Best Practices in Winery Operations Conference (Napa, 3/19 – 3/20)
James W. Terry Director at Dickenson, Peatman & Fogarty and chair of the firm’s business practice group, will serve as as program co-chair at the annual “Best Practices in Winery Operations” conference hosted by The Seminar Group, to be held on March 19 and 20, 2015 at The River Terrace Inn in Napa, California. The conference touches on many key issues facing the wine industry today including:
- The history and future of Napa’s Winery Definition Ordinance.
- Employment law issues surrounding winery volunteers, interns, and immigration.
- Applying for, and creating value in, an AVA
- Issues facing next generation winemakers.
In addition to the usual group of legal experts leading the panels, this year’s seminar features many noted voices from the wine industry, including Andy Beckstoffer, Cathy Corison, Genevieve Janssens, Tegan Passalacqua, Matthew Rorick, and Richard Sanford. A full program schedule can be downloaded here, and you can register here.
Richard P. Mendelson Of Counsel at DP&F will moderate a session on Napa’s Winery Definition Ordinance which will include panelists Andy Beckstoffer (Owner, Beckstoffer Vineyards).
Gregory J. Walsh, Director at DP&F, will co-present a session on Volunteers, Interns, and Immigration.
Carol Ritter, Director at DP&F, will provide a presentation on the AVA application Process, and then lead a panel discussion on “Creating and Maintaining AVA Value,” with panelists Richard Sanford (Alma Rosa Winery & Vineyards) and Rex Stults (Government Relations Director, Napa Valley Vintners).
Katja Loeffelholz, Of Counsel at DP&F, will moderate a panel discussing on diversity in teh Vineyard and the Cellar, featuring leading women in the wine industry, including Cathy Corison (Corison Winery), Genevieve Janssens (Robert Mondavi Winery), Vanessa Robledo (Black Coyote Winery), Coral Brown (Brown Estate Vineyards, LLC) and Remi Coehn (Lede Family Wines/ Cliff Lede Vineyards).
John Trinidad, an attorney with DP&F’s Wine Law practice group, will lead a discuss about the opportunities and challenges facing young winemakers as they try to establish their own brands and locate vineyard sources. Panelists include Tegan Passalacquia (Head winemaker and Vineyard Manger for Turley Wine Cellars and Proprietor of Sandlands Wines), and Matthew Rorick (Winemaker and Proprietor, Forlorn Hope Wines).
Loeffelholz / Trinidad on Wine Labeling Legal and IP Issues
Wine Business Monthly recently published an article by DP&F attorneys Katja Loeffelholz and John Trinidad on wine labeling legal and intellectual property issues. You can access the article using the following link:
(Published with the permission of Wine Business Monthly).
FTC Criticizes Franchise Laws…in Automobile Industry
“Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated.”
So concluded the Federal Trade Commission in a recent blog post criticizing franchise laws in the automobile industry. Tesla Motors, a leading manufacturer of high-end electric cars, implemented a sales model to allow it to sell cars direct to consumers. This has upset auto dealerships who have complained that Tesla’s efforts violated state franchise laws that require automobile manufacturers to sell their cars through local, independent auto dealerships.
Last week, the FTC weighed in, and criticized such laws as “bad policy” that protects middlemen and harms consumers. “We hope lawmakers will recognize efforts by auto dealers and others to bar new sources of competition for what they are — expressions of a lack of confidence in the competitive process that can only make consumers worse off.”
Numerous states have protectionist franchise laws that govern supplier-distributor relationships in the alcohol beverage industry. Such franchise laws vary in their scope from state to state, but generally restrict producers from terminating distributors absent “good cause.” In practice, “good cause” has been narrowly defined by state regulatory agencies and courts, making it difficult for producers to terminate even for well-founded business reasons. Some states impose severe penalties for terminating or restructuring distribution arrangements absent “good cause,” including significant fines and potential suspension or revocation of the wineries’ state permits.
One has to wonder if the FTC’s recent statement on automobile dealership franchise laws could have any repercussions in the alcohol beverage industry.
Tied House Laws: Alive and Kicking
The New York State Liquor Authority issued a stern reminder that tied house laws are not only still on the books, but will be strictly enforced. On Tuesday, March 25, the NYSLA accepted a plea offer from the numerous entities associated with restaurateur Joe Bastianich to pay $500,000 penalty, close down Manhattan-based wine store Eataly Wines for six month, and remove Lidia Bastianich (Joe’s mother) as an owner of that store due to tied house violations.
