TTB Brewer’s Bond Amount: How Much of a Bond Does a Brewery Need?

TTB Brewer's Bond
What TTB Brewer’s Bond amount does a brewery need? This post goes over the essentials for a TTB-compliant brewery’s operation.

What TTB brewer’s bond amount does a brewery need? Learn the essentials—calculating the right brewer’s bond amount, and choosing the right kind of bond.

What brewer’s bond amount does a brewery need? It’s a question that often comes up when a new brewery is completing its TTB application for its Brewer’s Notice. The TTB brewer’s bond form can look intimdating, but it’s fairly straightforward. First some background, then some guidance to frequently asked questions.

What is a TTB brewer’s bond?

A brewer’s bond is a way of guaranteeing TTB (or states that require them) that production tax, also known as excise tax on beer, is going to get paid. If a brewery fails to make its tax obligations, the bond is going to kick in and cover the deficient amount. That’s why it’s important to get a brewer’s bond amount right. In fact, if a brewer’s bond is too low for a brewery’s production, the brewery is not compliant.

How can I get a TTB brewer’s bond?

There are two kinds of TTB brewer’s bonds. A brewer’s surety bond and a brewer’s collateral bond. A TTB brewer’s surety bond is when a third party covers the brewery; it’s essentially insurance. The brewery pays a certain amount up front, and the insurance company is obligated to cover the bond. A brewery can get a surety bond by contacting an insurance agent. Many breweries go this route because the start-up brewery needs to put all of its cash toward start-up and build out expenses, and the bonds are relatively cheap. Typically $100 up front for a $1,000 bond and sometimes still just that $100 for a $5,000 bond.  To avoid having to deal with a third party, and keep filing paperwork every few years, another option is a Brewer’s Collateral Bond. Instead of paying a certain amount up front for the bond coverage, with a collateral bond, the brewery itself pays its full bond amount to TTB and TTB holds onto that cash. If a brewery doesn’t mind locking up the cash, it’s an option.

What TTB brewer’s bond amount is adequate?

The right TTB brewer’s bond amount depends on a brewery’s production. How many barrels of beer will a brewery produce in a quarter, and what would the brewery’s federal tax obligation on that beer be? That’s the amount of a TTB brewer’s bond a brewery needs to have on file. If a brewery anticipates its quarterly production and, in turn, brewery tax obligation is going to go up in a quarter, a brewery needs to strengthen its bond. The first bond a brewery files is an original. A superseding bond replaces that bond. A strengthening bond strengthens the amount of the one that’s on file.

Currently, the minimum TTB brewer’s bond amount for a production facility is $1,000. For nano breweries opening today, that’s sufficient. Or, at least, it wouldn’t take much more to be sufficient. If you plan to brew more than around 12 bbl per week, the bond would need to be bigger. We’ll walk through the numbers. Tax on beer is, at the time of writing, $7 per barrel for nearly all brewers. If you’re producing below 60,000 bbl per year, it’s $7/bbl today. So, a brewery would have to produce a bit more than 142 bbl per quarter—about 48 bbl per month or 12 bbl per week—to need a bigger brewer’s bond than the minimum $1,000 TTB brewer’s bond. Showing the math, $7 * 142 = $994. That 143rd bbl would bring the quarterly tax obligation to $1001, putting a brewery over the $1,000 minimum coverage. A greater bond would be required.

Notably, if a brewery is seeking a surety bond, very frequently a brewery can pay the same up-front amount, but get a much bigger bond. If a brewery is not posting a cash brewer’s collateral bond, it’s best to get the biggest surety bond it can while paying the lowest amount. This covers the brewery for increased production, without thinking twice. A brewery can shop around for coverage, often a $5,000 bond can be obtained for the same price as a $1,000 bond—that’d be 5x the coverage, giving headroom for production of up to nearly 60 bbl per week. As a brewery expands, or makes plan to, the amount of bond coverage on file with TTB should be in the back of the brewery’s mind.

Do TTB brewer’s bonds expire?

They do. Keep in mind that a brewer’s bond expires after four years. A Brewer’s Bond Continuation Certificate, whether for a surety brewer’s bond or a collateral brewer’s bond, must be filed and accepted by TTB.

Can a brewer change its TTB brewer’s bond type?

Yes, a brewery could switch from a surety brewer’s bond to a collateral brewer’s bond, or go from a collateral brewer’s bond to a surety brewer’s bond.

