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Lawful Libations

Legal Updates & Commentary for Vineyards, Breweries, Distilleries & Farmers

Marketing Activities of Vineyards: When Do Local Zoning Laws Apply?

Posted in Agriculture and Markets, Vineyards, Wine Law, Zoning

Vineyard Wedding PicWith an increase in the number of vineyards marketing themselves as venues for wedding receptions and special events, local governments across New York State have begun enacting legislation aimed at curtailing the marketing activities of vineyards, indicating that they are seeking to protect the health and safety of their communities. Some towns and villages now require vineyards to obtain special permits or even submit site plans, a process that can often be drawn-out and arduous, before permitting vineyards to host certain events. But can municipalities regulate the marketing activities of vineyards located in a local agricultural district? The answer is: it depends.

NYS Agriculture and Markets Law

The New York State Department of Agriculture and Markets recognizes the importance marketing plays in the success and economic viability of a vineyard. In fact, §301(11) of the Agriculture and Markets Law (“AML”) expressly acknowledges that “marketing activities” are part of the “farm operation” of a vineyard when the wine served at these events is composed predominantly of on-farm grapes and fruit. The Department has also determined that on-farm wedding receptions, charitable events and other similar undertakings constitute “marketing activities” and are thus protected and cannot be unreasonably restricted by local municipalities if the vineyard is located in a local agricultural district.

Events hosted by vineyards must be:

  • directly related to the sale of the wine produced on-site
  • be composed from at least 51% of the grapes harvested thereon
  • be incidental to the retail sale of the wine sold
  • hosted by the vineyard or a customer of the vineyard, not an unrelated third-party.

If these conditions are not met, the vineyard cannot avail itself of the protections afforded by the AML and will be subject to local zoning laws.

Municipality Rights & Limits

The Department will also allow local municipalities to require a vineyard to obtain a special use permit or subject itself to site plan review so long as the process is streamlined and not unreasonably burdensome or cost prohibitive. Local municipalities can also require certain information from the vineyard about the proposed event. For example a town or village may be interested in the date and time of a proposed event, the number of people expected to attend, security information, etc.

Should a vineyard find the process to obtain approval from the local government to be unreasonable or arbitrary and capricious, the Department may review the matter pursuant to its powers under §305-a of the AML.

Take-away for Vineyard Owners & Operators

It is important for owners and operators of vineyards to understand that not all marketing activities will be protected by the AML. Even more important is the requirement that vineyards maintain sufficient records which conclusively demonstrate that the marketing events hosted are incidental to the annual sales of the vineyard’s wine. Moreover, the local government may require the vineyard to submit an annual report that confirms the incidental nature of the marketing events.

The AML protects vineyards located within a local agricultural district from unreasonable regulations promulgated by municipalities and can be a good friend when a vineyard’s rights are being infringed upon.

Couple’s Dream of a Family Winery Crushed by Zoning Board Decision

Posted in Agriculture and Markets, Vineyards

A Southold couple’s dream to build a winery and continue operating a tasting room at their Old North Road residence seems all but lost after a recent ruling of the Southold Town Zoning Board of Appeals. The Town Zoning Board denied their requests for variances that would allow the winery and tasting room to operate on the same parcel they call their home. The Board also denied the couple’s request for an area variance that would allow the winery to be constructed 60 feet from the front yard lot line, where a 100-foot setback is required.Winery

Regan and Carey Meador purchased the 23.5-acre parcel in 2012 with the intention of raising their young family there and also operating a family-run winery. However, because the development rights for all but one acre of the lot had been transferred to the Town of Southold through its Farmland and Open Space Preservation Program, the remaining one acre, on which a single-family residence is situated, is too small for both uses, according to the Southold Town Zoning Code. Unlike Suffolk County’s Farmland Program, Southold Town prohibits agricultural processing facilities, like wineries, to be located on preserved farmland.

As per the Code, the Meadors’ proposal runs afoul of the “bulk schedule”, which requires a minimum of two acres of developable land per use. Because 22.5 acres of the property is preserved farmland upon which they operate their vineyard, the remaining one-acre lot is substantially undersized for both their residence and the proposed winery, according to the Zoning Board. The Meadors argued that the entire 23.5 acres should be considered as part of the family’s farm operation, thus eliminating the need for variances from the “bulk schedule”. The Zoning Board, however, did not find that argument persuasive and unanimously denied the couple’s application. It remains to be seen whether an appeal of the Zoning Board’s decision will be taken.

