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As many  know, on August 5, 2013, FDA issued a final rule regarding the labeling of gluten-free foods. See 78 FR 47178, Food Labeling; Gluten-Free Labeling of Foods. As noted by On Reserve previously, TTB announced on August 22, 2013 that the agency would review its policy on the use of the term “gluten-free” on alcohol beverage labels and advertising that are regulated by TTB. See TTB to Review its Policy on the Term “Gluten-Free” for Alcohol Beverage Labeling. While FDA’s final rule does, in fact, define the term “gluten-free,” the finalized definition only applies to food products that fall within the labeling jurisdiction of the FDA. On its Questions and Answers page, FDA specifically noted that the final rule does not apply to food and beverage products regulated by the United States Department of Agriculture (“USDA”) and the TTB. The agency clarified that, “USDA regulates the labeling of meats, poultry, and certain egg products (FDA regulates the labeling of shell eggs). TTB regulates the labeling of most alcoholic beverages, including all distilled spirits, wines that contain 7 percent or more alcohol by volume, and malted beverages that are made with both malted barley and hops.” Questions and Answers: Gluten-Free Food Labeling Final Rule. FDA’s final rule on gluten-free allows a food product to be labeled as free from gluten unless the product contains any of the following:

  1. An ingredient that is a gluten-containing grain (e.g., wheat, rye, barley, or cross-bred hybrid of these grains);
  2. An ingredient that derives from a gluten-containing grain but has not been processed to remove gluten (e.g., wheat flour); or
  3. An ingredient that derives from a gluten-containing grain but where the ingredient been processed to remove gluten (e.g., wheat starch), if the use of that ingredient results in 20 parts per million (ppm) or more gluten in the food. 21 C.F.R. 101.91(a)(3), 78 FR 47178.

Effectively, a food can bare a gluten-free claim on the label if that food product is inherently free of gluten or if the presence of a gluten-containing ingredient in the food product is processed to contain less than 20 ppm. If the food label contains a gluten-free claim but does not meet the aforementioned standards, the FDA would consider the food to be misbranded. (This standard applies to the claim regardless of whether the claim is “Gluten-Free” or “Free of Gluten,” “No Gluten,” “Without Gluten,” or similar.)

On February 11, 2014, TTB issued a revised interim policy on gluten content statements on the labels of wine, spirits, and malt beverages that fall within TTB’s labeling and advertising jurisdiction. See Ruling 2014-2 Revised Interim Policy on Gluten Content Statements in the Labeling and Advertising of Wine, Distilled Spirits, and Malt Beverages. In TTB’s interim policy for gluten-free labeling, the Agency concluded that the term “gluten-free” may be used on TTB-regulated beverages for labeling and advertising if the product meets the standards determined by the new FDA regulation for gluten-free at 21 C.F.R. 101.91. The Agency goes on to clarify this by reasserting its prior determination in Ruling 2012-2 that products that inherently do not contain gluten, such as wine fermented from grapes and do not include any gluten-containing ingredients, may continue to use gluten-free claims on their labels and advertisements. TTB noted that “this revision only clarifies the standards for these products and should not require any changes to TTB-approved labels for wines and distilled spirits that are made from ingredients that do not contain gluten and currently are labeled or advertised as ‘gluten-free.’” Revised Interim Policy on Gluten Content Statements in the Labeling and Advertising of Wine, Distilled Spirits, and Malt Beverages.

TTB recognized FDA’s allowance of gluten-free claims on food products where gluten-containing ingredients (i.e., not the food) are processed to removed gluten and the use of the ingredient in the food does not result in 20 ppm or more of gluten in the food. In its interim policy, TTB asserted that it generally does not believe this standard will be relevant to malted beverages fermented from malted barley or other gluten-containing grains or to distilled spirits distilled from gluten-containing grains because “these products are usually made from the grains themselves, not from ingredients such as wheat starch or barley starch.” Id. The difference here, from TTB’s point of view, is to claim gluten-free, the product must contain ingredients  that derive from a gluten-containing grain and were processed to remove gluten, not where the product derives from the actual gluten-containing grains themselves.

TTB further rules in its interim policy that foods containing a gluten-containing grain, such as wheat, rye, barley, or a cross-bred hybrid of those grains, are disqualified from containing a gluten-free claim, regardless of the amount of gluten in the finished product. Id. “TTB will continue to consider ‘gluten-free’ label claims for TTB-regulated alcohol beverages made from gluten-containing grains to be misleading.” Id. Moreover, TTB noted that because of FDA’s determination that there is no scientifically valid way to evaluate claims that a beer made from gluten-containing grains can be processed in a way to remove gluten, and there is no current method to determine if such evidence is valid or effective, TTB maintains its position that it would be misleading for such products to claim “gluten-free” on their labels or advertisements. “Accordingly, consistent with FDA’s decision to maintain the status quo for the labeling of beers subject to its regulations pending further rulemaking, TTB has decided that . . . TTB will also maintain its current policy . . . with regard to alcohol beverages made from gluten-containing grains.” Id. The Agency will continue to allow products made from gluten-containing grains to bear claims such that the product was “Processed” or “Treated” or “Crafted” to remove gluten, along with an appropriate qualifying statement as spelled out in Ruling 2012-2, but such products cannot bear a gluten-free claim.  See Ruling 2012-2, Interim Policy on Gluten Content Statements in the Labeling and Advertising of Wines, Distilled Spirits, and Malt Beverages. (The qualifying statement noted in 2012-2 informs consumers that: (1) the product was fermented or distilled from a gluten-containing grain; (2) the exact gluten content of the product cannot be confirmed; and (3) the product may contain gluten.)

