≡ Menu

Arthur Goldman, a Pennsylvania attorney, was recently convicted of selling wine without a license. The story goes that Mr. Goldman privately procured high-end wiArthur Goldman wine cellar Pennsylvania Liquor Law contraband seziure of wine Pennsylvania Attorneys Wine Collection Seized and May be Destroyed by Governmentnes for friends and colleagues, selling the wine directly to multiple parties through his personal cellar as opposed to shipping the wine through Pennsylvania’s state-controlled liquor stores. (For the full original story from January, see U.S. Lawyer Arrested in Undercover Fine Wine Sting.) “He maintained a list and kept about 20 people informed of wines he had available, one of whom was an undercover officer involved in a sting operation. Police said officers made several undercover buys . . . .” U.S. Lawyer Falls Foul of State Wine Laws. Pennsylvania is one of the ten states that presently bans direct shipment of wine sales to consumers.

His wine collection—which is alleged to be valued at about $125,000—was seized and may be annihilated by government officials. The state’s law mandates that contraband wine be destroyed. In particular:

No property rights shall exist in any liquor, alcohol or malt or brewed beverage illegally manufactured or possessed, or in any still, equipment, material, utensil, vehicle, boat, vessel, animals or aircraft used in the illegal manufacture or illegal transportation of liquor, alcohol or malt or brewed beverages, and the same shall be deemed contraband and proceedings for its forfeiture to the Commonwealth may be instituted in the manner hereinafter provided. No such property when in the custody of the law shall be seized or taken therefrom on any writ of replevin or like process. 47 P.S. § 6-601.

The attorney’s collection includes rare wines, as well as wines that are not sold in Pennsylvania’s government-run liquor shops. To wine lovers, the thought of destroying a collection otherwise imbibable is preposterous. Mr. Goldman’s attorney argued that the near-2,500 bottles seized were never intended to be sold and instead belonged to the lawyer’s personal wine collection. See, e.g.Attorney Wants Seized $125K Wine Collection Returned; Pennsylvania May Destroy 2,426 Bottles of Fine Wine. Mr. Goldman hopes to regain his seized collection before the bottles are destroyed or ruined.

If anything, the above story is a clear representation of the dichotomy of how antiquated and unfriendly some state wine laws and regulations can be and yet how encouraging other states are to wine businesses and sales. In the U.S., less than half of the states have state-controlled government liquor stores that oversee the wholesaling or retailing of some or all aspects of alcohol beverage sales. These states are often referred to as alcohol beverage control states (or simply control states). Since such is regulated by the state, the exact terms or conditions of each model vary by the individual state. Not all states with government-controlled retail stores are as discouraging as Pennsylvania. For example, in Virginia (a control state), the state operates several hundred Alcohol Beverage Control stores, but (generally speaking) wine and beer are also sold at local grocery stores. In other control states, like Pennsylvania, alcohol (including wine) can only be purchased at retail outlets run by the state government. To make matters worse, Pennsylvania does not allow direct shipment of wine to consumers from wineries and retailers which, in combination with the limited selections at retail outlets, significantly limits the types of wines consumers within the state can purchase. In this day in age, when technology trumps borders and there is a significant movement in craft beverages with an emphasis on expanding and developing ones palate, it is a true misfortune that such limitations in the wine world still exist. Perhaps Mr. Goldman’s story will one day serve as the collapse of anachronistic regulations.

I spent a great portion of my life in New York, and while the state does not have government-controlled sale of wine, there is a strong prohibition against the sale of wine in grocery stores. Since I spent so many years living in New York, I probably did not even realize—until I started studying wine law—that other states allow wine to be sold in grocery stores. For me, wine always had a separate place: in the liquor store. Perhaps this is the greatest example (for me) of how states differentiate on their regulation of wine. Why doesn’t New York allow wine to be sold at the grocery store? It is a long story, and one that helped earn New York a grade of D+ in the 2013 State-by-State Report Card On Consumer Access To Wine by the American Wine Consumer Coalition. Pennsylvania, however, earned an F on its report card—a grade that many wine aficionados can probably agree was well deserved.

