For Doug and I, there’s little more fun than helping out soon-to-be brewery owners very early in the planning process. Doug’s family owns a brewery in Asheville, North Carolina, so he’s been right there, and like many readers here I’m a proud homebrewer with my own aspirations.
When we get on a call to discuss a start-up brewery’s plans, a topic that often comes up is the cost of opening a brewery. That’s understandable, and apart from forum fodder and some speculation, there aren’t too many hard numbers tossed out there to help breweries in general business planning. So, to benefit some hopefuls and help fuel business planning, here are some starting-point figures. Of course, take these for what they are. There’s no rule, and plenty of creative business models work, with breweries getting their doors open (and rapidly expanding) for less than what’s noted. However, it can help to see numbers to get a sense of reality, as a starting point for that business plan.
Here are some general minimum brewery start-up costs:
Nanobrewery Start-up Costs: $50,000
7bbl-10bbl Production Brewery Start-up Costs: $250,000
10bbl-15bbl Brewpub Start-up Costs: $500,000
Packaging and Production Brewery Start-up Costs: $1,000,000
These brewery start-up figures are helpful estimations—but shouldn’t be discouraging. Breweries have achieved significant fundraises, where the founders put in very little (to none) of their own start-up capital. The market is not yet showing signs of stopping, and there are likely many investors out there who are curious about the beer world and willing to jump onboard, so long as a solid business plan and investment structure is in place.
Ultimately, with a savvy CPA and experienced brewery legal team on a start-up’s side, a brewery can get the pieces in place to make a great pitch, and without too much up-front expense either.
So, you’re ready to package. Awesome. What should be top of mind when preparing a Washington-ready beer label? There are a few things to note but, in general, compliance with TTB regulations will get you close to compliant with LCB. However, there are some extra Washington laws and regs to keep in mind.
If a Washington brewery is ready to package and sell—or an out-of-state brewery is interested in beer distribution in the State of Washington—there are certain labeling requirements set forth by the Washington legislature and the Washington Liquor Control Board (LCB). Fortunately, the beer labeling requirements are not particularly cumbersome. Notably, LCB’s direct label approval is not required. However, LCB does require that in-state breweries and out-of-state breweries alike obtain a federally approved label, known as a Certificate of Label Approval (COLA) before getting beer on the shelves. To be ready to ship or distribute beer in Washington, the producer must submit a copy of the federal COLA to LCB and, it goes without saying, have proper licensure. If a brewery makes changes that require a new label approval from TTB, the brewery likewise will have to submit that new label to LCB.
As for Washington’s own beer-labeling requirements, if a brewery is complying with federal regulations, the brewery is likely to be okay under LCB’s approach. However, the LCB does reserve the right to deny any label that doesn’t conform to their basic requirements and rules. What are those? Things you’d expect, and things that the Alcohol and Tobacco Tax and Trade Bureau (TTB) mostly already requires (though LCB and TTB may disagree about some subjective calls). No label can be misleading, you can’t make labels that especially appeal to children, and if you’re going to show adults on the label, the depiction has to be dignified and can’t promote illegal consumption of liquor. There are some other ones, so be sure to review the relevant regs and statutes, or shoot the proposed label to your beer lawyer for a quick review before submission.
As a reminder that regs can be quaint at times, LCB expressly prohibits subliminal messaging on labels or in beer advertising. So, for you crafty cats, make sure there’s nothing up your sleeves.
Last and maybe most notably of all, if a brewery wants to ship strong beer in Washington (that’s over 8% ABV), the brewery must include the ABV amount on the label. This differs from federal requirements, as TTB does not require an ABV statement. Something for producers to keep in mind.
A brief interruption to our dormant commerce clause constitutional beer law nerd-out, to bring you some breaking brewery trademark news. Rogue may have settled one trademark lawsuit, but yesterday they entered another. The case is captioned OREGON BREWING COMPANY v. SCOUT LLC, dba GONE ROGUE PUB and it’s 1:14-cv-00439 for those looking on the docket.
We’ve reported before about Rogue’s litigation against Rogue’s Harbor Inn, which settled out on August 11, 2014 (see image for details there). Yesterday, on October 14, 2014, a little over two months since getting that dispute out of the way, Rogue’s back before the bench. This time, Rogue has filed a complaint in federal court against an Iowa bar that opened in 2012 under the name “Gone Rogue Pub.” Rogue has its concerns, given they have a registration in restaurant services, on beer, on beverage glassware, and on clothing.
