Introducing: Washington State Liquor and Cannabis Board!

And just like that the Washington State Liquor Control Board has become the Washington State Liquor and Cannabis Board. Here’s Reiser Legal’s warm welcome to the agency we know and love, under a fresh new moniker. I suppose it’s only fair, given the rise of the cannabis industry—and in this the Evergreen State, at that. Maybe few have noticed and few will ultimately care. But, I like the new name! And, mostly, I’m just glad I can still affectionately think of them as the LCB (because LMB just wouldn’t have that same authoritative ring).

For those wondering when the change happened, it looks like the confetti fell on July 24, 2015, when a number of LCB-related bills went into effect after this last legislative session. Turns out, a section of the Cannabis Patient Protection Act (Senate Bill 5052) which we hadn’t been tracking was what made the change (which, LCB reports, is the first change to the name since the Liquor Control Board was established by the Steele Act back on January 23, 1934).

Here’s a header from their homepage taken just now:

Introducing, the Washington State Liquor and Cannabis Board!
Introducing, the Washington State Liquor and Cannabis Board!

And, here’s an old snap from April or so, thanks to the Wayback Machine:

 

Screen Shot 2015-07-29 at 3.38.27 PM

 

 

 

 

 

Nothing but hard-hitting news here on the Brewery Law Blog!

Danielle Teagarden
Danielle Teagarden
Brewery Attorney at Reiser Legal PLLC
Danielle Teagarden is a Seattle-based brewery lawyer, business attorney, and intellectual property advisor with particular focus on protecting trademark rights and handling trademark disputes. Danielle frequently represents craft breweries, start-ups, and small alcoholic beverage businesses, and she is Author and Editor of the Brewery Law Blog. You may reach her directly through the contact form on this blog.

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Can a Washington brewery make cider or mead? Can a Washington winery make beer?

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 produCan a Washington Brewery Make Cider or Mead?ct 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.

Danielle Teagarden
Danielle Teagarden
Brewery Attorney at Reiser Legal PLLC
Danielle Teagarden is a Seattle-based brewery lawyer, business attorney, and intellectual property advisor with particular focus on protecting trademark rights and handling trademark disputes. Danielle frequently represents craft breweries, start-ups, and small alcoholic beverage businesses, and she is Author and Editor of the Brewery Law Blog. You may reach her directly through the contact form on this blog.

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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.

Danielle Teagarden
Danielle Teagarden
Brewery Attorney at Reiser Legal PLLC
Danielle Teagarden is a Seattle-based brewery lawyer, business attorney, and intellectual property advisor with particular focus on protecting trademark rights and handling trademark disputes. Danielle frequently represents craft breweries, start-ups, and small alcoholic beverage businesses, and she is Author and Editor of the Brewery Law Blog. You may reach her directly through the contact form on this blog.

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Reiser Legal Expands, Now Providing Colorado Beer Lawyer Services

Reiser Legal has been serving breweries in Washington and Louisiana since 2010, and providing federal services to breweries nationwide for quite some time, too. Now, we're proud to add "Colorado Beer Lawyers" to our business cards, too.
Reiser Legal has been serving breweries in Washington and Louisiana since 2010, and providing federal services to breweries nationwide for quite some time, too. Now, we’re proud to add “Colorado Beer Lawyers” to our business cards, too.

We’re proud to announce that Reiser Legal is now offering a full slate of legal services for Colorado breweries. With Danielle Teagarden as a licensed Colorado brewery lawyer, you can count on us from the early days of a Colorado brewery start-up—entity formation, putting together an operating agreement, compliantly raising funds—all the way through to next steps near and far, such as securing federal, state, and local liquor licensing, brewery trademark protection, entering distribution agreements, and general world domination.

Since 2010, we’ve been devoted to providing cost-effective legal services to breweries and alcoholic beverage businesses. Now, we bring that thoughtful business model and years of experience to Colorado. Looking forward to providing our best to the one of this beer nation’s most creative and hard-working set of craft brewers. Here’s to you, Colorado!

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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.

Danielle Teagarden
Danielle Teagarden
Brewery Attorney at Reiser Legal PLLC
Danielle Teagarden is a Seattle-based brewery lawyer, business attorney, and intellectual property advisor with particular focus on protecting trademark rights and handling trademark disputes. Danielle frequently represents craft breweries, start-ups, and small alcoholic beverage businesses, and she is Author and Editor of the Brewery Law Blog. You may reach her directly through the contact form on this blog.

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