Adding to the Meadors’ problems, the New York State Liquor Authority has scheduled a hearing to determine if the winery’s liquor license should be revoked, since it has been operating without the proper local permits in place.

“Masquerade” Wine Trademark Refused, Too Similar to “Mascarade” Mark on Mixed Drinks

Posted in Trademark, TTAB, USPTO

In January I wrote about a decision from the Trademark Trial and Appeal Board (“TTAB”), in which the TTAB said that a beer brewer could not register a trademark too similar to a trademark for a wine product.  Trying to save its trademark application, that applicant argued that a consumer would not be confused over the source of its IPA beer as against the similarly-trademarked wine product, since wine is different from beer; they are different classes of product.  TTAB rejected this argument and affirmed the denial of IPA brewer’s trademark application.

I’d like to highlight another TTAB decision from that month that underscores this point, and offers a few others that a beverage producer should be aware of.  The decision is called In re 8 Vini, Inc., Serial No. 85857391 (Jan. 16, 2015) (not precedential).  The narrative is similar.  The applicant desired to register the mark MASQUERADE for use on wines.  A mark called MASCARADE already existed, but was registered for use on mixed drinks containing alcohol and fruit juice, not wines.  The Examining Attorney refused registration; the applicant appealed.

Mascarade Liqueur

Recall that TTAB analyzes “two key considerations”: (1) how similar the marks are and (2) how similar the goods or services are.  With respect to the second factor, TTAB held–again (see my prior post)–that consumers presented with both trademarks could be confused as to the source of goods, even though one trademark was approved for use on mixed drinks only, and the applicant sought approval for use on wine only.  First, TTAB noted a handful of examples in which a trademark was approved for use on both wine and mixed drink products.  Therefore, consumers understand that single trademark may be used on both types of alcoholic beverages.  Second, TTAB noted that because wine is sometimes an ingredient in a mixed drink (providing its alcohol content), wines and mixed drinks are related in the minds of consumers.  TTAB looked to and cited websites containing such recipes, including infodrinks.com, drinksmixer.com, kimcrawfordwines.com, and Wikipedia.

As for the other “key consideration”–how similar the marks are–TTAB determined that although words are technically different, “consumers are likely to attach similar meanings to the marks.”  The test, in TTAB’s words:

The proper test is not a side-by-side comparison of the marks, but instead whether the marks are sufficiently similar in terms of their commercial impression such that persons who encounter the marks would be likely to assume a connection between the parties.

The applicant argued that its MASQUERADE mark and the existing mark MASCARADE have different meanings; the former refers to “party at which people wear masks and often costumes,” and the latter means “farce,” in French.  The applicant also argued that the words are pronounced differently (any linguists care to weigh in?  I would personally say them the same way).  TTAB rejected both arguments, finding that an average American consumer would not parse the words so finely: they “will simply perceive the term ‘mascarade’ as it is, most likely as an alternate or variant of the term ‘masquerade,’ or even as an intentional misspelling of ‘masquerade.'”

What the takeaways here?  First, it seems to be an uphill fight to register a mark similar to an existing mark, even though the two marks are used on different alcoholic beverages.  Softening TTAB’s stance somewhat, however, is that TTAB stressed in its opinion “there is no per se rule that all alcoholic beverages are related.”  So hope is not all lost for a beer brewer wishing to register a mark similar to another that is used on another type of alcoholic beverage.  Second, this opinion hints that TTAB may not believe the average consumer appreciates the more fine nuances between words, neither in meaning nor sound.

Can an IPA Beer Trademark Be Confusingly Similar to a Wine? TTAB says “Yes”

Posted in Trademark, TTAB, USPTO

As a brewer (or seasoned beer drinker), you might think that a trademark for an IPA–with “IPA” in its name–could not possibly be confusingly similar to a wine product that bears a similar name, but without “IPA” in it.  An IPA is not a wine; a wine is not an IPA.  But an opinion last year from the Trademark Trial and Appeal Board suggests that, at least before that tribunal, you’d be wrong.  Though the opinion is not binding on courts, it suggests that brewers and wineries should be cautious to adopt a name for their product that is similar to an existing name for another product, even if that other product is a different class of alcoholic beverage.

