Earlier this week Robert had the pleasure of presenting a speech at the American Distilling Institute conference in Seattle. The speech was entitled “Needs Correction: 9 Common Label & Formula Controversies for Spirits at TTB.” A copy of the PowerPoint is here. The speech covered common Needs Correction issues such as proper class/type statements for moonshine labels, when age statements are required and prohibited, and the term “craft.” On the formula side, the speech covered when a formula approval is and is not required, and common issues that can make a fairly slow system even slower.
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Wine Growlers
Environmentally-conscious and corkscrew-phobic wine lovers alike will be thrilled to hear that TTB issued a ruling on March 11, 2014, allowing the filling of wine growlers by TTB-licensed tax-paid wine bottling houses (“TPWBH”). The ruling is in response to a new Washington state law allowing state-licensed wineries to sell wine off-site in kegs or “sanitary containers” (i.e., growlers) for off-premise consumption. Oregon passed a similar law in April 2013.
These laws are particularly helpful to wineries that operate both a production facility and a separate tasting room, allowing them to fill growlers for off-premise consumption at either location. The TTB ruling is somewhat less helpful to wine retailers, requiring that they go to the extra trouble of becoming TPWBH-licensed and comply with label and recordkeeping requirements.
Some wine retailers complain that it is unfair to not allow non-TPBH wine shops to sell growler fills to-go, since beer shops currently enjoy that privilege. TTB explains, the Internal Revenue Code (“IRC”) “has very specific requirements regarding the bottling of taxpaid wine. Section 5352 of the IRC requires any person who bottles, packages, or repackages taxpaid wine to first apply for and receive permission to operate as a taxpaid wine bottling house. There is no analogous provision with respect to beer.” The current TTB ruling interprets growler filling as bottling or packing and, therefore, restricted to TPWBH-licensed vendors.
Pom v. Coke, Battle of the Misleading Fruits
The U.S. Supreme Court, on January 10, 2014, agreed to hear Pom’s argument that Coke’s fruit beverage labels (such as the one at right) are misleading. The excellent FDA Law Blog has good coverage of the controversy here. Coke’s Minute Maid product only has a tiny amount of pomegranate juice — less than 0.5% — and so Pom (rather than the government) argues that this is misleading especially inasmuch as the labels show pictures of pomegranates.
Pom’s superfamous lawyer argued:
This is a classic false advertising case. Pom and Coca-Cola compete directly in the market for pomegranate juices. Pom sells juices that—as purchasers would naturally expect—overwhelmingly contain actual pomegranate juice, which is sought by healthconscious consumers. Pom’s products include a pomegranate-blueberry juice. Coca-Cola sells and aggressively markets its competing “POMEGRANATE BLUEBERRY” juice, which it colors a deep purple and sells with a label containing a large image of each fruit. … Coca-Cola’s misleading label causes consumers to believe that the juice actually contains significant amounts of those fruits when in fact it contains only trivial amounts: 0.3% pomegranate juice and 0.2% blueberry juice. … Pom introduced survey evidence showing that consumers are in fact seriously misled.
Pom also quotes a key part of the government’s brief: “Further, the ‘FDA does not approve juice labels, and its failure to initiate an enforcement action cannot be construed as such an approval.'” Other juicy tidbits courtesy of Pom include: FDA and the FDC Act “sets a ‘floor’—not a ceiling—on federal regulation of labels.” Pom explains the sweeping importance of this case, and why it is so ripe for review:
Even if it were limited to food products, the ruling below grants tens of thousands of food and juice producers sweeping immunity with respect to countless products from liability under the Lanham Act for even knowingly misleading consumers. … The government recognizes that the court’s “deference to FDA’s available but unexercised authority would arguably preclude a Lanham Act challenge to the label of any food,” including “the many foods that FDA’s regulations do not specifically address at all.” … As the GAO has confirmed, the FDA “generally does not address misleading food labeling because it lacks the resources to conduct the substantive, empirical research on consumer perceptions.'”
