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What Can I Do With the Type 85 ABC License?

April 20th, 2012

We’ve been getting lots of inquiries about the privileges and limitations of the new limited off-sale license offered by the ABC. Though we’ve already commented on the basics of the permit here, we’re following up with answers to the clarification questions we’ve been getting:

Where can I find the privileges for the new off-sale wine license?

Read the ABC Advisory and the enabling statute CAL. BUS. & PROF. CODE §23393.5.

Can I sell tequila and beer with the Type 85?

No, the privilege is limited to wine.

Can I get the Type 85 license if I have an upper-tier California license?

No. The Type 85 is a retail-tier license, and there are no special exceptions permitting it to be held with an upper-tier license. On the flip side, you can get it if you are an employee of an on-sale retailer. This is a key distinction between the Type 85 and the Type 17/20 combination that remains popular in California.

Can I deliver product stored out-of-state directly to consumers in California with the Type 85?

No. You must have possession and title to the wine in California. It must be delivered to the consumer from your licensed premises in California or the premises of a licensed public warehouse (Type 14 License).

Can I deliver wine to consumers outside of California with the Type 85?

Yes, but only to about 13 states. 2/3 of those states require additional licensing. You can’t reach New York, Texas, Illinois or Florida.

Do I have to have a location to obtain the Type 85?

Yes. You have to choose an address where the license will be active and your records will be kept. It may not be open to the public. You will have to post notice at the premises and mail notice to nearby neighbors.

Who can I buy wine from with the Type 85?

Licensed California wholesalers and wineries. Not retailers.

How do I apply for the Type 85?

If you are interested in obtaining the license, you need to fill out the forms for an original retail license (e.g. ABC 211-SIG, 217, 208-A/B, 253, 257, 255, 247, 251, 140, entity forms). You can obtain them from the ABC website, or can hire an attorney or licensing specialist to complete them and assist you with the process. The filing fee is $342 ($100 application fee plus $242 annual fee).

Do You Have a License to Play That Song? Appeals Court Affirms Win for Record Companies Against Copyright Infringing Restaurant

March 26th, 2012

Restaurant and bar licensees that play music in their establishments should take notice of the Ninth Circuit Court of Appeals’ recent decision in Range Road Music, Inc. et al. v. East Coast Foods, Inc. et al., 2012 WL 502510 (9^th Cir. 2012). In the opinion, which can be found here, the Court affirmed a lower court decision finding that East Coast engaged in copyright infringement through its unauthorized use of copyrighted songs in its southern California restaurant, Roscoe’s House of Chicken and Waffles, and the accompanying jazz club, the Sea Bird Jazz Lounge.

The plaintiffs in Range Road were several record companies, each members of the American Society of Composers, Authors, and Publishers (“ASCAP”). The court found that after East Coast opened Roscoe’s and the Sea Bird in 2001, the record companies repeatedly offered East Coast a license to play music owned by ASCAP members. East Coast failed to purchase a license for several years, and in 2008 the record companies independently investigated whether copyright infringement was occurring at Roscoe’s and the Sea Bird Lounge. The investigator discovered that the two establishments were playing CDs that included the record companies’ copyrighted songs and the record companies brought suit for copyright infringement. The court granted their motion for summary judgment, finding eight counts of copyright infringement, and assessing damages of $4,500 for each infringed work. The court also awarded the music companies attorney’s fees and costs in the amount of $162,728.22. The Ninth Circuit Court of Appeals affirmed both the finding of copyright infringement and the attorneys’ fees award, finding that East Coast “could have avoided liability by purchasing a valid license at any point during the seven years in which ASCAP importuned them to do so.”

Under the Copyright Act, copyright owners have the exclusive right, among other things, to perform the copyrighted work publicly. A plaintiff can establish a case for copyright infringement by showing 1) ownership of a valid copyright, and 2) copying of original elements of the copyrighted work, which includes performing a copyrighted work publicly. Statutory damages for copyright infringement range from $750 to $30,000 for each infringement.

Restaurant and bar owners who play recorded music or feature performances of live music should take notice of the Range Road decision and be aware of the basics of the Copyright Act. Letters from ASCAP or similar recording companies should not be ignored.

