- First user owns the trademark
- Even if you own the mark elsewhere, it doesn't matter in the US
- Giving up can be a better strategy than fighting
From Europe, the US wine market can be like looking at the Earth from space. It's huge and has powerful gravity, but also a host of dangers that can set a business on fire when you try to enter it. One of these hazards is US trademark law, which differs significantly from trademark law in the rest of the world. And it's only part of the US legal system, which is a hazard in its own right.
The best thing one can do regarding trademark conflicts is to avoid them.
There’s no need to be alarmist. Obviously some companies are making sense of it because more than 180,000 different wine labels were approved in 2021 alone by the US Alcohol and Tobacco Tax and Trade Bureau (TTB). But conflicts happen, and very few of them attract public notice.
The best thing one can do regarding trademark conflicts is to avoid them. However, in the US, anyone can sue anyone over anything, so this choice may not be available.
Clash of the Titans about a Leaf
The most famous US wine trademark battle was a heavyweight fight 25 years ago. Kendall-Jackson, owned by famously litigious Jess Jackson, sued E. & J. Gallo Winery over the latter's under-$10 Turning Leaf brand, which Jackson thought looked like the label for its domestically popular Kendall-Jackson Vintners Reserve Chardonnay. Both labels have a colourful autumn leaf on the label. Gallo won and still makes Turning Leaf to this day.
But Gallo, now the world's largest wine company, has deep pockets and a lot of patience. An illustration of this is offered by the way it stored brandies made by Julio Gallo in its cellars for decades because the market for the spirit was weak. This meant that the company was ready two years ago when brandy became fashionable again in the US. The fight with Kendall-Jackson was thought to have cost Gallo millions of dollars in legal fees.
That legal tussle was also an aberration, not just for trademark law but for US law in general. Most cases are resolved long before they reach trial. Outrageous – and to non-Americans, extraordinary - US lawsuits are common, such as the action brought by a McDonald's customer who claimed she had been burned by a cup of hot coffee. The jury awarded her nearly $3 million and that case ended up being settled outside the courtroom. She took an undisclosed amount rather than follow the case through a long appeals process.
If it is possible to avoid going to trial, that is the best course. Legal fees will probably cost $300-400 per hour and in some instances significantly more.
"There's an old saying in the legal industry: how much justice can you afford?" said trademark attorney Tsan Abrahamson, a partner at Cobalt Law in Berkeley, CA. "In the US the only cases that get into the courtroom are when both entities can afford it."
How US trademark law differs from Europe's
In Europe, and in much of the rest of the world, rights to a trademark are obtained through registration. It is necessary to register in each country, because a registered trademark in the UK won't help you in Australia, but one covering a country in the European Union will provide protection across that region. These registrations require effort, expense - and prior research, but properly done they generally remove most concerns about possible lawsuits.
In the US and Canada, however, trademark rights are based on use. Many wine brand names and logos are not registered trademarks, because small winery owners don't see a legal need.
Usually they are correct because the system is simple: the first to use the mark in question has the right to it. It's still worth trademarking it, but that won't be any help if somebody else used it first.
"You have to show use of your mark," Abrahamson says. "The earliest use of the trademark is going to be what is going to govern whether you have rights that are superior to someone else's rights."
First Come First Served
Abrahamson offers an example: "Let's say your company is called Redemption and you sell wine and you have a vineyard in California and you start selling in 2000. Your rights begin in the United States the moment you start using the trademark, e.g. the moment you sell wine under the Redemption brand in the United States. You may have been making the wine for a long time, but you don't get rights until you start selling the actual product.
"If another company was selling wine called Redemption in 1999, your wines are going to be junior to theirs, and they are going to be able to stop you, regardless of whether they have registered their trademark," Abrahamson said.
The factors that matter
Many trademark disputes are not over names: the famous Kendall-Jackson-Gallo showdown was over a logo of a leaf.
In US trademark law there is an official list called the Dupont Trademark Factors that judges use to determine whether or not a trademark has been infringed. The key concept is whether or not consumers might be confused: whether they might look at a bottle of Turning Leaf and think it was made by Kendall-Jackson.
