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Sunday, April 13, 2014

Under Proposed Bill, California ABC Would Regulate Medical Marijuana

A bill recently introduced by state assembly member Tom Ammiano in the California State Assembly (AB 1894) would create a Division of Medical Cannabis Regulation and Enforcement within the state's Department of Alcoholic Beverage Control.  The bill also gives the department the power to create a registration system for persons interested in cultivating, manufacturing, testing, transporting, storing, distributing, and selling medical marijuana within the state. 

Should AB1894 pass, and should California voters pass a ballot initiative in 2016 to legalize recreational marijuana, it is highly likely that the state ABC would be in charge of both medical and recreational marijuana regulation.  

The State Assembly’s Committee on Public Safety will hold a hearing on AB 1894 on April 22. 

For more information, please contact John Trinidad at jtrinidad@dpf-law.com.




Wednesday, April 9, 2014

Trends in Wine Package Design

Practical Winery & Vineyard recently published an article written by Dickenson, Peatman & Fogarty attorney Katja Loeffelholz.  Katja’s article  “What’s trending, how to capture it” discusses how technological advancements have permitted an evolution in wine labels, bottle shapes, closures and packaging designs.  

One wine bottle can contain several protectable elements.  Word mark, logos/images, taglines/slogans, color, configurations, label design, trade dress, product features and design patents are all protectable elements of wine packaging.  Protecting these different element can build brand equity.





Katja is a registered attorney with the United States Patent and Trademark Office.

To learn more about protecting all aspects of intellectual property in your wine label and packaging please contact Katja Loeffelholz at kl@dpf-law.com.


Wednesday, March 26, 2014

Tied House Laws: Alive and Kicking

The New York State Liquor Authority issued a stern reminder that tied house laws are not only still on the books, but will be strictly enforced.  On Tuesday, March 25, the NYSLA accepted a plea offer from the numerous entities associated with restaurateur Joe Bastianich to pay $500,000 penalty, close down Manhattan-based wine store Eataly Wines for six month, and remove Lidia Bastianich (Joe’s mother) as an owner of that store due to tied house violations. 

Tied house laws are aimed at prohibiting alcohol beverage suppliers (manufacturers, wholesalers, importers) from exerting control over retailers (including restaurants, bars, and liquor stores).  To that end, state laws typically prevent an owner of a licensed supplier from holding an ownership interest, direct or indirect, in a licensed retailer.   In this case, Bastianich and a number of his partners apparently held ownership interests in a number of New York retail licenses while also holding ownership interests in wineries in Italy.  

In a sign that not all publicity is good publicity, counsel for the NYSLA stated that their investigation started as a result of a cover story on Eataly owner Oscar Farinetti in Wine Spectator.  The article reported that “Eataly now owns stakes in six wine estates across northern Italy” and that Joe Bastianich was the “owner of several Italian wineries....”  NYSLA reviewed the various alcohol beverage retail licenses held by Bastianich-related entities and discovered that these various winery interests were never disclosed in the initial or renewal license applications.  



The NYSLA's enforcement of tied house laws is not surprising given past precedent.  In 2011, the Authority issued two separate declaratory rulings stating that an applicant holding an interest in a foreign-based alcohol beverage manufacturer could not hold a New York retail liquor license under New York tied house laws.  In fact, one of those rulings applied to an Italian wine producer seeking a New York restaurant license.    

California also has tied house laws, but provides exceptions allowing winegrowers (i.e., Type 02 license holders) to own an interest in an alcohol beverage retail license so long as they disclose their ownership interests and accept certain restrictions.  For example, under certain circumstances, a licensed California winegrower may own interests in multiple restaurants holding California alcohol beverage licenses so long as they do not sell their wine at more than two of those establishments and their wines do not constitute more than 15% of all brands offered for sale at those restaurants.  (This exception does not apply to custom crush clients / “virtual wineries” that operate under a Type 17/20 license.).  As the Eataly matter demonstrates, however, that winegrower would be barred from obtaining a New York alcohol beverage retail license.      


For more information on wine law or tied house issues, please contact John Trinidad at jtrinidad@dpf-law.com.  Mr. Trinidad was interviewed by Levi Dalton of Eater NY in an earlier article on this same matter.  