In Rogue’s complaint (again, as always, under Oregon Brewing Company—speaking of, glad they picked a more defensible trademark for their branding), they allege that Gone Rogue pub has some of Rogue’s own branding up inside the bar, that the word Rogue appears on the pub’s branded glassware and coasters there, and to throw salt in the wound: the pub has specifically identified serving Rogue beer in press releases.
Cheers to Rogue, as their complaint states that Rogue reached out to Gone Rogue Pub early on in 2013 and tried to get some kind of coexistence rolling, so the pub wouldn’t have to completely change its name. That was a year and a half ago. Per the complaint, the owners directed Rogue to their attorney, and the attorney didn’t respond to Rogue. Then, a few months ago in August (the same month the Rogue legal squad finally took a breather after Rogue’s Harbor) talks/negotiations were not successful when Rogue again initiated them.
Given the press release and also the use of Oregon Rogue-branded stuff in the bar, the court might infer some bad faith here, which would not be good news for Gone Rogue Pub. Also, I would imagine Rogue’s olive branch is no longer leafy and green after being forced to draft and file this complaint, instead of being able to quietly hammer out an agreement.
Below are the counts in the complaint. We’ll see what sticks, unless Gone Rogue Pub comes to the bargaining table and it settles. Stay tuned to the Brewery Law Blog, as we’ll keep you updated on this one.
TRADEMARK COUNTERFEITING UNDER THE LANHAM ACT
(15 U.S.C. § 1114)
TRADEMARK INFRINGEMENT, UNFAIR COMPETITION AND FALSE
DESIGNATION OF ORIGIN UNDER THE LANHAM ACT
(15 U.S.C. § 1114)
TRADEMARK INFRINGEMENT, UNFAIR COMPETITION, AND
FALSE DESIGNATION OF ORIGIN UNDER THE LANHAM ACT
(15 U.S.C. § 1125)
CYBER-SQUATTING UNDER THE LANHAM ACT (15 U.S.C. § 1125)
UNFAIR BUSINESS PRACTICES UNDER IDAHO LAW
(I.C. §§ 48-601 et seq.)
COMMON LAW TRADEMARK INFRINGEMENT
(I.C. §§ 48-500 et seq.)
Back to our regularly-scheduled programming. In our last content post, we promised an exploration of problems with protectionist legislation. In other words, laws that help in-staters while hurting out-of-staters, and why it’s no good for the brewing industry at large. Before getting there, though, today’s part of the discussion involves state concerns leading up to Prohibition, the problems that were still rampant during Prohibition, and how states dealt with it all after Prohibition (including implementing that three-tier distribution system we all know and don’t necessarily love). This is a general post, but you can find much more background in sections I–II here of Brewing Tension: The Constitutionality of Indiana’s Sunday Beer-Carryout Laws.
So, starting Pre-Pro. We didn’t have the Twenty-first Amendment yet (or, of course, that nasty Eighteenth, either). What we did have was the Commerce Clause. We know now that the Commerce Clause lets Congress regulate the instrumentalities and channels of interstate commerce as well as things that, in aggregate, are economic in nature and have an effect on interstate commerce. Well and good. Related to the commerce clause, however, is what’s been dubbed the “Dormant Commerce Clause.” That is, states can regulate things that Congress hasn’t but, in so doing, can’t discriminate against out-of-staters unless Congress says they can. This makes sense. It seems our Framers wanted us to live in the United States, and not a series of little countries that withheld their goods/services/resources or penalized other states for so doing. Anyway. The tricky part is that the Supreme Court has flipped back and forth in deciding whether alcohol is a “special” item exempt from Commerce Clause treatment. Could Washington, if it wanted, forbid out-of-state alcohol from being shipped in state while allowing full-blown production in state? Different answers, depending on the decade you ask the question.
So, go back to Pre-Pro. In 1847 in a series of cases known as The License Cases, the Supreme Court said, hey, alcohol is different and states were free from the restrictions of the Commerce Clause. But then in 1890, in Leisy v. Hardin, the Court struck down an Iowa law that confiscated alcohol shipped into Iowa if the alcohol lacked a proper permit. SCOTUS said that Congress was in charge of regulating interstate commerce, and if Congress hadn’t spoken, then states couldn’t. In response to this, Congress spoke, and passed the Wilson Act then eventually the Webb-Kenyon Act. The net effect of these acts was to basically give back to states the power to do whatever they wanted with respect to alcohol, whether discriminatory against out-of-staters or not.