Tied house laws are aimed at prohibiting alcohol beverage suppliers (manufacturers, wholesalers, importers) from exerting control over retailers (including restaurants, bars, and liquor stores). To that end, state laws typically prevent an owner of a licensed supplier from holding an ownership interest, direct or indirect, in a licensed retailer. In this case, Bastianich and a number of his partners apparently held ownership interests in a number of New York retail licenses while also holding ownership interests in wineries in Italy.
In a sign that not all publicity is good publicity, counsel for the NYSLA stated that their investigation started as a result of a cover story on Eataly owner Oscar Farinetti in Wine Spectator. The article reported that “Eataly now owns stakes in six wine estates across northern Italy” and that Joe Bastianich was the “owner of several Italian wineries….” NYSLA reviewed the various alcohol beverage retail licenses held by Bastianich-related entities and discovered that these various winery interests were never disclosed in the initial or renewal license applications.
The NYSLA’s enforcement of tied house laws is not surprising given past precedent. In 2011, the Authority issued two separate declaratory rulings stating that an applicant holding an interest in a foreign-based alcohol beverage manufacturer could not hold a New York retail liquor license under New York tied house laws. In fact, one of those rulings applied to an Italian wine producer seeking a New York restaurant license.
California also has tied house laws, but provides exceptions allowing winegrowers (i.e., Type 02 license holders) to own an interest in an alcohol beverage retail license so long as they disclose their ownership interests and accept certain restrictions. For example, under certain circumstances, a licensed California winegrower may own interests in multiple restaurants holding California alcohol beverage licenses so long as they do not sell their wine at more than two of those establishments and their wines do not constitute more than 15% of all brands offered for sale at those restaurants. (This exception does not apply to custom crush clients / “virtual wineries” that operate under a Type 17/20 license.). As the Eataly matter demonstrates, however, that winegrower would be barred from obtaining a New York alcohol beverage retail license.
For more information on wine law or tied house issues, please contact John Trinidad at firstname.lastname@example.org. Mr. Trinidad was interviewed by Levi Dalton of Eater NY in an earlier article on this same matter.
New York State Liquor Authority Sets 4/23 Meeting re Internet Wine Sales
The New York State Liquor Authority has scheduled a special board meeting for April 23, 2014 to consider two requests for declaratory rulings related to internet wine sales. Both Lot 18 and Connoisseur Encounters Co., Inc (doing business as “The Wine Cellar at Rye Ridge”) have asked the NYSLA for guidance regarding their proposed business operations. The Lot 18 petition is here and the Wine Cellar petition is here. According to its petition, Lot 18 plans to partner with “brand-strong Marketing Agents [such as magazines and other media entities] that have their own consumer lists, readership or website viewers, on-site customers and a recognizable brand” to deliver “personalized wine selections” to consumers.
Last year, the NYSLA rejected a request for a declaratory ruling regarding a platform that allowed for third party marketers, such as Lot 18, to operate in New York without an alcohol beverage license. The liquor authority subsequently held a hearing regarding internet-based sales of alcohol beverages, but to date has not issued any further guidance regarding third party marketing.
Earlier this year, we reported that Lot 18 had secured a New York state brick and mortar retail license.
DP&F does not represent Lot 18 in this matter.
Federal Court Dismisses Diageo’s Complaint in Franchise Law Case
Earlier this week, Missouri distributor Major Brands, Inc. won the most recent round in its year-long franchise law litigation with Diageo Americas, Inc. The federal district court in Connecticut has dismissed Diageo’s complaint, and the parties dispute appears to be gearing up for a trial in Missouri state court this summer.
Last March, Diageo brought suit in federal district court in Connecticut seeking declaratory relief to allow Diageo to terminate its relationship with Major Brands. In its complaint, Diageo argued that the parties’ contract included a clause that stated that their agreement would be construed under Connecticut law. Enforcement of such a clause would avoid the application of Missouri franchise law. Even though Connecticut also has a franchise law, Diageo argued that it only applied to franchise agreements that would require the distributor to maintain a place of business in that state. Since Major Brands was not required to establish a business in Connecticut, then the Diageo-Major Brands agreement falls outside the scope of Connecticut’s franchise laws, according to Diageo’s complaint.