Image property of Philly.com.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }

Introducing LabelVision: The 21st Century COLA Search

ShipCompliant Label Vision Logo 300x225 Introducing LabelVision: The 21st Century COLA SearchLast week, the folks at ShipCompliant officially rolled out a new service called LabelVision. To many in the wine, beer, or spirits industry, this new resource is a game changer. Instantly, we have access to over 1.5 million federally approved labels as far back as 20 years. To some, such a system may not seem much different from the TTB’s current public COLA database. To frequent users of the TTB system, however, LabelVision is a tremendous resource for many reasons. For one, LabelVision’s search capability significantly overpowers that of TTB’s public database: LabelVision allows a user to search a term that may appear on any part of a federally approved label. 

What does this mean, exactly? Well, for starters, instead of just searching the “Brand Name” or “Fanciful Name” of a federally approved label—which is currently the only portion of the actual, federally approved label text we can formally search through TTB’s public database—we can now search any part of an approved label’s text. This includes the paragraph of information a vintner may include about the vintage or the vineyard, as well as any stray text on the label. In the past, when using the public label database, I’ve often found its search capabilities limited and somewhat clunky. Many times, when assisting a client obtain a federal label approval, I’ve often wanted to search other portions of a label’s text than just the “Brand Name” or “Fanciful Name.” (What can be even more disheartening is that TTB tends to be very flexible with the actual brand name listed on the label, which means the applicant can be somewhat creative with what the wine’s brand name is listed as on the application, as long as such name appears on the label portion submitted to TTB as the true brand label.)

LabelVision changes all of this.

Another great aspect about LabelVision is that it serves as a mechanism for brand owners to patrol their registered trademarks and see if another company is potentially infringing upon the brand owner’s mark. This aspect reminds me a lot of my summer in Reims, in particular our trip to Le Comité Interprofessionnel du vin de Champagne (“CIVC”) in Épernay. During our visit, we met with the legal director of the CIVC, who recited many stories about how strictly the term “Champagne” is regulated—and not just on wine or other beverage products. While the CIVC looks at many other products (i.e., not restricted to alcohol) that may wrongfully use its protected geographical indication, a search tool like LabelVision could certainly come in handy for an organization (or brand owner) like the CIVC that seeks to protect a registered trademark or a geographical indication. As mentioned previously, LabelVision provides the ability to search all aspects of an approved label’s text, which can present results that TTB’s public label search simply overlooks or does not currently have the capability to search. (Note: Of course, just because an alcohol label is approved by the TTB does not necessarily guarantee that said label is used in commerce.)

 Label Vision Ship Compliant Searchable Database COLA Label Approval TTB 1024x483 Introducing LabelVision: The 21st Century COLA Search

In sum, ShipCompliant’s LabelVision is a great resource for alcohol beverage lawyers, compliance directors, and brand owners. It saves a significant amount of time, and offers great features like the ability to create alerts for new approvals matching certain terms. We’ll be using it a lot more going forward, and we certainly believe the ShipCompliant system is the future of alcohol beverage label searches.

For more information, view the ShipCompliant press release on LabelVision here or the ShipCompliant blog post here.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }

Rudy Kurniawan counterfeit wine fraudster The Rudy Kurniawan Sentencing and the Wine Label Certification Statement

On Thursday, August 7, 2014, Indonesian wine collector Rudy Kurniawan was sentenced to ten years in prison by U.S. District Judge Richard Berman. Mr. Kurniawan is purported to have swindled more than $20 million worth of fake wine that he allegedly created in his California home and later sold to collectors. Purchasers of Kurniawan’s wines included Bill Koch, David Doyle (co-founder of Quest Software Inc.), and real estate tycoon Peter Fascitelli. In December, jurors convicted Mr. Kurniawan of mail fraud and wire fraud. See Vintage Wine Scammer Kurniawan Sentenced to 10 Years Jail. Prosecutors urged a sentence term of 14 years, offering evidence that Rudy Kurniawan had cheated collectors, auction houses, and many others between the years 2004 to 2012.

