Breweries make beer. Wineries make wine (or, under their license, other emerging products such as cider and mead). But what about the reverse? Can a Washington brewery produce wine, cider, and mead? Or, can a Washington winery produce beer? Can either start distilling? Yes, the entity can do so. But, as you might expect, it’s critical to obtain the proper alcohol licenses to produce beverages in the other product category. Indeed, at both the state (Liquor Control Board or “LCB”) and federal levels (Alcohol and Tobacco Tax and Trade Bureau or “TTB”), different licenses are required to cross over into producing other kinds of alcoholic beverages. There are some facility setup issues to bear in mind when doing so, with separation concerns, but they’re not insurmountable. Indeed, as interest in all kinds of fermented beverages is on the rise, we expect to see more beverage businesses extending their brand into these new places.
Edit (5/9/2015): You all are astute readers, and it’s awesome. Thanks to a comment I received via email from one such reader, it appears there *has* been a tweak to the 25% rule. Although, it seems to be more of a sensical one to help keep taproom managers from breaking out calculators. I’m grateful for the note; and in my laser-like focus on the cider stuff, I didn’t cover this nuanced tweak. See my strikethroughs and underlined additions below; and I’ll be making a new post specific to this change where I also will point out some wonderfully inconsistent quirks in the bill. Look for that in the next day or so. -DT
Guest taps are a great thing. But, what about a cider guest tap in a State of Washington taproom? Can a Washington brewery sell cider? The reality right now is no (but if you can wait until July, I’ll have a different answer…read on).
Today, a brewery cannot legally have cider guest taps unless that Washington brewery is also a restaurant meeting certain food minimums (and even then you need a proper endorsement). This has been a bummer for cider fans of course, and also those needing and seeking to avoid gluten in their diets. It’s also kept beer and cider producers, who share a similar ethos, from doing a bit of teamwork to get presence in the marketplace. Of course, it’s also been an untapped revenue stream for both sides.
In any event, I have some good news for you. This legislative session, we saw House Bill 1342 introduced, which aimed to remedy just that. Thanks to our craft-savvy government, H.B. 1342 swiftly moved through the House and Senate and was recently signed by the Governor. H.B. 1342 not only permits cider guest taps, but it also allows sales for off-premises consumption. So, whether by the glass, growler, or packaged to go, cider has the forthcoming green light at Washington breweries, now with no extra regulatory or food-prep fuss.
When can you expect cider to (legally) pour at Washington breweries? The effective date is July 24, 2015.
A few last notes.
Keep in mind that nothing about House Bill 1342 changes the 25% rule on guest taps, covered over in this recent post, and it’s a welcome change in favor of common sense.
What Changed About the 25% Rule (Added 5/9/2015)
If you recall my first post on the 25% rule, you’ll remember that it was a weird rule. Under it, guest taps couldn’t exceed 25% of a brewery’s own on-tap offerings. It sounds great in theory, but the technical wording is actually annoying to apply. To make numbers easy, say you have 100 beers on tap. You could have 25 additional guest taps. Why? Because you have 100, you can have 25 guest taps (for 125 totals taps) because the additional 25 is no more than 25% of your own brands. As you can see, the law was confusing. So confusing, it’s hard to write out here. It would make a lot of sense if you could just count the taps, and not commit more than 25% of those taps to guests. For example, have 100 taps? Great, you can have 25 of them as guests—and that’s what I believe House Bill 1342 has done, even if it perhaps wasn’t its main intent.
Here’s the relevant part of H.B. 1342 with respect to this point:
(3) Any microbrewery licensed under this section may also sell from its premises for on-premises and off-premises consumption:
(a) Beer produced by another microbrewery or a domestic brewery ((
for on and off-premises consumption from its premises))as long as the other breweries’ brands do not exceed twenty-five percent of the microbrewery’s on-tap (( offerings of its own brands))offerings; or
(b) Cider produced by a domestic winery.