Major Brands brought its own suit in Missouri state court against Diageo and its new Missouri distributor, Glazer’s, and filed a motion to dismiss in Diageo’s federal court case. In that motion, Major Brands argued that the forum selection clause did not apply and also argued that the federal court should abstain given the parallel state court litigation and Missouri’s strong interest in regulating and enforcing its own alcohol beverage laws:
“The heart of this suit is the applicability of Missouri’s Franchise Act to the relationship between Plaintiff, a supplier of liquor in Missouri, and Defendant, a licensed liquor distributor and wholesaler doing business in Missouri. The Twenty-first Amendment recognizes each State’s sovereign interest in regulating and enforcing its own liquor distribution laws….”
On March 19, 2014, the federal court granted Major Brands’ motion, finding that the forum selection clause that Diageo relied on did not apply to the products at issue in the immediate case. The court did not address Major Brands’ abstention argument.
But this does not bring an end to the Diageo-Major Brands battle. Major Brands’ state court suit in Missouri continues, and the parties have engaged in extensive discovery in that forum. A trial date is set for July 21, 2014.
Branding Strategies in Agricultural Commodities: Vineyard & Block Designates
By Katja Loeffelholz, Dickenson, Peatman & Fogarty
The prominence of vineyard-designated wines is another lesson in value-added agricultural branding which presents both the winery and the vineyard owner or lessee with a number of marketing and legal issues. Recognizing the value of vineyard designated names, vineyards have long been designating blocks within their vineyards with proprietary names.
In this way, even though multiple wineries are purchasing grapes from the same vineyard property, each winery can have a distinct name to refer to the vineyard block where the grapes were grown, also known as the “block designate.” If a vineyard owner sells wine grapes to a winery under a vineyard designate or block designate, the winery may use that vineyard or block name on wine produced from those grapes to designate origin so long as such use complies with the vineyard designation labeling requirements of the Alcohol and Tobacco Tax and Trade Bureau (TTB). Accordingly, the vineyard owner — not the winery – theoretically owns rights in the name.
Wineries may consequently find their vineyard-designated wines embroiled in a trademark dispute between different winery owners. One of the most well-publicized vineyard name trademark disputes involved the famed To Kalon Vineyard. Originally planted in 1868, To Kalon was eventually divided up and by the 1990s, both the Robert Mondavi Winery and Andy Beckstoffer owned portions of the vineyard. Mondavi secured federal trademark registrations for both the TO KALON and TO KALON VINEYARD marks. Schrader Cellars had entered into an agreement to purchase grapes from Beckstoffer, and Schrader planned to use the “Beckstoffer Original To Kalon Vineyard” designation on its wine label. In 2002, Mondavi sued Schrader Cellars, and sought an injunction to bar Schrader’s sale of “To Kalon Vineyard” designated wine. The parties eventually settled their dispute, and Beckstoffer was granted a royalty free license to continue to use the To Kalon name.
Thus, when the vineyard is owned by another party, the risk to the winery in marketing vineyard and block designated wines made from contract grapes is that once the contract ends, so can the rights to continue use of the vineyard and/or block designation. A winery must accept that by producing and marketing vineyard-designated wine made from grapes grown in a vineyard that the winery does not own, the winery is potentially spending time and money building brand equity for someone else. When the grape contract ends, there is considerable risk that the “brand” of the vineyard owner may be used by the vineyard owner itself, or potentially by other wineries that contract with the vineyard owner.
Wineries are often unaware that the vineyard designation or block designation actually belongs to the vineyard owner. Many wineries feel that if they are using the vineyard designation on wine and popularizing the vineyard name, they should own the rights in the vineyard or block designate as a trademark. While this may be a questionable legal position, this attitude among some wineries may nevertheless be problematic from a practical perspective. Should a winery successfully register rights in a mark which is used as a vineyard or block designate, the vineyard owner will need to spend considerable time and money in a potentially unsuccessful effort to regain clear rights in the name. The best way a vineyard owner can protect itself is to register its brands and properly license them to a winery.