Help with a TTB Brewer’s Bond or TTB Brewer’s Notice Application

We regularly help handle TTB bonds as a part of our two Brewer’s Notice federal licensing packages. The first is our Comprehensive TTB Licensing Package, where we oversee the entire licensing process, guiding a brewery through every step of the way and handling all the application drafting. The second is our TTB Application Review, which is geared toward DIY breweries who want to save money by taking a stab at the Brewer’s Notice, but want an experienced professional’s review for completeness, removal of errors that may hold up the application, and guidance on streamlining the application for an efficient TTB review. Breweries in planning may call or email for details.

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Washington Brewers Trademark Dispute

The state of Washington is beautiful; as is the state of Washington beer. It's no less beautiful due to the recent trademark conflict among in-state breweries. But, those launching brands would be well-served to review trademark best practices, and budget for a defensible long-term brand-protection strategy.
The state of Washington is beautiful; as is the state of Washington beer. It’s no less beautiful due to the recent trademark conflict among in-state breweries. But, those launching brands would be well-served to review trademark best practices, and budget for a defensible long-term brand-protection strategy.

Over the weekend, the hard-working Kendall Jones over at the Washington Beer Blog reported on the latest trademark dispute to hit Washington breweries. This time, between them.

The issue?

Three Magnets Brewing Company over in Olympia had called their flagship IPA “Rainy Day IPA.” They got into a scuffle with another Washington brewery, not named in the article, and ended up changing the beer name.

No matter the breweries involved, the lesson is the same in the others we’ve seen. It’s the same for any industry, not just brewing. Before naming a business or investing in the release of branded flagship products—before launching any brand material you’d be bummed to change—the process is the same:

  1. Proactively clear the mark yourself. For the beer industry, that means using Google, Ratebeer, Untappd, Beer Advocate. Basic clearance involves looking for beers, but also wines and spirits. If it’s a brewery name, it involves looking into the names of bars and restaurants out there. Strike ‘em off the list or seek the counsel of a trademark attorney when finding a potential conflict or issue. The visual similarities between the marks matter, as do similarities in sound and in meaning.
  2. After pre-clearing and locating marks that seem potentially clear (or, at least, less fraught with problems), the next steps is to seek a professional trademark clearance report and analysis. Sure, you can search the trademark register yourself as a part of your pre-clearance processes. But, recognize that it’s not just the “hits” that matter; it’s the interpretation of the hits, the status of the marks, and how to interpret the results. It’s also knowing how to conduct the right search in the first place to not miss potentially confusingly similar (not just identical) marks. Getting a professional opinion from a trademark attorney doesn’t have to cost a fortune. And it shouldn’t.
  3. When finding a direction that appears clear, file. Not next week or next month, but immediately. The trademark register moves quickly. Beers are launched every day. Both filings and unregistered releases have implications on your potential trademark rights. You can file an intent-to-use trademark application before you launch products. Before you open the brewery.
  4. Now that you’ve done it right, stay on the lookout. Monitor for potentially conflicting applications and uses.

In closing, I will make one general note, when looking toward the future. Keep in mind that having a pending application or even a registration doesn’t immunize a brewery from potential name issues; despite careful planning, no one can predict how broadly others will construe their brands (See, for example, Red Bull opposing Old Ox Brewing). Even when you’ve done everything right, it can be expensive to maintain rights. Others can infringe, and you may have to stop them. Others may find you infringing and it’s expensive to fight it, even when they have a bad case. That’s an unfortunate reality. But, taking these steps is not just best practice, it’s essential practice for any brewery or beverage business that wants to stake a strong and long-term claim to its branding material. Budget for protection, the same way you’d budget for opening a brewery in the first place or planning for expansion. Get yourself on the register and visible to others looking to protect their brands.

It’s a minimal investment given that properly staked-out rights can potentially belong to the business forever.

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Brewery Copyright Beer Label Woes: A Tale From Canada

What’s the inspiration behind your beer label? Do you know if it’s original?

So many of our brewery clients have rad acquaintances who are graphic designers, eager to get onboard and build out brand material for little cost. Other breweries may not have the personal connections, but recognize the importance of brand material, and make significant investments in outside creative professional services. Both are great routes, and our post last year touched on copyright concerns in structuring even the most informal of those relationships, to make sure copyright ownership flowed fully to the brewery. Today, I’ll renew our discussion, highlighting another important point. This one is unfortunately inspired by headlines involving our friends up there in Canada, and it emphasizes again how important it is to get a strong creative services agreement in place whenever you’re engaging outside help.

