What the Duck? Duckhorn Sues Duck Commander Wines

Pardon my pun - but it's a bad time to have a duck anywhere near your label. Several weeks ago, the prestigious Duckhorn wine company sued Duck Commander wines, owned by Wal-Mart and affiliated with the Duck Dynasty brand, for trademark infringement.

Photo Source via TMZ.

While this story is already out of the news cycle, I thought I would use this opportunity to nerd-out about wine law. A brief explanation of how most courts may examine this case will teach you a lot about the world of trademarks.

Accordingly to The Examiner, Duckhorn argues that Duck Commander ("Commander") infringed on their trademark rights, and diluted the Duckhorn brand, because consumers are confused by the two labels. The basic purpose of trademark law is to ensure that consumers can rely on marks to indicate the source of goods/services. 

Here, Duckhorn claims that Commander's mark is unauthorized because of the likelihood that consumers will associate Commander's (arguably inferior) wines with Duckhorn and think that the wines are produced by, endorsed by or otherwise affiliated with Duckhorn. In order to make a determination as to whether there is a "likelihood of confusion" or not, the court does not engage in a side by side comparison. Instead, the court analyzes several key factors, including:

1. The strength of Duckhorn's mark,
2. The degree of similarity between the two marks,
3. The proximity of the wines,
4. Likelihood of "bridging the gap,"
5. Evidence of actual confusion,
6. Commander's good faith in adopting the mark (Intent),
7. Quality of Commander's products, and
8. Sophistication of consumers.

One of classic trademark case actually discusses these factors as applied to the wine industry. In E. & J. Gallo Winery v. Consorzio Del Gallo Nero (1991), the District Court actually held that Consorzio's use of the name "Gallo Nero" (meaning "Black Rooster" in Italian) did infringe on the E. & J. Gallo name based on the similarity of the products/marks. The court made some interesting points, including: the products are similar impulse purchases because "wine is wine" and sold in similar retails stores.

On the other hand, in Banfi v. Kendall-Jackson (1996), the court ruled on the same trademark infringement issue, within the same industry, and reached a different result. This case discussed the trademark, "COL-DI-SASSO" and held that there is no likelihood of confusion, despite it's use on both company's labels. Feel like this makes no sense - then you are on the right track! So how did the court get around the precedent set in E. & J. Gallo? In Banfi, the court held the products were not similar because while they were both sold in wine stores, they were sold "in different aisles, different regions and at different price points." Suggesting that the wealthier, or more sophisticated, buyers that purchased Kendall-Jackson, would be educated enough to notice the difference. 

I would argue a similar result can be expected with the Duckhorn v. Duck Commander case. More skeptical wine writers even suggest that Duckhorn only brought the suit to gain some publicity from the recent coverage of certain Duck Dynasty cast members comments regarding the gay community. I'll leave that determination up to you!

Congratulations, you survived the first wine law post of 2014. If you want to read the full case opinions, the citations are below. Looking forward to your comments!

Cheers!

Gallo, 782 F.Supp. 457

Banfi, 74 F.Supp.2d 188

Direct Wine Shipment Laws: A Prohibition Style Hangover

Photo Source

Watch for Angry Grapes!

Yes Enthusiasts! We are nerding out about wine laws! So, why care about State Shipping laws? Well, if you have ever wanted to order wine from a favorite winery, these laws likely affect you. 

In 2011, Maryland passed a law that allowed winemakers to ship wine directly to customers (with some restrictions). I was in Maryland at the time and remember the political uproar. When the law finally passed, I figured much of the direct shipping conflict was over. But, there are still several states that prohibit direct shipment and others that place significant restrictions on the process.

So what is this conflict all about? 

Naturally, all alcohol beverage laws are traced back to the Temperance Movement, Prohibition and the 21st Amendment that overturned Prohibition. The 21st Amendment, plainly stated, places significant (and arguably all) power to regulate alcohol beverage laws with the States. Some argue that this power even supersedes Federal power. Generally, however, the States simply have the power to regulate alcohol beverage laws within their borders, while the Commerce Clause allows the federal government to regular inter-state commerce.

The traditional system is a "three-tier system." This means all alcoholic beverages are sold from the producer --> to a state licensed distributor --> then to a state licensed retailer. The direct shipment option aims to cut out the middle man and allow customers to buy wine directly from producers. The states that still prohibit direct wine shipments are highlighted in the map below.