In In re High Water Brewing, Inc., Serial No. 85886282 (Oct. 3, 2014) (not precedential), the applicant High Water Brewing, Inc. (“High Water”) sought registration of the mark NO BOUNDARY IPA on the Federal Principal Trademark Register.  The Principal Register is where most trademarks are registered, since such registration conveys to a trademark the presumptions (albeit rebuttable) that the trademark is valid, and that the applicant is the exclusive owner of the mark.  High Water sought registration of the No Boundary IPA mark for use, as the name suggests, on beer.

The applicant High Water ran into a roadblock: the Trademark Examining Attorney had refused registration: she argued that the mark too closely resembled an already-registered mark called NO BOUNDARIES, which was approved for use on wine, but not beer.  The Examining Attorney argued that consumers would likely be confused between the two marks.  “Likelihood of confusion” is a phrase you will see in many trademark application decisions and discussed in many trademark infringement lawsuits. It’s not complicated; the term simply means what it suggests: the degree to which consumers in the marketplace will be confused between the two marks.  The “consumer” is considered to be an average one, in the market for the trademarked products or services.  The “average” consumer is not particularly shrewd or discerning.  She’s average.  As you might think, the more similar the actual marks are, and the more similar the trademarked products or services, the greater the potential for consumer confusion, courts say.

In this particular case, the applicant appealed the determination of the examining attorney to the Trademark Trial and Appeal Board, commonly referred to as the TTAB.  High Water’s main argument to the TTAB: it sought approval for its mark for use only on beer, whereas the existing NO BOUNDARIES mark was only approved for use on wine.  High Water explained that it chose NO BOUNDARY IPA as the name because it “suggests to the consumer” that its beer is “not the typical India Pale Ale,” and that the beer is an “edge-pushing stylistically adventurous beer crated for [the] thrill-seeking IPA enthusiast.”  So, the argument followed, how could a consumer of wine and beer be confused between the two?  Obviously, no drinker would confuse High Water’s IPA with wine, High Water argued to TTAB.  In High Water’s words: “it is an extreme rarity that beer and wine ever emanate or are sponsored by the same source. It is the exceptional case for a winery to also be a brewery or for a brewery to also be a winery.”

TTAB did not agree.  It affirmed the examining attorney’s refusal to register the  mark.  First, the TTAB determined that the two marks were similar, finding that: (i) the “NO BOUNDARY” part of the mark was the “dominant element” of the mark; and (ii) the singular and plural uses of the term did not matter.  NO BOUNDARY IPA therefore became nearly equivalent to NO BOUNDARIES–the existing mark.

Second (and more interestingly), the court noted that numerous existing marks were  used on both beer and wine, undermining High Water’s argument that consumers separated in their minds the two types of beverage.  Because consumers are presented in the marketplace with marks used on both beer and wine, consumers could think that the two marks were used by the same producer.  The court provided the following example, among others:

High Water has since abandoned its mark.  I think TTAB’s opinion is important for two reasons.  First, in the context of trademark registration, breweries should be careful to seek registration of a trademark for their product that is similar to one already used for a wine product, and vice versa.  Second, though this opinion is not precedential (i.e. not binding on a court), it suggests that even an already-registered mark may be susceptible to an action for trademark infringement by a rival.  One can conceive of the scenario where an owner of wine products seeks to expand into the beer market (or vice versa), and attacks a junior mark used on beer (one registered later in time) that is similar.  A plaintiff in that case could adopt an argument based on this opinion.

Beck’s Drinkers Confused Over Beer’s Origin Proceed to Class Certification

Posted in Labeling and Advertising, Litigation, TTB

You’re a brewer ready to launch a new label.  You received approval from the Alcohol and Tobacco Tax and Trade Bureau for your label.   You’re ready to go; you launch.

A few months later, you’re served with a lawsuit.  The plaintiff is a consumer, perhaps in another state.  The plaintiff alleges that some aspect of your label is misleading, and they seek to certify a class of similarly-minded consumers against you.  “But my label is fully complaint,” you say, “approved by the federal government!”

This has been a common defense trotted out not only by brewers, but by manufacturers of any food or beverage whose labeling is regulated by some government entity (FDA is a common one).  Sometimes this defense succeeds, sometimes not.  I’d like to highlight a recent opinion from the Southern District of Florida in a case against Anheuser-Busch (“AB”) concerning its Beck’s brand, in which this defense failed AB in its attempt to dismiss the case in its early stages.

