FTC Issues Proposed Non-Compete Ban To Spur Employee Mobility, Aligning with Existing California Law
Thursday, January 5, 2023, the FTC issued its proposal to prohibit non-compete clauses in employment agreements in an effort to boost wages and competition, citing worker mobility as essential to a thriving U.S. economy. California has long prohibited such clauses pursuant to Business and Professions Code Section 16600. The FTC’s proposed rule is shining a light on the issue, which makes it a good opportunity to focus California and non-California employers’ attention on what can be done to protect their businesses from unlawful competition.
The rule flows from President Biden’s 2021 Executive Order Promoting Competition, which directed the FTC to address unfair use of non-compete and similar agreements to stifle employee mobility and depress wages. Like California’s law, the proposed rule would invalidate existing non-compete agreements in place and would provide exception for the sale of certain types of businesses. If promulgated, the new FTC rule would supersede and preempt inconsistent state laws, and employers will be required to issue notice to employees, rescinding existing employment agreements to remove objectionable non-competition clauses.
Similar to California, under the proposed FTC rule, nondisclosure and non-solicitation agreements would also be scrutinized, e.g., as to whether such agreements are invalid in that they so broad as to effectively function as noncompete agreements.
The rule is currently open for public comment until March 6, 2023, and employers will be subject to enforcement 180 days after final publication.
For workers, the rule provides more flexibility to pursue future employment in a worker’s area of expertise, to market one’s talents and seek increased compensation. For employers, this rule is another wake-up call for the need to safeguard and secure trade secret assets of the business to which an individual has access.
Given the reality of increased mobility, employers should be ensuring that:
- Employees with access to sensitive information are covered by up-to-date confidentiality and lawful non-solicitation obligations; and
- Employers must redouble efforts to keep organized, diligent records of the existence, inventory and location of any employer assets or property, including devices and customer lists, so as to expediently secure such assets should an employee or contractor depart on short notice.
We continue to monitor developments and will make ourselves available to concerned clients to discuss what can be done to favorably address business impacts and requirements flowing from the new FTC rule and California’s existing non-compete prohibitions. For more information as to how this will impact IP rights, contact Chris Passarelli. For more information about how this will impact your employment agreements, contact Jennifer Douglas.
The Metaverse and Your Wine Brands
Every winery and wine brand will eventually need a Metaverse strategy.
During the pandemic, some wineries have become adept at conducting on-line tastings and enhancing customer experience by providing virtual vineyard, winery and cellar tours. Wineries were compelled to connect online with customers like never before. This is just the beginning. Wine businesses will need to adapt to an increasing technological sales process not only online but in the Metaverse.
The Metaverse is a virtual and immersive digital world that that reflects our real lives in many respects. The Metaverse is inhabited by digital representations of people, places and things (including brands). The Metaverse experience can provide experiences on par with the real world, while also offering experiences beyond those of the real world, for example, the sensation of human flight.
Of importance to brand owners, the Metaverse hosts a growing virtual marketplace that allows users to buy, sell and share digital assets like NFTs (non-fungible tokens), virtual real estate, experiences, information and virtual goods. It will be inhabited by users living second (or even third) lives – wholly digital lives. Just as the Metaverse parallels our real lives, where branding is used in the real world it will have a digital partner in the Metaverse.
Wineries should be interested in the Metaverse because retail will be one of the largest sectors in it, with social experiences, a close second. In addition, wineries should care about the Metaverse because it will have real world impact on their marketing and branding. Not only will the Metaverse be a new market for products and services, it will also be a new source of data collected from users of the Metaverse that can be leveraged by businesses in the real world. Just as real-world sales drive sales in the Metaverse, the Metaverse can drive sales in the real world.
There will be opportunities in the Metaverse for wine product placements (branded products in games or experiences), virtual events like cellar, winery and vineyard tours, virtual tastings, computer generated retail stores featuring wine, and virtual online education featuring branded content or sponsorship. The Metaverse can also offer wineries opportunities for sales of NFTs, for example, NFT Wine Club has more than three thousand real-life vines in Napa, California which are tied to a digital NFT. In addition, Wine Bottle Club will replicate its physical cellar in a virtual shop in the OVER (OVR) Metaverse.
The Metaverse is likely to become an important part of the wine industry marketing and sales. In addition to real world brands make sure your trademarks are registered for virtual goods, goods for use in online environments, virtual online environments and extended reality virtual environments, retail store services featuring virtual goods, etc. A trademark for a real-world brand may not protect you in the Metaverse. Ensure that your trademarks are registered for digital and virtual reality products. This is the key to protecting a brand in the Metaverse.
For assistance with branding protection in the Metaverse or the real world, contact Katja Loeffelholz.
USPTO Celebrating Women in Wine and IP
The U.S. Patent and Trademark Office is celebrating Women’s History Month by highlighting the numerous and remarkable accomplishments of women in all fields. To celebrate the many successes of women in the world of wine, the USPTO is offering a free event on March 24, 2021, that will showcase the stories of women working at the integral intersection of wine and intellectual property. Speakers will include Katja Loeffelholz of DP&F and Elizabeth Schneider, host of the podcast Wine for Normal People. Join to learn more about these women and their efforts, often behind the scenes, as they strive to keep the wine world swirling. Free registration at https://www.eventbrite.com/e/wine-ip-women-innovators-in-the-wine-industry-registration-143884760191?aff=ebdssbonlinesearch
Trademarks at the Supreme Court: The Court Extends Trademark Registration to “Generic.com” Brands
On June 30, 2020, the Supreme Court issued its second and final trademark opinion of the 2019 – 2020 term. The first opinion resolved a circuit split on the availability of profit remedies for trademark owners; the second determined the eligibility for trademark registration of compound generic marks.
In Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), decided in April, the Court addressed whether the Lanham Act required a plaintiff to show that the defendant willfully infringed in order to recover the defendant’s profits from a violation under 15 U.S.C. 1125(a). The parties in that case had entered into an agreement in which the plaintiff provided fasteners for the defendant’s leather goods. The plaintiff eventually discovered that the defendant’s manufacturers had been producing counterfeit fasteners under the plaintiff’s mark. It alleged and proved a violation under § 1125(a) for false or misleading use of a trademark. The trial jury found that, although the defendant had acted with “callous disregard” of the plaintiff’s trademark rights, it had not willfully infringed. Id. at 1494.
The Court noted that the plain language of § 1117 did not require a “willful” violation of 1125(a) in order for the plaintiff to recover defendant’s profits and further noted that the Lanham Act was generally explicit when it wished to impose such a state-of-mind requirement on a violation or remedy. Defendants relied, instead, on the statute’s qualification that a plaintiff’s ability to recover a defendant’s profits under § 1117(a) was “subject to the principles of equity”; it asserted that courts of equity had long required a willful violation for plaintiffs to recover profits in trademark cases and that the Lanham Act had preserved this tradition. The Court did not find the case law on this point convincing, and concluded that the statute’s “principles of equity” language “more naturally suggests fundamental rules that apply more systematically across claims and practice areas.” Id., at 1496. Although the defendant’s mental state is relevant in a court’s determination of the appropriate remedy for a trademark violation, there is no requirement that a plaintiff alleging a violation of § 1125(a) show that the defendant acted willfully in order for the plaintiff to recover wrongful profits as remedy.
