Monday, July 29, 2013

How to Deal with License Transfer Issues in the Sale of a Winery

As if there aren’t enough things to worry about when purchasing a winery - due diligence, seller demands, financing hassles - there’s the confusing matter of federal Alcohol and Tobacco Tax and Trade Bureau ("TTB") and California Alcoholic Beverage Control ("ABC") winery licensing compliance to grapple with.  Buyers want to get down to business as soon as possible, but regulatory compliance dictates otherwise. Those of us tasked with assisting a smooth transition for the winery buyer have the job of explaining the uncomfortable fact that TTB and ABC regulations do not mesh well under these circumstances.  The issues stem from conflicting federal and state rules and timelines for issuing new winery permits. 

Taking a step back to the basics, a California Type 02 winery permit allows a winery to produce, bottle and sell its wine.  The federal equivalent is a federal basic wine producer’s permit and bonded winery registration.  Both federal and state licenses must be in place for you to operate your winery. 

When a winery changes hands, typically the transfer is achieved via an asset sale.  The rationale for this structure is to avoid the buyer unintentionally assuming liabilities that might have been incurred by the old business.  Important as this is, it does present difficulties from a licensing standpoint.

Compliance on the state side is somewhat straightforward. The California ABC will issue a temporary permit to the new owner while the person-to-person transfer application for the Type 02 winegrower’s license is being processed. On the other hand, TTB does not issue a temporary permit to a new owner while a new winery permit application is being processed.  Instead, the new winery owner has to submit a change of proprietorship application to TTB, which is in essence an application for a new winery permit and registration.  It takes about 90 days from the time the application is submitted to obtain a new permit from the TTB, but most winery purchasers want to close much faster than that.  Therefore, despite the existence of a temporary permit on the state side, without having the federal basic permit, winery registration and wine bond in place, the purchaser still can’t conduct regular winery business. 

The best solution to this tough situation is for the buyer and seller to enter into a transitional services agreement (TSA).  Under the TSA, the buyer leases the winery back to the seller after closing and the seller continues to conduct winery operations under its existing permits and bond until all of the buyer’s permits have issued.  This involves some cooperation between the parties after closing but is, in the view of the agencies, the best way to proceed in light of the regulations regarding changes in control of winery premises.

No one wants to start their newly purchased winery business by running afoul of federal and state regulations, so make sure to plan ahead and consider these licensing issues as part of the overall sales transaction.

Please contact Caroline Boller at cboller@dpf-law for more information or assistance with these issues.  

Tuesday, July 23, 2013

Gallo Drops the Bomb, Sues Grenade Energy Drink Co. for EL GALLO and EL GALLITO Trademarks

E & J Gallo Winery (Gallo) has sued Grenade Beverage LLC (Grenade) for trademark infringement seeking an injunction as well as monetary damages.  Gallo owns federal trademark registrations for GALLO covering wines.  Gallo also utilizes a rooster on its wine label.  In addition to wine, Gallo sells other alcoholic beverages such as brandy, tequila, vodka, rum and gin. 

Grenade is promoting EL GALLO as a mixer for alcoholic beverages, namely, tequila, and also utilizes a rooster image on its label.  Grenade has also applied to register the mark EL GALLITO covering beverages, namely, carbonated and non-carbonated energy or sports drinks.  Gallo has included claims against this application in its Complaint and had previously filed an opposition proceeding at the Trademark Trial and Appeal Board (TTAB) opposing Grenade's registration of the mark.  Due to the long and continuous use, extensive advertising and promotion of the GALLO marks, Gallo is contending that Grenade is using the EL GALLO and EL GALLITO marks with full knowledge of Gallo's marks borrowing from the goodwill, reputation and fame of the GALLO marks.  Given what appears to be the solid legal footing of Gallo's Complaint, it will be interesting to see just how Grenade crows back.  We'll provide updates as the case proceeds.

For further information or assistance on trademark matters contact Katja Loeffelholz at 

Friday, July 19, 2013

NYSLA Revises Proposed Advisory re "Limited Availability" Sales

Earlier this week the New York State Liquor Authority ("NYSLA") revised it's proposed advisory regarding wholesaler and importer's ability to allocate "limited availability" alcohol beverage products.  We have created a redline highlighting the changes made to the earlier version of the advisory.

On Wednesday, July 17, the NYSLA Board held a hearing to discuss the proposed advisory.  Board Chairman Dennis Rosen voiced his concern that wholesalers and importers may use the "limited availability" model to shut out retailers.  The Chairman stated that an allocation whereby all inventory of a particular product was allocated exclusively to on-sale accounts, thereby shutting out off-sale accounts, would be "presumed to be improper," though he later stated that such a split may be appropriate in certain situations, and that the importer/wholesaler would have the opportunity to explain why such a split is reasonable.

The Board stated that it welcomed written comments submitted prior to the close of business eastern time on Friday, July 19.  The Board will vote on the proposed advisory during the next meeting, scheduled for July 31.