In its 2012-2 ruling, TTB noted that some of the alcohol beverages that fall within its labeling jurisdiction generally do not contain gluten if manufactured under good manufacturing processes (e.g., wine fermented from grapes or vodka distilled from potatoes) and reminded industry members that the bottler or importer was responsible for ensuring the accuracy and truthfulness of a gluten-free claim. In the 2012-2 ruling, brewers also asked TTB to consider allowing “gluten-free” claims on beverage products (e.g., malt beverages fermented from malted barley and other gluten-containing grains) that were crafted, processed, or treated to remove gluten if the product contained low amounts of gluten (e.g., 10 ppm). In its prior ruling, TTB determined in that it would be misleading to state “gluten-free” on products produced using wheat, barley, rye, or a cross-bred hybrid of  gluten-containing grains, but would allow the label to claim that the product was “[Processed or Treated or Crafted] to remove gluten,” along with an appropriate qualifying statement. In its 2014-2 ruling, TTB noted that it will continue to allow such claims (i.e., Processed, Treated, or Crafted with an appropriate qualifying statement) pending any subsequent rulemaking on behalf of the FDA.

In this new policy, TTB noted that:

Although TTB labeling regulations for alcohol beverages are not always identical to FDA labeling regulations for foods, given the important consumer health considerations relating to “gluten-free” claims, TTB believes that it is important to adopt an approach on this issue that is as consistent as possible with the regulations issued by FDA, while taking into consideration the differences in the statutes administered by TTB and FDA, respectively. Ruling 2014-2 Revised Interim Policy on Gluten Content Statements in the Labeling and Advertising of Wine, Distilled Spirits, and Malt Beverages

This is an important consideration given the consumer reliance on the term “gluten-free” on food products. For a claim like gluten-free, it is greatly important for there to be a particular level of congruence between agencies in determining and agreeing to a definition, especially given the use of the term on a wide variety of food and beverage products that fall into the labeling jurisdiction of multiple agencies. TTB’s declaration is also another demonstration of the workmanship between agencies, particularly TTB and FDA, especially with respect to food and beverage products. 

 

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The Alhambra Granada Spain Lindsey Zahn 300x200 European Parliament Passes Stricter Legislation for Labeling Sangria Wines

The Alhambra; Granada, Spain

I spent several weeks one summer in the Andalucía region of Spain. My trip included Granada, Seville, Cádiz, Córdoba, Madrid, Toledo, Segovia, and a few other cities. While the weather—particularly the mid-afternoon—was sweltering, one thing I did look forward to was trying the sangria at the many tapas restaurants we frequented. I found that most sangrias were made from fresh fruit (usually peaches, oranges, limes, and sometimes lemons or apples), red wine, brandy, and (sometimes) seltzer or a similar carbonated liquid. It was certainly a refreshing way to sit down after spending a day under the scorching sun and each restaurateur seemed to have a different way of making the traditional fruity beverage. Despite touring many cities that summer, Granada probably remains at the top of my list for Spain. Granada itself is a beautiful city known for its gratis tapas and tasty sangria, and is quite a different aesthetic from that of the streets of either Madrid or Seville.

The Alhambra Granada Spain 300x200 European Parliament Passes Stricter Legislation for Labeling Sangria Wines

The Alhambra; Granada, Spain

In recent news, the European Parliament passed legislation that imposes stricter geographical labeling rules for Sangria. In particular, the European legislation attests that “real” Sangria comes from Spain and Portugal. See True Sangria Wine Comes from Spain, Portugalsee also ABC News: True Sangria Wine Comes from Spain, Portugal. Going forward, aromatized wines from other European countries will need to include country of origin labeling. “European lawmakers in Strasbourg passed the motion—which also protects the Vermouth and Gluehwein aromatized wines—in a 609-72 plenary vote with four abstentions.” True Sangria Wine Comes from Spain. The new legislation is still awaiting a “rubber stamp” from European Union governments. Id.

The legislation had an overwhelming 90% of the Parliament’s votes in favor of restricting Sangria to Spain and Portugal unless the product includes a designated country of origin label. See It’s Only ‘Sangria’ if it Comes from Iberia. I am yet to see the exact legislation, but according to the European Parliament website, both the fruit and the wine must come from Spain or Portugal to be labeled “sangria” (i.e., without the designated country of origin labeling). See Things We Learnt in Plenary: EU Presidency, Greener Vans, Public Procurement. The legislation also applies to clarea, or sangria blanca, the white wine version of the traditional red wine beverage. See Off Limits: EU Bans ‘Foreign-Made’ Sangria.

What is interesting to consider is whether the addition of fruit produced only in Spain or Portugal has been the tradition of Spanish and Portuguese sangria producers. Council Regulation (EEC) No 1601/91 from June 1, 1991 suggests that, at least with respect to European Union law, sangria is

a drink obtained from wine, aromatized with the addition of natural citrus-fruit extracts or essences, with or without the juice of such fruit and with the possible addition of spices, sweetened and with CO2 added, having an acquired alcoholic strength by volume of less than 12 % vol. The drink may contain solid particles of citrus-fruit pulp or peel and its colour must come exclusively from the raw materials used. The description ‘Sangria’ must be accompanied by the words ‘produced in . . .’ followed by the name of the Member State of production or of a more restricted region except where the product is produced in Spain or Portugal. The description ‘Sangria’ may replace the description ‘aromatized wine-based drink’ only where the drink is manufactured in Spain or Portugal. Council Regulation (EEC) No 1601/91 of 10 June 1991.

The above definition of sangria under European Union law is from a 1991 Council Regulation, however the Regulation does not directly comment on whether the fruit used in Spanish and Portuguese sangria must be of Spanish or Portuguese origin. Perhaps the Council Regulation suggests such by indicating “the product is produced in Spain or Portugal,” and perhaps there are more restrictive laws or regulations within the countries of Spain and Portugal with respect to the labeling of sangria. From my understanding of geographical indications, it  follows through that both the wine and fruit must be of Spanish or Portuguese origin, but from the literal interpretation of the 1991 Regulation, this requirement is not as clear. It will be interesting to review the actual text of the new legislation once it is available from the European Parliament.

