In Vino Veritas: Federal Court Stomps Winery’s Trademark Priority Argument

A recent trademark infringement case involving two wineries highlights how compliance with industry-specific regulatory requirements can have a significant impact on trademark rights. In Tassel Ridge Winery, LLC v. WoodMill Winery, Inc., a federal district court in North Carolina held that the defendant winery’s earlier use of a trademark did not give it priority in the mark because its earlier use was unlawful under the Federal Alcohol Administration Act (FAA Act). See No. 5:11-cv-00066-RLV-DSC, 2013 WL 5567505 (W.D.N.C. Oct. 9, 2013). Instead, for the purpose of determining trademark priority under the Lanham Act, the court did not consider the defendant’s use of the mark to be lawful commercial use until the defendant’s wine label was fully in compliance with FAA Act regulations, well after the plaintiff had already commenced lawful use of a virtually identical mark.
 
The Iowa-based plaintiff, Tassel Ridge Winery, began selling a RED, WHITE, & BLUE-branded traditional table wine in July 2006, shortly after obtaining a Certification of Label/Bottle Approval (COLA) from the US Alcohol and Tobacco Tax Trade Bureau (TTB), pursuant to FAA Act regulations. Tassel Ridge subsequently filed for and obtained a federal trademark registration for the RED, WHITE, & BLUE mark. See US Trademark Reg. No. 3,448,996. Meanwhile, the defendant, WoodMill Winery of North Carolina, had begun promoting a “Red, White, and Blue”-branded blend of grape and blueberry table wine on its website as early as April 2006 and first sold the wine under the “Red, White, and Blue” label on July 3, 2006. Although WoodMill had attempted to comply with FAA Act regulations by obtaining approval for its nonstandard wine formula and process in April 2006, it did not file a COLA application with the TTB until late August 2006, and the TTB did not grant WoodMill’s request for label approval until October 5, 2006.
 
Tassel Ridge ultimately discovered WoodMill’s use of the “Red, White, and Blue” label for its wine in February 2011, and after attempts to persuade WoodMill to cease its use of the label proved fruitless, Tassel Ridge commenced litigation in May 2011, raising various claims of trademark infringement under federal and state law. In its answer, WoodMill raised several affirmative defenses and asserted a number of counterclaims again Tassel Ridge, including a claim contesting the validity of Tassel Ridge’s federal trademark registration and seeking the cancellation of its registration based on WoodMill’s alleged prior use of the mark.
 
The traditional rule for trademark priority in the United States is that the first to use a mark “in commerce” is the prior user. Merely using the mark in advertising is normally insufficient for the purposes of establishing commercial use, and the “use in commerce” requirement is usually satisfied by the placement of a mark on a wine bottle sold or transported in the US.  However, “use in commerce” must be lawful, and any commercial use that constitutes a per se violation of a federal statute cannot establish priority.
 
In ruling on a motion for summary judgment, the federal district court concluded that neither WoodMill’s regulatory filings in April 2006, nor its advertising of the “Red, White, and Blue” wine on its website were sufficient commercial use to establish priority. Further, the court found that any sale of WoodMill’s wine prior to October 5, 2006 was not lawful for the purpose of determining priority, given that FAA Act regulations require that an approved COLA must be issued by the TTB before wine can be lawfully bottled or sold in the US. Accordingly, the court ruled that as a matter of law, Tassel Ridge had established that it was the owner of a valid, protectable trademark under the Lanham Act, effectively dismissing WoodMill’s counterclaims for infringement and cancellation of Tassel Ridge’s trademark registration. The court otherwise refused to grant summary judgment on the remaining claims and affirmative defenses, and the case is ongoing.
 
Arent Fox will continue to monitor this case.  For more information about the Tassel Ridge Winery case, or other trademark questions, please contact Anthony V. Lupo or Anthony D. Peluso.