Part 1 of 3: Primer on Contract Brewing Arrangements in Washington State

In some states, contract brewing or “gypsy brewing” is a popular way to get started. For those unfamiliar with the term, contract brewing typically refers to an arrangement where one brewery uses another brewery’s equipment and sometimes staff to produce a batch of beer. It’s understandable why these arrangements are so popular in states that allow them. That is, start-up breweries can test the waters without sinking capital into equipment, while also relying on a fellow brewer’s well-calibrated, predictable brew setup along with its experienced team. On the flip side, contract brewing arrangements are attractive to existing breweries as a way to rake in a bit more cash, so long as the brewing obligations don’t get in the way of a brewery’s own ability to grow.

We frequently get questions from start-up breweries about whether contract brewing is a feasible or even permissible option to start brewing in Washington. Additionally, though we haven’t fielded such a question or run the numbers, we can wager that some out there might be curious about starting up a big brewing operation with a de-emphasized taproom, with the aim of landing contracts from breweries lacking the ability to easily scale their own operations.

Over the next few days, we’ll provide a rundown on what the Washington legislature and Liquor Control Board, so far, have had to say about contract brewing in the state of Washington. As a preview, you can view the LCB’s own quick-hitting and basic list here, though we’ll be filling it out with our own thoughts and comments over the next couple of days.

The first thing to know is this:

Washington Microbreweries Can Contract Produce for Other Washington Microbreweries

Washington limits contract production to fellow Washington-licensed microbreweries. That means out-of-state breweries are out of luck, in terms of setting up a contract arrangement in Washington to easily get product in the state. However, this does open up a lot of possibilities and business arrangements for in-state brewers. Nothing in the Washington regs expressly requires a Washington microbrewery to have its own big brewing gear to obtain its microbrewery license. Feasibly, a start-up could outfit a smaller taproom space, spending less cash to get up and running, while relying on a contract arrangement to generate its product. As an aside, there are some critics of contract brewing out there, contending the production arrangement somehow takes away from the “craft” of craft brewing. But, let’s also be honest: Evil Twin provides a damn good example of gypsy brewing that generates a premium product that we still identify as spawned from that brewery’s imagination and talent. And, after all, nothing in the law or code forbids a brewery from being intimately involved in the production of its contracted-for brews. In fact, we’d all probably expect these breweries to be hands on.

Next time, we’ll dive into other aspects and business considerations involved with contract brewing in Washington State, as permitted by the legislature and regulated by the Washington LCB.

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Washington Brewers: When Can You Give Beer Away?

Regulations ​aren’t fun to read. They’re cryptic. Often, it can seem like they were intentionally written to confuse you. Recently, we were reminded of that when we reviewed the Washington Liquor Control Board regs relating to when you can give away free beer. The general rule is that you can’t. But, here’s a quick rundown of what the LCB says about free beer, for those strategic or charitable times a brewery wants to pass out ​the good stuff, gratis.

Keep in mind, the beer given away under the exceptions below would all be subject to taxation.

1. A brewery can give away beer to licensed places like retailers or distributors for the purposes of negotiating a sale to them, subject to other LCB regs.

2. A brewery can give away beer for instructional purposes, such as ​educating the brewery’s employees or employees at other licensed places like bars and restaurants. ​ This exception isn’t limited to sales ​staff or bartenders, and the LCB expressly calls out chefs as the sort of employee a producer might want to educate. Bring on the pairings!

3. A brewery can give away beer to certain nonprofits, so long as the use of the free beer is going to be consistent with the reason the nonprofit is a nonprofit.

4. Of course, a brewery can hand it out on its premises, subject to some quantity restrictions (and also the obvious, no ​over​-​serving). Keep in mind that when a brewery has set up shop at a farmers market, the stall/space there temporarily becomes an extension of the brewery’s premises. Click here for more on beer at farmers markets.

​And, that’s the gist of the free beer exceptions. ​You can read the relevant LCB regulation in full ​here (have fun!).

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Selling Your Beer at a Washington Farmers Market

Our new breweries often seek legal and business advice about ways to get brand exposure, while building a connection with their community. And, one question that comes up is whether it’s a good idea to sell or sample beer at a farmers market. As you’d expect, a farmers market is a great place to engage consumers and other producers in conversation, in a fun and less formal way than even the most casual taproom environments allow. Still, although farmers markets are an awesome venue for talking beer, selling it, and introducing new friends to your brewery, Washington state law is really, really particular about when and how you can go about selling your beer at a farmers market.

There are some steps that the farmers market must take in order for a brewery to be eligible to come out. Brewers should be aware of this requirement, ensuring the market’s own approval is all in a row. On the brewery’s side, there are a series of regulations and requirements. For starters, the brewery has to provide the Liquor Control Board (LCB) a monthly list of dates, times, and locations the brewery will be offering its beer for sale at a qualifying farmers market. This list has to be approved before you can offer beer for sale. It’s also important to keep in mind that only so many wineries and breweries can be present at the market at the same time. Sample sizes are severely limited to no more than two ounces or less, with a maximum of two ounces to a customer per day. Beyond that, consumers can’t take a sample and leave your booth/stall; consumers must stay put and enjoy your wares in your designated area. Further, to be in compliance, a brewer would need to have food available for consumers or be positioned adjacent to a food vendor.
These are just a handful of the requirements breweries will need to keep in mind before setting up shop at a Washington farmers market. From a business perspective, heading to a farmers market can offer awesome exposure. But, attendant to that positive exposure is some exposure to liability. Established farmers markets tend to be savvy, and are typically proactive about helping brewers comply with the regs. However, before committing yourself and setting up shop, it’s always advisable to reach out to your beer attorney, making sure your side is sorted out and ready to go.