Photographs property of Lindsey A. Zahn.

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Ciropicariello Brut Orange Label 300x200 Champagne House Veuve Clicquot Sues Italian Sparkling Wine Producer Over Label

Update January 23, 2014: The Drinks Business reported today that Veuve Clicquot denied filing suit against Ciro Picariello and instead contends that the Champagne company contacted the Italian sparkling wine producer to note the “similarity” of the labels and see if there is any way Ciro Picariello’s label could “evolve” to avoid the risk of association between Veuve Clicquot and Ciro Picariello. See Veuve Clicquot Denies Lawsuit Over Label.

Yesterday, Wine-Searcher.com confirmed that the renowned Champagne house, Veuve Clicquot, is suing a small Italian sparkling wine producer over its label. See Veuve Clicquot Sues Italian Producer Over Labelsee also Veuve Clicquot to Sue Winery Over Labels. Ciro Picariello is a family-owned winery in Campania, Italy that produces “just 3,500 bottles of its fiano-based Brut Contadino each year.” Veuve Clicquot Sues Italian Producer Over Label. The label, pictured left, is a very distinct orange color, similar to the shade of a Jack-o-Lantern.

Veuve Clicquot is known for its bright mustard yellow labels, pictured below, on most of its Champagne products, including its brut. It is also the signature color of many of the company’s products, including those that appear at Veuve Clicquot-sponsored events around the world. The company registered this color, known as Pantone 137C, as a trademark with the European Community. Id. The maison is the second-largest Champagne house in the world and produces up to 18 million bottles of Champagne each year. See Golia Che Teme Davide: Il Colosso Dello Champagne Veuve Clicquot fa Causa al Produtorre Irpino Ciro Picariello. Meanwhile, Ciro Picariello produces about 50,000 bottles of wine each year in the Avellino region of Campania. See Veuve Clicquot Sues Italian Producer Over Labelsupra

Veuve Clicquot Champagne Brut Label 300x205 Champagne House Veuve Clicquot Sues Italian Sparkling Wine Producer Over Label

Irrespective of how different the colors of these two labels are, the LVMH-owned Veuve Clicquot “took exception to the label and has instructed its lawyers to take action against Ciro Picariello claiming the Brut Contadino label is too similar to its own Yellow Label Champagne.” Id. The Champagne house is concerned that the orange label of Ciro Picariello’s sparkling wine could cause consumer confusion with its Reims-based Champagne product, thus causing economic damage to Veuve Clicquot.

From a U.S. legal perspective, there are many factors that could count against finding in favor of a likelihood of confusion or trademark infringement, ranging from the different color scheme, different brand names, differing fonts and logos, to the distinct wine regions and perhaps even different method of production. However, Veuve Clicquot is quite powerful in the sparkling wine and Champagne world, and it likely has great resources to fight a continuous battle. Further, Veuve Clicquot’s mark strength or fame in light of the similarity of the goods could be a significant weight in favor of the maison. But again, this is from a U.S. perspective—the fate of this suit almost certainly lies within the European Community.

Interestingly, “[s]upporters of Ciro Picariello have taken to social media to protest at the legal action being taken against the Italian winery, creating the Twitter hashtag – #boicottalavedova (‘boycott the Widow’).” Id. Additionally, many public comments on blog posts, including those on the Wine-Searcher.com post and GrubStreet.com, indicate communal distaste for Veuve Clicquot’s suit. 

Images courtesy of TTB Public Label Database and Veuve Clicquot Sues Small Winemaker Over Label That Looks Nothing Like Its Own.

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I just finished reading an eBook, Into Wine, written by French sommelier Olivier Magny. As I am sure many can agree, I think it important to continually read about industry developments and about wine generally. While I enjoyed Mr. Magny’s publication, what I found most interesting was his discussion about organic and biodynamic wines, particularly with respect to the use—or, more appropriately, the disuse—of pesticides. (A short overview on biodynamic and organic wines is available here.) The popularity and quality of both organic and biodynamic have grown substantially over the course of several years, and Mr. Magny exemplifies the development of such in his book. As a wine lawyer, I am not as involved in the actual production of wine itself as much as I would like to be, and it is always refreshing to receive the perspective of someone who is.

I thought of Mr. Magny’s book when I recently read a New York Times opinion discussing the Burgundy region’s current position on pesticides in wine. See Pesticides in French Wine. The Ministry of Agriculture is known for its support of the rapidly expanding organic wine industry in France. See, e.g., French Minister for Agriculture Stéphane Le Foll Announces the Setup of a Roadmap for the Development of Agro-Ecology. Additionally, the author notes that there is growing public concern about the amount of pesticides present in French wine (“France is still the third-highest user of pesticides in the world after the United States and Japan, and the highest user in Europe, applying 110,000 metric tons of pesticides per year,” the residue of which certain tests have confirmed present even on organic wines). Id. 

However, despite this fact and the growth and support of organic wines in France, an organic wine producer in Burgundy was recently “charged with breaking the law for refusing to use Pyrevert, a pyrethrin pesticide.” Id. The applicable law is the Cote d’Or-wide directive. See Biodynamic Winemaker Prosecuted for Not Treating Vines with Insecticide. French vines are susceptible to flavescence dorée, which is a bacterial disease that is contagious to other vines and transmitted by a leafhopper. See INRA: Grapevine Flavescense Dorée. The wine producer, Emmanuel Giboulot, argues that, despite refusing to use pesticides, there is no indication that his vines are infected. Additionally, the producer states that Pyrevert is nonspecific to leafhoppers and kills what is deemed by growers to be beneficial bacteria as well. See French Minister for Agriculture Stéphane Le Foll Announces the Setup of a Roadmap for the Development of Agro-Ecology. Despite the above, the wine producer faces six months in prison and a fine of 30,000 Euros (or roughly $41,000). Id.