When imposing the sentence, Judge Berman noted that Mr. Kurniawan “failed to accept responsibility from his crimes.” Id. The Judge ordered Mr. Kurniawan to forfeit $20 million—inclusive of real estate, art, jewelry, and wine—as well as to pay $28.4 million to the purchasers of rare French wines he created and/or blended and bottled at his California home. The Judge noted that “[t]he public at large needs to know that our food and drink are safe and that what’s on the label and is not some potentially unsafe, homemade witches brew.” Id.

Kurniawan is the first individual in the U.S. to be prosecuted for wine fraud. In addition, it is believed that his wine fakes will “infiltrate” the marketplace and auction houses for years to come. Id. While ten years may seem like an unconventionally high sentence term for a crime of this nature, the extent of Mr. Kurniawan’s operation, as well as its effects, will be felt for years to come. Many reason that an extreme sentence term should reflect the extremity of Mr. Kurniawan’s enterprise, as well as pose as a warning for any other individuals contemplating a similar scheme. It should also serve as a message to the public at large, so that consumers may feel confident in their food and beverage purchases. Still, Kurniawan’s attorney, Jerome Mooney, argued that the wealth of the victims at issue in this case significantly diminished the gravity of Kurniawan’s crime. See Wine Fraudster Rudy Kurniawan, Once an L.A. Name, Gets 10 Years.

A sentencing with weight such as that imposed for Kurniawan is important, not just in the context of fraud but also with respect wine labeling. If Judge Berman had applied a lesser sentence to Kurniawan, wouldn’t he effectively be ruling out the importance of 27 CFR Part 4 and relevant Parts of Title 27? On every wine label application to the TTB, there is an application certification statement that reads as follows:

Under the penalty of perjury, I declare: that all statements appearing on this application are true and correct to the best of my knowledge and belief; and, that the representations on the labels attached to this form, including supplemental documents, truly and correctly represent the content of the containers to which these labels will be applied.

See Application for and Certification/Exemption of Label/Bottle Approval. The above certification statement indicates that each applicant for a wine label (or beer or spirits label) certifies that what is represented on the label is actually contained within the bottle. For example, a wine label approved containing a particular vintage year and varietal binds the applicant to the above certification statement. While I am doubtful Rudy Kurniawan ever filed label applications for the wines at issues in this case (if he had, red flags probably would have been raised at an earlier point in time), a lesser sentencing would indicate that fabricating a wine to mimic what a label declares is contained within the bottle is not punishable (or worthy of being punishable) by severe measures.

The above perjury statement is crucial and bestows a significant duty upon the applicant. While some may hold no sympathy for the Kurniawan victims like Bill Koch, I think it at least admirable that Mr. Koch raised the magnitude of the issue of wine fraud, especially as it relates to the industry at large. 

Image property of New York Daily News.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }

How Are Organic Wine Labels Regulated in the U.S.?

Here is a good, and relevant, question. What happens if a wine label boasts the term, “ORGANIC,” or “CERTIFIED ORGANIC” but is neither organic nor certified as such? As organic products—including wines—become more popular among consumers, there is a greater risk of fraudulent use of the term “ORGANIC.” See, e.g., Is Your Organic Food A Fraud?; OverseasCompanies Fake Organic Certificates.