Then, along came Prohibition. Everyone was “dry” on paper, but we all know about those zany flappers, the speakeasies, the booze that abounded underground. What States really didn’t like, though, was all the crime that went along with it. You had illegal distribution channels, and people like Al Capone vying for territory. No doubt about it, gangsters make for good movies, but States were not a fan. So, imagine the prospect of the Twenty-first Amendment from a State perspective. For years, alcohol was moving all over in ways that the State had zero control over. That booze was not being taxed. So, all of those underground trade networks out there stressed out states because, if they had to deal with grog, at least they could make some coin off of the whole situation. Apart from that, States were really worried about people drinking all the time. Like, all the time. Imagine seeing your people over-indulging with cheap whiskey, then heading off to the factory to operate heavy-duty machinery during the Industrial Revolution. Not a pretty combination, and one altogether too close in memory for State leadership now facing Post-Pro regulatory framework.
Another historic fun fact. You might have heard the term “Tied-house” thrown around. What’s that about? Well, back Pre-Prohibition the breweries figured out that rather than fight it out for tap share at every tavern in town, they could just open up their own tavern. They did, in droves, and some historians regale us with the consequences of all of that. You can imagine if a big out-of-town brewery opens up a tavern in a smaller town, then another big brewery does, then another, there’s not enough booze business to go around (or, if there is, the woman of the day were not fans). Consequently, some of those taverns turned to other forms of income, namely, entertainment of the illegal variety. States did not want to see this happen Post-Pro and they were also fearful that behemoth beverage producers would have so much cash, if they had tied-houses, they would be able to make all kinds of glitzy advertisements and everyone in town would be compelled to drink. Sort of a cute concern, when you think back.
At any rate, States were facing all of these competing concerns, with the realization that if they didn’t deal with it, they’d be back fighting all of the uglies they felt alcohol necessarily brought with it. The Twenty-first Amendment is on the horizon. What’d they do? States adopted the three-tier distribution system, and that’s what we’ll talk more about next time.
It’s official! I’ve joined Reiser Legal as a beer attorney licensed in Washington State. Having gotten to know Reiser Legal’s incredible set of passionate and ambitious brewery owners as a law clerk this past year, it means a lot to now officially partner in pursuing all of your unique visions.
I know that Doug Reiser’s tremendous industry knowledge, relentless work ethic, and straightforward legal approach are responsible for Reiser Legal’s growth. I know that because they’re the very reasons I’ve wanted to work alongside Doug ever since I got to know him years ago, when we started waxing poetic about what beer law—and a beer lawyer—can and should be. They’re the reasons I changed course, moved to Seattle, and am so excited and proud to make this announcement.
I should say, I am a huge fan of this industry, its people, and its culture, and maybe I have been before exactly knowing it. Back twenty years ago, it was my parents who started seeking out family-friendly brewpubs on our vacations, observing that local beer and breweries were a great way to get a feel for an area. To be sure, there weren’t nearly as many options in those days as there are today, but they’re still right about local culture speaking in its beer.
Like all of you, from my first batch of homebrew, I was hooked. As I’ve been traveling that long, winding, sudsy path, I’ve made some good ones and some great ones, and mostly a lot of friends in fellow homebrewers along the way. And I can say that on my end, as my garage became increasingly filled with beer gadgets and fresh grain bills, my head, too, was increasingly filled with all the ways breweries and the law intersected. While I spent my free time thinking, researching, and writing about it, I wound up doing work championing breweries with the Brewers of Indiana Guild, publishing an extensive piece about beer law reform in Indiana, and pouring beers on the side at an Indianapolis brewery in its first year of operation, all before packing my things and heading west to help push forward Reiser Legal’s mission. I see that mission as a simple one: be the most knowledgeable beer law shop out there, stay small and down to earth, never lose touch with the industry and what matters to it, and always make sure we’re doing things at reasonable rates that growing breweries can afford. My personal sub-mission at Reiser Legal will be to draw on my extensive intellectual property training, developing forward-thinking brand-protection tools and strategies, while managing our portfolio of trademarks.
I can’t wait to get to know all of you even better. It means a lot to be a part of your trusted team of counsel, and you can be sure that Doug and I will work hard together to best help build, protect, and defend your brewing business.