By contrast, Coke not surprisingly argues “the FDA has adequate resources to regulate the content of food and juice labels.” Coke further argues:
whether a multi-fruit juice name or label is deceptive is not only within the FDA’s expertise, but is a topic that the FDA has already addressed in detailed and specific regulations. … As the United States correctly observes, the regulation “reflect[s] the agency’s balance of competing considerations in a specific setting that could easily be upset by the intrusion of a general private remedy such as that provided under Section 43(a) of the Lanham Act.”
Getting deep into the nitty gritty of the labels at issue and the rules, Coke proudly proclaims “Here, the letters ‘FLAVORED BLEND OF 5 JUICES’ comply with this specific regulation because, as is clear from the image …, they are more than one-half the height of the words ‘POMEGRANATE BLUEBERRY.'” Coke claims it is a big (“hyperbolic”) exaggeration to say FDA lacks sufficient resources to regulate food labels.
If Pom wins this battle, it will seem to be another sign that the government, step by step, as it gains powers in some areas, continues to relinquish power in other areas, to allow large segments of statutory and agency mandates to be effectively privatized (or libertarianized). For example, as here, Pom and other Coke competitors would become the reviewers of Coke’s labels every bit as much or more compared to what FDA might have done in the past. This case could have enormous implications far beyond FDA labels, and could extend all the way over to TTB labels, TTB formulas, excise taxes, TTB permits, to almost every area that alcohol beverage regulators have firmly controlled in the past. In other news, this case provides a wonderful forum for Pom to beat up on Coke, and remind everyone that Pom has more juice, up and down the U.S. court system, year after year (since at least 2008). I wonder how the cost of this lawsuit compares to or relates to an old-fashioned ad campaign in the paid media.
From our perspective, working with thousands of labels and hundreds of such questions (from the trivial to the weighty) on a yearly basis (as opposed to an appellate litigator or a judge dealing with this from time to time when it flares up big) it seems clear that such tricky questions will inevitably get “litigated.” The only question is whether they will get litigated in an agency proceeding (as has been common in the past), the media, amongst lawyers battling apart from a court or agency proceeding, or in the courts (as was fairly rare in the past). To the extent that Pom wins, we can expect a huge shift from the first to the last.
Wine Trademarks in China
All the while you tend your vines, and the U.S. market for the fruits thereof, your precious brand names may be vulnerable to poaching, in the world’s most populous country. Lindsey Zahn points out the risks in a recent article in the Cornell International Law Journal Online. The article is entitled “No Wine-ing: The Story of Wine Companies and Trademark in China” and it was published on November 4, 2013. It points out the risks and opportunities, and provides a good overview of how China treats wine trademarks, and how that differs from the U.S. system. Lindsey is a lawyer specializing in wine law and food law, and she is a frequent writer on such issues at winelawonreserve.com.
In the article, Lindsey explains:
China follows a “first-to-file” rule for trademark registration. This means that the first person to file a trademark application with the China Trademark Office (“CTMO”) is usually granted the registration rights. Prior use of a mark in commerce generally affords little or no protection to a trademark applicant in China. By contrast, the United States Patent and Trademark Office considers whether the applicant is the first to use or intends to use the mark in commerce.
If a business even contemplates entering the Chinese market, it is generally recommended that a trademark application be filed before any product or service is present in China’s market. Failure to file trademark registration can allow third parties—referred to as brand “squatters”—to register the mark. This presents many problems: the prior registration of the mark can block the true brand owner from registration or force the owner to change its name to enter the Chinese market. Other times, a brand owner is forced to pay exorbitant fees to the third party registrant in order to procure the rights to the mark.
This is an important and timely topic, and the rest of the article is here. TTB has lots of good information about alcohol beverage law in China, here.
Of DSS, SOC and LabelVision
Well here I sit, writing on day 15 of the shutdown. All the government stuff I need (such as COLAs Online) is unavailable. Thank goodness that all the private stuff is available. It takes a lot of public and private resources to make this blog go. That is, on the private side, I need my web server, my ISP, my WordPress, Google, a bit of AC power, etc.