This is the original label design Canada’s Central City Brewing had adopted for it saison, before getting word of a potential copyright infringement claim.

Take a look at these two images. One is a beer label, the other an excerpt from a comic book. Eerie similarities, right? It turns out that Canada’s Central City Brewing hired an agency to create a beer label for its saison. The day before its release, the brewery proudly posted its rocking label art on its Twitter account.

This is artwork from the Powers comic book series, depicting character Deena Pilgrim. I think we can all agree that artist who made the beer label did not independently arrive at the design.
This is artwork from the Powers comic book series, depicting character Deena Pilgrim. I think we can all agree that artist who made the beer label did not independently arrive at the design.

Literally hours before the beer was due to be in stores, Twitter fans pointed out the infringement issue with the character Deena Pilgrim from the comic book series Powers. It seems the brewery had no idea, and thought it was getting a cool piece of original artwork.

So, what happened? The brewery had to put the release on hold and paste 24,000 new labels by hand onto its bottles. Below is an image of the new beer label. (Sidebar: Bear in mind that ideas are not protected by copyright law, but expression is. The concept of a foxy detective wielding her badge isn’t infringement, but as you drill down into specific choices—the placement of fingers on the badge, the style of the hair, the facial expression, the angle of the stance, the decisions involving light and shadows—that’s when you cross the line from idea over into expression. That’s when you run into problems.) Ultimately, this is a frustrating outlay of cash. And, although we’d like to think it was avoidable on the part of the ad agency, I’d like to think it’s easily reimbursable based on the agreement in place between the companies.

Here's the design that Central City ended up landing on for their Detective Saison. It may still have the same idea behind it, but the expression is what matters here.
Here’s the design that Central City ended up landing on for their Detective Saison. It may still have the same idea behind it, but the expression is what matters here.

So, how do you avoid this sort of issue? First, it’s important to get an agreement with your designer in writing that not only vests ownership in the brewery, but one that also is designed to address situations like this. That’s what a contract does, it sorts out who is liable for what, in the event all sorts of things go wrong with the relationship. This is the sort of thing that could foreseeable go wrong with a creative services relationship. We don’t know what was in the agreement here. But, it’s important to note that it was a professional agency that turned out the problematic work. Do you know where the design direction for your logos came from? Do you know what works were used as inspiration? It’s important to note that even the most talented of designers may not be familiar with the nuances of trademark and copyright, which are often confused in the media. In evaluating trademarks, a comparison of the goods/services in question comes into play. A badge-wielding agent could be used in connection with computer speakers and a brand of beer, and consumers probably wouldn’t be confused. But, when it comes to copyright, protectable elements of a work are afforded strong rights, even and especially when they’re used in different media and on different goods and services.

Best practice is to be proactive and get a copyright agreement in place. On the flipside, best practice is also to copyright your own works as soon as they’re created. No one wants to be the one slapping new labels on through the night, with doubt in your mind about just how easily you’ll get this expense covered. Beyond that, no one wants to be the company whose valuable brand material just got infringed upon. Taking both steps help best protect your brewing business, no matter how the dice roll.

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Washington Brewery Law Resources

When opening a brewery, all the laws and regulations can feel daunting. Here's a short list of key Washington Brewery Law Resources to help kickstart your understanding.
When opening a brewery, all the laws and regulations can feel daunting. Here’s a short list of key Washington Brewery Law Resources to help kickstart your understanding.

Opening and running a brewery is complicated, and Washington Brewery Law Resources aren’t necessarily all neatly gathered in one place. It can be hard to know where to look when your curiosity encourages you to start poking around. Today, I’ll do my best to help you start your research on how breweries in Washington State are regulated. There’s a bevy of laws/code/regs out there, that’s for sure. Here are some jumping off points for your legal excursions.

Keep in mind, these sources aren’t exactly written with readability as a primary objective. Important nuances pop up in all different places. That’s what we’re here for, if you’re ever not sure about something. Indeed, it’s through the code, and our understanding of it, that we can help answer all kinds of questions on the fly, such as: (1) Can my Washington brewery deliver beer to customers in Seattle?; (2) If I’m only selling beer within Washington’s borders, do I still need a Certificate of Label Approval?; (3) May those under the age of twenty-one come into my brewery without us having food service? The list of fun questions that vary from state to state goes on.

For anyone interested in checking out primary Washington Brewery Law Resources, here are some links along with my notes to help you navigate them.