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Beer Label Approval Process: TTB Employee Battle Martin Gets Some Headline Love

For those considering shipping beer across state lines, to do so lawfully, you’ll need a Certificate of Label Approval or a COLA for short. If you’re already distributing in another state, then you might have (though we hope you haven’t) encountered pushback from Battle Martin, the hardworking Tobacco Tax and Trade Bureau (TTB) employee who handles all of the label approvals (more than 29,500 this year…). With a name as epic as Battle Martin, it’s fitting that The Daily Beast has written a nice sort of tribute to the man. The article also does a good job of pointing out just how persnickety the label-approval process is due to the myriad labeling laws controlling what you can and can’t say on your bottles. If you’re getting close to making an out-of-state push, it’s worth checking out the article to get an idea of what you’re up against. Of course, given how frequently certain label rejections light up social media, you may already be in the know. There are things your labels must say, and there are things they cannot say, and there are a lot of grey areas in between. For example, labels can’t confuse or mislead consumers, and they can’t directly or impliedly tout the effects of drinking your booziest batch of grog. Artwork, too, plays a big role in whether your label stands. You can’t, for example, make Santa look too toasted (see here).

Given how complicated beer-labeling laws are, it’s worth sending a note to your beer attorney before bringing in an artist to work up a design or toiling over a hilarious beer description only to find out you’ll need to make deep revisions to comply with the law. Folks like us at Reiser Legal PLLC are here to help, having battled Battle and made it out on the other side. Feel free to get in touch, and for further reading, check out some of our past posts relating to beer labeling and the COLA process here, here, and here.

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Avoiding Headlines: Thoughts on the Lost Coast v. Aviator Brewery Trademark Lawsuit

It’s no longer surprising to hear about a brewery v. brewery trademark conflict. Even the non-legal-news follower hears about these disputes all the time, and most of what gets reported are conflicts during the registration process called opposition proceedings, which go before the Trademark Trial and Appeal Board (TTAB). Often, brewers come to an agreement before those things ever turn into expensive disputes, and filing an opposition or an extension of time to oppose can be more of a way for a brewery to preserve the issue and buy the time to come to an agreement before the other brewery’s mark registers. At any rate, what are far fewer are true brewery v. brewery lawsuits being played out in federal district court. These sorts of lawsuits tend to be more expensive, the stakes are high, and—of course—they also typically get resolved (at least, we always hope) before a judge or jury makes the call.

With that backdrop, we’re here to report that another brewery v. brewery trademark dispute has made its way into federal court in the United States District Court for the Northern District of California. This time, it’s the brewery we all know as Lost Coast from California (technically named as Table Bluff Brewing, Inc. as the plaintiff in the suit), and the alleged beer trademark infringer is Aviator Brewing Company from North Carolina. You may have seen some reporting on this elsewhere, and we need not comment too much on the case. The pictures tell the big part of the story on this one. But, what interests us maybe most of all is the story behind the story, which we can’t know and can only guess about. But, as a beer law firm, it’s the story we’re a part of all the time: helping breweries avoid getting into court and into headlines because of these potential disputes.

It would surprise us if Lost Coast didn’t attempt to reach out and settle this privately. After all, who wants to spend the $400 and the who-knows-how-much in attorneys’ fees in putting a complaint together? And, from the looks of the complaint, Lost Coast is in a pretty good position. They obtained a federal trademark registration for their Great White design all the way back fourteen years ago in 2000.

Again, they didn’t merely register the word “GREAT WHITE” but they registered the design itself. The design registration includes the following in its description: “A fanciful cubist style shark stands on a sandy beach holding a surfboard in one fin and a mug of beer in the other. The surfboard has a bite taken out of the top of it.” You’ve seen the Aviator design, so you know what’s at issue. But, from our very basic research, it doesn’t seem like Aviator even formed as a brewery until the late 2000s. Again, we can only guess that these breweries got in touch before filing the suit, but it’s a pretty good guess. And, although we can’t fault Aviator for trying to negotiate hard to keep some rights to what is a cool design and, no doubt, an important brand to them, we also feel bummed for both breweries and the brewing industry generally that another one of these trademark disputes has made the headlines.
It’s always our goal at Reiser Legal to help breweries resolve stuff behind the scenes. And, we are consistently amazed and delighted at how brewery owners are willing to give up a little turf that they may well have a better claim to, just to help another brewery out and avoid generating any bad blood. Really, the camaraderie in this industry is downright inspiring. Of course, when the overlap between two marks is too great, there’s not a lot that can be done to get a workable coexistence agreement in place. And, breweries like Lost Coast are totally within their rights (and positively charged with the responsibility) to enforce their registered marks.

Outside of the nitty gritty of this particular dispute, from our chair, there’s some wisdom in this one for any brewery that chooses, for whatever reason, to avoid registering all of its beer names and designs. It’s always a brewery’s own business call to invest in registration, and as this dispute and others highlight, we all can see why it’s well worth it. But, if the money’s not there or a brewery chooses to take a gamble on a design/name without registering, there’s a more affordable option that can at least offer some protection. A brewery might consider at least having its attorney make sure no one else has a substantially similar design or word mark already registered. That way, a brewery can generate bona fide common law rights, hopefully encouraging others to steer clear of that design/word mark—a better position than potential infringement from the start.

Last, we’ll nerd out on a legal thought, and welcome comments from our fellow beer and TM attorneys. There’s no copyright claim in Lost Coast’s complaint. We see at least that minimal spark of creativity here, and being able to prove 17 U.S.C. infringement, even if it’s just the threat of liability in encouraging settlement, offers potentially more to the plaintiff than under the Lanham Act. Maybe the brewery hopes to get this one out of the way early, with the least expense. Then again, it does seem worth amending to add another cause of action. What do you think?

We’ll keep you posted here as this one progresses.

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