To maintain trademark rights, an owner must control the quality of goods sold under the mark. For a vineyard owner, this can be accomplished through specific provisions in a grape contract or through a related trademark license agreement which is separate from the grape contract. A license will clearly establish that, as between the vineyard and the winery, the vineyard is the owner of the mark and that the winery (and its use of the designate) is subject to the terms of the license, as well as, the vineyard owner’s control of the quality of wine provided under the mark. In practice, such quality control can often be administered in a non-disruptive, nonintrusive manner (e.g., sufficient quality may be presumed based on maintenance of quality heretofore maintained by the winery operation).
The strategy of enhancing the value of grapes by naming the grapes from a certain vineyard is also widely used to enhance the value of other agricultural commodities, such as cattle from a certain ranch, or spinach from a particular farm. As the commodity producer, it is important to register the trademarks for the brands used with these agricultural products so that the commodities themselves (as well as the land from which they come) can accrue value, prestige and reputation which inures to the brand assets.
Are you adequately protecting your vineyard designate or agricultural commodity?
Annual “Best Practices in Winery Operations” Seminar (March 27-28, 2014)
Dickenson Peatman & Fogarty attorneys will be featured speakers during the upcoming “8th Annual Best Practices in Winery Operations: Risks and Rewards” to be held on March 27 & 28, 2014 in Napa. The seminar (which offers California CLE Credits) will cover the following:
- Legal and Regulatory Update
- County Audits and Compliance with Land Use Regulations Lessons Learned while Creating the Largest High-end Vineyard Development Portfolio
- Hot Topics in Land Use Law
- Marketing and Selling Wine Online: Opportunities and Speed Bumps
- Franchise Laws: Knocking Down Trade Barriers
- Building Brand Equity in the Global Marketplace
- Trademark Licensing: Being a “Wine Brand” without being a “Winery”
- Wineries in a Growth Mode – Human Resources
- Trends in Vineyard and Winery Acquisitions
- Passing the Torch: Family Business Transition Planning
- Bias in the Legal Profession and the Wine Industry
James W. Terry Director at Dickenson Peatman & Fogarty (DP&F) is the program co-chair and will introduce the session. Richard P. Mendelson Of Counsel at DP&F will give a special presentation “Legal and Regulatory Update: What is the Next Battleground?”
In addition, Tom Adams, Director at DP&F will present on lessons learned while creating the largest high-end vineyard development portfolio. Gregory J. Walsh, Director at DP&F will cover human resource issues such as how to secure talented people and keep them. Finally, Katja Loeffelholz, a registered attorney with the United States Patent and Trademark Office and Of Counsel at DP&F, will moderate a panel discussing bias in the legal profession and wine industry.
The seminar will be held March 27 & 28 from 9:00 am to 5:15pm at the Napa River Inn. For more information and online registration, please follow this link or contact The Seminar Group at email@example.com.
TTB Proposes New Oregon AVA, Cites Wine Blogs as Support
Winegrowers vying to become the 18th American Viticultural Area in Oregon have reached an important milestone. On February 26, 2014, a new notice of proposed rulemaking was published in the Federal Register, soliciting comments regarding the proposed “The Rocks District of Milton-Freewater” AVA. The comment period is open until April 28, 2014, and comments can be submitted online.
The proposed 4.9 square mile AVA is located just south of the Oregon/Washington border, in the southern part of the Walla Walla AVA, which in turn is nested in the Columbia Valley AVA. If TTB approves the new AVA, Washington wineries sourcing grapes from there will have to have their wines “finished” in Oregon in order to use the AVA name on their label pursuant to 27 CFR 4.25(e).
Wine blogs may end up playing a role in petitioner’s efforts to secure an AVA. Petitioners must submit evidence that the proposed AVA name is “currently and directly associated with an area in which viticulture exists.” The notice of proposed rulemaking cited two wine blogs (Washington Wine Report and Wine Peeps) that have referred to the area as “the rocks” in the section discussing “Name Evidence.” The petition submitted in support of the new AVA can be found through this link.
Dickenson, Peatman & Fogarty has represented a number of AVA petitioners before the TTB. For more information on AVA petitions, please contact Carol Kingery Ritter at firstname.lastname@example.org or John Trinidad at email@example.com.
Napa County Winery Audits: What are the odds?