The Court’s opinion in U.S. Patent and Trademark Office, et al. v. Booking.com B.V., No. 19-46, 2020 WL 3518365 (U.S. June 30, 2020), considered whether the addition of a generic top-level domain to an already generic term, thereby creating a “generic.com” mark, necessarily results in a generic compound mark that is incapable of registration. The Patent and Trademark Office (“PTO”) had refused registration to the mark BOOKING.COM, basing its decision on the Supreme Court’s prior ruling in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888), that the simple addition of the corporate designation “Company” to an otherwise generic mark did not create a distinctive mark capable of registration. Such an addition “only indicates that parties have formed an association or partnership to deal in such goods.” Id. at 602. A top-level domain, the PTO reasoned, was equivalent to a corporate designation because it simply indicates that the parties operate a website for such goods.
The Court rejected the PTO’s absolute rule and concluded that whether a mark is generic ultimately rests on whether consumers perceive it as so. The Court distinguished the top-level domains in this case from the corporate designations in Goodyear, reasoning that a “generic.com” mark implied an exclusivity that was absent in a “Generic Company” mark because only one company can own a domain name while many companies can add the corporate designation “company” to a generic term. The exclusivity of “generic.com” carried source-identifying significance. The Court also stated that the PTO misunderstood Goodyear as creating an absolute rule that a compound of generic terms is necessarily generic; properly understood, Goodyear stands for the proposition that the combination of generic terms is itself generic “if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.” Booking.com, 2020 WL 3518365 at *6 (emphasis in original). Survey evidence in this case indicated that consumers understood “booking.com” to refer to a single source of goods or services. Accordingly, the Court concluded that “booking.com” was not generic and that consumers did not necessarily perceive “generic.com” marks as generic such that an absolute rule was appropriate.
In his dissent, Justice Breyer disagreed that the case was distinguishable from Goodyear. It was not the non-exclusivity of “company” that animated the Court’s decision in Goodyear, said Breyer, but that “[t]erms that merely convey the nature of the producer’s business should remain free for all to use.” Id. at *12 (Breyer, J., dissenting). A top-level domain term was not capable of distinguishing a mark because it merely conveyed that the producer had an online presence. Therefore, adding “.com” to the generic term “booking” did not elevate the mark from generic to descriptive. Breyer also expressed concern about the anti-competitive effects of the majority’s decision. He worried that the doctrine of likelihood of confusion would not sufficiently preserve competition in generic terms if producers were able to appropriate “generic.com.” Finally, he noted that the survey evidence that the majority relied on was of little probative value in determining whether a mark was generic: evidence that consumers thought that “booking.com” was a brand name was evidence that consumers were familiar with the particular company Booking.com—“such association does not establish that a term is nongeneric” but merely that the business has advertised sufficiently to create the association. Id. at *13.
Both cases are victories for trademark owners. Romag Fasteners clarifies that a trademark owner need not show that a defendant acted willfully in order to recover the profits wrongfully gained through infringement. This decision enlarges the potential damage recoveries for successful infringement plaintiffs. However, willfulness remains relevant in determining the appropriate remedy for infringement, and it is unlikely that courts will often force innocent infringers to disgorge their profits. Booking.com is the more significant decision. It opens the door to trademark registration for companies that have built their brands around “generic.com” constructions and have advertised extensively to create strong consumer associations between domain names and their particular goods or services. By emphasizing that genericness is determined by reference to consumer associations, the Court has paved the way for registration of generic brand names.
The wine industry is already seeing the effects of the Booking.com decision. Wine.com, LLC, took an interest in the Booking.com proceedings and filed an amicus brief (as a member of the “Coalition of .com Brand Owners”) in support of Booking.com. The online wine retailer has been using the WINE.COM mark since the late 90s and has built considerable consumer goodwill in that mark, but the PTO denied registration of its WINE.COM word mark in 2003. Since the Court issued its Booking.com opinion in June, Wine.com has re-applied for registration of its domain name.
WINE.COM appears to be a good candidate for registration after Booking.com. But compound generic marks still face an uphill battle at the PTO—the owner of a “generic.com” domain name will need to show extensive use of the domain name as a trademark and strong consumer associations between the domain name and their company in order to obtain registration for this type of mark.
DP&F’s Katja Loeffelholz Presented at Vancouver, BC, International Wine Festival Law Seminar
Dickenson Peatman & Fogarty attorney Katja Loeffelholz presented “USA Wine Labeling Regulations” to the Wine & Liquor Law Seminar held in conjunction with the Vancouver International Wine Festival this past Monday. The seminar was the Ninth Annual Wine & Liquor Law gathering of wine and liquor industry professionals and covered new wine and liquor regulation, enforcement and business trends. A copy of Katja’s presentation is attached.
If you are interested in learning more about the Wine & Liquor Law Seminar or have branding questions please contact Katja Loeffelholz. If you have any questions about U.S. wine labeling regulations, please contact John Trinidad.
What makes a wine from Texas a Texas wine?
Texans may soon find that the Texas wines on their local retailer shelves are, well, a bit more Texan.
A Texas legislator has introduced a bill (HB 1514) which, if passed, would require that any wine indicating that it comes from the state or a geographical subdivision thereof must be made entirely from fruit grown in Texas and be “fully produced and finished” in the state.
These standards are stricter than federal regulations that govern use of an appellation of origin or AVA name on wine labels. Under federal rules, a wine can be labeled with a state appellation of origin (“Texas”) so long as 75% of the grapes used to make the wine came from that state and the wine was fully finished in Texas or a neighboring state. Additionally, a wine could use the name of a single county if 75% of the grapes came from the named county and was fully finished in Texas. There are slightly more stringent federal requirements for using the name of a Texas AVA. Such wines must be made of at least 85% grapes from the named AVA and be fully finished in the state in which the AVA is located, or, in the case of a multi-state AVA, in one of the states in which the AVA is located.
In addition to promoting local agriculture, the bill has the added benefit of protecting consumers from misleading labeling practices. Under the current system, wineries that choose to sell wine solely within their home state can apply for a Certificate of Label Approval (COLA) exemption for that wine, and can use a Texas appellation of origin without having to comply with any of the federal requirements mentioned above. According to some industry members, this loophole has allowed certain producers to market their wines as being from Texas even though the fruit is being trucked in from out of state. “[For Sale In Texas Only wine] sellers use symbology such as long-horned cattle, the colors of the state flag, allusions to Texas poets, claims of “Texas Style”, etc. on the label to mislead consumers into thinking that they are buying a Texas wine.”