Increasingly, I also need my LabelVision. LabelVision is a tremendous resource, provided by the people at ShipCompliant. It provides various ways to scour TTB’s label database, even when TTB’s systems are down. LabelVision enabled me to quickly find the WinterJack COLA as above. To find this label, my other and much less appealing options would have been to wait until TTB re-opens someday, or jump in the car and drive around until I find this new product.
I had a sudden need to look at this Tennessee Cider label in order to explore what is new and current in distilled spirits specialty (“DSS”) labeling, and the statements of composition (“SOC”) that go along with this category of spirits. To recap, where you have a common type, set out in the regulations, it is sufficient to mention simply VODKA or RUM or TEQUILA or WHISKEY. But where you have something more like miscellany, it is necessary to provide, on the front label, a “statement of composition.” This needs to appear near the “fanciful name” (and “brand name”) — and needs to match the SOC as suggested on the approved formula (formula approval is required for all DSS products). Most suggested SOCs have the alcohol base, then flavors, then colors, with very little extraneous matter. And so, the “normalized” SOC, here, would be LIQUEUR, WHISKEY, CARAMEL COLOR. Not too enticing.
So, with plenty of marketing prowess, the mighty Jack Daniel Distillery has substantially rearranged the various terms. Even the smallest changes (such as changing WITH NATURAL FLAVOR to WITH NATURAL FLAVORS) can cause delays, needs correction notices and rejections. Here, it seems Brown-Forman changed what would have been the TTB-suggested SOC, to add a whole lot of puff. All these words got added to the SOC: A, SEASONAL, BLEND, OF, APPLE, CIDER, JACK, DANIEL’S®, TENNESSEE. All these words got removed (from the SOC): CARAMEL COLOR. That is, the most-probably-suggested-SOC and the approved-label’s-SOC do not have a whole lot in common. And yet the label got approved.
I am not trying to suggest that there is anything wrong with the label or the SOC at issue. Instead I am using this label as an example of how the seemingly simple requirement, to put an SOC on the front, can raise many legal issues. Should the caramel be shown in the same font and color as the remainder of the SOC? With the caramel moved a line below the SOC, would it be ok to move it a bit more, such as to the back label? At what point does the puff, in the SOC, go too far and crowd out and obscure the true SOC? Could Brown-Forman add the caramel to the whiskey component, rather than the end product, in order to de-emphasize or avoid label references to color? For every approval like this, with a “creative” SOC, how many times did TTB press for an SOC that much more closely matches what is suggested on the formula approval?
Tobacco Vodka
Turning against the tide of a great many cake and candy flavored vodkas, this brand has cut in the direction of something rather surprising — tobacco flavored vodka. Credit to Robert Back of International Spirits (Jacksonville, Florida) for pulling this off. It probably was not easy, and it comes complete with a disclaimer that THIS PRODUCT DOES NOT CONTAIN ANY TOBACCO OR NICOTINE. The regular, flavored vodka version is here. The menthol version is here (distilled spirits specialty). The company explains:
“With over 45 million people in the United States identifying themselves as smokers, our new tobacco flavored vodkas will be sure to find a niche in the already crowded flavored vodka market,” said International Spirits’ CEO Tony Elward. “We’re also confident that non-smokers will enjoy the new tobacco flavor product as our customers are always looking for the next big thing.”
Ivanabitch Traditional Tobacco Vodka features a bold taste of smoky vanilla blended with sweet caramel. The Menthol Tobacco Vodka features the same taste as the Traditional Tobacco Vodka with a hint of mint.
A product of the Netherlands, all flavors of Ivanabitch are formulated using all-natural flavorings, are 70 proof and five times distilled and then filtered over active charcoal.
Although I don’t think anyone should hold their breath for a nicotine flavored or infused vodka, the next logical step might be something like this Perique Tobacco Liqueur (made with tobacco, unlike what is in the disclaimer above). So far, I don’t see any sign of TTB approval on Perique.