The New York Times specifically reports:

France has pledged, under the 2007 Grenelle law on the environment, to reduce its pesticide consumption by 50 percent by 2018. To help meet this goal, Stéphane Le Foll, the minister of agriculture, announced on Nov. 13 a new sustainable agriculture bill that is scheduled to be submitted to the French Assembly in January for debate. Considering organic producers who refuse pre-emptive use of pesticides as criminals will not help France’s transition to sustainable agricultural practices. The law requiring such use in Burgundy is not only bad policy, it is terrible publicity for French wine. The law should be changed, and the French Assembly should pass the new bill on sustainable agriculture this month. Id.

What will be interesting to see is how France follows through on its pledge, as well as how organic wine producers will be treated in the future. It is conflicting that France would pledge to reduce its pesticide consumption by 2018 and then prosecute an organic producer for refusing to use pesticides on his grapes. Perhaps what the Ministry of Agriculture is attempting to highlight is that it seeks to reduce the usage of pesticides, but not completely eliminate the use—although that theory is adverse to the concept of organic and biodynamic wines in their entirety.

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A few months ago, On Reserve reported about Napa Valley’s Duckhorn Wine Co. and its suit against Long Island-based Duck Walk Vineyards. See Duckhorn Wine Co. Files a Complaint Against Duck Walk Vineyards Alleging Consumer Confusion on Wine Labels. We were a bit skeptical as to the argument for consumer confusion for these two wines, as both Duckhorn and Duck Walk wines are sold at very different price points. Further, the labels of Duckhorn and Duck Walk (when ducks are even featured on the labels of the latter) could not be more different. Finally, if one searches TTB’s public COLA database, the term “duck” appears in the brand or fanciful name in well over 500 label approvals since mid-2007, including those of Duck Pond and Diving Duck. (Note: Such results in the COLA database are not indicative of the presence of trademarks, but simply demonstrate the commonality of the use of “duck” on alcohol beverage labels.) All those things aside, Duckhorn and Duck Walk did have some prior history, including a 2003 trademark suit settlement in federal court, which could certainly factor in to the weight of the Napa-based company’s allegations. See Duckhorn Asks N.Y. Winery to Modify Label and SalesDuck Commander Triple Threat Red Wine Label Approval 266x300 Napa Valley Duckhorn Wine Co. Sues Duck Commander Wine, Alleging Trademark Infringement

However, in recent news, the Napa Valley wine company is pursuing a new lawsuit pertaining to the term “duck” on wine labels. This time, the suit is against Trinchero Family Estates (“TFE”) and its Duck Commander brand of wines. See Duckhorn, Trinchero Tussle Over Duck Commander Wines. In its complaint, Duckhorn alleges that TFE’s Duck Commander name and motif “infringe” upon Duckhorn’s trademark. Id. Duckhorn indicated that the intention of the lawsuit is to “prevent further confusion, dilution and reputational and other harm” to Duckhorn. Id. quoting the complaint filed by Duckhorn. The Napa-based wine company is asking TFE to cease use of the Duck Commander name and motif and pay Duckhorn compensatory damages.

Duck Commander Miss Priss Moscato Wine Label Approval 266x300 Napa Valley Duckhorn Wine Co. Sues Duck Commander Wine, Alleging Trademark InfringementThe Duck Commander brand is developed from a partnership between TFE and the Robertson family of the television show Duck Dynasty. The wines are at a price point of $9.99 and sold at Wal-Mart with names including Triple Threat Red Blend, Wood Duck Chardonnay, and Miss Priss Pink Moscato. Id. Apparently, Duckhorn is concerned that, since many retailers place wines alphabetically, Duckhorn wines could be placed next to Duck Commander wines, and argues that such could cause consumer confusion and/or dilution of its mark. “Duck Commander wines are also produced in our hometown of St. Helena (as indicated on their bottle) causing further potential confusion.” Id. quoting a Duckhorn statement. While we emphasize with some of Duckhorn’s concerns, we also find it unlikely that the two wines—given their clearly different price points and (arguably) diverse target markets—would even be sold at the same retailer (although not impossible).

Popular wine blogs have already created quite a stir with yet another lawsuit on behalf of Duckhorn. According to Duckhorn, however, the wine company tried to reach several “amicable” resolutions such that Duckhorn and Duck Commander could “coexist.” See Napa Winery Sues Duck Dynasty Wine Brand Over Trademark Infringement. Stay tuned as On Reserve will post more updates as such become available.

Full copy of Duckhorn’s complaint against Duck Commander here

Images Property of TTB Public COLA Database, as per this and this.

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On December 17, 2013, TTB issued a public guidance on Wine Export Certificates for U.S. wines that are exported to the People’s Republic of China. See General Instructions for “Wine Export Certificate” for U.S. Wine Products Exported from the United States to the People’s Republic of China. Previously, the People’s Republic of China required U.S. exporters of wine to complete several certificates as a condition of entry. Starting March 1, 2014, China will accept a one-page Wine Export Certificate (also referred to as the Consolidated Certificate) from U.S. exporters who send wine to China. According to TTB, the Consolidated Certificate is “a multi-purpose document” as the Certificate will function as the certificate of origin, certificate of health/sanitation, and certificate of authenticity/free sale. See Consolidated Wine Export Certificate, image below.