So, what’s up with these changes? A couple of things. First, it becomes notable that if you have cider on tap, it’s a part of your “on-tap offerings”, so having cider on tap becomes part of your offerings for the purposes of your 25% calculation. Maybe that’s the only thing the law was written to do. I’d like to believe, though, that it was also intended to eliminate the weird calculation problem above. Even if not, it appears to do so. Read the excerpt again. You can sell beer produced by another brewery, as long as guest taps don’t exceed 25% of your on-tap offerings. You can’t commit more than 25% of your total tap share to brewery guests. Interestingly, though, the law doesn’t say split about restricting your cider offerings. I’ll report separately about that (as well as another implication about the 25% rule I’d like to note…so stay tuned if you’re into this stuff).
Whatever the case, House Bill 1342 is a bit of a win for anyone who (1) doesn’t want to break out the calculator to compliantly allocate guest taps and (2) wants to allocate a bit more to guest taps. Let’s apply it. Under the new law, it seems that if you have 100 taps, 25% can be guests. So, 75 of them must be your beer or ciders, and then 25 can feature your favorite third-party breweries. Compare this to the old setup. Let’s say you had 75 of your own beers on tap. The old law said guests couldn’t exceed 25% of that. We know that 25% of that is 18.75. So, they compare this way:
Compliant Under New Law: 75 house taps or cider taps, up to 25 guest taps.
Compliant Under Old Law: 75 house taps, 18 guest taps.
Clear as mud? I’ll follow up soon to cover this, and a few other notable notes.
Last, bear in mind that H.B. 1342 also was specifically focused on getting cider flowing, and did nothing (but pave the way for the bright craft future) to get wine flowing at a non-restaurant microbrewery with a proper wine endorsement. In any event, it still counts as another win for the Washington beer industry, and our kindred cider-producing spirits. Though, speaking of spirits…well, we’ll leave that for another day. Here’s a link to the passed bill.
Your beverage brand is racy, but it passes label muster thanks to the First Amendment. Can it be denied a trademark?
Credit goes to my beer trademark law chum Alex Christian over at Davis Brown in Iowa for pointing out this nuance, which is worthy of a post of its own today. In the past, I’ve written about the issue of having a potentially trademarkable beer name or logo, yet not being able to distribute that beer because of Certificate of Label Approval (COLA) issues. That is, the Alcohol and Tobacco Tax and Trade Bureau (TTB) may control a brewery’s speech on labels when, for example, the label is misleading, touts the intoxicating effects of the beverage, or would be appealing to kids. More on that here. Essentially, in that scenario, a brewery might have an otherwise trademarkable piece of branding material, but be unable to obtain a COLA to put that label or beer name into interstate commerce.
Here’s a different scenario. Imagine your beer name itself is distributable. It isn’t misleading. It’s not touting the effects of alcohol. It’s not appealing to kids. Now, if the label has subjectively “racy” content, we know the First Amendment is going to kick in and protect that brewery’s speech on the label. See my post last week on the case of Flying Dog and its Raging Bitch beer label, which caused a bit of a stir with Michigan’s Liquor Control Commission, which had initially (and improperly) rejected the label, contrary to Flying Dog Brewery’s First Amendment rights.
Could it be that the reverse is also true? That is, can you have a distributable beer label or brand that is not trademarkable? Indeed. The United States Patent and Trademark Office (USPTO) operates under the framework of the Lanham Act. Bear in mind that within the Lanham Act, USPTO is to refuse a mark that “[c]onsists of or comprises immoral, deceptive, or scandalous matter . . . .” There are a few other grounds for refusal, outlined in 15 U.S.C. § 1052. In fact, readers might be aware of the ongoing matter involving the registrability of “Redskins.”
So, you might say, wait a minute. If the First Amendment protects the government from restricting labels with subjectively scandalous content, then how can USPTO refuse registrations on this sort of ground? You might wonder, can USPTO, the Trademark Trial and Appeal Board (TTAB), and courts applying the law really do this, without affronting First Amendment rights? So far, they can. The distinction is that, by not granting a federal trademark, the government has not prevented the party’s use of the mark. You can speak on. The use would just not be granted the presumptions and protections connected with a federal trademark. A great case on point here was the matter of 1-800-JACK-OFF, a trademark sought for services it doesn’t take much imagination to determine.