Texas would not be the first state to adopt stricter grape sourcing requirements to protect consumers, grape growers, and the local wine industry. The draft legislation is similar to California Code of Regulations Sec. 17015, which imposes a 100% California grape sourcing requirement for wines labeled with “the appellation of origin ‘California’ or a geographical subdivision thereof” and requires that the wine be fully finished in the state. Oregon also has a 100% Oregon grape sourcing requirement, but it makes an exception for wines labeled with the name of a multi-state AVA, permitting such wines to carry the AVA name if 100% of the grapes came from Oregon and/or the other state in which the AVA lies. Given that the Mesilla Valley AVA straddles the Texas-New Mexico border, it will be interesting to see if HB 1514 will be amended to provide a multi-state AVA exception.
One last observation about HB 1514. The law may not be broad enough to address the full scope of the problem Texas wineries are facing from misleading labeling practices. California adopted Cal. Bus & Prof. Code 25241 to combat the use by certain wine brands of the Napa name separate and apart from the grape sourcing requirements under California Code of Regulations Sec. 17015. Perhaps Texas winemakers will need to promote similar measures to protect consumers from producers that want to wrap themselves in the Texas flag while making wine from fruit trucked in from other states.
Consumer Deception and Geographic Brand Names – KONA BREWING CO.
In the past few years the alcohol beverage industry has seen numerous consumer protection lawsuits centered around allegedly deceptive advertising statements on alcohol beverage brands, such as “Handcrafted” for Tito’s vodka. We previously blogged about this in the context of safe harbor defenses to such claims based on COLA approval.
We may be seeing a new front in these consumer protection lawsuits related to geographic brand names with a case filed on February 28, 2017 in the U.S. District Court for the Northern District of California against Craft Brew Alliance, Inc., owner of the KONA BREWING CO. brand of beer.
In 2010, Craft Brew Alliance, which is partially owned by brewing giant Anheuser-Busch InBev, acquired the KONA BREWING CO. brand which was started in the Hawaiian city of Kona in 1994. After acquiring the brand, Craft Brew Alliance began contract brewing KONA BREWING CO. beer throughout the mainland U.S. to increase its distribution. Obviously the brand name directly references the Hawaiian city of Kona and brand imagery, advertising and promotion all rely heavily on association with Kona and Hawaii. The class action lawsuit alleges that the brand name and Hawaiian brand imagery are deceptive and misleading to consumers who believe the beer originates from Kona, when in fact it now does not. A copy of the complaint may be found HERE.
Adopting a geographic brand name can be a risky proposition for this very reason. Parties often adopt geographic brand names because they hope to associate the product with the positive imagery of the location in the minds of consumers. Oftentimes the products also originate from, or are associated with the place identified, further re-enforcing that association in the minds of consumers. This is not a problem when the branded goods actually originate from the place identified in the brand name, but what happens in a case such as this where the brand is acquired and is no longer exclusively associated with the place in the name? Does it matter that KONA BREWING CO. beer is still brewed in Kona in small amounts even though the majority is brewed elsewhere? Would it be more deceptive if there were no longer any physical connection of the product with Kona? Is it more egregious because the beer was originally brewed in Kona and now it is brewed elsewhere? Is this fair to consumers? Is it fair to Kona and its citizens to have a mainland company using the name of their city to profit with little connection to Kona or Hawaii?
All very interesting questions, no doubt, and we will see if any of them are answered in this litigation (or whether the case is settled for a payment to the class plaintiffs with no admission of wrongdoing by the brewer). The standard in any of these cases is will consumers be deceived or misled in some way. If this can be proven by the plaintiffs, then Craft Brew Alliance may have a serious problem. The above questions will no doubt come into play during the pendency of this suit, so it will certainly be an interesting case should it proceed to a decision.
Protecting Wine Origins is Pro-Consumer and Pro-Industry
TTB’s attempt to put an end to an inherently misleading labeling practice and protect the AVA wine origin labeling rules has garnered significant reaction from certain commentators and some in the industry. In order to shed some light on the proposed amendments to federal labeling rules and why Napa Valley Vintners, the Wine Institute, over 50 members of Congress and others have supported TTB’s Notice of Proposed Rulemaking 160, we have prepared the following summary.
I. Current regulations allow certain wineries to employ misleading labeling practices.
Producers selling wine in interstate commerce must obtain a Certificate of Label Approval (“COLA”) and comply with federal regulations aimed at protecting consumers from misleading labeling practices. This includes federal standards for using vintage date, grape variety designations, and wine origin designations such as county, state, and country appellations and American Viticultural Areas (“AVAs”).
Wineries wishing to avoid enforcement of these federal truth-in-labeling standards can do so simply by filing for a COLA exemption and noting on the wine bottle that the wine is “For Sale Only” in the state in which the producing winery is located. This leads to the potential for misleading wine labeling practices. For example, federal regulations require that an AVA wine sold in interstate commerce with a 2015 vintage date must be made from at least 95% grapes grown in that vintage. But those regulations do not apply, and therefore would not prevent, a wine with a certificate of label approval exemption from using a lower percentage of 2015 harvested grapes and still being labeled as “2015.” Wines with certificates of label approval can be labeled with a varietal name, such as Pinot Noir, if it is made from at least 75% of grapes of that variety, but get an exemption and slap on a “For Sale Only” sticker, and then there is no obligation under federal regulations that the wine meet that 75% requirement.
Certain wineries have taken advantage of this COLA exemption loophole to designate their wine with an AVA while not complying with federal standards governing wine origin labeling, specifically, 27 C.F.R. Sec. 4.25 which requires that wine labeled with an AVA (a) be derived 85 percent or more from grapes grown within the boundaries of that AVA, and (b) be fully finished within the state in which the AVA is located. This “fully finished” federal requirement ensures that California wine production and labeling laws apply to wines that are identified with a California appellation or AVA.
These federal appellation labeling rules assure consumers that when they buy an appellation-designated wine, they are buying a product wherein both the grape source and the place of production are closely tied to the named place. Absent such rules, retail shelves could be stocked with wine labeled as “Burgundy” that was made in Sweden, “Barolo” that was actually produced in Slovenia, or “Sonoma Coast” made in Alaska.
II. TTB’s Notice 160 Proposes to Close the Loophole By Requiring All Wines to Follow the Same Vintage, Variety, and Appellation Labeling Standards.
In September 2015, 51 members of Congress wrote to TTB with a fairly simple request: “ensure that all wines bearing AVA terms—regardless of where they are sold—meet the clear and understandable American Viticultural Area rules.”
