Monthly Archives: August 2016
In an interesting combination of alcoholic beverage law and IP law, two breweries in the state of Florida recently butted heads over a trademark dispute. It started when Due South Brewing of Boynton Beach – which has a flagship series of IPAs which range from Category 3-5 – sent a cease and desist letter to Big Storm Brewing claiming that the Tampa-based brewery’s “Hurricane Series” of Belgian-style beers, labeled Categories 1-5, violated Due South’s common law trademark rights to the terms “Category 3” and “Category 4.”
While all beer labels must pass through the TTB before hitting the market, the TTB only makes sure that labels meet the compliance requirements on their checklist. They’re not checking for trademark infringement, so this type of dispute is not unheard of in the alcoholic beverage industry. It sounds like Due South is making a mountain out of a molehill, since a generic-sounding trademark on a completely different style of beer could have a tough time in court against fair-use arguments. But, there is a legal basis for their claim.
Firstly, Due South’s “Category” series is one of its most popular lines. The “Category” trademark is very valuable to them, so it’s in their best interest to take potential infringements seriously. If they don’t, it potentially becomes much easier in future disputes for imitators to argue that their use of the trademark is legitimate.
Fun fact: Due South’s Category 5 IPA placed in multiple categories of the Best Florida Beer Championships of 2014 and 2015. If the brewery’s trademark hadn’t expired last April, they surely would have included it in their claim.
Secondly, a trademark infringement claim must prove that the other party’s use of the trademark is likely to confuse consumers. In their cease and desist letter, Due South claims that they received more than 30 reports of “actual consumer confusion and/or diminution of consumer goodwill” in less than a week.
Fortunately for them, Big Storm made the smartest decision in this scenario: they consulted with a law firm. In a dense, six page response, they laid defensive groundwork citing fair-use, questioning the strength of the trademark, and denying the likelihood of consumer confusion. The legal exchange between the law firms representing the breweries can be read here.
In response, Due South appears to have dropped the issue for now to avoid potentially drawn out litigation. Overall, this serves as an excellent lesson for breweries and the benefits of retaining legal counsel.
With a presidential election upcoming, you can expect tax policies to be subject to heightened scrutiny. Proposing a tax increase of any kind is usually bad for any delegate’s political career – most of the time. Specifically, I’m talking about the so-called “sin taxes” that only apply to certain industries such as tobacco, gambling, and of course alcohol.
Increasing sin taxes is more or less acceptable to the public because part of their purpose to reduce the consumption of goods and services considered harmful. In some states, sin taxes are a major source of revenue. According to cost information website HowMuch.net, the state of Texas generated more than $1 billion in revenue from alcohol taxes in 2014. The runners-up were Florida, with $452 million and New York with $250 million.
That same year, Tennessee took in almost $148 million from alcohol taxes, accounting for about 1% of the states total tax revenue. I’m no tax expert, but that sounds low to me. Perhaps the state is comparatively lenient on the alcohol industry since producers of fine spirits are part of the state’s cultural history.
But that doesn’t mean those producers have it easy when it comes to taxes. They’re also subject to federal excise taxes (FET) on distilled spirits – which account for more than one-third of the shelf price of most alcohol brands when combined with state-levied taxes. Luckily, there is a chance those FETs could be reduced if the issue is given enough support. That’s something to keep in mind during this political season.
Alcoholic beverages have had this regulatory quirk where, even though they are considered foodstuffs, they are not required to have nutritional fact labels or ingredients lists. The reason for this is because alcoholic beverages are regulated by the TTB instead of the FDA. To date, the TTB has not put any major pressure on alcohol producers to label their products – but thanks to the largest trade association in the business, you may start to see nutrition facts for alcohol becoming widespread.
Earlier this month, the Beer Institute announced “The Brewers’ Voluntary Disclosure Initiative,” which aims to label beers with nutritional information – including a list of ingredients, serving size, calories, carbohydrates, fat, protein, and ABV.
As for how these labels should look, the Beer Institute is leaving that up to the individual breweries. The guidelines indicate that nutritional disclosures can appear as a label on the bottle, a reference to a website, or a QR code. Since the information provided is meant to be voluntary, the types of information disclosed will vary. For example, I can imagine lots of breweries not wanting to include an ingredients list.
Members of the Beer Institute are being encouraged to achieve compliance with the initiative by 2020. Several major breweries have already agreed to follow these guidelines, including:
- Constellation Brands Beer Division
- North American Breweries
- Craft Brew Alliance
Collectively, these breweries produce more than 81% of the volume of beer sold in the US – so you can expect other breweries to follow suit to stay competitive in the market.