Last week, The Drinks Business reported that an Australian vineyard, Kings Court Vineyards in Victoria, was accused by the National Association for Sustainable Agriculture, Australia (“NASAA”) for falsely labeling its wines as “ORGANIC.” See Vineyard Caught Over False Organic Claimssee also Organic Chief: We Will Discredit Firms Who Claim False Certification. NASAA, the Australian associated responsible for certifying companies as organic, issued a statement that the certifier never certified Kings Court Vineyards. NASAA indicated that the association never approved Kings Court Vineyards as organic and, as such, the vineyard has been falsely labeling its wines. The association has since obtained an injunction from the Australian Federal Court against the vineyard, preventing the vineyard from labeling its produce as organic. NASAA recited its reasoning for pursuing action to include its desired to protect truth in labeling. In addition, the association noted that there are extremely high costs associated with certifying an operator, an expense that many companies undertake to proudly proclaim their product is organic. See, e.g.Vineyard Busted for Falsely Claiming Organic Status. Additionally, NASAA commented that:

This case is not only about NASAA protecting its brand and reputation but also about defending the brand value and integrity of our certified operators.

See Vineyard Caught Over False Organic Claims (quoting NASAA general manager Ben Copeman). The association’s response portrays the seriousness of certifiers with respect to the term “ORGANIC.” If NASAA were inactive with respect to the above allegation, it is quite possible “ORGANIC” could lose its bite, so to speak, and many companies might be less willing to pay for organic certification.

The U.S. Regulation of Organic on Wine Labels

The United States Department of Agriculture (“USDA”) promulgates regulations relating to the term “organic” and to the National Organic Program (“NOP”), which govern the handling, labeling, processing, marketing, and certification of organic products (including alcohol beverages). Such regulations are found at 7 CFR Part 205. While these regulations are not promulgated by TTB, such organic regulations must be followed when claiming “ORGANIC” on an alcohol beverage label.

In the U.S., TTB recognizes four different types of “ORGANIC” claims. They are as follows:

  1. 100% Organic—the product’s ingredients are all (i.e., 100%) organic and the product does not contain chemically added sulfites;
  2. Organic—the product contains at least 95% organic ingredients and no chemically added sulfites;
  3. “Made with Organic [Ingredients, i.e., grapes]“—the product contains at least 70% organic ingredients (and may contain chemically added sulfites); and
  4. If the product contains less than 70% organic ingredients or if the product is not certified by an organic certified, the product may only include organic ingredients in its ingredient statement.

In addition to the USDA NOP organic regulations, a wine label containing an “ORGANIC” claim must also comply with general TTB wine label requirements (e.g., alcohol by volume percentage statement, net contents statement, and government warning statement, to name just a few).

A TTB label application for a wine label containing an “ORGANIC” claim (i.e., other than an ingredients statement) is required to contain a document called an ACA preview. The ACA preview is issued by a USDA-accredited certifying agents (or “ACA”) and contains the actual image(s) of the wine label along with the ACA’s stamp or signature that the wine at issue complies with organic regulations. For more information, see Changes to the Organic Documentation Requirements. Generally speaking, if an ACA preview does not accompany an organic wine label application, TTB will not approve the application. There are several other specifications required for organic wine labels, in addition to general TTB requirements such as alcohol by volume statement, most of which are detailed here.

IOrganic Wine Certification Statement TTB USDA How Are Organic Wine Labels Regulated in the U.S.?n addition to the ACA preview, TTB requires there to be a statement on the label (below the bottler or importer’s name and address) which states, “Certified Organic By [Name of Certifier].” And example of such requirement is shown on the label on the right.

Similar to the NASAA’s standpoint, the USDA maintains that a food product falsely represented as certified USDA organic violates federal regulations and law. The marketing, labeling, or selling of such products is punishable by fines. In some cases, the violation may be on behalf of the certifier (Some of the relevant regulations are found at 7 CFR 205.662). However, falsely representing a food product as “ORGANIC” is not always the fault of the certifying operation. In certain instances, a fraudulent organic certificate may be created without the authorization of the certifier. See, e.g., USDA Caution on Organic Fraud from ChinaThe National Organic Program welcomes the reporting of such violations by individuals as well as certifiers and maintains an active list of such reported fraudulent organic certificates.

