August 8, 2014
Label approval is not only important for regulatory purposes, but also for trademark registration. Brewers and distillers tend to be creative in their naming and packaging of products and to make sure that creativity is properly protected, label approval is essential.
In order to apply for registration of a trademark (unless filed on an intent to use basis), the trademark must be “used in commerce.” A mark is “used in commerce” when it is used in the ordinary course of business and when its transportation or sale affects interstate commerce. In other words, if you want to apply to register the trademark for the name of a beer that you have produced, you cannot apply (except on an intent to use basis) until you have sold that beer to a customer (and a mere token sale to establish “use in commerce” is insufficient) and offered it to customers that travel across state lines.
For most businesses, this is not problematic; it produces a product, offers it for sale, and completes a transaction. For breweries and distilleries alike, however, the labeling of their products is governed by the Alcohol and Tobacco Tax and Trade Bureau (the “TTB”) whenever the beer is going to sold into other states. All labels for such alcoholic beverages must be approved by the TTB prior to sale and, in fact, many alcoholic beverage producers must obtain formula approval prior to seeking a Certificate of Label Approval (“COLA”). For a list of distilled spirits subject to the formula evaluation requirement, see http://www.ttb.gov/industry_circulars/archives/2007/pre-cola_eval_spirits.pdf. For a list of malt beverage products subject to the formula evaluation requirement, see http://www.ttb.gov/industry_circulars/archives/2007/pre-cola_eval_beer.pdf. For those products subject to formula evaluations, label approval cannot even be sought until the formula evaluation is complete.
Once the formula evaluation, if necessary, is complete, a producer can seek label approval from the TTB. For more information on the COLA process, see http://www.ttb.gov/labeling/labeling-resources.shtml.
The reason COLA is necessary prior to obtaining a trademark is distilled in Tassel Ridge Winery, LLC v. Woodmill Winery, LLC, Case No. 5:11-cv-00066-RLV-DSC, 2013 WL 5567505 (W.D. N.C. Oct. 9, 2013). In that case, a wine producer sued another wine producer for trademark infringement over the trademark “RED, WHITE, & BLUE” for wine. The alleged infringer sought cancellation of the plaintiff’s trademark by asserting a counterclaim for trademark infringement based on prior use. Essentially, the infringer sought to rebut the plaintiff’s presumed ownership and exclusive right to use the mark arising from its registration on the grounds that the alleged infringer had used the mark in commerce before the plaintiff.
While there was evidence that, practically speaking, the alleged infringer had used the mark days before the plaintiff first used it, the defendant ran into a COLA problem. “Use in commerce” must be lawful and the defendant had been using the mark in commerce as early as July 3, 2006. The defendant, however, was not issued an approved COLA until October 5, 2006. Therefore, any use prior to October 5, 2006 was not lawful use, and was therefore, not “use in commerce” for purposes of establishing trademark rights.
This case shows how important it is for brewers and distillers to obtain a COLA before applying for registration of a trademark with the U.S. Patent and Trademark Office. States also may require labels to be approved by certain state agencies and such state label approval may also be necessary prior to registering a trademark. Having label approval is required for lawful “use in commerce” and absent label approval from the TTB (which the PTO may not be aware of when approving registration of a trademark) and the requisite state agencies, registration could later be challenged on the grounds that the mark was not in “use in commerce” when the application was filed, potentially rendering the registration void or subject to cancellation. See Horizon Healthcare Services, Inc. v. Allied Nat., Inc., No. Civ.A. 03-4098(JAG), 2006 WL 344277 (D. N.J. Feb. 14, 2006);CPC International Inc. v. Skippy, Inc., 1987 WL 124285 (T.T.A.B. 1987) (holding that registration is void when specimens did not demonstrate use in commerce).
While the Tassel Ridge Winery case related to federal label approval, one can certainly imagine the same logic applying to state label approval. The lesson: make sure you keep up to date on label approvals! And if you are subject to trademark challenges, see if the one challenging your use of a trademark obtained the necessary approvals. Brewers and distillers could use this as a tool to obtain leverage in a trademark dispute.