Thursday, March 20, 2014

Federal Court Dismisses Diageo's Complaint in Franchise Law Case

By John Trinidad

Earlier this week, Missouri distributor Major Brands, Inc. won the most recent round in its year-long franchise law litigation with Diageo Americas, Inc.  The federal district court in Connecticut has dismissed Diageo's complaint, and the parties dispute appears to be gearing up for a trial in Missouri state court this summer.

Last March, Diageo brought suit in federal district court in Connecticut seeking declaratory relief to allow Diageo to terminate its relationship with Major Brands.  In its complaint, Diageo argued that the parties' contract included a clause that stated that their agreement would be construed under Connecticut law.  Enforcement of such a clause would avoid the application of Missouri franchise law.  Even though Connecticut also has a franchise law, Diageo argued that it only applied to franchise agreements that would require the distributor to maintain a place of business in that state.  Since Major Brands was not required to establish a business in Connecticut, then the Diageo-Major Brands agreement falls outside the scope of Connecticut's franchise laws, according to Diageo's complaint.

Major Brands brought its own suit in Missouri state court against Diageo and its new Missouri distributor, Glazer's, and filed a motion to dismiss in Diageo's federal court case.  In that motion, Major Brands argued that the forum selection clause did not apply and also argued that the federal court should abstain given the parallel state court litigation and Missouri's strong interest in regulating and enforcing its own alcohol beverage laws:
"The heart of this suit is the applicability of Missouri's Franchise Act to the relationship between Plaintiff, a supplier of liquor in Missouri, and Defendant, a licensed liquor distributor and wholesaler doing business in Missouri.  The Twenty-first Amendment recognizes each State's sovereign interest in regulating and enforcing its own liquor distribution laws...."
On March 19, 2014, the federal court granted Major Brands' motion, finding that the forum selection clause that Diageo relied on did not apply to the products at issue in the immediate case. The court did not address Major Brands' abstention argument.

But this does not bring an end to the Diageo-Major Brands battle.  Major Brands' state court suit in Missouri continues, and the parties have engaged in extensive discovery in that forum.  A trial date is set for July 21, 2014.

For more information on distributor termination or franchise law issues, please contact John Trinidad at jtrinidad@dpf-law.com.

New York State Liquor Authority Sets 4/23 Meeting re Internet Wine Sales

The New York State Liquor Authority has scheduled a special board meeting for April 23, 2014 to consider two requests for declaratory rulings related to internet wine sales.  Both Lot 18 and Connoisseur Encounters Co., Inc (doing business as "The Wine Cellar at Rye Ridge") have asked the NYSLA for guidance regarding their proposed business operations.  The Lot 18 petition is here and the Wine Cellar petition is here.  According to its petition, Lot 18 plans to partner with "brand-strong Marketing Agents [such as magazines and other media entities] that have their own consumer lists, readership or website viewers, on-site customers and a recognizable brand" to deliver "personalized wine selections" to consumers.

Last year, the NYSLA rejected a request for a declaratory ruling regarding a platform that allowed for third party marketers, such as Lot 18, to operate in New York without an alcohol beverage license.  The liquor authority subsequently held a hearing regarding internet-based sales of alcohol beverages, but to date has not issued any further guidance regarding third party marketing.

Earlier this year, we reported that Lot 18 had secured a New York state brick and mortar retail license.

DP&F does not represent Lot 18 in this matter.

For more information on third party marketing, internet marketing, or wine law in general, please contact John Trinidad at jtrinidad@dpf-law.com.

Monday, March 17, 2014

Branding Strategies in Agricultural Commodities: Vineyard & Block Designates

By Katja Loeffelholz, Dickenson, Peatman & Fogarty

The prominence of vineyard-designated wines is another lesson in value-added agricultural branding which presents both the winery and the vineyard owner or lessee with a number of marketing and legal issues. Recognizing the value of vineyard designated names, vineyards have long been designating blocks within their vineyards with proprietary names.
               
In this way, even though multiple wineries are purchasing grapes from the same vineyard property, each winery can have a distinct name to refer to the vineyard block where the grapes were grown, also known as the “block designate.”  If a vineyard owner sells wine grapes to a winery under a vineyard designate or block designate, the winery may use that vineyard or block name on wine produced from those grapes to designate origin so long as such use complies with the vineyard designation labeling requirements of the Alcohol and Tobacco Tax and Trade Bureau (TTB).  Accordingly, the vineyard owner -- not the winery – theoretically owns rights in the name. 