Image property of Patianna

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 2 comments }

Jamieson Ranch Vineyards versus Pernod Ricard Jameson Whiskey The Trademark Battle of Jamieson Ranch Vineyards and Pernods Irish DistillersIn March, Jamieson Ranch Vineyards launched a declaratory judgment suit against Pernod Richard’s Irish Distillers Limited, owner of the renowned Jameson Irish Whiskey, in response to the Ranch’s receipt of a cease-and-desist letter. See Jamieson Vineyards Takes On Pernod Ricard’s Irish Distillers. According to Jameson Clashes with Jamieson Over Name, the letter issued by Irish Distillers on or around February 25, 2014 stated that “Jamieson” is “confusingly similar” to “Jameson” and is likely “likely to cause consumer confusion and/or the appearance that your client’s business originates from or is endorsed or authorised by Irish Distillers,” the use of which is likely to dilute the mark “Jameson.” See Jameson Clashes with Jamieson Over Name (quoting the original Irish Distillers cease-and-desist letter). Accordingly, Irish Distillers urged Jamieson Ranch Vineyards to cease use of the Jamieson mark, confirm (in writing) that the mark would not be used in the future and that Irish Distillers owns the Jameson mark, and account for the amount of revenue secured from the Jamieson mark (as well as sales of services in Napa) so that Irish Distillers could assess the damages. See Irish Distillers In Trademark Dispute With U.S. Winemakersee also Pernod Faces Trademark Clash Over Wine Firm’s ‘Jamieson’ Brand.

On July 14, 2014, the distiller counterclaimed against Jamieson Ranch Vineyards, asserting trademark infringement with respect to the name “Jamieson Ranch Vineyards.” Irish Distillers Limited noted that Jamieson Ranch Vineyards had recently changed its name to “Jamieson Ranch Vineyards”—mark whose appearance and sound the distillers argued would confuse consumers with respect to Jameson Irish Whiskey—and had previously been known as Kirkland Ranch Winery and Reata Winery. See Jameson Distiller Says Napa Winery Can’t Use ‘Jamieson.’ The counterclaim alleges federal infringement, dilution, and unfair competition, as well as common law infringement. Id. Jamieson Ranch Vineyards denies the allegations, and insists that its mark does not dilute the Jameson Irish Whiskey and seeks declaratory judgment, as mentioned previously.

In the last few months, several other wine companies have been victims to cease and desist measures pursued by larger, global alcohol beverage companies. A good example is the alleged battle between Champagne House Veuve Clicquot and Italian sparkling wine producer Ciro Picariello (Note: Such suit was denied by the Champagne House, but Veuve Clicquot did acknowledge contacting the Italian producer to note several label similarities), and the clash between Chateau Mouton Rothschild and Burgundy wine producer Laurent Mouton. In many instances, a smaller producer may choose to pursue legal action against larger companies to avoid changing its brand or business name. There are a significant amount of costs associated with changing the name of a business, such as phasing out labels (and changing the names of wines and labels), submitting label applications for government approval, and edits to a company’s website, logo, business cards, stationery, and related elements—and such cost may be particularly high for smaller wine businesses, enough to pursue litigation against a large company. But that being said, there is also an element of pride in ones name or brand that may have intangible value or goodwill that provides even greater incentive to defend ones mark.

A hearing for the case between Jamieson Ranch Vineyards (Madison Vineyard Holdings) and Irish Distillers is scheduled in front of Judge Charles R. Breyer on August 22, 2014 at 8:30 AM at the United States District Court for the Northern District of California. See Calendar for: Judge Charles R. Breyer.

Image property of KQED Blog.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }

Upcoming Seminars and Opportunities in Wine Law

Upcoming Winery and Vineyard Law Seminars and Academic Opportunities Upcoming Seminars and Opportunities in Wine Law

Two exciting opportunities in wine law are scheduled for the next few months. The first is the Wine and Spirits Law Academy at UC Davis on September 8th, 9th, and 10th. Wine and spirits legal experts from around the world will convene for a three-day conference to discuss topics including global wine and spirits market analysis, global issues facing wine entrepreneurs, comparative aspects of import/export law, current trends in U.S. regulations, and social media on the global wine market. The conference also features a private tour of Napa Valley’s Domaine Chandon and dinner at its world-renowned French restaurant, Etoile. More information is available at the UC Davis website here