Washington Brewery Law Resources – State Brewery Law

Revised Code of Washington. This is the law that the state legislature creates and revises. Primarily, you’re looking at the content in RCW 66, although keep in mind that other provisions relating to your business, potential distribution agreements, etc. all fall in other places in the code.

Washington Administrative Code. This is where administrative agencies put their regulations. In Washington, the primary administrative authority is the Washington State Liquor Control Board. They were created by the legislature by way of RCW 66 and given authority to do certain things relating to booze in Washington State. Any regulations they promulgate become part of the Washington Administrative Code. Unfortunately, this means that there are often provisions in RCW that address some of your questions, and then provisions in WAC that address other questions. It just depends on whether the legislature contemplated something or it’s LCB creating regulations by virtue of its authority.

Between those two, that’s the heart of Washington brewery law. Keep in mind there are some sanitation requirements set forth by the Washington State Department of Agriculture, and your compliance therewith is a part of maintaining your LCB microbrewery license. Further, there are some places where the County and your Municipality step in, particularly with respect to health codes and building codes.

Washington Brewery Law Resources – Federal Brewery Law

Of course, we all know that state and local government isn’t the final authority on breweries in Washington. Indeed, Uncle Sam, through the Alcohol and Tobacco Tax and Trade Bureau (TTB), has a say on a number of matters. When it comes to TTB, you’ve got to jump to the Code of Federal Regulations (CFR) to see all the regulations they’ve promulgated, and Title 27 is the place to go. Bear in mind, if you’re brewing off-the-wall beers, such as those without hops, the Food and Drug Administration (FDA) may be your labeling authority. And, very technically, FDA has concurrent authority over your brewing business—but TTB really is the place to go when you have questions of federal brewery law. Fortunately, they’ve put together helpful resources on their website to help you wade through labeling and advertising issues.

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The Skinny on Red Bull vs. Old Ox Brewery: Understanding this Brewery Trademark Dispute

Virginia craft brewery Old Ox faces a trademark opposition from energy drink giant Red Bull. Is Red Bull being a Red Bully? Read on to learn more.
Virginia craft brewery Old Ox faces a trademark opposition from energy drink giant Red Bull. Is Red Bull being a Red Bully? Read on to learn more.

Here’s what Red Bull vs. Old Ox Brewery is and what it isn’t. If you read the Brewery Law Blog, you know I love craft beer trademarks more than the average Esquire. Same goes for craft cider trademarks, mead trademarks, the whole lot. Over the last year, I’ve appreciated seeing the public get fired up about a craft beer trademark dispute in the making. Having said that, there’s a lot of misinformation out there. This is especially the case when word of a brewery trademark spat takes off and spreads all over social media, as it definitely has this time. A lot of the misunderstanding stems from not knowing exactly what’s at stake in any given trademark dispute.

What Red Bull vs. Old Ox Brewery isn’t:

This trademark dispute is not a lawsuit over whether Old Ox Brewery can use its name or logo. This dispute has not reached federal court. It is not a lawsuit. That might happen. But, so far, this matter has nothing to do with whether Old Ox Brewery can call itself Old Ox Brewery or whether they can use their logo.

What Red Bull vs. Old Ox Brewery is:

This is an administrative opposition proceeding. This involves whether the United States should grant Old Ox Brewery a federal trademark (which gives you important rights). So, this matter completely involves Old Ox Brewery’s right to register their brand name. It has nothing to do with whether Old Ox Brewery can use that brand name. Of course, Old Ox Brewery may not want to use a brand name if they can’t use it with the benefit of important federal trademark rights.

It's important to understand what this proceeding between Red Bull and Old Ox is and what it isn't. Importantly, Red Bull hasn't sued Old Ox Brewery.
It’s important to understand what this proceeding between Red Bull and Old Ox is and what it isn’t. Importantly, Red Bull hasn’t sued Old Ox Brewery.

How the Red Bull vs. Old Ox Brewery dispute came to be:

We can’t know all the details and interactions. But, here’s how these sorts of proceedings typically get started.