On June 22, 2016, the U.S. Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) responded by issuing Notice of Proposed Rulemaking 160, in which the agency proposed eliminating the COLA-exemption loophole by requiring COLA-exempt wines to comply with federal standards for vintage, varietal, and wine origin designations and to keep records to support such labeling claims. TTB subsequently granted a 90-day extension on September 8, 2016 and, in so doing, requested “comments regarding whether any geographic reference to the source of the grapes used in the wine could be included on a wine label in a way that would not be misleading with regard to the source of the wine” (emphasis added).
III. NVV and Wine Institute Support Notice 160 to Put an End to Misleading Labeling Practices.
Napa Valley Vintners (NVV), a non-profit trade association with over 500 members and our client, issued a comment letter supporting Notice 160, pointing out that the COLA exemption loophole was being used to mislead consumers and allow COLA-exempt wines to “unfairly benefit from the goodwill and brand recognition of appellation names without having to comply with the appellation regulations.”
NVV also pointed out that out-of-state wineries passing off their products as California wines by using the names of California appellations on their wine labels were able to avoid compliance with state laws regarding wine production and labeling. For example, wines produced outside of California but labeled with the name of a California AVA have no obligation to follow the state’s conjunctive labeling, wine composition and production, or misleading brand name statutes.
Similarly, wines produced outside of Oregon but using the name of an Oregon AVA, would have no requirement to follow the much stricter Oregon varietal composition (requiring at least 90% for most varieties) and appellation of origin (requiring 100% from Oregon and 95% for all other appellations). As David Adelsheim, founder of Oregon’s Adelsheim Vineyard, pointed out in his support of Notice 160, “the reputation of Oregon’s AVAs, hard won through years of experimentation and work” would suffer as a result of allowing COLA exempt wines to avoid enforcement of state wine-related laws.
After significant consultation, Napa Valley Vintners (NVV) and Wine Institute, a public policy advocacy association representing over a thousand California wineries and affiliated businesses responsible for 85 percent of the nation’s wine production and more than 90 percent of U.S. wine exports, issued a joint letter in further support of Notice 160, noting that the proposed amendments “put an end to the inherently misleading practice of using a Certificate of Label Approval … exemption to avoid compliance with federal labeling laws.” Sonoma County Vintners also issued a letter in full support of the NVV and Wine Institute position.
IV. NVV and Wine Institute Put Forward a Proposal that Allows For Optional Grape Source Information for COLA Exempt Wines.
In their joint letter, NVV and Wine Institute directly respond to TTB’s request for information as to whether grape source information could be included on COLA-exempt wines in a manner that was not misleading as to wine origin designations. The joint proposal directly addresses concerns that Notice 160 would prevent producers from providing consumers with truthful information regarding where the grapes used to make the wine came from, and at the same time protects AVA names as designators of wine origin. It also addresses concerns raised by wineries that had previously used COLA exemptions suggesting that they could continue to label their wine with truthful vintage and variety designations..
The NVV / Wine Institute proposal permits wineries to provide the following “Grape Source Information” on their wine: (a) the name of the county(-ies) and state(s), or just the state(s), where all of the grapes are grown; (b) the percentage of the wine derived from grapes grown in each county or state shown on the label; and (c) the city and state, or just the state, where the wine was fully finished. In order to avoid any confusion with wine origin designations, no name of an AVA (other than a county or a state) could be used as part of the Grape Source Information, and the wine itself would have to be designated using the “American” appellation. By using the American Appellation, (under current Federal regulations), the wine could also be designated with the vintage and grape varietal.
In short, NVV and Wine Institute are in favor of truthful labeling practices that protect the integrity of the AVA system. The goal of the joint proposal is simple: when consumers come across a wine labeled with an AVA name, they should be assured that the wine actually meets the legal standards for AVA labeling.
V. Support for Notice 160 comes from Industry Members That Believe Protecting Wine Origin Labeling is both Pro-Consumer, Pro-Grower, and Pro-Vintner.
Notice 160 is supported by a broad swath of industry members that believe the integrity of wine origin labeling regulations is essential to the U.S. wine industry. Regional associations (including the New York Wine Industry Association and Washington Wine Institute) and industry members from well-established as well as up-and-coming wine growing regions have written to TTB to note their support for the proposed amendments.
For example, Andy Beckstoffer, a noted grape grower with vineyards in Napa Valley as well as the Red Hills Lake County AVA wrote TTB to voice approval of Notice 160, stating:
It is vitally important to grape growers that the integrity of the AVA system be maintained, and I applaud TTB’s efforts in ensuring that all wine labeled with the name of an AVA meet the well-established federal wine labeling requirements. Grape growers, whether they farm vineyards in well established AVAs or in newer AVAs, benefit greatly from regulatory efforts to protect those place names.
This sentiment was shared by the High Plains Winegrowers Association, a group of winegrowers and vintners from the Texas High Plains AVA. They feared that the current COLA exemption loophole “is detrimental to Texas wineries that support locally grown wine grapes,” and further concluded that “[f]ailing to uniformly treat the labeling of all wine—whether distributed in-state or in interstate commerce—results in inequitable treatment within the same industry.” Douglas Lewis, a Texas Winemaker, also supports Notice 160 because it “helps consumers get more accurate information [about wine origin] by closing the loop hole.” And Andrew Chalk, a Dallas based wine writer, noted that by eliminating the COLA exemption loophole, TTB would be “remov[ing] the biggest impediment to the Texas wine industry’s growth.”
Notice 160 has caught the attention of industry members since it was first issued back in June, over 170 days ago, as more than 100 comments have been submitted to TTB on this matter. TTB will consider those comments as it comes to a decision on whether: (a) the COLA exemption loophole should continue to exist; and, (b) additional and truthful grape source information can be included on such wines in a way that does not undermine the AVA system for wine origin designation.
Wine industry members and consumers who believe that wine is a product of place and that place names are worthy of protection should support Notice 160. Although certain individuals may benefit financially from the COLA-exemption loophole, that is no reason for the federal government to allow an inherently misleading labeling practice to continue unabated. Moreover, elimination of the COLA-exemption loophole does not necessarily prohibit wineries from providing additional truthful, non-misleading information about grape sourcing. Any regulation that allows for such information, however, must also be crafted in a manner that maintains the integrity of the AVA regulatory system. The joint NVV / Wine Institute proposal does just that.
Furthermore, if the U.S. allows U.S. wineries to skirt the rules for proper use of American appellations and American Viticultural Areas, then the U.S. will be in no position to insist that other countries require that their wineries also follow the rules in respect of American appellations and American Viticultural Areas. Undoubtedly wine production is less costly in countries outside the U.S., and if wine grapes from Napa Valley can be shipped to Texas and the wine produced in Texas is allowed to use the “Napa Valley” AVA on the label, there is no basis to object to a Chinese or Canadian winery producing a “Napa Valley” wine from Napa Valley grapes shipped to those countries. Not only is that bad for the U.S. industry, but it diminishes the value of the AVA and harms all consumers.
NOTE – DP&F serves as outside counsel to several regional wine trade associations including Napa Valley Vintners with interests in protecting the integrity of regional appellations.