The second opportunity relates to the next session of the International Seminar “Wine Law in Context” hosted by The Wine & Law Program at the University of Reims Law School. The Seminar is calling for papers for its third session, which aims to bring together internationally recognized specialists in the sector of wine & spirits law but also wine economics, sociology, ethnology or political science. The key point of the Seminar is based on the idea that wine law can and should be apprehended and analyzed through a historic, geographic, economic and even political context. For each session, a paper is presented either in English or in French. The most authoritative papers are published online in The Wine Law in Context Working Papers. More information is available at Wine Law in Context Call for Papers 2014-2015.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }

Penfolds: The Unfolding of China’s New Trademark Law

Penfolds Wine Law Trademark China Brand Squatting Penfolds: The Unfolding of Chinas New Trademark Law

A new case that may show the effects of China’s recently updated trademark law made headlines this last week. Treasury Wine Estates reported that the company did not register the Chinese name for Penfolds and is currently engaging in a legal battle with Li Daozhi, an allegedly notorious trademark squatter. See Brand Wars: Battling China’s Trademark ‘Squatters’. (Li Daozhi is the individual responsible for registering a number of Castel Frères brands in China, as well as offering to sell the rights to these marks at exorbitant prices, as discussed previously at French Wine Company Castel Frères to Pursue Trademark Battle Against Panati in China’s Supreme Court.) Based on an investigation conducted by The Australian Financial Review, Li Daochi registered at least three variations of the Penfolds name. (Penfolds has done particularly well in China in the past, see, e.g.Chinese Appetite for Penfolds Driving Sales of Australian Fine Wine, but recently claimed a downturn in sales due to “government austerity measures.” See Penfolds Owner Fighting Trademark Battle in China.) While Treasury won the first legal battle against Li Daozhi, Li is appealing the ruling decided in favor of Treasury.

Castel is also appealing a case against Panati Wine Co., Ltd. (owned by Li Daozhi) to China’s Supreme Court, which was previously decided in favor of Panati. See French Wine Company Castel Frères to Pursue Trademark Battle Against Panati in China’s Supreme Court. In a separate case from June 2014, a Chinese company announced it would appeal a lower court’s decision after a favorable ruling for Roussillon winemakers against said Chinese company that sought to register the Chinese translation of Roussillon as a brand name. See The New Chinese Trademark Law In Effect: The Wine Version.

The outcomes of the aforementioned suits will set a tone for how China’s new trademark law is not only interpreted but also for how seriously the new law will be enforced. There are immeasurable reasons—not exclusive to wine or wine trade—why China should enforce its new law and offset or curtail brand squatters or individuals who register a mark in bad faith. The current environment in China with respect to registering a trademark is hostile and expensive for many companies despite the popularity of their products or success of sales. But an answer seems far off, as litigation often takes many months, if not years, to complete.

Until then, companies looking to pursue business in China can search China’s trademark database to see if their brand names have been registered. If the marks are not registered and a company even so much as anticipates doing business abroad, it is certainly advisable to register a mark as early as possible. If the company is victim to trademark squatting, prior matters involving Castel, Château Listran, Barrière Frères, and Château Ausone indicate few options: pay off the trademark squatter (usually at high cost), change the brand name (which can certainly be a high cost), pursue litigation (also at high cost, as well as the risk of an unfavorable judgment), or leave the market entirely. See, e.g., No Wine-ing: The Story of Wine Companies and Trademark in China. Perhaps some of these options will change in time to provide more supportive options to true brand owners.

Image property of Treasury Wine Estates.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }

 On Reserve Named a Finalist in 2014 Wine Blog Awards Best Overall Wine Blog CategoryIt is quite an honor to share that On Reserve was named one of five finalists in the 2014 Wine Blog Awards category for Best Overall Wine BlogSee 2014 Wine Blog Awards Finalists Are…. I am humbled to be named among many very respected wine bloggers and writers, especially within the “Best Overall Wine Blog” category.