Wineries may consequently find their vineyard-designated wines embroiled in a trademark dispute between different winery owners.  One of the most well-publicized vineyard name trademark disputes involved the famed To Kalon Vineyard.  Originally planted in 1868, To Kalon was eventually divided up and by the 1990s, both the Robert Mondavi Winery and Andy Beckstoffer owned portions of the vineyard.  Mondavi secured federal trademark registrations for both the TO KALON and TO KALON VINEYARD marks.  Schrader Cellars had entered into an agreement to purchase grapes from Beckstoffer, and Schrader planned to use the “Beckstoffer Original To Kalon Vineyard” designation on its wine label.  In 2002, Mondavi sued Schrader Cellars, and sought an injunction to bar Schrader’s sale of “To Kalon Vineyard” designated wine.  The parties eventually settled their dispute, and Beckstoffer was granted a royalty free license to continue to use the To Kalon name.        

Thus, when the vineyard is owned by another party, the risk to the winery in marketing vineyard and block designated wines made from contract grapes is that once the contract ends, so can the rights to continue use of the vineyard and/or block designation.  A winery must accept that by producing and marketing vineyard-designated wine made from grapes grown in a vineyard that the winery does not own, the winery is potentially spending time and money building brand equity for someone else.  When the grape contract ends, there is considerable risk that the “brand” of the vineyard owner may be used by the vineyard owner itself, or potentially by other wineries that contract with the vineyard owner.

Wineries are often unaware that the vineyard designation or block designation actually belongs to the vineyard owner.  Many wineries feel that if they are using the vineyard designation on wine and popularizing the vineyard name, they should own the rights in the vineyard or block designate as a trademark.  While this may be a questionable legal position, this attitude among some wineries may nevertheless be problematic from a practical perspective.  Should a winery successfully register rights in a mark which is used as a vineyard or block designate, the vineyard owner will need to spend considerable time and money in a potentially unsuccessful effort to regain clear rights in the name.  The best way a vineyard owner can protect itself is to register its brands and properly license them to a winery.

To maintain trademark rights, an owner must control the quality of goods sold under the mark.  For a vineyard owner, this can be accomplished through specific provisions in a grape contract or through a related trademark license agreement which is separate from the grape contract.   A license will clearly establish that, as between the vineyard and the winery, the vineyard is the owner of the mark and that the winery (and its use of the designate) is subject to the terms of the license, as well as, the vineyard owner’s control of the quality of wine provided under the mark.  In practice, such quality control can often be administered in a non-disruptive, nonintrusive manner (e.g., sufficient quality may be presumed based on maintenance of quality heretofore maintained by the winery operation).

The strategy of enhancing the value of grapes by naming the grapes from a certain vineyard is also widely used to enhance the value of other agricultural commodities, such as cattle from a certain ranch, or spinach from a particular farm.  As the commodity producer, it is important to register the trademarks for the brands used with these agricultural products so that the commodities themselves (as well as the land from which they come) can accrue value, prestige and reputation which inures to the brand assets.

Are you adequately protecting your vineyard designate or agricultural commodity?

For inquiries, please contact Katja Loeffelholz, a registered attorney with the United States Patent and Trademark Office and Of Counsel to Dickenson, Peatman & Fogarty at kl@dpf-law.com.

Thursday, March 13, 2014

Stella Rosa Trumpets Pyrrhic Trade Dress "Victory" Over Constellation

Plaintiff San Antonio Winery, Inc. (“SAW”) filed suit against Constellation Brands last August in the Central District of California, alleging trademark infringement, false designation of origin, and unfair competition due to Constellation’s promotion and sale of fizzy, low-alcohol, sweet (“FLAS”) red wine under the mark ROSATELLO. 

SAW claims trademark rights in the mark STELLA ROSA and its “Stella Rosa Crown” design mark  (U.S. Trademark Reg. Nos. 4,000,471 and 3,663,013, respectively) and use of the mark allegedly going back to 2004. In October 2013, subsequent to SAW’s filing, Constellation changed the design of its “Rosatello” labels, but otherwise kept the name in use. 

Then in November, SAW filed a motion for preliminary injunction to prevent sales of ROSATELLO in connection with FLAS wine, which was heard by the court in late January.  The court’s orders came down on March 11, 2013 – one order denying the injunction with respect to Constellation’s use of the trademark ROSATELLO on its newly modified packaging, and another order granting an injunction – but only as it relates to Constellation’s prior packaging, which is no longer in use.