Texas Alcoholic Beverage Commission Releases New Advisory in Connection with Authentic Beverages Company Decision

March 1st, 2012

As readers of this blog may recall, at the end of 2011 interesting new precedent came out of Texas when the United States District Court for the Western District of Texas granted partial summary judgment for plaintiffs in Authentic Beverages Co., Inc. v. Tex. Alcoholic Beverage Comm’n, No. A-10-CA-710-SS (D. W.D. Tex., December 19, 2011), and consequently struck down some Texas’ laws regarding beer labeling, advertising alcoholic content and suppliers telling consumers where their products can be found for purchase. (See our prior coverage of the case here.) About a month later the Texas Alcoholic Beverage Commission (“TABC”) issued Marketing Practices Bulletin 49 regarding the case (available here) and today they’ve just released Marketing Practices Bulletin 50 (available here). The new bulletin stresses that Texas’ stance on suppliers pre-arranging and pre-announcing promotional activities has not changed.

Texas allows liquor manufacturers and wholesalers to pre-arrange and pre-announce promotional activities, for example bar spending or sampling events, novelty item giveaways, and promotional appearances, but they do not allow beer manufacturers and distributors to do the same. While the Authentic Beverages decision resulted in the allowance for beer manufacturers and distributors to advertise retail locations where their products can be purchased (provided the advertising is not cooperative), it has not changed anything regarding pre-arrangement and pre-announcement of promotions. Those promotional activities by beer suppliers must be spontaneous, meaning they are not pre-arranged with retailers or pre-announced to consumers. The TABC is still in the process of formal rulemaking to deal with the effects of the Authentic Beverages decision, at which time Marketing Practices Bulletins 49 and 50 will be superseded by the new rules, but we do not expect that their position will change on this matter and violations are likely an enforcement priority for the TABC.

TTB Circular Warns Industry Members of Improper Tie-In Sales

February 20th, 2012

Last week, the TTB issued an Industry Circular on the issue of tie-in sales, which are illegal under the Federal Alcohol Administration Act (FAA Act) and 27 C.F.R. § 6.72. Tie-in sales occur when a retailer is forced to purchase a product (which it may or may not want) in order to get the product that it wants. Tie-in sales include combination sales in which one or more products may only be purchased in combination with other products.

In its Circular, available here, the TTB provides a list of examples of prohibited tie-in sales. The examples include:

- A retailer must purchase a certain amount of regular distilled spirits, whether bottled or cased, in order to be allowed to purchase distilled spirits in a special holiday container or packaging.

- A retailer must purchase ten cases of Winery X’s Merlot from a wholesaler in order to purchase ten cases of Winery X’s Chardonnay.

- A retailer must purchase an industry member’s pre-mixed alcohol beverage specialty product (for example, strawberry daiquiri) in order to purchase a certain amount of their regular distilled spirits case goods. In other words, the regular distilled spirits products are not sold separately but only in combination with the specialty product.

- A retailer is required to purchase a two-bottle package containing one each of a winery’s Merlot and Chardonnay in order to get the Merlot. The Merlot is not available for purchase separately.

- A retailer must purchase a slow moving wine in order to purchase a distilled spirit that is in heavy demand. The distilled spirit is not available for purchase separately.

The take-away point is that each alcoholic beverage item needs to be available for purchase separately. It is still permissible to package alcohol products together or with other consumer goods, subject to state and federal restrictions, but the alcohol components should also be available separately. For additional information on the rules applicable to combination packs, contact one of the attorneys at Strike & Techel with any questions.

Texas Advertising and Labeling Laws Found Unconstitutional

January 10th, 2012

“The practice of law is often dry, and it is the rare case that presents an issue of genuine interest to the public. This is just such a case, however.”*

The First Amendment and beer aren’t typical dance partners, but they dosey doed on December 19, 2011 when the United States District Court for the Western District of Texas granted summary judgment in part for plaintiffs in Authentic Beverages Co., Inc. v. Tex. Alcoholic Beverage Comm’n. In granting partial summary judgment, the Court found in favor of plaintiffs’ arguments that the First Amendment was violated by Texas’ statutes and regulations that (a) prohibited breweries and distributors from telling customers where their products can be purchased, (b) prohibited advertising the alcoholic content of malt beverages or any suggestions of alcoholic strength, and (c) mandated the use of “beer”, “ale” and “malt liquor” labels on malt beverages with such terms statutorily defined in a manner inconsistent with the ordinary use of those terms.