Consolidated Wine Export Certificate US China 300x248 TTB Issues Public Guidance on Wine Export Certificates for U.S. Wines Exported to ChinaTTB notes that, once the certificate is completed, the Agency will verify that the producer holds a valid TTB permit and then sign, date, and place the TTB seal on the Certificate before returning the Certificate to the submitter. The Agency indicates that “[t]o receive an approval, the submitter must (a) possess a TTB basic permit that is in good standing, (b) fill out all required information truthfully, accurately and completely, and (c) have the Consolidated Certificate signed by a person with signing authority according to the submitter’s TTB permit.” See General Instructions for “Wine Export Certificate” for U.S. Wine Products Exported from the United States to the People’s Republic of China. When a wine shipment arrives in the ports at the People’s Republic of China, a copy of the Certificate will be submitted to both the General Administration of Quality Supervision Inspection and Quarantine (AQSIQ) and the General Administration of Customs. 

This new and consolidated process comes at a time when exports of wine are on a rise, especially with respect to China. Recently, Time noted that China’s “thirst” for wine is greater than the demand for wine of many other countries, including the U.S., and the People’s Republic is expected to become the “world’s largest consumer” of wine by 2016. See How China Became the Wine World’s Most Unlikely Superpower. It’s no secret that the Chinese market has steadily developed a palate for wine, nor is it a secret that many wine producers are targeting China’s market. See California Wineries Eyeing China’s Wine Market. From a regulatory perspective, it is within China’s best interest to make it easier for wine to be exported to the People’s Republic, especially considering the growing demand of wine by its consumers. With an easier export process, such as the reduced paperwork requirement for exportation, China will likely see a greater number of U.S. wines within its borders.

Image property of TTB.gov.

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Happy National Repeal Day! In honor of the repeal of the National Prohibition Act on December 5, 1933, we thought it appropriate to re-post an article originally written two years ago on the Volstead Act. See Revisiting the Volstead Act: The Power Behind the Eighteenth Amendment for Prohibitionsee also Revisiting the Roads to Prohibition: The Maine Laws.

The Volstead Act: the legislative measure whose primary intent was to frame the execution of the Eighteenth Amendment, a curt and inexorable constitutional revision whose overtones still reside in contemporary American society even upon its repeal almost one hundred years ago.  The legal supremacy of the Eighteenth Amendment, however, often overshadows the real authority hidden within the Volstead Act of 1919. In actuality, the Eighteenth Amendment displays limited vigor and certainly lacks appropriate legislative clauses and actions that permit its objective to flourish. Its text, which remains in our present-day Constitution, reads as follows:

The manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited.

The vagueness of the Eighteenth Amendment leaves the reader with a multiplicity of questions, some of which include:  What are “intoxicating liquors”? What is meant by “for beverage purposes”? And what, exactly, entails the “manufacture” or the “sale” or the “transportation” of such substances for such purposes? The ambiguity of the Eighteenth Amendment would have, on its face, left the amendment void for vagueness. However, the United States Congress passed the National Prohibition Act, or the Volstead Act, on October 28, 1919 despite the veto of the then-President Wilson. The answers to the aforesaid questions lie within the text of the extended Volstead Act.

The Eighteenth Amendment became effective on January 16, 1920, a year after the Nebraska State Legislature ratified the Amendment and triggered the required two-thirds majority support for the Amendment to become law in the States. The Volstead Act was passed on October 28, 1919, shortly after Nebraska’s ratification, its name attributive to Andrew Volstead, a Republican congressman from Minnesota who reportedly drafted the bill. (It is also claimed that Wayne B. Wheeler, legal counsel for the Anti-Saloon League of America, was the creator and force behind the bill.)newspaper1 Revisiting the Volstead Act: The Power Behind the Eighteenth Amendment for Prohibition

The Act itself is divided into two Titles: (1) To Provide for the Enforcement of War Prohibition; and (2) Prohibition of Intoxicating Beverages. For the purposes of alcohol prohibition (or Prohibition), the greater focus remains on the second title of the act, which is in turn divided into subsequent sections. However, the first title does define exactly what is meant by “intoxicating liquors.”

What are the key provisions of the Act?

The Volstead Act refines the intentions of the Eighteenth Amendment, although it is not without its own imperfections. Title II, Section 3 of the Act maintains that, “[n]o person shall . . . manufacture, sell, barter, transport import, export, deliver, furnish or possess any intoxicating liquor except as authorized in this Act, and all the provisions of this Act shall be liberally construed to the end that the use of intoxicating liquor as a beverage may be prevented.”  The Act did not prohibit the consumption of intoxicating beverages, at least not directly and not entirely. In fact, the Volstead Act did explicitly exempt wine for sacramental purposes and liquor or alcohol proscribed by a physician for medicine (see infra.).

volstead act 5a88f473ef 193x300 Revisiting the Volstead Act: The Power Behind the Eighteenth Amendment for ProhibitionMost importantly, however, the Volstead Act clarifies the Eighteenth Amendment’s indistinct phrase of “intoxicating liquors.” Title I of the Volstead Act states, “[t]he words ‘beer, wine, or other intoxicating malt or vinous liquors’ . . . shall be hereafter construed to mean any such beverages which contain one-half of 1 per centum or more of alcohol by volume . . .” Before the Eighteenth Amendment was enacted, many producers of  fermented beverages like wine and beer, thought their products would be precluded from the Amendment and that the Amendment would only restrict alcoholic beverages with higher alcohol per volume, such as distilled spirits (hard liquor). During the push for the ratification of the Eighteenth Amendment, congressmen and the media particularly focused on the more “evil” and most alcoholic distilled spirits, thus allowing producers of wine and beer to believe they might not only evade the financial misfortunes of the Eighteenth Amendment but also flourish from the elimination of the distilled spirits market share. With the addition of the Volstead Act, however, these beliefs became misguided; Title I includes wine and beer under its definition of  “intoxicating liquors,” as both wine and beer contain more than .5% alcohol by volume.

What are the exceptions of the Act?