USPTO Makes Cannabis Trademark Go Up In Smoke
This past week the Trademark Trial and Appeals Board of the U.S. Patent and Trademark Office issued a blow to cannabis businesses attempting to protect their brands. In a precedential decision, In re Morgan Brown (click here for full decision), the Board affirmed the refusal to register the mark HERBAL ACCESS for “retail store services featuring herbs.” The HERBAL ACCESS trademark application was submitted by a Washington State cannabis dispensary operating a lawful business under Washington State law. Although the application was not for goods or services which explicitly identified “cannabis” or “marijuana,” the Trademark Office examining attorney determined that the “herbs” being offered for sale by the applicant were in fact marijuana. Thus, the examining attorney rejected the HERBAL ACCESS application on the basis that the use of the mark in commerce was not “lawful,” due to the fact that the retail sale of marijuana remains illegal under federal law, regardless of Washington State law which permits it. The Board affirmed this analysis, stating that the lawfulness of certain services or goods identified in a federal trademark application is determined under federal law.
The Board made two important points in its decision which potential applicants for cannabis-related brands should note. First, the Board made clear that while an application may broadly describe goods or services in a way which does not explicitly identify “marijuana” or “cannabis” the Trademark Office is not precluded from using external evidence (in this case the applicant’s website) from concluding that the identified goods or services encompass cannabis. Second, the fact that an applicant’s goods or services are lawful pursuant to a particular state’s law is irrelevant to the Trademark Office’s determination of whether those goods are lawfully being used in commerce. Unfortunately for cannabis businesses, that determination is to be made under Federal law, and nearly all state law compliant cannabis businesses remain illegal under the federal Controlled Substance Act.
While it appears that cannabis businesses remain precluded from obtaining an above-board federal trademark registration for cannabis goods and services, some of the states in which cannabis is legal do allow a state trademark registration for cannabis and a federal trademark registration will issue for goods and services under a cannabis brand which are not directly illegal (e.g. clothing). But for now, cannabis businesses clearly have an uphill battle in protecting their brand at the federal level.
Brexit! What happens to my EU Trademark Registration?
As of this writing, CNN is reporting that there is no possibility that the “remain” proponents will prevail in UK’s Brexit vote. By now we all know that “Brexit” refers to Britain’s vote to exit membership in the EU. And now it appears the Brexit will occur.
In a February 2016 report, Wine Institute United Kingdom Trade Director John McLaren stated: “The United Kingdom has always been a receptive market for California wines, and a quarter of all U.S. wine exports by volume come to this country. Value increases are now out-stripping volume growth, with U.S. wine export value to the UK rising by 28% last year.” Historically, the UK has been a strong consumption market for wine, with no significant domestic production, and an active importer for wine from throughout the world. Thus, many wine brands are active in the UK market.
An EU trademark registration has always been incredibly appealing for wine producers, covering the 28 EU member states for a single filing fee, including major export markets such as the UK, Ireland, Germany and the Nordic member states. So the question is, if I have an EU trademark registration and the UK leaves the EU, what will happen to my protection in the UK? The short answer: we don’t know.
There are no established provisions in place as to how your EU trademark registration will protect you in the UK once the UK leaves the EU. We do know that there is a two year process during which the UK and the EU will negotiate to “unwind” the UK membership in the EU. The general belief is that during this time the UK will enact basic “grandfather” provisions by which EU trademark registrants can convert their EU trademark registrations into UK trademark registrations with priority rights consistent with those established in the EU trademark registrations. However, this is not a certainty, and even if it occurs what is unclear is what will happen when there may be conflicts between EU trademark registrations and UK trademarks. Also unclear is whether EU trademark applications filed after June 23, 2016 will extend any protections to Britain, and whether trademark applications which were pending at the time of the Brexit vote will have any effect in the UK. The worst part, however, appears to be that we will not have any clear answers to these questions for at least the next two years.
In the mean time, what is an EU trademark registrant to do? In all likelihood, as previously stated, there will be provisions established to extend the EU registration protection back into the UK. However, as we were told by one UK trademark attorney: “some clients have been filing UK double-ups for new marks”; meaning, anticipating the possibility of a Brexit and the uncertainty that it would create, parties have been filing UK applications simultaneous with EU applications, even though the UK was still a member of the EU at the time of filing. If you believe in insurance and have a vested interest for your brand in the UK market this is a logical approach given the uncertainty which trademark owners face.
At the very least, now that the Brexit is official, going forward any winery wanting prospective protection in the UK should not rely on an EU trademark application for such protection and should file directly in the UK instead of, or in addition to, filing in the EU.
If you would like to discuss potential strategies related to protection of your trademark in the UK following the Brexit, please contact us.
California Court Issues Trademark Injunction Against Fresno’s Black Ops Brewery
New York based Brooklyn Brewery brought an action to enjoin the Fresno County Black Ops Brewery from any continued use of “Black Ops” on or related to beer products. The Court granted the injunction January 6, 2016. Brooklyn Brewery produces a single bottle Russian Stout (with a champagne cork) under the name “Brooklyn Black Ops,” which was issued as a federal trademark registration in 2009, and the brewery has since successfully sold tens of thousands of cases of the beer in 27 states in the past 8 years. Brooklyn Brewery is currently in negotiation to expand distribution to California. Case No. 1:15-cv-01656-JAM-EPG (E.D. Cal.) Click here for opinion.
Black Ops Brewery, Inc. in Fresno County, CA produces blondes and IPAs with specific identifying names, including “the Blonde Bomber” and “Shrapnel.” Each 22 ounce single bottle retails for less than $7.00, compared to Brooklyn Black Ops’ 22 ounce single bottle retail price of $29.99. In March 2015 Black Ops Brewery applied to the Patent and Trademark Office, and was subsequently denied, federal registration for “Black Ops Brewing” for beer and taproom services. Nonetheless, Black Ops Brewery continued its use of the name.
Brooklyn Brewery notified Black Ops Brewery of its infringement and demanded immediate cessation of use of the name; not only was Brooklyn Brewery issued federal registration for the mark, but Brooklyn Brewery’s Black Ops mark is also an incontestable mark because it has been in continuous use for 5 years since trademark issue. Brooklyn Brewery argued that continued infringing use of the name was in bad faith. Black Ops Brewery claimed it had adopted the name in good faith in memory of friends and family in military service and continued use of the term despite being on notice of Brooklyn Brewery’s alleged superior rights in the mark.
The Court found that Black Ops was a strong arbitrary mark (i.e., does not describe the product’s characteristics), and that despite some differences in beer quality, packaging and pricing of the goods, the two breweries had an identical product. These factors weighed heavily in favor of the Court’s finding that there existed a high likelihood of confusion by consumers between the two brands.