If approved, the current version of the Proposed Advisory will be effective as of October 2013.

For more information or assistance on alcohol beverage law / wine law, contact John Trinidad (

This post is made available for general informational purposes only and none of the information provided should be considered to constitute legal advice 

Tuesday, July 16, 2013

Wine Industry Forum, Friday, August 23, 2013 The Vintners Inn, Santa Rosa, CA

Plan to attend to receive the latest legal updates impacting the wine industry.  Learn from leading lawyers in the wine industry. Every Dickenson Peatman & Fogarty (DP&F) attorney in every practice group works daily with wine industry clients.  

Click on the image below for a PDF of the full program. 

Learn the latest in creating, protecting and building equity in your wine brands, adopting and clearing a brand, trademark registration and common law rights, enforcing your brand and how copyright in label designs and design patents in
bottle shapes create additional brand equity.

Hear employment and labor law updates, including the most common employment questions, five critical steps to wage and hour compliance for the wine industry and current changes to employment law. 

Review hot topics in compliance and licensing, such as marketing and sale of wine via the Internet and social media, contests and sweepstakes, differing privileges and obligations of type 02 and type 17/20 license holders and updates in the area of direct shipping.

Business topics such as current trends in wine industry agreements and the affordable care act and vineyard and winery land use update will also be presented including barriers to entry of new vineyard development, water quality and a climate change update.

To register call 877-500-1510, fax 914-574-6080 or on the web at

The conference includes continental breakfast, networking luncheon and concludes with a networking reception sponsored by Sonoma County Vintners.

Tuesday, July 9, 2013

New York SLA Announces 8/19 Meeting re Online Alcohol Beverage Sales

A few months ago, we reported on the New York State Liquor Authority's ruling on ShipCompliant's petition regarding online alcohol beverage sales using third party marketers.  We concluded by noting that a "final decision on the permissibility of sales of alcoholic beverages using third party marketers will be forthcoming from the NYSLA and NYSLA intends to hold public hearings on the matter, allowing interested parties the opportunity to present their positions."

The NYSLA has now set a board meeting for Monday, August 12 at 10a.m. to “solicit industry input regarding the regulation of Internet sales.”  The meeting is open to the public and will be webcast.  If you're interested in attending, you must notify the NYSLA via email ( to reserve a seat.

UPDATE - 7/11/2013
The NYSLA has moved the board meeting to "solicit industry input regarding the regulation of Internet Sales" to Monday, August 19 at 10 a.m. 

Monday, July 8, 2013

Southern Awarded Over $1.25 Million in Nevada Suit Against Small Competitors

Apparently, exclusivity in Nevada is serious business.  Certainly, as a jury there recently demonstrated, violating exclusivity is expensive.

In 2002, Southern Wines & Spirits, the large Miami based distributor, sued Chateau Vegas and Transat Trade, both small distributors based in Orange County, California, for selling certain Bordeaux wines and French champagnes in Nevada.  Southern Wines & Spirits believed that, under state law, it was the exclusive importer of those wines.  In 2011, the Nevada Supreme Court agreed and upheld Southern Wines & Spirits exclusivity.  (Chateau Vegas Wine, Inc. v. Southern Wine and Spirits of America, Inc., 265 P. 3d 680 (Nev. 2011).) 

In late June 2013, a jury found Chateau Vegas and Transat Trade liable for $267,750 in actual damages to Southern Wines & Spirits, and a whopping $1.078 million in punitive damages.  Southern Wines & Spirits is now also seeking an additional $6.5 million in attorneys’ fees from Chateau Vegas and Transat Trade. 

If you are importing and selling wine in Nevada, make sure you aren’t violating someone else’s exclusivity.  Even in Sin City, exclusivity can matter.

For more information or assistance on distribution litigation contact John Heffner at

Sunday, July 7, 2013

Update on The Battle of Missouri and Franchise Distribution Law

On June 20, a Missouri Circuit Court judge issued one of the first judicial rulings in a battle that could dramatically affect the relationship between producers and distributors of alcohol. 

In Missouri, Diageo PLC, Bacardi Ltd., and Pernod Ricard SA are all lobbying to end the state’s franchise laws.  These laws, which ten other states also have, make it difficult for producers to switch to different distributors.  In Missouri, a producer like Diageo cannot terminate an agreement with a distributor absent 90 days notice and good cause.

On March 6, 2013, Diageo notified its Missouri distributor, Major Brands, Inc., that it would terminate its relationship with it as of June 30, 2013.  Major Brands then sued Diageo and sought a preliminary injunction to prevent Diageo from terminating its relationship with Major Brands. 

In its June 20, 2013 ruling on Major Brands’ request for a preliminary injunction, the Missouri Circuit Court, to the chagrin of the large producers, affirmed Missouri’s franchise law.  The Court further held that there was no good cause for Diageo’s termination of its distribution agreement with Major Brands.  However, in a partial victory for Diageo, the Court declined to issue a preliminary injunction forcing Diageo to continue working with Major Brands – Major Brands would be entitled to money damages only.