So, in sum, some trademarkable beer names are not distributable. In the reverse, some distributable beer names are trademarkable. In the case of Flying Dog Brewery, however, they do have a trademark for their “Raging Bitch” brand of brew. In fact, I was surprised to see just how crowded the field of “Bitch” marks is on alcohol beverages. Among them, we have the pure and simple “BITCH” mark, as well as a battery of marks from different owners, with most of these bitches seeming to favor wine brands. You’ll find “HAPPY BITCH” but also “CRAZY BITCH”, “NASTY BITCH”, the nautical-themed “BEACH BITCH” and then “JEALOUS BITCH”, though that “RICH BITCH” is no longer protected.
At any rate, when developing a standout product for a brewery or beverage business, it can be fun to push the boundaries with creative ingredients and processes. To match the brew’s personality or create some pop on a crowded taplist or retail shelf, it can also be tempting to push the boundaries with the brand material itself. The First Amendment does kick in to protect a brewery’s speech on its labels, allowing all kinds of vulgar things to potentially come to market. Thanks, Bill of Rights! Nevertheless, so far, to develop a brand under the protections of a federal trademark, you’ll have to keep it a bit cleaner. In fairness, although it’s still a subjective call at the end of the day, the powers that be who review trademarks take a pretty measured approach in determining whether a mark warrants refusal for these reasons under the Lanham Act. Still, for any brand owner or marketer, it’s important to know the line exists.
There’s a new TTB Cider FAQ out. We’ve touched on Washington Cider Law in the past, but the feds play an important role in it too. Just today, TTB has provided helpful insight to the growing craft cider industry. Here’s a link to the new TTB Cider FAQ, with six bullet points from us below covering more notable stuff, especially for those comparing regs on the cider side with things on the beer side. Different worlds, but we help with both sides at Reiser Legal.
1. Cider is a wine, we know that. It’s not a malt beverage under the law.
2. From TTB’s labeling standpoint, to call a product just “cider” it has to come from fermented apples and optionally contain added sugar, water, or alcohol. Anything else, it’s not just “cider.” Fortunately, when you submit your formula, TTB will provide a suggested statement of composition to help you, and you can always designate a fanciful name on the label, so long as it’s not misleading.
3. If your cider contains less than 7% ABV, you do not need a COLA. This stems back from the TTB/FDA regulatory authority divide we’ve discussed in the past. If your cider is 7% to 24% ABV, you need that COLA to ship in interstate commerce, as you’re subject to TTB authority. Notably, Washington is going to want that COLA to get your project on the shelves here. Either way, even if you don’t need to obtain a COLA, if the cider leaves the premises, it still has to comply with certain basic labeling requirements.
4. Because cider is a wine, 7%+ ABV cider is subject to TTB’s standards of fill. That means 12oz packages (like the cans we know and love to see on the shelves) are no good for cider at that ABV. Below 7%, it’s all good. Notably also, as long as you’re shipping wine in containers above 18L (4.75G), you don’t have to comply with TTB’s standards of fill. Here are some standards of fill, which feel pretty arbitrary but it’s a reg so what do you expect:
- 3 liters
- 1.5 liters
- 1 liter
- 750 mL
- 500 mL
- 375 mL
- 187 mL
- 100 mL
- 50 mL (just a sip at 1.6907!)
5. If you’re only making cider below 7% ABV, you don’t need a basic TTB permit. Keep in mind, you’re still subject to applicable federal authority, and your local liquor board (in Washington, the Liquor Control Board) more than likely has its own sets of permitting requirements and onerous regs.
6. If your cider has CO2 in it (technically about .392g CO2/100mL, be careful. If CO2 is coming from secondary fermentation in a closed vessel (like a bottle), it’s considered “sparkling.” But, if you’re injecting CO2, it’s artificially carbonated so it has to be labeled as such. Note that sparkling/carbonated wines are taxed at higher rates. Speaking of tax, there are all kinds of nuances with respect to how you’d be going about your cider business.
The takeaway on the TTB Cider FAQ:
Regulations are really confusing, inconsistent among industries, and you might be subject to a completely different set of regulations depending on how much alcohol is in your project. For anyone thinking about starting a cidery in Washington State, we’re happy to help you wade through these tricky regulations. We’ll post further resources for cideries on the blog soon.