The Texas Alcoholic Beverage Commission decided not to appeal the District Court’s decision and instead published Marketing Practice Bulletin 49, Changes to Current Regulations – Advertising and Labeling, on January 6^th (available here). The Bulletin will eventually be superseded by formal rulemaking from the Commission after a stakeholders’ meeting on January 27, 2012. Until new rules are in place, the Bulletin allows manufacturers and distributors to advertise the retail locations where their products can be bought, provided such advertising is not cooperative. Additionally, manufacturers and distributors may refer to alcoholic content, including using words like “full strength” and “strong” in advertisements. Finally, brewers may continue to label malt beverages in accordance with the definitions of “beer,” “ale” and “malt liquor” provided in §1.04 of the Texas Alcoholic Beverage Code, or they may provide the percentage of alcohol by volume (“abv”), stated to the nearest 1/10^th of a percent, on the label. If abv is stated, the product may also be labeled with whatever term for such product is commonly recognized in the brewing industry. For purposes of Texas regulatory matters products labeled 5.1% abv or less will be considered beer by the Commission.

* Authentic Beverages Co., Inc. v. Tex. Alcoholic Beverage Comm’n, No. A-10-CA-710-SS (D. W.D. Tex., December 19, 2011), available at http://pdfserver.amlaw.com/tx/abc.pdf.

End of Year Viticultural Area (AVA) Report

December 21st, 2011

There were a number of new viticultural areas, commonly referred to as AVAs, approved by the TTB late this year, as well as an expansion of certain AVAs and several new proposed areas for which comments are due in early 2012. A summary on the latest activity is below. The TTB designates viticultural areas in order to allow vintners to more precisely describe the origins of their wines and so that consumers may make purchasing decisions with such specific origination information in mind.

Expanded Areas Effective December 16, 2011

Russian River Valley (California) – The Russian River Valley AVA, located in Sonoma County, California, was expanded by 14,044 acres.

Northern Sonoma (California) – The Northern Sonoma AVA, also located in Sonoma County, California, was expanded by 44,244 acres.

New Viticultural Areas Effective January 13, 2012

Coombsville (California) – The Coombsville AVA in Napa County, California covers 11,075 acres. The area is within the Napa Valley and North Coast viticultural areas. The Coombsville AVA is nearly identical to the previously proposed Tulocay AVA, which the TTB withdrew from consideration in June 2008.

Fort Ross-Seaview (California) – The Fort Ross-Seaview AVA in Sonoma County, California embodies 27,500 acres. The area is within the Sonoma Coast viticultural area, which in turn is within the North Coast viticultural area.

Naches Heights (Washington) – The Naches Heights AVA in Yakima County, Washington covers 13,254 acres. The Naches Heights AVA is within the Columbia Valley viticultural area located mainly in central and southern Washington, although a small portion of northern Oregon is also included within the Columbia Valley AVA.

New Proposed Viticultural Areas

Inwood Valley (California) – The TTB has proposed creating a 28,298-acre Inwood Valley AVA in Shasta County, California. Comments on the proposal must be received by February 3, 2012.

Middleburg Virginia (Virginia) – The TTB has proposed creating a 198-square mile Middleburg Virginia AVA located in the northern Virginia counties of Loudoun and Fauquier. Comments on the proposal must be received by January 9, 2012.

New York Wineries Branching Out Under New Law

August 16th, 2011

If you didn’t partake in the toast that New York wineries made at the end of July when New York Governor Andrew Cuomo signed bill S4143A into law, perhaps now is the time. The bill, known as the Fine Winery Bill, made a number of revisions to the state’s alcoholic beverage code regarding wineries and farm wineries. A number of the revisions to the law were originally suggested by the industry member group the New York State Grape Task Force in a 2008 report to the commissioner of the Department of Agriculture and Markets. Below is a brief outline of the legal changes:

Branch Offices

The licensing process for up to five branch offices of a farm winery was simplified through the elimination of separate licenses for each branch. Perhaps more importantly, the privileges of the branch offices now mirror those of the farm winery, as opposed to those of an off-premise retailer as was previously the case.