There are 13 Dupont Trademark Factors. We won't list them all here (the list is easily available online), but here are some key ones:
- The similarity or dissimilarity of the marks
- The similarity or dissimilarity and nature of the goods (meaning a wine company is unlikely to be sued by a soap manufacturer, but an action from a brewery is possible).
- The fame of the prior mark (part of Kendall-Jackson’s argument)
- The number and nature of similar marks in use on similar goods (so lawyers are unlikely to send a letter objecting to a bunch of grapes or a chateau on a wine label).
Keep Your Ideas to Yourself
One thing that cannot be trademarked is ideas. To come back to Vampire: There is a wine in the U.S. called Vampire that was originally produced in Romania for the trademark owner in California. Later, that same Romanian winery tried to produce several other wines with names evoking vampires, such as Bloody Merlot. The winery received a threatening letter from the trademark owner of Vampire and decided to pull its Bloody Merlot from U.S. distribution.
Abrahamson said that if that case had gone to trial, she believes Bloody Merlot would have prevailed. She would know: one of her clients was a winery that made True Blood wines as a spinoff of the HBO TV series.
"You don't get to own an idea," Abrahamson told Meininger's. "I'm going to give an example. There was a company that had Cannonball wines. The image was a little kid grabbing his leg, to jump into the water. Very cute. The shadow of a little kid. Somebody else decided they liked this idea and they came up with Handstand wines: same thing, shadow of a kid doing a handstand."
Abrahamson said the maker of Cannonball was not happy but was not able to stop Handstand.
"You can't patent the idea of using your wine to call to mind Bram Stoker's story."
"Ideas are not part of trademark law. Ideas are part of patent law," Abrahamson said. "You can't patent the idea of using your wine to call to mind Bram Stoker's story. That is not patentable. And trademark does not protect an idea. It protects a word, a symbol, a visual. If it's too close: if one was Vampire wine and the other was Vampire Deville wine, now they're similar."
Is fighting the case worth it?
Nonetheless, the Vampire trademark owner was able to get the makers of Bloody Merlot to back off, costing thousands of dollars in unsold product. The Bloody Merlot producer was advised that that would be cheaper than fighting the case, and that advice may have been good.
The misuse of trademark rights is not only an individual problem, it may also occur on a larger scale. Mass warning letters are a well-known phenomenon in the field of copyright law, and also happen in trademark law. The owner of the Vampire wine trademark also sued the restaurant chain Applebee's over a Halloween-themed ‘vampire’ cocktail that came with a pair of fangs. Was it a good case? We'll never know, as Applebee's settled out of court. He also sued a restaurant chain called Yard House over its Vampire Taco (it is not entirely sure why it's a vampire taco, but it does include roasted garlic). We don't know what happened or might happen in that case, but the Vampire Taco is still on the menu.
What to do when the letter arrives
So, what to do if a threatening letter from a US lawyer does arrive?
First, take a deep breath. A threat of a lawsuit is not a lawsuit. Sending a letter costs very little. Following through on a lawsuit is expensive for everybody.
"You may want to call the plaintiff's bluff," Abrahamson says. "Even if they threatened a lawsuit in a letter, they might not sue if their case is weak."
She also says that even though it doesn't seem like it, the threatening letter might be an invitation.
"When you get a demand letter, it can mean a lot of things," Abrahamson said. "It can mean they want to work it out."
She says that, while you are sweating about the prospect of spending thousands on lawyers, the other side may be doing the same as well. Sometimes people are very attached to a brand or logo that they created and seeing your brand may set them off, but that doesn't mean they actually have a case.
"There's a lot of people who think they understand trademark law but they really don't," Abrahamson says. "People don't run around thinking they understand the tax code. But trademark deals with things that we touch and use every day. There's a whole layman's understanding of what trademark law is that isn't what actual trademark law is. People are very wed to their ideas, which they almost uniformly think are brilliant and unique."