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.

TTB Approves San Luis Obispo Coast (SLO Coast) Viticultural Area

Last week was an exciting week for producers and consumers of California Central Coast wine. On Wednesday, March 9, the Alcohol and Tobacco Tax and Trade Bureau (the “TTB”) published a final rule establishing a new “San Luis Obispo Coast,” or “SLO Coast,” American Viticultural Area (“AVA”).

The SLO Coast AVA (identified in orange below) spans approximately 408,505 acres in San Luis Obispo County and is home to over 50 wineries and an estimated 78 commercial vineyards covering approximately 3,942 acres. It lies entirely within the multi-county Central Coast AVA and fully encompasses the established Edna Valley and Arroyo Grande Valley AVAs.

Map of “San Luis Obispo Coast” or “SLO Coast” AVA. Image: TTB.

Located along the westernmost portion of the Central Coast AVA, the SLO Coast AVA is a region of coastal terraces, foothills, and small valleys along the Pacific Coast. Its westward orientation provides more marine fog and cool marine air compared to other regions of the Central Coast AVA, using the powerhouse of the Pacific Ocean to moderate temperatures and foster optimal vineyard conditions for growing early-to-mid-season grape varietals such as Chardonnay and Pinot Noir.

Aaron Wines in Paso Robles, CA falls within the boundaries of the new SLO Coast AVA and has planted 90% of its 4,000 planted acres within 6 miles of the Pacific Ocean. Winemaker Aaron Jackson is thrilled by the important addition of the SLO Coast AVA to the “few truly coastal AVAs” in the state of California. Brian Talley of Talley Vineyards in Arroyo Grande, CA shares Mr. Jackson’s sentiments, adding that the approval of the SLO Coast AVA will “drive awareness of the coastal part of San Luis Obispo County as a world class winegrowing region.”

The establishment of the SLO Coast AVA formally recognizes the unique topography, climate, and soils of the area and offers winemakers more diversity and flexibility in marketing their wines to consumers.

Effective April 9, 2022, vintners will be able to label bottles with “San Luis Obispo Coast,” “SLO Coast,” and “Central Coast” as appellations of origin if at least 85% of the wine is derived from grapes grown within the boundaries of the SLO Coast AVA and the wine otherwise meets the statutory requirements of 27 CFR 4.25(e)(3). Vintners producing wine from grapes grown in the Edna Valley or Arroyo Grande Valley AVAs can also continue to label bottles with “Edna Valley” or “Arroyo Grande Valley” as appellations of origin for their wines.

Dickenson, Peatman & Fogarty has represented a number of AVA petitioners before the TTB, including the SLO Coast petitioners. For more information on AVA petitions and labeling compliance, please contact Carol Kingery Ritter or John Trinidad.

New Laws Expand Winery Off-Site Tasting Room Privileges and Manufacturer Charitable Donation Advertising

This week, Governor Gavin Newsom signed three bills that expand certain winery off-site tasting room privileges and grant alcohol beverage manufacturers the right to advertise and promote charitable donations in connection with the sale of alcohol. The laws will become effective on January 1, 2022. We have summarized the new bills and how they amend current law below.

Number of Winery Off-Site Tasting Rooms (SB 19)

Under current California law, Type 02 wineries are permitted to operate tasting rooms only at their licensed Type 02 premises (i.e., the same premises where the winery’s wine is crushed and fermented), and at an off-site Duplicate Type 02 premises (where crushing and fermentation of wine is not permitted).  Current law permits a winery to operate only one off-site Duplicate Type 02 tasting room.

SB 19 amends Section 23390.5 of the California Alcoholic Beverage Control Act (“ABC Act”) to increase the number of Duplicate Type 02 locations that a winery can operate to two locations.

Duplicate Type 02 tasting rooms can be quite helpful for wineries to reach consumers, as they allow wineries to operate a tasting room in another location in California and sell wine to consumers there without having to maintain a production facility on the same premises.