Despite the restrictive measures of the Volstead Act, it allows for some deviations from its control. Section 3 of Title II reads, “[l]iquor for non beverage purposes and wine or sacramental purposes may be manufactured, purchased, sold, bartered transported, imported, exported, delivered, furnished and possessed, but only as herein provided . . .” Additionally, section 6 of Title II reads, “a person may, without a permit, purchase and use liquor for medicinal purposes when prescribed by a physician . . . and except that any person who in the opinion of the commissioner is conducting a bona fide hospital or sanitarium engaged in the treatment of persons suffering from alcoholism, may . . . purchase and use . . . liquor . . .” Additional exceptions include the use of alcohol for “non-beverage” purposes (i.e. industrial use), such as for paints, chemicals, in manufacturing other products, etc.

NOTE: The Eighteenth Amendment was repealed by the ratification of the Twenty-First Amendment in 1933. The National Prohibition Act, or the Volstead Act, is—to this day—unconstitutional.

(Image Credit: The 18th Amendment and Greenwich Village History, respectively.)

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The Drinks Business reported last week that renowned cognac producer Hennessy won a trademark case in China against a Beijing company for trademark infringement and unfair competition. As demonstrated previously, China can be a difficult market for true brand owners to obtain trademark. See, e.g., Kasite Trademark Sours for French Vintner Castesee also What’s in a Name: French Winery Forced to Change Trademark to Avoid Squatters. However, several recent cases indicate that China’s ways may be changing. See, e.g.Chateau Ausone Wins Trademark Case in China.

The recent Hennessy case indicates the latter: possible improvement in the legal measure to protect true brand owners in China. According to The Drinks Business, Societe Jas Hennessy registered its trademark in China in 1980 and opened its office in Beijing and started business in China in 1995 (i.e., under its registered trademark Hennessy). Hennessy is well known throughout the Chinese market and its products are enjoyed by many Chinese consumers.

In November of 2012, the company discovered that Beijing company, Beijing Yan Wei Hong Trading Cooperation, used Hennessy as a trademark on its products and sold such illegally. “It was reported that the Beijing company bought the ‘Hennessy XO’ and ‘Hennessy VSOP’ below the market price and then sold them at a higher price. Both products used four registered trademark owned by Hennessy.” Hennessy Wins Chinese Trademark Case. Both Chaoyang District Industrial and Commercial Bureau examined the case and determined that Beijing Yan Wei Hong Trading Cooperation had, in fact, infringed upon Hennessy’s trademark. Id. The cooperation was ordered to cease the infringement, pay a high sum to Hennessy, and apologize to Hennessy in the national newspaper. Id.

Hennessy is one of several victors over the last few months with respect to trademark suits in China. In May, Bordeaux wine company Château Ausone opposed the registration of a Chinese ideogram that translated to “Ausone,” and won despite that the château did not hold the registration rights to the mark. Subsequently, négociant Barrière Frères opposed the third-party registration of a ship logo thought to be too similar to the négociant’s. Barrière Frères won the case, despite that the third-party registration had previously been approved.

The Hennessy case demonstrates that the legal protection of registered trademarks in China many be strengthening, with restitution options for true brand owners becoming more forceful. However, in the case of Hennessy, it is important to recognize that Hennessy did have a registered trademark in China many years prior, which may have strengthened its infringement case. While this victory differs from those of both Château Ausone and négociant Barrière Frères, all three outcomes can still be seen in a positive light for true brand owners seeking to enter China’s market and avoid trademark scandals.

For more information on China, trademark, and the wine industry, please see my recent publication, No Wine-ing: The Story of Wine Companies and Trademark in China, courtesy of The Cornell Journal of International Law Online.

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 No Likelihood of Confusion for Domaine Pinnacle Apple Juice and Pinnacles Ranches WineDomaine Pinnacle, Inc., a Canadian-based apple orchard and cidery, filed an intent-to-use application to register a mark in International Class 33 for apple juices and non-alcohol-based beverages on December 30, 2005 (mark pictured right). The description of the mark is as follows: “The mark consists of A drawing of an apple in reverse image with a snowflake on top of the apple above the words Domaine Pinnacle. The word Domaine is on top of Pinnacle.” See Domaine Pinnacle, Serial No. 78783236. Franciscan Vineyards opposed the registration of Pinnacle’s mark, arguing prior use and likelihood of confusion as under Section 2(d) of the Trademark Act, 15 U.S.C. § 1052(d), with respect to Franciscan’s prior registration of the term PINNACLES and PINNACLES RANCHES and in standard character format for “wine” (International Class 33) and “variations thereof.” See Franciscan Vineyards, Inc. v. Domaines Pinnacle, Inc., Opposition No. 91178682 (October 16, 2013) [not precedential]

Likelihood of Confusion

The Marks

The Board noted that opposer (as plaintiff in the proceeding) bears the burden of establishing there is a “likelihood of confusion by a preponderance of the evidence.” Id. First, the Board reviewed the similarity or dissimilarity of the marks in their entireties with respect to sound, appearance, connotation, and commercial impressionSee id. While the Board acknowledged the difference in design between the two marks, the Board also noted that such “minor distinctions” would likely be overlooked by an average consumer and instead be “confuse[d] . . . as originating from the same source, given that they either contain or consist solely of the literal element ‘pinnacle’ or ‘pinnacles.’” Id. In its analysis, the Board noted that the word “Pinnacle” in the applicant’s mark is more likely to be remembered by a consumer for the mere fact that “Pinnacle” appears in larger font size when compared to that of “Domaine.” In addition, the Board notes that words like “Domaine,” or the French word for “estate,” are generally considered to be “disclaimed” matter  and are less significant in creating a commercial impression. Thus, in totality, “Pinnacle” was the dominant element in the mark and, similarly, the same holds true for the “PINNACLES RANCHES” mark. Id. Furthermore, the Board found that with respect to connotation and commercial impression, the Board found the terms “PINNACLE” and “PINNACLES” to be highly similar. Thus, the Board found that the marks were similar with respect to sound, appearance, connotation, and commercial impression—one of the du Pont factors weighing in favor of finding a likelihood of confusion.