The Court determined that the two breweries shared similar marketing channels. While Black Ops Brewery does not have the same marketing teams or distributors as Brooklyn Brewery, Black Ops Brewery did use the same social media channels to promote itself as Brooklyn Brewery. The Court further found that Brooklyn Brewery would likely expand sales to Fresno County where consumer confusion would increase if both brands were available at the same location. As the Court noted, the purchasing environment of alcoholic beverages like beer is often “chaotic and impulsive,” such as when purchased at bars, thus further increasing the likelihood of confusion of the consumer when purchasing a “Black Ops” beer.
Finally, the Court held that Brooklyn Brewery would face irreparable harm if the injunction were not granted. Brooklyn Brewery has spent years of effort and financial investment to establish the goodwill of its brand. Brooklyn Brewery was concerned that if consumers drank a Black Ops Brewery beer they would be unlikely to ever purchase a Brooklyn Black Ops Beer “thinking it is connected with the “Black Ops” beer that they did not enjoy.” The Court agreed with this likelihood of consumer confusion and harm to Brooklyn Brewery, and concluded that the injunction would be effective immediately to enjoin and restrain Black Ops Brewing Inc. from using the marks “Black Ops” or “Black Ops Brewing” or any other infringing or unfairly competing mark with Brooklyn Black Ops.
This case is especially interesting because the Court issued the preliminary injunctive relief even though Brooklyn Brewery is not yet selling its Brooklyn Black Ops beer in California. Thus, the immediacy of the harm to Brooklyn Brewery could be questionable. However, the fact that Black Ops Brewery was on notice of Brooklyn Brewery’s rights and disregarded them no doubt had equitable impact on the Court’s decision.
Protecting Wine Brands in Central America, South America and the Caribbean
The growth of trademark applications in Latin America continue to climb. Recently, we have noticed an increase in Latin America trademark filings for wine brands that are identical or confusingly similar to our client’s U.S. brands. These have NOT been instances of brand hijacking. These are cases where the identical or similar brand has sought trademark registration in a Latin American country, thus potentially preempting a U.S. winery from using the same or similar wine brand. It will cost significantly less to register your brand now while it may still be available than to attempt to wrest it back in the future. Moreover, seeking registration now protects against the risk of being prevented from entering that market with your U.S. brand down the road.
Latin America is a growing region. Applications in the region have grown 14.9% from 2010 to 2014 according to “Trademarks and Patents” Marcasur. The increase in the number of applications was most pronounced in Chile (27.4%), the Dominican Republic (22.1%), Mexico (10.9%) Guatemala (8.4%), Colombia (7.5%) Argentina (4.9%) and Costa Rica (2.2%). Id. In 2014, nationally filed trademark applications, outnumbered foreign applications with 67.2% of all applications. Id.
Almost 3 million trademark applications were filed between 2010-2014. At the top of the list, with the greatest number of applications were Brazil, Mexico, Colombia and Argentina, the countries with the highest population growth rates. Id.
The average time for granting a trademark without opposition in Latin America in 2014 ranges from 3 months in the Dominican Republic to 36 months in Brazil. The average for all trademark applications filed in the region is 9.2 months (compared to 10.5 months in the United States). Id.
If you would like more information about registering your brands in Mexico, Dominican Republic, Panama, Guatemala, Colombia, Argentina, Costa Rica, Peru, Paraguay, Uruguay, Nicaragua, Bolivia, Brazil, El Salvador, Honduras, Ecuador and Venezuela, we have personally met with legal counsel in each of these countries and have developed a working relationship with them in order to help our clients protect their brands in Latin America.
For additional information or any other questions contact Katja Loeffelholz at her email. Katja recently attended the International Trademark Association (INTA) leadership meeting held in Panama City, Panama. INTA is the global association of trademark owners and professionals dedicated to protecting trademarks and related intellectual property.
Bella Union Winery and Union Wine Co. Settle Trademark Dispute
The ongoing litigation between California’s Bella Union Winery, owned by FN Cellars, LLC (owner of Far Niente) and Union Wine Co. of Oregon, over rights in the parties’ respective trademarks (BELLA UNION vs. UNION WINE CO.) has now concluded. On Wednesday, October 28, 2015, the parties filed a stipulation to dismiss all claims currently before the Federal District Court for the Northern District of California, including Bella Union’s claims for declaratory relief of noninfringement, which also sought cancellation of the asserted UNION WINE CO. trademark registration, as well as the latter’s counterclaims for infringement of the UNION WINE CO. mark. The parties have not publicly disclosed the terms of settlement. The federal court dismissal will likely be followed shortly by a dismissal of corresponding administrative cancellation proceedings before the Trademark Trial and Appeal Board against the BELLA UNION registration.
Clock is Ticking for Trademark Owners for .wine Generic Top-Level Domain
As we’ve previously reported, the Internet Corporation for Assigned Names and Numbers (ICANN) has been selling hundreds of generic top-level domains (gTLDs) to domain name registries for $185,000 each. These registries then authorize domain name registrars to sell domain names to the public under the gTLDs that the registries have purchased. The registry called Donuts has purchased many of these gTLDs, including two of particular interest to members of the wine industry — <.wine> and <.vin>. The <.wine> and <.vin> gTLDs have been in limbo since they were awarded to Donuts due to issues raised by the EU and several regional wine associations concerning the protection of appellations of origin within the <.wine> and <.vin> gTLDs. However, those issues have since been resolved and the <.wine> and <.vin> gTLDs are now moving forward.
This means that trademark owners that wish to secure domain names encompassing their trademarks under the <.wine> and <.vin> gTLDs must now do so within the sunrise periods that have been established by Donuts for the <.wine> and <.vin> gTLDs. If they fail to secure their domain names within the sunrise periods, those domain names under the <.wine> and <.vin> gTLDs can then be purchased by members of the general public and the only recourse available to the trademark owners will be through costly dispute resolution procedures.
The Sunrise periods for the <.wine> and <.vin> gTLDs open on November 17, 2015 and close on January 16, 2016. In order for a trademark owner to obtain its trademarks within domain names for the <.wine> and <.vin> gTLDs, the trademark owner must first register its trademarks with the Trademark Clearinghouse. We have previously blogged about the process for registering a trademark in the Trademark Clearinghouse here. Once a trademark owner has obtained registration in the Trademark Clearinghouse, it may then pay to register its trademarks as domain names under the <.wine> and/or <.vin> gTLDs with recognized domain name registrars during the November 17, 2015 – January 16, 2016 sunrise periods.
So, for all of you wineries wishing to take part in the new <.wine> and <.vin> gTLDs, now is the time to make sure that your trademarks are registered with the Trademark Clearinghouse. For additional information or any other questions contact Scott Gerien at his email.
ASCAP (ESCAPE) TO WINE COUNTRY
What should you do when copyright owners come a-knockin’?
Wineries throughout Sonoma and Napa Valley have recently received legal notices from copyright owner groups, threatening legal action for unauthorized live and recorded musical performances in their tasting rooms, etc. which feature songs subject to copyright protection.