Custom Crush

Farm wineries also gained the legal authority to perform custom crush services. The individual requesting a custom crush must be present during the entire production process and purchase the final wine product.

Charitable Events

Wineries can now obtain an annual permit allowing them to participate in events sponsored by charitable organizations. Previously, participation in a maximum of five events was allowed and the licensing process was more arduous.

Other Events & Tastings

Wineries may now charge for use of their premises and for wine tastings.

Reporting

Farm wineries can now maintain interstate shipping reports on their premises and present them when requested by the State Liquor Authority as opposed to filing those reports semiannually with the State Liquor Authority, thereby reducing reporting expenses.

Elimination of Redundant Licensing

Farm wineries that produce less than 1,500 gallons of wine annually are no longer required to apply for a micro-winery license in addition to their farm winery license.

Barry Strike Quoted in ABA Journal on Trademark Issues

August 9th, 2011

Partner Barry Strike, who handles numerous trademark issues for clients in the alcoholic beverage industry, was quoted in the ABA Journal’s article on the popular beer Collaboration Not Litigation. Click here to read the full article. If you have alcoholic beverage trademark questions, please feel free to contact Barry Strike at barry@strikeandtechel.com.

Wine and Grocers

May 27th, 2011

Paper or plastic, Bordeaux or rosé? Two states, Tennessee and New York, currently have active bills aimed at permitting grocery stores to sell wine. Proponents of the bills argue the change will generate jobs and create new tax revenue by expanding the consumer base. Opponents argue that liquor stores in the states, which are small and locally owned by law, will suffer steep losses in revenue and possibly face layoffs. In Tennessee, it appears that the bill’s opponents have been more persuasive to date, with a vote on the measure postponed until the summer of 2012. The New York Bill has bipartisan support and is possibly up for a vote before the legislative session ends in late June. Similar bills have been defeated in New York by the liquor store lobby in the past. As a preemptive measure, the new bill includes incentives for liquor stores, including the right to own more than one store. Even the title of the bill, “the wine industry and liquor store development act” reflects the hope that the liquor store lobby can be appeased. Given the fiscal climate, one factor that may garner additional emboldened supporters this time around is the “changeover” fees potentially generated by the measure: $346.7 million in new revenue in the first year through franchise and license fees, excise taxes and sales taxes.

TTB Regulators Double Down in Las Vegas

May 12th, 2011

Apparently, the TTB doesn’t agree that “anything goes” in Vegas. Just ask Diageo, Pernod Ricard, Moet Hennessey, Bacardi, Future Brands, and E. & J. Gallo Winery. According to the TTB, these companies allegedly violated the FAA’s tied-house “slotting fee” restrictions. A slotting fee has nothing to do with slot machines (good guess), but instead is anything of value a supplier provides to a retailer in exchange for favorable product placement. The TTB’s allegations included “that the companies collectively furnished nearly $2 million in inducements” with the purpose “to obtain preferential product display and shelf space (also known as slotting fees) at Harrah’s Hotels and Casinos.” In an industry guidance circular released shortly before the announcement of the offers in compromise, the TTB reminded industry members that while providing promotional items etc. to retailers might be legal in some contexts, doing so as an inducement for better product placement was a violation of FAA tied-house laws in general and slotting fee prohibitions specifically (at least when the elements of interstate commerce, exclusion of other brands, and, in the case of malt beverages, similar state law are present).

Under the terms of the offers in compromise, none of the companies admitted to any wrongdoing and collectively paid out $1.9 million in fines – the largest set of offers in compromise ever accepted by TTB for trade practice violations. Jackpot.

The TTB’s recent guidance on tied-house rules and slotting fees can be found here: http://www.ttb.gov/trade_practices/ttb-g-2011-3-tied-house-guidance.pdf

The TTB’s announcement and details of the offers in compromise can be found here: http://www.ttb.gov/press/fy11/press-release-fy-11-4-faa-oic.pdf

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