Fame of the Prior Mark

In likelihood of confusion cases, if fame of the prior mark is found to exist, it plays a dominant role in likelihood of confusion. In this case, opposer argued that the mark “PINNACLES” is famous due to its use for over forty years and pointed to its worldwide sales at wholesale level as well as honors and tributes from leading wine-related publications. The Board found that the opposer’s evidence fell short of establishing fame, as the sales did not specifically break down total U.S. sales and “the few instances of unsolicited media recognition, without more, are insufficient to support opposer’s assertion that its wine sold under the PINNACLES and/or PINNACLES RANCHES marks enjoy wide brand name recognition among consumers.” Id. Therefore, the Board concluded this du Pont factor was neutral.

Third Party Uses

Next, the Board considered the number and nature of similar marks used on similar goods. For the sixth du Pont factor, opposed argued that because the records were absent of third party examples with respect to wine and/or apple-based beverages, its mark was thus strong. The Board noted, however, that evidence of third party uses is usually introduced by the defendant, and not the plaintiff. In this case, since there was no evidence of such use, the Board contended that it could not conclude that the opposer’s marks are therefore strong and therefore worthy of protection. “Furthermore, to the extent, if any, opposer is arguing that its mark is conceptually strong, we disagree, finding that the mark is suggestive for the reasons articulated above in our discussion of the first du Pont factor.” Id. Thus, the Board found this factor to be neutral.

The Trade Channels/Purchasers

The Board identified that the trade channels overlapped in part—the applicant’s channels are wholesalers and retailers and the opposer’s channels are wholesalers and restaurants, as well as retails stores—and thus weighed in favor of likelihood of confusion.

The Goods

The Board’s next, and albeit most imperative, step was to identify the goods in applicant’s application vis-à-vis the goods in opposer’s registrations. In arguing that the goods are related, opposer relied heavily on In re Jacob Demmer KG, 219 USPQ 1199 (TTAB 1983), in which the Board refused to register similar marks for goods classified as wine and apple cider. In its decision in In re Jacob Demmer KG, the Board relied heavily on the dictionary definition of cider, which can be both an alcohol-based and non-alcohol-based beverage, but specifically can be a fermented apple juice with an alcohol by volume percentage “not significantly less” than that of wine. See In re Jacob Demmer KG at 1201. In addition, the Board in In re Jacob Demmer KG relied on the dictionary definition of wine, finding that “the fruit from which cider is made can also be used to make wines and the cider or apple juice itself . . . .” Id. In addition, the opposer introduced evidence from websites that both applicant and opposer are competitors in the Canadian market with respect to wine and ice wine. The Board here, however, noted that each case must stand on its own facts and the Board could thus not rely on the determinations made in In re Jacob Demmer KG to make factual findings in this case, especially considering In re Jacob Demmer KG was an ex parte appeal (and, for inter partes proceeding such as this case, the opposed has the burden of introducing evidence that the goods are related). Additionally, with respect to the Board noted that the evidence was of little probative value because the information pertained to  Canadian, and not  U.S., entities.

In its analysis, the Board pointed out that it had no evidence that wine and apple juice or “apple-based non-alcoholic beverages” are complementary products, “for example, consumed together at the same meal . . . or that these products are sold in proximity to each other in retail outlets and grocery stores.” Id. Thus, the Board did not find this du Pont factor to be in favor of likelihood of confusion.

The Market Interface Between the Parties

Opposer contended that applicant’s user or intent-to-use the applied-for-mark without the opposer’s consent or permission favors a likelihood of confusion. However, the Board noted that in this case there was neither consent from the opposer nor an agreement between the two parties and thus the Board could not draw a conclusion that the absence of such an agreement draws favor to likelihood of confusion, therefore deeming this du Pont factor neutral.

Conclusion

The Board found that the lack of evidence for showing relatedness of goods outweighed the first, third, and fourth du Pont factors and thus the opposed failed to prove its likelihood of confusion case by a preponderance of the evidence.

Is This Right?

In his blog post, “TTAB Dismisses 2(d) Opposition Due to Lack of Proof That Wine and Apple Beverages Are Related,” trademark attorney John L. Welch contemplates whether the outcome of this decision is proper. Specifically, he ponders whether opposer’s failure to produce evidence of third-party use of the mark and the Board’s refusal to find that the lack of such evidence reinforced the commercial strength of opposer’s mark was wrong. This is a great point and one that should be taken seriously. Perhaps, due to patrolling the marketplace for use of its mark and successful cease and desist letters, third party use was simply nonexistent, as Franciscan Vineyards contends. Why should companies be penalized for such due diligence? Or, perhaps what the Administrative Trademark Judge was attempting to say is the Board needed evidence, such as prior pursuits to remove third party uses (e.g., cease and desist letters). This is unclear—but I do agree with Mr. Welch in that a company should not be hindered by its inability to produce evidence of third party use, especially if none exists. 

Furthermore, it is difficult not to wonder how different the outcome may have been if the products were apple juice and dealcoholized wine, or even alcohol-based cider and wine. But that being said, this opinion reverts my thinking back to the TTAB’s recent decision from Joel Gott Wines v. Rehoboth Von Gott where the Board found a likelihood of confusion existed between a mark for wine and a mark for water. See From Water to Wine (Trademark): Joel Gott Wines v. Rehoboth Von Gott. Albeit, disregarding that each case must “stand on its own facts” and discounting the obviously different mark names and types in Gott and Pinnacle, it is still curious that a likelihood of confusion was found for water and wine, but estancia estates pinnacles ranches pinot noir monterey county usa 10208913 270x300 No Likelihood of Confusion for Domaine Pinnacle Apple Juice and Pinnacles Ranches Winenot non-alcohol-based apple juice and wine. 