The opinion is lengthy, so let’s hit on only the key points.  Plaintiffs are consumers of Beck’s residing in Florida, New York, and California.  They sued under the states’ respective consumer protection statutes:

Their claim?  That the labels on Beck’s misled them.  They:

believed they [we]re purchasing German beer, imported from Germany, brewed using German requirements and with German ingredients, when in fact, they [we]re purchasing beer brewed in St. Louis, Missouri … with ingredients from the United States.

Specifically, the plaintiffs pointed to the following statements:

  • “Originated in Germany”
  • “German Quality”
  • “Brewed Under the German Purity Law of 1516”

The plaintiffs say they were harmed because the St. Louis-produced beer had “less value” than what they thought they were getting: beer produced in Germany.  The purchases of a handful of plaintiffs is minuscule, so the plaintiffs filed their complaint as a putative class action, meaning they were asking the court to certify a class down the road consisting of all purchasers who were similarly duped.

AB moved to dismiss the case.  I’ll discuss two of its main arguments.

First, AB argued that its statements are protected by safe harbor provisions in the Florida and New York statutes.  For example, New York General Business Law states:

In any such action it shall be a complete defense that the act or practice is, or if in interstate commerce would be, subject to and complies with the rules and regulations of, and the statutes administered by, the [F]ederal [T]rade [C]ommission or any official department, division, commission or agency of the United States as such rules, regulations or statutes are interpreted by the [F]ederal [T]rade [C]ommission or such department, division, commission or agency or the federal courts.

The court determined that AB was not entitled to “safe harbor” protection under these statutes.  Even though TTB had approved AB’s labeling, the plaintiffs alleged that the labels (on the cans and bottles themselves) were not visible to a consumer until after she purchases a 12-pack of cans (which are fully enclosed by a container) or a 6-pack of bottles (unless the consumer removes a bottle from the carton and inspects it).  The court also noted that the plaintiffs took issue with AB’s “overall marketing campaign,” which is beyond TTB’s purview, and not regulated by any federal agency.

Second, AB argued that no reasonable consumer could be deceived by its representations.  It pointed to its bottles and cans of Beck’s, which stated: “Product of USA” and “BRAUEREI BECK & CO., BECK’S © BEER, ST. LOUIS, MO.”  But the court found that these statements were hard to see (they were on the underside of the can) and a reasonable consumer would not necessarily look at them before deciding whether to buy Beck’s.  AB also argued its claim of “German Quality” constituted “puffery.”  “Puffery” is a legal term of art that refers to general, subjective, or unverifiable claims that cannot be substantiated; they cannot be proven true or false, like “the Best Cup of Coffee in New York!”  An advertiser cannot be held liable for those.  The court said, however, that the “German Quality” statement, when evaluated in connection with other statements, was not “puffery.”  Personally, I’m not sure I agree–how can one prove that statement is false?–but there you have it.

The parties are currently briefing plaintiffs’ motion for class certification.  If they fail, plaintiffs would suffer a major blow: their potential damages, individually, are a pittance.  The case would likely go away.  If they succeed, the amount of potential damages becomes meaningful, and the case would go forward.  I will track this case and post any interesting updates.

Beer Wars: Lucasfilm Strikes Bock

Posted in Labeling and Advertising, Litigation, Trademark, USPTO

Empire Brewing Co., a small Syracuse-based brewery will need the force to be on its side as it readies to do legal battle with Lucasfilm, the production company responsible for the Star Wars saga.

The Brewery recently applied to the United States Patent and Trademark Office (“USPTO”) to register its “Strikes Bock” brew, a seasonal lager the brewery has been producing for nearly seven years. According to Empire there was never a need to seek a trademark in the past because it was only served in-house. However, the brewery now has plans to bottle and label the beer and make it available for sale in retail establishments. Thus the need for a trademark.

But when Lucasfilm caught wind of the application it filed a notice of opposition with the USPTO. In its filing, Lucasfilm argues that the “Empire Strikes Bock mark is virtually identical in sound, appearance and connotation to Lucasfilm’s The Empire Strikes Back mark.” It further alleges that, “Lucasfilm and/or its licensees have used the Skywalker mark in connection with wines produced from Skywalker Vineyards” and “for decades, consumers have been exposed to and understand that Lucasfilm’s Star Wars Film Franchise marks are used in connection with such products.”

The brewery has until November 24, 2014 to file its response to the notice of opposition.