Sale and Delivery of Consumer-Provided Containers at Duplicate Type 02 Tasting Rooms (AB 239)

Under current law, a winery may exercise all the same privileges at its Duplicate Type 02 tasting room as at its Type 02 winery premises (such as the sale and delivery of wine), with certain important exceptions. One of those exceptions is that a winery may not, at its Duplicate Type 02 premises, sell or deliver wine to consumers in containers that have been supplied, furnished, or sold by the consumer.

AB 239 amends Section 23390 of the ABC Act to delete that exception. Starting on January 1, 2022, consumers may provide their own bottles and containers to be filled at a Duplicate Type 02 tasting room premise. AB 239 provides an additional means by which wineries can provide wine to consumers that can be cost-effective for both the winery and the consumer.

Advertisements of Charitable Donations in Connection with the Sale of Alcohol (AB 1267)

Generally, California law prohibits an alcohol beverage licensee from giving a gift or “thing of value” in connection with the sale and distribution of alcoholic beverages, unless there is a statutory exception. The ABC Act permits licensees to donate to specified charities and nonprofit organizations (typically 501(c)(3)s). However, where such donations are tied to sales of alcohol beverage products and/or advertised as such – for example, when a licensee advertises that it will donate a portion or percentage of the proceeds from the sale of a product to a charity – the California Department of Alcohol Beverage Control (“ABC”) views these types of donations as “gifts” or “things of value” to consumers that “incentivize” or “entice” consumers to purchase and consume alcohol in violation of California law. During COVID-19, the CA ABC temporarily created an exception for the enforcement of this prohibition; however, this relief is limited to COVID-19 related charities only.

AB 1267 expands and codifies the CA ABC’s relief with respect to charitable donation advertising by amending Section 25600 of the ABC Act. Starting on January 1, 2022, specified manufacturers – winegrowers, beer manufacturers, distilled spirits manufacturers, craft distillers, brandy manufacturers, rectifiers, and wine rectifiers – may donate a portion of the purchase price of alcohol beverages to nonprofit charitable organizations (not limited to just COVID-19 related charities), subject to all of the following limitations:

1. The donation is only in connection with the sale or distribution of alcoholic beverages in manufacturer-sealed containers.
2. The promotion does not directly encourage or reference the consumption of alcoholic beverages.
3. The donation does not benefit a retail licensee or a charity established for the specific purpose of benefiting the employees of retail licensees, and the advertisement for any donations does not promote or reference any retail licensee. (Note that a manufacturer may identify – but not otherwise promote – the name, address, and website of two or more unaffiliated retailers who sell the manufacturers’ product being offered in the charitable campaign, subject to the restrictions in Sec. 25500.1 of the ABC Act).

Note that this new statutory exception will sunset on January 1, 2025, so unless the exception is made permanent or extended, licensees may not advertise any donations related to the sale of alcoholic beverages at all after the date.

Further Information

The bills’ text can be found on the California Legislative Information website at the following links: SB 19 (Winegrowers: tasting rooms); AB 239 (Winegrowers and brandy manufacturers: exercise of privileges: locations); and AB 1267 (Alcoholic beverages: advertising or promoting donation to a nonprofit charitable organization).

If you have any questions, please contact John Trinidad at [email protected] or Michael Mercurio at [email protected].

Taking Advantage of the New Law Allowing Service of Beer and Wine by Salons & Barbershops

As of January 1, 2017, California beauty salons and barber shops in good standing with the State Board of Barbering and Cosmetology are permitted to serve their customers, where local zoning permits,  no more than 12 ounces of beer or 6 ounces of wine by the glass for no charge.

Many of our winery, brewery and retail clients have asked whether they are permitted to sell wines and beer directly to salons and barber shops under this new rule.  Because salons and barber shops do not hold alcohol beverage licenses, they are treated like consumers under the California ABC Act and are only permitted to purchase wine and beer directly from persons who can legally sell to consumers, such as licensed retailers or licensees with retail privileges.

Licensed wineries and breweries in California luckily do have retail privileges, and thus they have the right to sell their products directly to consumers in California.  As such, they can sell wine and beer directly to salons and barbershops in the state, just as they would to a consumer.  Similarly, retail licensees with off-sale privileges may sell wine and beer to qualified salons or barbershops.  Note, however, that  licensees holding a type 17/20 license combination may only sell wine (and not beer) to consumers, including salons and barbershops.