Blogging about wine law the last four years has been an incredible journey, and one I truly feel is only the beginning. I have said this before, but when I started On Reserve four years ago, I never imagined or anticipated the continued interaction I have thanks to this blog. The blog has certainly grown and changed over time, and I believe this is only proof that a lot is in store for On Reserve and the wine law community at large.

If you enjoy reading On Reserve, please consider voting for us as this year’s best overall wine blog here. I’ll be sure to pop open some bubbly very soon to celebrate such a true honor.

Thank you again to all for your continued support, communication, and readership, and congratulations to all finalists in this year’s competition!

{ 0 comments }

Last year, California-based Duckhorn Wine Co. filed a complaint against Long Island-based Duck Walk Vineyards alleging consumer confusion and breach of settlement agreement that resolved a prior trademark infringement action between the two parties. See Duckhorn Wine Co. Files a Complaint Against Duck Walk Vineyards Alleging Consumer Confusion on Wine Labelssee also Duckhorn Asks N.Y. Winery to Modify Labels and Sales. One of Duckhorn’s lawyers stated that Duck Walk Vineyards did not follow a 2003 settlement agreement in which Duck Walk agreed to several constraints—including placing the vineyard’s place of origin on the front label of Duck Walk wines containing duck images, as well as restrictions to production volume and geographic distribution of Duck Walk wines with duck images—the alleged breach of which was the foundation of Duckhorn’s complaint.

This past week, the United States District Court of Eastern District of New York denied Duck Walk’s motion to dismiss. See Duckhorn Wine Co. vs. Duck Walk Vineyards, Inc., 13-CV-1642. Duck Walk had moved to dismiss the original compliant for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). In its complaint, Duckhorn alleged that Duck Walk had breached the settlement agreement between the two parties by:

  1. Failing to include the geographic location or place of origin (referred to as “Prefatory Language” in the Agreement) on the true front labels of Duck Walk’s cabernet sauvignon, merlot, and brut sparkling wines;
  2. Using duck images on its labels that were not approved or similar to those approved for use by the parties’ Settlement Agreement (i.e., use of two blue ducks in a silhouette is not similar to any of the approved images by Duckhorn, which generally contain about nine white ducks); and
  3. Selling Duck Walk wines in excess of agreed upon production and distribution limitations (i.e., selling more than 50% of Duck Walk’s annual Gross Production outside of New York, New Jersey, and Connecticut of wines containing the word “Duck” and/or the image or picture of ducks with the exception of Duck Walk’s corporate name, Duck Walk Vineyards, Inc.).

(One of the labels which Duckhorn opposed features blue duck silhouettes and is pictured at below. Duckhorn alleged that the label pictured on the left-hand side is the actual front label of the wine—not the label containing the Government Warning Statement, vintage year, origin, and producer’s name and address—and, as such, the actual front label fails to contain the requisite Prefatory Language of the Settlement Agreement. Duck Walk, however, argued that the front label is the label pictured on the right-hand side, the very same label that TTB recognizes as the wine’s “front” label under requirements outlined in 27 CFR Part 4.)

 It its motion to dismiss, Duck Walk argued:

  1. The Certificate of Label Approvals (“COLAs”), including that for its cabernet sauvignon, brut, and merlot, demonstrate that Duck Walk did comply with the Prefatory Language;
  2. The blue duck silhouette image does not violate the Settlement Agreement because the Agreement does not specifically restrict the color or amount of ducks; Duck Walk simply reduced the number of ducks and made them blue in color; and the duck is the same or similar type to those ducks approved in the Settlement Agreement; and
  3. Duck Walk has not sold more than 50% of its annual Gross Production outside of New York, New Jersey, and Connecticut.