A copy of Lucasfilm’s notice of opposition can be found at http://ttabvue.uspto.gov/ttabvue/v?pno=91218848&pty=OPP&eno=1

Diageo and The Explorers Club Settle Trademark Dispute, Enter Licensing Agreement

Posted in Labeling and Advertising

In a previous post, I wrote about a successful trademark infringement lawsuit initiated by The Explorers Club, in which it obtained an injunction against Diageo’s selling of its Johnnie Walker Explorers’ Club Collection whiskey line.

After the injunction was ordered on August 4, The Explorers Club and Diageo entered settlement talks.  Those negotiations bore fruit, as announced by the two parties in a recent joint press release.  Under the settlement agreement, the terms of which have not yet been released, Diageo will license The Explorers Club’s trademark for use in connection with the Johnnie Walker brand.  The President of The Explorers Club, Alan Nichols, lauds the deal:

Under the agreement, Diageo will license The Explorers Club trademark for use in the Johnnie Walker Explorers’ Club Collection. The Explorers Club will be directly incorporated into the promotion of the product line, providing a unique global opportunity to raise awareness of the legacy and mission of the Club and its members.  This agreement ensures the continued protection of the history, tradition, and strength of The Explorers Club name and trademarks, and the sponsorship serves as an extraordinary new platform for The Explorers Club as the World Center for Exploration.

It is good and refreshing to see a litigation result in an amicable solution between formerly adverse parties, and the likely legally correct result reached.

Harsh Winter Allows New York Wineries to Use Out-of-State Grapes

Posted in ABC Law, Agriculture and Markets, Labeling and Advertising, Vineyards, Wine Law

For the first time since 2005, the New York State Department of Agriculture and Markets is allowing New York wineries to produce wines with grapes grown out-of-state.  The move comes after New York suffered through one of the harshest winters in recent memory, which resulted in wide scale damage to vines and resulted in a drastic reduction of 2014’s grape yield. Some vineyards even experienced trunk damage so bad that entire plants needed to be replaced.

Pursuant to §76-a(5)(b) of the New York Alcoholic Beverage Control Law, “no licensed farm winery shall manufacture or sell any wine not produced exclusively from grapes or other fruits or agricultural products grown or produced in New York.” The law, however, provides an exception to this requirement where more than 40% of a specific grape varietal is destroyed by a natural disaster, Act of God, or continued adverse weather.

In order to be designated as a New York wine though, federal law requires that at least 75 percent of grape contents must have been grown in New York. It is still too early to know whether New York wineries will be able to meet this condition.

The grape varietals which are included in the Department of Agriculture and Market’s declaration are: Riesling, Cabernet Franc, Pinot Noir, Chardonnay, Gewürztraminer, Merlot, Pinot Gris, Cabernet Sauvignon, Lemberger, Syrah, Gamay Noir, Brianna, Frontenac, La Crescent, and Noiret.

Wineries interested in using out-of-state grapes will need to complete the Department of Agriculture’s application found at http://www. agriculture.ny.gov/AP /Farm_Winery_ Application.pdf.

Johnnie Walker “Explorers’ Club Collection” Whiskey Line Shut Down by Organization Bearing the Same Moniker

Posted in Labeling and Advertising

Diageo may not continue its Johnnie Walker Explorers’ Club Collection whiskey line, under a recent New York Supreme Court order granting a petition for a permanent injunction filed by a not-for-profit organization with the same moniker.  The facts are interesting (they always seem to be in these cases), the order well-written, and the lesson clear–so let’s take a look.

Johnnie Walker Explorers’ Club

Diageo, owner of the Johnnie Walker brand, launched its “Explorers’ Club” line of whiskey in 2012.  It was apparently quite successful, and earned Diageo around $50 million over a sixteen-month period.

The problem?  There’s an actual Explorers Club, with a storied past.  The Explorers Club, Inc. (the “Club”) is a not-for-profit organization based in New York City dedicated to, as the name suggests, to “inspire exploration” and maintain a “spirit of fellowship among all explorers.”  It was formed in 1904, and members of the Club were first to the reach both Poles, the summit of Mount Everest, and the Moon.

The Club was bothered by what it perceived to be Diageo’s attempt to profit from the reputation (and perhaps the mystique and allure of exploration fostered by the Club) the Club had built for over a century.  The Club never licensed its namesake to Diageo or otherwise allowed Diageo to use it.  The Club believed that Diageo marketed its Explorers’ Club Collection in an effort to conjoin its products to notions of adventure, travel, exploration, discovery–the very ideals the Club has promoted.  So in 2013, the Club sent a cease-and-desist letter to Diageo, telling them that Johnnie Walker Explorers’ Club “may dilute [the Club’s] property rights and serves to confuse the public.”  The two parties attempted to reach an amicable settlement but failed.