The American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) are two of the most prominent performing rights societies which collect license royalties for the public performance of musical works in their catalogs. Public performance is defined broadly under the Copyright Act to include both live performances (aka “covers”) and recorded music played on the radio, on television, or online (e.g., via regular Pandora, without a business account). Performing rights societies are well-known for bringing suit when their on-the-ground surveillance reveals that a commercial establishment is allowing public performance to take place without an appropriate license.
Since tasting rooms are commercial establishments which fall outside of the private listening license that typically applies when you purchase music, playing music in a commercial environment (i.e., outside the “normal circle of friends and family”) constitutes an actionable copyright infringement of the public performance right of the copyright owner. Businesses that fail to pay the licensing fees of the copyright owner society (such as ASCAP) will be liable for copyright infringement, potentially including an award of the plaintiff’s attorneys’ fees. See, e.g.,: http://www.ascap.com/press/2015/0527-venues-refuse-to-pay.aspx
If you have not yet been contacted by ASCAP or BMI and know that you are not in compliance but still want to play music in your tasting room, your best strategy would be to subscribe to a provider that will cover licensing obligations with ASCAP and BMI, such as Sirius XM Music for Business or Pandora for Business. (Note that such plans typically do not cover paid entry or dancing.)
Chris Passarelli is Senior IP counsel at Dickenson, Peatman & Fogarty with experience in copyright and trademark issues facing the food & beverage, hospitality and entertainment industries. Contact Chris here.
THIS BUD IS NOT FOR YOU
In a recent precedential case before the Trademark Trial and Appeal Board, the fame of the trademark BUD for beer owned by Anheuser-Busch, LLC (Anheuser) played a dominant role in the Board’s finding a likelihood of confusion between BUD for beer and WINEBUD for wine (and other alcoholic beverages). The Board found that Anheuser’s evidence clearly established the fame of their BUD and BUDWEISER marks. Anheuser has used its BUDWEISER mark since 1876 and its beer has been known as BUD since about 1895. Moreover, Anheuser is a heavy user of advertisement and has been a major sponsor of well known sporting events and is the recipient of scores of unsolicited publicity. In fact, BUD LIGHT is the best-selling beer in America.
In contrast, the mark WINEBUD had not been in use in the United States. The Applicant for the mark WINEBUD argued that WINEBUD is a “fanciful compound noun formed from the nouns WINE and BUD, an analogy to horticultural words such as ‘rosebud.'” It contended that wine drinkers would perceive the latter half of its mark as connoting the bud of a vine, not as a reference to BUDWEISER the beer or the BUD family of marks. In addition, Applicant argued that WINEBUD is essentially a play on the word “vinebud,” a word known in the wine industry.
The Board concluded that consumer would likely see the WINE component of the WINEBUD mark as the generic name for the beverage, and BUD, due to the fame of Anheuser’s marks, as the source-identifying portion of the mark. Accordingly, the Board found the dominant portion of the mark WINEBUD to be BUD, and that WINEBUD and BUD marks are “highly similar.” Moreover, the Board found the goods of beer and other alcoholic beverages, including wine, to be related. In the end, Anheuser’s famous BUD mark was the “heavy thumb” that tipped the scales in Anheuser’s favor.
For a complete review of the case see Anheuser-Busch, LLC v. Innvopak Systems Pty Ltd., Opposition No. 91194148 (August 17, 2015) [precedential].
NYSLA Proposes Advisory for Trademark Licensing Agreements
The New York State Liquor Authority is considering adopting an advisory regarding trademark licensing agreements between retailers and alcohol beverage producers. If adopted, the advisory would prohibit certain trademark licensing agreements between retailers and suppliers (i.e., producers and wholesaler) that involve a licensing fee based upon a percentage of sales or that otherwise “correlate[s] with sales.” According to the NYSLA, such arrangements violate state tied house law because they are indicia of a retailer having a direct or indirect interest in a supplier.
The draft advisory will be discussed at the June 30, 2015 NYSLA Board Meeting. Interested parties can submit comments to NYSLA Secretary Jacqueline Held at [email protected] by June 29, 2015.
6/30/2015 UPDATE – According to the NYSLA website, the hearing has been postponed until July 14, 2015.
<.wine> gTLD on the Horizon; Protect your Brand Name
In 2013, the Internet Corporation for Assigned Names and Numbers (“ICANN”), the non-profit organization responsible for managing the Internet’s domain identifiers, began rolling out new generic top-level domains (“gTLDs”). The most popular gTLD is <.com>. Specific domain names are registered under a specific gTLD, e.g., <gallo.com>.
However, ICANN believed that in time the <.com> gTLD would begin running out of domain name options, and that the Internet could be better organized if gTLDs were created around subject matter, such as <.plumber>, <.church>, <.porn> and <.wine>. Therefore, ICANN decided to introduce these new gTLDs by selling them to third-party domain name registrars to register and operate for $185,000 each. ICANN received applications for over 1,900 new gTLDs and many of them have gone into active status.
Many have questioned the need or practicality of these new gTLDs believing ICANN’s real motivation being to raise money. Indeed, Esther Dyson, the founding chairperson of ICANN, wrote that the gTLD expansion “will create jobs [for lawyers, marketers and others] but little extra value.” Many believe that these new gTLDs will add no more value than did the introduction of gTLDs like <.aero> or country code TLDs such as <.tv> (Tuvalu, in case you wondering). In fact, many feel that this is simply another opportunity for domain name registrars and unscrupulous domain name pirates to make money at the expense of trademark owners.
Since domain name high jacking has been fairly prevalent with the <.com> gTLD, it was determined that some preventative measures should be available for trademark owners to obtain their trademarks as domain names within these new gTLDs before the gTLDs are introduced. Enter the Trademark Clearinghouse (“TMCH”).
The TMCH is a place where trademark owners can “register” their trademark rights in order to obtain their trademarks in domain names for gTLDs before the public has a chance to do so. How does it work? A trademark owner goes to the web site for the TMCH located here. The trademark owner then fills out an application, provides evidence of a trademark registration in a country of the world, along with evidence of use of the mark, and then pays a fee of $150 per trademark per year of registration.
Assuming the trademark owner provides all the correct information, the trademark owner is then provided with a special authentication key that it can then use to “buy” a domain name identical to its trademark before the general public during a special Sunrise period when new gTLDs are introduced. As recently evidenced with the registrar for the new gTLD for <.sucks>, which charged a Sunrise registration fee of $2,499, this can be viewed merely as an attempt to extort trademark owners. However, other gTLDs have offered Sunrise period registration fees for as low as $20.