St. Helena City Council Rescinds Amendments to Small Winery Ordinance
St. Helena’s City Council unanimously voted to approve an emergency ordinance repealing recently passed amendments to the Small Winery Ordinance. We wrote about this matter earlier in the week. Tuesday’s vote prevents the amendments from being put on the November ballot as a referendum item, and effectively reopens debate regarding the proposed amendments.
A video of Tuesday’s meeting is available on the City Council website.
St. Helena City Council Will Consider Rescinding Amendments to Small Winery Ordinance
Lot 18 Secures Brick & Mortar Retail License from NYSLA
Over the past year, the New York State Liquor Authority has wrestled with how to treat third party wine marketers like Lot 18. As we discussed in an earlier blog post, the NYSLA questioned whether third party marketers were essentially operating as unlicensed alcohol beverage retail business.
Although the NYSLA has promised to issue additional guidance for third party marketers, Lot 18 decided not to wait, and instead applied for a retail liquor store license which would allow them to legally ship wine to New York state customers. On January 14, 2014, Lot 18 representatives appeared before the NYSLA to answer questions related to their May 2013 application for a liquor store license for a storefront located at 2 Clark Place in Mahopac, New York. Lot 18 provided an overview of their online and brick and mortar operations, how orders and funds would be processed, how they would work with other marketers. After some deliberation, the board approved Lot 18’s request, and a declaratory ruling should issue in the next few weeks.
Lot 18’s decision to secure an alcohol beverage retail license is an interesting move by one of the most widely recognized online wine businesses. Most third party marketers have been operating based on an assumption that their business model does not require a state alcohol beverage license. Lot 18 went through a nine month process to apply for and secure a retail license, which will allow them to reach consumers in New York, which is second only to California in direct-to-consumer wine shipments (according to the ShipCompliant / Wines & Vines 2013 Direct to Consumer Wine Shipping Report).
DP&F does not represent Lot 18 in this matter.
Five Key Points for Alcohol Beverage Distribution Agreements
Recently, Bahaneh Hobel, Senior Alcohol Beverage Attorney from Dickenson, Peatman & Fogarty, provided the Beverage Trade Network with some insights on the “5 Key Points You Must Cover in Your Distribution Agreements.” To review her article and learn more about important issues to consider in drafting distribution agreements. View Article
For more information or assistance on any alcoholic beverage law matters, contact Bahaneh Hobel
Sonoma Conjunctive Labeling Law Applies to Wines Bottled on or after Jan. 1, 2014
Producers using the name of an AVA entirely within Sonoma County on your wine labels take note: California law requires you to include a “Sonoma County” designation for all wine bottled on or after January 1, 2014.
In 2010, the California legislature approved a new “conjunctive labeling” law that requires wines labeled with the name of an AVA that falls entirely within the boundaries of Sonoma County (Russian River Valley, Sonoma Coast, etc.) to also carry a “Sonoma County” designation. Although the law, Cal. Bus & Prof. Code Sec. 25246, became effective on January 1, 2011, it only applies to wines that are bottled on or after January 1, 2014. In other words, there is no need for wineries to re-label wines already bottled, labeled, and in inventory prior to January 1, 2014. A full text of the Sonoma County conjunctive labeling law is found below:
CAL BUS & PROF. CODE SEC. 25246
(a) Any wine labeled with an American Viticultural Area established pursuant to Part 9 (commencing with Section 9.1) of Title 27 of the Code of Federal Regulations, that is located entirely within a county of the 19th class, shall bear the designation “Sonoma County” on the label in a type size not smaller than two millimeters on containers of more than 187 milliliters or smaller than one millimeter on containers of 187 milliliters or less.
(b) The department may suspend or revoke the license of any person who violates this section.
(c) This section shall not apply to any wine labeled with a viticultural area appellation of origin established pursuant to Part 9 (commencing with Section 9.1) of Title 27 of the Code of Federal Regulations when the name of the appellation includes the term “Sonoma County.”
(d) This section shall apply to wines bottled on or after January 1, 2014.
For more information or assistance on alcohol beverage labeling, contact John Trinidad (firstname.lastname@example.org).