  1. Old Ox Brewery prudently sought to protect its intended brand name. It applied for an intent-to-use trademark for both its name and its logo. Breweries can file intent-to-use trademarks, before they ever open up, so they can feel confident moving forward and investing in their brand and branding materials. If you read the blog, I champion proactive brewery trademark clearance and registration quite a bit.
  2. The United States Patent and Trademark Office (USPTO) examines every trademark application that comes in, and looks to see whether the mark should be allowed to register. There are technical defects in applications, and then there are issues like the mark being too descriptive or too similar to another registered mark.
  3. If USPTO thinks the mark is okay, the mark publishes for thirty days for others to review. Here, Old Ox Brewery’s marks published on September 30, 2014.
  4. Publication is a chance for everyone else outside of USPTO to protect their interests. Whereas USPTO may not find a problem with a mark during its limited review, actual brand holders have an important stake in their brand. They may see an issue with a potential mark that USPTO doesn’t or doesn’t catch, and publication gives everyone a chance to prevent a mark from registering. Keep in mind, if a mark registers, it gets important rights and becomes more difficult to combat.
  5. Red Bull no doubt has a legal team all over the USPTO Gazette (where marks publish each week). Notably, beer is in the same trademark class (032) as energy drinks, soda, bottled water, etc. That’s likely how Red Bull found it so quickly. They monitor Class 032 every week for problematic uses. However, bear in mind class has nothing to do with whether two marks are confusingly similar, it’s merely an administrative convenience for USPTO. Confusing similarity will turn on a number of things, including comparing the actual goods in the application vs. Red Bull’s.

Why Red Bull is doing this, even if you don’t think the marks are similar:

Opposition proceedings are relatively cheap. If a trademark owner sees a problem with another mark, an opposition proceeding can quickly nip it in the bud. It costs $300 to file and not much time to prepare a notice of opposition. On the other side, often small brands feel scared and don’t want to fight (or don’t have the funds to fight), so they willingly abandon their mark. This is often the case when it’s an intent-to-use mark (as Old Ox Brewery’s is), which typically means the mark isn’t yet in use at all or, at the very least, hasn’t been used too widely for very long. It appears Old Ox Brewery has been in operation for about seven months. So, $300, one filed document, and Red Bull potentially never has to worry about whether the Old Ox marks really are confusing again—because they’re gone. Some might think that’s bullying, others might think it’s effective brand protection.

What often happens behind the scenes in scenarios like the Red Bull v. Old Ox Brewery:

Usually, everyone wants out of an opposition proceeding. Here, Red Bull admittedly has a lot more in its cash reserves than the typical opposer. What can happen is that the two brands come to some agreement. They iron out a “coexistence agreement” which is essentially a plan for both brands to coexist in the marketplace to avoid consumer confusion. That might mean that one brand avoids the other’s colors and imagery or that Old Ox Brewery never makes an energy drink or a soda of any kind. In fact, given Red Bull’s statements to the media, it looks like they do want to iron something out:

“Red Bull has not sued anyone. Brands, big and small, seek to protect their trademarks every day. All we are asking for is to allow the administrative process at the US Patent & Trademark Office to run its course and we remain hopeful that a fair settlement can be reached by both parties.”

What could happen in Red Bull v. Old Ox Brewery:

If they don’t strike up a coexistence agreement, a few things could happen. Old Ox Brewery could forget about its trademarks and give up fighting on the USPTO front. As I highlighted before, though, this has nothing to do with whether Old Ox Brewery can use those marks. This is not a lawsuit. We might expect a full-on lawsuit from Red Bull in federal court, which they could file at any time given Old Ox is using their marks already in a territory Red Bull no doubt is in. Whatever you think of Red Bull’s merits in the lawsuit, they certainly have the most cash in the bank to drag things out and make it hurt. Thus, we typically a smaller brand like Old Ox Brewery just change its name, to avoid sinking cash into something like this, when it could be using that money to fuel its awesome growth. Meanwhile, whatever the outcome, Red Bull has scared off other users from adopting anything with the word “Ox” in the name going forward, showing everyone just how broadly they construe their brand. We’ll see where this one goes.

It’s also worth keeping in mind that beyond any confusing similarity between the marks, Red Bull can also toss in a claim of trademark dilution. If you have a famous mark, there’s an additional mechanism to protect it. We didn’t see this ground included in Red Bull’s Notice of Opposition, but it’s certainly something extra we might see tossed into any federal lawsuit, which would add even more to defend against, whatever you think of the merits.

Red Bull v. Old Ox Brewery, The Wrap-up:

I hope that gives everyone better insight into the Red Bull v. Old Ox Brewery matter. When reviewing an emerging trademark dispute, it’s important to pay attention to where it is procedurally. Is this in federal court involving a right to use a mark? Or is this an administrative proceeding before the Trademark Trial and Appeal Board involving a right to register a mark? That can help onlookers understand exactly what’s at stake. For more on trademark law, and why federal trademark rights matter, see our Brewery Trademark Law Explained (In a Nutshell) post here.

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