So why does this matter to wineries? There are two gTLDs that have been applied for specific to the wine industry — <.wine> and <.vin>. Both of these gTLDs have been awarded to the largest, most organized and most financially-backed registrar of new gTLDs, Donuts. The <.wine> and <.vin> gTLDs have been held up in procedural wrangling with the EU because wine appellations of origin could not be protected in the TMCH and there were fears that domain names such as <champagne.wine> or <bordeaux.vin> would be swiped up by parties for individual benefit or misuse. However, we have it on good authority that these disputes have been worked out and that we can expect the opening of the <.wine> and <.vin> Sunrise periods possibly as early as fall of 2015.
Therefore, all brand owners that are interested in securing the <.wine> and/or the <.vin> domain names for their brands during the Sunrise period should move with diligence in registering their trademarks in the TMCH so that they are ready with their authentication keys once the Sunrise periods open. Again, is this necessary? That depends on whether you think that <.wine> and/or <.vin> will catch on with consumers for locating web sites for wine brands. The gTLDs could go the same way as <.aero> and die on the vine. However, the risk is if the gTLDs do catch on, then brand owners could be left fighting or paying domain name pirates to get back their <trademark.wine> domain names, which will cost thousands of dollars more than registering in the Sunrise period. So, the question of whether to register your brand in the Sunrise period is a business decision based on a gamble as to whether you think <.wine> and/or <.vin> will succeed or fail.
For those wineries not wanting to deal with the TMCH registration process, contact your trademark counsel for assistance. This will certainly add to your costs, but it will relieve you of the burden of maneuvering through the TMCH registration process. DP&F is offering this service on a flat fee basis in partnership with Corsearch, an authorized TMCH agent. For more information please contact Scott Gerien via email.
Trademark for Wine vs. Vodka: Court Issues Preliminary Injunction
On March 9, 2015, the U.S. District Court for the Central District of California issued a preliminary injunction to White Oak Vineyards & Winery, LLC against White Oak Spirits LLC enjoining the spirits producer from use of the term WHITE OAK on vodka based on likelihood of consumer confusion with the mark WHITE OAK for wine. A copy of the decision may be found here.
While we have frequently written about the trend at the USPTO to find wine and spirits to be related goods for purposes of finding likelihood of confusion, we have not seen the same prevalence of findings in federal court decisions related to infringement. Thus, this decision is notable in such regard.
The marks in this case were virtually identical: WHITE OAK for wine vs. WHITE OAK PREMIUM VODKA for vodka. While defendant argued that the use of the words “premium vodka” with WHITE OAK would distinguish its brand from that of Plaintiff, the court found that consumers would focus on the distinctive portion – WHITE OAK – and give little consideration to the generic terms. Defendant also failed to convince the court that the distinctive labels of the products (see below) would allow consumers to distinguish between the goods, mainly because the court found that the products may also be ordered from wine lists in restaurants and bars or through other avenues where the labels would not be visible.
As far as the relatedness of the goods, the court noted that consumers would not believe one product to be the other, but rather that consumers may believe that the two products came from the same source or producer. The court cited to evidence submitted by plaintiff of the Napa producer of DOMAINE CHARBAY which produces both wine and spirits under the same mark. We have also noted in this blog that there is a current trend of the same brands appearing on wines and spirits which reflects a changing landscape on the issue of relatedness under trademark law. Below are a few more examples:
What is notable about the court’s opinion is that it expressly stated that it was not establishing a per se rule as to the relatedness of wine and spirits and specifically noted that on the totality of the facts – “namely, that the names of the two products are identical – the goods are sufficiently related for a likelihood of confusion to arise.” So does this mean that spirits and wine will be found to be related when the marks are not identical? Maybe. It will depend on the marks and the degree of similarity. However, what is clear is that going forward wineries and distilleries should not rely on any perceived marketplace differences between their goods to adopt marks that are identical to marks on goods in the other sector.
Two other takeaways from this opinion: 1) the distillery first approached the winery for a consent to register its mark after its trademark application was refused by the USPTO and winery’s response was a demand to stop use; a lesson as to potential implications in approaching other parties for consent agreements; and, 2) for all of you trademark geeks, the court issued a preliminary injunction despite the recent Ninth Circuit decision in Herb Reed Enterprises requiring that irreparable harm be grounded in evidence and not be speculative; while the court noted that harm could not be presumed, the court found that plaintiff’s loss of control over its mark would cause irreparable harm, which is essentially what the presumption once was ….
Tacking your New Trademark onto the Old? Supremes: Ask a Jury
Resolving a circuit split, the Supreme Court in Hana Financial, Inc. v. Hana Bank, et al., 574 U. S. ____ (2015) on Wednesday unanimously affirmed a Ninth Circuit decision that the issue of “tacking” – where a trademark user modifies its mark over time while managing to retain its longstanding use and priority position over others (i.e., “tacking” a newer mark onto an older version) – is usually an issue appropriately tried to a jury.
In so holding, the Court validated a District Court jury decision that Respondent Hana Bank did not infringe Petitioner Hana Financial’s trademark (although Hana Financial appeared to have priority in the U.S. going back to 1995) in part because Hana Bank operated under a series of “Hana” names (including advertising as “Hana Overseas Korean Club”) going back to 1994 in the U.S., and had operated under the name Hana Bank in Korea going back to 1991.
The case has some interesting implications. The question of whether two similar trademarks owned by the same party can be tacked together to provide earlier priority has historically come down to whether the marks are “legal equivalents” conveying the same, continuous commercial impression in the community and in particular, the eyes of the ordinary consumer.
Citing to an 1874 case for the proposition that “twelve men know more of the common affairs of life than does one man,” the Court determined that consumers, not judges, are in the best position to make this determination.
In the opinion rendered by Justice Sotomayor (slip opinion available at: https://home.comcast.net/~jlw28129/HANA.pdf), concerns such as potential lack of uniformity of trademark jury decisions and the resulting inconsistency of the evolving trademark case law around the tacking issue were eschewed in favor of upholding the perspective of the ordinary purchaser, through which the tacking doctrine is said to operate. However, the Court did reserve the tacking determination for judges in bench trials (where no jury is empaneled), and on motions for summary judgment and judgment as a matter of law.
The Court indicated that jury instructions will help guide the jury and ensure application of the correct legal standard.
Sometimes the wording of a jury instruction raises more questions than answers for the jury who must decipher the lingo. The jury instruction for “tacking” in this case was: “A party may claim priority in a mark based on the first use date of a similar but technically distinct mark where the previously used mark is the legal equivalent of the mark in question or indistinguishable therefrom such that consumers consider both as the same mark. This is called ‘tacking.’ The marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked.”
What does the decision mean for brand owners? The clear takeaway is that nothing is certain as it relates to the doctrine of tacking, and whether a given jury will agree to find that the newer iteration of a trademark is tied to an older manifestation of the same mark. In cases where a jury has been demanded, it will be much more difficult to quickly dispose of a case involving the tacking issue on a motion prior to trial. This creates a landscape of increased unpredictability and expense in prosecuting or defending such cases, giving rise to a host of strategic considerations on the branding side, as well as, in pre-litigation.