The battle in Missouri is far from over.  Bacardi is also seeking to terminate its relationship with Major Brands, and litigation is pending in both Federal and State Courts.  And certainly, the lobbying efforts of both distributors and producers will continue in earnest.   

For more information or assistance on distribution litigation contact John Heffner at

Monday, July 1, 2013

New York SLA Proposed Advisory for “Limited Availability” Wines

New York distributors of highly sought after wines produced or imported in minimum quantities may soon be able to breathe a sigh of relief.  The New York State Liquor Authority has issued a proposed advisory that, if approved, would let distributors favor their top accounts or prestigious retailers in their allocation of limited availability wine. 

New York state law prohibits wholesalers from discriminating between retailers.  ABC §101-b.  Wholesalers must file the price for the products they sell in New York, and provide their wines to any retailer that expresses an interest in purchasing any of their wines at the posted price:

No licensee shall refuse to sell any brand of liquor or wine to   any licensee authorized to purchase such brand of liquor or  wine from such licensee at the price listed in the schedule of prices ... provided the purchaser pays cash therefore….

There is some flexibility for items with limited availability.   ABC §101-b(4-a)(d) states,  “For good  cause  shown  to  the  satisfaction  of  the  authority, permission  may  be  granted  for  the  filing of schedules limiting the  distribution or resale of a brand to retailers.“

The proposed advisory provides additional details on what constitutes a limited availability wine and how a distributor can allocate those wines while still complying with New York ABC laws.  The advisory applies to wines which the manufacturer, importer or wholesaler “has reason to believe market demand exceeds or will soon exceed available inventory” as well as wines for which those entities has price posted for subsequent vintages (i.e., older vintages of wines the distributor previously sold and price posted in New York).  It also applies to wine that the distributor “dos not intend to purchase or cannot purchase further inventory for a period of at least one year,” “seasonal item[s],” discontinued items, and wines from suppliers with whom the supplier has ended its relationship. 

If a wine falls into these categories, the manufacturer can notify the NYSLA that those wines are “limited availability,” and describe how they intend to allocate those wines.  The advisory also specifies acceptable means of allocating limited availability wines.  For example, distributors will be able to favor on-premise accounts in allocating limited availability wines; take into account past sales; and also favor retailers identified in “respected third party sources” such as the Michelin Guide, Zagat Guide, or Wine Spectator’s restaurant wine list award.

The NYSLA will consider the proposed advisory on July 17, 2013, and public comments are welcome.   If approved, the revised guidelines will go into effect in September of this year.

For a copy of those guidelines as well as additional information on where to send public comments, please go to:

For more information or assistance on alcohol beverage law / wine law, contact John Trinidad (

This post is made available for general informational purposes only and none of the information provided should be considered to constitute legal advice 

USPTO Finds Trademark CHAMPARTY Not Confusingly Similar to CHAMPAGNE Appellation

Comite Interprofessionel du Vin de Chamagne (CIVC) and Institut National de l'Origine et de la Qualite (INAO) who under French law are charged with controlling, promoting and protecting the common law certification mark CHAMPAGNE, opposed the registration of the mark CHAMPARTY for "alcoholic beverages except beers."  CIVC/INAO argued that the marks CHAMPAGNE and CHAMPARTY are confusingly similar.

The Trademark Trial and Appeal Board (Board) found the parties goods to be identical.  While normally this factor alone would weigh heavily in favor of finding a likelihood of confusion, the Board found the marks CHAMPARTY and CHAMPAGNE dissimilar.  The Board stated that "customers of average perceptual abilities would not mistake one mark for the other or find the marks to be significantly similar" even if used on identical goods. 

CIVC/INAO argued that CHAMPAGNE is often associated with celebrations and thus PARTY might suggest a connection with CHAMPAGNE especially given that the initial letters are identical in both marks.  The Board was not persuaded as CHAMPAGNE is a term well known as a type of sparking wine, but CHAMPARTY has no literal meaning.  In fact, the Board noted that the English word "party" is a prominent feature of the CHAMPARTY mark and that the PARTY portion of the mark is "likely to counteract the visual similarities between the two marks in the perception of the consumers."  Unfortunately for CIVC/INAO, there was no evidence of record that CHAMPAGNE is more closely connected with celebrations than that of any other alcoholic beverage.  Similarly, the Board saw no support for the argument that consumers would view CHAMPARTY as a kind of "brand extension" of the CHAMPAGNE mark nor did not discern any other rationale why consumers might perceive a relationship or connection between the marks.

The Board concluded that the mark CHAMPARTY differs substantially from the mark CHAMPAGNE, "so as not to be likely to cause confusion, mistake or deception as to the source of applicant's goods."  Alas, CIVC/INAO has the CHAMPAGNE, but nothing to celebrate. 

Link to: 

For any questions or assistance on trademark matters contact Katja Loeffelholz at