The Club brought a petition for a permanent injunction against Diageo in New York Supreme Court, New York County, to prevent Diageo from using the Explorers’ Club name.  On August 4, 2014, Judge Ramos granted that petition.  The basis for the Club’s petition lies in New York General Business Law § 135.  That statute applies to “benevolent, humane, or charitable organizations” only, and provides:

No . . . corporation shall, with intent to acquire or obtain for personal or business purposes a benefit or advantage, assume, adopt or use the name of a benevolent, humane or charitable organization incorporated under the laws of this state, or a name so nearly resembling it as to be calculated to deceive the public with respect to any such corporation. . . . [A]n application may be made to a court or justice having jurisdiction to issue an injunction, . . . and if it shall appear to the satisfaction of the court or justice that the defendant is in fact using . . . a name so nearly resembling it as to be circulated to deceive the public, an injunction may be issued by said court or justice, enjoining and restraining such actual or threatened violation, without requiring proof that any person has in fact been misled or deceived thereby.

What’s unique about this statute is that the petitioner does not need to show “proof” that the public has in fact been misled or deceived by a corporation’s use of the name.  Often, for a consumer or business to prevail under a consumer protection or false advertising statute, they need to show the court some indication that people were, in fact, deceived.  Commonly that proof is made through consumer surveys.  For example, in this case, a survey could be devised in which consumers are shown a bottle of Johnnie Walker Explorers’ Club, or an advertisement, and asked: “What comes to mind?”  If a consumer were to refer to the Explorers’ Club in any way, that would be evidence that people connect the whiskey to the charitable organization in their minds–pretty strong evidence against Diageo.  After that open-ended question, consumers would be asked some more pointed and specific questions driving at whether they form an association between Johnnie Walker Explorers’ Club whiskey and the Explorers Club.

The Explorers Club

But this statute requires none of that from a charitable organization.  Nonetheless, the Club came forward with what the court considered powerful evidence.  It provided the court evidence that the Club “received numerous inquires regarding an affiliation between the Club and the whisky, including by its own members.”  The Chair of the East Asia Chapter of the Club submitted an affidavit in which he told the court that he personally thought the Club was an official sponsor of Johnnie Walker.  The Chair of the Norway Chapter of the Club did the same.  To be sure, these are self-serving affidavits, which could be granted little weight.  But yet more evidence came from the President of the Club.  He swore in an affidavit that a sales representative in an airport duty-free shop told him that there was, indeed, an affiliation between Johnnie Walker and the Club, and that the whiskey was actually made in the Club’s New York headquarters.  This conversation was video recorded and provided to the court.  The Club also provided photographs of its headquarters and Diageo’s airport displays promoting the whiskey, showing a striking resemblance.

In his opinion, after lauding at length the accomplishments and history of the Club, Judge Ramos held that the Club sufficiently showed that Diageo adopted “a name so nearly resembling [the Club’s] to be calculated to deceive the public,” and enjoined Diageo from using the name:

The Club has demonstrated that it . . . has been using the name “The Explorers’ Club” uninterrupted for nearly a hundred years, and has retained a distinct identity.  Diageo has adopted a nearly identical name . . . In addition to this obvious similarity, the latter’s tie-ins to the Club’s image and reputation of adventure and exploration in its marketing and commercial displays are blatant. . . . [and] leads to the inescapable conclusion that . . . Diageo adopted a “name so nearly resembling [the Club’s] to as to be calculated to deceive the public.”

In what has to be a severely disappointing result for Diageo, we are reminded how quickly a profitable line can come to a swift termination after an unfavorable court opinion.  Indeed, Diageo’s website is already being scrubbed of all reference to the doomed whiskey line, and Diageo’s other customer-facing media are sure to follow.  Diageo will likely appeal; if they do, I’ll be sure to post.