Duck Walk Vineyards Label Approval Merlot District Court Denies Duck Walks Motion to Dismiss Against Duckhorn

 

In its motion to dismiss, Duck Walk interestingly argued that the Settlement Agreement made Duck Walk’s compliance “expressly contingent upon approval of the BATF [TTB].” Id. at 9 (quoting Duck Walk’s motion). Meaning, if the TTB approved of a label as the “front” label, such label would be considered the “front” label of the wine in the context of the Settlement Agreement. The vineyard furthered its argument for compliance by stating that TTB considered the front label of the wine at issue to be the label containing the “alcohol percentage, government warnings, and product bar code.” Id. The District Court found Duck Walk’s first argument to be “patently meritless.” Id. at 10. In interpreting the parties’ Settlement Agreement, the Court found that Duck Walk could not merely comply with the Agreement’s requirement by obtaining label approval from TTB. Further, the Court noted that if it accepted Duck Walk’s argument, then a “front” label with the Prefatory Language could be placed anywhere on the wine bottle as long as such was approved by TTB (i.e., on the neck, strip, etc.)—and this could not possibly be what the parties intended.

The Court also rejected Duck Walk’s argument about the blue silhouette ducks and stated the vineyard’s argument was “absurd” and the words of the Settlement Agreement “permits Duck Walk to use only one of the approved images . . .  or ‘such similar pictures or depictions.’” Id. at 13 (quoting the Settlement Agreement). After analyzing Duck Walk’s blue duck silhouette in comparison to one of the labels annexed in the Settlement Agreement, the Court concluded that “the only thing similar about these images is that they contain ducks.” Id. at 14. (See example label below indicating one of the styles of ducks approved in the Settlement Agreement.)

Duck Walk Vineyards Windmill Red Label District Court Denies Duck Walks Motion to Dismiss Against Duckhorn

With respect to the production and distribution restriction claim, Duck Walk provided a declaration from its CEO, which introduced allegations and documents outside of the Complaints. However, the Court noted that, pursuant to FRCP 12(b)(6), a court’s review is limited to the facts asserted within the “‘four corners of the complaint, documents attached to the complaint as exhibits, and any documents incorporated in the complaint by reference’” and thus could not consider such facts without converting the motion to dismiss into a motion for summary judgment (which the Court deemed inappropriate given the factual dispute and the absence of discovery or evidentiary hearing). Id. at 15 (quoting McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007)).

Images property of the Alcohol Tobacco Tax and Trade Bureau.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 6 comments }

CLE International Wine Beer Spirits Law Conference Washington DC September 2014 Upcoming Wine, Beer, and Spirits Law Conference Hosted by CLE International

CLE International is hosting the 19th Annual National Conference on Wine, Beer, and Spirits Law this September in Washington, D.C. The conference will be Thursday, September 18th through Friday, September 19th at the Mayflower Renaissance Hotel in Washington, D.C. Additionally, attendees can earn up to 12 MCLE credits including one hour of ethics credit. More information, including the registration page, is available on CLE International’s website. See CLE International (CLE): Wine, Beer, and Spirits Law, Washington, D.C., September 18–19, 2014

The conference will include speakers from the following:

  • Alcohol and Tobacco Tax and Trade Bureau
  • Pillsbury Winthrop Shaw Pittman
  • McDermott Will & Emery
  • Diageo North America
  • Virginia Department of Alcoholic Beverage Control
  • New Belgium Brewing Company
  • Wine Institute
  • Federal Trade Commission
  • Hangley Aronchick Segal Pudlin & Schiller
  • And more to come!

Additional information on the conference will be posted on CLE International’s website in the upcoming weeks.

Update on July 20, 2014

CLE International has provided the following additional information regarding September’s conference:

CLE International Wine Beer Spirits Law Conference September 2014 Upcoming Wine, Beer, and Spirits Law Conference Hosted by CLE International

CLE International Wine Beer Spirits Law Conference September 2014 Page 2 Upcoming Wine, Beer, and Spirits Law Conference Hosted by CLE International

 

Photos provided courtesy of CLE International.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

{ 0 comments }