That being said, if one reviews the label of a bottle of PINNACLES RANCHES, it is worth noting that the actual brand name of the wine appears to be ESTANCIA, as classified on its TTB Certificate of Label Approval here. While this fact does not discount the above discussion nor the availability of a trademark for PINNACLES RANCHES, it is worth noting that on both the physical application and the label itself the term PINNACLES seems to be secondary to ESTANCIA.

Domaine Pinnacle photo property of the United States Patent and Trademark Office, Serial No. 78783236; Estancia Pinnacles Ranches photo property of Wine-searcher.com.

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In September, the Court of Appeals for the Eighth Circuit decided a case with respect to wholesale licensing in the state of Missouri. Southern Wine and Spirits of America, Inc. (“SWSA”), the plaintiff-appellant, appealed from a lower court decision. The plaintiff-appellant, a foreign alcohol wholesaler, applied for a license to sell alcohol at wholesale in the state of Missouri. The Division of Alcohol and Tobacco Control of the Missouri Department of Public Safety denied SWSA’s application because the corporation did not satisfy the residency requirement of the state’s statute. SWSA originally filed an action against the Division of Alcohol and Tobacco Control of Missouri Department of Public Safety arguing that the state’s residency requirement for a license to sell liquor at wholesale was unconstitutional. See Southern Wine & Spirits, et al. v. Division of Alcohol and Tobacco, et al. 2013 WL 5340391 (8th Cir. Sept. 25, 2013). The district court upheld the constitutionality of the state’s statute and the Court of Appeals for the Eighth Circuit affirmed.

Under the relevant Missouri law, Chapter 311 of Missouri Revised Statutes (The Liquor Control Law), the state defines a resident corporation as:

a corporation incorporated under the laws of this state, all the officers and directors of which, and all the stockholders . . . shall be qualified legal voters and taxpaying citizens of the county and municipality in which they reside and who shall have been bona fide residents of the state for a period of three years continuously immediately prior to the date of filing of application for a license, provided that a stockholder need not be a voter or a taxpayer, and all the resident stockholders of which shall own, legally and beneficially, at least sixty percent of all the financial interest in the business to be licensed under this law

Mo. Rev. Stat. § 311.060.3.

SWSA is a Florida corporation with operations in thirty-two states and four Florida residents collectively own over 97% of SWSA’s voting shares and more than 51% of all shares. See Southern Wine & Spirits, et al. v. Division of Alcohol and Tobaccosupra. Southern Missouri is a wholly-own subsidiary of SWSA and is incorporated in Missouri. In its application for a wholesale license in Missouri, Southern Missouri declared that the company’s sole shareholder is SWSA and that the sub’s officers and directors are Florida residents. As a result, the Missouri Division of Alcohol and Tobacco Control denied Southern Missouri’s application because the subsidiary did not meet Missouri’s definition of a resident corporation. Mo. Rev. Stat. § 311.060.3 

While the Eighth Circuit recognized that this case involved the dormant or “negative” commerce clause, the Court of Appeals also highlighted the much-disputed second section of the 21st Amendment: “[t]he transportation or importation into any State, Territory or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” U.S. Const. amend. XXI § 2. Effectively, the Court ascertained that this provision of the 21st Amendment “grants States certain prerogatives particular to the regulation of alcohol.” Southern Wine & Spirits, et al. v. Division of Alcohol and Tobaccosupra. The Court also recognized that, in previous years, the Supreme Court has addressed and “sent conflicting signals” pertaining to the relationship and functionality of these two very important amendments and specifically focused on the Supreme Court’s most recent ruling, Granholm v. Heald. Id. See additional background at Revisited: Granholm v. Heald and the Wine Industry and The Alcoholic Beverage Legal Environment Post-Granholm.

The Eighth Circuit reasoned that the constitutionality of Missouri’s wholesaler residency requirement rested on the relationship between the Commerce Clause and the 21st Amendment. In its analysis, the Court recognized the Supreme Court’s prior holding that the three-tier system is “unquestionably legitimate,” and that state practices that determine the structure of its liquor distribution system “while giving equal treatment to in-state and out-of-state liquor products and producers are ‘protected under the Twenty-first Amendment.’” Id. citing Granholm v. Heald, 544 U.S. 460, 489 (2005). The Eighth Circuit relied heavily on dicta from the 2005 Supreme Court decision Granholm, and reasoned that since the Missouri wholesaler requirement did not discriminate against out-of-state alcohol products or producers, the law was per se valid and thus barred from attacks questioning its constitutionality with respect to the Commerce Clause. 

There is a range of differing viewpoints throughout the courts pertaining to whether the holding of the Granholm Court extends to state regulation of out-of-state retailers and wholesalers in addition to producers. One might pose the argument that reading Granholm to cover only alcohol beverage producers—and thus leaving out-of-state wholesalers and retailers from constitutional protection—without proving an alternative means is ineffective, is a clear violation of the dormant Commerce Clause; after all, out-of-state wholesalers and retailers affect interstate commerce. However many courts, like the Eighth Circuit Court of Appeals, rely heavily on the dicta from Granholm and argue that the “more natural reading” of the renowned 2005 case is to review a questioned law in light of whether the law treats in-state and out-of-state alcohol in the same manner and whether the challenged law discriminates against out-of-state products or producers. Id. If it is decided that the law treats in-state and out-of-state alcohol in the same manner and does not discriminate against either out-of-state products or producers, then it is the view of the Eighth Circuit that the law need not be reviewed further with respect to the Commerce Clause doctrine.

In conclusion, the Eighth Circuit recognized that Missouri established a sufficient basis for the residency requirement for wholesaler licenses and that such was properly tied to the goal of the 21st Amendment (allowing states to regulate and maintain a system for controlling alcohol beverage transportation, importation, and use within the State).

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