THROWING THE MUD

In its moving papers, SAW claimed that Constellation copied its product line, transposed the STELLA ROSA trademark, and copied the packaging in a bad-faith scheme to “steal” its market share, resulting in actual confusion to consumers and retailers.  Evidence of confusion consisted of Instagram posts, as well as statements from a wine store owner, a manager and wine purchaser personnel.  SAW also cited in-store displays allegedly showing Rosatello product stocked on shelf space marked for Stella Rosa, and Stella Rosa product displayed atop a case of Rosatello. 

SAW alleged that Constellation’s marketing confused retailers into believing that Stella Rosa had become one of the Constellation brands, damaging its image as a 100-year-old family-owned winery operation.  

SAW provided “line-up” survey evidence which allegedly shows that 52% of respondents showed some confusion (over 50% confusion is considered “persuasive evidence”), based in part upon similarities in font, the crown logo adorning the capsule, the  bottle shape and label design (including the word “Rosa” in red type with a similarly stylized “R”).

WHAT DO YOU MEAN: NO TRADEMARK INFRINGEMENT?

To obtain a preliminary injunction is usually a tall order.  In this case, while the discontinued packaging was found problematic, the ROSATELLO trademark was not enough, by itself, to warrant an injunction from the court.

The court noted several key points in its denial of the trademark injunction.  For example, when SAW applied to register the STELLA ROSA mark, it was refused on the basis of prior registrations for STELLA BELLA and BUONA STELLA, and SAW overcame such refusals by arguing that its mark was distinctly different from those other marks, as well as the mark STELLA, and hence unlikely to cause confusion. (Yes, what you say to the USPTO can and eventually will be used against you. –ed.)

 In its motion, SAW relied on its considerable advertising expenditures (approximately $3.5 million) and commercial success (sales over $100 million in the last decade) of Stella Rosa to demonstrate how the strength of its mark increased over time, from what was originally considered a weak mark at the time of registration.

While the court found similarities with STELLA ROSA in the color scheme, label location and font of the prior ROSATELLO packaging, the new packaging was found to differ in all of those respects.  Interestingly, despite survey evidence which showed that 37.6% of the respondents mentioned something about the name being similar, the court found that this did not support the position that the names STELLA ROSA and ROSATELLO are similar to one another, or that use of the names alone will independently confuse consumers, since the names did not appear in isolation from the packaging in SAW’s survey.  (This is an important lesson in survey methodology.) The court noted that, while they bear some auditory resemblance to one another, the two marks begin and end with different sounds, and do not share any meaning – and that SAW provided no evidence that the current versions of the respective products are similar enough to confuse consumers.

The survey evidence and accounts from both retailers and consumers were found by the court to be unsupportive of the likelihood of confusion, since Constellation had already discontinued use of its prior ROSATELLO label.

SPIN CITY: WHAT’S REALLY GOING ON HERE?

Some wine writers -- and even SAW’s own legal counsel in the matter -- would have you believe that this represents a key victory for SAW over the “global giant” Constellation, but in reality this is hardly the case.  The press release by SAW’s counsel states: “[T]he court entered an order on March 11th preliminarily enjoining Constellation’s use of the complained-of labels,” (emphasis added) but only the prior label was enjoined.  In reality, the injunction is strictly limited to the older ROSATELLO product label, and only in connection with FLAS wine – Constellation’s use of ROSATELLO in connection with sparkling wines and other offerings has not been challenged by SAW’s suit.

In fact, Constellation’s ROSATELLO has not perceptibly skipped a beat, as sales continue under a slightly modified label and trade dress.  Perhaps more importantly, this ruling by the court is potentially somewhat of a setback in SAW’s overall enforcement of the trademark STELLA ROSA, for which the injunction was clearly denied -- creating an uphill battle for SAW on the trademark infringement claim, and effectively establishing the rather narrow scope of legal protection likely to be afforded to the STELLA ROSA mark going forward.


Below is a side-by-side comparison of the STELLA ROSA alongside both the old and new ROSATELLO bottles. Are consumers really likely to be confused?

For trademark protection and enforcement inquiries, please contact Chris Passarelli, Senior Intellectual Property Counsel at Dickenson, Peatman & Fogarty, at: cpassarelli@dpf-law.com.