Photo Source

Thankfully, the Feds have not been completely silent during this fight. Many States had begun reciprocity deals, where direct wine shipment would be allowed only between States who mutually agreed to allow wine shipments from their respective States. In 2005, the

Graholm v. Heald

 ruling held that under the Commerce Clause, States may not discriminate against out-of-state wineries by imposing barriers. This ruling encouraged the majority of States to switch to direct shipment, but as you notice above, there are several holdouts. Unfortunately, if your state is a holdout, you will likely have to stick with the three-tier system.

(Or you could consider moving?!) Just kidding! Here's to hoping the holdout States open up to direct shipping. There is great wine out there and customers should have access to it!

Cheers!

Wine and Law: Counterfeiting

For those of you who think wine and law go together like hot sauce and wedding cake (or more traditionally oil and vinegar) - think again! So many areas of the wine industry are intertwined with complicated legal issues, and this post discusses one of the most fascinating issues of all: wine counterfeiting.

Photo Source: Luke McGarry via Bloomberg BusinessWeek

http://www.businessweek.com/articles/2012-03-11/an-insiders-guide-to-counterfeiting-wine

Wine Counterfeiting in the News

Earlier this year, one "unlucky billionaire" was awarded $12 million dollars in punitive damages (on top of the near $400,000 in compensatory damages) by a New York jury for being sold counterfeit wine. The french wine in dispute was allegedly previously owned by Thomas Jefferson. Turns out it was fake.

While the story of one billionaire swindled by another billionaire over the sale of allegedly centuries old wine does not necessarily tug at my heart strings - this case does shine light on the growing counterfeiting problem in the wine industry. 

Wine Counterfeiting 101

The production of counterfeits is a problem across several industries, especially since counterfeiting is a lucrative business and the production of most goods moved overseas. Some common counterfeit items include: baby formula, medication and luxury fashion items. In fact, the production of counterfeit luxury handbags, sunglasses and other accessories is a billion dollar industry all by itself.

Counterfeit wine, on the other hand, remains largely only a problem in the Asian market and for high end collectors. (So no worries - that $15 bottle of reisling is probably legit). Regardless, if you enjoy a good con-artist tv show (White Collar anyone?!?!) or simply want to learn how to protect your investments, the process of counterfeiting is interesting. My research revealed the following themes for counterfeiting wine: 

1. Counterfeiters target older vintages. These bottles are more likely to sit in a collector's cellar, likely to remain closed, or if they are opened, the drinker is likely to accept potentially iffy tastes given the age of the wine.
2. Counterfeiters commonly modify the fraudulent bottle to look like the original bottle. There are several common approaches, including: relabeling, recycling, or "reverse fraud." 
   • The upside to relabeling is that it is the easiest approach, especially given today's technology. However, an examination of the cork (which may reveal the original producer) could reveal the fraud. 
   • Recycling an empty original bottle solves the problem of a faulty look, however, those empty original bottles are more costly (try over $1,000 on the black market) and high-end producers now use anti-counterfeiting techniques as a defense. 
   • Finally, reverse-fraud is the act of purchasing a real bottle, finding a reason to send it back, but sending a counterfeit bottle back and keeping the real one. That is bold sir.

According to wineauthentication.com, the top ten most common counterfeit wines include: 

Cheval Blanc 1921, 

Cheval Blanc 1947, 

Lafite 1787 Thomas Jefferson (single bottle format), 

Lafite 1870, 

Lafleur 1947, 

Lafleur 1950, 

Latour a Pomerol 1961, 

Margaux 1900, 

Petrus 1921, 

Petrus 1947. 

What do all these wines have in common? Bottom line: they are old, rare and pricey.

Photo Source: 

http://www.anotherwineblog.com/archives/5185

How does the law come into play?

Should you some day question the legitimacy of your wine and it is discovered that it is counterfeit - you have some legal remedies. Koch argued a successful claim for

fraud.

 A successful claim for fraud (in plain english) requires the plaintiff to show

somebody lied to you on purpose, with the goal of screwing you, you fell for it and you actually got screwed.

 A claim of wine fraud could be brought against someone you contracted with to buy wine or even auction houses. If you are successful, you have the ability (happily) to collect both compensatory and punitive damages.

Takeaway?

So what is to be learned from all this? #1 Don't ever but a bottle of wine from Rudy Kurniawan (most famous wine counterfeiter). #2 Do your due diligence if you are considering buying pricey vintage wine. #3 Your everyday wine purchases are likely legit.

If only the rest of us could be so lucky as to buy phony wine from a skeezey rich guy... oh well, better luck next time!

Cheers!