Is a COLA necessary to Establish Lawful Use of a Wine Trademark?

In the United States, trademark rights may be established through the lawful use of a mark in association with goods in commerce.  When one is selling a product that is not subject to government regulation, such as t-shirts, it is fairly simple to make lawful use of a mark in commerce; you label the t-shirt with your trademark and you then offer it for sale via the Internet, a retail store, or some other sales outlet.  However, when it comes to products that are regulated by the government, such as wine, there is the additional question of whether a use is lawful if the seller of the wine has not complied with all of the government regulations necessary to sell the product.  For instance, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) requires that before a wine may be released from bond or Customs a party must first obtain a Certificate of Label Approval (“COLA”) for the label for such wine.  So, if a party has not obtained a COLA when it first sells its wine, can that party establish lawful use of the mark in commerce as of that date of first sale absent the COLA?
This issue was recently addressed in a proceeding before the U.S. Patent and Trademark Office (“USPTO”) Trademark Trial and Appeal Board (“TTAB”) in the case of Churchill Cellars, Inc. v. Brian Graham, Opp. No. 91193930 (TTAB 2012).  Following is a link to the opinion: http://ttabvue.uspto.gov/ttabvue/ttabvue-91193930-OPP-23.pdf
In the Churchill case the TTAB found that even though the party claiming rights in the trademark at issue had not first obtained a COLA before making use of the mark on wine in commerce, such use was not necessarily unlawful so as to preclude the establishment of trademark rights.  The TTAB noted that it is not in a position to evaluate whether a party is in compliance with the regulatory schemes of other government agencies and absent some finding from a Court or an administrative agency such as TTB, TTAB cannot make a determination of whether the administrative failure to obtain a COLA made the use of the mark on the wine illegal.  The TTAB further noted that there was no evidence that the party would have been denied a COLA had it applied for one, and in fact a COLA was subsequently obtained for the label featuring the mark by the producer of the wine.  Therefore, TTAB concluded that it would not deny the party its claim of trademark rights simply because it failed to follow an administrative procedure.
This is good news in the sense that a party cannot be denied its trademark simply because it did not obtain a COLA. However, it can hardly be recommended that a party attempt to make use of a mark before obtaining a COLA simply to establish trademark rights.  Had the party opposing the trademark in this case raised the issue with TTB of the other party’s failure to obtain a COLA it is possible that there may have been a decision from TTB finding the sale of the wine to be unlawful thereby providing the USPTO TTAB with a basis for finding that the use of the mark was also unlawful.  Furthermore, the sale of wine without a COLA could result in significant penalties from TTB which could have a much more significant impact on a winery’s overall business.  Thus, while this decision may be positive from a trademark rights perspective, it should not act to encourage wineries to sell wine without a COLA simply to establish trademark rights.
From a legal analysis perspective, it should also be noted that this decision is precedent in the USPTO where decisions are made as to registration of trademarks.  However, the USPTO has no jurisdiction to stop a party from using a mark.  Such jurisdiction rests exclusively with the state and federal courts.  Furthermore, the decision of the Ninth Circuit Court of Appeals in the case of CreAgri, Inc. v. Usana Health Services, Inc., 474 F.3d 626 (9th Cir. 2007) took an arguably broader view of the unlawful use issue in the context of labeling requirements for dietary supplements under the Food, Drug and Cosmetic Act such that it could be argued that the Ninth Circuit could reach a decision different than that reached by the TTAB in the Churchill Cellars case. 
Therefore, it seems apparent that it is still in a winery’s best interest to obtain a COLA before selling a wine rather than selling the wine without the COLA simply to establish trademark rights.  The better course of action to quickly establish trademark rights in a wine brand is to file an intent-to-use trademark application with the USPTO which establishes rights as of the day of filing without having to first use the mark in commerce, lawfully or unlawfully.
For any questions or assistance on trademark matters contact Scott Gerien at [email protected] 

Copyright Dickenson Peatman & Fogarty at www.lexvini.com