This post is made available for general informational purposes only and none of the information provided should be considered to constitute legal advice
Cal Bar CLE Event for Attorneys at Kendall-Jackson
2.0 units of general MCLE sponsored by LaRiviere, Grubman & Payne,
Friday, December 6th, 9:30-2:30
The California State Bar Agribusiness Committee’s annual Winery Tour will start at Kendall-Jackson Wine Estate & Gardens in Santa Rosa, California and we will visit a nearby wine production facility and vineyard. Following the tour, attendees will enjoy a lunch prepared by Kendall-Jackson’s culinary team, together with wine pairings. During lunch, attendees will learn from leading legal experts on key issues that affect product marketing in the wine industry:
The Use & Defense of Product Appellations of Origin
Scott Gerien, Dickenson Peatman & Fogarty,
Current Issues in Advertising and Marketing
Kristen Techel, Strike & Techel,
Tour begins and ends at: Kendall-Jackson Wine Estate & Gardens
This program is $50 per person, and qualifies for 2.0 hrs of general MCLE credit.
Coffee, Light Breakfast and Buffet Lunch by Kendall-Jackson Culinary Team, and wine pairings.
Please RSVP to Tabatha Morgan (email@example.com or (831) 649-8800) $50 per person payments should made by check payable to Kendall-Jackson.
International Wine Law Educational Session Friday in Santa Cruz
This Friday. November 22, 2013, the International Wine Law Association and Continuing Education of the Bar California (CEB) will be sponsoring an educational session for wine industry professionals and attorneys on legal topics related to the international and domestic wine trade. The conference will take place at Hotel Paradox in Santa Cruz, California. There will be a morning session and afternoon session with a hosted lunch in between.
- The morning session will focus on these domestic market issues:
- Direct-to-Consumer Wine Shipping
- Third Party Providers: Unlicensed Participants in a Licensed Industry
- Wine Advertising
- Contests and Sweepstakes
- The afternoon session will focus on these foreign market issues:
- The Basics of Wine Importing and Exporting
- Protection of Brands and Geographical Indications
- International Trade Initiatives
- TTB’s Role in International Trade
Legal Highlights from CalPoly’s New Wine & Viticulture Program
Dickenson, Peatman & Fogarty attorneys Carol Kingery Ritter and Katja Loeffelholz were recently guest lecturers at Cal Poly San Luis Obispo’s new Wine and Viticulture program. The class was led by Professor William H. Amspacher who is promoting the interdisciplinary major of Wine and Viticulture. All students in the interdisciplinary major are educated about all aspects of the wine industry, with a curriculum that combines an understanding of vineyards, winemaking and wine business.
Ms. Kingery Ritter presented “Planning Your Entry Into and Exit from the Wine Industry” and discussed business planning, business structures and the acquisition of assets. Ms. Loeffelholz, a registered attorney with the United States Patent and Trademark Office presented “Protecting Your Intellectual Property Assets in the Wine Industry” which reviewed the various aspects of wine labels and packaging that can be trademarked, copyrighted and patented. Ms. Loeffelholz also presented detailed information on protecting trademarks abroad, focusing on protecting wine brands in China. Ms. Loeffelholz’s presentations can be accessed at the following links:
To learn more about the Wine and Viticulture program at Cal Poly San Luis Obispo please contact Dr. Jim Cooper at firstname.lastname@example.org. For more information on how you can structure your wine business and plan for your wine business, please contact Carol Kingery Ritter at email@example.com. To obtain more information about protecting all aspects of intellectual property in your wine label and packaging in the United States and abroad please contact Katja Loeffelholz at firstname.lastname@example.org.
New York Issues Survey re Proposed “At Rest” Legislation
For more information on wine law issues, please contact John Trinidad (email@example.com).
Disruptive Technologies: The Internet and Wine
Dickenson, Peatman & Fogarty attorney John Trinidad recently gave a presentation at the University of California-Berkeley School of Law on the impact of the Internet on the regulations that govern the wine industry. You can download a copy of Mr. Trinidad’s presentation here.
During his presentation, Mr. Trinidad provided an overview of how the spread of e-commerce influenced the Supreme Court’s landmark decision in Granholm v. Heald; discussed third party marketing, California’s guidelines thereto, and New York’s recent hearings on Internet marketing; and also summarized the U.S. Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau’s social media guidelines. He also discussed the blending of social media and mobile commerce.
For more information on third party marketing, internet marketing, or wine law in general, please contact John Trinidad at firstname.lastname@example.org.