manager Vinum Capital Management LLC has formed a $250-million private equity fund that will focus solely on acquiring and operating mid-size premium and super-premium wine properties producing between 20,000 and 150,000 cases annually. Wineries in California, Oregon and Washington are on the list.

I found the article interesting because it appears that the prospect of more significant consolidation in the wine industry may be upon us. Is this a good thing or a bad thing? On the one hand, this kind of capital can bring significant resources to wineries that may be underfunded and not operating at full capacity. On the other hand, is consolidation a good thing in terms of quality and diversity in the industry.

Time will tell, and until then I may see about getting some beer from Weed, California.

Weed used under a Creative Commons License provided by TooFarNorth.

Interesting article here on the TTB’s very own John Manfreda. The story provides a very good overview on several of the initiatives undertaken by Manfreda: from wine labeling proposals to overhaul of the AVA process, it details each of these initiatives in a fairly thorough manner.

What I find most interesting in the article, however, was the statement that Manfreda appears to be doing this not only absent any industry support (which is an understatement), but also absent government support.  Some may not be surprised by that, but in Washington, D.C. when there is absence of support on any third-rail type issue, the initiative is usually relegated to the dust heap.

I just wish the proposed nutrition labeling proposal were in the trash already.

For wineries quite a bit, particularly when it comes to American Viticultural Areas, or “AVAs”. There is a great article in today’s San Francisco Chronicle regarding the ongoing rulemaking proceeding at TTB addressing TTB’s rules governing AVAs.

TTB’s proposals constitute a fairly broad rewrite to its existing regulations governing AVA designations. What I think the article does a great job of capturing, is the significant cost and expense associated with both brand names and AVA designations. By the former, I am referring to those wineries which have spent significant time and capital establishing a respected brand name. As the article points out, in some instances these brand names can be greatly diminished — and actually rendered moot — when it collides with an established AVA.

My personal opinion is that TTB has struck the right balance on this issue with its proposal. Specifically, the article discusses the ‘rolling’ grandfather clause, that would permit certain wineries to use their established brand name regardless of the presence of an AVA application. For example, if a winery named “Millers Ridge Mountain” was approved for TTB label purposes and in use for a certain number of years, it would not be blocked from continuing to use that name even if an AVA designation is subsequently established for “Millers Ridge Mountain.”

Of course, this does not mean that everyone in Virginia should start running out to name their winery “Napa Valley Winery.” If the TTB’s rules are adopted, they would only apply to yet-to-be established AVAs.

The other interesting issue discussed in the article is the veritable explosion in AVAs over the last several years. I think even if TTB tightens up its alleged ‘rubber stamp’ approval, you will continue to see even more AVAs down the road.

used under a Creative Commons License courtesy of Stewart.

The TTB announced late last week that it was expanding the footprint for two West Coast AVAs — San Francisco and Alexander Valley — and establishing a new AVA in Lehigh Pennsylvania. Wines and Vines has a good summary of all three approvals here.

What I find most interesting, however, is that TTB had put a hold on AVA processing last November. Last week’s action represents the first movement in this area since TTB instituted its rulemaking proceeding late last year regarding proposed changes to how it reviews and approves AVAs. It remains unclear how TTB will ultimately rule in its AVA proceeding, although the indications are that the AVA approval process could get more strict.

We will keep you posted, but in the meantime, keep your eye peeled for wine from the newest AVA region in Lehigh, Pennsylvania!

There is something that has been troubling me lately. I have been reading a fair amount about AVA issues at the TTB. Particularly, they have one rulemaking proceeding addressing establishment of the Calistoga AVA, and another proposing broad changes to the AVA process. But in each of these proceedings, TTB — and even some of the commenters — seem to give short shrift to trademark.While I understand that TTB has broad authority with respect to labeling issues, does that authority trump trademark law? It seems to me that if the Patent and Trademark Office deems a trademark suitable for commerce, an argument could be made that the TTB lacks the requisite statutory authority to prevent the use of that trademark by a winery.

