Stopping Gray Market Wine Imports

On October 1, 2011, Scott Gerien, head of Dickenson, Peatman & Fogarty’s intellectual property practice group made a presentation at the annual meeting of the International Wine Law Association in Logrono, Spain on the issue of stopping gray market wine imports in the U.S. 

The ability to prevent gray market imports, especially as to wine, has always been difficult under U.S. law. However, a recent case out of the Second Circuit of the U.S. federal courts has provided foreign wine producers and their U.S. agents with a new weapon to potentially prevent the import of their wines through unauthorized importers. In Wiley & Sons, Inc. v. Kirtsaeng, 2011 U.S. App. LEXIS 16830 (2d Cir. August 15, 2011), the Second Circuit held that foreign copyright owners may prevent the unauthorized import into the U.S. of copies of their works not intended for sale in the U.S., thus changing the direction of prior decisions which had generally held that once a copyright owner sells a copy of its work, the buyer of such copy is free to dispose of such copy as the buyer sees fit.

So one may ask, what does copyright have to do with wine?  Well, the overwhelming majority of wine is sold with a wine label that is usually a creative work subject to the protection of copyright law.  Therefore, even though most consumers are buying the wine to own the content of the bottle, not the label on the bottle, the copyright law still gives the owner of the copyright in the wine label the ability to control how copies of such label are distributed.  See Quality King Dist. Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135 (1998) (recognizing use of copyright law to prevent gray market import of shampoo based on copyright in packaging).  Thus, the Wiley decision has the effect of allowing foreign wine producers who own copyright in their label designs to prevent the unauthorized import into the U.S. of authentic, gray market wine obtained in foreign markets.

It should be noted that the Wiley decision is based on a very specific interpretation of the copyright law and only applies to foreign copyrights and copies produced outside the U.S. and then imported here.  The Wiley decision also only applies in the Second Circuit (New York, Connecticut and Vermont) and is actually contradictory to an opinion of the Ninth Circuit (California, Arizona, Nevada, Oregon, Washington, Idaho, Montana, Alaska and Hawaii) meaning the issue could actually reach the Supreme Court on appeal.

However, until then, gray market importers selling wine in New York, Connecticut and Vermont (as well as in states in circuits other than the Ninth Circuit which choose to follow the Second Circuit) should beware as foreign producers and their U.S. agents appear to now have a very strong tool to stop such gray market imports.

For a full copy of Gerien’s presentation, click HERE.

For more information or assistance on intellectual property matters contact Scott Gerien at [email protected].