Once-Settled Dispute Between Long Island’s Duck Walk Vineyards and Napa Vineyard Flares Up

Posted in Labeling and Advertising, Litigation, Trademark

Back in 2001, Long Island’s Duck Walk Vineyards and Napa Valley’s Duckhorn Vineyards were locked in a trademark dispute.  Duck Walk sued Duckhorn, and Duckhorn countersued, for trademark infringement and other claims arising out of each party’s trademarks.  A couple of years later, the two vineyards buried the hatchet and reached a Settlement Agreement, under which Duck Walk agreed to certain limitations on its labeling imagery and production.  Over ten years later, Duckhorn now alleges Duck Walk has broken that agreement, and sued in the federal Eastern District of New York.  Duck Walk attempted to nip the lawsuit in the bud by filing a motion to dismiss.

But on June 9, 2014, the court denied Duck Walk’s motion.  A brief review of the court’s opinion, which contains a quick description of the litigious history between the East and West Coast vineyards, shows us why.

Under the settlement, Duck Walk agreed to the following, among other things.

First, not to produce or bottle more than 84,000 gallons where the word “Duck” or images of ducks appeared on the label (except as the word “Duck” appeared in Duck Walk’s corporate name), effectively limiting Duck Walk’s production to that amount had they continued with their duck-related labeling (which they did).  Duck Walk  also agreed not to sell more than half of this amount outside of New York, New Jersey, and Connecticut.

Second, to place words of “geographic designation . . . as may be approved by” the Bureau of Alcohol, Tobacco, Firearms, and Explosives (which, since this settlement agreement, has been reorganized into the TTB)–such as “the Hamptons,” “South Hamptons,” “South Fork,” or “Long Island”–on the front label of all of its bottles, right above the words “Duck Walk.”

Third, to only use a picture or logo of  ducks that was attached to the settlement agreement, or one “similar” to one of those approved images.

Duckhorn contended that Duck Walk breached all of these agreements; Duck Walk argued it didn’t.  First, Duckhorn said that Duck Walk sold more than 50% of its gross production outside of New York, New Jersey, and Connecticut.  Duck Walk argued it did not, and submitted a declaration from its CEO to this effect.  The court held, though, that at this early stage of the proceeding, it could not consider these outside facts introduced by the CEO.  More factual discovery was needed–for example, a deposition of the CEO, or more documentary evidence from Duck Walk concerning its production and where that production was eventually sold.

Second (and more interesting), Duckhorn said that Duck Walk’s labels on the front of its bottles did not contain the geographic language required by the settlement agreement.  Duckhorn pointed to the following example:

The front label of Duck Walk’s merlot

Duck Walk responded that it does use the required geographic language.  It pointed to the following label that does not appear on the front of the bottle, but was approved by TTB’s predecessor, the BATF:

Duck Walk’s approved (but not used in front) label

Duck Walk then argued that the BATF considered a “front label” to be one that “contain[s] the alcohol percentage, government warnings, and product bar code.”  The label directly above contains that information.  So, as the argument went, because the above label was approved by the BATF as a “front label,” and this label contains the geographic language “North Fork of Long Island,” Duck Walk complied with the settlement agreement–even though this label did not appear on the front of Duck Walk’s bottles.  The court rejected this interpretation of the settlement agreement, saying it could not have been what the parties meant when they wrote it.  Instead, both Duckhorn and Duck Walk knew fully well that the “front label” meant the label featured prominently on the front of the bottle: the label consumers actually look at.  Who cares whether Duck Walk obtained approval for a “front label” containing the geographic language but didn’t actually use it on the front of its bottles?

Finally, Duckhorn argued that Duck Walk used duck images that were not similar to those allowed in the settlement agreement.  The settlement agreement contained the following approved images:

Approved Images

But Duck Walk used the image:

The image on Duck Walk’s labels

Duck Walk’s response?  (1) The settlement agreement did not contain restrictions on the color of the image; (2) Duck Walk “simply reduced the number of ducks featured and colored them blue”; and (3) the ducks are “the same or similar type of duck[s] that appeared” in the approved images in the settlement agreement.   The court called these arguments “absurd.”  In the court’s opinion, a “quick visual inspection of the images” demonstrated that they were quite different than those approved by Duckhorn in the settlement.

Duck Walk’s early attempt to shake off the lawsuit therefore failed, and Duckhorn’s case moves forward.  It will be interesting to see how this plays out.  Will the two vineyards reach a revised settlement agreement?  Will Duck Walk have to make a payment to Duckhorn to induce them to agree?  Or will Duckhorn take a “fool me twice…” approach and forge forward with its case, insisting on monetary damages?  If so what would those be–has Duckhorn really been harmed, and how would that be quantified?  Stay tuned; I will monitor this case and post updates as I see them.