I examined some of the various AVA proceedings posted on the TTB website, and each makes passing reference to TTB’s view that wineries cannot use a designated AVA in their brand name, even if they have a trademark. At least one of the commenters in the Calistoga AVA proceeding raised a takings argument that a COLA is a protected property interest for purposes of the due process clause, requiring procedural due process before it may be revoked. They cited to the Cabo Distributing Co., Inc. v. Brady case, although this case seems to have a different outcome. But neither of these cases delve extensively into trademark issues?

Anyway, I thought it was an interesting issue and that I would throw it out there. If any of you have thoughts, feel free to comment.

The Law of Property in Shakespeare and the Elizabethan Drama used under a Creative Commons license provided by umjanedoan.

TTB recently concluded the comment cycle of a rulemaking proceeding addressing nutritional label information for . . . wine. That’s right. The Federal Government wants to ensure that every wine consumer out there is informed of how many carbs, calories and other nutritional information is in each and every bottle of wine they purchase. Is this a good idea, or just the ‘Nanny State’ run amok.

From a policy perspective, this whole proceeding surprised me. Are consumers even interested in this information? Probably not. Are the ‘benefits’ associated with implementing these proposals enough to justify the substantial costs — particularly for small wineries? Doubtful.

TTB’s notice of proposed rulemaking (NPRM), sought to answer some of these questions. I found their answers lacking.

For example, on the consumer interest front, TTB claims “numerically significant” public support for its proposal based on the fact that about 18,000 consumers signed an online petition supporting such disclosure. But when you consider that some estimates put U.S. wine drinkers at 64 million consumers, that 18,000 is hardly “significant”. It’s downright tiny.

TTB acknowledged that much of that support was generated through the “Know Your Drink” website. That website — which extols the virtues of mandatory wine labeling — was sponsored by Diageo, which also happens to be a $3 billion dollar a year, multinational corporation with more than 22,000 employees in excess of 80 countries. Gee. Why would a multi-billion dollar, multinational corporation want to impose onerous regulatory obligations that will increase costs for wine and alcohol manufacturers, particularly smaller competitors who happen to be creeping into the market share of larger brand name companies? I wonder.

Anyway, I will be writing some more about this issue in the weeks ahead, but in the meantime, you can read comments I filed at the TTB on behalf of my vineyard here (my comments are on the last page).

Nutrition Info used under a Creative Commons License provided by blmurch.

There is an interesting — and important — rulemaking taking place over at the TTB involving the manner in which that agency deals designates American Viticultural Areas (AVAs).

Among other things, TTB seeks comment on the effect that approval of an AVA may have on established brand names.  In other words, winery’s with brand names matching new AVA designations could be prevented from using that brand name in commerce.  TTB discusses this dilemma in its rulemaking.  To address this issue, TTB is considering a new grandfathering provision that would enable winery’s with brand names matching newly designated AVAs to continue using their brand name in commerce.

This to me is one of the more interesting aspects of the TTB’s rulemaking.  With the remarkable increase in the number of wineries in recent years, many have incorporated quasi-geographic regions into their names.  TTB notes — correctly I believe — that accomadations need to be made for  such circumstances.  Something not addressed by the TTB rulemaking is AVA designations may conflict with Trademark law.  In other words, solely on the basis of a newly designated AVA, could TTB prevent a winery from using an approved Trademark in commerce?  I will let the Trademark lawyers argue that one.

Other items the TTB is tackling include clarification of the regulatory standards for the establishment of AVAs within AVAs.  It also seeks to clarify the rules for preparing, submitting, and processing viticultural area petitions.  In this regard, TTB is really ‘upping the ante’ on what will be required to establish a sufficient petition.  Finally, from an administratve law perspective, TTB also inquires whether it can decline to proceed with a rulemaking.  In effect, TTB seeks the ability to deny an AVA petition without public comment.

The bottom line, there are a lot of key issues for wineries out there to be aware of in this rulemaking.  Comments are due on March 20th.  So if you are thinking of filing, get cracking on those comments!

Rhineland-Palatinate used under a Creative Commons License provided by Wolfgang Staudt.