For all such sales to salons and barbershops, licensees must ensure that they charge and collect sales tax and report such sales and taxes to the California State Board of Equalization.

For any questions, please contact Bahaneh Hobel.

ABC Provides Guidance on Passport Events

On March 4, 2016, the California Department of Alcoholic Beverage Control (“ABC”) published an Industry Advisory providing guidance to licensees, marketing companies and winegrower associations participating in “passport” marketing events.

Most passport events have the same format – consumers purchase an identifiable event glass, wrist band, passport or punch card from a marketing company or winegrower association organizing the event, which provides the consumers access to various experiences and tastings at the premises of participating manufacturer licensees (beer, wine or spirits).  The experiences and tastings are then provided to the consumers by the participating manufacturer licensees at their licensed premises to the extent such experiences and tastings are permitted under their existing licenses.  So, for example, tastings by wineries, breweries and distilleries as part of such passport events are permissible, since such licensees have the right to conduct such tastings under their licenses (subject to restrictions set forth in the ABC Act).  However, Type 17/20 licensees would not be able to provide tastings as part of any such passport event, since such licensees are not permitted to conduct consumer tastings.

While these events have been occurring for many years throughout California, ABC district offices throughout the state were dealing with licensing for these events in different and inconsistent ways (i.e., if a license was required at all, if one license could cover the whole event at all locations, if a separate license was required at each location, etc.).  As such, ABC provided the Passport Event Guidelines which set forth the conditions under which these events can be held without a license.

In order for a marketing agency or a winegrower association to organize a Passport Event without obtaining its own ABC license(s) for the event, the Passport Event has to satisfy all of the following requirements:

• The marketing organization or winegrower association is only marketing the event which is actually put on by the participating manufacturers.

• The organization sells only access to the experiences or activities that the manufacturer licensee may lawfully provide free of charge to consumers (such as tastings).

• The manufacturer licensees involved are doing no more than providing tastes of wine, beer, or distilled spirits to participating consumers under the authority of their license (which allows such manufacturer licensee to give or sell such tastes).

• There is no commingling of funds or sharing of revenue between the marketing organization and manufacturer licensee (i.e., all proceeds for the sale of the passport go to the organization, and revenue from sales of alcoholic beverages to consumers separate and apart from the tastes given during the marketing event are not shared with the marketing organization).

Events that fall outside of these parameters will require a license for the marketing company (if a license is even possible under the ABC Act), or the nonprofit winegrower association.  Thus, for example, Passport Events that include a gala dinner or tasting event where wines from multiple wineries are being poured at one location will require a temporary daily license held by the event organizer.  Or, where the tickets being sold by the organization include alcohol (in excess of the “tastings” permitted at a licensed manufacturer’s premises under the ABC Act), a temporary daily license will be required.  Note that because not all organizations are eligible for temporary daily licenses under the ABC Act (as such licenses are typically limited to nonprofit or other charitable organizations), event organizers should contact counsel or the ABC while organizing their event to determine if a license, if required, is even available to the event organizer.

For more information on licensing and other questions related to passport or other events at licensed premises, please contact Bahaneh Hobel, Partner in DP&F’s alcohol beverage law group, or Katy Barfield, Associate in DP&F’s alcohol beverage law group.

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.

DP&F Sr. Counsel Chris Passarelli’s Article on the <.Wine> TLD featured in the September Issue of Practical Winery & Vineyard Magazine

We are proud to announce Chris Passarelli’s feature article in the September 2014 issue of Wines &Vines/Practical Winery & Vineyard Magazine, regarding the ongoing controversy centered around the emerging .Wine TLD and its impact on the wine industry and consumers.  A link to the article (on page 58-59) is available here.

Chris Passarelli and Scott Gerien recently presented a continuing legal education (CLE) seminar on gTLD and brand enforcement for the 8,000+ members of the Business Law Section of the State Bar of California, which is available for download on the State Bar’s website here.